JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors

A freezing order may extend to a third party where there is a good arguable case that assets held by that party are, in reality, the defendant’s assets or under the defendant’s control. The order is ancillary to the principal freezing injunction. It requires a real risk that the third party will deal with the assets so as to frustrate enforcement.

Where those conditions are satisfied, relief may initially be granted without notice. Questions of ownership and control can then be resolved at a hearing on notice. Delay is not an independent bar to relief. The court should grant an order despite delay if a real risk of dissipation remains.

The claimants had obtained a worldwide freezing order against Mr Pugachev in aid of Russian proceedings. Information disclosed about several trusts led them to allege that trust assets were, in reality, his assets or under his control. After he fled the jurisdiction in breach of a passport order, the original trustees were replaced by newly incorporated companies.

Rose J refused, without notice, to extend the freezing order to the original and replacement trustees and to Luxury Consulting Ltd. She relied on procedure, delay, absence of a sufficient risk of dissipation, possible conflict with New Zealand proceedings and the voluntary freezing of two company bank accounts.

The claimants sought permission to appeal and an extension of the order under the jurisdiction associated with third-party freezing injunctions. The central issues were whether they had shown a good arguable case concerning ownership or control, a real risk of dissipation and the expediency required by section 25(2) of the Civil Jurisdiction and Judgments Act 1982.

1. Permission granted and appeal allowed. The worldwide freezing order was extended to the four original trustee companies, the four replacement trustee companies and Luxury Consulting Ltd. Ryder and Jackson LJJ agreed with Bean LJ.

2. A freezing order may be made against a third party holding assets on behalf of the principal defendant. There must be a good arguable case that the assets are, in truth, the defendant’s assets or under the defendant’s control. The third-party order is ancillary to the principal injunction and makes that injunction effective. It also requires a real risk that the third party will deal with the assets so as to frustrate enforcement. If that risk exists, the order may initially be made without notice. Disputed questions of ownership or control can be resolved at the subsequent hearing on notice: SCF Finance Co Ltd v Masri [1985] 1 WLR 876 and TSB Private Bank International SA v Chabra [1992] 1 WLR 231 applied.

3. The evidence established a good arguable case that the trust assets were Mr Pugachev’s assets or were under his control. His flight, breaches of court orders, the trust deeds and the unexplained replacement of the trustees supported both that conclusion and the inference of an increased risk of dissipation. This was a classic case for third-party freezing relief.

4. Delay is not itself a bar to a freezing injunction or an extension of one. Delay may provide evidence against a real risk of dissipation, but it does not preclude relief where that risk remains. The observations of Flaux J in Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm) were approved.

5. Possible discord with future orders of the New Zealand court did not make relief inexpedient under section 25(2) of the Civil Jurisdiction and Judgments Act 1982. Any conflict could be addressed by granting all parties liberty to apply to vary the order. The statutory expediency requirement was amply satisfied.

6. The voluntary freezing of two disclosed accounts did not remove the need for relief against Luxury Consulting Ltd. The disclosure had been inadequate, and the company could open other accounts or receive further payments on Mr Pugachev’s behalf.

• Court of Appeal (Civil Division): Granted permission to appeal, allowed the appeal and extended the worldwide freezing order to the second to tenth respondents: [2015] EWCA Civ 906.

• High Court, Chancery Division: Rose J refused the claimants’ without-notice application to extend the worldwide freezing order to the original trustees, replacement trustees and Luxury Consulting Ltd.