Freezing injunctions - can we be frank?
20 September 2018
A recent judgment in London provides a reminder to those seeking an ex parte worldwide freezing order ("WFO") that they must give full and frank disclosure when making the application. Failure to do so can be catastrophic and costly.
In the case of Fundo Soberano De Angola & Ors v dos Santos & Ors, Mr Justice Popplewell, sitting in the English Commercial Court, discharged a $3billion WFO obtained by the Angolan Sovereign Wealth Fund (FSDEA) against entities allegedly linked to its former chairman. Popplewell J found that at the original ex parte hearing, there had been a breach of the duty to make a fair presentation to the court in eight material respects.
This case is highly politicised, as FSDEA's former chairman is the son of Angola's recently retired and long-serving President (1979-2017). Further, much of the initial evidence was revealed in the 'Paradise Papers' leaks. Following those revelations, the Angolan Government took steps to remove FSDEA's chairman and initiated proceeding alleging fraud and conspiracy against a large number of defendants. Many of the defendants claimed that the speed of the WFO application and the enforcement actions were politically motivated. Popplewell J did find that some of the information withheld from the Court was readily available to senior FSDEA personnel. He stated that the breaches by the claimant "went far beyond the odd accidental slip" and taken cumulatively were serious, substantial and went to the heart of the claim.
This case confirms that a considered and careful approach to disclosure is required when obtaining WFOs and that the courts will take a dim view on an applicant's failure to provide full and frank disclosure.
The Guernsey courts take a similar approach to those in England. Our litigation team has recently dealt with a similar case in which a WFO was challenged as a result of the claimant's blatant and significant non-disclosure. We were able to identify crucial information omitted from the ex parte application, which resulted in the compromise of the entire matter in our client's favour - the claimant's negotiating position was significantly weakened by being on the back foot through his own failures.
What these cases demonstrate is that before rushing to fire off the "nuclear weapon" in a litigator's arsenal, clients and their legal teams should ensure they can present a "warts and all" picture to the court. Failure to do so may lead to punitive costs and sanctions and could fatally undermine the execution of an otherwise sound and legitimate litigation strategy.