E & Ors v M

A freezing injunction is an adjunct to substantive proceedings, so the claimant should progress the underlying claim with reasonable expedition. Delay does not automatically require discharge; the court must assess the explanation and all the circumstances. An undertaking not to enforce a freezing order abroad or obtain similar relief does not ordinarily prevent a claimant exercising an independent right to obtain different security, such as arrest of a vessel. Assets legally and beneficially owned by separate group companies cannot be frozen merely because the judgment debtor, or its controlling officer, may be able to influence those companies. Fortification of a cross-undertaking should not be released where future loss remains realistically possible.

The applications arose from a worldwide freezing order granted and renewed in support of maritime arbitration concerning unpaid hire and damages following termination of a charterparty. The respondent had previously been found in contempt for failing to provide an affidavit of assets and sought a declaration that its contempt had been purged and an order discharging the freezing order.

The claimant sought an order debarring the respondent from defending the arbitration, variation of the freezing order to include assets and funds held by other companies in the respondent’s group, and release of counter-security provided for the claimant’s cross-undertaking in damages. The respondent also alleged that the claimant had breached its undertaking by obtaining the arrest of a vessel abroad. The central issues concerned purge of contempt, delay, the scope of the foreign-enforcement undertaking, control of third-party assets, and fortification.

1. Contempt. The respondent had purged its contempt by providing an adequate affidavit of assets and an unconditional apology. Accounts were not required because the obligation was to identify assets, and a witness statement sufficiently confirmed that the respondent had no accounts. The application to debar the respondent from defending the arbitration therefore did not arise, and the court declined to impose a further fine.
2. Discharge of the freezing order. A claimant obtaining a freezing order should normally advance the underlying claim promptly. The claimant should have served further claim submissions sooner, but the delay was substantially explained by procedural uncertainty in the arbitration and the tribunal’s delay. In the circumstances, it was not sufficient to justify discharge.
3. Foreign arrest. The undertaking prohibited enforcement of the freezing order abroad or obtaining an order of a similar nature. It did not prevent pursuit of an independent right to obtain specific security abroad. Arrest of the vessel was different in nature from a freezing order and did not breach the undertaking. Any security obtained would nevertheless have to be disclosed because it could affect the amount secured by the freezing order. Even if there had been a breach, the court would not have discharged the order in the circumstances.
4. Third-party assets. The respondent could not be treated as controlling assets merely because its chief executive controlled the respondent and other group companies. That would effectively pierce the corporate veil without justification. Freezing assets of a non-cause-of-action defendant requires good reason to suppose either that the cause-of-action defendant can be compelled through enforcement to use those assets to satisfy a judgment, or that another enforcement process gives the claimant recourse to them. Neither condition was established.
5. Fortification. The claimant was not entitled to release of the US$50,000 counter-security. The absence of a claim for loss to date did not establish that no future loss could arise while the freezing order continued, particularly while the underlying issues remained undefined.

The respondent’s contempt was declared purged. The applications to discharge or vary the freezing order and to release the fortification were refused.