Merchant International Company Ltd v Natsionalna Aktsionerna Kompaniia Naftogaz Ukrainy & Anor

A third party debt order can attach only an existing debt due or accruing due when the application is made. An accruing debt is represented by a present obligation, although payment may be deferred. The court cannot attach funds merely because they are temporarily held by a paying agent or may later become repayable. The contractual relationship must be examined to determine whether an attachable debt exists. Without-notice applications engage a duty of accurate and sufficiently full disclosure. Whether an interim order should be made final remains a matter for the court’s equitable discretion, taking account of all relevant circumstances and the interests of those affected.

The claimant was an English judgment creditor of the defendant. It obtained three interim third party debt orders against the defendant’s paying agent, The Bank of New York Mellon, in connection with interest payments on guaranteed notes issued by the defendant.

The claimant argued that the paying agent owed, or would become obliged to repay, money to the defendant. The defendant relied on the Agency Agreement, under which the paying agent was obliged to receive funds and pay them to noteholders, and was not obliged to repay them except where payment claims became time-barred. The issues were whether an attachable debt existed for the second and third orders and, alternatively, whether the orders should be discharged for non-disclosure or in the court’s discretion.

1. The three interim orders were discharged. The first order was accepted to have been ineffective, and the second and third orders could not be made final.
2. Under CPR 72.2(1), the relevant debt must exist when the application is made. The words “due or accruing due” refer to a present obligation to pay a liquidated sum, whether immediately or in the future. They do not include a debt which, together with the obligation to pay, rests wholly in the future. The court followed the principles stated in Webb v Stenton (1883) 11 QBD 518 and subsequent authorities.
3. Alawiye v Mahmood [2007] 1 WLR 79 concerned the evidence sufficient to support an interim order. It did not permit an application where the creditor had no belief that the third party owed money to, or held money for, the judgment debtor.
4. The Agency Agreement made BNYM a paying agent, not a banker holding an ordinary customer account. Clause 6.4 required it to apply the funds towards payment to noteholders and excluded repayment to Naftogaz except where the relevant claims became time-barred. No debt was therefore owed by BNYM to Naftogaz in respect of the note payments. The subsequent Supplemental Agreement preserved that position. The later repayment of the balance did not arise from an attachable obligation.
5. Had jurisdiction existed, the court would nevertheless have declined to make the orders final. Without-notice applications require accurate evidence and full and frank disclosure. The duty is not automatically the same as in freezing-order proceedings, because third party debt orders are a routine enforcement procedure, but it becomes more demanding where the consequences are serious and the grounds are debatable. The court also retains an equitable discretion to consider all relevant circumstances, including events after the interim order and the interests of all affected parties.