Yukong Line Limited Of Korea v Rendsburg Investments Corporation Of Liberia & Ors

A court has ancillary jurisdiction to require a party subject to a Mareva injunction to be cross-examined on an affidavit disclosing assets where this is needed to make the injunction effective.

The governing question is whether the order is just and convenient in all the circumstances. Cross-examination is an exceptional measure, not a routine feature of Mareva proceedings. The court must weigh its substantial burden against the availability and adequacy of less onerous means; it need not be the only possible remedy.

Questions may concern matters also relevant to the substantive action if necessary to determine an asset-disclosure application. The court must guard against using the Mareva process to obtain merits evidence. Rules of the Supreme Court, Order 29 rule 1A supplies a safeguard by restricting use of the cross-examination record without consent or leave.

Yukong claimed damages after Rendsburg repudiated a three-year charterparty. It later joined Ladidi and Mr Yamvrias, alleging that they were undisclosed principals or otherwise liable for Rendsburg’s obligations. The claim was accompanied by Mareva relief, which was extended to the added defendants.

Following affidavits containing inconsistent information about assets, bank accounts and a trust connected with Ladidi, Clarke J ordered Mr Yamvrias to be cross-examined on his sixth affidavit. The purpose was to assist the determination of Yukong’s pending application for further disclosure. During that examination, Longmore J ruled that questions could be asked even though they might relate to issues in the action.

Mr Yamvrias appealed both orders. The central issues were whether the court had jurisdiction to order cross-examination on a Mareva disclosure affidavit and, if so, whether questions could extend to matters relevant to the substantive claim.

Appeals dismissed unanimously. Phillips LJ gave the judgment of the court, with which Kennedy LJ agreed.

1. The court had jurisdiction to order a Mareva defendant to be cross-examined on an affidavit disclosing assets. The power was an ancillary power inherent in the Mareva jurisdiction and could be exercised where necessary to ensure that the injunction achieved its purpose. The authorities did not recognise a merely theoretical power which could never properly be used.

2. The correct discretionary standard was whether the order was just and convenient in all the circumstances. Cross-examination was a very considerable imposition and an exceptional measure. The court should carefully consider whether a less burdensome means could achieve the same end, but it was not confined to cases where cross-examination was the only available remedy.

3. The possibility that examination might reveal material relevant to the substantive action did not create an absolute bar. Where questions were necessary to decide whether further disclosure should be ordered so that Mareva relief could operate effectively, they could be permitted. The court must nevertheless be alert to plaintiffs attempting to use Mareva relief to obtain evidence for the merits of their claim.

4. Rules of the Supreme Court, Order 29 rule 1A provided an important safeguard. It restricted use of the cross-examination record for purposes other than the proceedings in which the order was made, unless the examined party consented or the court granted leave. That safeguard enabled the court to prevent injustice if information relevant to the merits emerged.

5. On the history of incomplete and inconsistent asset disclosure, neither Clarke J nor Longmore J had erred in principle in exercising the discretion. The cross-examination was sought to make the Mareva relief effective, rather than to advance Yukong’s substantive claim. Both orders therefore stood.

• Court of Appeal (Civil Division): dismissed the appeals from the cross-examination orders of Clarke J and Longmore J.
• Queen’s Bench Division (Commercial Court): Clarke J ordered Mr Yamvrias to attend for cross-examination on his sixth affidavit. Longmore J subsequently permitted questions which might relate to issues arising in the action.