Tugushev v Orlov & Ors (No. 2)

An applicant for without-notice relief must make full, accurate and even-handed disclosure. The duty includes reasonable enquiries into a known and potentially decisive defence. Materiality depends on whether the presentation was liable to mislead the court, assessed proportionately and without turning the discharge application into a preliminary trial.

Material non-disclosure ordinarily warrants discharge, even where relief might otherwise have been granted. The court retains a sparing discretion to continue or regrant relief where justice requires it. A freezing order nevertheless requires solid evidence of an objectively real risk of unjustified asset dissipation; alleged dishonesty, offshore structures and delay must be assessed cumulatively in the context of the assets concerned.

The claimant alleged conspiracies by the first defendant to deprive him of interests in AA and the Norebo Group. He had obtained a worldwide freezing order and an order permitting service out of the jurisdiction.

The first defendant applied to set aside those orders for alleged breaches of the claimant’s duty of full and frank disclosure. The principal complaint concerned documents suggesting that, when entering Russian public office in 2003, the claimant had declared that he held no shares or interests in commercial organisations. The claimant sought continuation of the freezing order and, if it survived, permission to seek asset-freezing relief in Russia.

The court had earlier held that the English courts had jurisdiction: Tugushev v Orlov and others [2019] EWHC 645 (Comm). The central issues were the consequence of non-disclosure and whether there was a real risk of dissipation.

1. The worldwide freezing order was set aside and discharged. The claimant’s failure to make reasonable enquiries into whether he had declared or transferred his AA interest on taking public office was a serious breach of the duty of full and frank disclosure. The documents were undisputed, directly material to a core defence, and arguably supported the defendant’s case. The claimant had made categorical denials despite knowing that this was a likely defence. The court did not find deliberate concealment on an interlocutory basis, but held that the failure to investigate was a reckless disregard of the disclosure duty.

2. Other alleged failures did not justify discharge. The claimant had given a sufficiently fair account of his fraud conviction. The alleged omissions concerning earlier statements, Russian criminal proceedings, domicile evidence, unlawfully obtained border data, governing law and recordings were either immaterial, sufficiently disclosed, or not established.

3. Material non-disclosure normally calls for discharge even if the original order might still have been made. The court may nevertheless continue or regrant relief where the interests of justice require it. Relevant considerations include the importance and culpability of the omission, deterrence, and the injustice of leaving a defendant free to dissipate assets. Here, however, a fresh freezing order was not justified.

4. No real risk of dissipation was established. The defendant’s principal asset was a valuable shareholding in a substantial, public-facing fishing group worth materially more than the claim. Regulatory, lending and practical constraints made sale, asset stripping or devaluation unrealistic. The alleged dishonest conduct and historic use of offshore structures did not, in the circumstances, demonstrate a real risk that a judgment would go unsatisfied. The defendant had also not dissipated assets during years in which he knew of the dispute.

5. The order permitting service out was set aside only insofar as it concerned the AA conspiracy claim, but was regranted in the interests of justice. Refusing to regrant it could have ended that claim in England while leaving the other conspiracy claim to continue there. The appropriate sanction was a costs order against the claimant concerning that part of the service-out application.

This was a first-instance interlocutory judgment. Earlier in the same litigation, Tugushev v Orlov and others [2019] EWHC 645 (Comm), the court held that it had jurisdiction over the claims against Mr Orlov. Permission to appeal was refused, and Mr Orlov was seeking to renew his application before the Court of Appeal.