Factual and Procedural Background
The principal issue in this appeal concerns whether the Claimants were in breach of their duty of full and frank disclosure regarding the wealth and probity of an individual associated with them when they were granted worldwide freezing orders and proprietary injunctions against the Defendants. The injunctions were granted on various dates in August 2024 by two judges, with some applications made without notice or on very short notice, and some Defendants unrepresented or absent. The Defendants applied to discharge these injunctions based on six alleged failures of full and frank disclosure. The application was rejected by the trial judge in October 2024, and this appeal challenges only one of those six grounds, specifically relating to the Claimants' disclosure about the individual's wealth and probity.
The Claimants' case involves allegations of fraudulent misrepresentations leading to the transfer of shares in a Mexican publicly listed company to custodians as security for loans under a Stock Loan Agreement. The Defendants are alleged to have misappropriated these shares through a fraudulent scheme involving false identities and offshore companies. The Claimants assert multiple claims, including proprietary claims, conspiracy, deceit, breach of trust and contract, and claims in constructive trust. The injunctions were supported by evidence asserting the Claimants' willingness and ability to repay the loan amount in exchange for redemption of the collateral shares.
The Defendants challenged the Claimants' assertions about the wealth and probity of the individual, citing discrepancies in shareholdings, portfolio reports, and various public allegations and scandals. The trial judge considered these allegations but found them highly contentious and declined to conduct a trial within the interlocutory hearing to resolve disputed facts. The judge also considered the adequacy of disclosure concerning the Claimants' assets and their ability and willingness to meet the cross-undertaking in damages.
Legal Issues Presented
- Whether the Claimants breached their duty of full and frank disclosure in relation to the individual's wealth and probity when obtaining freezing orders and proprietary injunctions.
- Whether the alleged non-disclosure was material to the Claimants' ability and willingness to repay the loan amount or to comply with the cross-undertaking in damages.
- Whether the court should discharge the injunctions on the basis of the alleged non-disclosure.
- The appropriate approach to disputed factual allegations in the context of without notice injunction applications.
- Whether fortification of the Claimants' cross-undertaking in damages was necessary in light of the alleged non-disclosure.
Arguments of the Parties
Appellants' Arguments
- The Claimants failed to disclose material facts regarding the individual's true wealth and financial probity, including a lower shareholding percentage in the relevant company than asserted.
- There were public reports and allegations suggesting financial difficulties, scandals, and tax evasion involving the individual and associated companies, which ought to have been disclosed.
- The Claimants' evidence about their ability and willingness to repay the loan was misleading or insufficiently supported.
- The Claimants' failure to disclose these matters was material to the court's decision to grant the injunctions and to accept the cross-undertaking in damages without fortification.
Respondents' Arguments
- The shareholding figures cited by the Claimants were accurate when properly understood, with differences explained by direct versus indirect holdings across multiple entities.
- The public allegations and disputes cited were either resolved, ongoing without final determination, or irrelevant to the Claimants' probity and ability to pay.
- The Claimants demonstrated sufficient willingness and ability to repay the loan amount, supported by evidence of assets worth several billion US dollars.
- Disputed factual allegations are not required to be resolved at the interlocutory stage, especially where they are contentious and better suited for trial.
- The Defendants did not apply for fortification of the cross-undertaking, nor did they demonstrate a sufficient risk of loss to justify it.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Kazakhstan Kagazy plc v Arip [2014] EWCA Civ 381 |
Limits on the duty of full and frank disclosure at interlocutory without notice hearings; court will not conduct trial within a trial on disputed issues. |
Applied to reject attempts to challenge injunction based on highly contentious disputed facts about Claimants' financial position and motives. |
| Sectrack NV v Satamatics Ltd [2007] EWHC 3003 (Comm) |
Requirements for fortification of cross-undertaking in damages; need to show sufficient risk of loss and likely amount. |
Referenced to emphasize that Defendants did not apply for fortification nor demonstrated basis for it. |
| Harley Street Capital Ltd v Tchigirinski [2005] EWHC 2471 (Ch) |
Standards for fortification of cross-undertakings and protection of defendants from loss pending return date. |
Cited to support the principle that fortification is a matter for the defendant to raise with evidence. |
| Crown Resources AG v Vinogradsky (unreported, 15 June 2001) |
Inappropriate to set aside freezing orders for non-disclosure where the facts alleged are disputed and require trial. |
Applied to reject setting aside injunction based on disputed allegations of non-disclosure about wealth and probity. |
| Mex Group Worldwide Ltd v Ford [2024] EWCA Civ 959 |
Detailed principles governing full and frank disclosure on without notice applications, including materiality and proportionality. |
Extensively cited to frame the duty of disclosure and to guide the court's approach to alleged non-disclosure in this case. |
| Block v Nicholson t/a Limascue Ltd (1986) WL407113 |
Failure to disclose relevant criminal charges can justify discharge of interlocutory injunction. |
Referred to illustrate the importance of disclosing material facts affecting the court's discretion. |
| Mold Investments Ltd v Holloway [2025] EWCA Civ 986 |
Reinforces that disputed facts material to non-disclosure must be disclosed even if not resolved at interlocutory stage. |
Supported the principle that allegations must be disclosed even if contentious. |
| Memory Corporation plc and another v Sidhu and another (No 2) [2000] 1 WLR 1443 |
Duty of full and frank disclosure and consequences of non-disclosure in interlocutory applications. |
Referenced in setting out established principles on disclosure duties. |
| Behbehani v Salem [1989] 1 WLR 723 |
Standards for disclosure and fairness in interlocutory injunction applications. |
Used to support the framework of disclosure obligations. |
| Congentra AG v Sixteen Thirteen Marine SA (The Nicholas M) [2008] EWHC 1615 |
Materiality and proportionality in disclosure on without notice applications. |
Applied to assess the relevance and significance of disclosed and undisclosed facts. |
| Bank Mellat v Nikpour [1985] FSR 87 |
Disclosure obligations and consequences of non-disclosure in interlocutory relief. |
Referenced for foundational principles of disclosure. |
| JSC BTA Bank v Khrapunov [2018] UKSC 19 |
Disclosure duties and the court's approach to contested factual allegations at interlocutory stage. |
Supported the stance that the court does not resolve disputed facts at interlocutory hearings. |
| Banca Turco Romana SA v Cortuk [2018] EWHC 662 (Comm) |
Disclosure and fairness in interlocutory injunction applications. |
Supported the principles of proportionate disclosure. |
| PJSC Commercial Bank PrivatBank v Kolomoisky and others [2018] EWHC 3308 (Ch) |
Disclosure duties and the court's discretion in interlocutory injunctions. |
Referenced in the context of assessing disclosure and materiality. |
| National Bank Trust v Yurov [2016] EWHC 1913 (Comm) |
Encouragement of restraint and proportionality in full and frank disclosure challenges. |
Applied to discourage scattergun approaches to non-disclosure allegations. |
| Microsoft Mobile Oy v Sony Europe Ltd [2017] EWHC 374 (Ch) |
Disclosure obligations and fair presentation at interlocutory stages. |
Used to reinforce principles of thoroughness and objectivity. |
| Todaysure Matthews Ltd v Marketing Ways Services Ltd [2015] EWHC 64 (Comm) |
Disclosure duties and proportionality in interlocutory injunction applications. |
Referenced as part of the disclosure framework. |
Court's Reasoning and Analysis
The court began by recognizing the high duty of full and frank disclosure required in without notice injunction applications, emphasizing that this duty includes disclosure of material facts and a fair presentation of the case. The court noted that this duty extends to disputed allegations when such allegations are material to the issues before the court, even if the veracity of those allegations is contested.
In this case, many of the allegations concerning the individual's wealth and probity were highly contentious and disputed, involving ongoing proceedings, settlements without admission of liability, and public allegations not resulting in final judicial determinations. The court reiterated established authority that interlocutory hearings are not the appropriate forum to resolve such disputed facts, as doing so would amount to a preliminary trial, which is contrary to the principles governing freezing orders.
The court carefully examined the evidence presented, including affidavits explaining the individual's shareholdings and net worth, reports from reputable sources estimating multi-billion dollar wealth, and responses to allegations of financial difficulties and scandals. It found no credible reason to doubt the individual's substantial wealth or the Claimants' willingness and ability to repay the loan amount.
Regarding the alleged non-disclosure, the court held that the Claimants had provided sufficient detail of their assets for the without notice stage, and that the alleged failures did not amount to material non-disclosure. The court also noted that the Defendants had not applied for fortification of the cross-undertaking in damages and had not demonstrated a sufficient risk of loss to justify such a requirement.
Finally, the court emphasized the importance of proportionality and restraint in allegations of non-disclosure, discouraging scattergun approaches that rely on numerous minor or tangential points rather than focusing on significant failures. The court concluded that the appeal did not establish any material non-disclosure warranting discharge of the injunctions.
Holding and Implications
The court DISMISSED THE APPEAL, upholding the trial judge's decision to reject the application to discharge the freezing orders and proprietary injunctions.
The direct effect of this decision is that the injunctions remain in place against the Defendants, and the Claimants' cross-undertaking in damages stands without fortification. The court did not set any new precedent but reaffirmed established principles regarding the duty of full and frank disclosure, the handling of disputed factual allegations at interlocutory stages, and the criteria for fortification of cross-undertakings. The ruling underscores the court's reluctance to conduct mini-trials on contested facts in interlocutory applications and the necessity for proportionality in non-disclosure challenges.