In addition to being a key forum for the substantive resolution
of fraud disputes, the English court regularly plays an important
role in support of foreign proceedings. Perhaps the cornerstone of
this support are the different forms of interim relief it offers to
a litigant engaged in foreign proceedings under section 25 of the
Civil Jurisdiction and Judgments Act 1982, including freezing
orders.
Section 25 freezing orders should not be seen as identical to
freezing orders made in the context of domestic proceedings.
Differences between the two are subtle, but are very important, as
can be seen in the recent decision of the Court of Appeal in GFH Capital v David Haigh and
Others [2024] EWCA Civ 65.
The DIFC proceedings against Mr Haigh and the application
below
The context to this decision is an embezzlement perpetrated by Mr
Haigh, a former deputy CEO of the claimant, in the amount of US$5
million. The claimant obtained a freezing order against Mr Haigh in
the Dubai International Financial Centre (DIFC) courts, where it
brought its substantive claim against Mr Haigh. The claimant
thereafter sought a freezing order in support of the DIFC
proceedings from the Commercial Court in London, which was
granted.
The proceedings in the DIFC were somewhat protracted: judgment was
originally entered against Mr Haigh in 2016, but then set aside in
2017. Thereafter, a further trial took place, in which Mr Haigh
played no part, resulting in the claimant obtaining judgment
against him (again) in 2018.
The claimant later sought to enforce the DIFC judgment in England,
which was granted in 2020. In entering a judgment in this
jurisdiction based on the DIFC proceedings, Mr Justice Henshaw
rejected Mr Haigh's contention that an out of time appeal that
he had recently initiated in the DIFC (without paying the
appropriate fee) was a bar to enforcement.
Following judgment being entered against him in England, Mr Haigh
applied to set aside the freezing order against him. The main basis
on which he sought to do so was that the terms of the section 25
freezing order made it apparent that the order had been made in
support of the original DIFC proceedings and not any proceedings in
England. Given the DIFC proceedings had been finally resolved, Mr
Haigh contended that the claimant was no longer entitled to
maintain the section 25 freezing order: put simply, there was no
longer any foreign claim that the freezing order could
support.
To which proceedings was the order
referring?
At first instance, Mr Haigh's application succeeded. Andrew
Baker J concluded that the 'claim' referred to in the
freezing order could only properly be understood to be the
substantive claim in the DIFC. That claim having been resolved
definitively in 2018, the freezing order had already expired.
The claimant, clearly eager to maintain the freezing order in
England where Mr Haigh and associated parties appeared to hold
assets, appealed. The claimant submitted that the 'claim'
to which the freezing order referred must, in fact, be the
proceedings initiated by way of a CPR Part 8 claim form to obtain
the section 25 freezing order, and not the underlying DIFC
proceedings.
The claimant also put forward a further argument that, in so far as
Mr Haigh had an outstanding application to appeal the DIFC
judgment, there had been no disposal of those proceedings.
Consequently, even if the freezing order was referring to the DIFC
proceedings, they were not at an end.
The Court of Appeal carefully considered the way in which the
freezing order had been drafted and how it departed from the
standard form of freezing order. An important point, oft-repeated
by courts in the freezing order context both on discharge
applications and on appeal, is the extent to which these
differences from the standard form order were brought to the
judge's attention at the time. A failure to do so can often be
a source of drafting inconsistencies and errors.
The consequences in this case were readily identifiable. The Court
of Appeal noted the drafting contradictions contained in the order,
for example that the capitalised term "the Claim" was not
actually defined and that an uncapitalised term of "the
claim" was used in a context that seemed to refer to the
English proceedings. There was also provision made in the order for
costs, which tended to support the proceedings being the
substantive (DIFC) proceedings.
The Court of Appeal had centrally in mind the purpose of section 25
freezing orders. Such orders must be understood in their proper
context, namely as being in support of foreign proceedings.
Therefore, section 25 freezing orders necessarily focused on that
support and should not be used as a vehicle for turning the Part 8
proceedings into a substantive dispute in and of itself.
Finally, the Court of Appeal rejected the suggestion that an out of
time appellant's notice would result in the proceedings not
having been disposed of. The point was to some extent theoretical:
Mr Haigh confirmed that he had no extant appeal in the DIFC at the
time this came on for consideration by the Court of Appeal.
In the result, the freezing order had expired.
Lessons for claimants in foreign fraud
claims
The first takeaway from the judgment for those seeking section25
freezing orders and more widely is to ensure that freezing orders
are tightly drafted.
Quite often, applications for freezing orders are made under
significant time pressure and there is an understandable focus on
the evidence in support of the application.
However, this case shows that the draft order should not be left
behind: consistency of terms and correct use of defined terms
should be incorporated into orders at an early stage, carried
through in the proceedings, and regularly stress-tested against
wider developments in the proceedings. The Court of Appeal's
description of the order in this case was that it was "not
happily drafted" and resulted in serious consequences for the
claimant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.