Dadourian Group International Inc v Simms and others
[2006] EWCA Civ 1745, [2006] All ER (D) 305 (Dec)
Court of Appeal, Civil Division
Sir Andrew Morritt C, Arden and Longmore LJJ
20 December 2006
The court has given guidance on the exercise of its discretion to release a party who has obtained a freezing order from his undertaking not to use information obtained thereby in contempt proceedings against the other party.
Michael Ashe QC and Stuart Cakebread (instructed by David Wyld & Co) for the appellants.
Clive Freedman QC and Charles Samek (instructed by Wallace & Partners) for the respondent.
The claimant brought an action against the third and fourth defendants seeking damages for conspiracy and fraud. It obtained a worldwide freezing order, with corresponding disclosure orders.
An order was later made requiring the defendants to file further affidavits and to attend for cross-examination. As part of that order, the claimant undertook not to use the evidence obtained pursuant to the order for the purpose of any committal proceedings or the trial of the action without the leave of the court.
After the cross-examination, the claimant applied to be released from its undertaking before the trial of the action. The judge allowed the
application, on terms so far as the release was to be for the purposes of the trial but generally so far as the release was for the purposes of committal proceedings. The defendants appealed.
LADY JUSTICE ARDEN:
In her Ladyship’s judgment, the court should provide significant protections for the subject of a freezing injunction who was cross-examined or provided information under a freezing order. Subject to those protections, the court should lend its weight to an application to use information obtained from such a person for the purpose of enforcing or policing the freezing order. A freezing order was an important tool in the court’s armoury for the purpose of doing justice between the parties, or more precisely for the purpose of preventing or policing the disposition of assets which would inhibit the enforcement of an order. In the normal situation, failures to provide information about assets subject to a freezing order could be enforced by orders for further information. Litigants who were the subject of an order to produce further information would generally produce it to the best of their ability.
But that was not always the case, and the court would in particular be astute to identify those defendants who were deliberately concealing assets. In some situations, a party who obtained a freezing order would have little option but to bring contempt proceedings to ensure that the order was properly observed. Litigants who did not properly comply with orders made by the court to provide affidavits or information would be aware that the court might punish them for contempt because of the penal notice attached to the order.
The threat of contempt proceedings was more likely to motivate a person to give information frankly if the court was willing to give permission for the use of information obtained under a freezing order in any appropriate case, than if the court was prepared only to give permission to use that information in contempt proceedings in exceptional circumstances.
The court should not shrink from enabling a party who had obtained a freezing order to use the information obtained under the freezing order for contempt proceedings if that was necessary to protect that party’s position. The court was not required to find that exceptional circumstances existed before it gave permission.
The principle applying to the grant of permission to use information provided by the party under a freezing order in contempt proceedings against that person in a case such as this was that it should be just and convenient for that information to be used for the purpose of enforcing or policing the freezing order.
The particular matters would depend on the facts. However, in general the court would need to examine the basis on which it was said that the party had failed to comply with an order of the court, and to consider whether in all the circumstances it would be reasonable for such committal proceedings to be brought. That involved considering the seriousness of the alleged non-
compliance.
The court would no doubt want to consider whether, if time permitted, some other, less draconian, application for the production of the
information necessary to protect the rights of the party who obtained the freezing order would be likely to be sufficiently efficacious, such as an
application for further information. Obviously, the court should refuse permission to use information obtained under the freezing order if it could see at that stage that the committal proceedings would be bound to fail, or if the information in respect of which the release from the undertaking was sought would not be material in the committal proceedings. The court should clearly consider the objections or defences of the person against whom committal proceedings might be brought before deciding to grant permission for the information to be used.
The court would in general also need to consider whether use of any part of the examination in contempt proceedings could be said to be unfair. If, for example, the party who obtained the freezing order used the cross-examination to extract admissions from the person cross-examined on the motive for concealment rather than the location of assets, then the court might consider that it would be unfair to the party cross-examined to allow evidence of the cross-examination, or at least the relevant part of the cross-examination, to be used in the contempt proceedings.
The fact that the person giving evidence, though aware that he could claim the privilege against self-incrimination, decided not to make that claim, did not automatically make the grant of permission unfair. The position had to be considered on its facts.
The court should bear in mind that it was able to give permission on terms, or to give permission to use some only of the evidence to which the
application related.
Her Ladyship considered the facts and dismissed the appeal.
Lord Justice Longmore and Chancellor Morritt delivered judgments concurring in the result.
