Court of Appeal orders disclosure in relation to freezing order and cross-undertaking from a liquidator
A liquidator of a bank obtained a freezing order against the Russian defendant, in aid of Russian proceedings. One of the assets frozen by the order was “any interest under any trust, including any interest which may arise by virtue of the exercise of any…discretion or otherwise”. The defendant was subsequently ordered to disclose information about a discretionary trust in respect of which he was a member of a class of beneficiaries. He appealed against that order, arguing that the trust’s assets were not his assets.
The Court of Appeal has now held that the judge did have a discretion to make this order, since the freezing order was worded widely enough to encompass the defendant’s interest in the trust. Having disclosed his interest in the trusts, should the defendant also be compelled to disclose details of the trust assets themselves? The Court of Appeal held that he should. The jurisdiction to make a freezing order also allows a court to make ancillary orders which are necessary to make the order effective. The threshold test for ordering a defendant to provide information about assets which are, or may be, the subject of the freezing order is not the same as the threshold test for freezing assets: “An order for the provision of information is far less intrusive than an order which prevents someone from dealing with assets”. Furthermore, information was only being sought from the defendant, and not a third party.
A further point in the case was whether the judge was wrong to order the bank’s liquidator to provide an unlimited cross-undertaking. It had been argued that there is an exception to the requirement to give an unlimited cross-undertaking where the applicant for the freezing order has no personal interest in the litigation and is bringing the action on behalf of others. Lewison LJ said that “I do not consider that the mere fact that litigation is being brought by a liquidator of an insolvent company compels the conclusion that the cross-undertaking must be capped”. Although judges do have a discretion to accept limited cross-undertakings, the judge in this case had been entitled to require an unlimited cross-undertaking and so the appeal against that decision was also dismissed.
COMMENT: The decision that an unlimited cross-undertaking can be required from a liquidator can be contrasted with the position established by the Supreme Court in FSA v Sinaloa Gold (see Weekly Update 08/13) that an unlimited cross- undertaking cannot be required from law enforcement agencies enforcing the law in the public interest.