Court upholds worldwide freezing order pending appeal

The decision, of Mr Justice Picken in  dealing with consequential issues stemming from the main dispute, shows that WFOs "will continue to have real bite" after a first instance judgment has been obtained, according to civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law.com.

"Applicants should take assurance from the ruling," Sheeley said. "English courts are willing to maintain a WFO during appeal proceedings or an enforcement process, and to utilise the tools available under the WFO."

The court also dealt with quantum, interest, costs, permission to appeal, stay of execution and the currency in which the judgment debt was to be paid.

The successful claimants in the main litigation were a number of Kazakhstani companies, who sought damages on issues including fraudulent inducement to pay for construction work. The court granted a WFO in the amount of £72 million over the assets of the two individuals behind the fraud, Maksat Arip and Shunar Dikhanbayeva, before the claim was issued.

Parties on both sides of the case sought consequential orders from the judge, who had refused permission to appeal on the merits of the case. Arip and Dikhanbayeva have made a separate application for permission to appeal, which has yet to be decided. In relation to the WFO, the claimant companies applied to remove certain exceptions, which meant that the fraudsters could still use their assets in the ordinary course of business, for living expenses and in relation to legal costs. They also sought the removal of their cross-undertaking in damages.

Mr Justice Picken acknowledged that, following the judgment against Arip and Dikhanbayeva, it was unlikely that the claimant companies would be called upon to compensate them for the effects of the freezing order. However, he ruled that the cross-undertaking in damages should remain in place pending disposal of the application for permission to appeal by the Court of Appeal for "essentially pragmatic" reasons. However, there was no need for 'fortification' of that cross-undertaking to remain in place, given the claimant companies' success in their "very substantial claim".

The judge  ruled that Arip and Dikhanbayeva should not be permitted to benefit from the legal expenses, living expenses and ordinary course of business exceptions to the WFO following the claimant companies' success in court. However, he ruled that the legal expenses exception should not be removed at this stage, but rather that Arip should be given sufficient time to "address the application properly", including by providing documentary evidence of his financial position. Sheeley said that the ruling showed that the traditional exceptions "can be refused post-judgment to ensure that all of the Responent's assets are available for enforcement".

"Further, the ruling shows that further asset disclosure, to create a clearer picture of assets available for enforcement, can be ordered to ensure the effectiveness of the WFO," he said. "The applicants were also relieved from the undertaking not to use documents disclosed under the WFO in other proceedings, to allow this information to be used in enforcement proceedings."

"Clearly, the English courts will be minded to ensure a WFO is utilised not only to protect assets but also to identify further assets to assist with an enforcement process. However, applicants should be aware that the cross-undertaking in damages, which is usually unlimited in amount, will remain in place until the outcome of any appeal proceedings," he said.