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Court orders further disclosure of documents by respondents to a worldwide freezing order, where initial responses did not provide sufficient information on “value, location and detail” of assets held by the respondents

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management - Freezing Orders

09-06-2018

Re PJSC Commercial Bank Privatbank v Kolomoisky & Ors [2018] EWHC 482 (Ch)

Facts of the case

– A worldwide freezing order (“WFO”) was granted on 19 December 2017 against eight defendants (the “Ds”), pursuant to allegations by PJSC Commercial Bank (“C”) of fraud. The Ds were allegedly implicated in sham loan agreements, which led to a USD 1.9BN transfer from C to Ukrainian borrowers, which was then transferred to the Ds.

– The WFO stated that “the respondent [the eight defendants] must … to the best of his ability inform the applicant [C] solicitors in writing of all his assets exceeding £25,000 in value as at the date of this order, giving the value, location and detail of such assets”.

– The defendants provided some limited disclosure. C objected to the adequacy of the information provided, particularly in relation to certain loans receivable and trades receivables contracts (the “Contracts”). Although the Ds identified the counterparties, relevant jurisdictions and amounts due, they did not disclose the realisable value of the Contracts, and only provided the original dates and repayment dates for some but not all of the Contracts.

– C applied for further disclosure from the Ds arguing that the bank was entitled to receive information that would be sufficient to police compliance with the WFO, and, if necessary, to take further steps to prevent the dissipation of assets. The Ds argued that C was inappropriately seeking to extract wide-ranging disclosure which would apply to the substance and merits of the claim.

The decision

– The court ordered the Ds to confirm: 

1. the date on which each of the Contracts was entered into;

2. the nature of the goods sold or services provided under the Contracts as “the most basic of information relating to assets which falls within ‘details’ [under the terms of the WFO]”.

– The court agreed with C’s assertion that the repayment dates being unspecified was “entirely unsatisfactory” and that the date of repayment also falls within the terms of “location, value and detail”, and ordered the Ds to provide this information to C. 

– The court confirmed that C was also entitled to know whether repayment of monies under the Contracts is secured and, if so, the nature and estimated value of the security, and the estimated realisable value of the Contracts. This information was required for C to understand the Contracts’ true worth, and what would be available to satisfy a future judgment in the substantive proceedings. This information was needed in order to decide if any further policing steps were necessary.

– The court determined that C did not require sight of the actual Contracts themselves. It remained unsatisfied that this was necessary, as, in providing the information above, C would be able to identify the nature and extent of the Ds’ interests in the assets. Equally, C’s request for the bank account details of where payments under the Contracts were made or will be made was denied. 

Analysis and practical advice

– The court reiterated that the legitimate purpose of a WFO is to identify and preserve assets which might otherwise be dissipated. Consequently, the court found that it had jurisdiction to order disclosure of further documents or information where that was required to enable an applicant to identify the nature and extent of a respondent’s interest in assets, and to then decide what, if any, further protective steps should be taken.

– The court felt that all the disclosure ordered falls within the “value, location and details” terms of the original WFO on its true and proper interpretation, and that, in any case, it was “just and convenient” to make such disclosure orders.  

 

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