Taylor v Van Dutch Marine Holding Ltd & Ors

A freezing order restrains the defendant personally from improperly dissipating assets. It does not give the claimant security over those assets or affect genuine independent rights held by third parties. Accordingly, a secured creditor may ordinarily enforce its security over frozen assets without obtaining a variation, provided the enforcement is not collusive, does not amount to a disposal by the defendant, and does not assist a breach of the order. Disputes about ownership, delay, or the general desirability of “holding the ring” do not justify postponing enforcement where the creditor bears the risk of enforcing against property in which it has no title.

The claimant had obtained a freezing order against the defendants in proceedings concerning substantial liabilities and alleged interests in assets including intellectual property. TCA Global Credit Master Fund LP, a secured creditor of the second defendant under a debenture, sought permission or clarification enabling it to enforce its security.

The claimant opposed the application temporarily. It argued that enforcement should await the resolution of disputed ownership issues concerning the intellectual property and related collateral proceedings. The central issue was whether the freezing order prevented, or should be treated as preventing, a secured creditor from enforcing independent security rights.

1. Application allowed. The claimant’s application to postpone the matter was dismissed. TCA was entitled to the relief sought, although in a normal case it did not strictly need a variation of the freezing order.
2. A freezing order operates personally against the defendant or other persons expressly made respondents. Its purpose is to prevent improper dissipation and evasion of justice. It does not confer security on the claimant and does not affect genuine third-party rights over the frozen assets.
3. A secured creditor exercising a power of sale or other enforcement right ordinarily acts pursuant to its own independent rights. The enforcement is not a disposal by the defendant merely because the power is technically exercised as the defendant’s agent. Nor is it dissipation, since the secured debt and encumbrance already exist.
4. The position differs where the third party’s conduct is collusive, is aimed at defeating the order, assists a disposal by the defendant, or otherwise amounts to aiding and abetting a breach. No such allegation was made against TCA.
5. The court respectfully disagreed with the suggestion in Gangway Ltd v Caledonian Park Investments (Jersey) Limited [2001] 2 Lloyd's Rep 215 that a secured bank has a duty to apply for a variation. The broader observations in Z Ltd v A-Z Ltd and Z Bank v DI were confined to disposals by or on behalf of the defendant. The approach in The Law Society v Shanks [1988] 1 FLR 504 supported that construction.
6. Disputed ownership did not justify delaying the application. If TCA enforced against property that did not belong to the second defendant, it would bear the consequences of any wrong committed, but the freezing order would not thereby be infringed. Any concern that the order might validate TCA’s title could be addressed by an express reservation in the order.