Manchester Shipping Ltd v Balfour Worldwide Ltd & Anor

A freezing order requires a good arguable case on liability and quantum, a real risk of dissipation, and a conclusion that relief is just and convenient. The court must identify the claimant’s interest requiring protection and consider the least invasive sufficient relief. A claimant may establish loss where unlawful interference causes a contractual debtor not to pay, even if the attempted diversion itself fails. The claimant may pursue the full contractual debt where that debt was payable to it, notwithstanding onward payment arrangements. On a without-notice application, full and fair disclosure requires the applicant to investigate and fairly present material facts, law, likely defences and weaknesses. The court should assess alleged non-disclosure proportionately and avoid conducting a mini-trial.

Manchester obtained worldwide freezing orders from Males J on 18 May 2018 in support of a claim that the defendants conspired to divert $5.577 million in hire due under charterparties for three vessels. The defendants admitted that charterparties in favour of Balfour were sham agreements, but argued that Manchester had suffered no loss because the diversion failed and that Manchester had breached its duty of full and frank disclosure.

The defendants applied to discharge the orders. The issues were whether Manchester had a good arguable case that it had suffered loss in the claimed amount and whether material non-disclosure justified discharge.

1. Discharge application dismissed. The defendants did not dispute a good arguable case on liability or a real risk of dissipation. The remaining question was whether Manchester had a good arguable case on loss and whether the orders remained just and convenient.
2. A freezing order is justified where there is a good arguable case on the merits, including quantum, a real risk of improper dissipation, and it is just and convenient to grant relief. Its purpose is to protect the claimant’s interest in the enforceability of a prospective judgment. The court must identify that interest and consider the least invasive form of sufficient protection.
3. Manchester had a good arguable case that the defendants’ conspiracy caused KGK not to pay the hire. The failure of the attempted diversion to Balfour did not eliminate actionable loss. The evidence that KGK had previously proposed payment supported that conclusion, while the defendants’ arguments about credit risk, jurisdiction risk and KGK’s later conduct could not be finally determined on the application.
4. The full hire was payable to Manchester under the Manchester Charterparties. Its arrangements for onward payment did not restrict the amount it could claim to its 1% commission. Any sums received from Morshelf were to be credited.
5. The duty on an applicant for a without-notice freezing order is one of full and fair disclosure. The applicant must investigate the claim, disclose material facts and law, identify likely defences and weaknesses, and present the evidence fairly. Materiality is assessed objectively by whether the matter would have influenced the court’s decision or the terms of the order.
6. The alleged non-disclosures did not justify discharge. Manchester had fairly presented the material issues. The court should apply proportion and should not conduct a mini-trial on disputed matters such as the authenticity of the Ark Charterparties, the Morshelf Assignment or alleged improper control. Generalised, scattergun complaints were inadequate.
7. The worldwide freezing orders were continued. Further submissions would be heard on consequential directions.

On 18 May 2018 Males J granted worldwide freezing orders without notice. The present judgment determined the defendants’ application to discharge those orders. It was a first-instance discharge application, not an appeal.