Fraud Insights: The Importance Of The Duty Of Full And Frank Disclosure Emphasised Once Again

The recent decision in Banca Turco Romana SA (in liquidation) v Kamuran Cortuk and others [2018] EWHC 662 (Comm) emphasises the importance of the duty of full and frank disclosure in the context of freezing injunctions. In this case, the claimant, a Romanian bank acting through its liquidator, had sought the continuation of freezing injunctions which had been granted on a without notice basis. The bank had obtained a freezing injunction against the defendant and four non-cause of action defendants closely associated with the defendant (the "NCADs"). Three of the NCADs were Turkish citizens living in Turkey. It was argued that the NCADs hold or control or manage a significant proportion of the defendant's assets at his direction or for his benefit. There were also other proceedings in Romania, US and Switzerland.

Three of the NCADs successfully applied to set aside the injunctions on the basis of the claimant's material non-disclosure. The Court considered that the claimant had failed to present accurately the status of foreign proceedings against the defendant in the US and that this was deliberate, which justified the setting aside of the orders. One of the reasons identified by the Court for concluding this was that the allegations of non-disclosure were advanced by the NCADs in correspondence, giving the claimant an opportunity to explain how the conduct complained of had come about. The claimant failed to provide a witness statement explaining its position, despite having had sufficient time to do so before the return date hearing.

Annabel Thomas, a Partner in the Fraud Defence team at Mishcon de Reya says:

"As emphasised by the judge in this case, the duty of full and frank disclosure owed to the Court exists in order to ensure the integrity of the Court's process. A...