Incorrectly obtained or inadvertently lost? Freezing injunctions and the duty to give full and frank disclosure

Litigants that fall foul of the duty to give full and frank disclosure run the risk of their injunctive relief, protecting against the dissipation of assets, being set aside or a request to continue an order being refused. Here we consider the recent case law in which the duty of full and frank disclosure has been scrutinised in the context of freezing injunctions.

What do I need to know?

Where freezing injunctions are sought without notice to the respondent, the applicant will need to set out the reasons why the legal test is met and comply with their duty of full and frank disclosure of all material facts. If the court grants the interim injunctive relief, a return hearing is set at which the respondent can challenge the order made. A failure to provide full and frank disclosure at the without notice hearing can result in the freezing injunction being set aside or a continuation being refused.

How far does the duty of full and frank disclosure extend?

Learning from the guidance given by the courts of England and Wales in recent case law, key signposts indicating a requirement to disclose include:

• significant factual, legal and procedural aspects of the case
• information that would likely be relied on or brought to the attention of the court by the respondent
• defences that are available to the respondent
• the existence of related proceedings in other jurisdictions
• potentially adverse information and possible difficulties with the claim

Disclosing information alone, however, is not enough. The court also requires:

• fair presentation of the information providing the court with confidence in the thoroughness and objectivity of those presenting the case for the applicant
• reasonable enquiries should be made to understand the respondent’s position - the duty to disclose extends to matters of which the applicant would have been aware had reasonable enquiries been made.

Examples of litigants falling foul of the duty of full and frank disclosure

• in Mex Group Worldwide Ltd v Ford [2024] EWCA Civ 959 the Court of Appeal confirmed that the court of first instance had been entitled to conclude that there had been material non-disclosure of the sequence of events behind, and the timing of, the without notice application. The appellant had delayed for over a year before commencing the proceedings, and that delay was material to the court’s consideration of the risk of dissipation. For further reading see our full briefing here.
• in Uconinvest LLC v Jysan Holding LLC [2024] EWHC 1532 (Ch) the court discharged the freezing injunction due to the applicant's incomplete and misleading presentation of the facts at the without notice hearing. The applicant had presented a slanted and partial account of his dealings with the respondents, without disclosing his own knowledge and involvement in the events complained of. He sought to justify his omissions on the basis that he had thought they were immaterial. The court was not persuaded that the claim would have been valued in the same way at the without notice hearing if the full picture had been given. The applicant’s selective account favourable to his own case was a serious failure and the freezing injunction was set aside
• in Apparel FZCO v I [2004] EWHC 1931 (Comm), a freezing injunction was set aside on its return date because the affidavit and skeleton argument relied on at the without notice hearing had not presented the evidence fairly, and the claimant had failed to draw a potential defence available to the respondent to the judge's attention

Finding the balance in the duty to disclose

In Derma Med Limited & Anor v Dr Zack Ally & Ors [2024] EWCA Civ 175, the claimants appealed a decision to set aside a freezing injunction, stating that the High Court had erred in its decision to discharge the injunction for want of full and frank disclosure. The Court of Appeal critiqued the High Court’s finding on non-disclosure, highlighting the importance of maintaining a sense of proportion in complex matters and acknowledging that even in cases where there has been a significant failure of disclosure, this does not automatically lead to the discharge of an injunction. The overriding consideration is always the interests of justice. The Court of Appeal allowed the appeal by the claimants and granted fresh injunctions to enforce non-complete obligations.

The Court in Piacquadio & Anor v Sparkes & Ors [2024] EWHC 2518 (Ch) clarified that a freezing injunction applicant had to make reasonable but not exhaustive enquiries. Here the respondents submitted that the orders should not be continued because, amongst other reasons, the liquidators had failed to provide full and frank disclosure at the without notice hearing. The court disagreed - the liquidators had sought information from the respondent and shared that with the court. The court found there was no failure to give full and frank disclosure, and even if there had been, it would have been inadvertent. The court would nonetheless have concluded that the interests of justice required continuing the injunction in order to protect the investors' interests. As such the injunction was permitted to continue.

Whether or not a non-disclosure was innocent is an important consideration, but is not necessarily decisive. The courts have been critical of parties taking a scatter gun approach to allegations of non-disclosure, preferring focus on the ‘big ticket’ allegations with “quality not quantity being the watchword”. The courts recognise that the interests of justice may sometimes require that a freezing order be continued and that a failure of disclosure can be marked in some other way, for example by a suitable costs order. The court therefore has at its disposal a range of options in the event of non-disclosure.

Commentary

Parties seeking injunctive relief at without notice hearings need to be mindful of the extent of their duties of full and frank disclosure, in both the enquiries made in advance of the application and in the presentation of the information to the court. The case law is clear that it is open to the court to discharge a freezing order even if the order would still have been made had the relevant information been brought to its attention at the without notice hearing; strong merits never being a good excuse for a failure to disclose material facts. This is an intentionally penal approach by way of deterrent to ensure that applicants abide by their duties. That said, the court’s discretion to continue the injunction (or impose a fresh injunction) will ultimately depend on what the interests of justice require.