DUTY OF FULL AND FRANK DISCLOSURE: APPLIES TO APPLICATIONS MADE ON SHORT NOTICE

Mediatelegal

The “new year resolution” I recommended for litigators this year was to be very careful when making without notice applications.  A failure to make full and frank disclosure has proven to be financially and professionally disastrous for some litigants (and their lawyers). In Cooke -v- Parker 04/05/2017  Her Honour Judge Walden-Smith (sitting in the High Court) made it clear that these principles apply to applications made on short notice.

THE CASE

The parties were shareholders in a company that had become deadlocked, they were also a married couple whose relationship had broken down.  The petitioner applied to appoint a receiver. That application was made giving the respondent 1/4 of an hour notice. It was adjourned initially and heard when the respondent had one day’s notice.  Receivers were appointed.

The respondent sought to set aside the appointment of the receivers. He complained that, prior to their appointment, the petitioner had been in detailed discussions with the receivers about who was to run the company and that the petitioner was to be appointed general manager.

THE FINDINGS

  • There was a duty of full and frank disclosure at the application.
  • This duty was not fulfilled by the petitioner and her representatives.

The duty was to “act in the utmost good faith and disclose to the court all matters which are material to take account by the court in deciding whether to grant the application without notice, that includes presenting the court any facts  that the court should be aware of in reaching its decision.

  • At the initial hearing the appointment of the receivers was being represented to the court as an opportunity to hold the ring between the warring parties. The fact that there had been discussions and agreement that one of those parties would be appointed general manager should have been disclosed to the court on the application.

THE RESULT

The judge held that the only appropriate course of action was to replace the receivers with alternative receivers.

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