BUSINESS AND PROPERTY COURTS IN MANCHESTER
BUSINESS LIST (ChD)
1 Bridge Street West, Manchester M60 9DJ |
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B e f o r e :
SITTING AS A JUDGE OF THE HIGH COURT
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SAEED AKBAR |
Claimant |
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- and – |
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(1) MOHAMMED SAJEAD GHAFFAR (2) SAIRAH KANWAL SHAH |
Defendants |
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Francis Hornyold-Strickland (instructed by on a Direct Access basis) for the Defendant
Hearing date: 24 April 2023 (further written submissions received up to 12 May 2023)
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Crown Copyright ©
HHJ CAWSON KC:
Contents
Introduction | 1 |
Background | 8 |
The Discharge Application | 19 |
The principles to be applied | 23 |
The Defendants' case as to discharge | 30 |
Mr Akbar's response to the Discharge Application | 38 |
Determination of the Discharge Application | 53 |
Conclusion | 83 |
Introduction
Background
i) The sum of £380,000 paid by the Mr Akbar to Mr Ghaffar in December 2019 in respect of an investment in Flat 30 Thackery Court, Hanger Vale Lane, London ("Thackery Court"), which property, so it is alleged, the Defendants sold in March 2023 without informing Mr Akbar, and without accounting to Mr Akbar for his share, or indeed any part of the proceeds of sale;
ii) The sum of £90,000 paid by Mr Akbar to Mr Ghaffar in March 2020 in respect of an investment in Flat 21 Bramerton, 213-215 Willesden Lane, London, which property, so it is alleged, the Defendants have failed to sell in accordance with the terms of an agreement between them, and in respect of which it is also alleged that the Defendants have failed to fully and properly account to Mr Akbar for rental income;
iii) The sum of £310,000 paid by Mr Akbar to Mr Ghaffar in Spring 2020 for the purpose of contributing to the purchase of an unidentified commercial property in London, which such purchase never proceeded and where, so it is alleged, Mr Ghaffar has only returned the sum of £137,350 to Mr Akbar, leaving the sum of £172,650 outstanding;
iv) The sum of £1 million and the further sum of £833,000 alleged to have been entrusted by Mr Akbar to Mr Ghaffar for the purpose of investment in or with Richmond Point Capital ("RPC"), which sums have, so it is alleged: (i) as concerns the sum of £1 million, been paid by Mr Ghaffar to RPC, but without any reference being made to Mr Akbar as the investor, and then, on or about 21 September 2020, paid away by RPC to a person or persons unknown; and (ii) as concerns the £833,000 has been been paid and applied otherwise than to RPC, so as to have been dissipated by Mr Ghaffar otherwise than for the benefit of Mr Akbar;
v) The total sum of £975,000 paid by Mr Akbar to Mr Ghaffar in February 2021 for the purpose of purchasing shares in three companies, namely: NextSource Materials Inc (for which was paid £200,000), Pluto Digital Assets Plc (for which was paid £400,000) and 786 London Plc (for which was paid £375,000). It is alleged that, contrary to the basis upon which these monies were provided, Mr Akbar has received neither share certificates nor the return of his money;
vi) The sum of £315,000 entrusted by Mr Akbar to Mr Ghaffar between January and April 2021 for the purpose of investment in gold dealing, which sum, it is alleged, has been applied by Mr Ghaffar other than pursuant to the terms on which it was entrusted to him;
vii) The sum of £100,000 (representing the substantial part of the proceeds of sale of gold bars provided by Mr Akbar to Mr Ghaffar for sale on his behalf, and sold in January 2022), entrusted by Mr Akbar to Mr Ghaffar for the purpose of investment into a soft drinks business, which sum, it is alleged, has been applied by Mr Ghaffar other than on the terms pursuant to which it was entrusted to him.
i) In paragraph 11, Mr Akbar sets out that, in short, his complaint is that: "the Defendants dishonestly misled me in relation to a number of investments and have dishonestly appropriated money that belongs to me and which I entrusted to them for very specific purposes."
ii) In paragraphs 26 and 27, Mr Akbar refers to Thackery Court, and to having received on 21 June 2022 Office Copy Entries that revealed that Defendants had sold the latter on 23 March 2022. He goes on to say that it is of grave concern to him that the Defendants did not advise him of the sale and have not accounted to him for any part of the proceeds thereof. He says that the discovery of this "dishonest behaviour" on the part of the Defendants was very much "the straw that broke the camel's back" that had led him to make the application for a freezing order rather than, "as I had sought to do before, to try and resolve matters amicably with the Defendants (as to which see further below)".
iii) In paragraph 41 et seq, Mr Akbar deals in some detail with the £1,833,000 paid to Mr Ghaffar for investment with RPC, referring to £1 million being paid to Mr Ghaffar on 1 September 2020, and £833,000 being paid to Mr Ghaffar on or about 6 October 2020. In paragraph 51 he refers to chasing Mr Ghaffar extensively for updates without any success, and in paragraph 54 to Mr Ghaffar consistently making up excuses as to why Mr Akbar had received no returns. In paragraphs 60-62, Mr Akbar refers to continuing to chase throughout 2020, but to Mr Ghaffar continuously avoiding his questions and assuring him that his money would be returned, and to Mr Ghaffar saying, in or around November 2021, that RPC was saying to him that they were trying to get the money back for Mr Akbar, and Mr Ghaffar assuring him that his money should be "sitting in a Swiss bank account", and that RPC was looking at other projects to try and get his money back.
iv) In paragraphs 63-65, Mr Akbar said this:
"63. The First Defendant has alleged for many months that he has attempted without success to contact various directors of RPC to enquire as to the status of the investment sum and then to require payment of the same.
64. I have requested copies of the agreements, paperwork and correspondence in relation to this investment yet the First Defendant has been unable to provide this requested documentation.
65. Given the inability of the First Defendant to return my money or to offer any credible explanation as to what became of it, I caused my solicitors to write to RPC and its directors on 8 February 2022 seeking the return of the sum of £1.833 million … . In response to that letter, RPC wrote to my solicitors … and said, inter alia, the following:
i) That it had had no knowledge of and had had no dealings with me.
ii) That it had received £1 million from the First Defendant and had paid that sum away on instructions from the First Defendant including a payment back to him of £38,450 under reference Dominic Builders.
iii) That it had not received and had no knowledge of any further payment of £833,000.
iv) That the Purported Joint Venture Agreement [a document that Mr Akbar had earlier referred to in his affidavit as having been provided to him by Mr Ghaffar] was a forgery and that it had not executed that agreement."
I was taken to the letters dated 8 February 2022 and 14 February 2022 during the course of submissions on 11 August 2022.
v) In paragraph 66, Mr Akbar goes on to say that it appeared "tolerably clear" to him on the basis of the information that he had seen to date that Mr Ghaffar had defrauded him of the £1.833 million, setting out in sub-paragraphs 66(i) to (vii) various matters relied upon in support of that assertion, including the information provided by RPC's letter dated 14 February 2022, and documentation provided with that letter.
vi) In paragraph 68, Mr Akbar recognises that it is: " ... perfectly possible that RPC are themselves fraudsters and have either themselves or in cahoots with the First Defendant defrauded me." However, he goes on to say that: "… based on the material I have seen to date, it does appear clear to me that I am the victim of a substantial fraud at the hands of the First Defendant, both in relation to the initial £1 million and in relation to the further £833,000. That fraud, particularly against a background of my family relationship with the First Defendant and the trust that I placed in him and which he knew I placed in him, is particularly egregious."
vii) In paragraphs 101 to 114, Mr Akbar sets out what he describes as further examples of "chasing" Mr Ghaffar, including references to the following:
a) Mr Akbar, in June 2021, "… becoming increasingly frustrated", and Mr Akbar saying, at that time: "I've had enough" (paragraph 102);
b) "I was suspicious and therefore on 5 July 2021 I attended the First and Second Defendant's home" (paragraph 106);
c) Mr Akbar referred to having contacted Charles Proctor ("Mr Proctor") of Fladgate LLP, Solicitors, in July 2021 with regard to an email purportedly from Mr Proctor that Mr Ghaffar had provided to Mr Akbar, and to Mr Proctor having: "… con?rmed that he was totally unaware of the above matter, and he assumed the email was a 'scissors and paste' job on one of his emails and fraudulently used to deceive me" (paragraph 108);
d) The fact that for two weeks in July 2021, Mr Ghaffar had "evaded my calls" (paragraph 111).
viii) At paragraph 124 et seq of his affidavit, Mr Akbar dealt with the timing of the application for a freezing order, and referred back to paragraph 27 of his affidavit and to the discovery therein referred to made in June 2022 that the Defendants had sold Thackery Court without telling him and then failed to account to him in respect of the proceeds of sale as being very much: "the straw that broke the camel's back." In paragraph 125, he says this: "Prior to that, I was reluctant to bring proceedings against my cousin and his wife in the mistaken belief that they were honest, were acting in my best interests and would repay me and realise the investments that I had made with them. That may sound like gross naïveté or even gross stupidity on my part, but I would ask the Court to keep in mind that I was dealing with close family members whom I have a deep trust of and who I could not believe would act otherwise than in my best interests. To that I would add that my cousin, the First Defendant and his wife, like me, are practising and devout members of Islam. Family relations apart it was also inconceivable that my cousin and his wife would act contrary to the very foundation of our faith and to the teachings of the Prophet."
ix) In paragraph 126, Mr Akbar went on to say: "At every stage I have given the Defendants the benefit of the doubt and have been consistently reassured by the First Defendant that he and the Second Defendant were, like me, innocent and, like me, the victims of circumstance. I believed them and consistent with that belief I have sought to engage with them down to as recently as 9th of June 2022 to find an amicable solution. It was only when that amicable solution could not be found and when I discovered the sale Thackery Court that I reached the conclusion that I had no option but to bring these proceedings and to seek injunctive relief against the Defendants to preserve my assets and/or their assets as best as could be done in the circumstances."
"Weighing delay in the balance, it is a factor I take into account. These are circumstances where on the Claimant's case he placed a great deal of trust in the First Defendant in respect of the relevant dealings. Certainly, in the past, there were matters that might have given rise to suspicion that I can understand in the circumstances the Claimant being fobbed off until this year when having made enquiries of RPC he received their response, and then matters were really brought to a head in June of this year when he discovered the property had been sold without an attempt to account for monies. Clearly there was a delay between February and June. Even weighing that in the balance it does not detract from the solid evidence as to risk of dissipation that otherwise exists."
i) A meeting took place on 17 January 2022 at Pannone's offices, attended by Mr Akbar, Mr Ghaffar, Mr Jonson and Elizabeth O'Leary ("Ms O'Leary"), a paralegal with Pannone.
ii) In paragraph 17 of his witness statement, Mr Jonson says that in January 2022, some 17 months after Mr Akbar had given the £1.833 million to Mr Ghaffar, Mr Akbar asked him to attend a meeting with both of himself and Mr Ghaffar in order to discuss the position. In paragraph 20, Mr Jonson goes on to say that Mr Ghaffar spent the majority of the meeting discussing RPC and his dealings with them and, in particular, that he explained that he had not been able to obtain an update from RPC as to the funds invested on Mr Akbar's behalf despite numerous messages to RPC. Mr Jonson says that Mr Ghaffar said that he had instructed his own solicitors, Allison Law to write to RPC, but that no response had been forthcoming. In paragraph 21, Mr Jonson said that both Mr Akbar and Mr Ghaffar appeared to him to be very concerned at RPC's lack of contact with Mr Ghaffar and the general lack of cooperation as to the sums invested, and that it became clear to him during the course of the meeting that both Mr Akbar and Mr Ghaffar wanted Pannone to send a letter to RPC to try and establish what had happened to the sum of £1,833,000. Mr Jonson says that he was concerned that RPC might not be a legitimate investment vehicle and that both Mr Akbar and Mr Ghaffar might have been the victims of a fraudulent investment scheme.
iii) In paragraph 22 of his witness statement, Mr Jonson went on to say that, at this meeting, there was discussion as to the fact that RPC had had no direct dealings with Mr Akbar and that they might consider that Mr Ghaffar was their client, and concern that if Pannone wrote to RPC on behalf of Mr Akbar alone, there was a possibility that RPC would fail to engage. Mr Jonson goes on to say: "We therefore discussed the possible practical benefit of a letter to RPC referring to the involvement of the First Defendant as well. This informed my decision to draft a letter to RPC which stated that the First Defendant was one of our clients. The Claimant and the First Defendant agreed to this."
iv) Ms O'Leary's note of the meeting begins at paragraph 1 thereof by recording the following, explaining the background to the meeting:
"SA explained that SG was in attendance to give some background on the matter. PJ said that this was an open meeting and was not on a without prejudice basis and encouraged SA and SG to ask him anything. SA agreed that this was an open-ended conversation and he said they needed to sort this out. PJ asked if anything had changed since his last meeting with SA (this last meeting had taken place in November 2021). SA explained that he and SG had been actively attempting to work this matter out. PJ said that he seems a bit better for it. SA said that SG was fully on board in trying to get this matter resolved. SA added that this matter was a family matter as well as a financial."
v) On behalf of the Defendants, reliance is placed upon the fact that the note of the meeting on 17 January 2022 records that Mr Jonson deliberated on the question as to who Pannone should act for. Thus, at paragraph 82 of the note, it is recorded that: "PJ explained that he wanted to know who we should say we are acting for. If we write to them and say we are acting for SA then RPC could turn around and say that they do not deal with SA. PJ said he would need to think about this point." At Paragraph 94 it is recorded that Mr Jonson: … "Said he needed to think about who we represented. PJ said that we also needed to send a strong letter which would set out the background. This letter would need to set out and explain SA and SG's involvement. SG asked if we could block SA. SG said that this letter needs to come from his perspective. SA suggested it come from both. PJ agreed… ."
vi) Following this meeting, Mr Jonson drafted the letter that Pannone sent to RPC on 8 February 2022. In doing so, he liaised with both Mr Akbar and Mr Ghaffar in respect thereof, and obtained the agreement of both of them as to its content before it was sent as referred to in paragraphs 23 and 24 of his witness statement.
vii) Although I was taken to the letter dated 8 February 2022 at the hearing on 11 August 2022, I did not notice, and nor was it drawn to my attention that, in the letter, Pannone referred to both Mr Akbar and Mr Ghaffar as their clients, and referred to acting on behalf of both of them in sending the letter, which sought a number of answers in respect of the £1.833 million that Mr Akbar believed had been invested with RPC. A response was sought by 15 February 2022. The letter concluded by saying: "You should not contact our clients regarding this matter. All responses to the issue set out in this letter should be writing to this firm."
viii) As above, the letter dated 8 February 2022 led to RPC's response dated 14 February 2022 to which the significance referred to above has been attached by Mr Akbar in pursuing his claim.
ix) In paragraph 24 of his witness statement, Mr Jonson refers to the letter dated 14 February 2022 as: "a very unwelcome surprise for the Claimant as it stated that until receiving our letter, they had not heard mention of the Claimant and they did not believe that they had dealt with him. The letter went on to explain that documents previously provided by the First Defendant which apparently evidenced his dealings RPC did not appear to be genuine. I did not send a copy of RPC's letter to the First Defendant."
The Discharge Application
i) As to Pannone's letter dated 8 February 2022, is said that it expressly identified Mr Ghaffar as one of Pannone's clients, stated that Pannone acted for both Mr Ghaffar and Mr Akbar in relation to the RPC investment, and instructed RPC not to contact either of Pannone's clients (i.e., including Mr Ghaffar), but to send all correspondence to Pannone. On this basis, Mr George contends that the letter placed Pannone in an "obvious and irremediable" position of conflict, in particular in acting for Mr Akbar for the purposes of the present proceedings.
ii) In response to a letter from AG dated 6 September 2022, Pannone responded by letter dated 7 September 2022, denying that there was any conflict, and (a) stating that Mr Ghaffar had never been its client; and (b) seeking to explain the terms of the letter dated 8 February 2022 on the basis that it was necessary to claim that it represented Mr Ghaffar because, if the latter only referred to Mr Akbar, then it was likely that RPC would have ignored the letter. Mr George contends, at paragraph 3.4, that this was a "remarkable" position for Pannone to take on the basis that it amounted to an assertion that Pannone knew and believe that Mr Ghaffar was not its client, also believed that it was essential that RPC believe that he was its client, and persuaded Mr Ghaffar to "lend his name" to the letter in order to fraudulently misrepresent the position to RPC, and thereby maximise the chances of RPC responding substantively, and providing Pannone with material which could then be used to formulate claims against Mr Ghaffar himself.
iii) At paragraph 3.5, Mr George contends that what appeared to be an "admitted fraud" on Pannone's part achieved the desired result of obtaining the RPC letter which was then placed at the heart of Mr Akbar's case.
iv) In paragraph 4 of his witness statement, Mr George refers to the final sentence of Pannone's letter dated 8 February 2022 requiring RPC not communicate with its clients, maintaining that the significance of this paragraph "cannot be overstated" given that it prevented, so it is suggested, Mr Ghaffar from investigating the RPC investment, and resulted in Pannone interposing itself between the parties to a dispute in circumstances where they did not act for either of them and were in fact advising in respect of claims against both of them.
v) Paragraph 5 of the witness statement is headed: "Breach of full and frank disclosure". It is alleged in sub-paragraph 5.1 that neither Mr Akbar nor Pannone ever explained to the Court that:
"a) Key evidence in support of the Application had been procured by a fraud in which Pannone itself knowingly participated; and
b) Pannone interposed itself between Mr Ghaffar and RPC, preventing him from making any progress in resolving these claims and providing further explanation to the Claimant (a matter relied upon by the Claimant in support of the Application)."
vi) On this basis, in sub-paragraph 5.2 of his witness statement, Mr George contends that it is "self-evident" that these were material facts which required to be drawn to the Court's attention and that, given what he says is the apparent deliberate nature of Pannone's wrongdoing, it is hard to see how the failure to give full and frank disclosure could have been anything other than part of a "deliberate strategy".
vii) Paragraph 6 of Mr George's witness statement goes on to submit that given the misconduct said to be identified above, and what is said to be the abusiveness of making an application for a freezing order by reference to information obtained through fraudulent conduct on the part of an officer of Court, it is the Defendants' position that the only appropriate course is to discharge the Order in its entirety, and order Mr Akbar to pay the costs of both the application for a freezing order and proprietary injunction, and the Discharge Application.
i) AG came on the record as acting for the Defendants on or about 6 September 2022. Apart the matters raised in AG's letter dated 6 September 2022 which ultimately formed the basis of the matters alleged in Mr George's witness statement dated 18 November 2022, no other allegations of failure to give full and frank disclosure were ventilated. For example it was not suggested that particular potential defences had not been properly identified in making the without notice application on 11 August 2022, and nor were any objections taken as to the scope of the worldwide freezing order or freezing order then made, save to the extent that certain variations were agreed when the Order was continued by consent, with agreed variations, on 12 August 2022, 12 September 2022, 14 October 2022, 4 November 2022 and subsequently in December 2020.
ii) The Order dated 4 November 2022, required the Discharge Application to be issued by 4 PM on 18 November 2022. The Discharge Application was made just in time, but it limited the allegations as to failure to give full and frank disclosure to the matters referred to in paragraph 5.1 of Mr George's witness statement.
iii) Directions were given for the service of evidence in response to the Discharge Application, and for the Defendants to serve evidence in reply if so advised. In response to the Discharge Application, Mr Akbar filed and served Mr Jonson's witness statement and his own witness statement, each dated 9 December 2022. I must, I consider, proceed on the basis that those witness statements were prepared in order to meet the case as to discharge as advanced in Mr George's witness statement.
iv) No witness statement of either of the Defendants was relied upon in support of the Discharge Application, only that of Mr George. No evidence was served in reply to Mr Jonson's and Mr Akbar's witness statements.
v) There was some considerable delay in the Discharge Application being listed for a hearing, with it ultimately being listed on 24 April 2023 to accommodate Counsel then instructed by the Defendants.
vi) In the event, as referred to above, AG came off the record as acting for the Defendants in February 2023, and Mr Hornyold-Strickland has more recently been instructed by the Defendants on a direct access basis: to draft a Defence, and to then represent the Defendants at the hearing on 24 April 2023. Mr Hornyold-Strickland has been instructed in place of Counsel previously instructed when the Defendants were represented by AG.
i) So far as the £1 million is concerned:
a) It is common ground that this was paid by Mr Ghaffar to RPC.
b) In its letter dated 14 February 2022, RPC referred to "redirecting" £38,450 of this £1 million to Mr Ghaffar under the reference "Dominic Builders" but said nothing further about any application of the monies.
c) It is Mr Akbar's understanding and case, as referred to in paragraph 68 of the Particulars of Claim that, on or about 21 September 2020, RPC paid away £940,822.28 of the £1 million to a person or persons unknown. This is based on the contents of a text message dated 29 September 2020 from Mr Littlejohns of RPC to Mr Ghaffar, a copy of which was provided by Mr Ghaffar to Pannone under cover of an email dated 19 January 2022. This text message is in the form of a statement, appearing to show the receipt of the £1m and then payment out of the sum of £940,822.28 described as "Outgoing SEPA Payments", leaving a balance of some £59,000.
d) The Defendants' Defence does not specifically plead to paragraph 68 of the Particulars of Claim and thereby answer the case advanced. Matters were put by Mr Hornyold-Strickland in the course of submissions of it being the Defendants' case that the monies remain with RPC.
ii) So far as the £833,000 is concerned:
a) Pannone's letter dated 8 February 2022 had referred to the £883,000 being sent to RPC's associate, Mr Hofer, at RPC's request. On Mr Akbar's case this was included based on what Mr Ghaffar had said, and Mr Ghaffar approved the letter including this reference.
b) In its letter dated 14 February 2022, RPC said that it did not request a further payment of £883,000, and that it had no knowledge of the circumstances under which such payment was made.
c) In paragraph 43.2 of the Defendants' Defence, the Defendants plead that the whole sum of £1,833,000 was paid to RPC. The statement of truth on the Defence was signed by both Defendants and dated 31 March 2023.
d) However, at paragraphs of his first affidavit dated 1 September 2022, Mr Ghaffar said that he transferred an aggregate total of £833,000 (in various sums) to Fair FX to be converted to foreign currencies and then to be transferred onwards as directed by Mr Akbar to companies of which he had no material knowledge.
e) Then, at paragraphs 31-34 of his second affidavit dated 18 November 2022, Mr Ghaffar identified a number of transactions totalling £827,954.34 as being "identifiable as being part of this sum", with a balance of £5045.66 referred to as having become became co-mingled with his own dealings. The list of transactions show the funds to have been dissipated to various sources including: (i) to what Mr Akbar contends is Mr Ghaffar's company, Pomona, (ii) to various third parties and (iii) via a Fair FX account, to an organisation called Atlantic Partners Asia based in Singapore ("APA"). However, Mr Ghaffar then also asserts that to the best of his recollection and belief, in accordance with Mr Akbar's instructions, he transferred the aggregate sum of £833,000: "in various transfers via foreign exchange platforms to be converted into foreign currencies and then transferred onwards as directed by the Claimant to companies of which I had no material knowledge". He then added: "However, these transfers were co-mingled with my own dealings and I have not yet been able to identify the specific transfers which comprise this sum."
The Principles to be applied
"In considering whether there has been relevant non-disclosure and what consequence the court should attach to any failure to comply with the duty to make full and frank disclosure, the principles relevant to the issues in these appeals appear to me to include the following.
(1) The duty of the applicant is to make 'a full and fair disclosure of all the material facts:' see Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 48, 514, per Scrutton L.J.
(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex v. Kensington Income Tax Commissioners, per Lord Cozens-Hardy M.R., at p. 504, citing Dalglish v. Jarvie (1850) 2 Mac. & G. 231, 238, and Browne-Wilkinson J. in Thermax Ltd. v. Schott Industrial Glass Ltd. [1981] F.S.R. 289, 295.
(3) The applicant must make proper inquiries before making the application: see Bank Mellat v. Nikpour [1985] F.S.R. 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.
(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J. of the possible effect of an Anton Piller order in Columbia Picture Industries Inc. v. Robinson [1987] Ch 38; and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade L.J. in Bank Mellat v. Nikpour [1985] F.S.R. 87, 92–93.
(5) If material non-disclosure is established the court will be 'astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure … is deprived of any advantage he may have derived by that breach of duty:' see per Donaldson L.J. in Bank Mellat v. Nikpour, at p. 91, citing Warrington L.J. in the Kensington Income Tax Commissioners' case [1917] 1 K.B. 486 , 509.
(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.
(7) Finally, it 'is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded:' per Lord Denning M.R. in Bank Mellat v. Nikpour [1985] F.S.R. 87, 90. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms.
'when the whole of the facts, including that of the original non-disclosure, are before [the court, it] may well grant … a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed:' per Glidewell L.J. in Lloyds Bowmaker Ltd. v. Britannia Arrow Holdings Plc., ante, pp. 1343H–1344A."
i) In Memory Corporation Plc v Sidhu (No. 2) [2000] 1 WLR 1443, Mummery LJ had observed at 1459-1460 that "[i]t cannot be emphasised too strongly that at an urgent without notice hearing for a freezing order … 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".
ii) In Fundo Soberano De Angola v Dos Santos [2018] EWHC 2199 (Comm), Popplewell LJ had noted at [52] that, "although the principle is often expressed in terms of a duty of disclosure, the ultimate touchstone is whether the presentation of the application is fair in all material respects".
"vii) A defendant must identify clearly the alleged failures, rather than adopt a scatter gun approach. A dispute about full and frank disclosure should not be allowed to turn into a mini-trial of the merits;
viii) In general terms it is inappropriate to seek to set aside a freezing order for nondisclosure where proof of non-disclosure depends on proof of facts which are themselves in issue in the action, unless the facts are truly so plain that they can be readily and summarily established, otherwise the application to set aside the freezing order is liable to become a form of preliminary trial in which the judge is asked to make findings (albeit provisionally) on issues which should be more properly reserved for the trial itself;
ix) If material non-disclosure is established, the court will be astute to ensure that a claimant who obtains injunctive relief without full disclosure is deprived of any advantage he may thereby have derived;
x) Whether or not the non-disclosure was innocent is an important consideration, but not necessarily decisive. Immediate discharge (without renewal) is likely to be the court's starting point, at least when the failure is substantial or deliberate. It has been said on more than one occasion that it will only be in exceptional circumstances in cases of deliberate non-disclosure or misrepresentation that an order would not be discharged;
xi) The court will discharge the order even if the order would still have been made had the relevant matter(s) been brought to its attention at the without notice hearing. This is a penal approach and intentionally so, by way of deterrent to ensure that applicants in future abide by their duties;
xii) The court nevertheless has a discretion to continue the injunction (or impose a fresh injunction) despite a failure to disclose. Although the discretion should be exercised sparingly, the overriding consideration will always be the interests of justice. Such consideration will include examination of i) the importance of the facts not disclosed to the issues before the judge ii) the need to encourage proper compliance with the duty of full and frank disclosure and to deter non-compliance iii) whether or not and to what extent the failure was culpable iv) the injustice to a claimant which may occur if an order is discharged leaving a defendant free to dissipate assets, although a strong case on the merits will never be a good excuse for a failure to disclose material facts;
xiii) The interests of justice may sometimes require that a freezing order be continued and that a failure of disclosure can be marked in some other way, for example by a suitable costs order. The court thus has at its disposal a range of options in the event of non-disclosure".
i) Mr Connolly referred to Behbehani v Salem (supra) at 728F-G on the question of innocent non-disclosure, where Woolf LJ said that he was: "not happy about the suggestion that it is appropriate to regard a disclosure as not innocent when the facts not disclosed were not known at the time to be material, albeit that it ought to have been known that they were material." This provides authority for the proposition that a failure to provide full and frank disclosure is to be treated as innocent if the party in question did not intentionally omit information which they thought to be material.
ii) Further, Mr Connolly relies upon remarks made by Slade LJ in Brinks Mat at 1359, where he said: "By their very nature, ex parte applications usually necessitate the giving and taking of instructions and the preparation of the requisite drafts in some haste. Particularly, in heavy commercial cases, the borderline between material facts and non material facts may be a somewhat uncertain one. While in no way discounting the heavy duty of candour and care which falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths."
iii) Mr Hornyold-Strickland, on the other hand, refers to Behbehani v. Salem 1989] 1 WLR 723 [Note] at 729, where Woolf LJ said: "[I]f the court does not approach the question of non-disclosure of a material matter in a way that has been indicated in early decisions, there will be little hope of solicitors who are subjected to such pressures appreciating the importance of making full disclosure and, more important, bringing home to the clients serious consequences of non-disclosure."
iv) On the question of materiality, Mr Hornyold-Strickland relies upon a passage from Gee, Commercial Injunctions, 7th Edn at 9-003 for the proposition that the test is not whether the same result would have been achieved in any event. The duty is one of the utmost good faith (as in insurance contracts) and requires placing all matters relevant to the Court's assessment in front of it. This includes all matters which are important, and it is no defence for the Claimant or its solicitors to say that they did not think matters were important, the test being objective.
The Defendants' case for discharge
"2. In summary, the Defendants will say that:
2.1 As regards the meeting of 17 January 2022:
2.1.1. The Claimant failed to identify to the Court that its solicitors had represented that the First Defendant was also their client; that they had obtained documents which they subsequently used against the First Defendant to obtain a freezing order against him; and that they did so at a time when on an objective analysis the Claimant must have contemplated suing the First Defendant; and they then interposed themselves between the First Defendant and RPC;
2.1.2. Pannone's/the Claimant's non-disclosure could not have been innocent; therefore the Court has no discretion and must discharge the freezing order and proprietary injunction. If the Court decides to reissue the freezing order and proprietary injunction it should be on di?erent terms, to be determined either at a separate application by the Claimant, or at the CCMC; and the Claimant should bear its own costs relating to the freezing injunction and it should pay the First Defendant's costs of the discharge application.
2.2. As regards other breaches, the Claimant also failed to identify potential defences the First and Second Defendant might legitimately advance, including that: (a) the order could not possibly be against the Second Defendant for all the sums claimed since she was only party to the property transactions; (b) if the Claimant had any causes of actions, most of them were and remain against third-parties, not against the First Defendant (excluding the proprietary claims), since the First Defendant was acting as the Claimant's agent, and was (and remains) just as concerned about recovering the Claimant's monies as he was. To date, the Claimant has still not joined those parties to this action, though they should be."
i) Whether, in or around January 2022, Pannone believed that Mr Ghaffar was its client and, if not, objectively construed, would a reasonable person in the shoes of Mr Ghaffar and RPC nevertheless assume that Mr Ghaffar was a client of Pannone, and what was the effect of that? Mr Hornyold-Strickland contends that a reasonable person in the shoes of Mr Ghaffar and RPC would assume that Mr Ghaffar was Pannone's client and that, either way, Pannone abused its position.
ii) When faced with the Discharge Application, did Mr Akbar and/or Pannone admit fault, or did they double down and insist that there had been no material nondisclosure? Mr Hornyold-Strickland contends that Mr Akbar doubled down and refused to admit fault, which reinforces his wrongdoing.
iii) At the time of the interview on 17 January 2022 and the creation of the letter dated 8 February 2022 shortly thereafter, is it credible that Mr Akbar did not contemplate suing Mr Ghaffar? Mr Hornyold-Strickland submits that the answer to this is "No", although he says that this issue is not "determinative".
i) The RPC element of the claim against the Defendants was at the heart of the application for a freezing order and proprietary injunction, and central thereto was information obtained from RPC which had been acquired by Pannone's letter dated 8 February 2022 to RPC in which it was represented that Mr Ghaffar was their client. It is submitted that this was relevant and important information, because Mr Akbar did not come to court with "clean hands".
ii) If that representation was untrue, which must be Mr Akbar's position because it is his case that Mr Ghaffar was never a client of Pannone, then Pannone had put itself squarely in breach of SRA Code of Conduct Rules 1.2 and 1.4, which provide that solicitors should not take unfair advantage of clients or others, and should not mislead or attempt to mislead clients, the court or others.
iii) Assuming that Mr Ghaffar was not Pannone's client, it is submitted that Pannone nevertheless: (a) intimated by words or conduct that Mr Ghaffar was their client, by saying that they would think about who they represented and subsequently saying in the letter dated 8 February 2022 that Mr Ghaffar was their client, (b) did so in order to persuade Mr Ghaffar to lend his name to a letter to RPC to make it more likely that RPC would provide information which it could subsequently use against Mr Ghaffar, and (c) in doing so misled Mr Ghaffar.
iv) It is alleged that Mr Jonson failed to raise any of these alleged abuses of position in the application for the freezing order and proprietary injunction on 11 August 2022. Further, it is submitted that having put his mind to the question of who Pannone represented, Mr Jonson cannot claim ignorance of the question, and it is asserted that the position is exacerbated by Mr Jonson's refusal to accept any responsibility for wrongdoing, whether in Mr Jonson's witness statement or in the resistance to the Discharge Application.
v) Mr Hornyold-Strickland submits that it is no answer that the information might have been obtained by legitimate means, such as a Norwich Pharmacal Order. This is because an argument that one might obtain by legitimate means that which was obtained illegitimately is not a defence to an abuse of process, or conduct falling foul of the SRA Code of Conduct. Further, Mr Hornyold-Strickland says that it is non-responsive to the materiality test.
vi) Mr Hornyold-Strickland submits that it is clear on the authorities that the fact that the Order might have been granted anyway is no answer where there has been a breach of the duty to give full and frank disclosure, and specially a deliberate breach.
vii) Mr Hornyold-Strickland submits that either Mr Ghaffar was Pannone's client, in which case there was a serious conflict of interest in Pannone acting on the obtaining of the freezing injunction and proprietary injunction or, alternatively, Pannone did not believe that Mr Ghaffar was its client, but nevertheless acted towards him and RPC as if it was, and thereby obtained documents relied upon in support of the application for the freezing order and proprietary injunction by inducing Mr Ghaffar to believe he was its client, thereby putting itself in breach of SRA Code of Conduct Rules 1.2 and 1.4.
viii) Mr Hornyold-Strickland further submits that Pannone, in directing RPC by the language used at the end of their letter dated 8 February 2022 only to communicate with them, abused their position to gain access to information belonging to Mr Ghaffar, without him being able to gain access to that information.
ix) Mr Hornyold-Strickland submits that the fact that Pannone deemed it necessary to report themselves to the SRA is itself probative evidence that the matter is material.
x) Further, Mr Hornyold-Strickland submits that Mr Akbar ought properly to have, but failed to disclose to the Court potential defences that the Defendants had to the causes of action asserted against them as set out in paragraph 23 of his Written Submissions dated 2 May 2023, including that:
a) Mr Akbar has wrongly treated the Defendants as if they were one legal entity and as having collective responsibility for Mr Ghaffar's actions;
b) Mr Akbar has failed to identify that he was not the sole beneficial owner of Thackery Court or Flat 21, Bramerton;
c) There is a defence as to the width of the proprietary claim made against the Defendants; and
d) Specifically in relation to the RPC claim, Ghaffar had voluntarily provided evidence on 17 January 2022 that whilst he initially held Mr Akbar's monies on a Quistclose trust, he had complied with Mr Akbar's instructions, thereby extinguishing any proprietary claim, and that any action lay against RPC, thereby at least reducing the claim as against Mr Ghaffar.
Mr Akbar's response to the Discharge Application
"5. It is no part of the Defendants' application that, for example: (1) the First Defendant was a client of Pannone Corporate; (2) the First Defendant believed he was a client of Pannone Corporate; (3) the First Defendant was misled by Pannone Corporate or the Claimant into believing he was a client of Pannone Corporate; (4) Pannone Corporate abused their position at the meeting on 17 January 2022; (5) the Claimant and/or Pannone Corporate were contemplating suing the First Defendant at the date of the meeting on 17 January 2022; (6) the Claimant failed sufficiently to identify potential defences open to the Defendants (7) an Order in similar terms to that made against the First Defendant should not have been made against the Second Defendant; or (8) the form and/or substance of the Order made was materially incorrect."
"… in writing to writing to RPC there was no deliberate wrongdoing or fraudulent behaviour on my part, and it simply did not occur to me that there was any need to say anything more to the court about the correspondence with RPC when the Claimant applied for the Freezing Order."
Determination of the Discharge Application
i) I do not accept that key evidence in support of the application for the freezing order and proprietary injunction had been procured by fraud in which Pannone knowingly participated;
ii) I do not accept that Pannone did deliberately, or in any way improperly, interpose themselves between Mr Ghaffar and RPC so as to prevent him from making progress in resolving the claims and providing further explanations to Mr Akbar;
iii) On this basis, I do not accept the submission that the matters referred to in sub-paragraphs 5.1(a) and (b) of Mr George's witness statement were material facts that required to be drawn to the Court's attention.
iv) Further, I do not accept that it has been established that there was any "wrongdoing" of a "deliberate nature" on the part of Pannone, or that there has been any "deliberate strategy" to not provide full and frank disclosure as alleged in sub-paragraph 5.2 of Mr George's witness statement.
i) The breach would have been, on the basis of my findings above, innocent, and not deliberate or part of a deliberate strategy;
ii) I am not persuaded that the level of culpability would have been such as to require a penal approach to be applied;
iii) I am satisfied that I would have made the Order in any event when provided with a full explanation;
iv) The discharge of the Order would be liable to cause serious prejudice to Mr Akbar, and his ability to secure an enforceable judgment, through a dissipation by the Defendants of assets.
Conclusion