Mr Justice Peter Smith:
INTRODUCTION
- This judgment arises out of a freezing order on a worldwide and domestic basis together with other orders which I granted ex-parte on 4 December 2013. The return date was scheduled for 16 December 2013 (before the Interims Judge). The Defendants resisted the Claimants' application and sought a discharge of the order I made on the basis:
(a) That I had been misled into giving the orders and/or there was a failure to disclose important matters in breach of the Claimants' duty of full and frank disclosure and
(b) Some of the claims were contended to be unarguable.
- There was of course limited time on an interims return date to hear such an application. There was a Deputy High Court Judge available but he was in the same chambers as Mr Kitchener QC who appears for the Defendants and the Claimants refused to consent to him (Mr Nicholas Strauss QC) hearing the case.
- Apparently the Claimants attended court on 16 December armed with a letter from Counsel accepting that I had been misled in one critical aspect and offering an apology. That letter was not shown to the Court or the Defendants at the hearing.
- Given the lack of court time, the parties agreed on the basis of undertakings given by Mr Dowling (the First Defendant), Madison Lease Limited (Third Defendant), Craig O'Brien, the Scottish Corporate Defendants (American Bar & Grill Trading Ltd, Union Square Trading Ltd, Madison New Trading Limited, and Spread Eagle Trading Limited) that preserved the assets of the various individuals and companies pending the hearing of the present application.
- Against that the Claimants gave the usual cross undertaking in damages together with other undertakings which are of no concern.
- That regime still remains in place. It is those undertakings that the Defendants seem to have discharged.
- The matter was then re-listed to be heard before Mr Richard Spearman QC sitting as a Deputy Judge of the High Court. He correctly, in my view, concluded that in view of the nature of the Defendants' allegations the case ought to be referred back to me. I concurred in that view and the case was re-listed and came on before me on 7-8 April and 16 April 2014. At the conclusion of the hearings, I indicated that I would discharge the undertakings for the reasons given in a judgment to be provided later. The question will still also remain as to whether they should be restored in an order if the Defendants are unlikely to renew them.
- Subject to paragraph 119 if the Defendants no longer had been willing to give the undertakings that they gave on 16 December 2013, I would have heard submissions from the parties as to whether the Claimants should be granted any further relief and if so, what relief.
BACKGROUND
- The background to this case can be discerned from the first affidavit of Stephen John Hunt sworn on behalf of the Claimants in both actions on 4 December 2013. I had seen a draft of this with various incomplete parts of it on 2 December 2013.
- Mr Hunt together with Timothy James Bramston, was joint administrator of Greenwich Inc Ltd ("Inc"). Mr Bramston was also the liquidator of Greenwich Trading Limited ("Trading").
- As such joint administrator and liquidator he sought a freezing injunction against Mr Dowling, who was the sole de jure director of both Inc and Trading, and a Ms McCracken who was alleged to be a de facto director of Inc and Trading.
- Injunctions were also sought against the large number of companies referred to above (together the "Scottish Companies") and Mr O'Brien is said to be the de jure director of the Scottish Companies. All of the Scottish Companies were registered in Scotland. In addition, injunctions were sought against Madison Lease Limited.
- The primary claim was that assets belonging to Trading were purportedly transferred to the Scottish Companies and that there was no evidence of any consideration having been paid.
PREVIOUS HEARING
- The Claimants appeared before me ex parte on the afternoon of 2 December 2013. In that application the Claimants were seeking not only freezing injunctions but also search orders. However, the application was simply not ready; the main affidavit (that of Mr Hunt) was not only unsworn, it was full of blanks which Counsel had indicated required completion in various respects. The proposed Supervising Solicitors were there but there was no evidence in respect of the suitability of those proposed supervising solicitors although they were well known to me having been involved in search orders in the past.
- I declined to make an order on the basis of that material. At the time the concern was in respect of antiques which it was believed that Mr Dowling was improperly removing from the various company premises or had improperly held under his own control even though they belonged to the company. In Greenwich Inc Holdings Ltd's ("Holdings") accounts (the holding company of Trading and Inc) there was a figure of £3,373,000 as at 30 May 2011. Earlier a figure was as high as £6.6m for insurance purposes and the net figure in the evidence from a distressed sale was stated to be £2m. There were suggestions of antiques disappearing in a white van which was being followed by the police.
- Despite the enthusiasm of Counsel for the application, I declined to make a Search Order on the basis that it was premature and the evidence was not properly put together. I indicated that I might grant some negative injunctive relief if it was sought because at that stage the Claimants did not want to alert Mr Dowling whilst they were still pursuing assets which it was asserted he was wrongfully removing.
- I also indicated (transcript page 11) that as I understood it, the administrators and liquidators had control of all of the pubs. That was not corrected and it was not the true position.
- I also indicated (transcript page 3) that I was not convinced that even if I granted a freezing injunction, it should be worldwide.
INTERIMS – AN OVERVIEW
- I should say something about the interims procedure that operates in the Chancery Division.
- The Chancery Division has available for every day of the week a designated judge who only hears urgent interlocutory applications (both inter-partes and ex parte). By far the largest number of applications is ex parte or return days of ex parte injunctions previously granted. A judge is appointed to sit on a fortnightly basis. During that fortnight the relevant judge hears all the applications that are made in the interim court and the judge is also available on weekdays to hear urgent applications out of court hours. At the weekends a different judge hears the out of hours applications that might arise then.
- There is no limit to the number of persons who can apply. There is an overall limit that no application will be entertained if it has an estimated length of hearing in excess of two hours. Those two hours include pre-reading, hearing time and judgment time (a point regularly overlooked by Counsel and Solicitors). It follows that the relevant judge regularly sits very long hours. When the judge hears the cases on the day, the sittings might go as late as between 7pm and 9pm in the evening. There are regularly dozens of applications that are made. When the judge finishes that day he will then have to pre-read the applications that have been notified for the next day. During the day up until 4.15pm, parties can apply by contacting the clerk and asking to be heard.
- It is a challenging process both for the judge and the court staff. However, it is considered by the division to be a vital tool of the services that the division offers.
- It will be appreciated that when a judge is hearing so many applications, he will be provided with large amounts of material in respect of those applications. Given the limits it is unrealistic to believe that the judge will be able to read all the material that is put before him or her for consideration. Indeed if the interims judge pre-read all the material provided at the start of the day, there would be very little time for the actual hearings (despite often optimistic estimates of the time to read relevant material).
- The judges are therefore very dependent on what the advocates tell them. They are dependent first as regards the fleshing out of skeletons and explaining the basis of the case and second, as regards the material that it is necessary to read to be able to understand the case so as to make a decision. For example, in this case on 4 December 2013, I was told by counsel for the Claimants that I did not need to read the exhibits so I did not. They filled three lever arch files. If I had read them the case would have exceeded the two hour limit.
- Without that confidence in being able to rely on counsel, the interim system would simply collapse as there would not be enough time to accommodate the large number of applications that are brought before the judge. On the days in question, I had in excess of a dozen applications on each day. That did not count the ex parte applications which applied during the course of the days.
TRADING
- As can be seen by Mr Hunt's affidavit, serious allegations of fraud were made against Mr Dowling in particular. Trading was incorporated on 11 March 2002. It ran a number of bars and restaurants in London. Mr Dowling was a director from 1 June 2010; between 11 March 2002 and 11 September 2006 and between 24 March 2009 and 1 June 2010, it was asserted that Ms McCracken was a de jure director and after 1 June 2010 had been a de facto director.
- Trading was placed in provisional liquidation on 17 October 2013 following the making of a provisional liquidation order by me on that date on the application of the petitioning creditor of the Royal Borough of Greenwich.
- It was compulsorily wound up by Registrar Baister on 2 December 2013.
- Between those dates Mr Dowling had prepared a directors report and Statement of Affairs as at 14 February 2013. That Statement of Affairs showed that Trading was insolvent. According to its balance sheet it had a net deficiency of £3,898,680.
- It was not accepted that that was the correct figure in the sense that the Office Holders believed on the information they received that there were substantially higher sums due to HMRC in respect of unpaid PAYE, NIC, and VAT. In his interim report, as provisional liquidator of 23 October 2013, Mr Bramston suggested that Trading's liabilities to HMRC were understated in the Statement of Affairs and that that understating arose from a deliberate understatement of the amount of Input Tax which in his view indicated a likelihood of a substantial VAT fraud. On his analysis the amount due to HMRC was £6m greater than the amount shown in the estimated State of Affairs which made the total deficiencies regards creditors some £9m.
INC
- Inc was incorporated on 14 May 1993. It held a series of leases from which Trading operated. Mr Dowling was a director from 1 June 2010; Ms McCracken from 22 November 2002 and ceased formally to act as director from 1 June 2010. It was asserted Ms McCracken was a de facto Director after 1 June 2010.
- Holdings was incorporated on 10 June 2002. Mr Dowling again was a director from 1 June 2010 and prior to that Ms McCracken was a director.
HOLDING
- Holdings was the holding company of Inc and Trading.
- It placed itself into administration on 28 November 2013 and David Ingram and Ms Amanda Wade of Grant Thornton were appointed joint administrators.
- The shareholding as seen by the annual returns filed by Trading, Inc and Holdings showed that Trading and Inc had common shareholders namely Holdings and Wyncroft Development Ltd ("Wyncroft"). Holdings itself was a subsidiary of Wyncroft. It is an offshore company registered in Tortola BVI and the Office Holders believed Mr Dowling to be the ultimate beneficial owner. They therefore approached the applications on the basis that he was the ultimate beneficial owner of Trading, Inc and Holdings.
THE SCOTTISH COMPANIES
- On 30 May 2012 Madison New Trading Ltd was incorporated and its sole director was Craig O'Brien who was the partner of Ms McCracken. On 20 June 2012 all the other Scottish Companies were incorporated with the same director and shareholder structure as Madison New Trading Ltd.
CONCERNS
- The first investigation by the provisional liquidator showed undated agreements whereby the business of Trading, which was run from a number of public houses and restaurants, was disposed to the Scottish Companies for no consideration. The agreements permitted the Scottish Companies to run the business of each premises in return for 10 per cent of the net revenue. However, the evidence showed that the fixtures and fittings according to Trading's books were worth approximately £2.8m. In October 2013, Mr Dowling's then solicitors advised that in fact all the fixtures and fittings belonged to Inc, but there was apparently nothing in the company accounts to suggest that. Further, Mr Dowling stated expressly in the draft statement of affairs that they were the property of Trading. The trading agreements (if any) (other than the one relating to Trafalgar Tavern) were terminated by the administrators by a letter dated 29 November 2013 on the grounds that they were shams and part of a series of fraudulent transactions designed to defraud the creditors of Inc and Trading. The administrators recovered possession of all of the premises save one, although as set out above I was under the impression that they recovered possession of all of them. In fact, Trafalgar Tavern Ltd was not terminated.
MADISON LEASE LIMITED
- Inc held the lease of the premises at the Rooftop Terrace, 1 New Change, St Pauls, London EC4 M9F. This was the best trading location of all of the premises. However, on 1 September 2013 the lease of these premises held by Inc was apparently assigned to Madison Lease Limited. A copy of the TR1 form shows no consideration taking place and the transfer has not been registered.
WRITE OFF OF DEBTS
- On investigation of the records of Trading, the liquidator discovered that over the years from 31 May 2006 to 31 May 2011, its trading debtors had increased from £177,629 to £4,184,297. The accounts also purported to show transfers of leases from Trading to Inc which had a net value of £2.3m but they did not appear in Inc's balance sheet. With regard to the debtors the substantial amount of the debtors which were intercompany debts were written off in 2012. Inc's auditors, Hacker Young LLP, advised the bankers of the group, the Royal Bank of Scotland, that the intercompany debt due had been waived and written off to the profit and loss account with apparently similar journal entries in Inc's accounts. This was of concern as at the time Trading was insolvent, but Inc was solvent. Further, Trading's books recorded no waiver of the loan and no document was found to substantiate the waiver.
- In the light of all of these concerns the application was made on 4 December 2013. The evidence was Mr Hunt's affidavit. Counsel provided a detailed skeleton argument in which the causes of action were addressed as was the risk of dissipation justifying the present application. The papers were lodged early in the day for a hearing at 10am, but this was adjourned until 2pm.
- An application for a Search Order was not sought this time.
WORLDWIDE FREEZING INJUNCTION
- I commented as regards the prospects of such an application on 2 December 2014. Mr Hunt's affidavit included a claim for a worldwide injunction against Mr Dowling because of his actions, because of the fact he was an American citizen and was also using offshore companies in respect of the ultimate ownership of Inc, Trading and Holdings. He did not seek one against Ms McCracken nor Mr O'Brien but did against the Scottish company.
HEARING 4 DECEMBER 2013
- In the morning an application was started. I raised a question of the jurisdiction concerning Scottish companies and the application was adjourned until 2pm. It was indicated that the exhibits did not need reading; merely the skeleton argument and the affidavit. It was also indicated that there was no present intention to apply for a search order despite the initial concerns about the dissipation of assets.
- On the reserved hearing it was indicated that the application was for freezing injunctions only and I was told "it is freezing injunction, my lord.. I was going to show you the Particulars of Claim as well. You will have seen them described in the skeleton. My Lord, they are in standard form of freezing injunctions…"
- I stated again that I believed that all of the pubs have been taken over and that was confirmed (incorrectly). It was reiterated again that as the businesses had been terminated there was no need to consider the standard form exception in the freezing injunction of payments made in the ordinary course of the business. I asked "these are ex parte. I have seen a lot of these things over the last week or so, is there anything else I need to know?" Counsel replied "My Lord, you saw my skeleton argument I set out the defences that people might come out with that we could think of against our claims and you also read the full and frank disclosure section by the witness statement. I have not got anything that I can add to those.
- In the light of that observation having read the affidavit I indicated that the relief sought would be granted.
- The form of the order was briefly considered as the transcript shows. I can only assume that I did not consider it in great detail in the light of counsel telling me it was a standard form freezing injunction. I firmly believe that if I had read the order without that assurance I would have noticed the errors that were in it. It is a matter of regret on my part that I did not read the order in full; I am afraid that is down to the pressures on judges on Interims as I have set out above. It only works if the judges can rely on counsel to tell them what needs to be read and what (in this case) departs from the norm.
THE ORDER
- The court issued separate orders against each Defendant with a court stamp of 5 December 2013.
- I put it that way because there are a number of oddities about the event. First, I inspected the Court File and I found no copies of the applications nor the affidavit on file. More particularly, there were no copies of the issued order nor any copies of orders which I had signed. I have no positive recollection of signing the orders.
- Further it is my invariable practice for my clerk to have copies of every order I sign. She also obtains a copy of the order as issued with the seal on it. In the present case she had neither.
- During the course of subsequent hearings, my original papers were not to be found. The practice on Interims is that when an application is concluded, all papers are handed back. There are two reasons for this. First, if they were all kept then a lot of unnecessary documents would rapidly be generated. Second, the judge that hears an application ex parte will not necessarily be the judge on the return date (as has happened here). To avoid confusion with the first judge retaining the papers and them not being handed on to the second judge, the practice is to avoid that by simply returning the papers back to the solicitor who is under an obligation to produce them at the next hearing date. Eventually some of my papers were found in Counsel's room which is somewhat unusual.
- Counsel swore an affidavit which set out the drafts and how they had been created and further identified documents that were found in Counsel's room. These included some papers which had come back from my bundle as they contained annotations in my handwriting on a draft order to be sought against Barclays bank (but without it having been initialled) and comments on various parts of the sworn affidavits of Mr Hunt.
- Counsel was also required by me to produce the drafts that had been used at the ex parte hearing. Some were produced but it was not possible to say with certainty that the drafts which counsel produced were actually the ones which were used in the hearing.
- There is thus no chain of drafts starting with the one created by counsel, moving on to the one produced at the hearing and concluding in the one that is signed off. Equally there are no documents on the court file as part of that chain of documents. This is disturbing and it is very difficult to see what has happened.
- One possibility is that the form of order with the seal on was never approved by me. The issued order against Ms McCracken included a worldwide freezing injunction although the affidavit (see above) stated a domestic order was only sought against her. Further, drafts of the orders produced by Counsel as set out above show that the draft against Ms McCracken started life as a domestic freezing injunction but was changed to a worldwide one (as shown by the drafts of the Defendants' Solicitors letter of 10 April 2014 to the Claimant's solicitors, Messrs Moon Beever.) Mischon (the Defendant's Solicitors), in their letter dated 10 April to the Claimant's solicitors, suggested that there might have been a deliberate changing of the order after the ex parte hearing before me. Messrs Moon Beever in response to that in their letter of 11 April 2014 set out the change of the draft as regards Ms McCracken which shows that the last draft as regards Ms McCracken was sent out at 9.48am on 4 December by Counsel and that showed a worldwide form.
- They also set out the lack of material on the court file. It is true as is said in that letter that associates on sealing orders compare one initialled by the judge and it is usual for those to be retained. Sometimes due to urgency the initialled copy is given to the solicitors to take to the associates for signature. In that eventuality my invariable practice once again is to retain a copy with my clerk so that there is a continuous record for comparison. No copies of such orders are on my clerk's files. However, one must appreciate this was an order made on interims where there are a large number of hearings and a large number of orders. It is quite possible that the normal procedure was not done and that the initialled copy was taken away by the solicitors and has been retained by them.
- Nothing is clear and I am of the view that no definitive decision can be made as to the facts. I am not prepared to suggest that Messrs Moon Beever, an experienced and well known firm of insolvency lawyers who regularly appear in the Chancery Division, have done anything improper on the material before me (save in respect of participating in the failures that took place on 4 December 2013 and the failure to reveal that orders being sought for approval were not standard form).
FAILINGS IN ORDER
- The orders as issued had four departures from the standard form.
- It is accepted that, contrary to what I was told on 4 December 2013, the orders which were produced at the hearing were not in standard form. Further, Counsel wrote on 15 December 2013 accepting that the order was not in standard form and apologising for that, accepting that a decision of Lord Justice Mummery in Sidhu Memory Corporation (see below) required that the order should be drafted by Counsel personally and it was not. Finally, Counsel apologised because of an erroneous belief that the orders were in standard form.
- Apparently that letter of apology was not actually produced at court. Nor was it addressed to the relevant judge (i.e. myself) and I saw it only on the discharge application.
DEPARTURES
- The first departure was in respect of the standard exception (see for example paragraph 10(2) enabling a defendant to make any disposition in the ordinary and proper course of its business). There was added a proviso "provided only that three day's notice in writing should be given to the Claimants' solicitors of such dealing or disposal."
- On the basis of the information I was told at the hearing that none of the outlets were trading, had that been drawn to my attention I would probably have acceded to it. However, what I was not told was that one outlet was trading and that provision would have made it extremely difficult to put it mildly for an outlet with an operating business to be able to work effectively and plan in advance what notice would have to be given. I can understand the logic of the provision but it is not standard form.
- It is however I suspect a "Moon Beever" standard form. This is probably the cause of the problem in this case.
- The second variation is a paragraph headed "Prohibited Acts". Paragraph 1 provides "except for the purposes of obtaining legal advice, the defendant and any solicitors instructed by him must not directly or indirectly inform anyone (save for persons served and notified of this Order by the Claimants) of these proceedings or of the content of this order, or warn anyone that proceedings have been or may be brought against them, by the Claimant until 4.30pm on the day four days after the service of this Order upon him".
- There is no such provision in the standard form freezing injunction.
- There is such a provision in the standard form for Search Orders. The reasoning behind this of course is that where there are potential multiple defendants and it is not possible to serve them all at the same time, the effectiveness of the order could be frustrated if one defendant having been served informs another (who has not been served) of what the claimant is doing. Equally it is used (for example) in intellectual property cases when the claimants do not know all the potential defendants and once again the purpose of the order is to stop another alleged wrongdoer from being tipped off as to what the claimant is doing.
- It is quite possible that I might have included this provision, which is limited for a very short period of time, had there been argument about it and justification for it. However, no such debate took place because it was not expressly drawn to my attention.
- The third variation was the inclusion of the worldwide nature of the freezing order. The fourth variation was one which was found by Mr Spearman QC. That shows how complicated these matters can be if one bears in mind that prior to the papers coming before him, no-one had spotted the change. The change consists of the removal of the proviso which has an undertaking "the applicant will not without permission of the court seek to enforce this order in any country outside England and Wales [or seek an order of a similar nature including orders confirming a charge or other security against the respondent or the respondent's assets] (see Darby and Co Ltd v Weldon [1990] Ch 48 and IMRE Bank of Credit and Commerce International SA [1994] 1WLR 708)".
OTHER NON-DISCLOSURES
- The claims as originally formulated on 4 December 2013 were:
(a) The purported write-off of the intercompany debt by Trading in or around June 2012.
(b) The transfer in or around July 2013 of businesses that had been conducted by Trading to the Scottish Companies.
(c) Substantial under declaration of tax to HMRC in total of about £6m. The Particulars of Claim issued on 4 December 2013 claimed damages against the Defendants in respect of the above breaches. The damages were based on a breach of fiduciary duty owed by the First and Second Defendants as directors or de facto directors. As against Madison Lease Limited the assertion was assistance of the first and second Defendant's breach of duty. Somewhat surprisingly no relief was sought to set aside the transfer of the Madison Lease which was the most valuable asset of Inc.
(d) The transfer of the Madison lease is alleged to be a misfeasance. The transfer was challenged in separate proceedings issued in March.
- That latter failing was corrected by an application issued on 20 February 2014 by the administrator of Inc against Madison Lease Limited for relief pursuant to section 238 of the Insolvency Act 1986. An interim order for sale was made by consent on 14 March 2014 and the proceeds of sale are to be paid into court. If the value of the lease is recovered there will be a corresponding reduction in the losses in the original Particulars of Claim.
- The Defendants have comprehensively attacked the Claimants for non-disclosure in respect of those claims of potential defences. The Defendants provided a schedule of those non-disclosures/misrepresentations.
- In respect of the VAT claim it is asserted that the Claimants' failure to disclose the VAT cause of action was based on a non sequiturs, namely that non-payments of debt do not give rise to a loss in the amount. It is said that the Claimants acknowledge that they will have to re-plead that case. The Claimants accept (see paragraph 95 of their skeleton) that the plea in respect of the unpaid PAYE and VAT requires more pleading and may not simply be the amount of the Crown Debts. However they make the point that that is an issue as to quantum and contend that the quantum is at least £3m. It is based on the proposition that when the debt was written off the debtor was solvent but became insolvent later, so that as at the date of proceedings Inc can no longer repay the debt. The contention therefore is that the First and Second Defendants by the write-off deprived Trading of a valuable asset when as Directors they should have ensured that the intercompany balance was paid rather than written off in favour of Inc.
- There are other issues in relation to the decision to write-off such as the Defendants' contention that it was done on the advice of independent accountants. An application to discharge is not the place to go into the detail of these matters.
THE MADISON LEASE
- As I have said above, the Claimants now seek rescission of the transfer. It is a different type of relief but is equally a basis for seeking an interlocutory restraining order in respect of that valuable asset.
- As regards to the transfer of the businesses, apart from the Trafalgar property, the Claimants now have possession of all of the premises and have terminated the agreements. They now limit their claim to loss of value of assets which are not returned (cash and stock) and the account of profits made by the Scottish Companies. Those claims are likely to be relatively modest, I would have thought, given the short period. It might be larger against Trafalgar which continues to trade.
- It is impossible to evaluate the detail of the accounts at this stage. However, sight must not be lost to the fact that the Claimants are Office Holders in respect of companies which were insolvent at the time of at least some of the transactions which raises very serious questions as to the way in which the companies have been run by the First Defendant and potentially the Second Defendant in the years preceding the onset of insolvency.
- These claims will require fine tuning. However that regularly happens in cases like this as and when the Office Holders become aware of more information.
- I am not convinced that there has been a serious non disclosure in respect of the criticisms of the causes of action.
EX PARTE APPLICATIONS: DUTY OF APPLICANTS
- The scope and nature of the duty is set out in the well known decision of the Court of Appeal in Memory Corporation v Sidhu (2) [2000]1WLR1443. Mummery LJ provided the leading judgment.
- In respect of the duties at the hearing Robert Walker LJ said this:
"This court has also been referred to a number of more recent cases directly concerned with freezing orders and search orders.
Most of these recent authorities were cited to Hart J on the application to discharge the injunctions. However the judge accepted the submission that there was a significant distinction between the duty of full and frank disclosure which applies on without notice applications, and what the judge called "the separate duty owed to the court by counsel in relation to matters of law and practice". The judge saw the former duty as a duty in relation to disclosure of material facts; as owed by the claimant himself (although the claimant's lawyers could be expected to play a critical role in its performance); and as arising only because the application was made in the absence of the defendant. The judge saw the relevant duty owed to the court by an advocate as different in all three respects.
The judge continued,
"Of course, in the context of an application without notice the existence of both duties provides an important safeguard to the defendant, and a breach of either duty in that context requires to be treated very seriously. It does not, however, follow, that, because both duties in that context share the same aim, the same consequences should flow from a breach of either. The sanction underpinning the duty of disclosure is the threat that if it is not complied with the party who, or whose lawyers, are in breach will be deprived of the fruits of the process. ... The effective policing of the advocate's duty does not, however, in the same way require (although it may in a particular case justify) the imposition of that particular sanction."
He then recorded (in a passage set out earlier in this judgment) that he was satisfied that Mr Higginson had not deliberately misled him; and he concluded that the error was not such as to warrant the drastic sanction of the freezing order being discharged and the claimants denied relief.
Mr Howe, for Mr Sidhu, has criticised the judge's approach on four grounds. He has submitted that the misrepresentation about the form of the order was not only a breach of the advocate's duty to the court, but was also a failure to disclose material facts; that the judge's distinction (in terms of responsibility and consequences) between the litigant and his lawyers was contrary to authority and to the general policy of the court; that the breach of an advocate's duty should not have less serious consequences than a breach of the duty of disclosure; and that the judge should not have excused the misrepresentation in the absence of a proper explanation (that is, a fuller explanation than the claimants' counsel and solicitors had given) of how it came to be made. In those circumstances there was, Mr Howe submitted, no basis for the court to exercise its exceptional discretion to continue the freezing order. In describing the discretion as exceptional he relied on various authorities, including what was said by Balcombe LJ in Brink's Mat v Elcombe [1988] 1 WLR 1350, 1358 ("the discretion is one to be exercised sparingly") and by Dillon LJ in Lloyds Bowmaker v Britannia Arrow [1988] 1 WLR 1337, 1347 ("an element of discretion which, despite non-disclosure, might allow an injunction to stand in an exceptional case").
I see some force in some of these criticisms, if and so far as the judge intended to draw any fundamental distinction between the litigant's duty of full disclosure of material facts, and the advocate's duty to assist the court by reference to (or correct summary of) relevant authorities, statutory provisions and practice directions. In the context of what should be disclosed to the court on a without notice application, the distinction between fact and law is not clear-cut. Many of the authorities already cited refer almost interchangeably to non-disclosure of 'material facts' or 'relevant matters'. Little weight can be attached to these slight variations in language. But some statements of the principle of full disclosure extend to what the court is told about matters of law.
In Bank Mellat v Nikpour [1985] FSR 87, 92 Slade LJ said,
"The applicant should recognise his responsibility to present his case fully and fairly to the court and that he should support it by evidence showing the principal material facts upon which he relies."
In Siporex Trade v Comdel Commodities [1986] 2 LLR 428, 437, Bingham J said that the claimant
"Must show the utmost good faith and disclose his case fully and fairly ... He must identify the crucial points for and against the application, and not rely on general statements and the mere exhibiting of numerous documents. He must investigate the nature of the cause of action asserted and the facts relied on before applying and identify any likely defences."
In Tate Access Floors v Boswell [1991] Ch 512 (a decision of Sir Nicolas Browne-Wilkinson V-C not cited to this court, but referred to in some of the cases that were cited) the two matters considered by the Vice-Chancellor (at pp 534-5) as possible breaches of the duty of full disclosure (although not accepted by him) were not as to past facts, but as to the likely future course of litigation overseas, and as to the legal implications in terms of self-incrimination of a search order. In Marc Rich & Co Holding v Krasner (18 December 1998) Carnwath J cited Tate Access and said,
"Full disclosure must be linked with fair presentation. The judge must be able to have complete confidence in the thoroughness and objectivity of those presenting the case for the applicant. Once that confidence is undermined he is lost."
For these reasons I cannot fully accept the judge's restriction of the duty of full disclosure to matters of fact. Nor can I fully accept his corresponding distinction between non-disclosure of facts for which the client must bear responsibility (even if the nondisclosure was based on legal advice, as in Behbehani v Salem [1989] 1 WLR 723 ) and breaches of an advocate's duty which are exclusively or primarily a matter of professional discipline. The well-known decision of this court in Hytec Information Systems v Coventry City Council [1997] 1 WLR 1666 illustrates that an advocate's professional failure may lead to his client suffering the severe sanction of having his defence struck out. It also (in the judgment of Ward LJ at p. 1675) contains a clear statement of the principle which applies:
"Ordinarily this court should not distinguish between the litigant himself and his advisers. There are good reasons why the court should not: first, if anyone is to suffer for the failure of the solicitor it is better that it be the client than another party to the litigation; secondly, the disgruntled client may in appropriate cases have his remedies in damages or in respect of the wasted costs; thirdly, it seems to me that it would become a charter for the incompetent (as Mr MacGregor eloquently put it) were this court to allow almost impossible investigations in apportioning blame between solicitor and counsel on the one hand, or between themselves and their client on the other. The basis of the rule is that orders of the court must be observed and the court is entitled to expect that its officers and counsel who appear before it are more observant of that duty even than the litigant himself."
That was said in the context of an unless order but the same principle applies to without notice applications.
The correct view, it seems to me, is that the advocate's individual duty to the court, and the collective duty to the court, on a without notice application, of the claimant and his team of legal advisers, are duties which often overlap. Where they do overlap it will usually be unnecessary, and unprofitable, to insist on one categorisation to the exclusion of the other. It will however always be necessary for the court, in deciding what should be the consequences of any breach of duty, to take account of all the relevant circumstances, including the gravity of the breach, the excuse or explanation offered, and the severity and duration of the prejudice occasioned to the defendant (which will include the question whether the consequences of the breach are remediable and have been remedied). Above all the court must bear in mind the overriding objective and the need for proportionality. As Balcombe LJ said in Brink's Mat v Elcombe [1998] 1 WLR 1350, 1358, this judge-made rule cannot itself be allowed to become an instrument of injustice. The relative degrees of culpability of the client and of his lawyers are not irrelevant but will seldom if ever be determinative.
- In respect of the question or not the judge had read the order, and the impact that had, Robert Walker LJ said this:
"On 27 January Mr Higginson returned to court accompanied only by a trainee and a clerk from Mishcon de Reya. Mr Morton-Hooper and his assistant solicitor did not come to court but were deployed elsewhere for service and execution of the orders which they hoped to obtain. The draft order was, it seems, provided by Mishcon de Reya and it may be that Mr Higginson did not have long to study it before the judge sat at 9 am. The transcript of the proceedings that morning shows that the judge was handed two draft orders either when he sat, or just before, and that after some preliminary matters most of that morning's hearing was taken up with consideration of the draft orders (the judge having by then already considered the evidence and said that he was disposed to grant relief). The search order was considered first. It referred to various classes of documents and the judge seems to have noted an overlap with the freezing order "so far as the wide casting of the net is concerned". Then counsel's submissions moved on to the freezing order. He is reported as having said that this was in the form prescribed by the practice direction. A little later he is reported as having said, "
"Paragraphs 3 and 4 are again in the form prescribed by the practice direction, and 5."
(The transcript actually reads 'proscribed' in each place, but it is agreed that that is an obvious error.) There was some discussion to the effect that the appointment of a supervising solicitor was not a normal part of a freezing order, but that Mr Gould (the supervising solicitor for the search order) had recommended it.
Mr Higginson has emphasised to this court that the hearing on 27 January took nearly an hour, and that the greater part of the time was occupied by the judge reading and considering the two draft orders (a fact borne out, counsel said, by the relative brevity of the transcript of an hour's hearing). Nevertheless judges at all levels have to rely on the assistance of the advocates who appear before them, especially in considering relatively long and complex documents put before them at short notice. In this case Hart J acknowledged that, for the reasons given by Jacob J, he (Hart J) had been mistaken in including many of the non-standard provisions of the freezing order. He cannot have been overstating the position when he said that Mr Higginson's representation that the provisions were standard "should be viewed as having contributed to that mistake".
It is appropriate to set out in his own words the judge's perception of the mistake (which he had already described as serious),
"I should at this point record my firm conclusion, formed as a result of the way in which he conducted himself both on the original application and on the present discharge application, that there was nothing deliberate in Mr Higginson's acts and omissions. Mr Howe, on behalf of the first defendant, made much of the fact that I had been left without a full explanation as to how the misrepresentation came to be made to me. The fact was that Mr Higginson was at a loss to explain how he had come to say the fateful words. I think the explanation probably was that the draft was based on the form of the order recently obtained by his solicitors from the Vice-Chancellor in the Den Norske litigation, and which was being used as a precedent within the firm. The basic format of that order was in accordance with the standard form, but the exceptional nature of paragraphs 4 and 5 had not been noted, and was regrettably missed by Mr Higginson when he presented it to the Court."
- The Claimants in their skeleton contend that I had read the orders and carefully considered them as is shown by the corrections. I wish I had the confidence to say that. I firmly believe that if the draft orders put in front of me had the non-standard provisions and I had read them, I would have noticed them. I regret to say that I can only assume that like Hart J I fell into the trap of the blandishments of the statement by Counsel that the order was in standard form.
- The Claimants admit that the orders were not in the standard form and both Counsel and the Claimants' solicitors should have been aware of that.
- I can only pray in aid the pressures that judges face on heavy interim days, summarised above. The procedures will only operate efficiently if the judiciary are able to rely on what they are told by Counsel at the hearing.
- This was a theme which Mummery LJ considered in the Memory case, as follows.
"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.
- 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.
- Finally there was an error in that the order was not actually drafted by Counsel.
- 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.
- In short, in this case both Counsel and Solicitors were at fault in failing to draw this to my attention.
CONSEQUENCES
- 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.
- Providing reading lists of large amounts of material to a judge on an ex parte application on the interims day is almost always likely to lead to the situation that the judge does not read the vast amount of material deployed before him. In this case there were three lever-arch files of exhibits which I was told I need not read.
- I was not reminded of what happened two days earlier and, given the volume of work, I could not begin to say that I remember specific observations I might have made then.
DISCRETION AS REGARDS RE-IMPOSITION OF ORDER
- There is plainly a residual discretion whereby the Court can re-instate some or all of the order that is discharged. The principles are summarised in the case of Irena v Schroeder [2003] EWHC 1089 [paragraph 213] as follows:
"SUMMARY"
On the basis of the foregoing review of the authorities, I would summarise the main principles which should guide the court in the exercise of its discretion as follows:
(1) If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.
(2) Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.
(3) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.
(4) The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.
(5) The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.
(6) The court can weigh the merits of the plaintiff's claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff's case is allowed to undermine the policy objective of the principle.
(7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.
(8) The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.
(9) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.
- At present that does not arise because there are undertakings in place. However they were given voluntarily and at the moment I do not know whether the Defendants are content that the undertakings remain in place against the usual cross-undertakings in damages. If they are not willing for their undertakings to continue then on the hand-down of this judgment I expect them to apply to be discharged. In that eventuality the Claimants will have to consider whether they wish to seek re-imposition of all or any part of the relief I granted on 4 December 2013. That might require some argument.
- In that context, given the admitted changes to the Claimants' case it would be advisable for the Claimants (if they think it is appropriate of course) to produce an Amended Particulars of Claim reflecting all the matters raised before me.
- In the context of that application, if made, firstly one must not lose sight of the fact that, notwithstanding the failures, the Claimants are Office Holders pursuing duties on behalf of creditors of companies which were clearly insolvent. Secondly, there are some aspects of the events that took place before the demise of the companies that justify investigation. Thirdly, two of the offending provisions have long expired and the worldwide nature of the freezing injunction has been addressed. As I said earlier in this judgment, it is likely that, had some of these provisions been raised before me and argued for, they would have been granted. However, these are but factors which are to be taken into account after the overall position has been considered in the light of what the authorities say should be the approach to an application to reinstate some or all of the relief.
POST JUDGMENT MATTERS
- This extraordinary case had another series of extraordinary turns of event after the conclusion of the hearing. As indicated above I said I would reserve judgment, giving reasons why I determined that the undertakings should be discharged. The undertakings were not, of course, discharged at that time but I indicated that I would discharge them and give reasons.
- I indicated to the parties that in view of my sitting pattern this, which (then) was very full) I would have a very narrow opportunity of a number of days to do the judgment. Shortly thereafter I was informed that the parties were very close to settlement and that Mr Pascoe QC would attend court to explain the matter further if I wished. He duly attended and I pointed out that, given his indication, I would not initially do any work on the judgment which I had scheduled to do later that week. The consequence would be that the parties would be taking a risk that if they did not conclude the matter the judgment might well not be capable of being delivered finally before August or even October. Mr Pascoe QC accepted that position.
- Neither I nor my clerk heard anything further.
- The cases that were listed before me then settled with the results I had time to finalise the judgment. I dictated a draft to my clerk, who sent it out to all the parties on 26 June 2014 with a proposed hand down at 10 am on 15 July 2014.
- My clerk received a response the same day from Mr Pascoe QC informing her that in May 2014 the parties concluded a settlement of all disputes and that a joint letter had been written to the judge informing me of that dated 21 May 2014. In the light of that, he asked that I took no further steps in the matter and did not hand down the judgment.
- Further, the parties obtained a consent order from Chief Master Marsh on 27 May 2014 which stayed the action in Tomlin form, subject to a confidential schedule. I have ascertained that Master Marsh was not informed at the time he was asked to make the consent order that I was currently in the position of preparing to deliver a reserved judgment on the matter.
- Accordingly Mr Pascoe QC, on 7 July 2014, requested again that I took no further steps because the effect of the consent order he submitted was that there was no continuing jurisdiction to proceed with handing down the new judgment.
- If, contrary to that primary submission, I was of the opinion that I did have such jurisdiction, he submitted that as a matter of discretion, I should not hand down the judgment.
- In the light of that I indicated, via my clerk, my provisional view that I was not functus, that Master Marsh had no jurisdiction to make the consent order and the matter would have to be argued on the hand down day.
- Separately, I required the Claimant's partner dealing with the matter to answer various questions in a witness statement to be lodged by noon on Monday 14th July. Those questions were:-
(a) Who obtained the sealed orders at 4 December and from whom?
(b) Was a signed copy of the orders lodged? If so, provide copies of them.
(c) How was the letter of 21 May given to the court?
(d) Was a copy emailed or delivered to my clerk? If not, why not?
(e) What was Master Marsh told when asked to sign the consent order? In particular was he informed that I reserved judgment?
- The answers were provided by a witness statement of Richard James Hatton Saunders (his eleventh) dated 14 July 2014.
- He is a non-practicing barrister in the employment of Moon Beever and subject to the supervision of Ms Coulson, the head of Insolvency/Litigation. She had the responsibility for dealing with this case.
- The answers to the questions posed were as follows:-
(a) The sealed orders of 4 December were obtained from the court office. They were lodged for the attention of the relevant associate Ms Maria Barton but they were collected later in the day when they were provided with the seal on to Moon Beever.
- As I have said earlier in this judgment, there is no initialled copy of any of the orders on the court file, neither did my clerk have a copy of an initialled order in her records (which is the required practice in cases before me), nor did she have a copy of the sealed order. I have been unable to find out any more detail. I remain concerned as to whether the sealed order was actually seen by me in that form before it was sealed. However it is impossible, on the present material, for me to come to any clear decision on that and further investigation is not a worthwhile exercise. If there was a divergence between what I approved and what was sealed I am satisfied that that only occurred on the basis of inadvertence and no deliberate intention was made to mislead me.
- The answer to question (b) is that no signed copy of the order was seen by anyone.
- The answer to question (c) is unfortunate. Messrs Moon Beever sent the letters to the court by Document Xchange. It was addressed to me at Rolls Building DX 160042 Strand 4. Apparently this address is frequently used by Moon Beever and unfortunately that is the enforcement office. The relevant DX address for the Chancery Division at the Rolls Building is DX 160040 Strand 4.
- It follows that the letter sent to me was incorrectly addressed. It was not returned to Moon Beevers but mainly because the letter was delivered in one part of the entrails of the Rolls Building it does not follow that it arrived at its correct place.
- The answer to question (d) as to whether or not a copy was sent to my clerk or emailed to my clerk was that it was not. Apparently the claimant's solicitors thought that it was not necessary.
- In my view, this case should be a warning. When a matter is before a judge it is always advisable for his or her clerk to copied into all communications arising out of the matter that is currently before the judge in some way or another. Had that happened in the present case I would have had direct knowledge of the letter of 21 May 2014. This is especially so on the Interims. If papers are lodged out of time it is always advisable that they are lodged with the judge and not with the Court Office as there is always a risk that documents lodged late at the Court Office will not arrive in time. This occurs sufficiently frequently for parties to be aware of that problem and to address it in the way I have suggested.
- The answer to question (a) "What was Master Marsh told when he was asked to sign the consent order?" is "very little". He was certainly not told of the status of the hearing before me.
- This is another problem which can easily be avoided. If a consent order affects orders made by the judge it is advisable at first instance that any applications in respect of such an order should be made to a judge. In the present case, when there is a reserved judgment and the parties have compromised, it is quite clear that the first port of call should be the judge who is drafting his reserved judgment. The reasons for doing that are obvious.
- Attending a Master with a consent order and nothing more is likely to lead to difficulties, as this case shows. I accept the Master has jurisdiction to approve a consent order which includes the granting or discharging of injunctive relief (which he has no jurisdiction to give). However there needs to be some reason to take the matter before the Master as opposed to the Judge as the latter is fully seized of the case and is aware of all issues which might or might not arise because of the consent order. This case demonstrates why the procedure should have been to go before me for the consent order.
CLAIMANT'S STANCE
- As set out above, the Claimant's opposed the delivery of the judgment. However, by the time Mr Pascoe QC prepared his skeleton argument on 14 July they had changed their stance. They had accepted there was a conflict between Court of Appeal authorities (see below) as to whether the judge had a discretion to deliver his judgment. Further, in the light of a letter sent by Ms Camilla Bingham QC on behalf of one of the creditors dated 11 July 2014 they accepted that in this case, as I had already announced the result, I was by implication in the process of delivering the judgment when settlement was reached and they accepted that in that circumstance a discretion remained.
- Further they no longer sought to persuade me that I should not hand down the judgment as a matter of discretion.
- Mr Deacock also appeared on behalf of another creditor urging me to hand down the judgment.
- Finally Mishcon's, for the Defendants, wrote to me on 11 July 2014 setting out details of the hearing before Master Marsh. They confirmed that Master Marsh was not told that I had reserved judgment nor was a paragraph of the consent order, which addressed that judgment drawn to his attention either.
- Mr Pascoe referred me to a number of authorities. First is the case of HFC Bank plc v HSBC Bank plc (11/2/2000).
- In that case an appeal was heard by the Court of Appeal and at the end of the hearing the Court of Appeal announced that they would take time to consider the judgment and put them in writing. The Court prepared judgments which would be handed down on Tuesday in the week in question. The parties were told that draft copies of the judgment would be made available midday on that day.
- The Court of Appeal reiterated the need for parties to communicate to the court "any development which may make it unnecessary for judgment to be delivered..."
- In the case of Prudential Assurance Co. Ltd. v McBains Cooper C.A. [2000] 1 WLR 2000 the Court of Appeal determined in that case the parties settled on the date for the hand down of a judgment but they had already been provided with the draft written judgment. The Court of Appeal determined that the process of delivering judgment was initiated when the judge sent a draft to the parties' legal advisers for consideration and public policy dictated that the Judge had an independent discretion whether to accede to a request by the parties to abort that process or to continue with the process.
- The Court of Appeal made observations the situation was quite different where the parties settle immediately before the draft judgments are made available. The Court of Appeal referred to the HFC Bank plc case, which as they have said was different. There a compromise was effected before the parties were shown judgments. The Court of Appeal said "[that] makes all the difference" ibid. page 2010 E.
- There were some strong observations in the Prudential Assurance Co. Ltd. Case by Brooke LJ:-
"Counsel accepted that the logical consequence of the arguments they were both urging on the court was that the parties could prevent the judge from delivering judgment even if it contained findings of serious fraud or serious negligence, if the defendant was willing to pay the claimants large sums of money to suppress them. They also accepted that unless there was anything in the procedures of the House of Lords (which they had not researched) to the contrary it would be open on their arguments to the parties to private litigation, on reading the copies of their lordships' opinions made available to them shortly before they were delivered in the House, to settle their dispute there and then and require that the speeches should not be delivered.
The longer we tested their thesis, the more fragile it appeared. When we put to counsel the point made by the judge to the effect that if they were right, powerful defendants like insurance companies could pick and choose which judgments they were happy to see published and which judgments they were willing to pay money to suppress, we were told that it has always been a characteristic of the common law that it has developed haphazardly. It was then suggested to us that there might be one rule for first instance courts and a different rule for appellate courts. For the latter, it appeared to be conceded during the course of argument that this court might have a residual discretion to hand down its judgment notwithstanding the fact that the parties had compromised their dispute, if only to correct errors in the reported judgment in the court below or to reconcile conflicting lines of authority."
- Ms Bingham QC, in her letter, referred me to the decision of Lord Neuberger MR (as he then was) in Barclays Bank plc v Nylon Capital LLP [2011] ECA Civ 826, as follows:-
"74 Where a case has been fully argued, whether at first instance or on appeal, and it then settles or is withdrawn or is in some other way disposed of, the court retains the right to decide whether or not to proceed to give judgment. Where the case raises a point which it is in the public interest to ventilate in a judgment, that would be a powerful reason for proceeding to give judgment despite the matter having been disposed of between the parties. Obvious examples of such cases are where the case raises a point of law of some potential general interest, where an appellate court is differing from the court below, where some wrongdoing or other activity should be exposed, or where the case has attracted some other legitimate public interest.
75 It will also be relevant in most cases to consider how far the preparation of any judgment had got by the time of the request. In the absence of good reason to the contrary, it would be a highly questionable use of judicial time to prepare a judgment on an issue which was no longer live between the parties to the case. On the other hand, where the judgment is complete, it could be said (perhaps with less force) that it would be a retrospective waste of judicial time and effort if the judgment was not given.
76 The concerns of the parties to the litigation are obviously relevant and sometimes very important. If, for their own legitimate interests, they do not wish (or one of them does not wish) a judgment to be given, that request should certainly be given weight by the court. (of course, in some cases, the parties may request a judgment notwithstanding the fact that there is no longer an issue between them).
77 Where there are competing arguments each way, the court will have to weigh up those arguments: in that connection, the reasons for any desire to avoid a judgment will be highly relevant when deciding what weight to give to that desire.
78 In this case, I consider that the argument for handing down our judgments is compelling. First, by the time we were informed that the parties had settled their differences, the main judgment, representing the views of all members of the court, had been prepared by Thomas LJ, in the form of a full draft which has been circulated to Etherton LJ and me. Secondly, a number of the issues dealt with in that judgment are of some general significance. Thirdly, although we are upholding the judgment below, we are doing so on a rather different basis, so it is right to clarify the law for that reason as well. Fourthly, so far as the parties' understandable desire for commercial privacy is concerned, we have not said anything in our judgments which are not already in the public domain, thanks to the judgment below. Finally, so far as the parties' interests otherwise are concerned, no good reason has been advanced for us not giving judgment."
- Mr Deacock referred me to the case of Glaxo Group Limited v Genentech [2008] EWCA Civ 23 A.C. In that case the Court of Appeal heard an expedited hearing of an appeal against a decision of Lewison J. Before the Court of Appeal delivered its judgment, the Defendant's solicitors wrote informing the court that the client had decided to consent to the revocation of the patent subject matter of the dispute. The claimant's solicitors thereafter wrote to the court, referring to the consent to revocation explaining why the court might still consider it desirable to provide reasons for its judgment. The court at the end of the hearing had announced that the appeal would be dismissed but as the appeal raised an important point of principle practice, the judgment would be put in writing. Faced with that, Mummery LJ observed:-
"[20] Genentech's late consent to the revocation of the patent in suit took the urgency out of the situation that had led to the expedited hearing of the appeal and the immediate decision on it, but, in our judgment, it has not absolved the court from its duty to the parties and to the wider public to supply written reasons for its decisions."
- There is clearly an inconsistency in the various decisions. The clearest decision, in my view, is that of Lord Neuberger in the Barclays Bank case. It is to my mind artificial to have a situation that a judgment can in effect be stopped by the parties by an agreement made before they see the draft judgment but not afterwards. I can see no logical reason for that. It is true to say that the early authorities were not cited to the Court of Appeal in Barclays Bank, but as a matter of policy it seems to me that the reasoning in Lord Neuberger's judgment must plainly be correct in the modern environment. The court must retain a general discretion whether before or after the parties have seen a draft judgment to continue to deliver a judgment where it is appropriate so to do.
- If I am wrong, then the authorities appear to suggest that when the court has told the parties of the result (see Glaxo above) the court has a duty to give the reasons, if it is in the public interest so to do. Equally, the Prudential case establishes that where the Judge has prepared a draft and released it, a subsequent compromise cannot prevent him if he so wishes from releasing that judgment.
- In the present case I had of course pronounced the result with reasons later. The factual scenario is therefore the same, as in the case of the Glaxo decision.
- Further, in my view even if the parties have effectively put an end to the dispute between themselves, that in itself cannot stop the court from raising matters which concerns it. For example, if during the course of the trial it was clear that a party had perjured themselves or was guilty of fraudulent conduct it would be a matter of public interest that that should be known and the judge would be perfectly entitled, in my view, to deliver a judgment on dealing with those matters because the parties cannot unilaterally block such a matter by compromising the case.
- In this case the circumstances which led to the granting of the injunction and the failings of the lawyers in respect of obtaining that injunction are matters of interest, if only to reinforce the strict requirements on counsel and solicitors when making applications to the court for ex parte relief especially on busy interim application days.
- Equally, it is important, in my view to reiterate the need for communications to the judge via his clerk. That is well demonstrated by this case. In my view, even if I had not started on delivering the judgment by announcing the result, those factors are such that the parties could not have properly sought to stop me from delivering the judgment. I accept it is a matter of discretion but the public interest in my view weighs very heavily in favour of publication of judgments in line with the modern policy of the courts of ensuring, as far as possible, that justice takes place in an open environment.
- I therefore conclude that I do have a discretion as to whether or not to deliver a judgment and that in the circumstances of this case, for the reasons set out above, it is appropriate that I do so.
