Out-Law / Your Daily Need-To-Know

Court underlines importance of full disclosure in freezing injunction cases

Out-Law News | 27 Nov 2017 | 4:47 pm | 1 min. read

The English High Court has thrown out an application to set aside a without notice freezing injunction made against two defendants to a fraud action, saying the claimants had disclosed sufficient evidence for the case to proceed.

Ruling in a claim brought by petroleum companies which claim they have been defrauded by 10 defendants, High Court judge Mr Justice Cockerill said he would not set aside a freezing injunction against two of them. The claimants had made “full and frank” disclosure and had a good arguable case that the duo had been involved in a sophisticated fraud.

The judge also refused to strike out the claim against one of the defendants.

According to the ruling the claimants had obtained freezing injunctions against the defendants at a without notice hearing. At that hearing, the claimants relied on a report from an accountancy firm which had estimated that around $287 million had been directed to the defendants.

Litigation expert Jennifer Craven of Pinsent Masons, the law firm behind Out-Law.com, said in any without notice freezing order application it was the claimant's duty to  make full and fair disclosure of all the material facts.

“However, the court is unlikely to be persuaded to set aside an application where it descends into a mini trial, for example, in relation to what had or had not been disclosed,” Craven said.

She said the defendants argued that the accountant’s report on loss had been inaccurate, and that the claimants had put forward a misleading case in relation to a chain transaction. The court found that the claimant had made clear that the figures provided by the accountancy firm had been estimated and that they were relying on assumptions, which had already been fully explained to the court.

“The case is a further example of how important it is at the outset for the claimant to ensure that it carefully considers what disclosures and explanations are made to the court when seeking a without notice freezing injunction,” Craven said.

The UK courts have heard a number of similar cases concerning freezing orders this year. In September the High Court found in favour of a claimant who proved he could show that there was a real risk that money held in another's account would be dissipated if a freezing order was not continued.

In July, the Court of Appeal ruled that an applicant for a worldwide freezing order must be able to satisfy the court that there are grounds for believing the subject of the order actually has assets that can be caught by the injunction.