How to Obtain and Keep Freezing Injunctions

In investigating and litigating instances of fraud, freezing injunctions present an invaluable tool in locking down an entity’s assets and compelling disclosure. However, the bar for receiving these injunctions is not easy to clear, requiring a strong case and difficult discussions with clients in order to obtain them and keep them from being discharged.

In this feature we hear from Robert Wynn Jones, partner in Mishcon de Reya’s Fraud Group, who expands on this process and how he and his colleagues bring their expertise to bear in obtaining and keeping freezing injunctions.

Firstly, can you provide a brief overview of the Mishcon Fraud Group?

Mishcon Fraud Group is a sub-group of Mishcon’s wider Litigation Department. It has approximately 60 practitioners, including 12 partners. What distinguishes our group from many others is that the vast majority of the work that we undertake is in fact civil fraud, injunctive and asset tracing type work as opposed to the inverse, where many practitioners undertake general commercial litigation and a small percentage of fraud and injunctive work. We also undertake both claimant and defendant work, which allows both skillsets and know-how to feed off each other.

What specific types of work or cases are keeping the department busy at the moment? What is the client profile in this type of work?

We have traditionally been instructed in large cross-jurisdictional matters involving large UK-based corporations, overseas-based large corporations or high net worth individuals in control of such corporations. Within those client groupings, we have been and continue to be instructed in classic ‘fraud matters’ where there has been obvious dishonest conduct in commercial dealings, which invariably require injunctive measures – often in multiple jurisdictions – in the form of search orders, freezing injunctions and third-party disclosure orders.

In the last five years or so, the department has been instructed on numerous non-performing loan (NPL) matters on behalf of various international banks, essentially using the same injunctive toolkit to obtain meaningful recoveries for the clients.

Another significant area of work in the last few years has been in the crypto space, where there have been substantial losses on the part of the claimant or the claimant group. In these cases we utilise our injunctive expertise, combining with our investigation colleagues both inside and outside of the firm to identify the wrongdoing, the wrongdoers and the misappropriated crypto or assets obtained utilising those proceeds. Again, we are seeing a real upturn in these types of instructions.

Finally, over the last 15 years or so, we have been instructed on countless misappropriation of confidential information cases, which remain a central pillar of our offering. Again, in these we use our injunctive expertise and in particular search orders and freezing injunctions to secure the misappropriated information and, invariably, the evidence of wrongdoing. The most recent and high-profile example of one of these cases is the widely reported Ocado Group Plc v Project Today Holdings Limited & Others.

In all of the above categories of work, we are also doing work on behalf of defendants.

What distinguishes our group from many others is that the vast majority of the work that we undertake is in fact civil fraud, injunctive and asset tracing type work as opposed to the inverse

To what jurisdictions does the work take you, and how does the department undertake cross-border work?

Mishcon is predominantly a London-based law firm with offices in Hong Kong and Singapore. The vast majority of the matters on which we are instructed, however, have a multijurisdictional element. From the description of our work above, this is somewhat inevitable. We routinely act on matters involving common law jurisdiction such as Cayman, BVI, Hong Kong, Cyprus and Singapore, among others. In terms of non-common law judications that often feature in our cases, our clients’ cases regularly have a footprint in the United States, Switzerland and Luxembourg – again, among others.

To operate and project manage these types of multijurisdictional cases, we have the benefit of the International Fraud Group (IFG), which our department set up approximately 25 years ago and now has 43 firms worldwide. These firms are all experts in the fraud injunctive and asset tracing space in each of those jurisdictions and allow us to operate at the highest level in pursuing these matters. I should note that we do not only use IFG members, but it does form the backbone of our international fraud litigation operation.

What are the benefits for clients in obtaining these injunctions?

In terms of worldwide freezing injunctions (and the vast majority of the freezers we obtain are worldwide freezers due to the nature of the disputes), the two most obvious things they provide are, firstly, the freezing of a respondent’s assets – generally up to an amount or above the amount claimed.

While they are called worldwide freezing injunctions, in fact they only freeze up to that amount or have effect up to that amount in the jurisdiction in which they are ordered. It is therefore necessary to obtain further supporting freezing injunctions in the other jurisdictions in which the respondent’s assets are identified. In those circumstances we routinely obtain, for example, four, five or six freezing injunctions in other jurisdictions in support of the base worldwide freezing injunction. These are then generally served simultaneously on the respondents in order to lock down the target assets globally as tightly as possible.

The second benefit is worldwide asset disclosure. That provision of the Order, as opposed to the freezing provisions, is not dependent on the jurisdiction in which the Order is actually made. In other words, it does not matter if the worldwide freezing order is made in, for example, England or the Cayman Islands; the worldwide asset disclosure order is exactly that and the respondent has to disclose its assets worldwide.

While they are called worldwide freezing injunctions, in fact they only freeze up to that amount or have effect up to that amount in the jurisdiction in which they are ordered.

There is, of course, a risk of partial non-compliance with the freezing or the asset disclosure provisions. However, in our experience, the Orders provide an extremely powerful launchpad from which to conduct the litigation whereby the majority of the key assets are generally secured and those that may not have been previously known about have been disclosed under the asset disclosure provisions. Substantive breaches of these provisions which are discovered can be – and in our department routinely are – punished by contempt proceedings, often resulting in fines or imprisonment.

A search order is another immensely powerful tool that is hugely beneficial to the client. They can also be obtained in a multijurisdictional context in support of the same proceedings and executed simultaneously for maximum utility (time zones permitting).

It is hard to overstate the litigation advantage in obtaining the client’s opponent’s key documents relevant to the proceedings held in hard copy and on computers, phones, cloud networks and any other electronic devices held at the relevant premises by the respondents. On many occasions (but certainly not all) the litigation can be all but over within the first days, weeks, or months after review of the key hard copy and electronic material obtained as a result of executing search orders. This, combined with key assets being simultaneously frozen, is an extremely potent combination in any litigation – and particularly any fraud litigation where the client’s opponents have invariably been caught up in dishonest conduct.

Third-party disclosure orders, such as Norwich Pharmacal Orders and similar discovery type orders in the United States under the 1782 regime, can also be extremely beneficial in identifying assets, wrongdoing and further parties involved in the misconduct.

As you can see, the potential benefits to clients of properly obtaining, executing and (equally importantly) keeping these orders cannot be overstated.

What are the potential risks in obtaining these types of injunctions?

The primary risk in obtaining these sorts of injunctions is having your opponent’s client’s discharge the injunction in its entirety or substantially amend its scope. If the injunction is discharged, that may trigger the cross-undertaking in damages. This cross-undertaking has to be given by the client/applicant when obtaining all of the types of injunctions. Therefore, if the injunction has been made in error and damages have flowed to the respondents, the applicant will generally be liable for those losses – and a review of the case law in this area will show that some of those losses can be extremely large indeed.

The potential benefits to clients of properly obtaining, executing and (equally importantly) keeping these orders cannot be overstated.

It also should be said that, even if the losses are not particularly high and the injunction is substantively discharged, the costs of that discharge will generally be paid by the applicant. So there is clearly a significant risk and, rightly, a very high bar in obtaining these injunctions.

What are the common pitfalls resulting in these injunctions being discharged?

The most common reason for discharge of an injunction ultimately relates to the obligation of full and frank disclosure. This is an extremely high burden placed on the applicant which essentially requires that applicant to explain to the judge all of the good and bad parts of that client’s case, and all the good and bad parts (as far as they can know them) of the respondent’s case.

These applications are nearly always made ex-parte, or without notice, to the respondent and therefore by definition without the respondent in the Court while the application is being made. Hence the obligation of full and frank disclosure and why the Court requires that rule to be complied with in a very meaningful way. If it is not, the Court could make an order that it would otherwise not have made had it been provided with the full information reasonably available.

Why is communication with clients crucial to ensure that injunctions are not thrown out?

The obligation of full and frank disclosure means that the practitioner is in the unusual position of having to undertake what are sometimes extremely challenging and often uncomfortable conversations with the client virtually at the outset of the matter and in preparation of the evidence and application. Understandably, the client/applicant is usually reluctant to explain in significant detail some of the more difficult aspects of its case and past conduct in its commercial dealings with the target/respondent. Equally, the applicant is, particularly in the context of feeling significantly aggrieved by the opponent’s conduct, extremely reluctant to highlight the most promising aspects of its opponent’s defence.

However, it is precisely these conversations that must be had to allow instructions to be drafted into in the affidavit supporting the injunction applications. Needless to say, extracting these instructions can sometimes cause very uncomfortable moments between lawyer and client. But it is this process that usually provides the best way of ensuring that the injunctions are retained once they are under significant attack by the opponent at the return date and beyond during the inter-partes period of the litigation. Without pushing hard in such conversations, it is unlikely that the client will pass over information that is (partially) detrimental to its position – which can, in turn, put retaining the injunctions at significant risk.

What needs to be taken into account to ensure that an injunction neither underreaches nor overreaches in its scope?

When making the application, all of the written evidence, draft orders, written submissions and oral submissions must be pitched appropriately so as not to overstate the factual position and the legal position, or what is being asked for in the injunctions themselves. This is a constant and complex battle that the applicant team must have with itself so as to not overreach, and again allow the client/applicant to be successful when under attack in inter-partes hearings. By the same token, we must be equally careful not to underreach in conclusions and inferences that can be drawn on the evidence and in the reach of Orders to allow for their maximum utility in all possible circumstances.

The experience of preparing numerous injunctions and going through the processes described above also allows for our department to strenuously test opposing applicants and their legal teams when working on the defence team in these injunctive matters.

In conclusion, it is a highly complex, extremely challenging, but ultimately enjoyable area of law in which to operate.

 

Robert Wynn Jones, Partner

Mishcon de Reya LLP

Mishcon de Reya LLP, Africa House, 70 Kingsway, London WC2B 6AH, UK

Tel: +44 02033 217443 | Mob: +44 07525 392169

Fax: +44 02037 611856

E: robert.wynnjones@mishcon.com

 

Robert Wynn Jones is a partner in Mishcon de Reya’s Litigation Department and co-head of its Investigations Group. As a specialist in civil fraud, asset tracing and injunctive work, he has acted for both claimants and defendants, obtaining and opposing multiple search orders, asset freezing orders and disclosure orders in large cross-jurisdictional commercial disputes.

Mishcon de Reya is one of the UK’s leading law firms, employing over 1,200 people – including 600 lawyers – across its offices in London and Singapore. Mishcon’s team acts in accordance with the firm’s socially conscious values to affect profound and far-reaching change for their clients across all areas of law.

Leave A Reply