Freezing Orders Enforcing WFOs overseas under the Dadourian Guidelines

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Sometimes an English WFO is not enough.

The evidence of fraud might be overwhelming; the defendants' assets held through opaque structures in multiple jurisdictions; and the defendants might be domiciled outwith the jurisdiction.

In these circumstances, a claimant can apply to enforce its freezing order abroad under what have become known as the Dadourian Guidelines (after the Court of Appeal's decision in Dadourian Group Int Inc v Simms [2006] EWCA Civ 399).

The eight guidelines - which the CA stressed are just rules of general application - are described below.

1. The 8 Dadourian Guidelines

The eight guidelines are taken in turn below.

#1 The grant of permission to enforce abroad should be just and convenient for the purpose of ensuring the effectiveness of the WFO, and not oppressive to either parties to the English proceedings or third parties who may be joined to the foreign proceedings

This general guideline sets out the high-level questions the Court is always going to assess in the exercise of its discretion: justice and convenience, and oppression.

Here are some high-level points that bear on these questions:

  • How do the defendants hold their assets? Are the structures straightforward or opaque?
  • Where are the defendants? If they are in England, the existing WFO has more of a hold over them than if they are overseas.
  • What is the nature of the fraud? If it is vast and the evidence in support of it strong, this is a factor in favour of relief abroad.
  • Will the grant of relief lead to disputes abroad as to ownership of assets? If not, this again militates in favour of the grant of relief.
  • In how many jurisdictions are the claimants proposing to seek relief? The more jurisdictions on the list the more oppressive the application starts to look.

#2 All the relevant circumstances and options need to be considered, including the grant of relief on terms. Particular factors are (i) whether an undertaking to pay third party costs of compliance is given, (ii) the type of proceedings to be commenced abroad, (iii) the proportionality of proposed steps, and (iv) the form of order sought.

It is likely that the Court will usually require an undertaking to be given to pay the costs of a genuine third party in complying with an injunction. For example, if an order is obtained permitting a WFO to be recognised in Jersey, which order is then served on Barclays Bank Trust company, Barclays should be paid their (probably quite modest) costs of ensuring that the Jersey order is noted on their systems and complied with.

As for the type of proceedings to be commenced abroad, they might have a number of different possibilities:

  • They could be fairly straightforward proceedings seeking the recognition of the English freezing order under (say) the Brussels or Lugano convention. The costs of such proceedings should be relatively low.
  • They could be somewhat more difficult proceedings which require the claimant to persuade the foreign court to grant a freezing order in identical or near-identical terms to the English WFO. A foreign court in a common law jurisdiction will likely place a large amount of reliance and trust in the English court's decisions. But it will still have to exercise its own discretion and so such proceedings will be somewhat more involved and expensive.
  • They could be proceedings in which a claimant will allege and have to establish that an asset which it believes (but the defendant denies) belongs to the defendant should be frozen. This will likely be a substantial piece of litigation in its own right.
  • They could be proceedings in which the foreign court does not grant freezing orders as such, but grants other preservatory measures (e.g. charges over assets). Here, again, costs are likely to be higher than with option 2 because the foreign court will not be able to rely on the English decision in any significant way.

As for proportionality, this will assess the value of the relevant assets, the likely costs and complexity of the overseas proceeding, and other factors relevant on a case-by-case basis.

On the form of order sought, the key question here is not the minutiae of the drafting but the effect of the relief being sought abroad and the safeguards that will be built into it.

#3 The interests of the applicant should be balanced against the interests of other parties to the proceedings and any new party likely to be joined to foreign proceedings.

Here, the Court of Appeal made the following points in Dadourian:

  • A Claimant is prima facie entitled to take all reasonable steps to ensure that a WFO is effective. This is especially where assets are held through "... shadowy offshore trusts and companies formed in jurisdictions where secrecy is highly prized and official regulation is at a low level." (see [37])
  • On the other hand, a defendant should not be oppressed by an unreasonably multiplicity of suits and the need to incur unreasonable legal costs (see [38]).
  • Interests of third parties who are going to be sued must also be weighed in the balance. They will be afforded greater weight where the third parties are "independent" of the relevant defendant (see [39]).

#4 A Claimant should not normally be entitled to get local relief that is superior in nature to that obtained in England

This requires a bit of unpacking. The whole point of getting a local order in (say) Cyprus enforcing an English worldwide freezing order in Cyprus is to make the English order more effective.

But some jurisdictions do not recognise freezing orders, and instead grant relief such as pre-judgment attachments. These other orders may give the claimant security for his claim (giving priority over unsecured creditors), whereas in England security cannot be ordered pre-judgment.

The fact that foreign relief has the effect of granting security is not fatal; but it is a factor that has to be weighed in the exercise of the court's discretion.

#5 The evidence in support of the application should contain all information necessary to enable the Court to reach an informed decision, including as to the applicable law and practice of the foreign court, the nature of the proposed proceedings, the assets held abroad, and the person(s) who hold those assets.

This Guideline really speaks for itself.

#6 The standard of proof as to the existence of assets that are both within the WFO and within the jurisdiction of the foreign court is a real prospect, that is the applicant must show that there is a real prospect that such assets are located within the jurisdiction of the foreign court in question.

This Guideline applies where there is a dispute about whether a defendant owns an asset in a foreign jurisdiction. It may often be inapplicable, say (for example) where the Dadourian relief is targeted at assets that a defendant has disclosed.

What, though, if you want to target a chateaux in France that the defendant has not disclosed? This guideline makes it clear that you don't need to establish that the chateaux is owned by the defendant. rather, the test is: whether there is a real prospect that the chateaux is owned by the defendant. In other words, the test is much less than a balance of probabilities standard.

An alternative route is to have issues relating to the ownership of the chateaux determined before it is frozen. But, as the CA accept at [47] of Dadourian, this isn't very practicable - it could be sold and the proceeds dissipated well before ownership issues are determined!

#7 There must be evidence of a risk of dissipation

This will often be established by the evidence that has been relied upon in support of the English order.

#8 The application should usually be made on notice, but in cases of urgency it may be made ex parte.

If the overseas asset it likely to be dealt with in the immediate future, a without notice application is justified. But where this is not the case, an inter partes application should be used.

One practical tip: if you go without notice, you should get permission from the court to defer service of the Dadourian order granted by the English court until after the relief that you are seeking in an overseas court has also been obtained.

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