AAA v BBB (a company registered in Curacao) (Consequentials) [2025] EWHC 1763 (Comm)

[2025] EWHC 1763 (Comm)IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTSOF ENGLAND OF WALESCOMMERCIAL COURT (KBD)CL-2024-000694Venue COURT 8, ROLLS BUILDINGDate 4 July 2025
Before
THE HONOURABLEMR JUSTICE HENSHAW_______________________________
Between
AAAApplicant-v-
Between
BBB (a company registered in Curacao)Respondent-v-
Between
CCC (a company registered in Cyprus)DDD (a company registered in the Marshall Islands)EEE (a limited partnership)FFF (a company registered in Latvia)GGG (a company registered in Latvia)HHH (a company registered in the Isle of Man)IIIJJJKKKLLLMMMNNNNon-Cause of Action Defendants/Respondents_______________________________WILLIAM BUCK (Instructed by KAMEN SHOYLEV) appeared for Claimant/ApplicantFAISAL OSMAN (Instructed by QUINN EMANUEL URQUHART & SULLIVAN LLP) appeared for First Defendant/RespondentNIRANJAN VENKATESAN KC and MORITZ GRIMM (Instructed by PCB BYRNE LLP) appeared for Second, Seventh, Eleventh, Twelfth and Thirteenth Defendants/Respondents for The Third, Fourth, Fifth, Sixth, Eighth, Ninth and Tenth Respondents did not appear and were not represented
JUDGMENT(Approved)
Digital Transcription by Epiq Europe Ltd,Lower Ground 46 Chancery Lane WC2A 1JE
[1]MR JUSTICE HENSHAW: This is a consequentials hearing following a judgment I handed down on 30 June 2025, in which I concluded that the time for serving the claim form had expired by the time the Worldwide Freezing Order was granted in this case, and by the time the claim form was purportedly served. Further, I found that the grounds for a retrospective extension of time were not, and are not, met; and that the Claimant failed to disclose material facts on the extension application. Accordingly, I held that the claim form, and the order purporting to extend the time for serving it, must be set aside and that the Worldwide Freezing Order must be discharged.[2]Until this morning the Claimant was seeking a stay of the discharge of the existing freezing order, alternatively, a new interim freezing order pursuant to a new arbitration claim form which the Claimant had intended to issue, which has in the event been filed today. The Claimant was also seeking, until recently, retrospective consent for collateral use that has been made of materials obtained pursuant to disclosure provisions in the freezing order. Such materials have been used, it appears, in the underlying arbitration in Latvia in aid of which the injunction was obtained, and also in proceedings in Cyprus where the Claimant is seeking a further freezing order. Such use was clearly in breach of the collateral use undertaking in the freezing order. The Claimant says he has now belatedly asked the arbitrators and the Cyprus court to disregard these materials pending a decision by this court on collateral use. In addition, as canvassed during oral argument, it will be necessary to make a further order in order to deal with aspects of the collateral use that has been made.[3]As of this morning, the Claimant has explained through his counsel that he is not in a position to advance an application today for a new interim freezing order, nor an application for permission for collateral use, save in one limited respect. That is, that the Claimant seeks permission to use materials obtained in connection with the original freezing order for the purposes of his proposed new application for a freezing order in the proceedings to be commenced by the new arbitration claim form. The Claimant says such permission is necessary in order for him to comply with his duties of full and frank disclosure(a) in seeking permission to serve the new proceedings on the Defendant out of the jurisdiction, and(b) in seeking a new freezing order, which it is envisaged would initially be done at a "ex parte on notice" hearing.[4]The Defendants oppose the grant of any such permission per se, and also on the basis that it would serve no useful purpose because(1) the appropriate sanction for the breaches of the Claimant's full and frank disclosure duties to date is that the court would in any event refuse to grant a fresh freezing order;(2) the court would in fact have no jurisdiction to grant a new freezing order; and(3) the grounds for a new freezing order could not be made out, in particular as regards risk of dissipation.[5]I have come to the conclusion that the Defendants are essentially correct and that no such permission should be given.[6]First of all, at least as matters stand, the court would in my view have no jurisdiction to grant a further freezing order. Under section 44(3) and (4) of the Arbitration Act 1996, unless the case is one of urgency the court can make an order only with the permission of the tribunal or the agreement of the other parties. Such urgency has not been made out. As I noted in my previous judgment, the defendant to the arbitration, BBB, was on notice of potential legal proceedings at least since an email from the Claimant of 5 December 2023, and on notice of the arbitration proceedings since a letter from New Balkans Law Office dated 26 January 2024. Yet, as I noted, there was no evidence before Dias J (who granted the freezing order) of BBB having taken steps in the ensuing 15 months to dissipate assets or conceal evidence.[7]Moreover, it is apparent from the evidence before the court today that the Claimant submitted its claim to the arbitral tribunal in Riga, Latvia on 20 February 2025. There has therefore been ample time, it would appear, to seek the tribunal's consent to an application to this court for urgent relief. No explanation has been provided for why it appears the tribunal was not asked for any such permission. It is not appropriate, or in accordance with section 44 of the Act, for the court to intervene in this way, in the context of an arbitration that has now been going on for some months, without the consent of the parties or the permission of the tribunal.[8]Secondly, section 44 of the Act applies to foreign seated arbitrations by virtue of section 2(3) of the Act, but the court may refuse to make an order if in its opinion the fact that the arbitration is seated abroad "makes it inappropriate to do so". By analogy with the position under section 25 of the Civil Jurisdiction and Judgments Act 1982, it is inappropriate to make such an order in circumstances where the evidence does not indicate that BBB, as the defendant to the arbitration, has assets in England and Wales over which this court's enforcement jurisdiction could be exercised. As was set out in submissions or evidence before the court on the previous occasion, it appears that the only putative asset was a chose in action in favour of the Fourth Respondent (which is not BBB itself) which, on the evidence, was a Belize-sited asset.[9]Thirdly, at least as matters stand, the breaches of the Claimant's duties of full and frank disclosure when the injunction was obtained and when the extension order was granted are such that it would refuse to regrant an injunction. The usual, albeit not invariable, sanction for breach of those duties is for the court to discharge a freezing order and refuse to regrant one. As Saini J recently put it in Apollo XI Limited v Nexedge Markets [2025] EWHC 1488 (KB) [62]:
"The starting point (and usually the default end point) for breach of full and frank disclosure and a failure in fair presentation is immediate discharge of injunctive relief without renewal."
I note that that was a case of serious but non-deliberate disclosure. Indeed, other cases make clear that refusal to regrant the injunction may well be the appropriate sanction even in cases of non-deliberate breach: see, for example, Millhouse Capital UK Ltd v Sibir Energy plc [2010] BCC (475) at [107] and Arena Corporation v Schroeder [2003] EWHC 1089 (Ch) at [213(iv)].[10]The importance of applying an appropriately severe sanction for failure to make full and frank disclosure is also underlined by numerous other authorities. These include Bank Mellat v Nikpour [1985] FSR 87, VTB Commodities Trading DAC v JSC Antipinsky Refinery [2020] EWHC 72 (Comm), and Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm). As has been made clear, the sanction for a breach of the duty of full and frank disclosure is concerned not only with the parties, but also has a deterrent aspect and aims to uphold the integrity of the judicial process on ex parte applications: see, for example, Gee on Commercial Injunctions, paragraph 7-019 and cases cited. Christopher Clarke J in the Millhouse case said at [104]:
"The court will look back at what has happened and examine whether, and if so to what extent, it was not fully informed and why in order to decide what sanction to impose in consequence. The obligation of full disclosure, an obligation owed to the court itself, exists in order to secure the integrity of the court's process and to protect the interests of those potentially affected by whatever order the court is invited to make. The court's ability to set its order aside and to refuse to renew it is the sanction by which that obligation is enforced and others are deterred from breaking it. Such is the importance of the duty that, in the event of any substantial breach, the court strongly inclines towards setting its order aside and not renewing it, so as to deprive the defaulting party of any advantage that the order may have given him. This is particularly so in the case of freezing and seizure orders."
And at [106]

the judge said:

"As with all discretionary considerations, much depends on the facts. The more serious or culpable the non-disclosure, the more likely the court is to set its order aside and not renew it however prejudicial the consequences."
[11]The factors relevant to the exercise of the power to refuse to regrant a freezing order include the culpability of the applicant, the importance and significance to the outcome of the application of the matters not disclosed, and the nature of the order obtained, as well as the merits of the claim: see Dar Al Arkan Real Estate Development v Al Rafai [2012] EWHC 3539 (Comm) [149].[12]In the present case, the breaches by the Claimant were serious and culpable. As has been pointed out by the Defendant, an applicant seeking a freezing order can have no reasonable excuse for overlooking so basic and fundamental a requirement as the validity of the claim form, even if the breach is non-deliberate. The failure to tell Dias J on 7 February 2025, when the freezing order was obtained, that the claim form had expired was then compounded. The Claimant did not then promptly disclose that fact even after its advisers became aware of it, until a late application was made some weeks later for an extension of time. That application itself contained further material non-disclosures, as indicated in my earlier judgment.[13]It has become apparent that there are further matters which ought to have been disclosed, but which were not disclosed. In recent correspondence various matters have been pointed out to the Claimant, which also ought to be highlighted on any fresh application for an injunction, the clear implication being that they are and always were material. Those matters include the position of CCC in terms of financial security, which I shall come to, which is highly relevant to risk of dissipation. In addition, it appears that there was a failure to make any disclosure of a large volume of accounting data showing payments to Green Tiger, a company owned by the Claimant, which on BBB's case amounted to performance of the contract whose alleged breach is the basis of the Claimant's arbitration claim. The matters which were not disclosed were important to the outcome of the applications, particularly those relating to the validity of the claim form, which went to fundamental matter of jurisdiction.[14]It is an aggravating factor that the order obtained in this case was a freezing order.[15]Further, and leaving aside any question about arguable case on the merits, on current evidence the requirement to show risk of dissipation has not been satisfied. I have already made the point about BBB being on notice of the dispute and the lack of evidence of actual dissipation. As regards the Second, Seventh and Eleventh to Thirteenth Respondents (“NCAD Parties”), I note that the total claim against BBB is for approximately €11 million of which about €3 million is said to be due from the NCAD Parties to BBB. Yet the evidence includes CCC's financial statements for the year ending 31 December 2023 indicating turnover of approximately €269 million, profit of €114 million, net equity of €42 million and an interim dividend paid in 2023 of €94 million.[16]For all those reasons, had the court been asked to grant a fresh freezing order today, it would have declined to do so. Certainly on current evidence, it is very difficult to envisage the court doing so on some future application. For that reason, I would conclude that permission to make collateral use of material for the purpose of a fresh freezing order application would serve no useful purpose. As with my previous judgment, given the view I have taken on those issues, I find it unnecessary to consider whether the court would have jurisdiction to make a section 44 order against the NCAD Parties, as third parties to the arbitration, at all.[17]In addition to those matters, I do not consider that the normal criteria for the grant of permission to make collateral use of materials obtained pursuant to a freezing order are made out.[18]The existing freezing order is to be set aside and no new freezing order granted today even on an interim basis. The original freezing order was wrongly obtained, and hence so was the ancillary disclosure order. It would therefore clearly be wrong retrospectively to give permission for collateral use. But equally it would be wrong, in my view, to give prospective permission even for a limited purpose. That would, in practice, allow the Claimant to keep some of the benefits of orders which were wrongfully obtained. As the NCAD Parties point out, an applicant who has breached the duty of full and frank disclosure cannot be allowed to obtain any advantage from the proceedings and must be deprived of any advantage he may already have obtained by means of the order wrongly obtained: see, for example, R v Kensington Income Tax Commissioner [1917] (1) KB 486, 509, cited with approval in Brink's Mat v Elcombe [1988] 1 WLR 1350, 1357C; see also Tugushev v Orlov [2019] EWHC 2031 (Comm) [7].[19]In addition, the ordinary grounds for release from the collateral use undertaking are not made out. Those grounds require an applicant to identify cogent and persuasive reasons establishing special circumstances: see Tchenguiz v Serious Fraud Office [2014] EWCA Civ 1409 [50(ii)]. Here, there have been serious breaches of the undertakings in circumstances where the Claimant was aware of the collateral use undertaking (and privilege has not been waived in order to demonstrate any misunderstanding). Moreover, there has not been a showing of special circumstances. It appears to me that even if the Claimant were (despite the contents of this judgment) to pursue a further application for permission to serve out or for a freezing order, any problems relating to the need to make full and frank disclosure can be dealt with in a highly specific and narrow manner, probably by correspondence between the parties, failing which by asking the court to give a ruling on any specific, concrete points of disagreement. But in any event, it would clearly be inappropriate to grant any form of general leave of the kind currently sought.[20]For all those reasons, I therefore refuse the Claimant's application. Epiq Europe Ltd hereby certify that the above is an accurate and complete record of the proceedings or part thereof. Lower Ground, 18-22 Furnival Street, London EC4A 1JS Tel No: 020 7404 1400 Email: civil@epiqglobal.co.uk

Cited in 1 later judgment