The disclosure bar for freezing applications is firmly policed. In Tugushev v Orlov (No 2)(1) the High Court has provided a further reminder of the perils of failing to comply with the duty of full and frank disclosure on ex parte applications.
The case concerned a dispute between Mr Orlov and Mr Tugushev over a stake in the international fishing business, Norebo Group.
In July 2018 Tugushev made a without notice application for a worldwide freezing order against Orlov's assets.
Orlov challenged the worldwide freezing order on the basis of alleged breaches by Tugushev of his duty of full and frank disclosure when making his without notice application before Judge Bryan (the non-disclosure application).
Orlov identified four main categories of alleged failure by Tugushev in his duty of full and frank disclosure – namely, a (deliberate) failure to:
- present fairly his prior conviction for fraud;
- present fairly the credibility of Orlov's claim that Tugushev had divested himself of his shares in Almor Atlantika (AA), the predecessor to Norebo, before taking public office in 2003 with the State Fisheries Committee;
- draw the court's attention to his previous statements that he had knowingly transferred his shares in AA to Orlov and Roth in 2003; and
- inform the court of parallel criminal proceedings in Russia.
In relation to the four main categories of alleged failure, the court found the following:
- There was no evidence that Tugushev had failed to present fairly his prior convictions. Tugushev had informed the court of the conviction and was entitled to express his view that the charge was politically motivated and to deny it.
- Tugushev had failed to present fairly the credibility of Orlov's claim that Tugushev had divested himself of his shares in AA, before taking public office in 2003. Tugushev maintained that he had not given up his shareholding in AA. However, Orlov put evidence before the court indicating that, on appointment to the State Fisheries Committee, Tugushev would have been required under Russian law to provide a signed declaration and thereafter annual reports setting out any shares he had and the income received, as well as any participation in commercial organisations. Tugushev said he had no copies of any such documents. These documents were found in May 2019 and passed to Orlov's lawyers. The judge referred to Tugushev's failure to investigate whether he had signed the declarations about his shares as a "reckless disregard of his duty of full and frank disclosure".
- No deliberate material non-disclosure was found in respect of Tugushev's alleged failure to draw the court's attention to his previous statements that he had knowingly transferred his shares in AA to Orlov and Roth in 2003. The judge said that in broad terms, express and clear reference was made throughout the application to the fact that Orlov would say that Tugushev had voluntarily given up his shares in 2003.
- The judge was unsatisfied by Orlov's claim that Tugushev knew of the Russian proceedings and had failed to disclose them. Tugushev had put clearly before the court that he had made a criminal complaint against Orlov, which had been transferred to the Investigative Committee in Moscow.
The judge held that Tugushev's failure to present clearly the credibility of Orlov's claim was material and justified the discharge of the worldwide freezing order.
This case has again highlighted the onerous burden on applications for worldwide freezing orders to carry out reasonable enquiries to comply with the duty of full and frank disclosure. The court expects applicants to investigate properly the factual basis of their own assertions and that of the likely defence. Willfully ignoring potential sources of unhelpful documentation will not be tolerated. Further, one material failure can mean discharge and a refusal to re-grant, as in the case at hand.
Endnotes
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