Freezing orders and third-party assets [ENGLISH].

Freezing orders and third-party assets [ENGLISH].

Abstract: Asstes of third parties controlled (de facto or de jure) by the respondent are commonly outside the scope of a freezing injunction unless exceptional circumstances.

 

In the case of FM Capital Partners Ltd v Frédéric Marino, Aurélien Bessot, Yoshiki Ohmura, and Marit Sjovaag [2018] EWHC 2889 (Comm), the English High Court held that if a company wholly owned or controlled by the respondent is a non-trading company without an active business, and the respondent deals with or disposes of that company’s assets outside the ordinary course of business, that conduct may be enjoined by the terms of a freezing injunction.
In this exceptional circumstances the third party’s assets can be within the scope of the freezing injuction.
In all other circumstances, the proper course of conduct is for an application to be made to join the third party as a respondent to the order itself.

 

Facts

A Worldwide Freezing Order was granted in July 2018 following the High Court’s judgment against Mr Ohmura (the Respondent) for dishonest assistance in acts of bribery and breaches of fiduciary duty by the First Defendant.
This WFO, prohibited the Respondent from disposing of, diminishing in value, or otherwise dealing with his assets up to a value of US$ 11,250,000.

On 9 October 2018, Peter McDonald Eggars QC had dismissed an application by Mr Ohmura for the discharge of that freezing order.
The claimant in the action also applied for an order for further disclosure in respect of Mr Ohmura’s assets, and also a variation of the freezing order to reduce the values of transactions which required notification.
Mr Ohmura’s application was that the freezing order should not attach to the assets of several companies.

For the most of the assets, Mr Ohmura had 100% direct or indirect shareholding and was a director along with his sister. and he underlined that the companies’ assets belonged to and were in the control of third parties and not his self.
The claimant argued that the companies’ assets were covered by the freezing order indirectly because if a company decreases it assets it reduced the value of Mr Ohmura’s shareholding in that company.

On deciding the point, the judge discussed the cases of Lakatamia Shipping Co Ltd v Su, Group Seven Ltd v Alive Investment Corporation Limited and JSC BTA Bank v Ablyazov. H
e quoted Lord Clarke from the Supreme Court Ablyazov decision:
The extended definition of assets in the standard form of freezing order captured assets which are not owned legally or beneficially by the respondent, but over which the respondent has control and has the power to dispose of or deal with as if he or she did. In other words the extended definition expands the ordinary meaning of assets.”

It was the judge’s view that the extended definition did not apply to assets over which the respondent has control, but which the respondent does not legally or beneficially own.

He therefore found that the freezing order did not apply to the assets of the companies in which Mr Ohmura had a direct or indirect shareholding. Mr Ohmura also argued successfully that other variations should be made to the freezing order, including a curtailment of the clause referring to him having an interest in assets legally, beneficially or otherwise. This is because there was no evidence that Mr Ohmura owned any assets as a trustee nominee or any other basis other than as the legal or beneficial owner.

 

The judge also gave the claimant some satisfaction. In relation to notification of the sale of assets from the companies owned by Mr Ohmura, the claimant had to be notified of any dealing or disposal of assets.
The claimant sought an order for further disclosure of information relating to:

  • All transfers of more than a specified limit made from Mr Ohmura and two bank accounts belonging to his companies since 2015.
  • Details of the turnover and profit made by the companies.
  • Other information that had been requested in inter partes correspondence.

The judge allowed the order for further disclosure with the following reasons:

  • He had already decided there was a real risk of dissipation of assets.
  • There was an obvious discrepancy between the funds and assets which were at one time held by Mr Ohmura and the assets actually disclosed by him.
  • Mr Ohmura did not originally comply with the disclosure order made in the worldwide freezing order dated September 2018.

Such an order was justified in order to identify not only what assets were held by Mr Ohmura, but what has become of any assets which he may have dissipated.

The disclosure was not burdensome and could be provided without substantial expense.

 

Conclusions:

This case judgment’s  confirmed that third-party assets will remain outside the scope of such a freezing injunction unless:

  • the respondent can be held to have a legal/beneficial interest in the assets and
  • exceptional circumstances can be established, or
  • the third party in question is named as a co-respondent to the freezing injunction.

 

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