The duty of full and frank disclosure – Part 2

Litigants wishing to commence court proceedings against a defendant located outside the jurisdiction of England and Wales need to be aware of the importance of full and frank disclosure from the outset to avoid potential delays, increased costs and at worst, a claim becoming time barred. In Part 2, we consider the recent case law in which the duty of full and frank disclosure has been scrutinised in the context of applications for permission for service out.

What do I need to know?

The need to serve proceedings outside the jurisdiction can arise in many situations including (but not limited to) enforcement of contractual rights, seeking disclosure of information by way of Norwich Pharmacal orders, obtaining anti-suit relief, preventing the dissipation of assets and the enforcement of judgments.

Applications for permission for service out and/or alternative service, are normally made without notice to the defendant. In the interests of fairness, the applicant has a duty to make full, fair and accurate disclosure of material information to the court and to draw the court’s attention to significant factual, legal and procedural aspects of the case (‘the duty of full and frank disclosure’). See Part 1 on Full and Frank Disclosure in respect of how far the duty extends.

A failure to provide full and frank disclosure can result in permission being retrospectively withdrawn and/or service being invalidated. The impact of this could be fatal to a claim which subsequently becomes time barred, or where permission to serve one defendant is dependent on the ability to serve another; the “anchor defendant” having to be someone who has been served in accordance with permission lawfully granted under one of the jurisdictional gateways.

Even where a service order survives a set aside application, the courts have a range of options available to them including costs sanctions where appropriate.

Finding the balance: material non-disclosures versus proportionality of sanction

Several recent decisions in the courts of England and Wales have considered the balance between holding parties culpable for failures to give full and frank disclosure and imposing proportionate consequences in complex cases.

In Wragg & Ors v Opel Automobile GmbH & Ors [2024] EWHC 110 (KB) the court decided that the non-disclosure of the potential limitation defences was material as to whether there was a serious issue to be tried on the merits, but that the court would have granted the order to serve out of the jurisdiction even if disclosure had taken place. The court balanced the necessity for integrity when making representations under a duty of full and frank disclosure and the fact that the claimants were a class, not a singular entity. In this instance, the non-disclosure was a “much less serious transgression” from a class perspective, as not all claims were subject to the limitation defences. The court found that it would not have been proportionate for a class of claimants to carry out the work necessary to make such disclosures at such an early stage in proceedings, and it would have been “draconian” to terminate all claims in the group action. Instead, the court imposed a costs order for the claimants to pay the defendant’s costs regarding their application on an indemnity basis. If the claimant were a unitary entity, however, the standard of full and frank disclosure would have been much higher and such a transgression may have been treated more seriously by the court.

In Magomedov & Ors v Kuzovkov & Ors [2024] EWHC 2527 (Comm), the court granted permission to serve the respondents with Norwich Pharmacal applications by three separate alternative means. The applicant’s failure to produce evidence of foreign law that one alternative service method contravened local laws of the jurisdiction in which service was to take place was found to be a material non-disclosure. However, recognising the need for “judicial economy and efficiency”, the court only set aside the contravening element of the order, finding that there was no reason to prevent alternative service at the UK address. From a practical perspective, the court was influenced by the high likelihood that service of the applications would come to the respondents’ attention in any event, given their connections with the respondent UK entity.

What is necessary to discharge the duty of full and frank disclosure in any given scenario will turn on the facts, context, and conduct of the parties. Specifically for applications for permission and alternative service, information such as the local law position on legality of service methods, details of proceedings in other jurisdictions, facts pertaining to forum conveniens, and potential defences will be relevant to the court’s decision as to what service order should be made. 

The judicial guidance cited around the duty of full and frank disclosure in the context of injunctive relief, applies equally to applications to serve out of the jurisdiction. The overriding consideration is the interests of justice and the need to maintain a due sense of proportion. The courts recognise that the more complex the case, the more fertile the ground for raising arguments about non-disclosure, pleading that litigants draw sensible limits when applying the broad test of materiality, and do not lose sight of the wood for the trees when challenging compliance with the duty of full and frank disclosure.

Commentary

A failure to provide full and frank disclosure at a without notice hearing can result in service orders being set aside, delay and/or the loss of the protective relief sought. The same applies to applications for an extension of time to serve out of the jurisdiction where the permission granted may be reviewed and potentially withdrawn where circumstances have changed or an existing jurisdictional gateway forming the basis of permission has fallen away.

Whilst in some cases there may be an opportunity to re-apply, claims with a limited shelf life run the risk of becoming statute barred, or out of time as a result of contractual limitation periods, if they fall at this first hurdle.

Where a party falls foul of its duty of full and frank disclosure, whether deliberately or by mistake, it is advisable to come clean with the court at the earliest opportunity. It may mean the difference between maintaining and losing the order concerned and/or a costs award on a standard basis as opposed to on an indemnity basis.