Camdex International Ltd v Bank of Zambia (No 2)

A freezing injunction preserves assets capable of satisfying a judgment. It must not be used to pressurise a judgment debtor into payment by withholding property which has no realisable market value but is exceptionally important to the debtor.

Post-judgment freezing relief is appropriate only in the rare case where it prevents the removal or dissipation of an asset before execution can realise its value. The equitable discretion may also require variation where continued restraint would cause overwhelming public harm without preserving value for creditors.

The claimant obtained summary judgment for £80 million against Zambia’s central bank. After the bank’s appeal against that judgment was dismissed, the claimant obtained a freezing injunction covering the bank’s assets within England.

The bank had purchased 19 tons of unissued high-denomination Zambian banknotes from De La Rue Plc. Morison J refused to exclude the notes from the injunction, reasoning that their importance to the bank gave them value and that the claimant could execute against them.

The bank sought permission to appeal and appealed. The central questions were whether removing commercially worthless notes would dissipate an asset available to satisfy the judgment and whether the injunction should be varied in the exercise of the court’s equitable discretion.

1. Appeal allowed unanimously. The Court of Appeal granted permission to appeal and varied the freezing injunction so that the banknotes could be removed from the jurisdiction.

2. Sir Thomas Bingham MR held that a freezing injunction prevents a prospective or actual judgment debtor from dissipating assets so as to deny a claimant satisfaction. The unissued notes had no open-market value and could not provide value to the claimant or the bank’s other creditors. Their removal therefore would not dissipate an asset available to satisfy the judgment.

3. The bank might have paid a substantial sum to secure the notes because they were essential to its functions. Using the injunction to exploit that special need would amount in substance to holding the bank to ransom. The possibility of a separate application to stay execution did not make the application to vary the injunction empty.

4. Aldous LJ agreed. Freezing relief prevents removal or dissipation of assets; it is not an instrument for obtaining preferential repayment from an insolvent debtor. The notes acquired market value only upon issue in Zambia. The evidence also established overwhelming prospective harm to Zambia’s residents and monetary system if the notes remained restrained.

5. Phillips LJ held, by reference to Deutsche Schachtbau-Und Tiefbohr-Gesellschaft MBH v Shell International Petroleum Company Ltd [1990] 1 AC 295, that post-judgment freezing relief is comparatively rare. It may be granted where necessary to preserve an asset until execution can realise its value for the judgment creditor. These notes would be worthless to a sheriff executing a writ of fieri facias, and ZCCM was not shown to be a potential purchaser of them.

6. The court also varied the injunction on wider equitable grounds. Morison J had given inadequate weight to the exceptional context: ordinary insolvency procedures were unavailable against the central bank, Zambia faced severe national hardship if it defaulted internationally, and proportionate payments to creditors, including the World Bank and International Monetary Fund, were legitimate concerns. Permission to appeal to the House of Lords and a stay of the Court of Appeal’s order were refused.

1. Court of Appeal: Permission to appeal granted and appeal allowed unanimously. The freezing injunction was varied to permit removal of the banknotes from the jurisdiction. Permission to appeal to the House of Lords and a stay were refused.

2. Commercial Court: Morison J refused the bank’s application to exclude the banknotes from the freezing injunction on 17 May 1996.