High Court Evaluates Possibility of Issuing a Freezing Injunction Over a Party Outside Its Legal Reach to Facilitate Enforcement
English Court Grants Freezing Order Against Third Party Outside Jurisdiction
In a significant ruling, a court in England and Wales has granted a worldwide freezing order against a third party outside the jurisdiction, in a case that sheds light on the use of the "necessary or proper party" gateway for serving proceedings out-of-jurisdiction.
The case revolves around a claimant who suspected that the 10th defendant may hold assets against which the claimant could enforce a judgment obtained against the first to third defendants. The claimant, therefore, sought a further worldwide freezing order against the 10th defendant, who was a non-cause of action defendant.
To qualify for a freezing order against a third party outside the jurisdiction, the court must find that the third party is a necessary or proper party to the claim involving an "anchor defendant" within the jurisdiction. In this case, the court considered whether the 10th defendant was a necessary or proper party to the claim against the first to third defendants.
The court's decision hinged on several factors. Firstly, there must be a good arguable case that the third party is a necessary or proper party to the claim. In this case, the court accepted that the 10th defendant was holding assets against which the Sharjah judgment could be enforced.
Secondly, there must be a real issue between the claimant and the anchor defendant within England and Wales, and the third party outside the jurisdiction must be related to the enforcement of the judgment against that anchor defendant. The application for a freezing order against the 10th defendant was based on the potential to enforce the judgment against defendants one to three against the 10th defendant, not on the substantive claims made against the 10th defendant in the proceedings.
Thirdly, the claimant must demonstrate that there is a serious issue to be tried on the merits of the claim. The court did not find this to be the case, as the real purpose of the application was considered to be the disclosure of assets, rather than the resolution of some live issue or common factual enquiry.
Fourthly, the claimant must persuade the court that England is clearly the most appropriate forum for the trial of the action. Although the court found that England was an appropriate forum, it was not clear that it was the most appropriate forum, given the connections of the parties and the assets to other jurisdictions.
Lastly, the third party outside the jurisdiction must have assets which could potentially be enforced against. This factor was satisfied in this case.
It is worth noting that the court does not have unlimited discretion to use gateway 3 to grant freezing orders against non-cause of action defendants. For such an application, the claimant must prove that the claim falls within one of the jurisdictional gateways set out in Practice Direction 6B.3.1.
In the case of Commercial Bank of Dubai PC and others v Al Sari and others, the High Court considered the circumstances for granting a freezing order relating to the enforcement of a judgment against a third party. This case serves as a reminder that a court will only grant a freezing order against a third party outside the jurisdiction under the "necessary or proper party" gateway when the specific circumstances are met.
In conclusion, the court uses the "necessary or proper party" gateway to extend freezing orders to third parties outside England and Wales when those third parties have assets tied to an anchor defendant within England and Wales, where there is a real dispute requiring enforcement, and the court finds England to be the appropriate forum. The court carefully evaluates jurisdictional and procedural conditions to ensure this relief is justified.
[1] Practice Direction 6B - Service Out of the Jurisdiction, paragraph 3.1 [2] Commercial Bank of Dubai PC and others v Al Sari and others [2018] EWHC 146 (Comm)
In light of the case that revolves around the enforcement of a judgment against particular defendants, it is essential for a claimant to demonstrate that a third party holding potential enforcement assets is a necessary or proper party to the claim. The application for a freezing order against such a third party outside the jurisdiction must also meet specific jurisdictional conditions, including the existence of a good arguable case, a real issue between the claimant and the anchor defendant within England and Wales, and a serious issue to be tried on the merits of the claim.
The court's decisions on applying freezing orders against third parties outside the jurisdiction are guided by the principles outlined in the case of Commercial Bank of Dubai PC and others v Al Sari and others, where the High Court considered the circumstances for granting a freezing order relating to the enforcement of a judgment against a third party.
