Dadourian Group International Inc. and Others v Simms and Others (No 2)
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Longmore,The Chancellor |
| Judgment Date | 20 December 2006 |
| Neutral Citation | [2006] EWCA Civ 1745,[2009] EWCA Civ 169 |
| Docket Number | [2006] EWHC 699 (Ch) |
| Court | Court of Appeal (Civil Division) |
| Date | 20 December 2006 |
[2006] EWCA Civ 1745
The Chancellor of The High Court
Lady Justice Arden and
Lord Justice Longmore
[2006] EWHC 699 (Ch)
Case No: A3/2006/0868
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
Warren J.
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Ashe QC & Stuart Cakebread (instructed by David Wyld & Co.) for the Appellants
Clive Freedman QC & Charles Samek (instructed by Wallace & Ptnrs) for the Respondents
For the second time in this action, this court has had to consider the exercise by the court of its discretion under powers conferred by the freezing order. On the first occasion, now reported as Dadourian Group International Inc v Simms [2006] 3 All ER 48, this court gave guidelines for the exercise by the court of its discretion to permit a worldwide freezing order to be enforced abroad. In this case, the court has to consider the exercise by the court of its discretion to release a party who has obtained a freezing order from his undertaking not to use information obtained from the party against whom the freezing order is made in contempt proceedings against that party.
The undertakings in this case were an expanded form of the relevant undertaking in the specimen form of freezing injunction set out in the annex to Practice Direction 25 of the Civil Procedure Rules 1998. The specimen form of freezing injunction sets out the basic undertaking routinely required when a freezing order requires a party to divulge information about the assets subject to the order. That undertaking states:
"The applicant will not without the permission of the court use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in England and Wales or in any other jurisdiction, other than this claim."
In this case, the undertaking also prevented the claimants from using the information without the court's permission. The undertaking made express reference to use in committal proceedings, for which permission of the court was also required. There were exceptions for other proceedings which had already been commenced against the defendants, or some of them. However nothing turns on this appeal on these particular differences. Nor does anything turn on the fact that the order containing the undertaking with which this appeal is particularly concerned was an order which so far as material required the provision of information subsequent to the original freezing order.
The history of freezing injunctions was summarised by Lord Bingham in his speech in Commissioners of Customs and Excise v Barclays Bank plc [2006] 3 WLR 1 at [9]. He explained (so far as material to this case) as follows:
"FREEZING INJUNCTIONS
[9] The jurisdiction to grant Mareva injunctions, to give freezing injunctions their original and better-known name, was developed by judicial decision from the late 1970s onwards. It was recognised in s 37(3) of the Supreme Court Act 1981, and is now governed by CPR 25.1(f) as an order which may be made—
'(i) restraining a party from removing from the jurisdiction assets located there; or (ii) restraining a party from dealing with any assets whether located within the jurisdiction or not . . .'
A standard form of injunction (which may be modified to meet the needs of the particular case) is annexed to the practice direction on interim injunctions ( CPR 25 PD) . The prescribed standard form contains a penal notice:
'If you [ ] disobey this order you may be held to be in contempt of court and may be imprisoned, fined or have your assets seized.
Any other person who knows of this order and does anything which helps or permits the respondent to breach the terms of this order may also be held to be in contempt of court and may be imprisoned, fined or have their assets seized.'
The first of these warnings is addressed to the subject of the order, the second to any party (such as a bank) who knows of it…."
Order under appeal
Warren J made the order which is the subject of the appeal in this case on 20 March 2006 in the early stages of the trial of this substantial action. In this action, Dadourian Group International Inc ("DGI") and others claimed damages for inter alia conspiracy and misrepresentation against Mr and Mrs Dadourian and other defendants. (For convenience I will refer to DGI in this judgment as if it were the only claimant) . So far as material, the application before the judge was an application by DGI to release it from undertakings given to the court to enable it (DGI) to use at the trial, and on any subsequent contempt application, both affidavits and transcripts of the cross-examination on those affidavits of the third and fourth defendants, Mr and Mrs Dadourian.
Those affidavits and transcripts had come into existence in the following manner. On 3 February 2004 Lindsay J made a freezing order against Mr and Mrs Dadourian, as well as a number of other defendants, which in the usual way required them to disclose their assets by affidavit. The order was extended by Lewison J on 13 February 2004. The affidavits which Mr and Mrs Dadourian provided were unsatisfactory, and the claimants therefore sought and obtained an order for further and better information. This order was made by Peter Smith J on 14 October 2005 on the basis that DGI gave an undertaking to the court that it would not, without the leave of the court, use that evidence "for the purpose of (a) any criminal proceedings whatsoever (b) any committal proceedings, and (c) the trial of this action". By an order dated 22 November 2005, Sir Donald Rattee, sitting as an additional judge of the Chancery Division, extended the time for Mr and Mrs Dadourian to file evidence in accordance with the order of Peter Smith J.
7. The order made by Peter Smith J also provided for the deponents to attend the court for cross-examination as to (inter alia) the assets and what had become of them. The assets as defined in the order included personal assets of Mr and Mrs Dadourian and assets which they claimed were held by the thirteenth defendant, Brinton Establishment. DGI's case is that Peter Smith J ordered cross-examination in order to assist in the policing of the freezing order. The cross examination took place on 30 and 31 January 2006.
The judge acceded to DGI's application to be released from its undertakings pursuant to the order of 14 October 2005 and ordered that release on terms, but the terms related only to the use of the affidavit and transcripts in the course of the trial. No objection is made to the judge's order of 20 March 2006 in so far as it authorised the use of affidavits and transcripts of cross-examination at the trial, and so I need not set out the terms that the judge imposed on the use of the affidavits and transcripts at the trial.
The trial of this action took twenty-nine days, and on 24 November 2006 the judge handed down a judgment of 762 paragraphs. DGI succeeded in one of its claims against Mr and Mrs Dadourian, being a claim in deceit added by amendment dated 27 April 2005. All other claims were dismissed. We are not concerned with the grounds on which the judge accepted or rejected the claims in the action. The immediate impact of the judgment is that damages will have to be assessed against Mr and Mrs Dadourian. Moreover, Warren J has also yet to make an order for costs arising out of the trial of the action. The freezing orders already obtained will prevent the dissipation of assets below the amount of the damages assessed and ordered to be paid by Mr and Mrs Dadourian, and in addition, any costs which they are ordered to pay. We have not been told whether any application has been made for permission to appeal.
The gist of the appellants' case on this appeal is that the judge's order of 20 March 2006 was in error in so far as it gave permission to the claimants to use the affidavits and transcripts in later committal proceedings. When Mr and Mrs Dadourian gave their evidence, no such permission had been given. Now, however, the judge's order unconditionally releases DGI from its earlier undertaking to the court in relation to contempt proceedings. It is that undertaking that forms the springboard for a challenge to the exercise by the judge of his discretion in this case. It is said that a judge ought to release a party from his undertaking not to use information obtained from a defendant under a freezing order only in exceptional circumstances. Mr and Mrs Dadourian further contend that, if a claimant is released too readily from this undertaking, a person cross-examined is likely to claim the privilege against incrimination where he might not otherwise have done so, and that would inhibit the proper enforcement of freezing orders. They further say that they had a reasonable expectation that the information they provided would not be used in subsequent committal proceedings save in exceptional circumstances. Accordingly, they contend that it is unjust that DGI was released from its undertakings in this case. The judge failed properly to balance the interests of DGI and those of Mr and Mrs Dadourian. Mr and Mrs Dadourian further contend that the evidence was obtained under compulsion and that the purpose of any contempt proceedings would be to punish Mr and Mrs Dadourian.
11. It is common ground that it is open to a defendant who is alleged to have committed a breach of a court order to claim to rely on the...
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