Banca Turco Romana SA v Cortuk & Ors

An applicant for freezing relief without notice must present the evidence and arguments fairly and even-handedly. It must disclose adverse matters which the absent respondent could reasonably be expected to raise. This duty extends to prejudicial material on which the applicant chooses to rely.

A substantial breach strongly favours discharging the order and refusing its renewal, even if innocent and even if proper disclosure would not have altered the original decision. Deliberate breaches will almost always attract that sanction. The court assesses multiple breaches cumulatively and may refuse renewal to punish the abuse, deter similar conduct and preserve the integrity of its process.

BTR had obtained freezing and disclosure orders without notice against the judgment debtor and four non-cause-of-action defendants. The third to fifth defendants sought discharge of the orders at the adjourned return hearing.

The orders were intended to support enforcement of a Romanian judgment and related foreign proceedings. BTR alleged that the respondents held, controlled or assisted in dealing with assets beneficially belonging to the judgment debtor. The relevant structures included English intermediate holding companies, but the respondents and most underlying assets were abroad.

The respondents alleged serious misrepresentation and non-disclosure concerning proceedings in New Jersey and Switzerland, a Swiss settlement, weaknesses in an alleged Romanian property fraud, evidence about a life insurance policy and the jurisdictional basis of the English enforcement order. They also challenged the jurisdictional and discretionary grounds for continuing the freezing relief.

1. The freezing orders against the third to fifth defendants were set aside and not continued. BTR had committed substantial and serious breaches of its duty of full and frank disclosure. The significant breaches had to be treated as deliberate and justified discharge irrespective of the underlying merits.

2. An applicant proceeding without notice must present both evidence and argument fairly and even-handedly. It must identify adverse evidence and arguments which it can reasonably anticipate the absent party would advance. The duty protects the integrity of the court's process because relief without hearing both sides is exceptional. A substantial breach strongly inclines the court towards setting aside the order and refusing renewal, even when innocent. A deliberate abuse will almost always attract that sanction: paras [45]–[46].

3. BTR seriously misrepresented the nature of the New Jersey proceedings. Those proceedings sought substantive enforcement against assets within the Rowena structure, not merely relief concerning one transferred property. This was material to whether England was the appropriate forum, whether equivalent relief was available elsewhere and whether an English intermediate company supplied a sufficient jurisdictional link: paras [31]–[34].

4. BTR also failed to disclose ongoing Swiss enforcement proceedings and misrepresented a consensual Swiss settlement as a prosecutorial forfeiture of criminal proceeds. It omitted material weaknesses in an alleged property fraud and withheld relevant evidence concerning the source of funds for a life insurance policy: paras [35]–[43]. The separate error about the regulatory basis for enforcement was explained and was not significant: para [44].

5. The recognised Chabra jurisdiction permits relief against a non-cause-of-action defendant who has legal control, or at least independent de facto control including a discretionary power of disposition, over assets arguably amenable to execution against the cause-of-action defendant: para [17]. Section 37 of the Senior Courts Act 1981 might also permit rare ancillary relief against a person sufficiently mixed up in assisting prohibited dealings, where necessary to make the primary freezing order effective. That possible jurisdiction was novel and constrained by territorial and enforcement considerations: paras [18]–[20].

6. The court did not decide whether some relief could otherwise have been justified. The respondents and most assets were abroad; the English companies were intermediate entities; overlapping proceedings existed in New Jersey; and the broader relief concerning assets merely known to belong to the debtor rested on a novel basis. The merits were therefore far from overwhelming and did not justify withholding the usual sanction: para [46].

This was a first-instance interlocutory decision. On 16 November 2017 Popplewell J granted freezing and ancillary disclosure orders without notice. The orders were continued against the first and second defendants at the initial return date, while the third to fifth defendants received an adjournment to contest continuation. Following the adjourned hearing, the court set aside and declined to continue the orders against the third to fifth defendants.