In a recent judgment, the Privy Council has delivered a “ground-breaking exposition of the law of injunctions” (in the words of the Master of the Rolls), including a restatement of the test for freezing injunctions. Although the analysis is technically obiter dicta, it will be highly influential on any English or other common law court exercising a general power to grant injunctions on the basis of what is just and convenient: Broad Idea International v Convoy Collateral Ltd and others; Convoy Collateral Ltd v Cho Kwai Chee  UKPC 24.
Importantly, the Privy Council concludes that the general equitable injunctive power includes a power to make a freezing order where the sole purpose is to aid enforcement in foreign proceedings – contrary to the position established by the House of Lords’ decision in Siskina v Distos Cia Naviera SA  AC 210. This will have limited impact in England, where there is a specific statutory power to grant injunctive relief in support of foreign proceedings (s.25 Civil Jurisdiction and Judgments Act 1982), but may be significant in other common law jurisdictions which have no such statutory power.
More broadly, the Privy Council’s judgment may facilitate a future expansion of the scope of freezing and other injunctive relief in both England and other common law jurisdictions. The majority judgment emphasises the need for the law in this area to be able to adapt to meet changing commercial practices. In particular, its exposition of the rationale underlying freezing orders and other enforcement-focused injunctions is intended to provide a foundation for the future development of such remedies as required, unshackled from principles developed in the different context of traditional ‘orthodox’ interim injunctions. It is not difficult to envisage it being relied upon in a number of areas where the law is currently being asked to respond to fundamental changes in commercial and financial practices, such as cryptocurrency and blockchain commerce.
For more information, see this post on our Civil Fraud and Asset Tracing Notes blog.
In this fourth episode of our series of commercial litigation update podcasts, we look at a variety of cases and developments, including an update on the disclosure pilot and proposals in relation to witness statements. We also look at recent cases on privilege, witness evidence, access to court documents, claim notices and freezing injunctions. This episode is hosted by Anna Pertoldi, a partner in our litigation team, who is joined by Maura McIntosh, a professional support consultant, and Kevin Kilgour, a senior associate.
Our podcast is available on iTunes, Spotify and SoundCloud and can be accessed on all devices. A new episode will be released every couple of months. You can subscribe and be notified of all future episodes.
Below you can find links to our blog posts on the developments and cases covered in this podcast:
The Court of Appeal has dismissed an appeal against the removal of a so-called Angel Bell exception to a post-judgment freezing order, with the effect that the defendant was prevented from continuing to make payments in the ordinary course of business: Michael Wilson & “Partners” Ltd v John Forster Emmott  EWCA Civ 219.
Whilst the court was mindful of the fact that the grant of a freezing injunction is a discretionary decision reached on a fact-specific basis, with which higher courts will be slow to interfere, it nevertheless sought to provide some clear guidance in its judgment.
First, the court held that there is no “presumption” that an Angel Bell exception should be excluded from a post-judgment freezing order, but noted that its inclusion “will sometimes and perhaps usually be inappropriate”.
Second, the court found that the existence of an unsatisfied judgment debt “does make a difference” when considering the ambit of a freezing order. In short, it will be easier to justify the exclusion of a business expenditure exception when a party has refused to honour a judgment. The public policy in favour of ensuring that judgments are respected means that, where (as in this particular case) a party has persistently failed to pay what is due, a strict approach to exceptions is appropriate.
Kevin Kilgour, a senior associate in our disputes team, considers the decision further below.
The High Court has varied a worldwide freezing order by removing language in the order which would have frozen the assets of companies owned by the respondent (directly or indirectly). The variation was granted on the grounds that the relevant assets belonged to, and were in the control of, those companies rather than the respondent: FM Capital Partners Ltd v Frederic Marino & Others  EWHC 2889.
In doing so, the court clarified the extent to which the Supreme Court’s decision in JSC BTA Bank v Ablyazov  UKSC 64 (considered here) impliedly overturned the decision of the Court of Appeal in Lakatamia Shipping Co Ltd v Nobu Su  EWCA Civ 636 (considered here) in relation to the interpretation of the extended definition of assets in the standard form of freezing order – that is, to cover any asset which the respondent “has the power, directly or indirectly, to dispose of or deal with as if it were his own”, including where “a third party holds or controls the asset in accordance with his direct or indirect instructions”.
The court has sought to resolve the tension between Ablyazov and Lakatamia by holding that, if a respondent is the sole shareholder or director of a company, it does not automatically mean that the company’s assets are also subject to the freezing order. However, if the respondent also has such a degree of control over the company’s assets that the company is in truth the “wallet” of the respondent then, in an order which contains the extended definition, those assets will be subject to the order. In light of this decision, it seems likely that there will be an increased focus on what level of control a respondent does, in practice, have over the companies he owns and their assets. Continue reading
The Commercial Court has recently considered the scope of the standard undertaking provided in connection with worldwide freezing orders, which requires the applicant to seek the court’s permission before seeking to enforce the order outside England and Wales, or seeking an order of a “similar nature”: Akcine Bendrove Bankas Snoras v Antonov  EWHC 887 (Comm).
The court held that the claimant bank was not in breach of its undertaking by obtaining orders in Lithuania and Switzerland seizing certain of the respondent’s assets, as the foreign courts had independent jurisdiction to make the orders which did not derive from the making of the worldwide freezing order in England.
This decision provides welcome clarification as to the scope of the standard undertaking, and should provide some comfort to those seeking to secure assets abroad based on a separate and independent right or jurisdiction, where they have also obtained an English freezing order.
The decision also suggests that, where there has been a breach of the undertaking, the court may be inclined to grant retrospective permission and continue the freezing order unless the respondent can present clear evidence that the foreign order has had an oppressive or prejudicial impact. Continue reading
The Court of Appeal has confirmed the court’s approach to issues of causation where a defendant applies to enforce a cross-undertaking in damages: SCF Tankers Ltd (formerly Fiona Trust & Holding Corp) v Privalov  EWCA Civ 1877.
A party that obtains an interim injunction (including a freezing injunction) will typically be required to provide a cross-undertaking to the court to compensate the other party if the injunction is later found to have been wrongly granted. The present decision confirms that a party seeking to enforce a cross-undertaking in damages must establish a prima facie case that its loss would not have been suffered “but for”‘ the injunction. It is then for the party who gave the undertaking to rebut the case on causation. When considering such applications, the court should adopt a “common sense” approach to issues of causation, mitigation and remoteness.
The case shows that, in resisting an order to enforce a cross-undertaking, a claimant will not necessarily be able to rely on an argument that the defendant should have applied for a variation to permit transactions and avoid its losses. While each case will turn on its own facts, the decision recognises that there can often be real practical and commercial difficulties in applying for a variation to a freezing injunction.
The decision provides a stark reminder to claimants of the potential for very significant consequences if an injunction is later found to have been wrongly granted. In this case, claimants who were seeking damages of US$850 million ended up being ordered to pay over US$70 million to the parties they had sued. Continue reading
We are pleased to publish the second issue of our periodic publication “Cross-Border Litigation”, designed to highlight legal and practical issues specific to litigation with an international aspect.
Tapping into the expertise of the firm’s leading commercial litigators across the globe, the publication gives readers the benefit of their hands-on experience and flags key developments that should be on commercial parties’ radars.
The topics covered in this issue include:
- Highlights of recent developments from across the globe
- The Singapore International Commercial Court
Has it lived up to the hype?
- Cross-border litigation and Brexit
What we know so far
- Partner Spotlight on Helmut Görling
His journey from a police detective to head of our corporate crime team in Frankfurt
- Using disclosed documents for multiple proceedings
Recent judgments suggesting a restrictive approach
- Jurisdiction disputes
When will the English courts take into account politics, corruption and other obstacles to justice in foreign jurisdictions?
- India related commercial contracts
Getting your dispute resolution and governing law clauses right
To download the publication, click here.
To read the previous Issue 1 (March 2017), click here
The Court of Appeal has held that, to obtain a freezing injunction, an applicant must establish either a “good arguable case” or “grounds for belief” that assets exist. It rejected the higher threshold of a “likelihood” that assets exist, but held that it is not enough for the applicant to assert that the respondent is apparently wealthy and must have assets somewhere: Ras Al Khaimah Investment Authority & Ors v Bestfort Development LLP & Ors  EWCA Civ 1014.
This decision provides greater clarity as to the test for the existence of assets, though it is not helpful that the Court of Appeal referred to either a “good arguable case” or “grounds for belief”. Although Longmore LJ indicated a preference for “grounds for belief”, and commented that “there is, no doubt, not much difference between the two”, introducing two potentially different thresholds risks creating uncertainty.
The decision also suggests that the courts may be willing to be more lenient than had previously been thought in relation to delays in applying for a freezing injunction. However, an applicant would be wise to treat this with extreme caution and always to apply as soon as possible. Not only does delay risk allowing the respondent actually to dissipate the assets before an injunction has been obtained, but (notwithstanding the comments in this case) on different facts a lengthy delay may well be a basis for refusing an injunction. Continue reading
The Court of Appeal has held that a notification injunction (an order requiring a respondent to give notice of any dealings with or disposal of assets or other transactions that fall within the scope of the order) drawn in wide terms is, in effect, a modified version of a conventional freezing order, rather than a distinct type of injunction, such that the same test in relation to the risk of dissipation of assets applies: Candy & Ors v Holyoake & Anor  EWCA Civ 92.
This judgment provides clarity as to the proper classification of notification injunctions, and the risk of dissipation that applicants must demonstrate in order to succeed. A party seeking a notification injunction in wide terms must show a real risk, supported by solid evidence, that a future judgment would not be met because of unjustifiable dissipation.
The position may, however, be different in relation to notification injunctions which are not in wide terms. The judge suggested, albeit only obiter, that where the applicant seeks a simple order requiring notice to be given of a proposed disposition of a specific property, there may be a different test.
James Allsop, a senior associate, and James Leadill, an associate, in our dispute resolution team consider the Court of Appeal's decision further below.
In a unanimous decision, the Supreme Court has confirmed that the right to draw down under loan agreements is caught by the expanded definition of “asset” contained in the current standard Commercial Court form of freezing order which includes “any asset which it (the respondent) has the power, directly or indirectly, to dispose of or deal with as if it were its own”: JSC BTA Bank v Ablyazov  UKSC 64. The decision helpfully clarifies that:
- freezing orders will be construed strictly in accordance with what the words in fact mean;
- in the absence of the expanded wording now contained in the standard form of order, the right to draw down loans will not be frozen; and
- the expanded wording does widen the scope of the order meaningfully and can include assets not “owned” by the respondent.
From a practical perspective, great care needs to be taken when drafting freezing orders to ensure that assets which the respondent is suspected of having are clearly within the scope of the order. It will be dangerous to assume that the word “assets” will necessarily have its everyday meaning in the context of a freezing order.