Where Defined Terms Go Wrong: Getting The Freezing Order Terms Right

The English court aids foreign fraud proceedings through section 25 freezing orders under the Civil Jurisdiction and Judgments Act 1982. The recent GFH Capital v. David Haigh case highlights the necessity of precise drafting, as ambiguities can lead to the expiry of such orders.
UK Criminal Law
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In addition to being a key forum for the substantive resolution of fraud disputes, the English court regularly plays an important role in support of foreign proceedings. Perhaps the cornerstone of this support are the different forms of interim relief it offers to a litigant engaged in foreign proceedings under section 25 of the Civil Jurisdiction and Judgments Act 1982, including freezing orders.

Section 25 freezing orders should not be seen as identical to freezing orders made in the context of domestic proceedings. Differences between the two are subtle, but are very important, as can be seen in the recent decision of the Court of Appeal in GFH Capital v David Haigh and Others [2024] EWCA Civ 65.

The DIFC proceedings against Mr Haigh and the application below

The context to this decision is an embezzlement perpetrated by Mr Haigh, a former deputy CEO of the claimant, in the amount of US$5 million. The claimant obtained a freezing order against Mr Haigh in the Dubai International Financial Centre (DIFC) courts, where it brought its substantive claim against Mr Haigh. The claimant thereafter sought a freezing order in support of the DIFC proceedings from the Commercial Court in London, which was granted.

The proceedings in the DIFC were somewhat protracted: judgment was originally entered against Mr Haigh in 2016, but then set aside in 2017. Thereafter, a further trial took place, in which Mr Haigh played no part, resulting in the claimant obtaining judgment against him (again) in 2018.

The claimant later sought to enforce the DIFC judgment in England, which was granted in 2020. In entering a judgment in this jurisdiction based on the DIFC proceedings, Mr Justice Henshaw rejected Mr Haigh's contention that an out of time appeal that he had recently initiated in the DIFC (without paying the appropriate fee) was a bar to enforcement.

Following judgment being entered against him in England, Mr Haigh applied to set aside the freezing order against him. The main basis on which he sought to do so was that the terms of the section 25 freezing order made it apparent that the order had been made in support of the original DIFC proceedings and not any proceedings in England. Given the DIFC proceedings had been finally resolved, Mr Haigh contended that the claimant was no longer entitled to maintain the section 25 freezing order: put simply, there was no longer any foreign claim that the freezing order could support.

To which proceedings was the order referring?

At first instance, Mr Haigh's application succeeded. Andrew Baker J concluded that the 'claim' referred to in the freezing order could only properly be understood to be the substantive claim in the DIFC. That claim having been resolved definitively in 2018, the freezing order had already expired.

The claimant, clearly eager to maintain the freezing order in England where Mr Haigh and associated parties appeared to hold assets, appealed. The claimant submitted that the 'claim' to which the freezing order referred must, in fact, be the proceedings initiated by way of a CPR Part 8 claim form to obtain the section 25 freezing order, and not the underlying DIFC proceedings.

The claimant also put forward a further argument that, in so far as Mr Haigh had an outstanding application to appeal the DIFC judgment, there had been no disposal of those proceedings. Consequently, even if the freezing order was referring to the DIFC proceedings, they were not at an end.

The Court of Appeal carefully considered the way in which the freezing order had been drafted and how it departed from the standard form of freezing order. An important point, oft-repeated by courts in the freezing order context both on discharge applications and on appeal, is the extent to which these differences from the standard form order were brought to the judge's attention at the time. A failure to do so can often be a source of drafting inconsistencies and errors.

The consequences in this case were readily identifiable. The Court of Appeal noted the drafting contradictions contained in the order, for example that the capitalised term "the Claim" was not actually defined and that an uncapitalised term of "the claim" was used in a context that seemed to refer to the English proceedings. There was also provision made in the order for costs, which tended to support the proceedings being the substantive (DIFC) proceedings.

The Court of Appeal had centrally in mind the purpose of section 25 freezing orders. Such orders must be understood in their proper context, namely as being in support of foreign proceedings. Therefore, section 25 freezing orders necessarily focused on that support and should not be used as a vehicle for turning the Part 8 proceedings into a substantive dispute in and of itself.

Finally, the Court of Appeal rejected the suggestion that an out of time appellant's notice would result in the proceedings not having been disposed of. The point was to some extent theoretical: Mr Haigh confirmed that he had no extant appeal in the DIFC at the time this came on for consideration by the Court of Appeal.

In the result, the freezing order had expired.

Lessons for claimants in foreign fraud claims

The first takeaway from the judgment for those seeking section25 freezing orders and more widely is to ensure that freezing orders are tightly drafted.

Quite often, applications for freezing orders are made under significant time pressure and there is an understandable focus on the evidence in support of the application.

However, this case shows that the draft order should not be left behind: consistency of terms and correct use of defined terms should be incorporated into orders at an early stage, carried through in the proceedings, and regularly stress-tested against wider developments in the proceedings. The Court of Appeal's description of the order in this case was that it was "not happily drafted" and resulted in serious consequences for the claimant.

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.

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