Dadourian Group International Inc & Ors v Azuri Ltd

The court may grant a freezing injunction against a non-party where there is good reason to suppose that the non-party holds, controls or can access assets which are, in substantive reality, available to the defendant. Strict legal or equitable beneficial ownership is unnecessary. The relevant question is substantive control, including control over assets held through discretionary trusts or corporate structures. The evidence must establish a good arguable case, assessed with care according to the circumstances. The order should be no wider than necessary to preserve the defendant’s assets. Where continuation is ordered after an interim injunction, the order may be a new and distinct order, and the non-party should be joined where an issue requiring trial arises.

The claimants sought continuation of a freezing injunction made against Azuri Ltd, which was not then a party to the substantive proceedings. The injunction had been granted as ancillary relief in support of freezing orders against other defendants, including Helga and Jack Dadourian.

The relevant assets comprised a Paris flat held through a French company, Azuri and a Liechtenstein establishment called Brinton. The claimants alleged that the structure was controlled by Helga or Helga and Jack and was intended to place assets beyond the reach of creditors. Azuri disputed that allegation and relied on the legal status of the discretionary trust.

The issues were whether there was good reason to suppose that Azuri’s assets were in truth assets controlled by the defendants, whether the injunction should be continued, whether Azuri should be joined, and how the underlying issue should be tried.

1. The injunction was continued. The court had good reason to suppose that the assets of Azuri and Brinton were in truth under the direct or substantive control of Helga, or Helga and Jack. The evidence included the defendants’ history of asset dissipation, the use of offshore companies and trusts, substantial benefits received from Brinton, the arrangements concerning the flat, Azuri’s conduct in withholding Brinton’s identity, and the surrounding corporate connections.

2. The Chabra jurisdiction is ancillary to freezing relief against a substantive defendant. It is not confined to cases where the third party holds assets on a bare trust or as nominee. It may apply where the defendant has some right in respect of, control over, or other rights of access to the assets.

3. The court must examine the substantive reality of control rather than apply a strict trust-law analysis. A discretionary trust does not prevent relief where there is good reason to suppose that the defendant controls the exercise of its discretions. At the interim stage, it is unnecessary finally to decide whether the trust is genuine, a sham, or subject to veil-piercing analysis.

4. “Good reason to suppose” means a good arguable case, although the degree of persuasion required depends on the facts. The court must exercise the jurisdiction with considerable care. An order against a third party should be tailored to the purpose of preserving the defendant’s assets and should be no wider than necessary.

5. The court declined simply to refuse to discharge the earlier order. It made a new, separate and distinct order continuing the injunction. Azuri was joined as the twelfth defendant because the continuation of the order established the necessary basis for joinder.

6. An issue requiring trial remained between the claimants and Azuri as to whether the assets of Azuri and Brinton were available to satisfy any judgment against Helga or Jack. Further directions were required concerning pleadings, evidence, disclosure and the timing and conduct of that trial. The order was to continue until trial of that issue or further order.