We have previously highlighted our Dispute Resolution team's successful attempts to oppose the variation of an £88 million worldwide freezing order and secure the continuation of such order, which addressed some key points of law on the obtaining and maintaining of worldwide freezing relief in support of action to enforce a judgment debt.
Two subsequent judgments in the same case ([2024] EWHC 2927 (Comm) and [2024] EWHC 3087 (Comm)) have recently been released, having formerly been subject to a seal and gag order.
These judgments usefully set out the principles and approach relating to applications for third party disclosure orders and related seal and gag orders. The judgments indicate the Commercial Court prefers a two-stage approach to such applications (as opposed to a single wrap around hearing) as favoured by courts in other offshore common law jurisdictions. This entails (i) seeking a hearing (in private) to determine whether or not to grant a seal and gag order; and (ii) a further hearing (on notice to the third party, with the protection of the seal and gag) to determine the disclosure application itself.
The judgments provide comprehensive analyses of the court's jurisdiction (i) under the Norwich Pharmacal jurisdiction; (ii) section 37 of the Senior Courts Act 1981; and (iii) the inherent jurisdiction to grant third party disclosure orders to enable parties to properly police freezing orders.
Background
Our client, Cancrie Investments Limited ("Cancrie"), has been assigned the benefit of a judgment debt amounting to approximately £82 million, which originates from a judgment in the United Arab Emirates.
Cancrie is pursuing the enforcement of this debt through legal proceedings in the High Court of England and Wales against the defendant, Mr Haider, who resides in London. As part of this strategy, Cancrie has secured a worldwide freezing order ("WFO") valued at £88 million over Mr Haider's assets.
The applications
Following the continuation of the WFO, Cancrie sought further relief on the basis that it considered that Mr Haider had breached the terms of WFO by providing insufficient disclosure of his assets and in view of the interim finding that there was a real risk that Mr Haider would dissipate assets.
Cancrie specifically sought further information from a third party bank, EFG Bank, which Cancrie understood held assets on Mr Haider's behalf which had potentially not been disclosed as required. Given the real risk of dissipation, this disclosure was sought without notice to Mr Haider so as not to alert him of the steps being taken. Otherwise, there would be a risk in the meantime of assets being moved and/or hidden.
At an earlier hearing before Mr Justice Butcher, the court indicated that any such disclosure application ought to be made on notice, at least to EFG Bank. Cancrie therefore sought disclosure pursuant to the two-stage approach which is common in offshore jurisdictions like BVI and Hong Kong (see for example CIF v DLG (BVIHCM2023/0050) and Asiya Asset Management (Cayman) Limited v Dipper Trading Co Ltd [2019] HKCFI 1090 respectively). This approach is typified by, first, an application made for a private hearing for a "seal and gag" order. With a seal and gag order in place, the third party then has the opportunity to consider the application for disclosure and state its position. On receipt of that position (which is often one of neutrality) the substantive disclosure application is then heard by the court.
Two-stage approach
Seal and gag order
EFG Bank was not given notice of the first application, for a seal and gag order, on the basis that the purpose of the order was to ensure that EFG Bank did not inform Mr Haider or his family of the disclosure application, which it may otherwise be legally bound or feel obligated to do. This approach protected the bank and ensures the purpose of the relief is not nullified by any disclosure which the bank may otherwise have been obligated to make.
The court considered the necessity of the seal and gag order in light of the potential risk of asset dissipation by Mr Haider. The court acknowledged the exceptional nature of such orders, which restrict the exercise of Article 10 rights to freedom of expression and derogate from the principle of open justice.
The court was ultimately satisfied that the order was strictly necessary to secure the proper administration of justice (including to allow Cancrie to police the WFO in circumstances where Mr Haider has not provided sufficient information as required) and prevent Mr Haider from taking steps to dissipate his assets. The court concluded that there is a strong legitimate interest of the court in ensuring that its orders are effective in these circumstances. Further, the seal and gag order was sought only for a limited time.
Accordingly, the court made an order preventing ESG Bank from informing Mr Haider (or anyone else) of the disclosure application and sealing the court file concerning that application until the conclusion of the hearing of that application.
Disclosure order
Shortly thereafter Cancrie returned to court to seek disclosure orders. The application was made without notice to Mr Haider, but on notice to ESG Bank, subject to the seal and gag order. EFG adopted a neutral position to the application. Again this hearing was conducted in private.
The disclosure application was granted pursuant to section 37 of the Senior Courts Act 1981 and/or the court's inherent jurisdiction and under the Norwich Pharmacal jurisdiction.
The court has the power to make disclosure orders, particularly where such disclosure orders supplement a freezing injunction and are necessary to police the same. A Norwich Pharmacal order allows information to be obtained from a third party who is either involved in or mixed up in wrongdoing to assist the advancement of proceedings in relation to the wrongdoing. Although it is an order made in exceptional circumstances and with narrow scope, it is a valuable tool to obtain information for the purpose of enforcement and recovery of assets in the face of a reluctant defendant.
Cancrie sought documents and information relating to two specific accounts held by EFG Bank which were understood to be held jointly by Mr Haider and his wife and specific investment portfolios and deposits of which Cancrie was aware. An order was also sought requiring EFG Bank to identify any other accounts of deposits held at EFG Bank by Mr Haider or his wife, or financing arrangements entered into by them with EFG Bank of which Cancrie was not aware.
Cancrie contended that the balance was firmly in favour of granting the disclosure orders sought due to the real risk of dissipation, non-compliance by Mr Haider with his asset disclosure obligations in the WFO, Mr Haider's failure to comply with obligations to disclose the source of payment of his living expenses and legal fees under the WFO, the real risk that the WFO is being breached (creating wrongdoing for the purpose of the Norwich Pharmacal orders) and that disclosure is necessary to ensure that the WFO is effective.
The court granted the order as sought, requiring EFG Bank to provide the necessary disclosure. The court emphasised the importance of such disclosure orders in policing freezing orders and ensuring their effectiveness and was satisfied that Cancrie had shown that disclosure was necessary for this purpose on the facts. EFG Bank was sufficiently involved (however unknowingly) in the wrongdoing due to its extensive banking relationship with Mr Haider and his family and was in a position to provide relevant information, which would not be likely to be disclosed in the proceedings at a later date.
The court also extended the seal and gag order for a period of eight weeks to allow time for EFG Bank to produce the required disclosure and for Cancrie to consider it and take any necessary steps (including further urgent applications) based on the information obtained.
Conclusion
These recent judgments underscore the critical role of seal and gag orders and third party disclosure orders in the effective enforcement and policing of worldwide freezing orders. The court's willingness to adopt a two-stage approach, as seen in other jurisdictions, provides useful guidance as to how prospective applicants ought to approach such applications.
Furthermore the judgments serve as valuable guidance for practitioners as to what steps may be available in the face of a defendant who is suspected of breaching a freezing order. It also illustrates the approach the English court will take in balancing the principles of open justice and the need to protect the integrity of its orders.
For clients and legal professionals alike, these judgments provide a clear framework for navigating complex enforcement scenarios, ensuring that justice is not only served but also effectively administered.
" The need to ensure that Court orders are respected, and not rendered futile and ineffective out weighs the interference with freedom of expression and the open justice principle. "
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
