In a recent judgment, the High Court discharged a worldwide freezing injunction and an access and imaging order obtained by J&J Snack Foods Corporation and ICEE Corporation (ICEE) against Ralph Peters & Sons Limited (RPSL) and Mark Jeffrey Peters. The orders were initially granted on an ex-parte basis (without notice to the defendants) but were later set aside due to the claimants' failure to provide full and frank disclosure. We explore the court's reasoning for the discharge and refusal to re-grant the freezing injunction.
Background
On 3 December 2024, His Honour Judge Davis-White KC heard an application by the claimants for a worldwide freezing injunction and an access and imaging order against both defendants. The claimants alleged trademark infringement and passing off related to their UK and European 'Slush Puppy' brands. The hearing was without notice to the defendants and was heard in private.
The orders were granted and a return date of 12 December 2024 was specified. The claimants sought to freeze up to £10,000,000 of assets, but the wording of the order effectively froze £20,000,000 of assets.
The access and imaging order was executed on 5 December 2024 against Frozen Brothers Limited (FBL), a subsidiary of RPSL, at its offices in High Wycombe, and nowhere else. Documents on FBL's servers were imaged and are held by an independent computer specialist.
At the return date, the court gave directions for a further two-day hearing of the applications and expressed concern regarding the manner in which the orders were obtained, given that there was related existing litigation in Ohio, in the US between ICEE and FBL. Concern was also expressed regarding the amount of the freezing injunction, as the quantum related to profits allegedly made by FBL, rather than the defendants to the proceedings, who were unusually sued as accessories to infringement by FBL, with FBL not party to the claim.
The defendants sought to discharge the orders on the basis that the claimants had failed to provide full and frank disclosure when obtaining the orders.
Full and frank disclosure
The law on full and frank disclosure requires an applicant for a without notice injunction to make a comprehensive and accurate disclosure of all material facts, drawing the court's attention to significant factual, legal and procedural aspects of the case. This duty is of paramount importance to ensure the integrity of the court's process, as it compensates for the absence of the other party. The applicant must present the argument in a fair and even-handed manner, highlighting evidence and arguments that the absent party would likely make. Proper enquiries must be made before the application. The duty extends to matters of intention and would include disclosure of related proceedings in another jurisdiction.
If material non-disclosure is established, the court will typically discharge the order to deter future non-compliance and ensure that any advantage obtained is negated, although it retains discretion to continue the injunction if the interests of justice so require.
The court's reasoning
First, the court considered the necessity of a without notice hearing and concluded that there was no attempt to "divert the Judge from jumping to a conclusion about the necessity for a without notice hearing".
The claimants did not adequately justify the need for a without notice hearing. The only basis advanced was the risk of destruction of documents which does not, on the face of it, justify a freezing injunction without notice. It was alleged that Mr Peters had staged a theft of his laptops days before a disclosure request was made in respect of their contents in Ohio. However, the claimants failed to present facts that could lead to a different decision, such as the fact that disclosure of FBL's documents relating to the part of the claim concerning the period 2019-2021 ("Phase 1") had already been given in Ohio, so were safe from destruction. Further, the related proceedings in Ohio had been going on for years without any evidence that the defendants or FBL had taken any steps to put assets out of reach of a judgment creditor. In fact, FBL had continued to trade, published financial information and paid some royalties to the claimants.
The court noted that, the failure to openly address the question of whether the hearing of the claimants' applications should have been on notice was a concern and a failure of fair presentation. However, this was outweighed by other failures to be full and frank. In summary:
- Distinction between Phase 1 and Phase 2 claims: As above, the Phase 1 claims related to the 2019-2021 period. The claimants advanced a much larger claim in relation to different alleged infringements from 2021 onwards ("Phase 2"). The claimants did not make it clear that they were seeking to include profits allegedly accruing to FBL in Phase 2 in the amount sought by way of freezing injunction, or that the second, extensive class of documents sought to be imaged related to Phase 2, rather than Phase 1. The claimants failed to establish a good arguable case for the Phase 2 claims and relied instead on the "incontrovertible evidence" in support of the Phase 1 claims when addressing whether they had a good arguable case.
- Quantum of the claim: The claimants wrapped up Phase 2 sales with Phase 1 sales, applied a higher profit margin figure and presented the quantum of the claim only briefly in oral submissions. They did not put forward alternative arguments, such that the quantum of the freezing injunction should be based only on Phase 1 sales, which totalled approximately £5,000,000.
- Accessory liability: The claimants did not present a good arguable case against the defendants for liability as a principal tortfeasor rather than as an accessory to wrongdoing by FBL. Accordingly, given that an account of profits was sought, rather than damages, the relevant question was what profits the defendants received as a result of FBL's wrongdoing. The claimants failed to address the principle established in Lifestyle Equities CV v Ahmed [2024] UKSC 17 that accessories to others' wrongdoing are only liable for profits that they receive. Instead, the quantum figures relied upon were infringing gross profits of FBL (and potentially other EU sister companies too). This point was not made to the court.
- Broad access and imaging order: In addition to the impact of the failure to distinguish between the Phase 1 and Phase 2 claims on quantum, it also resulted in the scope of the access and imaging order being broader than was justified. There was also inadequate presentation by the claimants as to whether the order should have, in effect, been made against a non-party to the proceedings, FBL. The claimants noted that the documents might not be within the possession, custody or control of the defendants, but no evidence was identified in support.
- Risk of dissipation: The claimants did not adequately present the argument that the defendants might raise regarding the claimants' position that they might take steps to make themselves "judgment-proof". The court noted that dishonesty alleged against a defendant is not of itself sufficient to justify the conclusion of a real risk of dissipation. The claimants failed to present any points that the defendants might have raised, including the fact that there had been no evidence of the defendants taking steps to defeat any judgment in the years of other related litigation which had taken place.
Accordingly, the court discharged the freezing injunction and the access and imaging order.
Refusal to re-grant the freezing injunction
The court declined to re-grant the freezing injunction. The court found multiple and serious failures in the claimants' presentation of the case, which led to the grant of a worldwide freezing order for "a hugely excessive sum". The order was in place for two and a half months and resulted in entry to the offices of a non-party to proceedings to image its documents which mostly related to a claim in relation to which no strong prima facie case had been established.
Without the failures identified, the court considered it unlikely that a freezing injunction would have been granted (except at least on a very limited basis).
The claimants' failures were so serious (albeit not deliberate) that it was inappropriate to re-grant a freezing injunction. The court found that no injustice would be done as a result. Instead, the court required Mr Peters to provide an undertaking to preserve documents and ordered the documents already imaged to be held by the defendants' solicitors pending a future hearing.
Comment
This case serves as a stark reminder of the importance of complying with the duty of full and frank disclosure when seeking ex-parte relief. The duty to present the respondent's likely arguments and any weaknesses in the applicant's case is paramount to ensure the integrity of the court's process.
As the court summarised, "Anyone applying without notice for a freezing injunction or an access and imaging order, and especially if applying for both together, must understand that there is a very high duty on them to ensure that relief of that nature is not granted without the defendant's case, so far as it can be anticipated, being put squarely before the court, and any weaknesses in the applicant's case being identified. However much a judge may indicate that they see things the applicant's way, the absent respondent's likely case still needs to be articulated and understood before a decision is made."
" The duty of fair presentation means that an advocate cannot simply acquiesce in indications by a judge that the judge agrees with the applicant, but they must nevertheless ensure that the judge understands the respondent's likely argument against the relief sought. "
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