ZI WANG v GRAHAM DARBY

Where a non-proprietary freezing order permits expenditure on living or legal expenses, the defendant must show that no other assets are available for those purposes. The burden remains on the defendant, and the court may adopt healthy scepticism towards unsupported or contradictory assertions about wealth, particularly where a risk of dissipation has already been established.

The usual exceptions remain appropriate where the order extends to all the defendant’s assets. The balance may instead favour their removal where the order covers only some assets and the defendant is known to have valuable assets elsewhere. The outcome is fact-sensitive and must be just and convenient in all the circumstances.

The claimant sought variation of a worldwide maximum-sum freezing order by removing the exceptions permitting the defendant to spend £500 per week on living expenses and a reasonable sum on legal expenses.

The order restrained dealings with assets up to £1 million. A proprietary element had previously been set aside, but the freezing order was continued. The claimant relied on unchallenged expert cryptocurrency analysis indicating that the defendant owned or controlled Bitcoin substantially exceeding the value of the claim.

The central issue was whether the defendant had discharged the burden of showing that he had no other assets with which to fund his living expenses and defence.

1. The application was granted. The defendant had not discharged the burden of demonstrating that he lacked assets exceeding the value of the claim.
2. In an application concerning exceptions to a non-proprietary freezing order, the frozen funds remain the defendant’s funds. He may ordinarily use them for living and legal expenses only if he shows that no other funds are available for those purposes. The ultimate question is what is just and convenient in the circumstances, applying the fact-sensitive principles identified in JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors [2015] EWHC 3263 (Ch) and Halifax Plc v Chandler [2001] EWCA Civ 1750.
3. Where a worldwide or domestic order bites on all the defendant’s assets, the starting point is to include living and legal expense exceptions. Where the order covers only assets in England and Wales and the defendant is known to possess valuable assets elsewhere, the balance is likely to favour excluding such exceptions. The placement of a case on that continuum depends on the evidence.
4. The court was entitled to assess the defendant’s evidence sceptically. The expert evidence showed that he had undertaken substantial Bitcoin transactions after claiming that he had stopped meaningful trading and lost access to the relevant credentials. His explanations were contradictory, self-serving and largely uncorroborated, and the expert evidence was left unanswered.
5. Monitoring blockchain transactions was not an adequate substitute for removing the exceptions, because cryptocurrency could be moved immediately. The court declined to redesign the order to exclude only Bitcoin exceeding the claim, as no such application supported by full and frank evidence had been made. The exceptions were therefore removed.