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Paying the price for flouting the authority of the Court

Tidewater Marine International Inc. v Phoenixtide Offshore Nigeria Ltd & Anor [2015] EWHC 2748 (Comm)

A recent decision in the Commercial Court shows that a Defendant who has had its assets frozen and deliberately misleads and flouts the authority of the court may be prevented from using those frozen assets to fund its defence.

The standard form of freezing order permits a Defendant to spend a reasonable sum on legal advice and representation, subject to it informing the Claimant where the money is to come from. This enables the Claimant to bring the matter before the Court if it objects. The ordinary rule is that where there are no other assets available, i.e. assets that are either not frozen by the Court order or belong to another party willing to fund the litigation, a Defendant will be permitted to use frozen assets to fund its legal costs so that, in the interests of justice, it can defend itself.

However, in exceptional circumstances those interests may be outweighed by other factors such that an assessment of the “overall justice” of the case is required. Such exceptional circumstances were held to exist in the recent Tidewater case, where Mr Justice Males refused an application by the Defendants for an order that would enable them to use monies from a frozen account.

In that case, the Defendants had deliberately flouted court orders such that they were found to be and remained in contempt of court, and it was considered that they were prepared to mislead the court when it suited them. Such was their conduct that the judge considered it grotesquely unfair in the overall interests of justice for the Court to exercise its discretion in their favour. This would have been the case even if the Defendants had given credible evidence that they had no other source of funds with which to defend the action (which they had not). The case therefore presents a stark reminder to parties subject to freezing orders and other Court orders that it does not pay to flout the authority of the Court.