Offshore Litigation

Blog

Offshore Litigation

Contributors

Jonathan Addo
Jonathan Addo
  • Jonathan Addo

  • Partner
  • British Virgin Islands
Ian Mann
Ian Mann
  • Ian Mann

  • Partner
  • Hong Kong
Nick Hoffman
Nick Hoffman
  • Nick Hoffman

  • Partner
  • Cayman Islands
Vicky Lord
Vicky Lord
  • Vicky Lord

  • Partner
  • Hong Kong
Chai Ridgers
Chai Ridgers
  • Chai Ridgers

  • Partner
  • Hong Kong
William Peake
William Peake
  • William Peake

  • Partner
  • London
Peter Ferrer
Peter Ferrer
  • Peter Ferrer

  • Partner
  • British Virgin Islands
James Noble
James Noble
  • James Noble

  • Partner
  • Singapore
Jeremy Child
Jeremy Child
  • Jeremy Child

  • Partner
  • London
Claire Goldstein
Claire Goldstein
  • Claire Goldstein

  • Partner
  • British Virgin Islands
Jayson Wood
Jayson Wood
  • Jayson Wood

  • Partner
  • Cayman Islands
Phillip Kite
Phillip Kite
  • Phillip Kite

  • Partner
  • London
Stuart Cullen
Stuart Cullen
  • Stuart Cullen

  • Partner
  • British Virgin Islands
Lorinda Peasland
Lorinda Peasland
  • Lorinda Peasland

  • Consultant
  • Hong Kong
Paul Madden
Paul Madden
  • Paul Madden

  • Partner
  • Cayman Islands
Jessica Williams
Jessica Williams
  • Jessica Williams

  • Partner
  • Cayman Islands
Paula Kay
Paula Kay
  • Paula Kay

  • Partner
  • Hong Kong
Andrew Thorp
Andrew Thorp
  • Andrew Thorp

  • Partner
  • British Virgin Islands
Henry Mander
Henry Mander
  • Henry Mander

  • Partner
  • Cayman Islands
Andrew Johnstone
Andrew Johnstone
  • Andrew Johnstone

  • Partner
  • Hong Kong
Nicola Roberts
Nicola Roberts
  • Nicola Roberts

  • Partner
  • Hong Kong
Julie Engwirda
Julie Engwirda
  • Julie Engwirda

  • Partner
  • Hong Kong
Paul Smith
Paul Smith
  • Paul Smith

  • Partner
  • Cayman Islands

Penal Approach to Duty of Full and Frank Disclosure

In the recent English High Court case of Tugushev v Orlov and others (No 2), Justice Carr toed the line with the approach taken in Rogachev v Mikhail (see blog here) by discharging a freezing injunction obtained in breach of the Claimant’s duty of full and frank disclosure.

The Claimant alleges that he has been unlawfully deprived of a one-third share in a large international fishing business as a result of a complex and sophisticated conspiracy by the Respondent and two of his associates. The claim is yet to be determined, however in July 2018 the Claimant obtained a world-wide freezing injunction over US$350million of the Respondent’s assets on an ex parte basis.

The Respondent subsequently sought to discharge the injunction on grounds of material non-disclosure by the Claimant.

In considering its decision, the Court noted the following principles (amongst others) in relation to the duty of full and frank disclosure:

  • The Courts adopt a penal approach to injunctions obtained in breach of the duty of full and frank disclosure so as to ensure future compliance by applicants;
  • The Courts may therefore discharge an injunction obtained by non-compliance, even if it would have been granted had full disclosure been made at the without notice hearing;
  • The discretion to allow the injunction to continue despite non-disclosure should be exercised sparingly, taking into consideration the following:
    • the importance of the facts not disclosed;
    • the need to encourage compliance/deter non-compliance;
    • the extent to which the failure was culpable; and
    • the injustice the claimant may suffer if the injunction is dismissed (noting there are other ways in which the non-compliance may be marked, such as by an appropriate costs order).

The Court ultimately dismissed the injunction on the basis that aspects of the non-disclosure pertaining to the divestment of certain shares by the Claimant (i) comprised a core component of the Respondent’s defence, which was known to the Claimant at all material times, (ii) were material to the granting of the injunction, and (iii) fell within the Claimant’s duty of enquiry.

The application of such penal principles will no doubt be a persuasive consideration in Offshore Courts faced with material non-disclosure and serves as an apt reminder of the potential consequences for litigants seeking to freeze assets in the Cayman Islands, BVI or Bermuda.

Penal Approach to Duty of Full and Frank Disclosure

Leave A Comment