High Court rejects application to set aside freezing orders in Gulf Air Fraud Case

Jessica Joel

In Gulf Air BSC v One Inflight Ltd and others [2018] EWHC 1019 (Comm), several defendants failed to have freezing orders against them set aside on the basis there was a failure to establish a risk of dissipation of assets.

In April 2015, Gulf Air entered into a contact for in-flight entertainment services with Global One Media, a company which, unbeknown to Gulf Air, did not exist. The services were in fact provided by One Inflight Ltd and a distinct entity called Global One Media Ltd (“GOM”), which according to Gulf Air, were all corporate vehicles of the senior manager of its in-flight services team, Mr El Assaad, his wife and his associate, Mr Hirani.

It was Gulf Air’s case that the contract was a vehicle for fraud and that these individuals conspired against Gulf Air to procure a contract from which they personally benefitted. Gulf Air alleged that Mr El Assaad authorised advanced payments under the contract to One Inflight, via GOM, to the sum of US$22.1 million over two years.

Gulf Air was awarded a worldwide freezing order against One Inflight, its associated companies, Mr El Assaad, his wife and Mr Hirani. Mr Hirani and some associated companies applied to have the freezing order set aside, claiming that Gulf Air had failed to establish any real risk of dissipation, arguing that allegations of fraud and evidence of generalised dishonesty was not sufficient to justify the order.

Rejecting Mr Hirani’s challenge to the freezing order, the court considered that the scale and complexity of the fraud advanced by the defendants adequately justified the risk of dissipation. In his judgment, Picken J commented that past events are highly relevant in assessing whether there is a sufficient risk of dissipation or not. The court found Mr Hirani’s argument that his subsequent notification to the court of assets in the US which he had failed to disclose earlier in proceedings did not militate against the risk of dissipation and upheld the order against him.

This case approved the principles for granting a freezing order summarised by Males J in National Bank Trust v Yurov and others [2016] EWHC 1913 (Comm), as follows:

a. The claimant must demonstrate a real risk that a judgment against the defendant may not be satisfied as a result of unjustified dealing with the defendant’s assets.
b. That risk can only be demonstrated with solid evidence; mere inference or generalised assertion is not sufficient.
c. It is not enough to rely solely on allegations that a defendant has been dishonest; rather it is necessary to scrutinise the evidence to see whether the dishonesty in question does justify a conclusion that assets are likely to be dissipated.
d. The relevant inquiry is whether there is a current risk of dissipation; past events may be evidentially relevant, but only if they serve to demonstrate a current risk of dissipation of the assets now held.
e. The nature, location and liquidity of the defendant’s assets are important considerations.
f. Whether or to what extent the assets are already secured or incapable of being dealt with is also relevant.
g. So too is the defendant’s behaviour in response to the claim or anticipated claim.

Gulf Air BSC v One Inflight Ltd and others [2018] EWHC 1019 (Comm)

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