Celtic Resources Holdings v Arduina Holding BV

A freezing order protects against a real risk that assets will be dissipated so that a judgment remains unsatisfied. It does not provide security for the judgment. The applicant bears a relatively high burden and must produce solid evidence of an intended unjustifiable disposition. The mere fact that assets can readily be transferred is insufficient. The court may consider the defendant’s past conduct, opportunities to dissipate assets, ownership structure, financial history, and offers of security. A judgment establishes the existence of the debt, but does not lower the evidential threshold for proving dissipation. Discovery must be necessary and proportionate to the fair disposal of the issue and consistent with the overriding objective.

Celtic Resources Holdings plc obtained an arbitral costs award against Arduina Holding BV and permission to enforce it as a judgment. Arduina challenged the underlying awards under sections 67, 68 and 69 of the Arbitration Act 1996. Celtic obtained an interim freezing injunction over Arduina’s assets, principally shares in Emperor Mines Limited.

Celtic applied to continue the injunction. Arduina opposed continuation and sought further discovery of documents concerning the use of the arbitral awards in Russian proceedings. The central issues were whether there was a real risk that Arduina would dissipate its assets so as to frustrate enforcement, and whether the requested discovery was necessary and proportionate.

1. Freezing injunction. The injunction was not continued. A judgment creditor must establish a real risk that, without relief, the defendant will dispose of assets otherwise than in the ordinary course of business, with the result that the judgment will go unsatisfied. The standard is relatively high. The existence of a judgment establishes the debt and a good arguable case, but does not create a more favourable test for proving dissipation.
2. The ability to transfer assets easily is not enough. There must be solid evidence giving reason to believe that the defendant will make an unjustifiable disposition. Relevant matters included Arduina’s membership of a substantial group, its history of building up rather than disposing of the shareholding, the absence of previous dispositions or charges, the absence of a demonstrated pattern of default, its opportunity to dispose of the shares after becoming aware of Celtic’s attempts to obtain protection, and its offer of security.
3. The court treated the absence of direct evidence from Arduina’s director or ultimate owners as relevant but not determinative. Evidence from its solicitor was approached with caution because of criticisms made in the arbitration, but the conclusion did not principally depend on that evidence. The conduct of the arbitration and alleged discovery disputes were of limited assistance on the central question.
4. Further discovery. The application was refused. The proposed documents could not affect whether the arbitrator had exceeded his jurisdiction, made an error of law, or committed serious irregularity. The court expected Celtic to use the declarations in related Russian proceedings, and the existing material gave sufficient indication of that use. Discovery of documents filed in proceedings to which Arduina was already a party was also inappropriate. The request was unnecessary, disproportionate and inconsistent with the overriding objective.

First-instance decision of the High Court (Commercial Court). The judgment does not state any subsequent appellate history.