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National Bank Trust v Mr Ilya Yurov & Others [2016] EWHC 1913 (Comm)

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management - Freezing Orders

03-05-2017

The High Court dismisses an application to discharge a freezing order despite material non-disclosure by the Claimants.

Facts of the case

– two of the Defendants (“Ds”) applied to discharge the freezing order on the grounds that:

– there were serious and multiple breaches by the Claimant (“C”) of its duty of full and frank disclosure when applying for the order

– there was no real risk of dissipation of Ds’ assets

– Ds served 130 pages of written evidence “with a liberal scattering throughout of allegations of failures of disclosure”. Males J directed the Ds to identify on a single page the six principal failures in disclosure on which they sought to rely

The decision

– Males J found that there had been material non-disclosure on three of the six grounds advanced by the Ds, including in respect of one which impacted on the merits of the C’s position in the main claim

– however, he declined to discharge the freezing order on the basis that:

– there was a significant potential for injustice in doing so given the clear strength of the C’s case, evidence of previous attempts to dissipate the Ds’ assets and that one of the Ds (by his own admission) had engaged in conduct that appeared prima facie dishonest

– the failures in disclosure (while important) were not decisive since Males J found that he would have granted the freezing order even if the non-disclosed facts had been known

– notwithstanding the importance of ensuring compliance with the duty of full and frank disclosure, the question of punishment did not arise in this instance as the failures were innocent (in the sense that there was no intention to omit or withhold information which was thought to be material) and deterrence could be met by an appropriate order as to costs

– as a sanction, C was only entitled to 40 per cent of its costs of the discharge application on the standard basis. Males J also declined to order payment on account

Analysis and practical advice

– the overriding consideration in determining such applications will be whether it is in the interests of justice to continue the freezing order (or impose a fresh order) despite the failings in disclosure

– each case will turn on its particular facts, but what appears to have been decisive in this case is the continued risk of dissipation, particularly in circumstances where there was evidence of apparent dishonest conduct by one of the Ds and the non-disclosure was found to have been an innocent mistake

– in seeking to discharge freezing orders, applicants should ensure that their grounds are concise and limited to the key alleged failures. Applicants should avoid taking a “scattergun” approach and, in the cases where there is an alleged failure to provide full and frank disclosure, avoid the application becoming a “mini trial” of the merits

– the punishment consequent on failure to comply with the duty of full and frank disclosure may be lessened if the failure was innocent, e.g. if the failure was a result of a fact not known to the applicant or its relevance was not appreciated at the time

 

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