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Cite as: [1999] EWHC 836 (Ch)

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BAILII Citation Number: [1999] EWHC 836 (Ch)
HC 1999 No. 00446

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

The Royal Courts of Justice
Strand, London WC2A 2LL
21st May 1999

B e f o r e :

THE HON. MR JUSTICE HART
____________________

MEMORY CORPORATION plc & ANR Claimant
-and-
SIDHU & ANR Defendant

____________________

Timothy Higginson
instructed by Messrs Mishcon De Reya
appeared for the Claimants
Robert Howe
instructed by Messrs Morgan Cole
appeared for the Defendants


Hearing dates: 28 APR 99 and 4 MAY 99

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

  1. I have before me four applications by the first defendant Sukhbir Singh Sidhu, namely
  2. (1) an application to discharge the freezing and search orders made by me on the claimants' without notice application on 27th January 1999 ("the discharge application");

    (2) an application to strike out the claims of the first claimant ("Memory") against Mr Sidhu on the grounds that the Statement of Claim discloses no reasonable cause of action. This application, made by notice of motion dated 30th March 1999 invoked RSC Order Rule 19(1)(a), but has been treated before me as if made under Part 3.4(2)(a) of the C.P.R.;

    (3) an application that the claimants given security of £250,000 in respect of their cross-undertaking in damages if (notwithstanding the first application) the injunctions are continued; and

    (4) an application that the claimants give security for costs.

  3. Before dealing with each of these applications I will shortly summarise the nature of these proceedings. I can conveniently do so for present purposes by quoting from paragraph 4 of the affidavit of Mr Doughty sworn on 26th January 1999 in support of the original without notice application for search and freezing orders:
  4. "4. Memory [i.e. the first claimant] is a company incorporated in Scotland and the ultimate holding company of a number of wholly owned subsidiaries and the majority shareholder in a number of other subsidiaries including DHK [i.e. the second claimant]. A copy of the group structure and DHK's place in it is at page 2. Memory is engaged in the design, manufacture and sale of computer hardware and software, in particular digital data capture and data storage products and systems. DHK is engaged in the business of high volume semi-conductor sourcing, assembling and distributing. The end use of these components is for personal computers. The intended first defendant, Mr Sidhu, has been employed by DHK since 17 July 1998 as acting Managing Director, responsible for running DHK's office in Hong Kong He may remain a director, however, of DHK although it was intended that he should resign. The directors of DHK are David Savage, William Hipp and myself who are also directors of Memory. Under the terms of his employment contract with DHK Mr Sidhu has been obliged to devote the whole of his time to his duties with DHK and is not permitted, without the approval of the board of directors of DHK, to have any outside business interests where he has a shareholding over 10%. His basic remuneration is £75,000 plus an attractive benefits package and a bonus scheme. Without the prior knowledge or consent of the other directors of DHK, or Memory, Mr. Sidhu has substantial interests in at least two other businesses, including the intended Second Defendant, Sunsar Limited ("Sunsar"), a company registered in England and Wales and carrying on business here. He is also a director and shareholder in a company called Microsimm India PVT Limited ("Microsimm India"). Those two companies have been doing substantial business with DHK. Mr Sidhu has been using his position as Managing Director of DHK with a view to benefiting those two companies unlawfully thereby causing substantial loss to Memory and DHK"

  5. It is necessary to expand a little on that summary. Datrontech Hong Kong Limited ("DHK") was from the middle of 1998 the wholly owned subsidiary of a joint venture company (Dtech Memory Corporation (Holdings) Ltd) which was owned as to 51% by Memory and as to 49% by Datrontech plc. The first defendant's written service contract dated from the period of the acquisition of DHK by the joint venture company. He had, however, been in post as the managing director of DHK from about December 1996, when DHK was owned as to 100 per cent by Datrontech plc.
  6. The allegations against him relating to Microsimm and Sunsar formed the backbone of the case on the without notice application. In essence the picture then sought to be presented was that both these companies were customers, and substantial debtors, of DHK; that in the autumn of 1998 the first defendant had been instructed to afford these companies no further credit, but that in breach of these instructions he had continued to do so by a variety of devices (including the issue of credit notes); and that the first defendant's motivation for this course of conduct lay in his undisclosed and unauthorised (indeed forbidden) interest in these companies. The essence of that case was summarised in paragraph 6 of Mr Doughty's affidavit which read as follows:
  7. "INITIAL SUMMARY OF EVIDENCE OF WRONGDOING

    6. The investigation is still continuing but strong evidence has already emerged from which I believe the following facts can be established or, alternatively, inferred:-

    (i) Mr Sidhu was appointed director of Sunsar on 27 June 1996 and he owns 50% of the issued share capital of that company. He has failed to disclose that interest to DHK.

    (ii) Mr Sidhu is a director of Microsimm India and owns 50.10% of the issued share capital of that company. He has failed to disclose that interest to DHK.

    (iii) Both Sunsar and Microsimm India have been doing business with DHK since July 1998. Indeed when Memory acquired its interest in DHK in July 1998 it was reported that Sunsar owed DHK US$ 278,239 and Microsimm India owed DHK US$ 191,189 in debts which were over sixty days old (such sums having been disclosed at the time). They were the largest debtors. However, at the end of July 1998, the financial information I received from DHK indicated a total indebtedness of Sunsar at about US$ 750,000 and of Microsimm India at about US$ 285,000. The indebtedness of those two companies according to the latest information received from DHK indicates the following approximate amounts still owed by those companies.

    Sunsar - US$ 676,000

    Microsimm India - US$ 232,000

    (iv) In the intervening period the indebtedness has increased substantially reaching a reported level of US$ 923,000 in respect of Sunsar, but in respect of Microsimm India it had remained at about a level of US$ 232,000 in other words not decreasing to any appreciable degree.

    (v) It is to be inferred that Mr Sidhu has allowed that level of indebtedness to remain as he intends that those two companies should derive some unlawful benefit from the business they have been transacting with DHK; as a finance director I do not regard DHK as having a substantial problem with trade debtors other than with Sunsar and Microsimm India which happens to be the two companies in which I now know Mr Sidhu has undisclosed interests.

    (vi) I instructed Mr Sidhu in October 1998 only to ship goods to Sunsar and Microsimm India if they paid cash in advance: he has disobeyed that instruction.

    (vii) Mr Sidhu has been acting in breach of his contract of employment, in breach of his fiduciary duties owed to DHK and has caused or intended to cause Memory and DHK substantial losses which can be presently calculated to be in the region of US$ 1,000,000."

  8. During the course of their investigations (partly conducted on their behalf by inquiry agents, Network International ("Network")), the claimants discovered a number of pieces of documentary evidence which confirmed (and inflamed) their grounds for suspecting that the first defendant was engaged in substantial wrongdoing, particularly by reference to DHK's dealings with the second defendant ("Sunsar").
  9. The firs was a note discovered at DHK's offices in Hong Kong and believed by the plaintiffs to have been written by the first defendant to one Neil Gentleman Hobbs, at the time a co-director of the first defendant in Sunsar. After referring to the amounts outstanding from Sunsar to DHK at or after 24th November 1998 it read as follows:
  10. "So much for the situation, but what do we do about it-

    1. OLD DEBTS - We must get everything in within 90 days - se when they do the year end, the Auditors do not ask too many questions. HOW DO WE DO THIS - Lots of turnover as each payment is allocated to the oldest Invoice.

    2. AMOUNT - Obviously this amount sticks out like a sore thumb - if it was Ingrams or CHS maybe I could blag it. Anyway, we just need to reduce the debt down through trading and getting your Credit Notes issued - that's already happening.

    Regarding the Agreement

    After the meeting we had to discuss this I sent a Fax. Basically, we decided the 1/3 of the GP goes towards the debt and the balance is split. Charles and Lee were also at the meeting. I think this is fair since the company is providing the credit lines and that's what feeds all the mouths. I can't see if anyone has a problem with this, if there is let me know and we will see if we can make alternative arrangements"

  11. "Charles" and "Lee" are believed by the claimants to be respectively Charles Gaffney and Lee Steele, both of whom are believed to be associates of the first defendant and Mr Gentleman Hobbs.
  12. The claimants interpreted these notes as evidence of the existence of a secret agreement for distribution of profits made by Sunsar from its trade with DHK.

  13. Secondly, the claimants uncovered evidence of Mr Sidhu having helped Mr Hobbs draft a fax from Sunsar to DHK claiming a credit in respect of certain items supplied.
  14. Thirdly, the claimants discovered, apparently after a search by Network of Sunsar's rubbish bins, a spreadsheet which (on one possible interpretation) further confirmed the suspicion of, and the first defendant's participation in, some form of profit-sharing agreement with reference to Sunsar's trading.
  15. So far as the substance of the matter is concerned the first defendant has taken the position on the discharge application that it is unnecessary for him to set out his case in detail. It is accepted on his behalf that the material relied on by the claimants discloses a good arguable case by DHK against the first defendant, and that it is not profitable to attempt to persuade the Court otherwise on these interlocutory applications. Apart from providing an innocent explanation of the second of these three pieces of documentation he has not therefore indicated his case in relation to the other two otherwise than by bare denial.
  16. With that introduction, I turn, first, to the discharge application.
  17. I The discharge application

    It is submitted that the search and freezing orders should be discharged on the grounds of material non-disclosure by the claimants in respect of six matters, namely:

    (1) the fact that the without notice application was based, in part, upon materials which had been obtained illegally;

    (2) the freezing order which was made on the without notice application departed substantially from the form prescribed by the relevant practice directions and the court was not informed of the variation;

    (3) The Court's attention was not drawn to the decision of the Court of Appeal in Den Norske Bank v Antonatos [1998] 3 WLR 711, [1988] A.E.R. 74;

    (4) The facts relied upon, even if true, did not disclose a good arguable case on the part of Memory against the first defendant;

    (5) The claimants had failed to disclose that the trading name 'Microstar' was not a vehicle for 'some dishonest end' but was, and was well known by the staff in DHK's office to be, merely a device to enable the second claimant to trade in certain "grey market" goods; and

    (6) the first defendant's association with Microsimm India PVT Limited was not "undisclosed" but had on the contrary been expressly discussed and agreed with Mr King, a director of Datrontech plc and of DHK.

  18. Some further background material is necessary for a proper understanding of each of these allegations. Before I give it, I would make the following observations.
  19. First, the allegations fall into two quite distinct groups. On the one hand (i.e. (2) (3) and (4)) they consist of allegations that counsel for the claimants made defective submissions of law and practice to me on making the original without notice application. On the other hand they consist of more conventional allegations that material facts were not disclosed by the claimants in making the application.
  20. Secondly, in approaching the question of discharge for material non-disclosure, I have to apply the approach set out by the Court of Appeal in Bebehani v Salem [1989] 1 WLR 723. In that case the Court of Appeal reviewed both the content of the duty of disclosure (in particular by extensive citation from the judgments of the Court of Appeal in Brink's Mat v Elcombe [1988] 1 WLR 1350), and also the nature of the balancing exercise to be performed by the court on the application for discharge. As to the latter, the case is clear authority for the proposition that in the case of deliberate non-disclosure of a material fact it is incorrect for the court to be guided solely, or even largely, by a consideration of what its attitude would have been had the material fact been disclosed. As Woolf L.J. said (at page 729 e-f)
  21. "In deciding in a case where there has undoubtedly been non-disclosure whether or not there should be a discharge of an existing injunction and a re-grant of fresh injunctions, it is most important that the court assess the degree and extent of the culpability with regard to the non-disclosure, and the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court.

    In this connection Mr Brodie at one stage of his argument submitted that the acid test was whether or not the original judge who granted the injunction ex parte would have been likely to have arrived at a different decision if the material matters had been before him. I do not regard that as being the acid test. Indeed, although I regard it as a relevant matter when considering the question of discharge and re-grant of injunctions, I do not regard it as a matter of great significance unless the facts which were not disclosed would have resulted in the refusal of an injunction."

  22. He had earlier indicated that:
  23. "I regard it as undesirable to apply hard and fast rules. It is preferable, in my view, for each case to be considered on its own merits taking into account the public interest which exists in protecting the administration of justice from the harm which will be caused if applicants for the draconian relief of Mareva and Anton Piller orders do not, on an ex parte application, make disclosure of all the material facts, whether or not the non-disclosure is innocent. I recognise the strain placed on legal advisers and the pressure under which they have to work, especially in large commercial actions, where prompt steps sometimes have to be taken in order to protect their clients' interests. However, if the court does not approach the question of the non-disclosure of material matters in the way that has been indicated in earlier decisions, there will be little hope of solicitors who are subjected to such pressures appreciating the importance of making full disclosure and, more important, bringing home to the clients the serious consequences of non-disclosure"

  24. It is made very clear in that judgment that the public interest in the Court ensuring that full disclosure is made on without notice applications must have a considerably greater weight in the scales of the necessary balancing exercise than the mere fact that, absent the non-disclosure, the merits of the case would have favoured the grant of the relief sought. Nourse LJ's judgment was to similar effect. He emphasised (at p738) that "if the rule of policy [requiring full disclosure] is to be maintained, as it is essential that it should be" consideration of the merits of the plaintiff's case could not be allowed to play the same part on an application for discharge as it does in the initial ex-parte application [see p738].
  25. In the Bebehani case the court, without refusing altogether the claimant some modest continuing relief, acceded to the defendant's application. It is clear that it did so having regard to the materiality, the seriousness and the deliberate nature of the non-disclosure. In the Brink's Mat case the Court of Appeal had taken a different course, in a case where the original non-disclosure was perceived as having been innocent. It did however emphasise that the discretion to continue the injunction where non-disclosure had occurred was one to be exercised sparingly. Neither case concerned what I have described as a defective submission of law and practice by counsel making the application.
  26. I turn now to the allegations, and deal first with those which I have described as defective submissions of law by Counsel making the application.
  27. The background to the first two of those lies in the forms of orders sought, and in particular the form of the freezing order. This differed from the standard form sanctioned by the practice direction then in force (see [1994] 1 WLR 1233, and [1996] 1 WLR 1552 in three particular respects.
  28. First, it provided, in similar fashion to the standard form of search order, for the execution of the freezing order to be superintended by a "Supervising Solicitor". In paragraph 3(1) of the order there had been added after the words "The Defendants may be entitled to refuse to provide some or all of this information on the grounds that it may incriminate them" a sentence in the following terms:
  29. "In the event that the defendants claim to be entitled to the benefit of such a privilege they must provide such allegedly privileged information to the Supervising Solicitor who will hold such information to the order of the court."

  30. Secondly, it contained two lengthy paragraphs (numbered 4 and 5) not to be found in the standard form which were directed, first, to disclosure of documents relating to the defendants' assets and, secondly, to the preservation and delivery up of such documents.
  31. Thirdly, it contained an order (in paragraph 6) for the first defendant to deliver up his passport.
  32. Mr Higginson, who appeared before me for the claimants on the original without notice application, on that occasion drew my attention to the unusual inclusion in the freezing order of the provision for, and proposed role of, a "Supervising Solicitor" and also specifically addressed me on the subject of the order in relation to the first defendant's passport (referring me to Bayer v Winter [1986] 1 WLR 497). He did not, however, bring to the Court's attention the fact that paragraphs 4 and 5 of the order represented substantial additions to the standard form. Indeed the transcript of his comments to me in this respect reveals him actually to have misrepresented that "Paragraph 3 and 4 are again in the form prescribed by the Practice Direction, and 5".
  33. The orders were designed to expire on a "Return Date" and that was designated as Monday, 1st February 1999. On that date the matter came before Jacob J. He made a new freezing order in the conventional form, but discharged the last sentence of paragraph 3(1) and paragraphs 4 and 5 of the freezing order made by me on 27th January 1999. In essence his reasons for doing so were that the last sentence of paragraph 3(1) should not have been included in the light of the Court of Appeal's judgment in Den Norske, and that no case had been made out of justifying the extensive and potentially oppressive variations in the standard order represented by paragraphs 4 and 5 of the original freezing order.
  34. I will deal first with the Den Norske point. In that case a freezing order had been made by Sir Richard Scott V-C in terms similar to those of the original freezing order in this case. Although this does not appear from the report, I am told that it contained, not only the offending sentence from paragraph 3(1), but also provisions substantially similar to those contained in paragraphs 4 and 5. No application appears to have been made to discharge the order made in that case. The point which went to the Court of Appeal arose at a later stage in the proceedings, and concerned the question whether, and to what extent, the defendant should be ordered to submit to cross-examination on his affidavit sworn in compliance with the freezing order, and in particular the extent to which it was open to the defendant to invoke the privilege against self-incrimination in the course of such cross-examination. In answering that question of the Court of Appeal (whose leading judgment was delivered by Waller LJ) considered the nature of the protection afforded to defendants by the interposition of a supervising solicitor in cases where the privilege against self-incrimination was claimed on the execution of the search or freezing order.
  35. In the course of the judgment Waller LJ adverted to the fact that, once incriminating information had been divulged, there was "nothing that a civil court can do to prevent the prosecuting authorities obtaining the information supplied" and he continued [at pp723-4]
  36. "The lack of power in the court needs emphasis in this case, because the order envisaged that somehow, by allowing matters which might otherwise incriminate an individual to be placed in the hands of a supervising solicitor, that that would provide the requisite protection. During the course of the hearing before us serious doubts were expressed by members of the court whether this did provide adequate protection. It is right to say in that regard that in the standard form Anton Piller order issued pursuant to Practice Direction (Mareva Injunctions and Anton Piller Orders: Forms) [1996] 1 W.L.R. 1552, dated 28 October 1996, issued by Lord Bingham of Cornhill C.J. with the concurrence of Sir Richard Scott V.-C., the warning given to the defendant under paragraph 6 is in the following terms: "You may be entitled to refuse to permit disclosure of any documents which may incriminate you ('incriminating documents') or to answer any questions if to do so may incriminate you." But in the body of the order under the heading "Obtaining Legal Advice and Applying to the Court" it is stated that the defendant before permitting entry to the premises may:

    'gather together any documents he believes may be incriminating or privileged and hand them to the supervising solicitor for the supervising solicitor to assess whether they are incriminating or privileged as claimed. If the supervising solicitor concludes that any of the said documents may be incriminating or privileged documents or if there is any doubt as to their status, the supervising solicitor shall exclude them from the search, and shall retain the documents of doubtful status in his possession pending further order of the Court.'

    That form of orders thus seems to contemplate that documents of doubtful status may be put in the hands of the supervising solicitor to alleviate the risk of self-incrimination. Of course I accept that putting documents in the hands of a supervising solicitor lessens the risk of prosecuting authorities becoming aware of the information. But, if a prosecuting authority heard of what was happening, and if it sought an order for the handing over of the information in the possession of the supervising solicitor, it is difficult to see how the High Court would have any power to prevent the same. Furthermore, paragraph 3 of Sir Richard Scott V-C's order in this case did not allow the supervising solicitor to return answers provided, even though they were clearly self-incriminating. The effect of the paragraph quoted in the standard form of the Anton Piller order at least allows clearly incriminating documents to be returned, and in any event, since it is dealing with pre-existing documents, it may be regarded as acceptable. The effect of paragraph 3 is thus not simply to leave in the hands of the supervising solicitor documents about which there is doubt, but documents which may clearly be incriminating".

    and later in his judgment (p728) he reverted to the them in the following passage

    "There is one further point to emphasise. An Anton Piller order should not be made where it will require the defendant to incriminate himself. The authorities on this aspect are summarised in Cobra Golf Ltd v. Rata [1998] Ch 126-128. It is possible to build a mechanism into an order which provides a clear warning to the defendant through, for example, advice from the supervising solicitor. But the authorities summarised by Rimer J. in the Cobra Golf case show how difficult it is to provide adequate protection and there is no distinction in this regard between an Anton Piller and a Mareva order. Once again I emphasise that the expedient of ordering a defendant to place incriminating information in the hands of a supervising solicitor does not seem to me to provide adequate protection."

  37. In making his submissions to me on the original application Mr Higginson was now aware of these important observations. They were, unfortunately, also overlooked by me, as they appear also to have been by the editors of successive supplements to the White Book. I would also observe that they appear to have had no decisive influence on the contents of the CPR: the latter no longer prescribe the use of a standard form of search order, but the example they give of a "search order" continues to proceed on the assumption that delivery of documentation into the hands of a supervising solicitor provides a safeguard to the potentially incriminated defendant: see the Practice Direction supplementing Part 25 of the CPR. I am also told by counsel that orders continue to be made by judges in this Division in the standard form notwithstanding citation to the court of the observations of the Court of Appeal in Den Norske.
  38. I entirely accept that Mr Higginson's failure to draw my attention to the Den Norske decision was innocent of any attempt to mislead the Court, and that his failure, and that of those instructing him, to appreciate its potential significance was understandable. This was not, unlike the Den Norske case, a case where the potential invocation of the privilege against self-incrimination loomed large. In the Den Norske case itself, the nature of the core allegations (bribery), coupled with the effect of the standard part of the freezing order, immediately focused attention (or perhaps should have done) on the likelihood of the privilege against self-incrimination there being invoked. Moreover, as I have indicated, in overlooking the significance of the decision in relation to the relevant part of the standard form of search order, Mr Higginson was in distinguished company. The explanation for this communal oversight may lie in the fact that in the first report of the case (which was on 24th June 1998 at [1998] 3 All ER p74) the headnote fails to draw attention to the potential significance of the case in this critical aspect. In that regard the headnote in the later Weekly Law Reports report of the case is an improvement, although even there the point can relatively easily be missed by the reader.
  39. I have no doubt that the relevant passages in Den Norske ought to have been drawn to the court's attention before it was asked to make a search order in the standard form or a freezing order in the form in which it was here sought. That seems to me, however, to be not necessarily the same thing as saying that there has been a breach of the rule of policy which requires full disclosure to be made of material facts on an application without notice. It is, in my judgment, necessary to distinguish the duty imposed by that rule from the separate duty owed to the court by counsel in relation to matters of law and practice. The former duty has, inter alia, the following characteristics. First, it applies in relation to material facts, in essence all information which is relevant to the claimant's cause of action, to any defence which the defendant may have, and to the exercise by the Court of its discretion to grant the interlocutory relief being sought: see per Bank Mellat v Nikpour [1985] FSR 87 per Lord Denning M.R. at 89, Brink's Mat Ltd v Elcombe [1988] 1 WRL 1350 per Ralph Gibson LJ at 1356. Those facts include, of course, not only facts known to the applicant and his lawyers, but also facts which would have been known had proper enquiries been made. Secondly, the relevant duty is one owed by the party, not simply by his lawyers (although of course the lawyers are expected by the rule to play a critical role in its due performance): see Bebehani v Salem [1989] 1 WLR 723 at 729d. Thirdly, the relevant duty arises precisely because the application is being made in the absence of the defendant. The court is being asked to disregard the usually fundamental requirement that the other side should be heard: see per Isaacs J in Thomas A. Edison Ltd v Bullock (15) CLR 679 at 681 as quoted by Slade LJ in Bank Mellat v Nikpour (supra) at 92.
  40. By contrast the relevant duty owed by the advocate to the court to (in the words for example of the Bar's Code of Conduct) "ensure that the court is informed of all relevant decisions and legislative provisions of which he is aware..." stands on a different footing in all three respects. In the first place it does not relate to facts and matters of which, in the absence of having its attention drawn to it, the court can be presumed to be unaware. Secondly, it is a duty owed by the advocate as part of his professional duty to the court rather than the duty of the party for whom he appears. Thirdly, the duty is not confined to the situation where the advocate has no opponent present in court.
  41. Of course, in the context of an application without notice the existence of both duties provides an important safeguard to the defendant, and a breach of either duty in that context requires to be treated very seriously. It does not, however, follow, that, because both duties in that context share the same aim, the same consequences should flow from a breach of either. The sanction underpinning the duty of disclosure is the threat that if it is not complied with the party who, or whose lawyers, are in breach will be deprived of the fruits of the process. The courts have considered that such a sanction is necessary to make solicitors appreciate" and more importantly bring home to their clients" the importance of making full disclosure (see Woolf LJ in Bebehani supra at p. 729). The effective policing of the advocate's duty does not, however, in the same way require (although it may in a particular case justify) the imposition of that particular sanction.
  42. With those observations, I turn to the second of the three areas in which Mr Higginson's conduct of the original application has been criticised, namely his failure to draw the Court's attention to the fact that paragraphs 4 and 5 of the order represented substantial departures from the standard form. At the time the Chancery Guide expressly required the attention of the Judge to be drawn to any material change sought to the standard form of order, and that continues in my judgment to represent proper practice.
  43. It was accepted by Mr Higginson that he ought to have drawn the attention of the court to the fact that the paragraphs were not in standard form, and that he was quite wrong to have used language which could only be understood as representing that paragraphs 4 and 4 were in the standard form. He did not accept that the court would not have made that order which it did make had the extent of the departure from the standard form bee spelt out, nor was he inclined to accept that the court did not fact appreciate the extent of the departure. It was clear from the transcript that the content of the relevant paragraphs had been considered by the court.
  44. It is not appropriate that I should in any way enter into a debate as to the actual effect on my mind at the time of the representation which was made by Mr Higginson. It is only by an accident of listing that the discharge application is before me. The question must be looked at objectively. Plainly the court was aware (and was made aware by Mr Higginson) that the draft order was not altogether in standard form: the inclusion in the freezing order of a provision for a supervising solicitor was one example of this. Plainly, also, the court's attention was drawn to the nature and content of the additional provisions contained in paragraphs 4 and 4 of the order. They were designed to assist the policing of the freezing order in relation to the defendant's assets. Equally plainly, however, it seems to me that the making of the representation created a risk that the Court might be diverted from a full consideration of whether in the particular circumstances it was appropriate to make an order in those exceptional terms. That was particularly so where, as in this case, the provisions of the draft order were being considered under pressure of time (and where, contrary to best practice, the draft had only been supplied to the Court during the course of the application itself). I am persuaded, for the reasons give by Jacob J when the matter came before him on the return date, that a proper consideration should have led to the conclusion that, with the possible exception of paragraph 5(1), the freezing order should not have included these paragraphs, that I was mistaken in including them, and that Mr Higginson's representation should be viewed as having contributed to that mistake.
  45. What consequences flow from that? In the first place it was obviously desirable that the court's mistake should be corrected at the earliest opportunity. In the event this was achieved by Jacob J's order on the return date. My order had, of course, envisaged that the defendant could apply at any time to discharge the order, and I had insisted in any event on an earlier return date than that proposed by the plaintiffs. The error having been corrected, and having been inherently capable of being corrected before damage flowed from it, it does not seem to me obvious that the further consequence should necessarily follow that the applicants should be deprived of all the relief which they sought and obtained on their application or any continuation of that relief. While that is an entirely appropriate response in the normal case of a breach of the duty of disclosure, the court has other means of policing and reinforcing the separate duties owed by the advocate to the court. Serious as the breach in my judgment was, I do not think that it should have the consequence of denying to Mr Higginson's clients the relief to which they may otherwise be entitled.
  46. I should at this point record my firm conclusion, formed as a result of the way in which he conducted himself both on the original application and on the present discharge application, that there was nothing deliberate in Mr Higginson's acts and omissions. Mr. Howe, on behalf of the first defendant, made much of the fact that I had been left without a full explanation as to how the misrepresentation came to be made to me. The fact was that Mr. Higginson was at a loss to explain how he had come to say the fateful words. I think the explanation probably was that the draft was based on the form of the order recently obtained by his solicitors from the Vice Chancellor in the Den Norske litigation, and which was being used as a precedent within the firm. The basic format of that order was in accordance with the standard form, but the exceptional nature of paragraphs 4 and 5 had not been noted, and was regrettably missed by Mr Higginson when he presented it to the Court.
  47. The third area of criticism of Mr Higginson's conduct lies in his alleged failure to disclose to the court the weaknesses in Memory's cause of action (or, as we should now say, its grounds for bringing a claim) against the first defendant. I consider below the question of whether Memory has, in the event, successfully pleaded such a cause of action and conclude that it has not. But there was no concealment on the original application of the (as I viewed it at the time) adventurous and precarious nature of the cause of action being asserted on behalf of Memory. It was a point raised by me before Mr Higginson had an opportunity of dealing with it. Rightly or wrongly I took the view that DHK was clearly entitled to apply for the relief sought and the fact that Memory probably was not and did not affect the exercise of my discretion. The consequence of the inclusion of Memory as a party did indeed contribute to my decision to dispense with any requirement that security be given on the cross-undertaking in damages in respect of the period up to and including the return date. Whether that was a correct course to take may be debatable, but it was not taken as a result of any improper concealment by the claimants or their counsel of the legal weaknesses of Memory's claim.
  48. I turn now to consider the matters which are alleged as having constituted breaches of the duty to disclose material facts.

    (1) The fact that the application was based, in part, upon materials which had been obtained illegally.

  49. The background to this is as follows. The evidence on the application identified nine bank accounts as belonging to the first defendant, and all nine accounts were listed in the freezing order. In the event it turned out that the claimants had been misinformed as to five of these accounts. These five accounts were not those of the first defendant but those of his brother, a solicitor of the Supreme Court, who happens to have the same initials as the first defendant. The first defendant contends that the plaintiffs could only have come by this misinformation by unlawful means, certainly in breach of the duty of confidence between the bank and its customer, and very probably by commission of criminal offences under the Data Protection Act 1984.
  50. The claimants have given evidence on this application that they were supplied with this information by Network, the firm of investigators retained by the claimants (and whose retainer was disclosed to the Court on the original application). Network has, in turn, given evidence that it was supplied with the information by a "sub-contractor", and that the terms of its contract with the sub-contractor obliged the latter at all times to "comply with all applicable laws". Network has declined to identify the sub-contractor "to maintain confidentiality", and Mr Berger, the managing director of its Investigations Department, has deposed that "I am not aware of the method that was used to obtain the information because it is considered to be a business secret. However, based on the above criteria, I do not believe that there has been a breach of the Data Protection Act 1984". The "above criteria" is, it appears, a reference to the sub-contractor's warranty that it would comply with all applicable laws.
  51. This raises a number of issues. Were the claimants aware that the information had been obtained by illegal means? If not, should they have been so aware as a result of making the inquiries which they ought to have made before applying to the court for "without notice" relief? If so, was that a material fact which should have been disclosed to the court? These issues raise wider questions of some general importance, since the employment of independent investigators and the production of information of this kind is increasingly common.
  52. So far as concerns the particular questions, it is in my judgment incumbent on a party applying for without notice relief to inform the Court of any illegality, if known, in the means by which any evidence adduced has been obtained. That is not because that fact would necessarily be material to any defence the defendant might have. As a matter of principle it would not normally be, having regard to the absence in English law of an exclusionary rule in relation to such evidence: see Kuruma v R [1955] AC 197. Rather it is because it would be material to the Court's exercise of its discretion to grant the particular relief sought. The more difficult question is to what extent an applicant is bound to seek reassurance from its inquiry agents that they have obtained the information lawfully in circumstances where those inquiry agents have already warranted that that is the case, and as to the nature of any further enquiries which the without notice applicant should make on receipt of such reassurance. Much will in my judgment depend on whether the nature of the information obtained itself points prima facie to an illegal source.
  53. In the present case the information consisted of the name and account numbers of five accounts at the Maidenhead branch of the National Westminster Bank. The mere fact that the applicants' inquiry agents had apparently succeeded in identifying these did not, in my judgment, put the applicant on inquiry as to the legality of the means by which this information had been obtained. On the assumption that the information was accurate, it is possible to imagine ways in which it might have been obtained lawfully, or at least without fraud or criminal conduct. It is the fact that the information turned out to be inaccurate which points much more forcibly to the probability that in obtaining it the sub-contractor employed means which constituted an offence under the Data Protection Act 1984. But the applicants were obviously unaware of the inaccuracy of the information. While the consequence may be (I do not decide the point) that documents obtained or produced in the course of the investigation will not enjoy the privilege from discovery which otherwise they might (see Dubai Aluminium Co. v Al Alawi & Ors [1999] 1 AER 703), I am not persuaded that the applicant was in breach of its duty of disclosure in not airing with the court the possibility that the information had been illegally obtained. I should add that, in arriving at this conclusion, I am very far from accepting Mr Berger's evidence that, in the circumstances which now obtain, there is any relevant confidentiality in the name of the sub-contractor or in the method actually used by the sub-contractor to obtain the information in question. I would also add that it seems to me desirable that the court should in the future be more astute than perhaps it has been in the past to be satisfied that information of this nature, placed before it on a without notice application, is both accurate and lawfully obtained.
  54. (2) The trading name "Microstar" was not a vehicle for some "dishonest end" but was, and was well-known by staff in DHK's office to be, merely a device to enable DHK to trade in certain "grey market" goods.

  55. As already mentioned, DHK's core contention on the original application was that it had discovered evidence that the first defendant had undisclosed interests in, and was improperly extending credit to, two of DHK's principal outstanding creditors, namely Microsimm and Sunsar. The evidence produced in support of this showed, as is conceded for the purposes of this application, a good arguable case of dishonest conduct by the first defendant. The passage in Mr Doughty's affidavit dealing with Microstar related to concerns which he had in relation to a number of documents very recently obtained by the applicants as a result of searches made of the second defendant's offices in Hong Kong during his absence therefrom and immediately prior to the making of the application. It was in the following terms:
  56. "Microstar

    Documents relating to a company called Microstar tend to suggest a connection between that company and DHK. A Mr David Cheung, a current employee of DHK, was apparently working for Microstar in late 1997, because he was signing letters on its behalf (page 158). Secondly Mr Pahwa, who is a director of Sunsar and Microsimm India, was the contact name for Microstar in may 1958 (page 162). It is not known whether or not Microstar have any current involvement in the Defendants' activities but I strongly suspect that Mr Sidhu, having put his people in place at that time, would have done so for some eventual dishonest end".

  57. It was quite clear in the affidavit that Mr Doughty was drawing the inference that Microstar was a dishonest vehicle from nothing more than the fact that he had already established grounds for suspecting and alleging dishonesty against the first defendant in his dealings with Microsimm and Sunsar, and from the fact that these companies appeared to be connected (via the common directorship of Mr Pahwa) with Microstar. This was not a case, therefore, when the information being given to the court in relation to Microstar was being given in order to buttress the allegation of dishonesty which had already been made in relation to Microsimm and Sunsar. It was simply being adduced as evidence of a further area of concern and suspicion on the part of the applicants at that stage.
  58. The complaint which is made is that the applicants had within their knowledge, or means of knowledge, information from which they should have concluded that the first defendant's connection with Microstar was entirely innocent of wrongdoing vis-a-vis DHK. The first defendant's case is that Microstar was a mere trading name which he used, on behalf of DHK, as a "front" for the purposes of shipping "grey market" Intel CPUs into the United Kingdom and Europe. That device was adopted in order to avoid embarrassment to DHK's parent Datrontech plc which enjoyed the Intel UK and Europe franchise. The first defendant claimed that the fact that he was employing such a device was known to, and approved of by, Mr King a director of DHK, who had told him to find a "safe" way of doing the business and that he (Mr King) did not want to know the details. Mr King's evidence in response concedes a conversation with Mr Sidhu in November 1996 in which reference may have been made to finding a "safe" way of distributing the Intel CPUs, and in which approval was given to this part of the business being established under a separate trading name, but falls short of admitting all the implications of the first defendant's account.
  59. In my judgment no criticism of the applicants should be made for their failure to disclose what they knew or might on further inquiry have discovered in relation to the Microstar business. Their suspicions at the date of the application were not presented to the Court as more than suspicious, and it was clear from the way in which they were presented that they were prompted by a very recent and as yet unexplored discovery. Moreover, disclosure by the applicants of what Mr King might have guessed was the purpose of Microstar (once identified), or what others in the Hong Kong office knew of its purpose, would not necessarily have enabled Mr Doughty to say that his suspicions had been allayed. Even if he would have been so enabled, the whole Microstar sub-paragraph was irrelevant to the case of dishonesty centrally relied on by the applicants in relation to Microsimm and Sunsar.
  60. (3) The first defendant's association with Microsimm India PVT Limited was not "undisclosed" but had on the contrary been expressly discussed with Mr King.

  61. The allegation of non-disclosure made under this head is complicated by the fact that the exact nature of the first defendant's case in relation to his association with Microsimm is unclear on his own affidavit evidence and pleadings. On his account he had been keen in March 1996 to find a means of extending DHK's business into India. With that in mind he unsuccessfully advertised in the Times of India for interested Indian companies to enter into a joint venture. On the failure of that initiative (which he claims was known to Mr King) he asked a local business contact, Mr Pahwa, to set up a local company with whom DHK could do business ("in such a way that I could give credit to him and yet retain security over DHK's funds.... We agreed that the easiest way was for me to become a signatory on the Microsimm India account and a director of the company, to retain executive control. The Bank mandate was set up so that Mr Pahwa could only make payments limited to US$1,000,000 but so that there was no limit for payments made to DHK". The first defendant further deposed that "I told Mr King about the arrangements with [Microsimm] in about June 1996.... He was quite excited about the prospect of business in India". I should add that in addition to that evidence the first defendant discloses in his Defence (which he has verified on affidavit) that he became not only a director but also a 50.1% shareholder of Microsimm in June 1996 but that he resigned as a director and "relinquished" his shareholding in Microsimm on or about 20th April 1998.
  62. Mr King's account is that he knew that the first defendant had established an "association" with Microsimm but was not aware that he was a director or shareholder or had any financial interest in Microsimm. He says that he was also told, in November 1998, by the first defendant that he had recently met with Microsimm's directors and that it had then been agreed that payments from the Government of India in respect of its debts to Microsimm would be paid directly to DHK. Mr King claims that he did not know that the first defendant was a signatory on the Microsimm bank account. The reassurance as to Microsimm's indebtedness which the first defendant then gave him was that Microsimm was run by a friend of his "who had never before let DHK down".
  63. There is therefore a conflict of evidence between the first defendant and Mr King as to what exactly the latter knew of the nature of the association between the first defendant and Microsimm, and a lack of clarity in the first defendant's case as to the nature of that association. In particular he has not explained whether his shareholding was originally held by him beneficially or on behalf of DHK, and (if the latter) what has happened to it. It is possible, I suppose, that his case may turn out to be that, prior to entry into the written service contract, there was no restriction on his freedom to take a personal financial interest in one of DHK's customers.
  64. Given the conflict of evidence, the only agreed fact in response of which an allegation of non-disclosure can be made is that the first defendant had volunteered to Mr King in November 1998 that Microsimm was run by a friend of his. I am myself quite unable to see how disclosure of that passing comment was material for the purposes of the application which was made. Equally, since there is no unchallenged evidence that Mr King's knowledge of the first defendant's "association" with Microsimm went beyond the knowledge that a continuing business relationship had been established, I cannot see that it would have advanced the matter one way or another for the details of Mr King's knowledge (such as they are claimed to be by him) to have been disclosed on the application.
  65. For these reasons I find that none of the grounds relied on by the first defendant in the application to discharge has been made out.
  66. II The application to strike out Memory's claim against the first defendant.

  67. DHK's cause of action is quite clear. It is based on the contractual and fiduciary duties owed to DHK by the first defendant as a result of his employment under the service contract with DHK and his role thereunder as DHK's managing director. It is agreed for present purposes that, whether or not formally on the board of DHK, the first defendant can be treated as if he was.
  68. The position so far as Memory is concerned is quite different. There is no pleading that the first defendant was ever employed by Memory or acted as a director of Memory. There is a bare assertion in the draft re-amended Statement of Claim which was placed before me, first, that (by paragraph 4 of the original pleading) the first defendant owed both plaintiffs fiduciary duties (which were then listed) and, secondly that
  69. "4A Further or alternatively, the First Defendant owed to the first Plaintiff a fiduciary duty not to damage the goodwill which existed in the Second Plaintiff and which was owned, as the First Defendant knew, by the First Plaintiff".

  70. Apart from pleading that Memory was at all material times "the ultimate holding company" of DHK, no foundation is laid by the pleading for the allegation that the first defendant owed Memory any fiduciary duty at all. Nor can I see one in the evidence. Mr Higginson argued that such a duty could be said to have arisen as a result of one or more of four background circumstances. First, there was evidence that the first defendant had played a direct role in the process whereby Memory and Datrontech plc had come together in forming the joint venture company; secondly, there was evidence that Memory had through its officers been directly involved in the running of DHK through instructions given to the first defendant; thirdly, Memory had granted the first defendant certain share options at the time he entered into his service agreement with DHK; and fourthly, the service contract itself imposes duties on the first defendant towards Memory.
  71. None of these matters is in fact pleaded. But even if they all were, I am unable to see how they could be put in such a way as to provide a basis for asserting the existence of a fiduciary duty owed directly by the first defendant to Memory. It is quite clear that the only parties to the service contract were DHK and the first defendant, and there is no suggestion that the first defendant was ever seconded pursuant to that contract to employment by Memory. Nor is there any suggestion that the first defendant ever acted, in law or in fact, as a director of Memory.
  72. The suggestion, raised by paragraph 4A of the draft, that the fiduciary duty in some way arose out of the first defendant's knowledge that actions by him in his role as managing director of DHK might damage goodwill in DHK which was owned by Memory, are in my judgment completely untenable. This was not advanced as an argument that the first defendant had committed the tort of unlawful interference with Memory's business, but specifically as founding the assertion of a fiduciary duty. The principle defect of the pleading lies in the assertion that Memory owned goodwill in DHK. It was made clear to me in argument that this was intended to convey that, at the time of its acquisition of its 51% shareholding in the joint venture company, Memory had separately acquired an asset consisting of "goodwill" in DHK. There is no evidence whatsoever to support such a proposition. It is based on a misreading of the consolidated accounts of the Memory group of companies as at 31st December 1998. The group balance sheet does indeed show £8.045m of intangible fixed assets which (as Notes 11 and 13 reveal) is attributable in part (£4.073m) to "goodwill arising on the acquisition" of the 51% interest in DHK acquired through the medium of the joint venture company. This is, however, a very different thing from saying that Memory itself acquired any such goodwill as a result of that acquisition. What Memory acquired were shares in the joint venture company, and these are reflected in Memory's own balance sheet by the item "investments": see page 18 of the accounts. The item of "goodwill" in the group balance sheet arises as a result of the process of accounting within the consolidate group accounts for the acquisition by Memory of its stake in DHK. Moreover the nature of that item of goodwill should not be lost sight of. What it represents in the consolidated accounts is the difference between the fair value of the consideration given for the acquisition and the fair value of the net assets acquired.
  73. In the present case the fair value of the latter (i.e. the net assets of DHK) was in fact taken to be a negative figure (-£329,000). The sense in which a layman might understand that goodwill to be an asset is very different from the sense in which it is so described in the accounts. There has for a long time been controversy within the accounting profession as to the best method of accounting for "goodwill" arising on acquisition: see, for example, the discussion in UK GAAP, 4th (1994) edition at pp 287 et seq. None of this can, however, alter the essential fact that the only asset acquired by Memory was its shareholding in the joint venture company.
  74. If the position is that the value of Memory's shareholding (in the joint venture company) has been diminished by a wrong done by the first defendant to the joint venture company, the proper claimant in respect of the wrong would in any case prima facie be the joint venture company. No wrong is, however, alleged to have been committed against the joint venture company. Apart from the submission that the first defendant owed a fiduciary duty directly to Memory (which I reject as untenable on the pleadings), the only wrong alleged is a wrong committed against DHK, the wholly owned subsidiary of the joint venture company. The only proper claimant in respect of that wrong is DHK itself. The recent authorities on this subject are usefully collected and reconciled in the recent decision of the Court of Appeal in Johnson v Gore Wood & Co. 12.11.98 New Law Cases 2981117601; see especially at pages 32 to 34.
  75. Mr Higginson sought to escape from some at least of the coils in which these authorities ensnared him by pleading that the first defendant (a) had with others unlawfully conspired to injure Memory and DHK by unlawful means and (b) had unlawfully interfered by unlawful means "with the trade or business of [Memory and DHK]", and that Memory had suffered separate damage as a result of "the cost of managerial and staff time spent in investigating and/or mitigating the consequences of both defendants' conspiracy and/or unlawful interference as aforesaid". While this avoids some of the difficulties it does not, in my judgment, avoid them all. The essential difficulty remains that the person injured by the overt acts of conspiracy relied upon was DHK; and Memory is not pleaded as having any relevant trade or business apart from its role as (ultimate) holding company of DHK. Memory's real complaint is that as shareholder in DHK's holding company, it has been damaged by a wrong done to DHK. Absent an independent duty owed by the first defendant to Memory, I am unable to see that Memory has a pleadable cause of action.
  76. III Security for the cross-undertaking in damages.

  77. I did not order security to be given for the cross-undertaking given by both Memory and DHK on the original grant of the injunctions on 27th January 1999. The duration of both orders was expressed to be only until 1st February 1999. It appeared to me inconceivable that the first defendant would suffer any damage during that period which would be incapable of being met by the claimants. The evidence then before me satisfied me that Memory was good for its undertaking in respect of any such damage.
  78. The situation which now obtains is different in the following respects. In the first place the injunctions which I granted were replaced on 1st February 1999 by the order made by Jacob J. Oddly, that order (which was in substance a freezing order against both defendants in conventional form) appears on its face to be unlimited in duration, and contains no liberty to apply to vary it. However, I am told by both counsel that its duration ought to have been expressed as "until trial or further order". It will therefore probably last until trial which may not take place for many months or even, possibly, years. Secondly, in the context of the more substantial damage which the first defendant may suffer as a result of a freezing order remaining in place over such an extended period, it is necessary to look more critically at the (updated) financial information which is now available in respect of the claimants. I disregard for this purpose the fact that I have held Memory to have no pleadable cause of action against the first defendant. Whether it has or not, and whether or not it remains formally on the record as a party, it will, as it seems to me, continue to be bound by the cross-undertaking in damages which it has already given unless and until it is formally discharged from that undertaking.
  79. In approaching this issue it is necessary to bear in mind that the question is not whether Memory is currently in a position to meet any damages which may arise as a result of the order and which it may be ordered to pay, but whether it will be at the date (it may be years hence) when it is ordered to pay these damages and they have been assessed. To decide that issue I have only Memory's current financial position to go on. Looking at its consolidated accounts for the year ended 31st December 1998 the criticism can, in my judgment, fairly be made that although the group is shown as having £5.5m of net assets, this figure is only arrived at as a result of including £8.045m of "goodwill" arising on 1998 acquisitions as a fixed asset. There is a sense in which such purchased goodwill amounts to nothing more than a value attached to the right to receive future profits in excess of that which might reasonably be expected from the assets employed (since it represents the excess of consideration paid over the fair value of the net assets acquired). Moreover the group profit and loss account shows (thus far) that the group has made losses during its last three years trading. Some evidence was produced to me of an improvement in profitability in the first quarter of 1999 but it fell short of showing any dramatic changes in the group's fortunes from which any comfortable predictions of future performance can be made.
  80. I heard no argument on either side as to the strength of Memory's own balance sheet for the purposes of this issue, but note that its value is effectively attributable to the value ascribed to its investment in its subsidiaries and the amounts owing to it by its subsidiaries. I consider therefore that Counsel were correct to focus attention for this purpose on the group accounts.
  81. I have come to the conclusion on the basis of the material currently before me that I cannot altogether be satisfied that (in say two years time) Memory will necessarily be good for its cross-undertaking. It operates in an extremely competitive market of comparatively recent origin in which great fortunes have been made and lost within very short periods of time. Any doubts as to the ability of an applicant to meet its cross-undertaking in damages ought, in my judgment, to be resolved in favour of the defendant. I cannot see that it is any hardship in the circumstances to require the claimants to give security by way of bank guarantee for their cross-undertaking. I propose so to order.
  82. As to quantum, what is sought is a round sum to reflect the fact that, as is alleged, the existence of the freezing order will prevent the defendant from earning his living during the period it is in force and this loss of earnings is put, broadly, at some £100,000 per annum. The evidence in support of this is of the sketchiest kind. On the face of it, any obstacle which these proceedings present to the defendant's ability to obtain alternative employment will more probably be the result of the pending allegations of dishonesty than of the fact that his assets have been subjected to the freezing order. I accept, however, that the existence of the freezing order will in practice affect his credit-worthiness and his general freedom of action as an independent businessman. Doing the best I can on the very limited information before me I fix the amount at £100,000.
  83. IV Security for Costs

  84. So far as this application is concerned, I should take into account the fact that I have already decided that Memory has no sustainable cause of action against the first defendant and will, as matters stand, only remain as a party to the action because it continues to make a claim against Sunsar (which has to date made no application to strike out Memory). In those circumstances it cannot be posited that, if DHK's claim is dismissed with costs, Memory will be jointly and severally liable with DHK in respect of those costs: see notes to RSC Order 23 at 23/3/5 in the 1999 Supreme Court Practice. Indeed it cannot be assumed that Memory will at that date still be a party.
  85. It is accepted that, if DHK were the sole claimant, this would be an appropriate case (DHK being a foreign company, and in any case having negative net assets) in which to order security for costs to be given under section 726(1) of the Companies Act 1985. In the circumstances I think it right that DHK be ordered to give security. The first defendant claims to have incurred £21,000 in costs to date and to expect to incur a further £20,000 up to the conclusion of the disclosure and inspection. DHK does not quarrel with these figures subject, in Mr Higginson's words, "to the usual discount". Discounts applied by the court in ordering security are either made because the skeleton bill tendered is perceived to be exaggerated or to reflect the possibility of early settlement. Since no suggestion is made that the amount here has been exaggerated, and since security is at this stage only sought until disclosure and inspection is complete, there appears to me to be little room for a discount. Experience suggests that in a case of this kind, however obviously desirable an early settlement might appear to be, the chances of it being achieved prior to completion of disclosure and inspection are small. However it would be wrong to discount the possibility that the parties between them might achieve such a sensible conclusion of this litigation. I therefore fix the amount of security at £35,000.00.


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