Tidewater Marine International Inc v Phoenixtide Offshore Nigeria Ltd & Ors

On an application to vary a non-proprietary freezing order, a defendant may ordinarily use frozen assets for a reasonable legal defence, but must persuade the court that no other assets or sources of assistance are available. The court must then assess objectively the overall justice of releasing the funds, including enforcement risks and the fact that the injunction is not security for the claim. In exceptional cases, wider justice may outweigh the ordinary rule. Continuing deliberate contempt, misleading evidence and the fact that the litigation was caused by the contempt can justify refusal, even if refusal leaves the defendant unrepresented. Unsupported assertions and incomplete financial disclosure may fail to discharge the burden.

The second and third respondents sought permission to use funds in the second respondent’s Bank Julius Baer account to pay legal expenses in defending Tidewater’s personal claims and an existing costs order of £60,000. The account was subject to a Swiss attachment order, so the proposed mechanism required Tidewater to join an application for variation before the Swiss court.

Tidewater opposed the application on the grounds that the respondents had not shown that no other funds were available and that the overall justice of the case, including their continuing contempt of court, made release unfair. The central issues were whether the respondents had discharged the evidential burden and, if so, whether justice nevertheless required refusal.

The application was dismissed.

1. In a non-proprietary freezing-order case, a defendant may ordinarily spend a reasonable sum of frozen assets on legal advice and representation. The defendant bears the burden of persuasion to show that no other assets or sources of payment are available, including assistance which may be provided by others. The evidence must be credible and placed fully and fairly before the court. The principles applied equally despite the need to vary the Swiss attachment order.
2. The court must assess objectively the overall justice of permitting payment. Relevant considerations include the likely effect on the prospects of satisfying a future judgment, the fact that the assets belong to the defendant, and the principle that a freezing order is not security for the claim or an untouchable fund. The absence of other funds will usually be decisive, but the ordinary rule can be outweighed in an exceptional case. The risk that the defendant will be left unrepresented is an important factor.
3. The authorities, including The Angel Bell [1981] 1 QB 65, Sundt Wrigley Co Ltd v Wrigley, Halifax Plc v Chandler [2001] EWCA Civ 1750 and Serious Fraud Office v X [2005] EWCA Civ 1564, supported those principles. The same approach was applicable to a restraint order under section 77(1) of the Criminal Justice Act 1988, and variation remained governed by the just and convenient jurisdiction under section 37(1) of the Supreme Court Act 1981.
4. The respondents failed to discharge the burden. Their assertions were unsupported by readily available bank statements and other financial documents. Their history of false evidence justified scepticism, and they had provided inadequate information about substantial receipts, trusts and possible assistance from family, friends or business associates. Their Nigerian assets were treated as unavailable for ongoing legal expenses, but there was no sufficient explanation why those assets could not meet the £60,000 costs order.
5. Even assuming that the attached account was the only available source of defence funding, the overall justice of the case required refusal. The respondents had deliberately and continuously disobeyed the mandatory order, and the personal claims and resulting costs arose only because of that contempt. It would have been grotesquely unfair to require Tidewater to procure the release of funds for respondents who had refused to procure payment to Tidewater. Any resulting lack of representation was a consequence of their own deliberate conduct.