THE DUTIES OWED TO THE COURT ON A WITHOUT NOTICE APPLICATION: A VERY HIGH STANDARD

In Standard Bank -v- Just Oil LLC [2014] EWHC 2687 (Comm) the Hon Mr Justice Walker considered the duties owed when a party makes an without notice application to the court.  Strong words are said.

THE FACTS

The claimant had obtained permission to serve the claim form out of the jurisdiction. The defendants applied to set aside that order.  The order was set aside on several grounds. However the judge went on to consider the information given to the court on the initial without notice application.

THE JUDGMENT

F. Standard Bank’s breach of duty to the court

1. This aspect of the case concerns what has been described as a “golden rule”: those who seek relief from the court without notice to the other side must disclose to the court all matters relevant to the exercise of the court’s discretion. The rule was discussed by the Court of Appeal in Knauf UK Gmbh v British Gypsum Ltd [2001] EWCA Civ 1570 at [62]-[71]. The Court of Appeal identified additional essential principles in paragraph [65]. For convenience I summarise them as involving four propositions, and I add a fifth proposition derived from paragraphs [70] and [71]:

(1) Failure to observe the rule entitles the court to discharge the order obtained even if the circumstances would otherwise justify the grant of the relief which had been obtained without notice;(2) A due sense of proportion must be maintained between, on the one hand, marking the court’s displeasure at the non-disclosure and, on the other hand, doing justice between the litigants;

(3) For these purposes the degree of any culpability on the part of the applicant or of any prejudice on the part of the respondent are relevant to the court’s discretion when deciding what should be done in the light of the non-disclosure;

(4) A balance must be maintained so that the without notice applicant’s “heavy duty of candour and care” is not undermined, without giving respondents who lack any substantial merits an easy escape route from their difficulties;

(5) Where a without notice order is designed to affect and does affect the jurisdiction or potential jurisdiction of the English court in respect of foreign parties, it is absolutely necessary to bring to the court’s attention the possible existence of a possible jurisdiction clause in favour of a foreign jurisdiction. Nothing else would vindicate the “heavy duty of candour and care”. It is for the court, not for the parties, to decide whether the possible existence of such a clause should affect the court’s decision, for otherwise the court is effectively taking that decision blindfolded.

1. UBR’s evidence in support of the set aside application noted in this regard that Yates 1 had not clearly drawn the court’s attention to the jurisdiction agreement at clause 11.1 of the UBR supply contract. In their skeleton argument for the hearing before me Standard Bank acknowledged in this respect that “the potential argument now relied upon by UBR should have been drawn to the court’s attention.”
2. Having acknowledged that Standard Bank had not done what it should have done, Standard Bank’s skeleton argument went on to say that the proper context for this issue included that “the clause does not bite on the actual claim.” It will be apparent from section E2 of this judgment that in my view this assertion was overconfident. But even if I had held that UBR were not entitled to rely upon the Mongolian exclusive jurisdiction clause, mere confidence on the part of Standard Bank in such an outcome would not provide an exculpatory “context” for non-disclosure of the existence of a potentially important issue. On the contrary, it suggests that what is no better than a nonchalant approach has been taken to a very serious matter.
3. In those circumstances it is hardly surprising that Mr Toledano described what was said in Standard Bank’s skeleton argument as “a rather grudging apology”. He added that Standard Bank had wholly failed to explain their conduct in this regard.
4. The opportunity arose in oral submissions for Standard Bank to seek to remedy the deficiencies in what was said in the skeleton argument. What happened, however, was that Mr Joseph began by saying this:

We did not mean for there to me a mealy mouthed apology. We obviously apologise if in any way we inadvertently misled the court but we don’t accept we did, but we obviously unreservedly do apologise.

1. It seemed to me that this was, at best, a qualified apology. When I asked whether it was unqualified, Mr Joseph replied that he did not believe there had been a failure to give the full disclosure that the court would expect. He then explained that the reason for qualifying the apology was that Yates 1 had properly reflected the position which was advanced by UBR. It had set out what UBR had said in correspondence, which had not included any reliance upon the Mongolian exclusive jurisdiction clause. This, to my mind, was an unsound point. One would only expect UBR to have relied in correspondence on the Mongolian exclusive jurisdiction clause if UBR had been told that Standard Bank intended to bring proceedings somewhere other than in Mongolia. After checking the position, Mr Joseph acknowledged that Standard Bank had not told UBR that it intended to sue UBR in London, and that it was perfectly valid to say that in those circumstances one would not have expected a point to be taken by UBR relying upon the exclusive jurisdiction clause.
2. So far as the correspondence between Standard Bank and UBR was concerned, Mr Joseph summarised it in this way:

The point they [UBR] are advancing is not: we do have relations with you but under the supply agreement. They say: we have no civil law relations with you at all, even under the supply agreement.

1. At best, it can be said on Standard Bank’s behalf that UBR had not drawn their attention to the Mongolian exclusive jurisdiction clause. But it was not UBR’s task to do this. It was Standard Bank’s task to consider what objections might be advanced by UBR to the proposal that the court give permission for proceedings against UBR to be brought in London. Standard Bank could hardly think that UBR had made whatever points needed to be made in correspondence, when there had been no suggestion in correspondence that Standard Bank intended to bring proceedings in London.
2. The next point taken by Mr Joseph was to repeat the assertion in the skeleton argument that a relevant factor was that the Mongolian exclusive jurisdiction clause did not bite. I have already explained why that is no answer: it ignores what I have described as proposition (5) in my summary of the principles described in Knauf.
3. Mr Joseph then relied upon what had been said by Lightman J in Albon v Naza Motor Trading Sdn Bhd [2007] EWHC 9 (Ch); [2007] 1WLR 2489. At paragraph 17 Lightman J said:

The court exercises what has been variously referred to as “disciplinary control” and a “regulatory power” in respect of non-disclosure… for this purpose the court is concerned whether it is satisfied that the claim falls within the letter and spirit of the gateway relied on and that there is a serious issue to be tried, but it is not further concerned with the merits of the case and who is likely to succeed in the action. Where there have been deficiencies in the evidence, the form of application or presentation on the application for permission, the court is not for that reason obliged to discharge the order granting permission. A wrongful non-disclosure (at any rate if not deliberate), though a serious matter, will not automatically require the court to set aside the order granting permission if such a sanction is disproportionate or would be contrary to the overriding objective of dealing with the case justly: a costs or some other sanction may alone be appropriate. …

1. I accept that wrongful non-disclosure, if not deliberate, does not automatically require the court to set aside the order granting permission. I must apply the overriding objective, and, as emphasised inKnauf, strike a balance which ensures that the case is dealt with justly. The difficulty for Standard Bank in the present case is that it has not lodged any evidence to explain how the non-disclosure in the present case came about. Before deciding whether to make the permission application, there was a need to investigate whether clause 11.1 might arguably be an exclusive jurisdiction clause applicable to a claim under the UBR acknowledgement. The need for this would have been apparent to any careful lawyer examining the key agreements. I infer from the evidence that Standard Bank took a deliberate decision that the evidence in support of the permission application should not draw attention to the jurisdiction clause in the UBR supply contract and the fact that under Mongolian law it constituted an exclusive jurisdiction clause. It is vital that the judge who is asked to deal with these matters on paper is not left in ignorance of a key point of this kind. This was a very serious breach of the golden rule. In the circumstances, it seems to me that justice requires that I should deprive Standard Bank of the benefit which it obtained in this way.
2. I add that it has not been said that there was a failure by Standard Bank to consider the question whether UBR might wish to rely upon the jurisdiction clause. Nor has it been said that Standard Bank did consider this but upon doing so there was a failure to appreciate that there might be an arguable basis for relying upon the jurisdiction clause. Nor has it been said that there was a failure to appreciate that Standard Bank had to apply its own mind to this question, and not merely assume that any point arising in this regard would have been raised by UBR in correspondence. If there had been a recognition of the need to take proper care on such an important matter, and proper care had indeed been taken, then it is difficult to see how any such failures could have occurred. I have no reason to think that there were any such failures. However I observe that if there were any such failures it seems to me that in the circumstances of the present case they, too, would have involved such a serious breach of the golden rule as to require that I should deprive Standard Bank of the benefit which it obtained in this way.
3. For all these reasons, even if my decision on other matters had been in Standard Bank’s favour, I would have allowed the set aside application on this ground alone.

SO A BREACH OF THE “GOLDEN RULE” CAN LEAD TO AN ORDER BEING SET ASIDE

This is an important point to note for anyone applying for a without notice order of any kind.

• Inevitably “forensic myopia” can set it on occasions. This must be guarded against.
• Even when time is of the essence it will help to draw up a list of matters, adverse to the applicant’s case, which the court may wish to know about.
• This may seem labourious. However the duty is very, very high. A failure to explain the duty to the client and then take rigorous steps to ensure that the golden rule is complied with can lead to serious problems for the applicant.

ALSO ON THIS ISSUE

• Material non-disclosure on without notice applications: a salutary reminder
• Without notice applications for freezing orders: the dangers abound
• The dangers of without notice applications: the whole truth is the only option