Freezing order

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Third-party assets controlled (de facto or de jure) by the respondent are ordinarily outside the scope of a freezing injunction unless exceptional circumstances can be established.

By Oliver E. Browne and George Schurr

In the recent case of FM Capital Partners Ltd v Frédéric Marino, Aurélien Bessot, Yoshiki Ohmura, and Marit Sjovaag [2018] EWHC 2889 (Comm), the English High Court held that if a company wholly owned or controlled by the respondent is a non-trading company without an active business, and the respondent deals with or disposes of that company’s assets outside the ordinary course of business, that conduct may be enjoined by the terms of a freezing injunction. These are exceptional circumstances that brought the third party’s assets within the scope of the order. In all other circumstances, the proper course of conduct is for an application to be made to join the third party as a respondent to the order itself.

Facts

A Worldwide Freezing Order (WFO) was granted in July 2018 following the High Court’s judgment against Mr Ohmura (the Respondent) for his dishonest assistance in acts of bribery and breaches of fiduciary duty by Mr Marino (the First Defendant). The terms of the WFO, as issued, prohibited the Respondent from disposing of, diminishing in value, or otherwise dealing with his assets up to a value of US$11,250,000.

By Daniel Harrison

The English High Court has again demonstrated its willingness to exercise supervisory jurisdiction in support of arbitration proceedings by granting an anti-suit injunction and a freezing order against a party which started foreign court proceedings despite an arbitration agreement.  This judgment emphasises the English courts’ desire to uphold and protect arbitration agreements when a party tries to evade arbitration.

By Simon Bushell and Robert Price

Case: JSC BTA Bank v Ablyazov [2015] UKSC 64

Introduction

A freezing order is an interim injunction that prevents a party to litigation from dealing with their assets until judgment (and on occasion, after judgment). Its purpose is to prevent a losing party from dissipating their assets and frustrating enforcement.

However, the standard form freezing order does not make specific provision to prevent respondents from borrowing money. Freezing orders generally entitle a respondent to access certain funds for ordinary living purposes and to pay their legal fees. Consequently,  a potential loophole existed where respondents could borrow money and default on the loans after paying the proceeds to third parties. If the lender then obtained a judgment against the respondent, this would create a competing claim and frustrate the purpose of the freezing order by reducing the assets available to the original claimant. Alternatively, a respondent might have entered into a loan with an affiliated lender, which would then act to protect its claim in concert with the respondent in priority to the genuine claimant. This could also have the effect of frustrating the freezing order.