DBI Innovations (UK) Ltd v The May Fair Avenue General Trading LLC & Ors

A worldwide freezing order is an exceptional and draconian remedy. The applicant must show a good arguable case, assets outside the jurisdiction, and a real risk of dissipation. An applicant seeking ex parte relief must make full and frank disclosure of all material facts, including reasonably anticipated defences. Material non-disclosure may justify discharge irrespective of whether it was deliberate or innocent.

At the return date, the court should avoid conducting a mini-trial, but must address an alternative case which materially changes the picture presented when the order was made. Where the disclosed evidence shows no proper foundation for the order, it should be discharged. Appropriate undertakings may preserve assets pending an account and trial.

The claimant obtained an ex parte worldwide freezing order against four defendants in connection with a failed joint venture for the exploitation of Muhammad Ali-branded fragrances. The claimant alleged unpaid royalty contributions, salary and other sums, and alleged that the defendants risked dissipating assets.

On the return date, the defendants relied on evidence of payments, cancelled invoices, the parties' contractual arrangements, further stock sales and alleged forged documents. The central issues were whether there had been material non-disclosure and lack of candour, whether the claimant had a proper foundation for a freezing order, and what arrangements should govern approximately 29,000 bottles of fragrance pending determination of the parties' accounts.

1. The freezing order was discharged. The claimant had failed to make full and frank disclosure when obtaining the ex parte order. The omissions included the defendants' payment of $62,500 towards royalties, the credit note cancelling invoices relied on for a salary claim, the arguable 50% rather than 80% liability for minimum royalties, the failure to account for 8,000 additional units sold, and invoices inconsistent with the joint venture agreement.
2. The governing principles were those described in Lloyds Bowmaker v Britannia Arrow Holdings [1988] 1 WLR 1337. An applicant must disclose all material facts and any defence reasonably anticipated. The consequence of material non-disclosure does not depend on whether it was deliberate or innocent, subject to limited latitude for a quickly corrected slip.
3. The caution in Brinks Mat Ltd v Elcombe [1988] 1 WLR 1350 and Kazakhstan Kagazy plc v Arip [2014] EWCA Civ 381 did not prevent the court from considering the alternative evidential picture. A return-date hearing should not become a preliminary trial, but that principle cannot operate as a complete answer where the defendant's material would have presented the original judge with a substantially different case.
4. The evidence showed that an account of the parties' liabilities and expenditure was required. It was not sufficiently clear that the defendants owed money to the claimant, so there was no proper foundation for continuing the freezing order.
5. The defendants were to return the approximately 29,000 bottles of fragrance to the claimant. The claimant was to sell them at the best possible price and preserve the proceeds in an escrow account pending the account between the parties and determination of damages. Costs of both applications were reserved to the trial judge.