Freezing Orders against “Non-Cause of Action Defendants”

Posted on: February 19th, 2013

A recent decision in the High Court has confirmed that freezing orders can be made against non-cause of action defendants (‘NCADs’), i.e. against a defendant against whom no cause of action is alleged. NCADs are typically parties to a claim by virtue of the fact that a cause of action defendant (‘CAD’) exercises control or influence over the NCAD (whether or not the CAD can actually compel the NCAD to take action with regard to particular assets).

The decision was made in the ongoing case of JSC VTB Bank –v- Skurikhin & Others (unreported). In the case, Mr Skurikhin was believed to have a beneficial interest in certain English LLPs, which were joined as defendants to the proceedings, even though they were not themselves accused of any wrongdoing. The claimant sought a freezing injunction against them to prevent them (at Mr Skurikhin’s behest or otherwise) from dealing with certain valuable Italian properties that they held, which the claimant believed could ultimately be used to satisfy a judgment against Mr Skurikhin.

Burton J noted that a freezing injunction will usually only be granted against an NCAD where there is good reason to believe that the CAD: i) can be compelled to cause the assets held by the NCAD to be used for the purpose of satisfying a judgment; or ii) that there is some other process of enforcement by which the clamant can obtain recourse to the assets held by the NCAD.

He was also satisfied, in accordance with the principles set out in the Privy Council decision in Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Company (Cayman)Ltd [2012] 1WLR 1721 and the decision of Mr Gabriel Moss QC in Blight v Brewster [2012] EWHC 56 (Ch) that the CAD, Mr Skurikhin, had sufficient powers of revocation as a discretionary beneficiary of the trusts that owned the NCAD that he could in equity be regarded as having rights tantamount to ownership to compel him to cause the assets held by the NCAD to be used for the purposes of satisfying a judgment.

Please contact PCB Litigation if you require any further advice on freezing and recovering assets from non-cause of action defendants.