Posted on: May 21st, 2014
In the recent case of Lakatamia Shipping Co Ltd –v- Nobu Su & Ors, the Court of Appeal provided useful clarification regarding the operation of freezing injunctions. It held that a controlling shareholder who was the subject of a freezing order was further restrained from directing the company to make dispositions of its assets, as to do so was likely to result in a diminution in the value of his shareholding. That would impermissibly diminish the value of his worldwide assets.
The appeal was brought by the defendant who was the subject of an interim worldwide freezing order. The defendant had initially applied for a declaration that his companies’ assets were not covered by the worldwide freezing injunction, arguing that such extension of the freezing order infringed the key principle of separate legal personality of companies. Burton J held at first instance that the companies’ assets were directly affected by the injunction, on the basis that the defendant could direct the fate of the assets of the companies. As such, if a person subject to a freezing injunction could direct a company he owned to sell its assets, that would impermissibly diminish the value of his asset, namely his shareholding in the company, making such assets subject to the injunction.
In dismissing the defendant’s appeal, the Court of Appeal clarified the reasoning behind the decision by stating that it was not correct to say that the companies’ assets were within the definition of assets subject to the injunction. However, in upholding Burton J’s decision, it was held that the companies’ assets were “covered” by the injunction because any dealings with them had the potential to diminish the defendant’s shareholdings in the companies. As such, it was held that where the owner of a non-defendant company was subject to an injunction restraining any diminution in the value of his assets (and therefore his shareholding in a company), he was restrained from procuring the company to make a disposition likely to result in such a diminution.
In a further recent development, the Court of Appeal held in JSC BTA Bank –v- Ablyazov and Others that the Court had jurisdiction to try the issue of a non-defendant company’s ownership. The main defendant was the subject of freezing and receivership orders and there was a good arguable case that he had entered into an agreement with third parties that concealed his beneficial ownership of the company in question. The decision may assist claimants faced with defendants who it is believed are using third parties to conceal the true ownership of assets.”