Fiona Trust & Holding Corporation & Ors v Privalov & Ors

The clean hands maxim does not deprive a claimant of equitable relief merely because the claimant has engaged in misconduct. The misconduct must have a sufficiently immediate relationship with the equity sought. The enquiry is fact-sensitive and ordinarily concerns deliberate and immoral conduct, although trivial matters may be insufficient and separate matters may be assessed cumulatively. Misconduct in obtaining information or failing to disclose material on an interlocutory application will not ordinarily bar substantive equitable relief where it did not affect the proceedings, will not be deployed at trial, and was not directed towards presenting a false case.

The claimants, members of the Sovcomflot group, brought extensive claims including conspiracy, deceit and equitable relief against the defendants. The defendants pleaded that the claimants should be denied equitable relief because they had failed to disclose material when obtaining freezing orders and had commissioned investigations allegedly involving unlawful methods.

The claimants applied under CPR part 3.4 and CPR part 24.2 to strike out or obtain summary judgment on those pleaded defences. The issue was whether, assuming the alleged misconduct, it had a sufficient connection with the equitable relief sought to give the clean hands defence a real prospect of success.

1. The application for summary judgment was granted. The pleaded non-disclosure and investigations complaints, separately and cumulatively, had no real prospect of constituting a defence to the equitable claims. The alternative strike-out application was not considered.

2. The clean hands maxim requires more than proof of misconduct. Following the formulation in Grobelaar v News Group Newspapers [2002] UKHL 40, the misconduct must be sufficiently closely connected with the equitable remedy sought. The relationship must be sufficiently immediate; the expression “immediate and necessary relation” should not be treated as requiring that the misconduct was necessary to obtain the relief.

3. The enquiry is fact-sensitive. The maxim is ordinarily directed to deliberate and immoral conduct. Misconduct may be too trivial to justify withholding relief, but separate matters may be assessed cumulatively. The gravity and effect of the conduct must be considered in context.

4. The authorities concerning deception in the presentation of litigation, including Armstrong v Sheppard & Short Ltd [1959] 2 QB 384, J Willis & Son v Willis [1986] 1 EGLR 62 and Gonthier v Orange Contract Scaffolding Ltd [2003] EWCA Civ 873, involved misconduct directed to securing equitable relief or presenting a false case. They therefore did not govern the present allegations.

5. The alleged non-disclosure was not pleaded as deliberate or misleading, had not affected the interlocutory course of the proceedings, and could not affect how the substantive claims would be presented at trial. The investigations had ceased before proceedings began, the claimants did not rely on their results to establish liability, and the alleged use of unlawful investigative methods was insufficiently connected with the relief sought.

Not stated in the judgment.