Without-Notice Freezing Order: Full and Frank Disclosure Under Pressure
You act for Meridian Capital, which has a £4.2 million arbitration award against Deltacore Trading LLC, a commodities trader. The award is enforceable, but Deltacore has no assets in the jurisdiction except £900,000 in a London bank account and a long-term charterparty. A former employee says Deltacore's director is moving funds to a UAE entity and has booked a one-way flight. Your client wants a without-notice freezing injunction over the London account and worldwide assets up to £4.2 million. The application is listed for 4pm today. You have bank statements, the award, and a two-page witness statement from the former employee, who has an outstanding unfair dismissal claim against Deltacore and has asked for £50,000 for the information. The client has not yet provided a cross-undertaking in damages or evidence of its own ability to meet it. The bank may freeze the account if served.
1. What must you include in the without-notice application, and what are the main risks of it being set aside?
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A without-notice freezing order requires full and frank disclosure. You must put before the court: the claim and the arbitration award; the basis for jurisdiction; the evidence of a real risk of dissipation, not merely that the defendant is abroad or has one overseas entity; the asset position; the amount sought and why it is proportionate; the cross-undertaking in damages and evidence that the client can satisfy it; the fact that the former employee has an outstanding claim and has asked for £50,000; any delay; and any possible defence. You must also explain why notice cannot be given. Risks: if you omit the employee's motive or payment demand, the court may discharge the order for non-disclosure. If the client cannot support the cross-undertaking, the court may refuse or require fortification. The order may be set aside with costs, and the client may be liable on the undertaking. Delay in applying is also a material fact. Serve promptly and include a penal notice.
2. How should you handle the former employee's demand for £50,000 and the conflict with her unfair dismissal claim?
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Do not treat the payment as a simple purchase of evidence. A payment to a witness can be proper if it compensates for time and expenses, but it is highly problematic if it is contingent on the evidence or on the outcome. The employee's outstanding unfair dismissal claim gives her a motive to harm Deltacore, and the court must be told about it. Advise the client not to agree a £50,000 payment before the application. If a payment is made, document it as compensation for time and expenses, not as a reward for evidence, and disclose it. Consider whether the employee should give evidence at the return date and be available for cross-examination. If her evidence is central and her credibility is damaged, look for corroborating bank records or flight bookings. The client should also be warned that paying a witness may attract criticism and cost consequences.
3. If the court grants the order but Deltacore applies to discharge it for non-disclosure, what is the likely outcome and how do you mitigate?
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The court has discretion. Material non-disclosure is serious and can lead to discharge even if the order would otherwise have been justified, but discharge is not automatic for every immaterial omission. The court will consider the gravity of the omission, whether it was innocent, whether it was corrected promptly, and the prejudice. Mitigate by correcting the record immediately, apologising, providing the missing evidence, offering an enhanced cross-undertaking, and proposing a prompt on-notice hearing. Do not defend the indefensible. If the order is discharged, the client may face costs and a claim on the undertaking. Consider whether a fresh on-notice application is viable, and whether settlement or security is a better commercial route. Preserve the bank account and notify the bank of any variation.