Ivy Technology v Martin & Ors

INTRODUCTION

This judgment follows a hearing on the return date of a freezing order granted by Knowles J at a without notice hearing on 29 July 2019. The order requires the Defendants not to remove from the jurisdiction or dispose of assets up to the value of £4 million.

The Claimant (“Ivy”) applies for the continuation of the freezing order (substantially in the same form, with minor variations) as against all Defendants and against a Fourth Respondent, Mrs Lisa Martin.

The First Defendant (“Mr Martin”) consented to the continuation of the freezing order against him in varied form. The Third Defendant (“Premier Punt”) did not consent, but issued no application and indicated that it did not intend to appear on the return date. The Fourth Respondent consented to the grant of a freezing order against her in agreed form.

The Second Defendant (“Mr Bell”) applies by notice dated 23 August 2019 for the freezing order to be discharged against him on the bases that:

For the reasons set out below, I have come to the conclusion that the freezing order should be discharged as against Mr Bell.

BACKGROUND FACTS AND IVY’S CLAIMS AGAINST THE DEFENDANTS

The claim arises in connection with the sale of an on-line gambling business known as “21Bet” by Mr Martin to Ivy. By a Sale and Purchase Agreement dated 4 April 2019 (“the SPA”) Ivy agreed to buy, and Mr Martin agreed to sell, the shares in five companies who together constituted the business. Mr Bell was not a party to the SPA, but was a 50% beneficial owner of the business (via beneficial interests in the five companies). Ivy alleges that Mr Bell conspired with Mr Martin to make misrepresentations in connection with the sale, and to breach a non-competition covenant in the SPA (“the non-competition covenant”); and that Mr Bell also procured Mr Martin’s breach of the non-competition covenant.

In overview, the claims Ivy makes against the Defendants are (adopting Ivy’s summary for present purposes) that:

GOOD ARGUABLE CASE AGAINST MR BELL

It is common ground that Ivy has to show a “good arguable case” against Mr Bell, meaning “one which is more than barely capable of serious argument, but not necessarily one which the judge considers would have a better than 50 per cent chance of success” (Ninemia Maritime v Trave Schiffartgesellschaft, The “Niedersachsen” [1983] Lloyd’s Rep 600, 605 per Mustill J).

Ivy alleges that in the course of negotiations leading up to the SPA, which started in June 2018, Mr Martin made representations including that (a) the EBITDA (earnings before interest, tax, depreciation and amortisation) of the 21Bet business in 2018 were £1.6 million (based on income stream figures provided on 27 August 2018) and (b) the business was profitable and self-sustaining from its revenue, such that Mr Martin would be able to earn considerable sums under earn-out provisions contained in the draft SPA: a point which Ivy says was discussed by Mr Martin and Mr Bell at a meeting with Ivy in Prague on 1 October 2018.

In addition, Ivy alleges against Mr Martin breach of various representations contained in the SPA itself.

Ivy’s pleaded case against Mr Bell (leaving aside a draft amended claim form to which I was referred but for which I was not asked to give permission to amend) is that Mr Bell:

Conspiracy to injure must be pleaded to a high standard, particularly where the allegations include dishonesty:

The conspiracy allegation in the present case includes, but is not limited to, an agreement to make dishonest misrepresentations. It also includes an alternative allegation of an agreement to make representations negligently and/or within the terms of the Misrepresentation Act 1967. There may be some conceptual difficulty about the idea of an agreement to make representations honestly but negligently or (under section 2(1) of the 1967 Act) without reasonable grounds for believing them to be true. However, for present purposes I think it arguable that such an agreement can exist: at least in theory at least one might make an agreement to make statements without due care, even if in practice such an agreement would be hard to distinguish from an agreement to act recklessly (hence potentially falling within the scope of fraudulent misrepresentation).

Another feature of the present case is that the SPA contained at § 15.1 an ‘entire agreement’ clause indicating that the SPA superseded all prior negotiations and that no representation not set forth in it had been relied on by either party. However, aside from the point that such a clause would probably not prevent liability for fraudulent misrepresentation, clause 15.1 is expressly subject to § 7.28 of the SPA, which contained a warranty by Mr Martin that:

“… neither this Agreement nor any other agreement, document, certificate, information or statement furnished to the Purchaser by or on behalf of the Companies and/or the Shareholder in connection with the transactions contemplated hereby contain any untrue statement of fact or omit to state a fact (i) necessary in order to make the statements contained herein or therein not misleading, (ii) required for providing a true an[d] accurate status and situation of the Companies, and (iii) related to the transactions contemplated hereby and/or in order to allow the Purchaser to make a decision as to whether to enter into this Agreement.”

It is therefore possible, depending on the circumstances, for non-fraudulent misrepresentations outside the SPA to give rise to liability.

It is relevant to record an issue raised about the adequacy of Ivy’s plea of knowledge. The Particulars of Claim include allegations that Mr Bell “knew or should be taken to know” that the SPA contained certain provisions, and “was aware (or must be taken to have been aware)” that representations alleged to have been made at the Prague

Pending disclosure, Ivy pleads a series of matters by way of particulars of the conspiracy allegation referred to in § 11(i) above. No details are provided of the date or place of the alleged agreement or the means by which it is said to have been made, though in submissions Mr Bell’s counsel indicated that it must have occurred at some time before the Prague meeting on 1 October 2018. The matters relied on, in Ivy’s Particulars of Claim and witness evidence, include that:

Mr Bell strongly denies these allegations. He makes inter alia the points that:

In addition, Mr Bell submits that as a matter of law, there is no authority which establishes that the unlawful means necessary to establish this form of conspiracy can include breaches of contract: see Digicel (St Lucia) Ltd v Cable & Wireless plc (“Digicel”) [2010] EWHC 774 (Ch) at Annex I § 65, where after an extensive analysis of the authorities Morgan J declined to decide the point. I return to this issue later in the context of non-disclosure. It does not, however, prevent Ivy from having a good arguable case, since as Morgan J noted at Annex I § 21 (by reference to In Rookes v Barnard [1964] AC 1129, 1209), there are dicta suggesting that unlawful means for the purposes of the tort of conspiracy do include breach of contract.

So far as concerns the misrepresentations allegedly made, or repeated, at the meeting in Prague on 1 October 2018, Ivy’s case is that Mr Bell was aware of those representations because he was present at the meeting and participated in the discussion. Ivy notes that Mr Bell has not addressed the Prague meeting in any detail in his evidence. Ivy’s case as to knowledge of falsity is that the cash injections Mr Bell had himself procured to be made by the date of that meeting were obviously inconsistent with the business being profitable and self-sustaining from its revenue and with it having an EBITDA of £1.6 million in 2018. By 1 October 2018, Mr Bell had on Ivy’s evidence made or procured cash injections, for the purposes referred to in § 17.vii) above, of:

Thus, Ivy says, Mr Bell had caused to be injected more than £150,000 into the business in the 5 months leading up to the meeting. This included about £130,000 injected during the 2 months (August and September 2018) immediately prior to the meeting, with payments being made every few days to support the business’s regular running costs.

Whether Mr Bell’s knowledge of those payments meant he knew the alleged representations were false will be a matter for trial, but for present purposes the point is in my view sufficiently arguable.

More difficult is the question whether Ivy has shown a good arguable case (in the Ninemia sense) that Mr Martin and Mr Bell agreed that Mr Martin should make the alleged misrepresentations. In principle it is possible to infer from other facts and circumstances that an agreement must have been made. Such an inference may sometimes arise where, for example, a significant transaction is entered into by a company ultimately beneficially owned by a single individual who has no executive position with the company but in practice instigates all of its important commercial decisions. The present case is different in that Mr Bell was only a 50% owner of the 21Bet business and, it appears, was content to let Mr Martin run the business at least from day to day, albeit with very regular funding provided by Mr Bell.

Nonetheless, the combination of Mr Bell’s 50% ownership of the business, his history of working with Mr Martin, his very regular cash injections into the 21Bet business, the fact that the sale resulted in a payment to a company (SBL) owned by his daughter and the fact that he attended and took part in the discussions in the meeting in Prague, arguably constitute material from which an inference could be drawn at trial that Mr Martin and Mr Bell had agreed that Mr Martin should make the alleged representations at the Prague meeting. At least to that extent, therefore, I consider that Ivy claim of conspiracy to make representations satisfies the good arguable case criterion.

A second facet of Ivy’s claim for conspiracy to make misrepresentations is that Mr Bell “knew or should be taken to know that the [SPA] contained provisions relating to and verifying the financial position of the Business and a provision to the same or similar effect as the Non-Compete Covenant (such being a matter of course in any agreement for the sale of such a business)”. On the basis that the word “such” refers to both of the types of provision referred to in the preceding wording (another ambiguity which Ivy should resolve), Ivy’s case is that even if Mr Bell did not see the SPA or a draft of it, he must have realised that it would contain warranties in relation to the financial position of the business.

It certainly seems arguable that, as an experienced businessman, Mr Bell would have realised that the SPA would contain some financial warranties, and that these would include standard provisions such as confirmation of the accuracy of the companies’ financial statements. However, whether the fact that the business was needing regular cash injection from Mr Bell rendered untrue any such financial warranty would depend on the content of the warranty. For example, the EBITDA figure of £1.6 million provided in August 2018 is said to have been based on income stream figures rather than necessarily being derived from or reflected in the companies’ financial statements or even their management accounts. There is no allegation that Mr Bell must have realised that that figure would be warranted in the SPA, nor (for example) that there would be a warranty to the effect that the business was profitable and selfsustaining. It could not be said to be obvious that a warranty of those figures would be included in the SPA. Ivy does not allege any specific respect in which a financial warranty Mr Bell must have realised would be given in the SPA was, to his knowledge, untrue. As a result, I do not consider that this facet of Ivy’s case, at least as it currently stands, passes the good arguable case test.

Ivy’s case in this regard is primarily based on inferences to be drawn from Mr Bell having:

In relation to Premier Punt Ivy places particular stress on an email of 9 October 2018 from Mr Martin to Mr Bell which includes the following passages:

“Morning mate.

As discussed here is the to do list:

1.

Tabella [Ivy] offer/Other Options.

a.

Lets keep all these plates spinning for the moment and see what comes in.

2.

Premier Punt

a.

Create offshore entity for all contracts for PP (let me know if you need me to do that as we will need something in the next 48 hrs for Hill Dick to place within the contract)

b.

Consilium UK bank for office/PAYE/settlements etc

c.

You want to change Richard Ward as Director or leave him on it?

d.

£65k payment to Incentive Games for purchase of PP and database/app etc (can come from anywhere)

e.

£20k for Ameico to set up sportsbook/casino platform for PP (can come from anywhere)

f.

£15k for new Curacao License for PP for all the non UK biz (can come from anywhere)

g.

We will build a Consilium Solutions website for recruitment biz

…

7.

Plan going forward

If we are to go again and really step this up using all the facets of the business, I would see it looking like this:

a.

Staff …

b.

Marketing spend …

7.

UK license

a.

If we are going ahead with this, getting our own UK license is not only going to save us 15% off the bat on UK revenues, but also gives us lots of latitude in managing our players and their balances.

b.

A new application is straightforward with a cost of around £25k …”

Mr Bell says this was no more than a proposal, and that he declined Mr Martin’s offer to become involved in Premier Punt and had no involvement in it save for offering office space for five or six employees on a short term basis as a favour.

Mr Bell provides no details of how and when he declined the proposal, nor any documentary evidence. It is well arguable that, on a fair reading of the 9 October 2018 email, it goes beyond a mere proposal and (on the contrary) implies that Mr Bell has already been involved in discussions of the Premier Punt project and has some form of decision-making role in relation to it. For example, point 2(a) of the email in substance seeks Mr Bell’s decision about whether to keep Mr Ward as a director of Premier Punt. Point 2(c) asks Mr Bell whether Mr Martin should deal with the setting up of the “offshore entity”.

Ivy’s allegations in relation to the non-competition covenant depend on the premise that Mr Bell realised that the SPA would contain a covenant that would prevent Mr Martin from setting up a competing business. In the event, clause 9.6 of the SPA contained very wide restrictions precluding Mr Martin for two years from:

Ivy’s witness evidence is to the effect that anyone in the online gambling business, “or indeed any experienced businessman”, would know that a sale and purchase agreement such as the SPA would contain non-competition provision in these or equivalent terms.

Mr Bell makes the point that such clauses take many forms, and it cannot be said to have been obvious to Mr Bell that there would be a provision restricting competition

Secondly, Mr Bell argues that clause 9.6 is in such wide terms as to be void, citing the concession in Tillman v Egon Zehnder Ltd [2019] UKSC 32 that a clause precluding holding a shareholding, however small, in a competing company would be unenforceable. The Supreme Court held that the offending wording in that case could be severed, since (a) it was capable of being removed without the necessity of adding to or modifying the wording of what remained, (b) the remaining terms continued to be supported by adequate consideration and, (c) the removal of the unenforceable provision would not generate any major change in the overall effect of all the postemployment restraints in the contract. Mr Bell submits that those criteria could not be satisfied in the present case. However, I consider the contrary to be reasonably arguable and do not view this point as precluding Ivy from having a good arguable case.

Viewing this part of Ivy’s case in the round, I consider that it has an arguable case.

The second limb of Ivy’s case in relation to non-competition concerns Incentive, which was the holder of the UK Gambling Commission licence under the auspices of which both 21Bet and Premier Punt operate. There is some evidence dating from February 2019 that Mr Bell was intended to be a 50% owner of Incentive, and Mr Bell accepts that he has taken steps to acquire it for and on behalf of his daughter. Ivy says Incentive too was to be a competitor of 21Bet, and there is evidence that pursuing the Incentive business was regarded as being dependent on the sale of the 21Bet business. Ivy makes the point that a licence holder such as Incentive undertakes a range of activities and regulatory responsibilities for companies such as Premier Punt (known as ‘white label’ companies) who operate under the licence. Thus, Ivy says although Incentive is the licence holder for 21Bet, it is at the same time facilitating and permitting the competing business of Premier Punt; and Premier Punt’s website states that it is “operated by Incentive Games Limited”. Mr Bell denies that Incentive is a competing business of 21Bet. However, whether it is or is not a competitor seems likely to be a complex factual question for trial, and I take the view that this facet of Ivy’s claim also passes the good arguable case test.

Ivy alleges that Mr Bell procured Mr Martin’s breach of the non-competition covenant. By way of particulars it simply repeats the particulars of its conspiracy allegations.

In OBG Ltd. v. Allan [2007] UKHL 21, [2008] 1 AC 1 § 39 it was stated that in order to be liable for inducing a breach of contract:

“you must know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realise that it will have this effect. Nor does it matter that you ought reasonably to have done so.”

In Meretz Investments NV v ACP Ltd [2008] Ch 244 § 114 Arden LJ stated the essential elements of the tort as:

Mr Bell points out that conspiracy and inducing breach of contract are separate torts, the former being a form of primary liability and the latter a species of ancillary liability (Meretz § 114). He submits that it is not proper for the same facts merely to be repeated in support of the separate torts. However, it is arguable that the matters alleged by Ivy summarised in § 17(viii), (ix), (x) and (xi) above do include the essential elements referred to in Meretz.

Mr Bell also submits that Ivy’s case requires it to demonstrate his knowledge of the specific terms of the non-competition covenant. This point was not explored in detail before me. However, I note that the summary of the relevant law in Clerk & Lindsell on Torts, 22^nd ed. § 24-15, includes the statements that:

“The defendant must be shown to have knowledge of the existence of a contract; but “in many cases a third party may be deemed to know of the almost certain existence of a contract and indeed of some of its likely terms”. The defendant need not know of the precise terms to be liable, for given that he knew of the existence of the contract, the test of his intention is objective.” (footnotes omitted).

It seems to me arguable that the question at trial may well be whether or not Mr Bell must have realised that the SPA would contain a non-competition covenant substantially to the same effect of clause 9.6, a matter on which as indicated earlier there is a conflict of evidence on which I consider Ivy has a good arguable case.

Accordingly, I consider that Ivy has a good arguable case on this aspect of its claim too.

RISK OF DISSIPATION

The considerations relevant to risk of dissipation were summarised by Popplewell J in Fundo Soberano de Angola v Jose Filomeno dos Santos [2018] EWHC 2199 (Comm) § 86 as including the following:

“(1)

The claimant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets. In this context dissipation means putting the assets out of reach of a judgment whether by concealment or transfer.

(2)

The risk of dissipation must be established by solid evidence; mere inference or generalised assertion is not sufficient.

(3)

The risk of dissipation must be established separately against each respondent.

(4)

It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets are likely to be dissipated. It is also necessary to take account of whether there appear at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.

(5)

The respondent's former use of offshore structures is relevant but does not itself equate to a risk of dissipation. Businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets. Such legitimate reasons may properly include tax planning, privacy and the use of limited liability structures.

(6)

What must be threatened is unjustified dissipation. The purpose of a freezing order is not to provide the claimant with security; it is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business in a way which will have the effect of making it judgment proof. A freezing order is not intended to stop a corporate defendant from dealing with its assets in the normal course of its business. Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs in the way he has always conducted them, providing of course that such conduct is legitimate. If the defendant is not threatening to change the existing way of handling their assets, it will not be sufficient to show that such continued conduct would prejudice the claimant's ability to enforce a judgment. That would be contrary to the purpose of the freezing order jurisdiction because it would require defendants to change their legitimate behaviour in order to provide preferential security for the claim which the claimant would not otherwise enjoy.

(7)

Each case is fact specific and relevant factors must be looked at cumulatively.”

The following further statements of principle are relevant:

Ivy submits that the following factors evidence a risk of dissipation of assets by Mr Bell:

Taking these in turn, Ivy’s factor (i) is that its good arguable case of conspiracy, including conspiracy to make fraudulent misrepresentations, and of and procuring a breach of contract, itself supports an inference of a sufficient risk of dissipation.

It is not always easy to decide whether a given allegation of dishonesty points to the conclusion that assets are likely to be dissipated. However, I note that in the present case:

In these circumstances, whilst the allegations against Mr Bell are a factor to be taken into account, I am not persuaded that they provide solid evidence of a risk of dissipation.

Factor (ii) referred to in § 45 above is the one which has given me the most pause for thought. The first two aspects of it involve no more than allegations, but the third involves a finding against Mr Bell by the Deputy High Bailiff of the Isle of Man.

Viewed at a high level of generality, the Deputy High Bailiff’s findings may be taken as indicating that Mr Bell has been involved in criminal conduct, and that such conduct has involved the attempt to evade legal obligations (specifically, VAT) and/or to misappropriate funds. A propensity to evade legal obligations may suggest that he is likely to evade any obligations he incurs in the present case, by dissipating assets.

Against that, Mr Bell makes the points that:

These considerations are in my view finely balanced. It is relatively infrequently that a freezing order is sought in circumstances where there has been an actual prior finding of criminal conduct, and this must be a significant factor to weigh in the balance when considering risk of dissipation. Its significance in the present case is tempered by the factors set out in § 51 above, as well as the more general circumstances set out in § 47 above. Whilst the Deputy High Bailiff’s conclusions, as well as the other matters Ivy relies on as part of factor (ii), leave at least a strong suspicion that Mr Bell has been involved in organised criminal activity, it must nonetheless be significant for present purposes to bear in mind that he has even now never been the subject of a criminal charge or conviction, that the matters Ivy refers to are some four years old and unrelated to the present case, and that those matters do not directly indicate a propensity to dissipate assets.

It might be argued that the Bailiff’s findings indicate that Mr Bell has committed VAT frauds using a complex web of companies, so that the present case is analogous to VTB (see § 44.iv) above). Though the comparison is not without some force, there are differences, in that there is no suggestion that the alleged conspiracy in the present case involved any complex international web of companies into which the funds at issue disappeared rendering the enforcement of any judgment difficult. There is no suggested nexus between Ivy’s allegations and the alleged VAT frauds described in the Bailiff’s decision, either in terms of direct connection or as regards modus operandi (contrast the assumed facts outlined in VTB at § 172). Further, the evidence indicates that Mr Bell has substantial assets both in the Isle of Man and the UK against which a judgment might be enforced. Overall, and not without some hesitation, I have concluded that this group of the matters relied on by Ivy does not provide solid evidence of a risk of dissipation in the present case.

Factors (iii) and (iv) referred to in § 45 above do not in my judgment advance matters very far, if at all. It is arguable that Mr Bell has in effect placed his daughter in charge of SBL and Incentive in circumstances where in reality he is their directing mind and will. There may be regulatory reasons why Mr Bell felt it necessary to do so. Although Mr Bell may have been disingenuous in stating in his witness statement that Ivy was wrong to describe SBL as “one of my companies”, there is no evidence before me that Mr Bell has made any attempt to conceal his daughter’s ownership of, and his own practical involvement in, the company. He has been open about the fact that he personally had lent money to the 21Bet business as well as injecting cash into it for working capital (“I explained [to the Claimant] that I inject funds into the business on an ad hoc basis for working capital purposes” (my emphasis))notwithstanding the fact that, as the account statements show, the payer of those injections was a Simplify company. In my view the matters Ivy relies on here do not evidence a propensity to use corporate bodies to conceal or dissipate assets, or to evade liabilities. Similarly, the responses (apparently completed by Mr Martin) to the Due Diligence Questionnaire dated 26 July 2018 in relation to the proposed sale of the 21Bet business made clear that the companies constituting the business were legally owned by a Mr Richard Hogg but that the true owners were Mr Martin and Mr Bell in 50/50 shares.

It might conceivably be inferred from the fact that SBL is threatened with striking off that (a) SBL has already paid to or at the direction of Mr Bell the repayment it received from 21Bet and (b) Mr Bell has dissipated that money, as opposed to paying

Equally, I do not consider that factor (v), relating to the value of Mr Bell’s house in London, has any great merit. The copy Mr Bell exhibits of the official copy Land Register as at 6 August 2019 indicates that the house was stated to have been bought for £2,250,000 in August 2013. Mr Bell’s evidence is that there is no mortgage of the property, and that he has spent about £600,000 on the house since he bought it. The copy Land Register does not refer to any mortgage or charge, but it does record that a restriction was registered on 26 March 2013 to the effect that under a Restraint Order made under the Proceeds of Crime Act 2002 on 24 March 2015, no disposition by the proprietor of the registered estate (Mr Bell) is to be registered except with the consent of the Proceeds of Crime Division of the Crown Prosecution Service or further order of the court (a fact which must significantly reduce the risk of dissipation of this particular asset). No evidence was provided of the reliability of Zoopla estimates, and on the basis that Mr Bell has spent £600,000 on the property since purchasing it for £2,250,000 in August 2013, I do not consider it possible to conclude that Mr Bell has materially overestimated its value.

Viewing the matter in the round, taking account of all the factors Ivy advances as discussed above, I have come to the conclusion that Ivy has not demonstrated solid evidence of a risk of dissipation of assets such as to justify the continuation of the freezing order against Mr Bell.

NON-DISCLOSURE/MISREPRESENTATION

In the light of my conclusion on risk of dissipation, it is not strictly necessary to consider Mr Bell’s submissions in this regard. However, for completeness I address them briefly below.

Mr Bell contends that Ivy’s presentation of the case at the without notice hearing was incomplete or misleading in seven respects.

First, Ivy’s affidavit in support of the freezing order application incorrectly stated that as of April 2019, 666Bet’s gambling licence was still suspended and customers were demanding refunds. The correct date was April 2015. This may have been

Secondly, Ivy’s evidence before the judge also asserted that its solicitors had asked for confirmation that Mr Bell has sufficient assets to return the sum of £3.2 million if ordered to do so, but that they had received no response to that request. That assertion was plainly wrong, because in the relevant correspondence Ivy’s solicitors had sought such a confirmation from Mr Martin but not Mr Bell. Ivy again says it did not rely on this point in its skeleton argument before the judge. That is not in my judgment a sufficient answer. The point was relied on in Ivy’s evidence as a factor showing a risk of dissipation by Mr Bell, but (whether deliberate or not) was incorrect and misleading.

Thirdly, Mr Bell says Ivy was wrong to state in its evidence that SBL was “one of his [Mr Bell’s] companies”, enabling it to assert that Mr Bell received payment from Mr

Fourthly, Ivy’s evidence was that Mr Bell’s daughter was party to certain emails about slogans that could be used to market Premier Punt. However, it is clear on the face of the exhibit that this is incorrect. This point appeared in Ivy’s skeleton argument as well as its affidavit, although in the skeleton argument it was relied on only as against Mr Martin. It was in my view a further material misrepresentation, whether or not it was made inadvertently.

Fifthly, in the context of risk of dissipation, Ivy made the point in its skeleton argument before the judge that Mr Martin had disbursed the funds paid to him to Mr Bell as well as to other creditors of the business. Ivy’s witness statement stated a belief that “Mr Martin has already dissipated the Pre-Payment received in April. I understand that he paid £1,019,106 to Mr Bell as well as £701,400 to Mr Alan Spence, as described above.” Ivy’s evidence indicated that the payment to Mr Spence was to settle a debt owed as a result of a winning bet. It did not make clear that the payment to SBL (attributed to Mr Bell) also reflected a payment of a bona fide debt. I do not understand Ivy necessarily to have accepted that the payment to SBL was of that nature, but in the light of the substantial advances apparently made to 21Bet by SBL it seems likely that it was. By mentioning the payment in the context of risk of dissipation without referring at least to the possibility that the payment was to satisfy a bona fide debt, Ivy evidence was liable to give a misleading impression.

Sixthly, the judge was not taken to the law on non-competition covenants, or informed that clause 9.6 of the SPA might not be enforceable. Ivy points out that this is not a point raised by Mr Bell’s solicitors in correspondence during the six-week period between the letter before claim and the without notice application. Whilst that mitigates the matter to a degree, in principle the matter ought to have been drawn to the judge’s attention as a potential argument available to the absent respondents to the application.

Seventhly, the Judge was not informed that there is no authority establishing that the unlawful means necessary to establish a claim for conspiracy could include breaches of contract. Again, although the point is legally arguable, it represented a potential argument available to the absent respondents which in my view should have been drawn to the judge’s attention.

It is of course well established that an applicant for without notice relief must disclose to the court all matters that are material to the application. The test of materiality is an objective one. All matters which are relevant to the ‘weighing operation’ that the court has to make in deciding whether or not to grant the order must be disclosed: see Gee, Commercial Injunctions § 9-003, White Book, vol. 1, note 25.1.25.4.

This requirement of full and frank disclosure has been described as a “heavy duty of candour and care”: Brink’s Mat v. Elcombe [1988] 1 WLR 1350, 1359C, per Slade LJ. It is the quid pro quo for an applicant inviting the court to proceed in the absence of another party. Scrutton LJ observed that the duty was “of the greatest importance to maintain”: R v. Kensington Income Commissioners, ex p de Polignac [1917] 1 KB 486, 514. As indicated by the judgment of Morris J in Rogachev v Goryainov [2019] EWHC 1529 (QB) § 93, given the duty to make proper inquiries, a material misrepresentation, even if inadvertent, may justify the setting aside of a freezing order if it shows a high degree of lack of care or recklessness.

Where there has been a failure by an applicant to give full and frank disclosure, the general rule is that the injunction obtained must be discharged: Brink’s Mat per Balcombe LJ at 1358C (with whom Slade LJ agreed); and Millhouse Capital UK Ltd v. Sibir Energy plc [2010] BCC 475 §§ 102(1) and 103, per Christopher Clarke J, who added at § 104:

“The obligation of full disclosure, an obligation owed to the court itself, exists in order to secure the integrity of the court’s process and to protect the interests of those potentially affected by whatever order the court is invited to make. The court’s ability to set its order aside, and to refuse to renew it, is the sanction by which that obligation is enforced and others are deterred from breaking it. Such is the importance of the duty that, in the event of any substantial breach, the court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given him. This is particularly so in the case of freezing and seizure orders”.

The court in Millhouse Capital recognised that if there has been culpable nondisclosure, the court nonetheless has a complete discretion and should also consider the prejudice that will occur if the injunction is not renewed. Christopher Clarke J said at § 106:

“The stronger the case for the order sought and the less serious or culpable the non-disclosure, the more likely it is that the court may be persuaded to continue or re-grant the order originally obtained. In complicated cases it may be just to allow some margin of error. It is often easier to spot what should have been disclosed in retrospect, and after argument from those alleging non-disclosure, than it was at the time when the question of disclosure first arose.”

See also Congentra AG v Sixteen Thirteen Marine [2008] 2 Lloyd's Rep. 602 § 64.

The purpose of this rule is to act “as a deterrent to ensure that persons who make ex parte applications realise that they have this duty of disclosure and of the consequences … if they fail in that duty”: Brink’s Mat, at 1358D. As Bingham J commented in Siporex Trade SA v. Comdel Commodities Ltd [1986] 2 Lloyd’s Rep 428, 437:

“If the duty of full and frank disclosure is not observed the Court may discharge the injunction even if after full enquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure.”

Carr J in Tugushev v Orlov et al [2019] EWHC 2031 (Comm) § 7 recently summarised the law in thirteen propositions, including the following of particular relevance to the present case:

“iv)

An applicant must make proper enquiries before making the application. He must investigate the cause of action asserted and the facts relied on before identifying and addressing any likely defences. The duty to disclose extends to matters of which the applicant would have been aware had reasonable enquiries been made. The urgency of a particular case may make it necessary for evidence to be in a less tidy or complete form than is desirable. But no amount of urgency or practical difficulty can justify a failure to identify the relevant cause of action and principal facts to be relied on”

“vi)

Where facts are material in the broad sense, there will be degrees of relevance and a due sense of proportion must be kept. Sensible limits have to be drawn, particularly in more complex and heavy commercial cases where the opportunity to raise arguments about non-disclosure will be all the greater. The question is not whether the evidence in support could have been improved (or one to be approached with the benefit of hindsight). The primary question is whether in all the circumstances its effect was such as to mislead the court in any material respect”

“x)

Whether or not the non-disclosure was innocent is an important consideration, but not necessarily decisive. Immediate discharge (without renewal) is likely to be the court's starting point, at least when the failure is substantial or deliberate. It has been said on more than one occasion that it will only be in exceptional circumstances in cases of deliberate non-disclosure or misrepresentation that an order would not be discharged”

“xii)

The court nevertheless has a discretion to continue the injunction (or impose a fresh injunction) despite a failure to disclose. Although the discretion should be exercised sparingly, the overriding consideration will always be the interests of justice. Such consideration will include examination of i) the importance of the facts not disclosed to the issues before the judge ii) the need to encourage proper compliance with the duty of full and frank disclosure and to deter non-compliance iii) whether or not and to what extent the failure was culpable iv) the injustice to a claimant which may occur if an order is discharged leaving a defendant free to dissipate assets, although a strong case on the merits will never be a good excuse for a failure to disclose material facts”

“xiii)

The interests of justice may sometimes require that a freezing order be continued and that a failure of disclosure can be marked in some other way, for example by a suitable costs order. The court thus has at its disposal a range of options in the event of non-disclosure.”

In the present case, I would (had the issue arisen) have concluded that the misrepresentations described above when taken as a whole were sufficiently serious to justify the discharge of the freezing order, even on the footing that they were all inadvertent, and even though each one individually may not have been sufficient. In combination, they resulted in my view in the judge being given a misleading impression of the considerations relevant to whether a freezing order was appropriate against Mr Bell. Whether the freezing order would have been re-imposed is hypothetical, because that would have been influenced to a significant degree by whether sufficient risk of dissipation existed to make that the just course of action. In the event, I have concluded that no sufficient evidence of risk of dissipation has been shown in any event.

IVY’S FALLBACK POSITION

Ivy submits that if the court considers that Mr Bell has sufficient assets that the risk of his reducing these below the maximum sum is so limited that the balance of convenience requires discharge in relation to that sum, then the court should, as suitable protection for Ivy, require Mr Bell to pay funds into his own solicitors’ client account or, as a minimum, notify Ivy of any steps he may take to deal with his fixed assets in the jurisdiction.

However, a notification injunction is not a lesser form of relief, but a version of a freezing order, and the test for granting such an order is the same as would be required in order to obtain a conventional freezing order: Ivy must show a real risk, supported by solid evidence, that a future judgment would not be met because of unjustifiable dissipation (see Holyoake and another v Candy and others [2017] 3 WLR 1131 §§ 34-42). I do not consider that requirement to be satisfied here.

CONCLUSION

For the reasons given above, the freezing order should be discharged as against Mr