The Court is entitled to reverse an order where there has been an innocent but material non-disclosure in obtaining that order.

12/11/2008

The company was an unregistered company being wound up in Russia. In May 2007, the company was declared insolvent, and K was appointed as its liquidator. The company was carrying on business only for the purpose of winding up its affairs and was unable to pay its debts. Accordingly, the English courts had jurisdiction to wind it up. K had powers equivalent to those of an English liquidator.

On 12 November, a petition was filed in the High Court in England by the company's parent company and another company for the winding up of the company, and the appointment of a provisional liquidator. They wanted to secure the appointment of an English liquidator who would continue English proceedings the company had commenced against the applicants. On 14 November, C was appointed as provisional liquidator of the company. On that same date, the company commenced proceedings against the applicants. The applicants subsequently sought an order that: (i) the appointment of C should be set aside; (ii) and a declaration that the court should decline to exercise its insolvency jurisdiction over the company; and (iii) an order that the petition to wind the company up should be dismissed.

The applicants (successfully) submitted, inter alia, that the appointment of the provisional liquidator on 14 November 2007 had been procured by materially misleading statements and by a failure to disclose matters of relevance and importance to the court.

The Court held that the question of whether, in the absence of full and fair disclosure, an order should be set aside and, if so, whether it should be renewed either in the same or in an altered form, was pre-eminently a matter for its own discretion, to which the facts (if they be such) that the non-disclosure was innocent and that an injunction or other order could properly have been granted if the relevant facts had been disclosed, were relevant.

The Court would look back at what had happened and examine whether, and if so, to what extent, it was not fully informed, and why, in order to decide what sanction to impose in consequence. The obligation of full disclosure, an obligation owed to the court itself, existed 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 was invited to make.

The Court's ability to set its order aside, and to refuse to renew it, was the sanction by which that obligation was enforced and others were deterred from breaking it. Such was the importance of the duty that, in the event of any substantial breach, the Court strongly inclined towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order might have given him.

Here there had been substantial non-disclosure on more than one account. The matters not disclosed had not been peripheral to the case which the company sought to assert or to the alleged urgency of the application. Whilst there had been no intention to mislead the court, for whatever reason, inadequate disclosure had been made to the Court, and the extent of the non-disclosure was such that, had the claims not been struck out, the order appointing a provisional liquidator would have been set aside, and the claim dismissed. It would then have been be open to the company to commence new proceedings. The Court was entitled to take whatever steps were necessary to deprive the defaulting party of the fruits of his default.

The winding up petition was dismissed.

[i](*Re OJSC ANK Yugraneft; Millhouse Capital UK Ltd and another v. Sibir Energy plc and others [2008] EWHC 2614 (Ch))

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