Darnitsa v Metabay Import/Export Ltd

A worldwide freezing order may be continued against a third party where there is a good arguable case that the third party holds assets connected with a foreign claim against another person, together with a real risk of dissipation. The court must assess the pleadings in the foreign proceedings when determining arguability. Delay does not automatically defeat relief where the claimant was unable to bring the foreign claim earlier or the surrounding circumstances still support a risk of dissipation. Alleged failures of full and frank disclosure must be material and serious. Ancillary disclosure under a freezing order should be confined to information reasonably required to police the order, rather than investigate or prove the underlying claim.

The claimant, a Ukrainian pharmaceutical company, obtained an ex parte worldwide freezing order against the defendant under section 25 of the Civil Jurisdiction and Judgments Act 1982. The order supported intended derivative proceedings in Ukraine concerning alleged excessive payments and commissions said to have been diverted to the defendant.

The defendant applied to discharge the order or opposed its continuation. The issues were whether the Ukrainian pleadings disclosed a good arguable case against the defendant through the alleged liability of other respondents, whether there was a real risk of dissipation, whether the claimant had failed in full and frank disclosure, and whether ancillary disclosure had been ordered too widely.

1. Disposition. The application to discharge the worldwide freezing order was dismissed. Subject to minor amendments, the order was continued until seven days after judgment in the Ukrainian proceedings or further order.
2. Good arguable case. The foreign claim had to be assessed by reference to the pleadings in the Ukrainian proceedings. Those pleadings alleged that the relevant individuals were officers of the Ukrainian company and had caused it loss. There was a good arguable case that the daughter remained an officer for the purposes of the pleaded claim, despite the end of her formal executive-board role. There was also a good arguable case against the defendant through the alleged liability of the parents, who were plainly officers.
3. Third-party relief. The Chabra jurisdiction was applicable. The defendant could properly be restrained where the pleaded case provided a good arguable basis for treating its funds as connected with the alleged liabilities of persons who were respondents in the Ukrainian proceedings.
4. Risk of dissipation. The existence of funds remaining in the defendant’s account did not eliminate risk. The unexplained commission arrangements, the absence of directors, the corporate limbo, and the absence of explanation for payments after 2016 established a real risk of dissipation. The passage of time had to be assessed in the particular circumstances and was not automatically decisive.
5. Full and frank disclosure. The complaints did not amount to a material failure requiring discharge. The ordinary case required something serious which might have affected the making or continuation of the order, rather than a catalogue of matters which could have been expressed more fully.
6. Ancillary disclosure. Disclosure ordered to police a freezing order must be limited to that purpose. It should not become a means of tracing assets, proving the underlying claim, or investigating the wider alleged scheme. The order was amended to confine the relevant disclosure to payments made or payable to the defendant.

The judgment records that HH Judge Pelling QC granted an ex parte worldwide freezing order on 19 March 2021. The present court, on the return date, dismissed the application to discharge and continued the order subject to amendments.