ORB a.r.l. & Ors v Ruhan & Ors

A court order providing that it will cease upon alternative security being agreed remains effective unless actual agreement is obtained or the court varies it. A party cannot disregard its terms because it considers proffered security reasonable.

A freezing order and ancillary disclosure order may be enforced by an unless order where repeated, deliberate non-compliance threatens effective enforcement. The sanction must be proportionate to its purpose. An unresolved allegation of unclean hands does not necessarily prevent interim protection. The court should balance the prejudice arising from granting or withholding relief pending determination of that allegation.

The claimants alleged an oral profit-sharing agreement and breaches of fiduciary duty arising from the acquisition and disposal of substantial hotel and property assets. Mr Ruhan counterclaimed for proprietary and personal relief concerning assets transferred from the Arena Settlement to the claimants and associated parties.

Earlier orders imposed mutual undertakings, a worldwide freezing order and extensive disclosure obligations. The Orb Parties did not comply with the disclosure order. They applied for a declaration that the order had lapsed or should be discharged, relying principally on a negative pledge given to liquidators. Mr Ruhan sought variations extending the freezing and disclosure relief, together with an unless order. The court also considered allegations that Mr Ruhan lacked clean hands and applications concerning fortification of his cross-undertaking in damages.

1. The lapse and discharge application was dismissed. Paragraph 8(f) of the March Order was plain. Alternative security would terminate the order only if agreed with Mr Ruhan’s legal representatives. No agreement had been sought or obtained. The Orb Parties therefore remained bound to comply and should have applied for a variation and interim relief if they disputed the order’s continuing effect. The negative pledge was not adequate alternative security. It was given to the liquidators, lacked the coercive force of a court order and was unsupported by reliable evidence of ownership or value.

2. The challenge to the existing fortification of the cross-undertaking failed. A point available at an earlier interlocutory hearing cannot ordinarily be advanced later in support of the same or similar relief without a significant and material change of circumstances or newly discovered facts. That principle protected the finality and efficacy of interlocutory decisions.

3. Unclean hands requires misconduct having an immediate and necessary relationship with the equity invoked. The alleged hacking, surveillance, blackmail and attempted suborning of security personnel could not be determined summarily. The allegations had to be considered cumulatively and required disclosure, oral evidence and probably expert evidence. Their possible relevance to the counterclaim and interim relief could not be excluded before trial.

4. Mr Ruhan had a good arguable proprietary claim to most of the identified proceeds and pledge assets. Payments from subsidiaries to the ultimate beneficial owner, unsupported by a commercial explanation, were arguably distributions through the corporate chain and therefore traceable proceeds of the disputed shareholdings. A purported loan could likewise be treated according to its substance where the evidence supported an inference that repayment was never intended.

5. The freezing order was varied. Assets subject to a good arguable proprietary claim were specifically frozen without an ordinary-course-of-business exception, save for reasonable residential and maintenance expenditure at the principal residence. Further sums presenting a real risk of dissipation were added, additional disclosure was ordered, and the monetary cap was adjusted to prevent double counting.

6. An unless order was necessary and proportionate. Repeated deliberate non-compliance, misleading evidence and breaches of undertakings showed that a lesser sanction would not make the disclosure order effective. Failure to comply within the further period allowed would strike out the Orb Parties’ claim and defence to counterclaim. The sanction applied only to the existing disclosure obligations, not the newly ordered variations.

7. The unresolved clean-hands allegations did not justify postponing relief. The limited potential prejudice to the Orb Parties was outweighed by the serious risk that further delay would defeat effective enforcement and undermine the administration of justice. Additional fortification of the cross-undertaking was refused.

• High Court (Commercial Court), March 2015: Cooke J made a worldwide freezing order and a disclosure order after finding that the court had been misled, earlier disclosure obligations had been breached and protection of Mr Ruhan’s claims was necessary.
• High Court (Commercial Court), February 2015: Cooke J permitted Mr Ruhan to amend his defence and pursue a counterclaim, imposed mutual undertakings and ordered disclosure. Other applications by the claimants for joinder, service outside the jurisdiction and injunctive relief were refused.