LLC Eurochem North-West-2 v Société Générale SA & Ors

A court should not use an interim remedy to secure payment of an unadjudicated debt where the requirements for an interim payment or freezing injunction are absent. Sums claimed as debt or damages are not ordinarily “relevant property” under CPR 25.1(1)(c) unless they are identifiable and distinctive property, such as a specified fund or property in which a proprietary claim arises. The inherent jurisdiction cannot properly be used to bypass established safeguards governing interim payments and freezing orders. Lack of utility and potential prejudice to the defendant are relevant discretionary considerations.

The claimant sought payment into court or into a frozen account of sums allegedly due under on-demand bonds relating to the construction of a fertiliser plant. Société Générale and ING declined payment, relying on sanctions-related substantive defences, including illegality and contractual excuses from performance.

The application relied on CPR 25.1(1)(a), (c), (k) and (l), the court’s inherent jurisdiction and CPR 3.1(2)(m). The central issue was whether the court had jurisdiction, and should exercise any discretion, to order security or payment before trial.

1. Interim payment. The application under CPR 25.1(1)(k) failed because CPR 25.7(1)(c) required satisfaction that, if the claim went to trial, the claimant would obtain judgment for a substantial sum. The defendants had pleaded sanctions-related substantive defences, including the Ralli Brothers principle, illegality, frustration and an implied sanctions term. The application was not a suitable occasion to determine that those defences were bound to fail. Mints was materially different because sanctions had not formed part of the defendants’ substantive defence in that case.
2. Relevant property. Money is not excluded from the concept of property merely because it is intangible. However, CPR 25.1(1)(c) does not encompass an ordinary, unsegregated sum claimed by way of debt or damages. The property must be identifiable and distinctive, and capable of detention, custody, preservation, inspection, sale or yielding income. The claimed bond sums did not meet that description.
3. Specified fund. CPR 25.1(1)(l) requires an actual identifiable fund in the legal title, possession or control of the person against whom the order is sought, a dispute concerning proprietary entitlement or interest, and circumstances requiring security. No such fund existed. The defendants had not ring-fenced money for payment, and the claimant had no arguable proprietary claim to their monies.
4. Other powers. An interim injunction was inappropriate on American Cyanamid principles because damages were an adequate remedy. The inherent jurisdiction and CPR 3.1(2)(m) did not justify an order which would bypass the established requirements for interim payments or freezing orders. The proposed order had little practical utility, while payment could expose the defendants to sanctions-related prejudice and unrecoverable expense.
5. The orders sought were declined.