UK: Maintaining Legal Advice Privilege - Many Rivers to Cross

Last Updated: 21 January 2004

Article by Barry Donnelly and Bruce J. Lincoln

In the most recent decision arising out of the case of Three Rivers District Council and BCCI SA v. The Governor and the Company of the Bank of England [2003] EWHC 2565 (4 November 2003), it has been necessary for the Court to clarify the meaning of "legal advice" following (and despite) the extensive analysis of legal advice privilege by the Court of Appeal earlier this year ([2003] EWCA Civ 474).

In the Court of Appeal, the BCCI Liquidators had sought disclosure of communications between the Bank of England's specially appointed Bingham Inquiry Unit ("BIU" -3 Bank of England officials) and the Bingham Inquiry itself (a non-statutory private inquiry into the supervision of BCCI under the Banking Acts). The BIU's communications with the inquiry were the subject of advice from the Bank of England's external legal advisers, and the Liquidators accepted that the BIU constituted the client for the purposes of the inquiry.

The Court of Appeal declared that the only documents or parts of documents coming into the Bank's possession between the closure of BCCI on 5 July 1991 and the issue of the present proceedings in May 1992, which the Bank was entitled to withhold from inspection on the ground of legal advice privilege, were:

  • communications passing between the Bank (through the BIU) and its legal advisers (including any solicitor seconded to the Bank) for the purposes of seeking or obtaining legal advice;
  • any part of a document which evidenced the substance of such a communication.

A further separate aspect of the decision was that documents such as internal memoranda prepared by employees but not the BIU (including those prepared for submission to or at the direction of the Bank's lawyers) did not satisfy the "dominant purpose" test, where they were prepared for the dominant purpose of putting relevant factual material before the inquiry and not for the dominant purpose of taking legal advice.

Therefore, legal advice privilege was confined to client/lawyer (BIU/external legal adviser) communications and not internal (employee/BIU) communications, even if prepared for the dominant purpose of being shown by or sent by the BIU to external lawyers or prepared at the request of external lawyers.

Four classes of documents prepared by employees but not the BIU were held not to be privileged:

  • documents prepared by Bank employees, which were intended to be sent to and were in fact sent to the Bank's lawyers;
  • documents prepared by Bank employees with the dominant purpose of the Bank obtaining legal advice but not, in fact, sent to the Bank's lawyers;
  • documents prepared by Bank employees, without the dominant purpose of obtaining legal advice, but in fact sent to the Bank's lawyers;
  • any of the above documents prepared by Bank employees who had become ex-employees of the Bank.

In its judgment, the Court of Appeal left hanging the question of whether assistance by external lawyers in the presentation of their client's case, constituted "legal advice" in the sense in which the phrase is used when referring to privilege claimed for legal advice. This in turn led to a subsequent dispute between the parties as to what the Court of Appeal meant by "legal advice" and it therefore fell to Mr Justice Tomlinson to consider this issue.

The BCCI Liquidators accepted that they should perhaps have made it clear to the Court of Appeal that their eschewing of the pursuit of disclosure of documents passing between the BIU and the Bank's external lawyers was premised on the documents in question being concerned with the seeking or obtaining of legal advice properly so-called. In effect, despite having limited their argument before the Court of Appeal to documents other than those passing between the BIU and the external legal advisers, the Liquidators were performing a "volte face" in submitting that communications between the BIU and the Bank's external lawyers concerning the Bingham inquiry which were not for the dominant purpose of seeking or obtaining legal advice, but rather seeking or obtaining assistance and advice on presentational matters, should be disclosed.

In deciding what the Court of Appeal meant, the judge stated that legal advice privilege covers the seeking or obtaining of advice concerning rights and obligations. Against that background, it seemed to the judge inherently unlikely that the Court of Appeal could have intended to decide that all communications or documents passing directly between the BIU and external legal advisers concerning the Bingham inquiry, attracted legal advice privilege, because the subject matter of such communications and documents was not, or had not been shown to have been, the rights and obligations of the Bank.

The Bank of England submitted that legal advice should not be confined to telling the client the law, but should include advice as to what should prudently and sensibly be done in the relevant legal context. This, according to the Bank, included presentational advice.

However, the judge preferred the argument that the material in question was prepared for the dominant purpose of putting relevant factual material before the inquiry in an orderly and attractive fashion, not for the dominant purpose of taking legal advice upon such material. The judge could find no support in the Court of Appeal's judgment for the proposition that the Bank's lawyers' presentational assistance and advice should be categorised as legal advice of the sort which attracts legal advice privilege. On the contrary, it seemed to the judge that in the light of the Court of Appeal's judgment as a whole, what the Court of Appeal must have been intending to convey was that the relevant legal context meant the nature of the Bank's legal rights and obligations. He considered that it was implicit in the Court of Appeal's judgment that it did not regard the Bank's lawyers' assistance and advice on presentational matters as attracting legal advice privilege.

In short, the judge held that the Court of Appeal had decided that legal advice privilege would not be extended to encompass assistance or advice in the conduct of proceedings which are not litigation.

Unfortunately, because the BCCI Liquidators had not previously sought disclosure of direct communications between the BIU and the Bank's external lawyers, there emerged scope for considerable further argument as to whether individual documents were or were not privileged.


The Three Rivers case will be of particular interest to Banks and other financial institutions, when involved with inquiries or investigations such as those conducted by the Financial Services Authority or the Department of Trade and Industry, where litigation privilege may not be claimed in relation to documents prepared in connection with the relevant investigation.

In light of the Three Rivers decisions, certain practical steps should always be taken to ensure effective maintenance of legal advice privilege. The following points should be borne in mind:

  • only direct communications between representatives of the client who are nominated to seek legal advice and external lawyers will be privileged;
  • legal advice privilege generally applies to in-house counsel in respect of his/her legal function, but may not apply to communications prepared in an administrative or compliance capacity;
  • in-house counsel may continue to communicate internally with colleagues under the cloak of privilege, when acting in an advisory capacity and/or for the dominant purpose of obtaining external legal advice;
  • legal advice privilege will not apply to internal communications of other employees, even if they are preparatory to the instruction of external legal advisers or result in the creation of documents requested by external legal advisers sent to them;
  • any factual investigation should preferably be conducted by in-house counsel reporting directly to external legal advisers or by the external legal advisers themselves;
  • where in-house lawyers are conducting an investigation, they should be wary when seeking the assistance of colleagues in preparing material;
  • it must be shown that documents in respect of which legal advice privilege is claimed have been produced for the dominant purpose of seeking legal advice;
  • internal communications relating to the issue upon which advice is sought should be kept to an absolute minimum;
  • all legal advice should be kept confidential and only circulated for the purpose of informing people of legal advice received.

This aspect of the Three Rivers case is controversial. Some may consider it unfair to confine legal advice privilege to "telling the client the law", and not what should prudently and sensibly be done in the relevant legal context, as part of the much wider lawyer/client relationship.

The narrow definition applied in this case, namely advice concerning rights and obligations of the client, would seem unduly restrictive when compared to certain special statutory definitions.

For example, Section 413 of the Financial Services and Markets Act 2000, defines materials protected by legal advice privilege as:

"Communications between a professional legal adviser and his client (or a person representing his client) made (i) in connection with the giving of legal advice to the client…; or

items (i) enclosed with or referred to in any of the above communications, and (ii) made in connection with the giving of legal advice to the client… and (iii) in the possession of a person entitled to possession of them".

However, whilst FISMA 2000 effectively, therefore, contains its own definition of legal advice privilege, care must be taken when seeking to rely upon this provision, pending clarification by the Court. In the meantime, Section 413 appears to be wider than the common law definition of legal advice privilege as it stands, since it would appear to protect documents created "in connection with the giving of legal advice", namely so as to enable legal advice to be obtained.

Syndicated Loans - Validity of Majority Voting Provisions

In Redwood Master Fund Limited and Others v TD Bank Europe Limited and Others [2002] EWHC 2703 (Ch), the Court clarified the scope of minority lenders to influence workouts, when considering how well the majority voting provisions in syndicated loans work. The decision was of unique importance to the syndicated loans market and welcomed by the banking community.

The borrowers, being two companies in a telecoms group, entered into a syndicated credit or facility agreement with a large number of lenders. The facility agreement provided for three separate facilities to be available to the borrowers (A, B and C), which set out the proportions in which each lender assumed commitments under the three facilities. Fifteen out of 38 lenders assumed C commitments; and 26 lenders assumed A and B commitments; no lender assumed an A or B commitment without also assuming the other.

An event of default occurred in the form of cross-default under the facility agreement triggered by the activities of a related company, such that it became necessary for the borrowers to negotiate a waiver. Clause 25, headed "Amendments and Waivers", was of central importance, providing for amendments and waivers to be sanctioned by a majority vote with any such amendments or waivers to be binding upon all parties.

An ad hoc committee of lending banks was established to conduct the waiver negotiations on behalf of lenders generally, and one of the elements ultimately negotiated was a reduction in the overall facility in the amount of 500 million Euros. Part of this reduction was achieved by using previously undrawn funds from facility A (which was a revolving credit facility) to reduce facility B (a larger and almost fully drawn term facility). In the borrowers' opinion, this was the best way to match their business needs. The ultimate waiver agreement was approved by the majority lenders, who held predominantly B commitments.

The Claimants were certain minority lenders who held predominantly A commitments, which had largely been purchased in the secondary market after the default. They objected to the funding obtained by drawing under facility A to reduce facility B.

The Claimants asserted that against the background of admitted risk in respect of the related company's longer term viability, the waiver agreement was manifestly unfair to the A lenders as a class, or at any rate to that minority of lenders who, like the Claimants, held only A commitments, or else held predominantly A commitments. Because of the related company's cross-default, the A lenders had been absolved from any obligation to advance any funds to that company.

The Claimants recognised that it was open to a majority of lenders to waive the default, and so render the A lenders liable to honour their lending commitments; and the Claimants had even been paid a premium to take these commitments on. But whilst it was, or may have been, one thing for the terms of the waiver to require the A lenders to advance funds for the working capital purposes of the group of companies as a whole, it was, the Claimants argued, quite another to require them to advance funds to the related company in its distressed state for the purpose of prepaying or reducing the B loan in respect of which no repayments were due until 2004. The effect of this aspect of the waiver agreement was pro tanto to transfer to the A lenders the exposure, and with it the risk, which had hitherto been faced by the B lenders.

In short, the Claimants' main point of complaint, was that the waiver agreement discriminated against the A lenders as a class by imposing discriminatory and disapportionate overall reductions in A and B and, at a time when the future viability of the related company was in question, subjected the A lenders as a class - or at least that minority sub-class of A lenders of which the claimants formed part - to an unfair exposure to risk solely for the purpose of removing an equivalent risk from the B lenders.

The Claimants' case was advanced on the two alternative grounds that:

  • there had been a subjective lack of good faith by the majority lenders; or
  • viewing the matter objectively, no reasonable lender could have concluded that the waiver agreement was in the interests of the lenders as a whole.

The Court held that the minority lenders were bound by the terms of the waiver. It was unable to accept that there had been a "subjective lack of good faith", which the court regarded simply as a politely phrased allegation of subjective bad faith. In turn, the allegation appeared to amount to an allegation that the majority lenders in general, and TD Bank in particular, were motivated in promoting the waiver either by (i) a wish to improve their own position at the expense of the A lenders or (although the judge did not in fact understand the Claimants to have suggested this), (ii) by motives of vindictiveness or malice towards the Claimants and other A lenders of like interest.

Of the Claimants' argument that provision for a two thirds majority to make binding amendments and waivers to the agreement, had to be exercised bona fide for the benefit of the lenders as a whole, the judge held that this could only be so if a term to that effect could properly be implied in the agreement. The judge agreed with the majority lenders that such a term could not be implied into the agreement. He stated that having regard to the particular terms of the facility agreement, Clause 25 was and was intended to enable the majority lenders to make decisions binding on all three classes, even though it might perhaps be capable of being said by one class that the decision could not be said to be for its benefit.

The judge also found that in a case such as this, with an inherent potential for competing interests between lenders under the three facilities, an assessment of the validity of a majority decision by reference exclusively to whether or not it was for the benefit of the "lenders as whole", was misplaced. The starting point in assessing the validity of the exercise of majority voting power was by reference to all the available evidence, including whether the power was being exercised in good faith for the purpose for which it was conferred. In this case, he considered that it was.

The Court's decision has ensured that the operation of the syndicated lending market, particularly in connection with restructurings, will not be hampered by difficulties with majority voting provisions.

Exchangeable Bonds

"Not Contingent" Deliverable Obligations

In Nomura International Plc v Credit Suisse First Boston International [2003] EWHC 160, the Court held that certain exchangeable bonds were "Not Contingent" within the meaning of Section 2.18(B) of the 1999 ISDA Credit Derivatives Definitions ("the ISDA Definitions"), despite the existence (in certain circumstances), of rights of both the bondholders and the trustee for the bondholders to exchange or convert the bonds into shares.

The Claimant ("N") had purchased from the Defendant ("C") credit protection referrable to Railtrack Plc in a principal amount of US$10 million, for which N paid 0.47% of US$10 million per annum. The terms of the transaction were contained in a letter agreement ("the Confirmation") which entitled N on the occurrence of a "Credit Event" in relation to Railtrack Plc, to deliver to C bonds up to the value of US$10 million having certain "deliverable obligation characteristics", including the characteristic of "Not Contingent". Upon such delivery C was obliged to pay N the value of the bonds. The applicable Credit Events included bankruptcy.

The Confirmation was expressly subject to the ISDA Definitions, unless inconsistent with the terms of the Confirmation itself.

On 7 October 2001, Railtrack Plc entered into administration. On 9 November 2001, N served certain notices on C (including a Notice of Intended Physical Settlement), specifying certain Railtrack Plc 3.5% Exchangeable Bonds due 2001 ("Exchangeable Bonds") as the obligations it expected to deliver in settlement of the credit derivative transaction. C refused to accept delivery of the Exchangeable Bonds.

The key question in deciding whether or not the Exchangeable Bonds constituted Deliverable Obligations under the Confirmation, was whether they satisfied the Obligation Characteristic of "Not Contingent" as defined in Section 2.18(B) of the ISDA Definitions. In particular, the issue was whether the payment of principal in respect of the Exchangeable Bonds was or was not "subject to any contingency" (see Section 2.18(B)(vii)(A) of the ISDA Definitions). C claimed it was. N claimed that it was not.

The Exchangeable Bonds entitled the holder to interest and payment of principal amounts on final maturity. Railtrack Plc had no relevant rights to exchange or convert that payment obligation to any other form of obligation or security, but in certain circumstances, the bondholders and the trustee for the bondholders (under the terms of the Trust Deed by which the Exchangeable Bonds were constituted) ("the Trustee") did have such rights (i.e. they were "vanilla convertibles").

The relevant rights contained in the Exchangeable Bonds were as follows:

  • Condition 9(A):

"Exchange Periods and Exchange Price: a Bondholder shall have the right ("the Exchange Right") to exchange ("Exchange") all or any of its Bonds for registered original shares of 25p each in the Railtrack Group….credited as fully paid. Upon exchange the right of the exchanging Bondholder to repayment of the principal amount …. shall be satisfied by the redemption of the Bond to be exchanged in cash at its principal amount and an application of the proceeds (by the Issuer irrevocably acting on behalf of the Bondholder)….in subscription for the relevant number of Ordinary Shares and thereupon the exchanging Bondholder shall have no further claim against the Issuer….. "

The relevant number of Ordinary Shares to be issued on exercise of the Exchange Right was to be determined by dividing the principal amount of the bonds to be exchanged by the "Exchange Price". The Exchange Price was initially fixed at £18.40 a share, but adjustable in certain limited circumstances. Accordingly, if a bondholder chose to exercise his right, Railtrack Plc's obligations to pay the value of the bonds would effectively be replaced by an obligation to deliver the relevant number of shares in Railtrack Group Plc, calculated by dividing the principal value of the bonds exchanged by (usually) £18.40.

The Court considered that no bondholder was likely to exercise its option to convert the debt into shares unless the shares could be realised for more than £18.40 at the time of Exchange. The judge commented that the figure of £18.40 was, on the evidence, a figure significantly in excess of the then current market price of the shares when the bonds were issued. He also emphasised that the predicate to the exercise of the Exchange Right was the holder's own decision to take the benefit of it for himself. This could be contrasted to the predicate to the operation of the credit derivative transaction, which was a "Credit Event" in relation to Railtrack Plc and which led the bondholder (N) to deliver the bonds to C as seller of the protection, in exchange for payment. The judge noted that it was most likely that the "Credit Event" would reflect and crystallise the lack of benefit to be derived from the Exchange Right, and the decision of the bondholder to deliver the bonds would reflect the commercial reality that those bonds were worth less than the value of the obligation of the party selling the protection.

In addition, the Exchangeable Bonds also provided for automatic exchange by the Trustee in certain circumstances, as follows:

  • Condition 9 (D)

"Automatic Exchange by the Trustee: The Trust Deed provides that the Trustee may, at its absolute discretion (and without any responsibility for any loss occasioned thereby) within the period commencing on the date 6 days immediately prior to, and ending at the close of business on the second London business day immediately prior to, the date fixed for redemption from time to time of any of the Bonds ….. elect (on behalf of the relevant Bondholders) by notice in writing to the Issuer and Railtrack Group Plc to exercise the Exchange Rights in respect of such Bonds pursuant to Condition 9 (A) and exchange the …Bonds for Ordinary Shares by reference to the Exchange Price applicable on such date if… the Trustee is satisfied or is advised by an investment bank in London of international repute… that the net proceeds of any immediate sale of the Ordinary Shares arising from such exchange… would be likely to exceed by 5% or more of the amount of the redemption monies and interest which would otherwise be payable in respect of such… Bonds … All of the Ordinary Shares issued on such exchange shall be sold by, or on behalf of, the Trustee as soon as practicable and… the net proceeds of sale… shall be held by the Trustee and distributed rateably to the holders of such …. Bonds."

The judge noted that the above mentioned Condition ("the widows and orphans clause") was designed to protect bondholders from losing the opportunity to benefit from the Exchange Right when that right was about to expire and was worth at least 5% more than the cash sum which was otherwise to be paid on expiry. If the Trustee then exchanged the bonds for shares, he was required to sell the shares as soon as practicable and account to the holder for the enhanced proceeds.

Although the judge did not appear to find the witness evidence of much assistance, he did note that C accepted that as a matter of commercial practice, vanilla convertibles should in fact satisfy the "Not Contingent" definition.

Therefore, the judge held that N was entitled to deliver the Exchangeable Bonds. In his view, a provision which operated in favour of a holder of bonds and which was exercisable at his option could not properly be described as a contingency to which that bondholder's right of payment was subject. He emphasised that the provision was within the control of the bondholder and not dependent on any external event, whereas a bond convertible at the Issuer's option was a real contingency affecting payment of the principal amount of the bonds. The judge was also of the view that it must have been in the contemplation of both parties that a Credit Event triggering the Confirmation would almost certainly mean that at the time of the delivery of the Exchangeable Bonds to C, the Exchange Right would have been commercially otiose. He considered the purpose of requiring that the Deliverable Obligation be "Not Contingent", was to ensure that the right to payment of the principal amount under that obligation could not be affected by external factors over which the seller of the credit protection, as holder of the bonds following delivery, had no control.

Nor was the judge persuaded by the argument that the fact that the exercise of the Exchange Right could depend upon an independent decision of a third party (the Trustee), rendered the exchangeable bonds contingent. It was the judge's view that Condition 9 (D) was intended to give effect and substance to the Exchange Right in Condition 9 (A) in circumstances where the holder of the bonds ought to exercise the right because it would be beneficial to do so. He emphasised that in circumstances where the seller of the protection was required to perform his bargain, the commercial reality was that he would acquire the right to payment as holder of the Exchangeable Bonds without that right being subject to a contingency, because the Trustee's right of exchange under Condition 9 (D) was exercisable only in the holder's interest, and would have lost its commercial purpose.

The judge stated that the payment obligation under a bond would be considered to be subject to a contingency when the holder of that bond may be deprived of the full benefit of it by some external event over which he has no control. However, a provision or provisions in the bond itself designed solely to protect his interests would not have that effect.

Therefore, the judge held that the Exchangeable Bonds were Deliverable Obligations within the terms of the Confirmation and C should have accepted them as such when N delivered the appropriate Notices to C.


The decision has been considered in certain quarters to be troublesome, particularly on the basis of a perceived misreading of the definition by the Court. For example, the Court appears to apply the test of contingency to the right of the bondholders, rather than to the obligations of the issuer of the bonds. Nevertheless, whether or not the Court misconstrued the commercial rationale underlying the definition, the decision has had the apparent benefit of expanding the range of deliverable obligations and therefore liquidity in the market.

The definition of "Not Contingent" has been amended in the 2003 ISDA Definitions to exclude only those obligations where payment of principal is subject to reduction.

Freezing Orders

Worldwide Order Ancillary to Foreign Proceedings

In Motorola Credit Corporation v Uzan [2003] EWCA Civ 752, the Court of Appeal considered the circumstances in which the Court would make a worldwide freezing injunction in support of litigation taking place in a non-contracting state.

The appeals and applications for permission to appeal before the Court related to both worldwide freezing orders and orders for cross-examination made against each of four defendants in exercise of the powers of the English Court to grant injunctive relief (1) in support of substantive proceedings abroad (being in this case proceedings in the US District Court for the Southern District of New York), (2) where the defendants in question were neither domiciled nor resident within the jurisdiction and (3) where there was no substantial connection between the relief sought and the territorial jurisdiction of the English Court.

The statutory provisions governing the exercise of the Court's jurisdiction are Section 37(1) Supreme Court Act 1981 which empowers the Court to "grant an injunction… in all cases in which it appears to be just and convenient to do so…", and Section 25 of the Civil Jurisdictions & Judgments Act 1982, which empowers the Court to grant all forms of interim relief in aid of foreign courts, unless "in the opinion of the Court, the fact that the Court has no jurisdiction apart from this section in relation to the subject matter of the proceedings in question makes it inexpedient for the Court to grant it".

Section 25 of CJJA was originally applicable only in cases where substantive proceedings were pending in a Brussels or Lugano state and the subject matter of the proceedings was within the scope of the Brussels or Lugano Conventions. However, Section 25 was extended by S.I. 1997 No. 302 (which came into force on 1 April 1997) to non-convention countries and to proceedings outside the scope of the conventions.

Rule 6.20 of the Civil Procedure Rules permits a claim to be served out of the jurisdiction with the permission of the Court "if … (4) a claim is made for an interim remedy under Section 25(1) of the 1982 Act".

However, on the face of these statutory provisions, no criterion or guideline is provided as to the test to be applied by the Court in considering whether it is "inexpedient" to grant an order.

The Court of Appeal held that there are five considerations which must be taken into account when deciding whether it is expedient to make an order:

  • whether the making of the Order will interfere with the management of the case in the primary court (e.g where the Order is inconsistent with an order in the primary court or overlaps with it);
  • whether it is the policy in the primary jurisdiction not itself to make worldwide freezing/disclosure orders;
  • whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state where the person enjoined resides or where the assets affected are located. If so, then respect for the territorial jurisdiction of that state should discourage the English Court from using its unusually wide powers against a foreign defendant;
  • whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order;
  • whether in a case where jurisdiction is resisted and disobedience to be expected, the court will be making an order which it cannot enforce.

In this case, the Claimant was a large multinational company involved, together with its affiliates, among other things in the sale of cellular telephone equipment. The defendants were members of a wealthy and powerful Turkish family who owned a telecommunications company which was the second largest supplier of mobile telephone services in Turkey.

Whether Freezing Order Registerable Charge

In Flightline Limited v Edwards [2003] BCC 361, the Court of Appeal considered whether a freezing order could create a registerable charge.

Flightline operated air routes on behalf of Swissair, which collapsed in 2001 and repudiated its arrangements with Flightline. In early 2002, Flightline commenced proceedings for damages against Swissair and obtained an order freezing Swissair's assets in England and Wales up to the value of £4.2 million.

Shortly after proceedings were commenced, Swissair was expecting to receive a significant payment in excess of £4.2 million from IATA. Consent orders were made for £4.2 million to be paid into an account in the joint names of the parties' solicitors and for the freezing orders to be discharged on the basis of an undertaking by Swissair not to withdraw or dispose of or deal with the monies in the joint account up to a limit of £3.325 million pending further order or consent of both firms.

Following the compulsory liquidation of Swissair in the English court, Flightline applied for leave to continue its action pursuant to Section 130(2) of the Insolvency Act 1986 and at first instance the judge concluded that Flightline had a charge over the monies in the joint account to secure any judgment it might obtain up to a maximum of £3.325 million and accordingly granted Flightline leave pursuant to Section 130(2).

The liquidators appealed, arguing that the effect of the joint account was not to create a charge and that even if a charge was created, it was void against the liquidator for non-registration pursuant to sections 395 and 396 of the Companies Act 1985.

The Court of Appeal allowed the appeal, holding that a freezing order did not create a security right over the assets from time to time subject to it because a freezing order did not, without more, impose an obligation on the part of the respondent to it to satisfy any judgment debt out of particular "frozen" assets. The freezing Order provided a sufficient hold to prevent the application of those assets but that was not enough to create a security interest.

Furthermore, the Court stated that it was not possible to interpret the terms of the consent orders so as to construe a provision to the effect that Swissair had to satisfy any judgment obtained by Flightline up to the specified maximum of £3.325 million out of the monies in the joint account. The freezing orders did not indicate that anything other than continuing interim protection of a freezing nature was intended to be provided. The mere fact that the monies in the joint account were under the control of the Court was irrelevant. The consent orders did not confer any security rights.

Therefore, the Court of Appeal considered that the judge had been wrong to conclude that the freezing order conferred a security right on Flightline and wrong to have granted leave to Flightline to continue the action.

Since no charge was created, there was no need to consider whether it was void for want of registration.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.