Full and Frank Disclosure: What To Consider?

Full and Frank Disclosure: What To Consider?

Full and Frank Disclosure: What To Consider? 600 398 Jonathan Gray
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Parties to legal proceedings will normally aim to disclose only information and documents which are beneficial to their case. However, there are certain situations in which a party owes a duty to the court to actively draw its attention to all material information relating to the case, even if such disclosure may damage that party’s case. This is called “full and frank disclosure”.

Ex parte proceedings and subsequent inter partes hearings

There is an obligation for full and frank disclosure in ex parte applications. ‘Ex parte’ refers to an application which is only made by one party in Court (without the attendance of the other party).

Full and frank disclosure obligations are continuous, such that once the duty arises in ex parte proceedings, the obligation subsists in subsequent inter partes hearings (where both parties attend the hearing) on whether to discharge orders granted on an ex parte basis. In the case of Chu Hung Ching v Chan Kam Ming [2001] HKEC 130, the Court of Appeal held that:

“The fact that the hearing… was inter partes made no difference: it did not absolve or relieve the plaintiff from making full disclosure since his duty was a continuing one and it arose before the inter partes hearing took place.”

It should be noted that the above was said in the limited context where the Plaintiff had failed to make adequate disclosure relating to a material issue in his initial ex parte application. The nature of this continuous duty is clarified in the case of Chung Chun Fai v Chan Man Lung and Another [2021] HKCFI 697, where it was held that:

“…the continuous duty of full and frank disclosure applies to disclosures made at the ex parte stage but not at the inter parte stage when the defendant is in court and in a position to respond or deny the allegations. Thus, this continuous duty applies if an applicant has made some disclosures which turn out to be incomplete or false… To extend the duty of full and frank disclosure to factual disputes raised at the inter parte stage would be an unjustified extension of that duty.

It can therefore be seen that an ex parte applicant owes a continuous duty of full and frank disclosure to the court in inter partes proceedings only with respect to matters raised in the ex parte stage.

Furthermore, an ex parte applicant only needs to disclose relevant materials with respect to the grounds on which they are relying. For example, if the applicant has 3 substantive grounds on which an ex parte application may be granted, he may choose to disclose materials pertaining to just one of them. However, in doing so, he forfeits his right to rely on the other 2 grounds in subsequent inter partes hearings if that ground fails. He can, however, advance the other grounds in an inter partes hearing for a re-grant. It was held in Chung Chun Fai that:

The relevant principle is: if an applicant advanced a certain ground and obtained an ex parte stage [sic] on that ground, he may not at the inter parte stage rely on some other grounds, if his original ground fails. This is how the duty of full and frank disclosure operates. But the applicant is not estopped from raising some other grounds which he had not presented to the ex parte judge, if it becomes necessary to argue for a re-grant. Since the defendant would be in court at the inter partes stage, there is no issue of unfairness.

Hearings attended by only one party

The position is less clear as to whether the same obligation for full and frank disclosure exists for hearings which are heard with only one party present.

For instance, the Lands Tribunal has held that there was no duty for full and frank disclosure in an inter partes hearing where a party failed to attend in the case of 1638 Ltd v Power Cycles Ltd [2007] 3 HKC 306.

1638 Ltd concerned an application to discharge a mareva injunction. The mareva injunction was applied for on an ex parte basis but was adjourned for an inter partes hearing. The party subsequently seeking to discharge the injunction had chosen not to attend the inter partes hearing and the tribunal granted the injunction on that day. In the subsequent application to discharge the mareva injunction, the tribunal held that where a party elects not to attend an inter partes hearing, it does not turn that hearing into an ex parte application. Accordingly, there was no duty to give full and frank disclosure in an inter partes hearing where only one party attends. The Tribunal held that:

… it does not lie in the applicant’s mouth now to say that the order was granted on an ex parte basis.  … The court, or rather the tribunal in this instance, is entitled to take into account the failure of the applicant to appear in deciding whether to grant the relief to the respondent. … Since it is an inter partes application, the obligation on the part of the respondent to give full and frank disclosure at ex parte stage no longer applies.”

It is also worth noting the case of Alan Chung Wah Tang & Kan Lap Kee v Chung Chun Keung & Joint Group Investment Limited & Vicfont Company Limited [2021] HKCFI 369, which dealt with an application to set aside a default judgment.

In Alan Chung, liquidators of a company commenced an action seeking a declaration from the court that the former director of the company had breached his fiduciary duties and for an order that the sale of the company’s property be withdrawn.

Subsequently, upon application by the defendant to set aside the default judgment, it was held that the court was misled by the liquidators in granting the default judgment because the court was given the impression that nothing substantive had occurred in the parallel proceedings and that there was apparent inaction on the defendant’s part.

However, the defendants showed that substantial evidence had in fact been filed in the parallel proceedings by all parties involved. In setting aside the default judgment, the court expressed that had it not been misled at the application for default judgment, it would most likely have refused the application in full.

Crucially, it was held that while strictly speaking there is no clear obligation on an applicant to give full and frank disclosure in an application for default judgment, the nature of such an application made it “akin to an ex parte application” such that an applicant should nevertheless give full and frank disclosure to aid the court in properly assessing the merits of the case without having the benefit of full submissions from both sides.

Opposed ex parte motions

An opposed ex parte motion is where the responding party is present at the hearing of the ex parte application and takes part in it to assist the court.

A court has the discretionary power to adjourn an ex parte motion to be heard either on a full inter partes basis or for an “opposed ex parte” hearing. Plaintiffs are required to give full and frank disclosure to the court on any ex parte applications.

Paragraph 29/1/52 of the Hong Kong Civil Procedure (White Book) 2021 provides:

when a plaintiff moves ex parte and the defendant is present and addresses the court, the hearing is effectively inter partes, and any appeal therefrom is an appeal against an inter partes order. It is unsatisfactory, however, for the Court of Appeal to be asked to adjudicate on such appeals when only one side’s evidence has been heard. It is preferable that the motion should stand over to a subsequent inter partes hearing when all the evidence can be put before the court.

In Muginoho Co. Ltd v Vimiu HK Co. Ltd [2012] HKCU 641, Deputy High Court Judge M Chan discussed what makes a motion inter partes or ex parte, as well as its implications.

Citing the case of Chu Shu Ho David and Mission Hills Golf Club Limited v Lam Hon Lit Harry HCA3525/2002 and HCA3618/2002 30 October 2002, it was reiterated that in determining whether an order was made on an ex parte or inter partes basis, “the question is not to be decided by seeing whether arguments had been advanced by both parties, but by seeing whether the opposing party had been afforded a reasonable opportunity to argue against the application if it so wished. If due notice of the application had been given to the responding party, then the hearing and the order made is to be regarded as inter-partes”.

In Chu Shu Ho, the Court had held that 7 days’ notice to the responding party was sufficient for them to make oral and written submissions on two issues before the court such that an order made in that situation would be an inter partes one.  In Muginoho, in contrast to the 7 days’ notice given in Chu Shu Ho, it was observed that 4 days’ notice was insufficient. This was because, given the fact that Japanese law was also relevant to the application, the Defendant was not afforded a reasonable opportunity to prepare and was unable to present any evidence in opposition by then. As such, in Muginoho, it was held that the order made was an ex parte one.

Deputy High Court Judge M Chan however went on to say that:

Even if the hearing… and the order made that day can be said to be inter-partes in the sense that due notice had been given to the defendant, and arguments had been presented on the defendant’s behalf, I would not go on to say that the plaintiff did not have the duty to make disclosure to the court of material facts of which it had knowledge… A party which comes to court for relief, particularly discretionary or equitable relief, has the obligation to place before the court all matters which are relevant to the court’s determination of the issues and the cause before it.”

More recently, in CHEN LINGXIA(陳玲霞)v 中國金谷國際信託有限責任公司 AND OTHERS – [2019] HKCU 589, the defendants attended an inter partes hearing where interim orders were made. However, they did not have sufficient time to prepare any evidence for the hearing as they only had 2 days’ notice. In applying to discharge the interim orders, one of the grounds relied on was material non-disclosure on the part of the applicant. It was stated that the legal principles are clear as to an applicant’s duty to make full and frank disclosure in its application to the Court for discretionary relief, in circumstances when the Court only has the evidence presented by one side, and the other parties who may be notified and present at the hearing of the application have not had the fair and reasonable opportunity to present their evidence and arguments in opposition.

It was further stated that:

Although the Summons was inter-partes, Chen was not absolved from her duty to make frank disclosure of all facts known to her and which are material to the Court’s determination of whether to exercise its discretion to grant the interim relief which she sought, on the evidence she presented unilaterally… By presenting a partial picture of the criminal charge and proceedings before the Xiamen Court, disclosing only the facts which were helpful to and in mitigation of her case, but withholding other material facts relating to her disqualification to act and remain as a director and legal representative of XS, she had knowingly misled the Court into granting the Interim Injunctions in her favor, on the incomplete information which she presented.”

Accordingly, the interim injunction was discharged on the ground of material non-disclosure of material facts which had misled the Court in making the orders.

When to make full and frank disclosure?

When making applications to the court, an applicant must consider whether it owes duty of full and frank disclosure to the court. If an applicant is subject to such duty, inadequate or inaccurate disclosure can be sufficient grounds to discharge or refuse an otherwise successful application.

While case law seems to be consistent in indicating that a hearing will be deemed to be an inter partes hearing if the responding party has been given ample time to prepare submissions and to present to the court, it is less clear as to whether an applicant in such proceedings has a duty of full and frank disclosure. It appears from Muginoho and Chen Lingxia that where discretionary relief is sought (which includes interlocutory injunctions) there is a duty to disclose relevant and material information to the court regardless of whether proceedings are heard on an inter partes or ex parte basis. However, as can be seen from the 1638 Ltd case, there is authority to the contrary. Practitioners, accordingly, are advised to carefully consider their clients’ duties to the Court and whether/when full and frank disclosure is required or otherwise risk having an order made in their client’s favour discharged, or application refused, for failure to comply with such duty.

 

Our team at Hugill & Ip has extensive experience in dealing with Dispute Resolution matters – so kindly get in touch with us to find out how we can help.

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.

Jonathan Gray

Jonathan specialises in dispute resolution, acting for clients in a wide range of general commercial disputes covering both litigation and arbitration. He also advises on both contentious and non-contentious employment law matters.

All articles by : Jonathan Gray
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