On 27 February 2015 the Court of Appeal held that it had jurisdiction to order a beneficiary under a discretionary trust to disclose details of the trust.

The court also dismissed the claimant liquidator's appeal against an unlimited sum cross-undertaking in damages, but allowed the liquidator to appeal against the fortification of the cross-undertaking.

The case concerned a freezing order under which the defendant had to inform the claimants of his assets. The defendant disclosed that he was a discretionary beneficiary under certain named trusts, but did not give further details of the trusts. The defendant applied for an order discharging the freezing order unless the claimants gave an unlimited cross-undertaking fortified by an appropriate payment into a bank account in England to be held to the order of the court.

The Court of Appeal held as follows:

  • The defendant's interests under the discretionary trust were caught by the prohibition on dealing with assets and were subject to the disclosure order. The purpose of a freezing order was to prevent a defendant from putting assets beyond the reach of creditors in the event that judgment was entered against him. On the face of it assets held by the trustees of a discretionary trust would not be amenable to execution if judgment was entered against one of the class of potential beneficiaries at the suit of a third party. However, in the present case the wording of the freezing order was non-standard, and did in fact cover the interests of a beneficiary under a discretionary trust.
  • The court had jurisdiction to order the beneficiary under a discretionary trust to disclose details of the trust and the trust assets, and it had been appropriate to make the disclosure order in the present case. The jurisdiction to make a freezing order carried with it the power to make whatever ancillary orders were necessary to make the freezing order effective. The claimants were only asking for information (not for an order preventing the defendant from dealing with assets).
  • The judge had been correct in ordering an unlimited cross-undertaking from the liquidator, but there was not enough evidence in the present case to require fortification. The judge was entitled to take into account the lack of evidence about what efforts the liquidator had made to persuade substantial creditors, for whose benefits the recoveries would enure, to back the cross-undertaking. As regards fortification, the judge had reasoned that an international businessman on the scale of the defendant was likely to suffer loss if prevented from conducting his ordinary business activities. However, the judge did not provide details about why she reached the general conclusions that she did regarding such business activities, and those conclusions were unsustainable on the evidence.

JSC Mezhdunarodniy Promyshlenniy Bank v Sergei Viktorovich Pugachev [2015] EWCA Civ 139, 27 February 2015