High Court Upholds Duty of Full and Frank Disclosure in Trafigura v Gupta Case

Citation: [2023] EWHC 3184 (Comm)
Judgment on

Introduction

In the case of Trafigura Pte Ltd & Anor v Prateek Gupta & Ors [2023] EWHC 3184 (Comm), the High Court was tasked with considering an application to discharge a Worldwide Freezing Order (WFO) that was previously granted. The defendants argued that the claimants, Trafigura, had not complied with their duty of full and frank disclosure upon obtaining the WFO. This analysis explores the judicial reasoning, scrutinizing the application of legal principles concerning injunctive relief and the responsibility for disclosure in a ‘without notice’ application.

Key Facts

Trafigura, a commodity trader, established that they were potentially defrauded by the defendants in nickel trading transactions. Upon discovery of the alleged fraud, Trafigura secured a WFO from Foxton J without notice, based on fears of being undermined by the defendants. The defendants sought to discharge the order, arguing that Trafigura had failed to disclose critical information about the knowledge of the fraud within Trafigura, particularly involving the employees Mr. Oikonomou and Mr. Bhatia. The defendants premised their application on assertions that Trafigura’s internal team knew that cargoes under buyback contracts did not contain nickel and, in fact, were complicit in the alleged fraud.

The core legal principles examined center on the duties imposed on a claimant seeking a without notice injunction. As established in the benchmark case of Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350, a party must disclose all material facts, including potential defenses and detrimental information. This duty stems from the imbalance created when one party is not present to argue their case. The principle of full and frank disclosure is fundamental to ensure judicial fairness and the proper administration of justice.

In this case, the court referred to the principles elucidated by Ralph Gibson LJ in Brink’s Mat and their interpretations in subsequent cases, such as Bilta (UK) Ltd v Nazir (No. 2) [2016] AC 1, particularly the concept of attribution of knowledge within a company for the purposes of establishing fraud. Trafigura’s counsel argued that even if certain employees had known about the fraud, such knowledge could not be attributed to Trafigura due to their acting contrary to the interests of the company.

Outcomes

Mr. Justice Bright dismissed the application to discharge the WFO. He concluded that the submissions and evidence provided by Trafigura during the without notice application adequately apprised the court of the possibility that Mr. Bhatia may have been complicit in the alleged fraud. Furthermore, no substantial evidence suggested Mr. Oikonomou’s involvement. The court emphasized that Brink’s Mat principles were correctly applied by Trafigura; hence, their disclosure was deemed full and frank within the required limits. The duty does not demand disclosure of every suspicion or possibility unless it is material and substantive. Consequently, the decision indicated that Trafigura’s conduct had been fair and appropriate in the circumstances.

Conclusion

Trafigura Pte Ltd & Anor v Prateek Gupta & Ors provides a noteworthy affirmation of the duties incumbent upon parties seeking injunctive relief without notice. The ruling reinforces that the threshold for disclosure is not exhaustive of every potential issue but must encompass all material facts and possible defenses known to the applicant at the time. Justice Bright’s decision underscores that while future proceedings may uncover a different landscape of evidence, the application for a WFO was granted appropriately based on the representations made and the evidence available to the claimants at that juncture.

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