The dangers of overegging the pudding: a party’s duty of full and frank disclosure

The High Court judgment in Apparel FZCO v Sheeraz Iqbal [2024] EWHC 1931 (Comm) serves as a useful reminder to applicants to carefully consider their duty of full and frank disclosure when making without notice applications and ensure that they present their case in a “fair, objective [and] even-handed manner”. 

Background

Apparel Fzco allege that individuals impersonating retail buyers fraudulently deceived them into shipping goods valued in excess of £1 million to the fraudsters. The impersonators did not make payment for the goods, first claiming that they had not been delivered and eventually cutting off all contact with Apparel. Meanwhile, the impersonators had received the goods and sold them on to a third party that had purchased the goods on the recommendation of their agent, Mr Iqbal. 

Apparel claim that Mr Iqbal orchestrated the fraud. Mr Iqbal denies these allegations, claiming that he, too, was a victim of the fraudulent scheme.

At a without notice hearing, Apparel obtained a freezing order against Mr Iqbal. At the return date hearing, Mr Iqbal argued that the order should be set aside due to Apparel’s failure to comply with its duty of full and frank disclosure.

Judgment

The court agreed that the order should be set aside, describing some of the evidence put forward in support of the original application as “highly prejudicial”. Further, the court held that the freezing order should not be re-instated because, amongst other issues, the application contained a “pervasive overselling” of Apparel’s evidence in material respects at all stages of the application.

Full and frank disclosure

The duty of full and frank disclosure requires an applicant for a without notice order to disclose any defence that it has reason to believe may be advanced and identify the crucial points that may potentially undermine their application.

In this case, the court held that Apparel had breached its duty to provide full and frank disclosure by failing to present:

1. the possible defence that Mr Iqbal believed the transaction was genuine and that he too had fallen victim to the fraud;
2. evidence that would support that defence; and
3. the lack of direct evidence to undermine the evidence on which the defence was based.

The judgment provides the following practical insights:

1. When presenting evidence under the duty of full and frank disclosure, it is not sufficient for such evidence to simply be included in the application papers. The claimant should take the court to the evidence during the without notice hearing and explain how it supports the legal point being made in the defendant’s favour. In this instance, Apparel had referred to evidence which supported the defence in an affidavit and attached it as an exhibit. However, since it had not brought the court to that evidence and explained how it supported the defence, it had not discharged its duty to provide full and frank disclosure.
    
2. In most instances, a skeleton argument should contain a section on full and frank disclosure which demonstrates that counsel has considered the application from the perspective of the defendant, including in particular:
   • what evidence ought to be highlighted to the court on the defendant’s behalf; and
   • what weaknesses there are in the claimant’s evidence and/or case.
     
     Apparel’s skeleton argument was criticised for not containing such a section, which caused the judge to ask for assistance on the point during the hearing.
3. The claimant’s counsel at a without notice hearing should normally address full and frank disclosure. Only in a “rare case” will there be nothing which can be said against the application or for the defendant. During the without notice hearing in this case, the judge asked at least three times to hear matters of full and frank disclosure. Apparel’s counsel stated that there was nothing that they ought to bring the judge’s attention to. The court found that this was a significant failure by the claimant.

Presenting the case in a fair, objective and even-handed manner

The judgment went on to dismiss Apparel’s application to re-instate the freezing order, in part due to Apparel’s presentation of its case (other factors included the Claimant’s case not reaching the threshold of a “good arguable case” and there being no evidence of a risk of asset dissipation).

The judge criticised Apparel for failing to present its case in a “fair, objective or even-handed manner”. Whilst such failures may not have been intentional, there was nonetheless a “pervasive overselling of the Claimant’s evidence in material respects at all stages of the application (affidavit, skeleton and oral argument)”.

The judge noted that the affidavit in support of the freezing order contained “highly prejudicial statements apparently of fact which are not backed up by documents or by any attempt to identify a source of knowledge”. The judge highlighted ten passages from the affidavit that:

1. were factually incorrect;
2. were misleading;
3. failed to identify source material;
4. were not qualified when they ought to have been; and
5. were not appropriate for an affidavit and should instead have been included in Apparel’s submissions.

The judge also noted that the skeleton argument similarly contained assertions that were submissions on material points “dressed up as factual matters” and failed to mitigate the problems with the affidavit by presenting a more balanced account of the evidence and the case. 

Comment

This judgment highlights the importance of an applicant in a without notice application presenting their case to the court in a balanced and objective way and providing full and frank disclosure of matters adverse to their position. In addition, it provides useful guidance as to how this can be achieved. Failing to take this into account is likely to be counterproductive: ironically, refusing to admit to weaknesses in the applicant’s case may simply end up weakening it further.

For more information, please email the authors or your usual CMS contact.