In Invest Bank v El-Husseini [2023] EWHC 3350 (Comm), Mrs Justice Dias has considered a number of important and unresolved questions of law concerning freezing injunctions.
The claimant, a UAE bank, obtained a judgment in the UAE against D1 for c.£20m. In the English proceedings, it advances claims under section 423 of the Insolvency Act 1986 seeking to reverse various property transactions that it alleges were entered into by D1 for the purpose of prejudicing his creditors. D6, one of the defendants to this claim, gave asset freezing undertakings in terms that are equivalent to the standard form freezing injunction. The undertaking provides, in the usual way, that she is entitled to use frozen funds for paying her living expenses and a reasonable sum on legal advice and representation “but only where she has no other means to pay for the same”.
In October 2022, D6 gave notice that she intended to use frozen funds for her living fees and legal expenses as she had exhausted non-frozen funds. The Bank objected on the ground that she had funds available in Lebanon, alternatively that her sons (also defendants to the claim) could be expected to fund her. Although the Lebanese funds are inaccessible as a result of the financial crisis in that country, the Bank contended that they should be treated as “means to pay” because D6 might be able to access them by suing the Lebanese banks. On this basis, it sought a declaration that D6 does have “means to pay” within the meaning of the undertaking and an order restraining her from using frozen funds without the prior permission of the Court. It was an important part of the Bank’s case on this point that it was for D6 to prove that she did not have non-frozen funds, rather than for the Bank to prove that she did (this contention was founded upon the well-known decision of Males J in Tidewater Marine [2015] EWHC 2748 (Comm)).
In response, D6 contended that: (1) the Bank was not entitled to seek a determination as to the availability of non-frozen funds because this would circumvent the law relating to contempt of court; (2) the Bank’s application was an abuse of process under the Chanel principle; (3) the Court did not have jurisdiction to grant the relief sought by the Bank; and (4) as to the onus of proof, Tidewater was distinguishable, alternatively wrongly decided.
Following a 1-day hearing, Dias J dismissed the Bank’s application, essentially for the reasons advanced by D6. Since the Judge accepted D6’s submission that the Bank was not entitled to seek a determination as to the availability of non-frozen funds (para 23), it was not necessary to decide whether Tidewater was wrongly decided, but the Judge agreed that “there is some apparent conflict in the authorities as to the nature of the onus which the defendant bears as regards the availability of other sources of funding”; and paragraphs 39-50 contain an important analysis of the authorities in this area, some of which were not cited in Tidewater. The Judge also observed (without deciding) that the willingness of relatives or other third parties to fund a defendant does not constitute “means to pay” for the purposes of the legal fees exception in a freezing injunction: see paras 32 and 55-56.
Niranjan Venkatesan and Constantine Fraser acted for the successful defendant, instructed by Debenhams Ottaway LLP.
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