Dadourian Group International Inc & Ors v Simms & Ors

Material non-disclosure on a without-notice application will normally lead to discharge of a freezing order, but the court retains a proportionate discretion to continue or re-impose relief. The court must assess the significance of the non-disclosure and must not apply a simple balance between the claimant’s merits and the breach. A later-successful cause of action may support an existing freezing order where the order was properly granted on related claims. A stay pending appeal depends on the risk of injustice, including whether enforcement would probably stifle the appeal and whether the judgment could be recovered if the appeal succeeded.

The claimants obtained freezing orders against the defendants during proceedings arising from an arbitration and related commercial transactions. Most pleaded claims failed, but a deceit claim based on an intermediary representation succeeded. The defendants sought discharge of the freezing orders and enquiries under the cross-undertakings, and sought stays of payment and assessment orders pending appeal.

The court considered whether the original orders had been wrongly obtained because the successful claim was added later, whether material non-disclosure concerning Jack and Helga’s involvement with Charlton and the arbitration justified discharge, and whether enforcement pending appeal would cause injustice.

1. Freezing orders and later amendments. The freezing orders had been properly granted on the material then before Lindsay J and Lewison J. The fact that the originally pleaded claims failed did not require discharge where the later intermediary-representation claim was closely related and the orders would have been justified had that claim been pleaded from the outset. Financiera Avenida SA v Shiblaq was distinguishable because the later claims concerned different sums and represented a much smaller proportion of the claim.
2. Material non-disclosure. The failure to draw attention to Jack and Helga’s asserted non-involvement with Charlton and the arbitration was material before Lindsay J. However, the relevant fact was disclosed to Lewison J on the return date, who continued the order after considering the non-disclosure allegations. It was therefore not open to the defendants to obtain discharge on that basis.
3. Following Brink’s Mat Ltd v Elcombe, Lloyds Bowmaker Ltd v Britannia Arrow Holdings and Behbehani v Salem, the normal response to material non-disclosure is discharge, but the jurisdiction is discretionary. The court must reconcile the disciplinary purpose of the rule with justice between the parties, assess the importance of the omitted matters, and impose a proportionate sanction. The court must not use a simple balancing exercise of merits against non-disclosure.
4. The freezing orders should continue post-judgment because there was a real risk of dissipation. A post-trial order would not be a disproportionate response to the non-disclosure.
5. Stays pending appeal. Under CPR 52.7, an appeal does not automatically operate as a stay. Applying Hammond Suddards Solicitors v Agrichem International Holdings Ltd, the essential question was the risk of injustice. Mr Simms established that enforcement would probably stifle his appeal, so a limited stay was granted preventing bankruptcy procedures based on the interim orders, while other enforcement remained available. Jack and Helga did not establish that refusal of a stay would stifle their appeals. Further costs assessments and the damages inquiry were stayed pending appeal because proceeding would risk substantial waste.
6. The court followed Aujla v Sanghera and held that the lower court had jurisdiction under CPR 52.4(2) to extend time for filing appellants’ notices, notwithstanding CPR 52.6(1). Permission to appeal was refused on the additional costs and corporate-veil grounds, and the claimants’ proposed appeal on Conspiracy I.

• High Court (Chancery Division): Freezing orders were granted by Lindsay J on 3 February 2004 and continued by Lewison J on 13 February 2004.
• Court of Appeal: Dyson LJ dismissed Mr Simms’s appeal concerning whether he was privy to the arbitration, in a judgment dated 13 May 2004.
• High Court (Chancery Division): Warren J determined the post-judgment applications, continued the freezing orders, granted a limited stay to Mr Simms, stayed assessments pending appeal, and extended time for appellants’ notices.