Interactive Technology Corporation Ltd v Ferster & Ors

Applicants seeking without-notice freezing, property-preservation or search orders owe a duty of full and frank disclosure. An interlocutory appeal may nevertheless concern only whether the first-instance judge was entitled to make the relevant factual assessment. A context-specific statement that destruction of documents was not expected does not necessarily negate a genuine concern about destruction or deletion of relevant evidence. Information that business income continued to reach the claimant may be immaterial where the alleged wrongdoing lies in an unauthorised transfer of the business, diversion of opportunities or unauthorised remuneration. Nor must every item of correspondence be highlighted where it has no bearing on the claimant’s entitlement.

Interactive Technology Corporation Ltd obtained without-notice freezing, property-preservation and search orders against the defendants. On the return date, Asplin J concluded that there had been no material non-disclosure and declined to set aside the orders. The defendants appealed on three grounds: that the claimant had misrepresented the perceived risk of destruction of evidence; that it had failed to highlight an auditor’s statement that business income had been paid to the claimant; and that it had failed to highlight a solicitors’ letter concerning access to documents.

The appeal concerned whether those omissions were material and whether Asplin J had been entitled to accept the claimant’s explanations. The underlying proceedings also included a petition under section 994 of the Companies Act 2006.

The Court of Appeal, in a judgment given by Tomlinson LJ with which Moore-Bick LJ and Keehan J agreed, dismissed the appeal unanimously.

1. The duty of full and frank disclosure on an application without notice was well established. The appeal raised no issue of principle. It challenged the judge’s essentially factual conclusion that there had been no material non-disclosure.
2. As to the alleged misrepresentation about destruction of documents, Warren Ferster’s statement had been made in a heated and specific discussion about alleged losses through payment processors. His explanation that the concern related principally to electronic evidence was not inherently implausible. Asplin J was entitled to accept it, and her decision fell within the bounds of reasonable decision-making. The statement did not undermine the wider concern that relevant evidence might be destroyed or deleted.
3. The auditor’s statement that income from the online gaming business had been paid to the claimant was not material to the alleged fraud. The alleged wrongdoing consisted principally of the unauthorised transfer of the business and assets, diversion of business opportunities and unauthorised remuneration. Continued payment of income to the claimant did not remove the risk that the arrangements could be terminated or that evidence of the transactions could be destroyed. It also did not affect the risk of dissipation of assets.
4. The solicitors’ letter concerning access to documents did not need to be drawn specifically to the attention of the judge. It was one item in a wider correspondence, had been written when the solicitors acted for Warren and Stuart rather than the claimant, and did not bear on the claimant’s entitlement. The surrounding evidence supported the judge’s conclusion that there had been delay and prevarication in supplying documents.

Court of Appeal (Civil Division): The appeal was dismissed unanimously.

High Court of Justice, Chancery Division: Asplin J concluded in 2015 EWHC 393 (Ch) that there had been no material non-disclosure in obtaining the without-notice orders.