Application for a freezing order in support of foreign proceedings/appointment of a receiver and a power of attorney

http://www.bailii.org/ew/cases/EWHC/Ch/2015/3383.html

The applicants (based in the UAE and Georgia) sought freezing orders against the respondents in support of proceedings taking place overseas. The respondents are LLPs registered in England and Wales and owned by a Georgian national.

The relevant test is whether the court would have granted a freezing order had the substantive claim been brought in England. One of the issues here was whether the respondents had assets which might be caught by the order. A v C [1981] is authority for the proposition that a claimant will only be entitled to a freezing order if he can at least give grounds for believing that the defendant has assets which will be caught by the order – the court will not make an order which is futile.

Rose J held that she was not satisfied that there were substantial assets held by the respondents anywhere in the world (or, at least, assets worth more than the legal costs of enforcing an order). The applicants had also failed to show that an order would be effective to freeze the assets (which might include sums held in bank accounts in Latvia). The evidence showed that the Latvian courts would not recognise an order from the English court freezing assets in Latvia to support substantive proceedings being brought outside of England. To overcome this problem, the applicants proposed the following:

  1. The appointment of a receiver over the respondents, pursuant to the power granted in section 37 of the Senior Courts Act 1981, to obtain payment of all sums standing to the credit of all bank accounts held anywhere in the world in the name of the respondents. The courts have been willing to grant this relief in the past – usually where the frozen asset (eg a property) needs some ongoing management and the freezing order is insufficient on its own. However, the applicants accepted that the appointment of a receiver alone would not be enough as the Latvian courts would not recognise such an order. In any event, Rose J referred to Recital 33 of Regulation 1215/2012, which provides that if protective measures are ordered by the court of a Member State which does not have jurisdiction to hear the substantive claim, the effect of those measures should be confined to that Member State.
  2. An order compelling the respondents to grant a power of attorney to the receivers to act on their behalf. However, the evidence was that the Latvian banks would still be unlikely to comply with the receiver's instructions, even if such an order was made. Rose J did, however, accept (despite little authority on the point) that it would be permissible in theory to grant a power of attorney. However, it would not have been ordered here "against Respondents most of whom who are not defendants to any claim brought by the Applicants; where the sole reason for making the order is to overcome the policy of Latvia not to enforce orders of this kind; where there are unlikely to be assets of sufficient value to justify the very considerable costs that will be incurred by the receivers in using the power of attorney and where there is no history of disobedience to court orders".

The judge also found that a risk of dissipation had not been proven here.

Although a transfer of assets by the owner of the respondents had looked suspicious, that was countered by the fact that neither the respondents nor their owner had failed to comply with any court order. The use of offshore companies was also not a factor in favour of finding a risk of dissipation: "there are many reasons why people working in politically uncertain countries choose to hold their assets in that way and this does not of itself give rise to an inference that [the owner] will try to defeat any judgment awarded against him". Furthermore, there had been considerable delay in bringing the application, and the explanation for that delay- that investigations were ongoing and new material was coming to light all the time - had been weak. This case therefore follows the earlier decision of Anglo Financial v Goldberg (see Weekly Update 37/14), where there had been significant delay to allow protracted negotiations to take place and the judge had held that the defendant would have had ample opportunity to dissipate assets during that time had he been so inclined, and so the risk of dissipation could not be proven.