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Terms of a freezing order to be interpreted purposively and in accordance with the principle of strict compliance

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

06-02-2018

Gerald Metals SA v Timis [2017] EWHC 3381 (Comm)

Facts of the case

– following a US$75 million arbitration award in its favour, Gerald Metals SA (“GM”) obtained a worldwide freezing order (the“WFO”) against FPC Management Inc (“FPC”) which was the trustee of the FPC Capital Trust (the “Trust”)

– the WFO required FPC to disclose, within 24 hours, details of all of its worldwide assets which exceeded £50,000 in value, “giving the value, location and details of all such assets [emphasis added]”

– GM sought disclosure of the terms of the Trust on the basis that:

– these constituted “details” of the assets of FPC since (i) FPC’s interest in the Trust’s assets depended on the basis on which it was acting as trustee and (ii) it was therefore insufficient for FPC simply to say that it held a “beneficial interest” in them

– the identification of FPC’s interest was required to preserve assets which might otherwise be dissipated, e.g. so that notice of the WFO could be given to third parties and/or steps could be taken for the delivery up of specified assets or the enforcement of the WFO abroad

The decision

– Bryan J found that while FPC was not inbreach of the WFO by not providing the terms of the Trust, the WFO would “most accurately be complied with by providing”such document. He accordingly ordered its disclosure. He also accepted GM’s alternative argument that such disclosure was required to police the injunction

– Bryan J however refused disclosure of another document sought by GM on the basis that, properly construed, it went to how FPC acquired a particular asset, rather than the nature of its interest in it. Byran J characterised this as a request for advanced specific disclosure and found that the test for such disclosure was not met

Analysis and practical advice

The case is a reminder that:

– the provisions of a freezing order will be construed purposively and in accordance with the principle of strict interpretation identified by Beatson LJ in JSC BTA Bank v Ablyazov [2014] 1 WLR 1414 (as approved by the Supreme Court in the same case ([2015]UKSC 64))

– it will be no answer to an order for disclosure pursuant to a freezing injunction to say that it is not necessary because the injunction itself prevents any dissipation of assets. This is on the basis that the courts have long recognised the need for provisions (including disclosure) which enable such injunctions to be policed