A NEW YEAR'S RESOLUTION FOR 2017 : EX PARTE APPLICATIONS ARE NO PARTY (AND CAN LEAD TO CRYING)
Last year I had 10 new year’s resolutions for litigators. This year I have one. (The resolutions from last year remain current but one resolution is easier to keep)
THINK VERY CAREFULLY BEFORE, DURING AND AFTER, MAKING AN EX-PARTE APPLICATION OF ANY KIND
2016 saw several cases where the party that obtained an ex-parte order ended up paying for it dearly.
- In Fiona Trust & Holding Corporation -v- Privalov  EWHC 2163 (Comm) the claimant was ordered to pay tens of millions of dollars in damages following the obtaining of a freezing order.
- After a lengthy legal battle two solicitors were struck off because of failures to disclose matters when obtaining an ex-parte freezing injunction.
THESE ARE THE NUCLEAR WEAPONS OF THE LAW: AT THE VERY LEAST YOU HAVE TO HAVE READ THE RULE BOOK
There are two dangers: (i) lawyers who are familiar with this type of litigation and overlook the requirements; (ii) lawyers who are not familiar with this area of practice and overlook the requirements. Further these applications take place against a background of a limited amount of time and a large degree of pressure. However if mistakes are made then the courts are – as we have seen – very unforgiving to both litigant and lawyer.
SO BEFORE YOU DO ANYTHING READ THE IMPORTANT CASES
PCV -v- The Y Regional Government of X  EWHC 68 (Comm) Mr Justice Hamblen
The importance of making full and frank disclosure on without notice applications is well established and has been repeatedly emphasised by the Court – see, for example, Bank Mellat v Nikpour  FSR 87 at p92; Brink’s Mat Ltd v Elcombe  1 WLR 1350 at p 1357; Arena Corporation Ltd v Schroeder  EWHC 1089 (Ch) at .
“[The applicant] must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether to grant the application. It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state. If the duty of full and fair disclosure is not observed the Court may discharge the injunction even if after full enquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure.”
Although the YRG may not be a State, its title states that it is a “government” and it is accepted that Freshfields were well aware of the publicly available information relating to it. This shows it to be a self-governing region which is recognised as a federal region in the country’s constitution which also acknowledges that the YRG has sovereign powers. It has an elected parliament, a president and a department of foreign relations with representative offices abroad. It also has its own military forces.
Further, the potential applicability of Section 12 SIA was of fundamental importance to the application which was being made. That application concerned both method of service (the mandatory subject matter of s.12(1)) and time for acknowledgment of service (the mandatory subject matter of s.12(2)). The application was presented to the Court as a straightforward application under PD 62.4 which could and should be dealt with on the papers. There was no suggestion that there was anything unusual about the application being made. In fact the application raised serious and substantial issues, as the present application and hearing has borne out. There is no doubt that if the applicability of s.12 had been brought to the Court’s attention there would have been no question of it being dealt with on the papers. At the very least an oral hearing would have been required and the outcome of any such hearing is far from clear even on a without notice basis.
The Claimants were therefore in breach of duty when they made their application for the November Order. Given what Freshfields knew and should have known and the fundamental importance of the disclosure to the application being made I regard that breach as being seriously culpable. As is accepted, the duty is a continuing one and the Claimants remained in breach of duty thereafter. They were in further breach of duty when they issued their application for the December Order on 12 December 2014 without reference to the potential applicability of the SIA.
Freshfields were first alerted to the SIA issues by WilmerHale’s letter of 16 December 2014. The YRG were highly critical of Freshfields’ conduct thereafter and submitted that they were in deliberate breach of duty. I reject that allegation. Freshfields considered the position in the light of WilmerHale’s letter. That understandably took time. They eventually responded with a letter to the Court and to WilmerHale of 18 December 2014 in which they rejected the applicability of s.12 for the reasons stated therein. Although they were criticised for not ensuring that all WilmerHale’s correspondence was put before the Court, since they were told by WilmerHale that they had put it before the Court I consider that this criticism is unjustified. They were also criticised for not proactively going back before the Court and requesting that the November Order be set aside. However, the whole matter was before the Court as part of the application for the December Order. As far as Freshfields were aware all relevant correspondence relating to the applicability of the SIA was before the Court and the Court was therefore in a position to consider what should be done in relation to the existing November Order and the requested December Order. In the event it appears that through a mix up at the Court Office none of the relevant correspondence was before Flaux J when he made the December Order on 18 December 2104, but that could not have been foreseen.
Subject to one matter I therefore do not consider that the Claimants continued to be in breach of duty after they had written to the Court on 18 December 2014. That matter is the potential applicability of s.12(2) to the December Order. In circumstances where the Claimants were asking the Court to abridge the time for acknowledgment of service I consider that they should have drawn the Court’s attention to the potential effect of s.12(2) if the SIA applied. On their own case they were asking the Court to make an order which might well facilitate depriving the YRG of any right it may have to rely on the SIA.
I recognise that this is not a case in which injunctive or equivalent relief was being sought, that (if the Claimants are right on s.12(1) or s.12(6)) no significant advantage would have been obtained and that this is not a case of deliberate breach. Nevertheless the duty of full and frank disclosure is of the first importance and in all the circumstances I consider that the non-disclosures in this case are sufficiently serious to warrant setting aside the orders obtained. This was a seriously culpable non-disclosure by extremely experienced and well-resourced solicitors in relation to matters of fundamental importance to the applications being made. If the November Order is set aside then the December Order must equally be so regardless of whether there are independent grounds for so doing.
For completeness I would add that if the Claimants’ case had succeeded on s.12(3) but not otherwise then it would be an even clearer case for setting aside the Orders. In such circumstances the Claimants would be taking advantage of a Catch 22 which should never have arisen and only did arise because of their non-disclosures.
AN EXAMPLE OF THOSE LESS FAMILIAR WITH MAKING EX PARTE INJUNCTIONS
COOKE -v- VENULUM PROPERTY INVESTMENTS LTD  EWHC 4288 is interesting reading. It concerns an application for a freezing order made by claimants who were not familiar with the the process.
The action was proceeding in the county court. It concerned a disputed right of way and damages were limited to £15,000. The claimants were concerned that the property had been transferred. After the trial in the county court, but prior to judgment, the claimants made an application for, among other things, a freezing injunction.
- The freezing order did not have any of the usual provisions of a freezing order.
- There was an issue as to whether the court had jurisdiction to make an order in the
The High Court judge set aside the order and ordered that the claimant pay the costs on an indemnity basis.
“19. I consider that it was inappropriate for the claimants to have made their original application ex parte. Courts have said time and time again that there is something inherently unjust in hearing one party without the other party. Of course, sometimes a court is forced to act in that way and run the grave risk of an injustice being done, but the court should not be asked to do that save where it is fully justified. Mr Blackett-Ord says that it is common place with applications for freezing orders to go ex parte and indeed that is right, although it may happen more often than it should, but, looking at this case, I do not see there was any grave risk of disadvantage to the claimants by informing the defendants, including the intended third defendant, of the intended application. What is the worst that could have happened? The worst that could have happened is that the third defendant would transfer the property again and so the court would be faced at an inter partes hearing with another party, say a fourth defendant, owning the title rather than the third defendant. There was no particular magic in the third defendant owning the property. The claimant would have preferred the first defendant to have retained it so that the third defendant being substituted by the fourth defendant would hardly have been a disadvantage to the claimants. If the third defendant had been given an opportunity to appear before Judge Barker with the benefit of legal advice, it may very well be that this order would never have been made in the first place.”
HAD THE CLAIMANTS’ DRAWN THE DEFENDANTS’ ARGUMENTS TO THE JUDGE BARKER?
Mr Justice Morgan found that the claimants had not addressed the defendant’s possible arguments
“20. Secondly, I am also critical of the fact that Judge Barker was not told that there was a possible argument as to jurisdiction. I am prepared to assume that the claimants just did not think about it and so they are not personally at fault. However, that does not remove the sting of the criticism because it seems to me that it was obvious that they should have thought about it. They were essentially making an application for security for costs in circumstances where they did not address the criteria for security for costs and were seeking to turn an application for security for costs, wholly impermissibly and, in my experience, in a wholly novel way, into an application for a freezing order, so the matter ought to have been drawn to the attention of the judge by competent legal advisors.
21. I am also concerned that the risk of dissipation was not properly addressed by the claimants and, further, the order which they produced for Judge Barker’s consideration had quite wrongly removed from it appropriate safeguards and, contrary to the settled practice, the deletions from the standard form of order were not drawn to the attention of Judge Barker. The fact is that the claimants then did not read the order they had obtained, did not realise that there was a return date of 8th November, did not serve an application notice for 8th November, did not arrange for the court to deal with the matter on 8th November and then, when they had that matter pointed out to them, went behind the back of the third defendant and made another ex parte application to get the order extended at a time when they knew that the continuation of the order was something which was opposed by the third defendant.
THE CLAIMANTS’ BREACH OF THE UNDERTAKING TO SERVE THE ORDER AND SUPPORTING MATERIAL
He also concluded that the claimants’ solicitors had not complied with their duty to serve the order and supporting material, even though they had warned the third defendant that an order had been obtained. This warranted an order against them for indemnity costs:
“22.My attention has also been drawn to the fact that the claimants’ solicitors did not comply with the undertaking they gave to serve the order and the supporting material they had shown to Judge Barker. Some of the sting of that criticism is blunted by the fact that there was a communication of the fact that an order had been obtained, and that communication was relatively prompt. That did not relieve the claimants’ solicitors of the burden of complying with the undertaking to serve as they should have served. They should not have taken the view that they could unilaterally decide to postpone service to allow them to register the order at the land registry. I think, in view of those various criticisms, this case is outside the norm and it is appropriate, therefore, to order the claimants to pay the costs of the High Court proceedings on the indemnity basis.”
COUNSEL ALSO OWES SPECIFIC DUTIES OF DISCLOSURE AND TO ENSURE THAT THE ORDER IS IN AN APPROPRIATE FORM
The case law was reviewed by Peter Smith J in Peter Smith J in Greenwich Inc Ltd (in Administration) -v- Dowling & others  EWHC 2451 (Ch), referring back to the case of Sidhu Memory Corporation
“Evidence of Counsel ”
The ground of material non-disclosure relied on to discharge the freezing order is based on serious criticisms of counsel’s conduct on a without notice application. It is regrettable that counsel has not at any stage even attempted to supply the other party’s advisers or the court with a written statement of his recollection of the hearings that took place before Hart J late in the afternoon of 26 January and early in the morning of 27 January 1999. In particular he has not supplied a written explanation of how, as is evident from the transcript, he came to misinform the court on 27 January (albeit not deliberately) that certain paragraphs in the draft freezing order were in the standard form , when in fact those paragraphs were clearly not in the standard form and the judge was not given any good reason in argument or in the evidence for departing from the standard form.
In my judgment it is always prudent in cases where an advocate’s conduct of a case is subject to, or is likely to be subject to, controversy for the advocate to make a full written account of his recollection as close in time to the events in question as possible. This is particularly desirable where the impugned conduct occurred at a hearing at which the other side were not present and no transcript is available, as was the case with the hearing late in the afternoon of 26 January. Within the limits allowed by legal professional privilege, if it is not waived by the client, the advocate’s statement should be made available to the other side and to the court.
It is unsatisfactory for the advocate to do what counsel has seen fit to do in this case, namely to give oral evidence to Hart J and to this court many months after the relevant events and as an integral part of his overall submissions in the course of seeking to retain for his client the benefit of the order obtained in the disputed circumstances.
It was only when this court asked to see the papers in the Den Norske litigation used by Memory’s solicitors in connection with the application for the freezing order in this case that they were provided to the court. It was only when Alliott J indicated in the course of the hearing of this appeal that an apology in this court might be appropriate that counsel offered an apology. I cannot help thinking that if counsel had at an early stage written down his recollection of what had happened in connection with the January hearings he might have formed a keener appreciation of the seriousness of the criticisms of his conduct and of the appropriate response to those criticisms.
Duties to the Court.
It cannot be emphasised too strongly that at an urgent without notice hearing for a freezing order, as well as for a search order or any other form of interim injunction, there is a high duty to make full, fair and accurate disclosure of material information to the court and to draw the court’s attention to significant factual, legal and procedural aspects of the case. It is the particular duty of the advocate to see that the correct legal procedures and forms are used; that a written skeleton argument and a properly drafted order are prepared by him personally and lodged with the court before the oral hearing; and that at the hearing the court’s attention is drawn by him to unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be observed.
There was a lapse of duty in the failure to provide Hart J with a skeleton argument and a draft order before the oral hearing on 26 January 1999 started. It is unsatisfactory for an advocate to hand to the court for the first time during the course of an urgent hearing a long and complex draft order which requires close reading and careful scrutiny by the court. If the advocate is unable to produce a draft order for the judge to read before the oral hearing starts then the application should not be made, save in the most exceptional circumstances, until the order has been drafted and lodged.
I emphasise the special responsibility of the advocate for the preparation of draft orders for the use of the court. There may be a convenient precedent to hand on the word processor of the instructing solicitors or in their files or in counsel’s chambers, but it is the duty of the advocate actually presenting the case on the oral hearing of the application to settle the draft order personally so as to ensure that he is thoroughly familiar with the detail of it and is in the best possible position to respond to the court’s concerns and to assist the court on the final form of the order.
Applications of this kind should never be treated by the advocate and those instructing him as involving routine pieces of paper work containing common form orders to be printed out from a computer and rubber stamped by the court. The urgency of the application and the absence of the other side necessarily mean that the court is even more reliant than it normally is on the scrupulous and meticulous assistance of the advocate in deciding whether or not to make extreme orders of this kind in the circumstances of the particular case.
In this case I am sorry to say that Hart J did not receive from counsel as much careful assistance as he was entitled to expect on the detailed form of the freezing order. That lack of assistance contributed to the judge making an order in a form which I am confident he would not have made if counsel had performed his functions to the high standard required of the profession of an advocate.
APPLYING THIS TO THE GREENWICH CASE
In this case counsel acknowledged before the 16 December hearing that there was an error and an apology was drafted, although what was done with it afterwards remains obscure. It is acknowledged that during the course of the present hearing there were errors of departure from the standard form. There were also errors of fact, namely telling me that all of the pubs were not trading.
I note what Mummery LJ said on this but it is regularly the case where solicitors are experienced in repeat applications of a similar nature that they develop their own particular form of order. However, I should caution that if that is used it must nevertheless be provided to Counsel who must in effect approve it. Counsel has the primary responsibility to the court, as Mummery LJ spelled out clearly. It would be Counsel’s failure if the order does not comply with the requirements. Nevertheless that is not the end of the matter. If the solicitors prepare the order they will also have a liability if they do not appreciate that their order departs from a standard form or if they know that the order departs from a standard form and they permit Counsel to make the application without drawing to the judge’s attention the non-standard provisions.
The failures to disclose in the context of an application on a busy interims court day leads inexorably to the conclusion that the undertakings must be discharged. There may be an Admiral Byng element in this, but I cannot emphasise too much the need for Counsel to be very careful in how the order is presented and how the matter is deployed before the judge. It is essential that Counsel satisfies himself or herself that this case has been fully understood by the judge.
CLAIMANTS SHOULD SPEAK FOR THEMSELVES
Since a claimant is on the line to pay substantial (potentially millions) of pounds in damages if an ex parte order is found to be wrongfully obtained it is prudent (and indeed a requirement in some cases) that they give the evidence directly. In YXB -v- TNO  EWHC 826 (QB)
“A claimant who seeks an injunction to restrain misuse of private information is asking the court to attach more importance to his right to respect for his private life than to the defendant’s free speech rights. Claimants are expected to speak for themselves, unless there is some good reason why they cannot do so. Ordinarily, therefore, at every hearing at which an order for non-disclosure is sought there should be evidence from the claimant. If the rights of any third parties such as partners are relied on, they too should ordinarily speak for themselves. If, due to urgency or for any other reason, evidence from these sources cannot be obtained in time, the court hearing an application without notice or on short notice will expect an undertaking to provide it when it can be obtained. If such evidence is still not available on the return date, the court will look for an explanation of why that is. All these points are well-known to practitioners in this field, and to a wider audience, at least since they were made by Tugendhat J five years ago in Terry v Persons Unknown  EWHC 119 (QB); see in particular -.”
THE EVIDENCE IN THIS CASE
The evidence was contained in a single witness statement, made by Ms Feely, associate at Manleys solicitors, on 19 February 2015, the day of the application. The first paragraph of the statement said that its contents were within her own knowledge unless otherwise stated. Very little of it could however have been within her own knowledge. Paragraph 2 described the claimant, giving his professional roles and his age. The claimant was said to have “a long-term partner, with whom he lives a married life and who is the mother of his only child, a daughter.” The statement gave no explanation of why there was no witness statement from the claimant. An explanation has since been given, to which I shall come. Nothing further was said about the claimant’s partner or child or why, given that her rights were implicitly being relied on, the partner had not made a statement. No explanation for the absence of any such statement has been given since.
Paragraph 3 of Ms Feely’s statement opened in this way: “My colleague Mark Manley (“Mr Manley”) received a telephone call from the Claimant’s agent (“the Agent”) on Tuesday 17thFebruary 2015 to request legal advice”. This part of the evidence therefore seems to be Ms Feely’s account of what Mr Manley told her he had been told by the Agent. Further degrees of hearsay are involved, as will be clear from the account given,... .
The defendant’s statement notes at paragraph 50 that there was no mention in Ms Feely’s first statement of any distress that would be caused to YXB by the release of any of the information. The response came in Ms Feely’s third statement. The information in this statement was, like her first, said to be “derived from my own knowledge unless otherwise stated.” At paragraph 18 she refers to the defendant’s paragraph 50, describing it as “remarkable” to suggest the claimant would not be distressed. She asserts that it is “obvious that such would result from infringement of his privacy. For the avoidance of any doubt the publication of the claimant’s confidential and private information would undoubtedly cause the claimant distress and embarrassment.” This once again takes the form of a submission rather than a statement of fact based on what she has been told by the claimant. She goes on “The claimant believes that his sex life is and should remain private and that details of it should not be published to the world at large (whether for commercial gain or not)”. This is not much better. Although it does refer to what the claimant believes, it does not state that she has spoken to him about the matter. I note that the statement of truth on the Particulars of Claim is not signed by the claimant but by Ms Feely.
- Obtain an injunction: pay tens of millions in compensation: another warning lesson.
- Football, sex, injunctions and material non-disclosure.
- The duty of full and frank disclosure on without notice applications.
On without notice applications and the duty of candour
- The duty of full and frank disclosure: a case in point.
- Freezing Orders and the duties owed on ex parte applications: nuclear weapons that can blow up in your face. (There are useful links to other articles on this subject in that post).
- Without notice applications for freezing orders: the dangers abound: Greenwich case contains some timely lessons
- Solicitor found to have deliberately misled the court: Boreh -v- Djibouti