High Court makes disclosure orders and amends freezing order during trial to ensure its effectiveness (England & Wales)

Key Takeaways

1. The Court, even during a trial, will make escalatory orders to ensure that a freezing order is effective, including orders for disclosure against entities ultimately beneficially owned and controlled by a respondent (but which entities are not themselves parties to the proceedings), and orders for information about the respondent’s ultimate source of funds for their ordinary living expenses.

2. Applicants and respondents should pay close attention to a respondent’s changing financial circumstances during the lifetime of a freezing order – which can often be in place for many years – given that:

a. a change in the respondent’s outgoings can justify the Court revisiting the limits on how much the respondent is permitted to spend on their ordinary living expenses, to prevent the respondent from using that proviso as a means to dissipate assets and thereby reduce what is available for the applicant’s enforcement purposes in due course. In this case, the Court was willing to more than halve the respondent’s allowance for that purpose; and

 b. a change in the respondent’s assets and / or the value of those assets can impact whether the respondent is above or below the amount specified in the freezing order, beyond which the respondent is free to deal with their assets – in this case the respondent relied on questionable valuations to purport that the total value of his assets was greater than the amount specified in the freezing order against him, such that he was (he said) permitted to deal freely with certain of those assets and did so.

3. The Court will be flexible and pragmatic in assisting judgment creditors, in this case amending the freezing order to allow the applicant to use information obtained as a result of the freezing order for enforcement purposes, including enforcement outside of the jurisdiction. That the Court made this amendment is also a reminder to applicants of the need, post-trial, to seek the variation of the usual undertaking they will have given to the Court (as a condition of obtaining the freezing order) so as to be able to use such information for enforcement purposes.

Facts of the Case

On 3 February 2021, the first claimant (“C1”) obtained a worldwide freezing order (“WFO”) against the first defendant (“D1”) for up to USD30m in support of proceedings in which C1 alleged that D1 had: (i) misappropriated and retained a fund of around USD25m; and (ii) breached the terms of a settlement agreement. On 12 July 2022, the WFO was continued to trial or further order.

On 7 February 2024, during the trial of the action, Mr Justice Calver heard applications from C1 for the following orders against D1 in relation to the WFO:

• Disclosure of all bank accounts in D1’s name or under D1’s control, including or additionally: (i) all bank accounts in the name of any company in a group of companies ultimately beneficially owned and controlled by D1 (the “Group”); and (ii) the bank account to which the proceeds of sale of D1’s apartment in Montenegro had been paid (the “Bank Accounts”);

• Provision of copies of the complete set of the Bank Accounts showing all transactions from 1 January 2021 to the date of the Court’s order; and

• To amend and update the WFO, by: (i) updating an asset schedule to reflect D1’s current asset position; (ii) reducing the amount that D1 was permitted to spend on his ordinary living expenses to reflect the fact that D1 no longer incurred certain expenses; and (iii) to specify the account details from which D1 was funding ordinary living expenses and the ultimate source of those funds.

The Decision

Mr Justice Calver largely granted C1’s application, ordering that:

• D1 must disclose the Bank Accounts and provide account statements for them, on the finding that D1 had repeatedly disposed of and concealed various assets without C1’s consent or the Court’s permission (in breach of the WFO), and therefore such disclosure was necessary in order to make the WFO effective;

• The WFO should be amended and updated, by:

• D1 providing an updated asset schedule verified on oath, on the finding that D1’s current asset position was unclear (as a result of the disposal, acquisition, changing value, or need to properly value assets identified in D1’s original asset schedule);

• Reducing the threshold of the WFO to USD29.4m, and specifically excluding the value of D1’s interest in the Group when valued on a realistic basis, on the finding that D1 had overvalued that interest so as to purport that his total assets exceeded USD30m and therefore he was permitted to deal freely with certain other assets;

• Reducing D1’s ordinary living expenses allowance from £17,500 per week to £7,500 per week, on the finding that D1 was no longer incurring certain expenses in respect of assets which had been disposed of / seized; and

• Requiring D1 to specify the details of the account from which payments were being made to D1 for ordinary living expenses, and details of who ultimately was providing those funds, on the finding that D1 had not complied with the standard requirement to tell C1 the source of funds being used for D1’s ordinary living expenses.

• C1’s standard form undertaking to the Court not to use information obtained as a result of the WFO outside of the proceedings should be amended to make clear such information could be used in relation to the enforcement of any judgments or orders in the proceedings, including those obtained abroad, on the finding that this was just in all the circumstances.