In Gerald Metals SA v Timis, Mrs Justice Rose granted an on notice application under CPR 25.1(1)(g) requiring the provision of information about assets that might be the subject of a freezing order. In doing so she confirmed there was no reason to depart from the two stage test applied in previous case law:
- Has the jurisdictional threshold been crossed? (namely, the requirement that there are assets which are, or may be, the subject of an application for a freezing order).
- Using the court’s discretion, is it just and appropriate to grant the relief in all circumstances?
It was held that the jurisdictional threshold was not very high and in this case a freezing order might well be sought, depending on what the disclosure about the assets revealed.
As to the court’s discretion, it was held there was an on-going lack of clarity about assets held in a trust, in respect of which the applicant had sought answers for some time prior to making its application, and the applicant needed this information in order to make an informed decision about applying for a freezing order.
Underlying the application is a claim by Gerald Metals SA (“GM”) against Mr Timis for over $77 million arising from an off-take contract entered into in November 2014. A guarantee was provided by the Timis Trust (the “Trust”) in relation to that contract based on a disclosed list of assets said to be held by the Trust. GM alleged that the contract was not performed as provided for and took various steps to negotiate a solution. However, matters escalated and GM sought to rely on the guarantee provided. In July 2016 Mr Timis informed GM that certain assets previously listed as being held by the Trust were in fact not held by it at all and had been included in various letters and organisational charts as a result of “an administrative error.” Dissatisfied with this position, and by now losing faith that Mr Timis was taking steps to pay the debt, GM made this application for information on the assets held by the Trust.
In reaching her decision, Rose J considered the test set out in Lichter & Schwarz v Rubin  EWHC 450 (Ch), namely, whether: (1) the jurisdictional threshold had been met; and (2) was it just and equitable to grant relief.
Rose J held there were “ample grounds for holding that the jurisdictional threshold had been crossed“. There was good reason to belief that GM would apply for a freezing order pending disclosure on the Trust’s assets. It appeared common ground a debt was owed and that this was guaranteed by the Trust. In particular the judge rejected an argument that because GM had by this application put Mr Timis on notice of its intention to pursue a freezing order, it must have no genuine concern for the dissipation of assets. This would produce a “Catch 22 situation” that the making of an application for disclosure must itself mean a freezing order was inappropriate. This could not be the proper interpretation of CPR 25.1(1)(g).
As to discretion Rose J stated this was “an appropriate case” to grant relief. She accepted the applicant would be prejudiced if it could not find out more about the Trust’s assets without further delay.
Rose J ordered that Mr Timis’ and the Trust’s assets had to be disclosed to the value of $77 million together with a cross-undertaking in damages to a limit of £10,000 per asset.
The case is a useful reminder of CPR 25.1(1)(g) and how it can be used as a tool to identify assets ahead of making an application for a freezing order. The court usefully summarises the case law and two stage test to be applied. In particular, it is noted that the thresholds to make an application under CPR 25.1(1)(g) are lower than those required to obtain a freezing order itself. That said, although it may be a useful tool in some circumstances, perhaps where there is a real concern that no assets exist upon which to apply a freezing order, there is a significant risk that such an application will alert the respondent to the possibility of such an order. This could defeat the purpose of the application if assets are dissipated before the freezing order can be obtained.
Gerald Metals SA v Timis  EWHC 2136 (Ch). The judgment in this case is available to Lawtel subscribers.