A recent case in the Commercial Court in London saw the successful recipient of a worldwide freezing order (WFO) ordered to provide an asset disclosure when it could not provide fortification for a cross-undertaking. This is the first reported case of an order of this nature under English law.
At its most basic, the purpose of a WFO is to freeze the respondent’s assets where there is a risk such assets may be dissipated, particularly when those assets are overseas. However, with such an oppressive order, the applicant may be required to fortify (i.e. pay funds into court or put in place a bank guarantee) its cross-undertaking in damages. This is in case the injunction is wrongly granted and the respondent suffers a loss as a result. This oppressiveness is heightened still with general freezing orders, such as WFOs, as it is hard to determine what the level of loss would be, so judges must look at a respondent’s potential risk of loss, which is more difficult to quantify.
In this case, the applicant obtained a WFO on a without notice basis but adduced evidence that it did not have assets within the jurisdiction to provide fortification of its cross-undertaking in damages due to respondent’s underlying conduct. Interestingly Foxton J found there was no reliable evidence that this was the case, as the applicant’s financial difficulties seemed to pre-date the dispute and have a wider scope beyond it.
The respondent then applied to vary the WFO to require fortification on the basis that it would suffer a significant loss in a relation to a drilling project. Although the respondent was currently unable to establish a sufficient risk of loss, it was found that it might be able to do so in the future because of the fluid and unpredictable nature of such a project.
Foxton J also noted the “apparent asymmetry” between the parties – the applicant had obtained an injunction and come under a contingent liability under the cross-undertaking in damages without the burden of adducing any evidence as to its assets, all the while subjecting the respondent to a quite onerous order.
When ordering the applicant to provide asset disclosure, Foxton J reasoned that such disclosure would act to somewhat “ameliorate the consequences of its inability to identify assets within the jurisdiction,” especially since it was recognised that the respondent could suffer loss in the future. Furthermore, the judge held that the applicant was “less well placed to complain about the invasive nature of the disclosure order of this kind or its interference with rights of privacy or confidence” compared to the respondent subject to the WFO. If the applicant did not provide the asset disclosure by the specified date, the WFO would lapse.
This case demonstrates that the Courts will consider the balance of interests between an applicant and respondent when granting these types of order i.e. the applicant’s wish to have the respondent’s assets preserved pending the outcome of the trial versus the need for the respondent to protect its own financial position after having an invasive order imposed upon it. As a result, WFOs would not be granted lightly and applicants should show they have the means to meet their obligations under their cross-undertakings throughout the life of such an order.