Worldwide freezing order in support of arbitral award continued despite “serious and numerous” breaches of duty to give full and frank disclosure

Anna Caddick

In U&M Mining Zambia v Konkola Copper Mines, the Commercial Court continued a worldwide freezing injunction in support of sums awarded by a London arbitration tribunal despite “serious and numerous” breaches of the claimant’s duty to give full and frank disclosure.

Mr Justice Teare considered that the nature of the breaches suggested that the appropriate course was to refuse to continue the worldwide freezing order to reflect the importance of the duty of full and frank disclosure, noting that the fact that the order would otherwise be continued was not by itself a reason which trumped the failure to give full and frank disclosure. However, the judge considered that the failures in disclosure did not (save for one) go to the issue of risk of dissipation, the failures were not deliberate and the deterrent purpose could be satisfactorily achieved by an appropriate costs order. On that basis, he ordered the claimant to bear its own costs of the ex parte and inter partes applications and to pay one third of the defendant’s costs of resisting continuance of the order on the indemnity basis.

The defendant had also argued that a risk of dissipation of assets had not been established. It was common ground that the correct test was:

(1)        whether there was a real risk that, unless restrained, the defendant would dissipate or dispose of his assets other than in the ordinary course of business; or

(2)        that, unless restrained, assets were likely to be dealt with in such a way as to make enforcement of any award or judgment more difficult, unless those dealings could be justified for normal and proper business purposes.

The judge found that an entity which had employees willing to give untrue evidence, to be obstructive in the arbitration process and to take untenable points to delay enforcement of an award, might well seek to deal with its assets other than in the ordinary course of business with a view to making enforcement of the award more difficult.

The judge was not, however, persuaded by evidence which suggested that the defendant preferred to spend its resources on capital projects rather than on paying its current debts. That evidence gave rise to a risk that the claimant might not be paid because the defendant appeared to lack the resources to pay all of its debts, but it was no part of the purposes of a freezing injunction to pressurise a defendant into discharging a claimant’s debt in preference to the debts of others.

Finally, Teare J held that it was just and convenient to grant the freezing injunction despite the fact that there were no assets in the jurisdiction and enforcement would have to take place in Zambia. He considered that it was appropriate for two courts to grant a freezing order, the English court, due to the London arbitration clause, and the court of Zambia, where the defendant was resident. However, that did not mean it was inappropriate for the English court to make an order, nor that it was more appropriate for the Zambian court to do so, given that the seat of the arbitration was London.

U&M Mining Zambia Limited v Konkola Copper Mines plc [2014] EWHC 3250 (Comm)

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