September 07, 2023 court of first instance - Orders
Claim No. CFI 051/2023
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
BETWEEN
CARMON REESTRUTURA – ENGENHARIA E SERVIÇOS TÉCNICOS ESPECIAIS, (SU) LDA
Claimant
and
ANTONIO JOAO CATETE LEPES CUENDA
Defendant
ORDER WITH REASONS OF JUSTICE WAYNE MARTIN
UPON the Part 8 Claim Form dated 20 July 2023 (the “Claim”)
AND UPON the Claimant’s Urgent Application No. CFI-051-2023/1 dated 20 July 2023 seeking a freezing order (the “Application”)
AND UPON an Urgent Hearing have been held before me on 24 July 2023 (the “Hearing” or “ex parte Hearing”)
AND UPON the Freezing Order of Justice Wayne Martin dated 24 July 2023 (the “Freezing Order”)
AND UPON a Return Hearing having been held before me on 4 August 2023 (the “Return Date”)
AND UPON the Defendant’s oral application made at the Return Date seeking a discontinuance of the Freezing Order (the “Defendant’s Application”)
AND UPON reviewing the parties’ submissions dated 14 August 2023
IT IS HEREBY ORDERED THAT:
1. The Freezing Order is continued until further order.
2. The Claimant is to provide security for the undertaking as to damages given in relation to the Freezing Order in the amount of USD 100,000 within 28 days of this Order, in the form of a bank guarantee in favour of the Defendant or by payment of that amount into Court.
3. Each party has liberty to apply to vary or set aside the Freezing Order upon reasonable notice.
4. There shall be no order as to costs with respect to the costs of the Application, or of the Defendant’s Application.
Issued by:
Delvin Sumo
Assistant Registrar
Date of Issue: 7 September 2023
At: 8am
SCHEDULE OF REASONS
Procedural history
1. These proceedings were commenced when an application was made by the Claimant (“Carmon”) without notice to the Defendant (“Mr Cuenda”) for a Freezing Order prohibiting Mr Cuenda from disposing of or dealing in any way with funds in accounts held with Emirates MBD Bank PJSC (the “Bank”) in his name, including two specifically identified accounts (the “Application”). The Application was supported by an affidavit of Ms Adelina Martins, who is the Director of Accounting and Finance of Carmon. A substantial bundle of documents was exhibited to the affidavit of Ms Martins.
2. I heard the Application on an ex parte basis a few days after it was filed. The case presented in support of the Application was broadly as follows
3. Carmon is a construction company incorporated in Angola. Mr Cuenda was employed by Carmon since its inception in 2007. He was the most senior officer of Carmon, and a high degree of trust and confidence was reposed in him.
4. Carmon entered into a co-operation agreement with China Railway 20 Bureau Group (the “CR20”) relating to the construction of an airport in Angola. According to Carmon, bank accounts were required in Hong Kong to facilitate transactions relating to the airport construction project.
5. Carmon asserts that Mr Cuenda was sent to Hong Kong in November 2016 in order to set up a branch or subsidiary of Carmon. Carmon asserts that because of possible difficulties opening bank accounts in Carmon’s name in Hong Kong (because of the relationship between the beneficial owner of Carmon and the former President of Angola), it was necessary to incorporate another company in Hong Kong (“Carmon HK”) and for Mr Cuenda to serve as the sole director and shareholder of that company. Mr Cuenda controlled the bank account of Carmon HK at DBS Bank (“Hong Kong”) and was the sole signatory of that account. Mr Cuenda provided log in details relating to the account to Carmon in order that transactions could be carried out remotely by Carmon as required.
6. Carmon asserts that it was agreed that Mr Cuenda would act as the nominee or agent of Carmon in his role as director and shareholder of Carmon HK and that Carmon would always have ultimate beneficial ownership and control of Carmon HK and its assets. Carmon asserts that this agreement was recorded in a number of agreements including a Nominee Services Agreement (the “NS Agreement”) signed in May 2022.
7. The relationship between Carmon and Mr Cuenda deteriorated for reasons which are not germane to the issues in this Application, with the result that Mr Cuenda was asked to leave Carmon’s employment. On 9 August 2022, Mr Cuenda tendered his resignation. In early December 2022, Carmon discovered that the log in details for the bank account held by Carmon HK had been changed. Despite request, Mr Cuenda failed to provide the new log in details. The last known balance of the account was approximately USD 23 million.
8. Carmon commenced proceedings in the courts of Hong Kong. In the course of those proceedings, a domestic Mareva injunction against Carmon HK and Mr Cuenda, together with a disclosure order were obtained ex parte on 30 December 2022, and continued (also ex parte) on 5 January 2023.
9. In or about 16 and 18 January 2023, DBS Bank Hong Kong provided information pursuant to the disclosure order from which it was apparent that transfers had been made from Carmon HK’s account to various accounts held by Mr Cuenda in his own name in other banks and in other countries, including 2 accounts in his name at the Bank.
10. On 19 January 2023, the Hong Kong Court issued a worldwide Mareva injunction against Mr Cuenda ex parte. The relevant terms of that order will be referred to later in these reasons.
11. On 14 March 2023, Mr Cuenda filed an affidavit in compliance with the disclosure order issued by the Hong Kong Court. The domestic and worldwide Mareva injunctions issued by the Hong Kong Court continue in force until final judgment pursuant to an order made by that Court by consent on 16 March 2023. However, on 8 June 2023, Mr Cuenda brought an application in the Hong Kong Court challenging the jurisdiction of that Court and seeking the discharge of each of the injunctions. That application has not been determined.
12. The information disclosed in the course of the Hong Kong proceedings revealed amounts of AED 3,300,000 and USD 17,400,000 had been transferred from the Carmon HK account into accounts in the name of Mr Cuenda held at the Bank. Dealings with the funds in those accounts were prohibited by the injunctions issued by the Hong Kong Court on 19 January and 16 March 2023.
13. In March 2023 Carmon, through its lawyers, gave notice to the Bank of the orders that had been made by the Hong Kong Court. However, in early April 2023 the Bank responded asserting that the orders made by the Hong Kong Court, or indeed any Court outside the UAE, were not enforceable in the UAE unless and until those orders had been recognised by the Courts of the UAE. Carmin asserts that the delay in commencing these proceedings was occasioned by the difficulties which were encountered transferring funds to the UAE in order to fund the proceedings.
14. The Application was brought pursuant to the jurisdiction of the Court to issue injunctive orders, including freezing orders, as an incident of the Court’s jurisdiction to enforce domestic or foreign judgments, whether the judgment has been granted or is prospective.1 More specifically, the Application invited the Court to exercise its powers to preserve assets from dissipation so that if and when judgment is obtained in Carmon’s favour in the proceedings in Hong Kong, those assets might be available in the exercise of this Court’s power to enforce that judgment.
5. During the ex parte Hearing of the Application for the Freezing Order, counsel for Carmon directed my attention to affidavits which had been sworn by Mr Cuenda in the course of the Hong Kong proceedings and which were exhibited to Ms Martins’ affidavit. In the course of one of those affidavits, Mr Cuenda provided his version of the events which resulted in the creation of Carmon HK, which are very different to those asserted by Carmon. More specifically, Mr Cuenda asserted that he was the ultimate owner and controller of Carmon HK, and rejected any suggestion that he held either shares in that company or his office of director as a nominee for Carmon. He also asserted that he never signed the NS Agreement, and that the signature on that document which appears to be his is a forgery.
16. Counsel drew the Court’s attention to an assertion by Mr Cuenda in one of his affidavits in the Hong Kong proceedings to the effect that following his resignation, Carmon had offered to buy the shares of Carmon HK, which was said to be unequivocally inconsistent with Carmon’s assertion that it had been the beneficial of Carmon HK at all times. Counsel for Carmon accepted that this assertion, if believed, “could amount to a complete defence”.2 However, counsel asserted that there was no documentary evidence of any offer by Carmon to purchase the shares in Carmon HK.3
17. After hearing arguments and considering the materials which had been provided to the Court, I gave short reasons for my conclusion that the Freezing Order should be granted. In the course of those reasons, I expressed the view that there was an arguable case to the effect that there was a significant prospect that a judgment might be obtained in the Hong Kong proceedings which could be enforced in this Court, and that there was a risk of dissipation of the funds in the bank accounts the subject of the Application if the orders sought were not granted on an ex parte basis. In accordance with standard practice, I directed that the Freezing Order would remain in force until a specified Return Date, which in this case was eleven (11) days after the Hearing, or earlier order. Included amongst the orders which I made was an order requiring Mr Cuenda to inform Carmon’s legal representatives within seven (7) days of service of the order upon him of the balance of funds held in the accounts at the Bank and details of any transfers made from those accounts since 19 January 2023.
18. The Freezing Order was served on Mr Cuenda, and on the day before the Return Date he served a lengthy affidavit in opposition to the continuation of the Freezing Order. However, even though the time for compliance with the Freezing Order requiring him to provide information in relation to dealings in the relevant bank accounts had expired, he neither provided the information nor any explanation for his failure to provide that information.
19. In his affidavit, Mr Cuenda asserts that his connections in China enabled him to facilitate the transaction between Carmon and CR20 and that a Consortium Agreement was entered into between Carmon and Carmon HK specifying that 90% of the profits from the CR20 project4 would be for Carmon, and 10% would be for Carmon HK in order to compensate him for his contribution to the introduction of CR20. Mr Cuenda asserts that the copy of the Consortium Agreement drawn to the attention of the Court during the ex parte Hearing is incomplete, as it omits the provisions relating to the percentage of revenue split between the parties.
20. In the affidavit, Mr Cuenda also refers to negotiations for the sale of his shares in Carmon HK to Carmon around the time of his resignation and exhibits a draft deed relating to the purchase of those shares to his affidavit. He also exhibits another draft contract for the purchase of the shares in Carmon HK prepared in October 2022. Mr Cuenda points out that no reference was made to these documents in the ex parte Hearing and that, to the contrary, counsel had asserted that there were no such documents.
21. In his affidavit, Mr Cuenda again asserts that he never signed the NS Agreement. He further asserts that in an affidavit presented to the Court in Hong Kong, Ms Martins asserted that the NS Agreement had been signed on 16 November 2016, but later in the course of those proceedings it was asserted that the NS Agreement had been signed in or about May 2022 and backdated to 16 November 2016.
22. In his affidavit, Mr Cuenda further asserts that revenue of USD 418 million was received by Carmon HK, with the result that under the Consortium Agreement, Carmon HK was entitled to 10%, or USD 41.8 million.
23. Mr Cuenda also refers in his affidavit to proceedings commenced by Carmon against him in Switzerland seeking a freezing order over funds held in bank accounts in his name in that country. He refers to his opposition to the orders sought in those proceedings, and the evidence which he gave in that regard.
24. On the Return Date, senior counsel for Mr Cuenda argued that the Freezing Order should be discontinued for two reasons:
(a) Carmon had not established a seriously arguable case or a case with a real prospect of success; and/or
(b) Carmon had breached its duty of disclosure at the ex parte Hearing.
25. Although these grounds are conceptually distinct, there is a significant overlap between the factual basis for each ground. So, apart from the legal issues to which I will briefly refer below, the various matters which are said to support the conclusion that there is no seriously arguable case, or that Carmon has no real prospect of success, are all matters which are said to have been known to Carmon at the time of the ex parte application, but which were not disclosed, in breach of the duty of disclosure which falls upon any party moving for an order without notice.
26. In relation to the contention that the Freezing Order should be discharged because Carmon has not established a seriously arguable case against Mr Cuenda, or a case that has a real prospect of success, it is significant to note that the Freezing Order has been sought and granted pursuant to what has been described as the “enforcement principle” in the cases on this topic to which I referred in Lateef v Liela5, in respect of a prospective foreign judgment.6 It will be for the foreign Court, not this Court, to determine the merits of Carmon’s case against Mr Cuenda. Of course, this is not to say that this Court should abdicate the responsibility of assessing the strength or prospects of Carmon’s case in the foreign Court in order to determine whether interlocutory relief should be granted. Rather, the question is whether, having regard to the matters raised on Mr Cuenda’s behalf, the case which will be prosecuted against him in the Hong Kong Court is sufficiently arguable to justify the continuation of the relief granted.
27. The principal matters upon which Mr Cuenda relies for the proposition that the case against him is not seriously arguable or has no real prospect of success are as follows.
28. First, it is said that Ms Martins’ change in position in relation to the backdating of the NS Agreement is a matter which will tell strongly against her credibility. However, the question of the credibility of any witness is pre-eminently a matter for determination by the trial Court. Further, it can be safely assumed that the assessment of credibility of the respective witnesses for each party may be significantly influenced by evidence likely to be called from experts in the analysis of manuscript on the question of whether or not the signature purporting to be that of Mr Cuenda on the NS Agreement is a forgery.
29. Next, attention is drawn to the existence of two documents recording offers from Carmon to purchase the shares in Carmon HK, which is said to be inconsistent with Carmon’s case. It is submitted that the significance of such evidence was conceded by Carmon’s counsel at the ex parte Hearing, as indeed it was. However, at trial the existence and terms of the offers to purchase the shares might support either party’s case, depending upon whether the purchase was for Carmon HK with or without its entitlement to cash or a share of revenue/profits from the CR20 transaction. If the purchase was for the shares in Carmon with all its rights to revenue/profits, it could be argued that the price offered for the purchase (which was nominal in one document and very modest in the other document) is entirely inconsistent with the value of those shares, and therefore only consistent with an understanding that Carmon was the beneficial owner of Carmon HK and a very small consideration was being proffered as an inducement to Mr Cuenda to regularise the state of affairs. It follows that this is another matter properly explored at trial.
30. Next, reliance is placed upon the terms of the Consortium Agreement, under which Carmon HK was to receive 10% of either revenue or perhaps profits. There is no doubt that this is a significant matter which counts against the case put forward by Carmon. However, the circumstances in which the arrangements between Carmon and Carmon HK were made, and the terms of those arrangements, and the manner in which they were implemented are all matters likely to be explored in considerable detail at trial. It is not appropriate to conclude that Carmon’s case is not seriously arguable or has no real prospect of success by taking one of those matters out of the overall commercial context.
31. Next it is said that the communications relating to Mr Cuenda’s resignation from Carmon make no reference to Carmon HK, apart from the documents recording Carmon’s offer to purchase Mr Cuenda’s shares in Carmon HK. However, like the terms of those offers, this is another matter which could support either party’s case at trial. Although Mr Cuenda contends that an inference of his beneficial ownership can be drawn from the lack of communication on the subject, Carmon could equally contend that the lack of communication is explicable by the common assumption or understanding that it was always the beneficial owner of the shares in Carmon HK.
32. For these reasons, none of the matters raised by Mr Cuenda, either singly or in combination, sustain the conclusion that Carmon has failed to establish a seriously arguable case or that Carmon’s case has no real prospect of success at trial. Rather, they are all matters to be properly investigated during the course of a trial, in which each can be viewed and assessed in the context of the evidence generally.
33. Carmon’s case is that Mr Cuenda misappropriated very large amounts of money which were held by Carmon HK subject to Carmon’s direction in breach of his duties to both companies. The sheer size of the amounts involved, and the circumstances in which Mr Cuenda distributed funds from the account of Carmon HK to his personal accounts in various countries support Carmon’s case. On the evidence before this Court, it cannot be said that Carmon’s case is unarguable or has no real prospect of success.
34. However, the evidence establishes that all of the matters upon which Mr Cuenda has relied in support of his opposition to the continuation of the Freezing Order in this Court, were matters upon which he relied in his opposition to the continuation of injunctive relief in the Swiss proceedings. Whether or not these matters were known to Carmon’s counsel in these proceedings, they must have been known to Carmon, which was a party to the proceedings in Switzerland. There can’t be any doubt that these matters should have been drawn to the attention of this Court at the time injunctive relief was sought without notice to Mr Cuenda. The consequences of Carmon’s breach of the obligation of disclosure are a matter to which I will return.
35. For the sake of completeness, I note that senior counsel for Mr Cuenda also advanced legal arguments relating to beneficial ownership of the funds derived through Carmon HK, and principles relating to reflective loss in support of the contention that there was no seriously arguable case. However, those arguments turn critically upon the facts established at trial, and those facts are not sufficiently clear to enable any conclusion to be safely drawn in relation to the likely outcome of those legal contentions. Put another way, the facts likely to be established at trial cannot be identified with sufficient certainty to enable a conclusion that Carmon’s case is likely to fail by reason of the legal arguments raised.
36. During the Hearing I expressed my concern that the timetable which had been established by the Freezing Order was intended to ensure that the information which Mr Cuenda was to provide in relation to his dealings with the relevant bank accounts was available to the Court on the Return Date. However, Mr Cuenda had apparently taken it into his own hands to thwart that objective, for reasons which were entirely unexplained. Senior counsel for Mr Cuenda advised that the matter could be rectified by the provision of the information in relatively short order, and directions were made for the exchange of written submissions after the information had been provided. I directed that those submissions should be limited to the effect of the information on the question of whether the Freezing Order should be continued and the question of whether Carmon should fortify its cross-undertaking with security and if so, in what form and amount.
37. A few days after the Hearing, on the Return Date, Mr Cuenda’s legal representatives served an unsigned witness statement from Mr Cuenda, together with copies of bank statements relating to various accounts he holds at the Bank. An affidavit in the same terms as the unsigned witness statement was later served.
38. The bank statements reveal that Mr Cuenda holds five accounts with the Bank. The copies of the statements have been redacted to exclude any information relating to transactions on the accounts prior to 19 January 2023, consistently with the terms of the Freezing Order.
Account 401
39. It is convenient to refer to the accounts by reference to the last three numbers of the relevant account. The statements for account 401 show that as of 19 January 2023 the account had a credit balance of AED 2,047,558.24. The statements show that funds were progressively withdrawn from that account over the following months. By 14 March 2023, when Mr Cuenda swore an affidavit in the Hong Kong proceedings, the balance in the account had been reduced to AED 1,058,415.14. By 27 July 2023, which is the last date shown in the copy statement provided, the balance of the account had been reduced to AED 82,120,68.
Account 402
40. Account 402 is denominated in USD. The statement shows that on 23 January 2023 an amount of USD 120,000 was withdrawn from the account, leaving a credit balance of USD 17,531,524.98. The following week, another USD 3.5 million was withdrawn from the account. During February 2023 USD 10 million was withdrawn from the account, reducing the balance in the account to a little over USD 4 million, which was the balance on 14 March 2023.
41. On 20 March 2023, another USD 2 million was withdrawn from the account, reducing the balance to a little over USD 2 million. A further USD 1 million was withdrawn from the account on 10 May 2023, reducing the balance to a little over USD 1 million. Another USD 100,000 was withdrawn two days later. A further USD 70,000 was withdrawn over 21-22 July 2023, leaving a balance of USD 848,046.08 in the account at the end of the period covered by the statement.
Account 403
42. Account 403 had a credit balance of AED 153,000 as of 27 July 2023.
Account 404
43. Account 404 is also denominated in USD. The statement provided shows that USD 254,488.67 was withdrawn on 8 February 2023, leaving a credit balance of USD 511,511.34. More than USD 500,000 was withdrawn over the following two days, leaving a balance in the account of USD 2,323.83, although as a result of subsequent transactions which have been redacted on the statement provided, the balance at the end of the period covered by the statement is USD 21,751.01.
Account 405
44. The statement provided in respect of account 405 shows that an amount of AED 183,000 was withdrawn from the account on 22 July 2023, leaving a credit balance of AED 400,000.
The orders in the Hong Kong proceedings
45. This evidence must be evaluated in the context of the orders made in the Hong Kong Court. On 19 January 2023, that Court ordered that Mr Cuenda was not to deal in any way with funds held in the account of Carmon HK “or traceable proceeds thereof”. The order specifically provided that the traceable proceeds included, without limitation, funds transferred from the Carmon HK account to four specified accounts, including account 401 and account 402 with the Bank. The order further required Mr Cuenda to inform Carmon’s solicitors of the “location, nature and value of all assets which represent in whole or in part or are derived from proceeds or fruits” of the funds transferred from the Carmon HK account. The order further required that information to be verified on affidavit
46. In addition to the orders specifically freezing both the funds in the Carmon HK account, and the funds in the four specified accounts, including accounts 401 and 402 at the Bank, and “the traceable proceeds” thereof, orders were also made prohibiting Mr Cuenda from removing any of his assets within Hong Kong up to a value of USD 23m from Hong Kong, and in any way dealing with or diminishing the value of any of his assets worldwide up to a value of USD 23 million.
47. As noted, on 14 March 2023, Mr Cuenda swore an affidavit in the Hong Kong proceedings. In that affidavit he stated that as at the date of his affidavit, funds had been transferred from the Carmon HK account to a number of bank accounts including the amount of AED 3.3 million (approximately) to account 401 at the Bank, and USD 17.4 million to account 402 at the Bank. The affidavit makes no mention of the fact that by the time it was sworn, the funds which had been transferred into those accounts had been substantially depleted. Although it is inappropriate to make adverse findings on the basis of only written evidence in the course of interlocutory proceedings, there is a prima facie case to the effect that this affidavit created the misleading impression that the funds which had been transferred from the Carmon HK account remained in the accounts specified in the affidavit. As noted, the orders of the Hong Kong Court required Mr Cuenda to provide information with respect to all traceable proceeds of funds withdrawn from the Carmon HK account. That information was not provided in the affidavit of 14 March 2023, and as will be seen, has not been provided to this Court.
48. On 16 March 2023, by consent, orders were made by the Hong Kong Court prohibiting Mr Cuenda from disposing of, dealing with or diminishing the value of the funds held in the Carmon HK account (or traceable proceeds thereof) until final judgment or further order.
49. Any question of whether Mr Cuenda has breached the orders made by the Hong Kong Court must be determined by that Court. However, the fact that there is a strong prima facie case to the effect that Mr Cuenda has breached those orders is very relevant to these proceedings.
50. In the affidavit to which Mr Cuenda exhibited the bank statements, he asserts that
“When the Hong Kong order, issued on 20 January 2023 was served on me on 1 February 2023, I understood that it prohibited me from disposing or dealing with my worldwide assets, whether inside or outside Hong Kong to a value of USD23,679,195.60. I did not understand the Hong Kong order to be in any other way relevant to my UAE accounts.”7
51. It is difficult to reconcile this assertion with the clear and unequivocal terms of the order made by the Hong Kong Court, which explicitly refers to accounts 401 and 402 held by Mr Cuenda with the Bank. It is also difficult to reconcile this assertion with the statement made by Mr Cuenda in his first affidavit in these proceedings, in which he stated:
“On 16 and 18 January 2023, Carmon Angola obtained information as to transfers from Carmon Angola’s accounts to … Emirates NBD Bank …, following which it successfully applied for an order dated 19 January 2023, to freeze the funds in those accounts worldwide.”8
52. In his second affidavit, Mr Cuenda makes no reference to the depletion of the funds in accounts 401 and 402 prior to 19 January 2023. Further, although it appears that the funds in account 401 were depleted after 19 January 2023 by expenditure on an apparently lavish lifestyle, Mr Cuenda provides no information with respect to the destination of more than USD 16 million withdrawn by him from account 402 in apparent breach of the orders of the Hong Kong Court.
53. In his second affidavit, Mr Cuenda asserts that if the funds in his bank accounts are frozen “we will have no means to live in the UAE, we will not be able to buy food, acquire transport or pay for accommodation locally”. It is impossible to accept that assertion in the absence of any explanation relating to the transfer of more than USD 16 million from account 402 since January of this year.
54. There is also a prima facie case to the effect that Mr Cuenda failed to comply with the order of this Court relating to the provision of information relating to the funds in the accounts at the Bank prior to the Return Date in order to attempt to persuade this Court to discontinue the Freezing Order before his depletion of the funds in those accounts in apparent breach of the orders of the Hong Kong Court was revealed.
55. Despite the direction which I made limiting the topics to be addressed in the further written submissions, each party revisited issues that were canvassed on the Return Date in those submissions. It is unnecessary to consider the propositions put in any detail, as they essentially replicate propositions previously put.
The strength of Carmon’s case
56. For the reasons given above, I reiterate my conclusion that Carmon has established an arguable case which has a real prospect of success in the proceedings in Hong Kong. The information disclosed by Mr Cuenda since the hearing on the Return Date fortifies that conclusion. It seems likely that the trial of the Hong Kong proceedings will turn significantly upon the Court’s assessment of the credibility of the principal witnesses in the proceedings. Mr Cuenda has raised issued issues in relation to the credibility of Ms Martins. However, the information now available to this Court suggests that there will also be issues in relation to Mr Cuenda’s credibility. Obviously issues of this kind cannot be appropriately resolved in the course of interlocutory proceedings such as these, and are pre-eminently matters for determination at trial.
Breach of the obligation of full disclosure
57. The provision of procedural fairness to all parties is a fundamental tenet of the operation of common law courts, such as this Court. One of the basic principles of procedural fairness requires that a party be given the opportunity to be heard before any order adverse to the interests of that party is made. That principle is only departed from sparingly, and only in the interests of justice. One circumstance in which the Court will proceed in the absence of notice to an interested party is the circumstance in which the provision of notice would defeat the purpose of the order which is sought. However, because departure from the principles of procedural fairness is exceptional, it is subject to conditions. One of those conditions is the fulfilment of the obligation imposed upon the party seeking the Court’s intervention without notice to the other party to provide full disclosure to the Court of any matter which might have been raised by the other party if notice had been given.
58. The cases establish the importance of the fulfilment of this obligation.9 The Court has a discretion to set aside any order made following a breach of the obligation of full disclosure.10 If there has been non-disclosure which is material and other than “innocent” then it will only be in exceptional circumstances that the Court would decline to discharge the order.11 However, if the order is discharged, in an appropriate case the Court can immediately reinstate the order, in the exercise of its discretion. In exercising the discretion to continue the order, the overriding question for the Court is the determination of what is in the interests of justice,12 and on occasions the need to do substantive justice may outweigh the desirability of imposing a sanction upon a party which has failed to make full disclosure.13
59. In this case it cannot be said that the matters which Carmon failed to draw to the attention of the Court were peripheral or of no particular significance, although in the result they do not cause me to conclude that the Freezing Order should be refused based on an assessment of the strength of Carmon’s case. Had matters remained as they were at the hearing on the Return Date, I would very probably have discharged the Freezing Order on the ground of non-disclosure and then considered whether the Freezing Order should nevertheless have been renewed.
60. However, the information which has come to hand since the hearing on the Return Date has revealed:
(a) That there is a very serious risk of dissipation of assets – indeed a risk which has been realised to the point at which the relief sought by Carmon is of reduced utility, although nevertheless of some utility;
(b) A prima facie case of serious breach of the orders made by the Hong Kong Court involving more than USD 16 million; and
(c) A prima facie case of an unsuccessful attempt to subvert the processes of this Court by failing to comply with an order for the timely provision of information relating to the bank accounts in question.
61. In the unusual circumstances of this case, neither party to these proceedings has adhered to the standards expected of litigants in this Court. In these circumstances it would not be in the interests of justice to single out one party for sanction. For the reasons given, I am satisfied that there is a serious case to be tried in the Hong Kong Court, and if the Freezing Order is not continued, a serious risk that assets which might be available for the enforcement of a judgment of the Hong Kong Court in due course will be put beyond the reach of this Court. For these reasons the Freezing Order should be continued without interruption.
Fortification of the undertaking as to damages
62. In accordance with invariable practice Carmon has provided the usual undertaking as to damages in support of its Application for the Freezing Order. As noted, Carmon has explained its delay in commencing proceedings in this Court by reference to difficulties it experienced in transferring funds into the UAE. There is no evidence that Carmon has any significant assets in the UAE against which enforcement could issue in the event that the undertaking is called upon or costs are ultimately ordered against Carmon because, for example, Carmon’s case in Hong Kong is dismissed.
63. In these circumstances the undertaking proffered by Carmon is hollow and of little worth. It should be fortified by the provision of security in the amount of USD 100,000. That security should be provided either by way of a bank guarantee in favour of Mr Cuenda, or by the payment of funds into Court. That security should be provided within 28 days of the publication of these reasons. If the security is not provided within that time, Mr Cuenda has liberty to apply to discharge the Freezing Order.
Costs
64. In all the circumstances of this case, the proper exercise of the discretion with respect to costs is to order that there be no order as to the costs of the proceedings to date.