Fiona Trust Holding Corp & Ors v Privalov & Ors

An applicant seeking a freezing order must show a good arguable case, a higher threshold than the serious issue to be tried required for permission to amend pleadings. The court assesses the evidence as a whole. A freezing order also requires a real risk that a judgment will remain unsatisfied through dissipation, secretion or dispersal of assets. Delay is relevant but not decisive, particularly where reasonable investigation was required. The order is ancillary to disclosure of assets.

At the interlocutory stage, a claim for disgorgement of profits arising from bribery may be sufficiently arguable even where the claim is not compensatory. The strength of such a claim may differ between the briber and an allegedly bribed fiduciary.

The claimants, companies in the Sovcomflot group, alleged conspiracy, fraud, bribery and breaches of fiduciary duty against several defendants. They applied to amend their statement of case to add claims concerning time charters, commissions and an assigned bank debt. They also sought further worldwide freezing orders against Mr Nikitin, his companies and Mr Skarga.

The amendments were not substantively opposed. The central issues were whether the new claims satisfied the good arguable case threshold and whether there was a real risk of dissipation justifying freezing relief. The court also considered the effect of security previously provided for earlier claims.

1. Amendments and standard of proof. Permission was granted to add the Clarkson Commission claim and the RCB claim. The court proceeded on the basis that all three new claims had realistic prospects of success. A freezing order required more: the applicant had to show, on the evidence as a whole, a good arguable case, as stated in The Niedersachsen [1983] 1 W.L.R. 141. This was distinct from the lower threshold of a serious issue to be tried applicable to amendment applications.
2. Merits of the claims. The evidence provided a good arguable case that the time charters and commission arrangements were procured through bribery or fiduciary misconduct. The claim against Mr Nikitin for an account of profits was sufficiently arguable. The position of Mr Skarga differed: his exposure was likely to include losses caused by uncommercial charters and bribes, but the evidence was insufficient at this stage to support joint liability for all profits made by Mr Nikitin. The court distinguished the factual setting considered in Fyffes v Templeman [2000] 2 Lloyd’s Rep. 643 and considered the approaches in Ultraframe v Fielding [2006] F.S.R. 17 and Murad v Al-Saraj [2005] EWCA Civ 959.
3. Risk of dissipation. There was a real risk of dissipation in relation to both Mr Nikitin and Mr Skarga. The alleged bribery, offshore structures, backdating, false documents, lack of substantial roots in England and possible destruction of evidence were material. Delay was relevant but did not defeat the application where reasonable inquiries had been made, applying the principles discussed in Laemthong International v ARTIS [2005] 1 Lloyd’s Rep. 100 and Grupo Torras v Al-Sabah. The freezing order was ancillary to the disclosure order. The rationale was the risk that a judgment would remain unsatisfied, as explained in Mercedes Benz AG v Leiduck [1996] AC 284.
4. Existing security and orders. The security previously provided related only to the earlier claims and represented a bona fide compromise. It could not be treated as security for the new claims. Further freezing orders were therefore granted up to $377 million against Mr Nikitin and relevant companies, and up to $112 million against Mr Skarga.

The judgment records that Morison J had previously permitted amendments concerning the time charter claims, restrained related arbitrations and refused a stay. The arbitration-related orders were later varied on appeal, but the damages claims remained before this court. No appellate history for the present judgment is stated.