This freezing injunctions round up looks at: Akcine Bendore Bankas Snoras v Antonov and Société Générale v Goldas Kuyumculuk Sanayi and others.


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Ambiguity in standard undertaking given to the court when obtaining a freezing injunction

When the English court freezes a defendant's assets the claimant will have to give various undertakings in return, such as agreeing to be liable for any loss the defendant suffers as result of the freezing order being wrongly obtained, or, in the case of a world- wide freezing order, not to seek to enforce the order outside the jurisdiction of the English courts without first obtaining the permission of the court.  The standard form freezing injunction, which contains this undertaking, is annexed to CPR PD 25A – here. It also appears at Appendix 11 of of the Commercial Court Guide - here

In Akcine Bendore Bankas Snoras v Antonov, Comm, [2018] EWHC 887 (Comm) the claimant had, in May 2012, obtained an order freezing the defendants' assets and had undertaken "not without the permission of the court [to] seek to enforce this order in any country outside England and Wales or seek an order of a similar nature, including orders conferring a charge or other security against the Respondent or the Respondent's assets" 

In April 2017 the claimant had issued overlapping proceedings in Lithuania, and in those proceedings obtained an order in Lithuania seizing assets owned by the same defendants, and a few months later a similar order in Switzerland. The claimant became concerned that their Lithuanian claim might constitute a breach of the undertaking which it had given to the English court, so it applied for a declaration that it had not breached the undertaking.

The Deputy High Court Judge reviewed the background and history of the undertaking set out in the standard form freezing injunction, noting that it has been used:

  •  to avoid the oppression of a defendant by the institution of multiple proceedings enforcing an English freezing order in several countries, at the expense of the ability of the defendant to defend the English proceedings; and 
  • to prevent the enforcement of a freezing order in a foreign jurisdiction having more far reaching effect than in England and Wales, for example, by creating a security interest in favour of the claimant.  

He also noted a potential ambiguity in the wording of the undertaking: the phrase "order of a similar nature" could have either a broad or narrow construction. It could refer to (1) an order similar in nature to the freezing order (broad) or (2) an order similar to an order enforcing the freezing order (narrow). He preferred the narrow interpretation on the basis that:

  • The principal concern underlying such undertakings is to prevent enforcement of an English freezing order in another jurisdiction having a more far- reaching effect than the order does in this jurisdiction
  • In relation to the question of avoiding multiplicity of proceedings, the English court's immediate concern would be to prevent its own orders being used to contribute to such oppression.

The standard undertaking is not concerned with the situation where the order sought abroad does not amount to the direct or effective enforcement of the English freezing order, he said: it is not concerned with a foreign court exercising its own independent jurisdiction, irrespective of the English freezing order, even if the English freezing order is referred to in support of an application abroad.

The narrow interpretation of the undertaking meant that in this case it had not been breached by the claimants: the "arrests" of assets in Lithuania and Switzerland were in support of the Lithuanian claim and not the English claim.

Comment

The freedom to pursue defendants in more than one jurisdiction, subject to the restrictions on overlapping claims (lis alibi pendens) in the Brussels Recast Regulation on Jurisdiction, and under common law, is valuable to claimants, particularly when pursuing fraudsters who may have assets in, or move them between, multiple jurisdictions. So this is a welcome clarification of the wording currently in use by the English courts when granting freezing orders. However, given the possible sanctions for breaching undertakings to the court, claimants may not feel comfortable relying only on this decision (of a Deputy High Court Judge) as to the meaning  of the standard form undertaking, especially as the judge acknowledged ambiguity in the wording used. Applicants for freezing orders, who may want to start similar claims in other jurisdictions, might consider asking judges to amend the standard form wording, so as to make to clear that it only prohibits enforcement of the English freezing order, and does not extend to prevent the claimant bringing claims for similar relief in other jurisdictions.

Please contact Kate Menin for more information.

Both claimant and defendant criticised for delays while freezing injunction in place – both lose out

Société Générale v Goldas Kuyumculuk Sanayi and others [2018] EWCA Civ 1093

The claimants, Société Générale, obtained worldwide freezing orders and issued two claims in 2008. Service was not properly effected for either claim form in Turkey or Dubai. The claimant decided to focus its efforts on proceedings in Turkey instead of pursuing the English claims. The limitation periods expired in 2014. In 2016 the defendants, Goldas, applied to strike-out the claims and discharge the freezing injunctions.

At first instance, the freezing injunctions were discharged. The Court of Appeal upheld that decision, holding that the claimant's failure to progress the English proceedings "expeditiously" following the grant of the freezing injunctions was an abuse of process. The claimants' decision to put the English litigation on hold indefinitely to await the developments of the Turkish litigation ("warehousing") was also an abuse, as was the failure to comply  with the undertakings given by the claimants on the grant of the injunctions, to serve the claim forms as soon as practicable. 

Popplewell J had ordered an inquiry as to the damages suffered by the defendants, to be paid by the claimants under the cross-undertaking given by the claimants in support of the freezing orders. However, the Court of Appeal discharged that order holding that whilst the claimants' delay was "more reprehensible", the defendants own delay in asking for an inquiry could not be discounted: an 8 year delay was an "excessively long time". Lord Justice Longmore found that the defendants' delay was not "credible and understandable" as money had been freely available to the defendants for them to conduct the Turkish litigation. They could have applied for the discharge of the injunction earlier. 

Overall, the judgement highlights the need to progress claims and respond to them in a timely manner, especially when there is a freezing injunction in place.

 

Please contact Hannah Harrison for more information

Key contact

Kate Menin

Kate Menin

Principal Knowledge Lawyer, Dispute Resolution
London

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