Paylor v Bowers & Ors

On an application to discharge, set aside, vary or stay a worldwide freezing order after the return-date stage, the applicant bears the burden of proving the grounds relied on, ordinarily on the balance of probabilities. It is insufficient merely to raise doubt about the claimant’s underlying case.

An applicant for an ex parte freezing order must make full, fair and accurate disclosure of material facts, including relevant documents and the significance of the evidence. Materiality is assessed by reference to what the judge would want to know. The duty extends to facts that proper enquiries would have revealed, but proof of nondisclosure must not become a preliminary trial of the underlying claim.

The claimants obtained worldwide freezing orders in support of claims alleging fraudulent misappropriation, fraudulent trading and breaches of fiduciary duty arising from foreign exchange and teak investment schemes. The defendants applied to discharge, set aside, vary or stay the orders.

The application challenged the sufficiency of the evidence of fraud, alleged material nondisclosure concerning the nature of the investment schemes and the value of teak plantations, asserted oppressive use of the orders, sought access to business and personal funds, and sought to vary earlier costs orders. Certain conflict-of-interest and injunction issues were withdrawn.

1. The application was refused in its entirety. The defendants had to prove the grounds of their application. They could not succeed merely by raising sufficient doubt to require the claimants to prove again the basis for the orders (paras [13]-[16]).
2. The court adopted the established principles governing full and frank disclosure on an ex parte application. The applicant must make full, fair and accurate disclosure of material facts, identify relevant documents, direct the judge to important evidence and explain its significance. Materiality is a matter of law and includes facts which proper enquiries would have revealed. The extent of enquiry depends on the nature of the case, the order sought and the urgency. Proof of nondisclosure must not depend on proving the very facts in issue in the underlying action, since that would turn the application into a preliminary trial (para [21]).
3. The defendants failed to prove that there was no prima facie case of fraudulent wrongdoing. The evidence concerning transfers between the investment vehicles and repayments to investors did not demonstrate proper use of investment funds and was consistent with the pleaded fraudulent case (paras [23]-[29]).
4. The defendants also failed to prove material nondisclosure concerning the teak plantations. The uncertainty in the valuation evidence had been disclosed, and the claimants had provided an expert report explaining its methodology and limitations. The defendants’ unsupported photographs and valuation assertions did not establish that reasonable enquiries would have produced contrary evidence (paras [30]-[37]).
5. The proposed stay, variation for brokerage income, challenge to the allegedly oppressive enforcement of the orders, and challenge to the costs orders were rejected. The orders contained an ordinary and proper course of business exception, and any alleged breach could be brought before the court. The remaining issues were withdrawn or immaterial.