Home Information Cases Irish Response Ltd v Direct Beauty Products & Simon Gook (2011)

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Irish Response Ltd v Direct Beauty Products & Simon Gook (2011)

Summary

Freezing and search orders made against the defendants in a claim for inducing a breach of contract were discharged where the claimant had failed to demonstrate that it had a good arguable case in relation to that claim, there was no real risk of dissipation of the defendants' assets, and the claimant had acted in breach of the duty of fair presentation by failing to disclose certain correspondence.

Facts

The applicants (D and G) applied for the discharge of freezing and search orders made against them in the course of proceedings issued by the respondent company (X) and for the striking out of parts of X's claim. X had entered into an exclusive agreement with a Danish company (P) to distribute beauty products in the United Kingdom. That agreement came to an end in disputed circumstances which gave rise to proceedings between P and X in the Danish courts. G, who was D's sole director and shareholder, gave evidence at that trial. A Danish court found that P had not breached the agreement. X's appeal against that decision was yet to be determined. X subsequently issued proceedings against D and G seeking relief on the grounds: (i) that they were guilty of inducing P to breach the terms of the exclusive distributorship agreement by supplying a certain product to D (the inducement claim); (ii) that they had deliberately misled P into supplying that product to them by representing, falsely, that they intended to resell it in territories other than the UK (the unlawful means claim); (iii) G had conspired with P's company director to give false evidence at the trial of the Danish proceedings (the conspiracy claim). Prior to issuing the claim form, X had applied for and been granted freezing and search orders against D and G. D and G contended that the unlawful means and conspiracy claims should be struck out on the basis that they had no prospect of success. X accepted that it was appropriate to strike out those parts of its particulars of claim. D and G submitted that the freezing and search orders should be discharged in their entirety as there was no good arguable case against them and no real risk of dissipation of assets such as to justify their grant and continuation. They argued, that, in obtaining those orders, X had been in breach of the duty of fair presentation by failing to disclose to the judge the existence of correspondence between G and X's former solicitors two years before. X admitted that breach.

Held

(1) An applicant for a freezing order had to demonstrate, first, that it had a good arguable case against the respondent, Ninemia Maritime Corp v Trave Schiffahrts GmbH & Co KG (The Niedersachsen) (1983) 1 WLR 1412 CA (Civ Div) followed. The elements of the tort of inducing a breach of contract were set out in the decision in OBG Ltd v Allan (2007) UKHL 21, (2008) 1 AC 1. Whilst the House of Lords did not state in terms that had to be a breach of contract, that was nevertheless obvious, OBG Ltd followed. The Danish court had concluded that P had not acted in breach of the distributorship agreement with X. The commencement and pursuit of the inducement claim therefore amounted to an abuse of the process of the instant court because it was in the nature of a collateral attack on the correctness of the Danish judgment. It would be contrary to the spirit ofRegulation 44/2001 for a court in England to entertain, in advance of a hearing of an appeal in Denmark, a claim which was based on the proposition that the findings in the Danish judgment were wrong. Whilst it would not be right to dismiss the inducement claim, because issues of limitation might arise if that were done and it was left to X to commence fresh proceedings after determination of the Danish appeal, X had nevertheless failed to demonstrate that it had a good arguable case in relation to that claim (see paras 25, 44-45, 66 of judgment). (2) The next requirement for a freezing order was to show that its refusal would involve a real risk that a judgment or award in the applicant's favour would remain unsatisfied, Ninemia followed. That alleged or proven dishonesty on the part of a person against whom a freezing order was sought was not, of itself, sufficient to justify the conclusion that there was a real risk of dissipation of assets: all of the circumstances had to be considered to see whether the inference that there was such a risk was justified, Thane Investments Ltd v Tomlinson (No1) (2003) EWCA Civ 1272 followed. The undisclosed correspondence was highly significant in that regard since it showed that D and G had been put squarely on notice of the inducement claim two years previously and had taken no steps towards arranging their respective affairs so as to avoid or minimise the impact of a judgment in favour of X. There was, accordingly, no real risk of dissipation of assets if the freezing order was not maintained. Further, an applicant for a freezing order was under a duty to make a full and fair disclosure of all the material facts, Brink's-MAT Ltd v Elcombe (1988) 1 WLR 1350 CA (Civ Div)Fourie v Le Roux (2007) UKHL 1, (2007) Bus LR 925 followed. The duty of fair presentation applied similarly in relation to an application for a search order. Given the admitted breach of the duty of fair presentation, together with the lack of good arguable case and no risk of dissipation of assets, the freezing, and similarly the search order, had to be discharged (paras 27-28, 35, 40, 43, 76, 79).

Application granted

Queen's Bench Division
Judge Richard Seymour QC
Judgment date
21 January 2011
References

​LTL 27/1/2011 : [2011] EWHC 37 (QB) 

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