Harrington and Charles Trading Company Limited (in liquidation) & Ors. v Jatin Rajnikant Mehta & Ors.

A worldwide freezing order may be continued after non-disclosure where the interests of justice require it. The usual starting point is discharge, but an isolated and inadvertent omission which does not materially undermine the relief may be excused where discharge would cause injustice. On an inter partes hearing, disputed facts should generally be left for trial, but the court must assess whether a plausible evidential basis establishes a good arguable case. The court found a good arguable case of a major international fraud, claims in equity, breach of fiduciary duty, insolvency and conspiracy, together with a real risk of dissipation and assets within the jurisdiction. The freezing order was continued to trial at its existing value.

The claimants, companies in liquidation and their liquidators, alleged that the defendants were involved in a substantial international fraud involving bullion advanced to companies in India and funds transferred through multiple corporate layers.

At an earlier without-notice hearing on 27 May 2022, the court granted a worldwide freezing order. The defendants applied for its discharge on grounds of non-disclosure and unfair presentation. The claimants sought continuation of the order to trial. The central issues were whether the claimants had a good arguable case on the pleaded claims, whether there was a real risk of dissipation, and whether the order should be discharged or continued despite one identified omission concerning a later investigative report.

1. Discharge. Applying the principles stated in Tugushev v Orlov [2019] EWHC 2031 (Comm) and OJSC Ank Yugraneft v Sibir Energy plc [2008] EWHC 2614 (Ch), the court found one failure of disclosure or fair presentation: the claimants had not specifically drawn attention to the later Kroll 2014 Report. The omission was isolated, innocent and not central to the earlier decision. Even assuming the later report displaced adverse parts of the earlier report, the other evidence supported the relief. The freezing order was therefore not discharged.
2. Good arguable case. The court adopted the three-limb approach explained in Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV [2019] EWCA Civ 10 and Goldman Sachs International v Novo Banco SA [2018] UKSC 34: a plausible evidential basis was required; the court should take a reliable view of disputed facts where possible; and, where reliable assessment was unavailable, a plausible contested basis was sufficient.
3. The evidence established a strong, and at least good arguable, case that the funds represented the proceeds of a major international fraud. The UAE proceedings did not determine fraud and did not prevent that inference at the interim stage. The claimants also had a good arguable case in relation to proprietary claims, shadow directorship and fiduciary duties under the Companies Act 2006, claims under sections 212, 213 and 423 of the Insolvency Act 1986, and unlawful means conspiracy. The court did not finally determine the disputed legal issues.
4. A liability to third parties could constitute recoverable loss. The claims were not limited to the amount of proofs of debt already submitted by particular consortium banks. Their potential maximum value was the total amount of funds said to have passed through the claimant companies.
5. The requirements for a freezing order were satisfied: good arguable case, real risk of dissipation, assets within or outside the jurisdiction, and justice and convenience. The order was continued to trial at its existing value. The defendants’ discharge applications were dismissed and the claimants’ continuation application was allowed.

This was a first-instance inter partes hearing. A worldwide freezing order was made without notice on 27 May 2022 and continued by consent on 10 June 2022. The present court dismissed the discharge applications and ordered continuation of the order to trial.