Parbulk II AS v PT Humpuss Intermoda Transportasi TBK & Ors

On 17 June 2011, I heard three applications in this matter:

On 17 June 2011, at the first effective inter partes hearing in this matter, I made orders:

On 24 June 2011, I heard further short oral submissions from the parties as to the basis upon which, and the amount in which, it would be appropriate for the court to impose a freezing order against the second respondent, HSTPL. Both parties supplemented their oral arguments by further detailed written arguments dated 5 July, 19 July, 23 and 27 July 2011.

I record that, at no time during the June hearings, nor in the post-hearing written submissions lodged prior to 26 August 2011, were any arguments addressed to me on behalf of the Respondents to the effect that the court did not have personal or subject matter jurisdiction over HSTPL to make a freezing order against it. In particular, no arguments were addressed to the effect that it would not be appropriate for the court to make a freezing order against HSTPL on the basis of the decision in TSB Private Bank International SA v Chabra [1992] 1 WLR 231 (“Chabra”) by reason of the fact that:

On 26 August 2011, during the course of the vacation, I circulated a draft of my judgment which concluded that, for the reasons set out therein, I would continue the freezing order against HSTPL, restraining it from dissipating its assets worldwide, but only up to an amount of its indebtedness to Heritage and to HIT (if any). I also indicated that I would hand down the judgment on 1 September 2011, but that I would hear further argument on the form of the order and any consequential matters arising from the judgment at a date that was convenient to the parties and the court.

By letter dated 30 August 2011, Lawrence Graham LLP, solicitors for the defendants, wrote to the court, informing it of the recent decision of the Court of Appeal in the related proceedings of Linsen International Ltd and Others v Humpuss Sea Transport Plc Ltd and Others (2009 Folios 1652 and 1653 and 2010 Folios 1343 and 1346) (“Linsen (2)”). The letter also indicated that I might wish to see a transcript of the Court of Appeal’s judgment and hear further submissions on jurisdiction and service in relation to HSTPL before handing down my judgment.

In the light of that development, I adjourned the handing-down of my judgment and indicated that, on 4 and 5 October 2011, I would hear further arguments on jurisdiction and service, although no submissions on those particular points had previously been made.

On 4 and 5 October 2011, I heard further submissions from counsel, and received further written submissions in relation to HSTPL’s new jurisdictional arguments.

Given that the Respondents have now had, effectively, three bites at the cherry in their attempt to resist the continuation of the freezing order against HSTPL, I have decided that, rather than completely re-working my draft judgment as already circulated, I shall set out the conclusion that I would have reached in light of the submissions made in June and July 2011, and then, subsequently, set out my final conclusions in the light of the later arguments advanced in relation to HSTPL’s new jurisdictional points.

The factual background to this dispute can be briefly summarised as follows.

Parbulk is a special purpose fund established under the laws of Norway. By a charterparty on an amended BARECON 2001 form, dated 11 December 2007, Parbulk, as owners, chartered its vessel, the Mahakam (“the Vessel”), to Heritage as charterers on a bareboat charterparty for 60 months at a rate of US$38,500 a day (“the Charterparty”). The Charterparty was subject to English law and London arbitration under LMAA terms. The Vessel had previously been owned by Heritage, prior to its purchase by Parbulk.

Heritage, which is a company incorporated under the laws of Panama, is, and was at all material times, a special purpose vehicle, a fact of which Parbulk was aware, since it retained US$ 6.75 million from the purchase price of the vessel, as security for the performance of Heritage’s obligations under the Charterparty.

Heritage is a 100% subsidiary of HSTPL, a company incorporated under the laws of Singapore. HSTPL, in turn, is a 100% subsidiary of HIT. HIT, an Indonesian company, which is listed on the Indonesian stock exchange, is the ultimate holding company in the Humpuss Group. It is involved primarily in shipping transportation and the provision of ship management services. HIT is ultimately controlled by a Mr. Tommy Suharto, the youngest son of the former President of Indonesia. Mr. Suharto holds a 60% stake in an Indonesian entity, PT Humpuss, which directly owns over 60% of HIT. The remaining stake in the Humpuss Group is owned by Mr. Suharto’s brother.

Heritage’s obligations under the Charterparty were 100% guaranteed by HIT, pursuant to a guarantee dated 11 December 2007 (“the Guarantee”). Following Heritage’s repeated failures to pay hire, various disputes arose between the parties. In June 2009 Parbulk terminated the Charter - or, according to the Respondents, wrongfully purported to do so. Pursuant to Clause 30 of the Charterparty, Parbulk commenced LMAA arbitration proceedings against Heritage seeking unpaid hire and damages. The arbitration was held in Singapore between 11 and 15 October 2010. On 20 January 2010, Parbulk commenced proceedings in the English High Court against HIT (2010 Folio 58) under the Guarantee, which was governed by English law.

On 23 December 2010, Messrs Edward Mocatta and Mark Hamsher and Dr. Colin Ong (“the Tribunal”) issued the Award pursuant to which they ordered Heritage to pay Parbulk the sum of US$27,031,759.04 plus interest in unpaid hire and damages. As at the date of the hearings before this Court in June 2011, there was approximately US$28,107,045.35 outstanding in unpaid hire, damages and interest. The issue before the Tribunal was whether Parbulk was entitled to terminate the charterparty for repudiatory breach. The Tribunal held that Parbulk was entitled to do so on two grounds: first, on the grounds identified in a termination notice dated 22 June 2009, i.e. because of defined Events of Default on Heritage’s in failing to pay hire from 16 April to 15 June 2009; and second, on the grounds that, at common law, and independently of any contractual right under the charterparty, Parbulk was entitled to accept the totality of Heritage’s conduct in not paying the instalments of hire due for the period 1-15 June and 16-30 June 2099 as repudiatory breaches of contract.

On 17 January 2011 Teare J gave judgment for Parbulk against HIT on the Guarantee in the amount of US$27,031,759.04 plus interest. Neither the Award nor the judgment has been satisfied.

On 20 January 2011, the last day for doing so, Heritage issued an arbitration claim form (2011 Folio 72) seeking leave to appeal the Award pursuant to s69 of the Act on the grounds of error of law. On 31 January 2011, Heritage filed a skeleton argument in support of the application. Parbulk filed a respondents’ skeleton argument together with a respondents’ notice. Heritage did not file submissions in reply. On 17 May 2011, David Steel J granted Heritage permission to appeal. At the time of hearings before me, the appeal had not been heard. Subsequently, on 8 November 2011, Eder J dismissed Heritage’s appeal.

On 28 March 2011, Parbulk issued an arbitration claim form seeking permission to enforce the Award as a judgment pursuant to s66 (2011 Folio 372). The application was granted ex parte by David Steel J and sealed on 7 April 2011. Pursuant to this order, Parbulk was granted permission to enforce the Award as a judgment against Heritage. The only defendant to the arbitration claim was Heritage.

On 26 April 2011, Heritage served its application to set aside the s66 order. On 1 April 2011, Parbulk applied, ex parte, for injunctions and ancillary relief against all three Respondents. The orders sought included:

On 1 April 2011, Parbulk appeared before Teare J who granted relief in the terms sought. The ex parte order was dated and sealed on 4 April 2011. The ex parte orderwas duly served upon the Respondents on the same day or shortly thereafter.

The orders were sought as against HSTPL and Heritage, under the aegis of a new arbitration claim form which Parbulk undertook to issue, claiming the relevant injunctive relief, including the worldwide freezing order and disclosure orders. The new arbitration claim form was duly issued on 5 April 2011 (2011 Folio 424). The injunctions as against HIT were apparently made under the aegis of the action seeking payment under the Guarantee (2010 Folio 58).

The Respondents took no steps to comply with the disclosure obligations set out in the ex parte order. They did not acknowledge the existence of the ex parte order until 15 April 2011. On 15 April 2011, the working day before the return date was listed for hearing, solicitors for the Respondents (Lawrence Graham LLP) responded. They wrote a letter which indicated for the first time that the Respondents had any intention to engage with the Court’s orders (namely the ex parte s66 order and the ex parte order). They attached acknowledgements of service for both the s66 arbitration claim form (2011 Folio 372) and the freezing injunction arbitration claim form (2011Folio 424), which stated that they intended to contest the claims. However, in neither case did any of the Respondents check the box on the acknowledgement of service indicating that they intended to dispute the court’s jurisdiction.

The return date was originally listed for 18 April 2011. In the event, the return date was adjourned until 23 May 2011, when the injunctions were continued pending a hearing on the merits of the application.

As I have already said, on 17 June, I continued the freezing orders as against all three Respondents. On that date, I was satisfied that it was just and appropriate to do so. Parbulk clearly had a good, indeed, strong, arguable case on the merits as against HIT and Heritage, that it was entitled to terminate the Charterparty for repudiatory breach, notwithstanding the grant of leave to Heritage to pursue its s69 appeal. As submitted by Mr. Duncan Matthews QC, leading counsel who appeared on behalf of Parbulk, there were three alternative bases upon the basis of which Parbulk contended that it was entitled to terminate the Charterparty, any one of which, if correct, would be sufficient to justify its actions. These were:

Heritage’s skeleton in connection with its s69 appeal only addressed the First Basis. It did not address the Second or Third Bases. However it is not necessary for me to say anything more about the merits of Heritage's claim, since Mr. David Joseph QC, leading counsel on behalf of the Respondents, accepted the proposition that Parbulk had a good arguable case to support the judgments and the Award, notwithstanding the grant of s69 leave to appeal.

I was also satisfied that there was a clear risk that the judgments and the Award would remain unsatisfied because of steps that the Respondents, unless restrained, might take to dispose of or dissipate their assets otherwise than in the ordinary course of business, or which they might take to make enforcement against them more difficult.

In particular, in the absence of any substantive evidence to the contrary from the Respondents, the evidence, albeit at an interlocutory stage, showed the following:

In addition, the evidence before me showed the following:

The evidence also demonstrated that the Respondents had failed to comply with their disclosure obligations under the various orders. Their reasons for not having produced the required accounting information were unsatisfactory. The evidence strongly suggested that there were substantial concerns about the solvency of the group. The recent financial information, which had been provided, demonstrated that the group was facing rising liabilities and a dramatic fall in profits. Those concerns were aggravated by the movements of assets into the Indonesian HTK.

At the hearing on 17 June 2011, I was also satisfied that the evidence demonstrated substantial intra-group transfers of funds from Heritage to HSTPL, strongly suggesting that HSTPL was involved in assisting Heritage in rendering itself judgment-proof. For that reason, I formed the preliminary view that, although these transfers had been characterised by the Respondents as commercial intra-group loans made in the normal course of business, or repayments of funds applied by HSTPL on Heritage’s behalf, there was sufficient justification for a freezing order to be made as against HSTPL in accordance with the relevant authorities.

However, because of the very limited court time available on 17 June, I required the parties to make further and more detailed submissions to me, both as to the basis of the foundation for making third-party freezing orders of the Chabra-type as against defendants such as HSTPL against whom there was no substantive cause of action (“NCAD defendants”), and as to the quantum of any order as against HSTPL. As I have already mentioned in paragraph 3 above, this led to the further submissions made both orally (on 24 June 2011) and in writing. The Respondents’ submissions challenged my preliminary view that there was jurisdiction, or that it was in any way appropriate, to make freezing or disclosure orders as against HSTPL. As pointed out above, these did not include submissions in relation to HSTPL’s new jurisdictional points subsequently advanced on 4 and 5 October 2011.

Mr. Duncan Matthews QC submitted that there were three different jurisdictional bases upon which the court could grant interlocutory freezing injunction relief as against HSTPL, in respect of the full amount of the judgment sums owing by Heritage and HIT.

Mr. Joseph submitted that, as a matter of principle, and on a proper analysis of the authorities, no freezing injunction should be granted as against HSTPL save possibly to the extent the evidence showed that HSTPL held, or had once held, the assets of Heritage and/or HIT.

As to three jurisdictional grounds put forward by Mr. Matthews, Mr. Joseph submitted as follows:

It is obvious that, in every case where a world-wide freezing order is sought against a third party or NCAD who is not a judgment debtor, or potential judgment debtor, the court has to look very carefully at the particular facts upon the basis of which it is being asked to exercise its jurisdiction and discretion to make such an order. Although one can articulate general principles that govern the approach, whether or not an order can, or should, be made will be necessarily heavily fact-dependent.

The ground appears to have been well-trodden, or at least reasonably well-trodden, in the authorities. I would summarise the relevant principles governing the circumstances in which an order may be made against a third party NCAD as follows.

Jurisdiction to grant an interlocutory injunction (of which a freezing order is but an example) is available under section 37(1) of the Senior Courts Act 1981 in all cases where it is “just and convenient” to do so.

The purpose of a freezing order is so that the court “can ensure the effective enforcement of its orders”. To this end the aim is to ensure that there is a fund to meet any judgment.

The jurisdiction is to be exercised in a flexible and adaptable manner, which has to be able to deal with new situations as and when they arrive. But great care should be taken not to be oppressive to the persons involved in the carrying on of their business; see per Mummery J in Chabra at 241D. In particular, the court should be cautious about making an order which extends to the property of persons who are not substantive defendants and cannot be shown to have frustrated the administration of justice; see generally Paul Cardile v LED Building Proprietary Ltd. [1999] HCA 18.

Usually, but not invariably, a freezing order will be directed at assets beneficially owned by the principal defendant; see per Steel J in Yukos v Rosneft paragraph 11.

Thus assets apparently the property of a third party (whether a company or otherwise), which credible evidence at the interlocutory stage shows may be held by that third party as nominee or trustee for the principal defendant, even though that third party asserts that they are beneficially owned by him, may be the subject of a freezing order in appropriate circumstances; such an order against the third party is made on the grounds that the assets are, in reality, the assets of the principal defendant, and that such an order is ancillary and incidental to the claim as against him ; see Chabra at 242; SCF v Masri; Mercantile Group (Europe) AG v Aiyela [1994] QB 366 (CA); Yukong Line Ltd of Korea v Rendsburg Investments Corporation (supra).

However, it is not legitimate, in the context of third party freezing orders, to disregard the separate corporate personality of individual companies in a group (sometimes referred to as “piercing the corporate veil”), merely because the ultimate, or intermediate, holding company may have the practical ability to require a subsidiary to act in a particular way, or because it is necessary to achieve justice (Footnote: ²), even in circumstances where one or more of the companies in question may have been involved in some sort of impropriety. To do so would offend the well-established principles of separate corporate personality enshrined in Salomon, Woolfson v Strathclyde Regional Council [1978] SC (HL) 90 and Adams v Cape (supra);see also per Sir Andrew Morritt VC in Trustor AB v Smallbone (No 2) at paragraphs 21-23; and per Munby J is Ben Hashef v Ali Shayif [2008] EWHC 2380 (Fam) at paragraphs 159-166 and 199.

The circumstances in which the “piercing of the corporate veil” doctrine can be applied in order to justify the making of a freezing order against a third party are limited to situations where the company or entity against whom the order is sought has been used as a device or façade for concealing the true facts, or for avoiding or concealing the liability or assets of the principal defendant. Thus in circumstances where, for example, the evidence shows that a company or trust has been used as a vehicle or device for receiving monies wrongly paid out of a claimant company in breach of a defendant’s duty to that company, the receipt by the third party vehicle will be treated as the receipt by the defendant; see Woolfson v Strathclyde Regional Council at p96; Trustor AB at paragraph 22-25; Dadourian trial decision reported at [2006] EWHC 2973 at 678-685. Similarly, where an individual has deliberately set up a façade of vehicle or “puppet” companies and trusts to conceal his receipt of the proceeds of fraud or to render himself judgment proof (which was the factual position in In re a Company) the court may pierce the corporate veil and treat the receipt by the vehicle as the receipt by the defendant for the purposes of making a third party freezing order.

For the purposes of obtaining a freezing order against a third party, it is not necessary for the claimant to be able to identify a specific asset belonging to the principal defendant in the hands of the third party; the court can in appropriate circumstances – for example where the principal defendant has paid over monies, or other assets, to the third party, and those assets are not readily identifiable in the latter’s hands – make an order freezing the general assets of the third party up to the total amount of the assets of the principal defendant which the third party has in its hands: see Yukong Line Ltd v Rendsburg Investments Corporation at paragraph 44 per Potter LJ, where he said:

“Although it is plain that the Court's Chabra-type of jurisdiction would only be exercised where there are grounds to believe that a co-defendant is in possession or control of assets to which the principal defendant is beneficially entitled, it does not seem to me that the jurisdiction is limited to cases where such assets can be specifically identified in the hands of the co-defendants.” (my emphasis.)

But the underlined passage in Yukong v Rendsburg (supra) quoted above is not authority for the proposition that, absent equitable or beneficial ownership of an asset under a trust, or otherwise, on the part of the principal defendant, no freezing order could be made against a third party in possession or control of that asset. All that the Court of Appeal was doing in that passage was briefly summarising the Chabra-type jurisdiction; it was not invited to consider the legitimate outer reaches of the Chabra-type jurisdiction and should not be treated as having done so; see the analysis of David Steel J in Yukos v Rosneft at paragraphs 16-22, with which I respectfully agree; see also C. Inc v L [2001] 2 Lloyd's Rep 459 and HM Revenue & Customs v Egleton [2006] EWHC 2313 (Ch), which would have arguably both been wrongly decided, had the Chabra-type jurisdiction been so limited.

But it is also clear – at least from four first instance decisions in England (Footnote: ³)- that the English court does not regard the Chabra-type jurisdiction as limited to cases where the third party holds, or has received, assets beneficially belonging to the principal defendant or assets in which the latter has some sort of proprietary entitlement. These English Court decisions followed the important decision of the Australian High Court in Paul Cardile v LED Building Proprietary Ltd (supra) . That case concerned freezing orders made against the shareholders and associate company of a housing construction company, the substantive defendant against which proceedings for breach of copyright had been brought. The justification for seeking a freezing order against those third parties was the payment of substantial dividends to them.

At paragraph 57 of the judgment of the majority, the High Court stated:

“What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word ‘may’, be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which:

(i)

the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including “claims and expectancies”, of the judgment debtor or potential judgment debtor; or

(ii)

some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.

It is that principle which we would apply to this case. Its application is a matter of law, although discretionary elements are involved.”

This decision was considered in detail by Aikens J in C. Inc v L (supra) at paragraphs 44-50. The relevant passage in his judgment was as follows:

“The decision of the High Court of Australia

44.

The High Court considered the Australian and English authorities on freezing orders, which are now referred to in Australian jurisprudence as ‘Mareva orders’ or ‘asset preservation orders’. The Court's principal conclusions were: (1) that the Mareva order was a doctrine or remedy which the courts had developed ‘to protect the integrity of its processes once set in motion’. (2) The general principle behind the exercise of the power to grant interlocutory relief is that the court may make such orders, ‘… at least against the parties to the proceedings against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked”. (3) But that situation should be contrasted with the current case, where LED sought a ‘Mareva order’ against the assets of third parties (i.e. the Cardiles and Ultra) in order to satisfy LED's prospective money judgment against Eagle. There were ‘significant differences’ between an order protecting the assets of a party to the action and an order ‘extending to the property of persons who are not parties and who cannot be shown to have frustrated, actually or prospectively, the administration of justice’. (4) The seriousness of an order against such third parties is emphasised by the fact that, although a ‘Mareva order’ did not confer any proprietary rights over the assets the subject of the order, nor did it create any attachment, the order did, in practice, operate as a ‘very tight “negative pledge” species of security over property, to which the contempt sanction is attached’. This meant that the court had to act very cautiously before making such an order. (5) The grant of ‘Mareva relief’ against a third party is not limited to circumstances where the third party ‘holds or is about to hold or dissipate or further dissipate property beneficially owned by the defendant in the substantive proceedings’. (6) There are two principles to guide the courts in determining whether to grant ‘Mareva relief’ in a case where the activities of third parties are the object sought to be restrained. They are that an order may be made in circumstances in which:

‘(i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of assets, including “claims and expectancies”[62] of the judgment debtor or potential judgement debtor; or

(ii)

some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor’.

45.

The High Court then applied those principles to the facts of the case. For present purposes it is the application of the principles to the Cardiles that is important. The High Court concluded that the payment of the dividends by Eagle was a non – commercial exercise. The High Court agreed with the judge at first instance that the object of the dividend was to limit the funds of Eagle available to meet a judgment in favour of LED. At the time of the payment of those dividends, Eagle appeared to have insufficient funds to meet the likely judgment debt to LED. A liquidator, ‘probably appointed on the initiative of LED, but acting on behalf of all creditors, would be entitled to pursue and recover those funds’ – i.e. the dividends. Therefore an order should be made requiring the Cardiles to keep unencumbered assets up to a value which is reasonable in all the circumstances. That was the order that was proposed and made.

46.

Kirby J gave a separate judgment. It followed the analysis of the joint judgment. He concluded that, in the law of Australia at least, there was no universal rule that:

‘asset preservation orders of the Mareva type may not, or will not, be made against non – parties in the absence of proof that the party seeking such relief has a subsisting cause of action against that party (or that the judgment debtor has a proprietary or beneficial interest in the property held by the non – party)… Judicial dicta which propose such strict rules are too broadly stated. At least this is so where such rules are intended to suggest a categorical requirement’.

47.

Kirby J decided that the jurisdiction to grant an ‘asset preservation order’ against a third party extended to cases where: ‘the actual or potential judgment creditor has a vested or accrued cause of action against the non – party or may otherwise become entitled to have recourse to the non – party, its property and assets to meet the claim’.

48.

That statement appears to me to be very similar in effect to the one made in paragraph 57 of the joint judgment. Kirby J agreed that an order should be made against the Cardiles restraining them from disposing of their assets up to a certain amount.

49.

Miss Dias submitted that the Cardile case has not extended the principles relating to freezing orders that have been laid down in the English cases. Mr. Wood submitted that the case clearly went beyond English law as it now stands. In particular he argued that the Siskina case, followed in the Aiyela case, required that there must be a ‘Siskina cause of action’ available against any person on whom a freezing order was to be made. He submitted that when the English courts exercised the ‘Chabra-type of jurisdiction’ then, effectively the assets frozen were treated as being those of the principal defendant. Therefore there was always a ‘Siskina cause of action’ against a relevant defendant. Mr. Wood also pointed out that, on the facts, the Cardile case was a clear example of ‘asset stripping’ to avoid having to pay a judgment debt.

50.

It seems to me that the High Court of Australia has stated that, in Australia, the assets of a third party can be frozen in aid of enforcing a pending or actual judgment, even where those assets are not beneficially owned by the actual or potential judgment debtor. The necessary precondition for power to make a freezing order over the third party's assets is that the actual or potential judgment creditor should have some legal right to get at the third party's funds. However, on my reading of the judgments, particularly paragraphs 57 and 121, the High Court of Australia is stating that there must be some causal link between the fact that the Claimant has obtained a judgment against the principal defendant and thus has a legal right, as a consequence of the liability giving rise to the judgment, to go against the assets of the third party. I will delay deciding whether English law permits the exercise of the freezing order jurisdiction where there is such a causal link until I have considered the remaining two factors I have identified.”

At paragraphs 75-77 Aikens J summarised his conclusions as to the English Court’s power to grant third party freezing orders as follows:

“Conclusions on the Court's Legal Power to grant freezing orders over the assets of a non – party against whom there is no claim for substantive relief

75.

I think that the following conclusions can be drawn:

(1)

The purpose of a freezing order is to ensure that the orders of the Court are effectively enforced.

(2)

A freezing order will usually be granted against a defendant against whom there is a claim for substantive relief. The order will cover assets of which he is the beneficial owner. But the Court has the power to grant freezing orders against third parties.

(3)

Unless it is a case under section 25 of the CJJA 1982, a freezing order cannot be entirely ‘free – standing’. It has always to be incidental to and dependent upon a claim to enforce a substantive right. That substantive right has to be one that the English Court will recognise. But the claim to enforce that right does not have to be made in the English Court.

(4)

If the claim for substantive relief is not made in the English Court, then the English Court will only have the power to grant a freezing order if the respondent to the order can be made subject to the territorial jurisdiction of the English Court.

(5)

If there is a claim for substantive relief by A against B (whether or not in the English Court), or A has obtained a judgment against B (in the English Court), then the English Court can grant a freezing order against the assets of C. But, generally, it must be arguable that those assets, even if in C's name, are, in fact, beneficially owned by B.

(6)

The crucial question is whether the Court can go one stage further. Does it have the power to grant a freezing order against the assets of C when: (i) A has a substantive right against B (e.g. in the form of a judgment); (ii) the assets of C are not, even arguably, beneficially owned by B. The answer, to my mind, depends on how one interprets the phrases “ancillary” and “incidental to and dependent upon” used by Lords Browne–Wilkinson and Mustill in the Channel Tunnel case. In the Cardile case the High Court of Australia has, effectively, given those phrases a broad interpretation. But, critically, the High Court of Australia held that the right of A to a freezing order against C is dependent upon A having a right against B and that right itself giving rise to a right that B can exercise against C and its assets. Therefore the freezing order sought by A against C is ‘incidental to’ A's substantive right against B and it is also “dependent upon” that right.

76.

In this case the Claimant has a substantive right against Mrs L; it has the default judgment. Because of that right, indeed because of the antecedent liability of Mrs L to the Claimant, Mrs L has (arguably) a right to an indemnity from Mr. L. That can either be enforced by her, or if she will not do so, by a Receiver appointed by the Court. That receiver would have the right to claim against Mr. L and to satisfy any judgment out of his assets.

77.

I have concluded that, upon analysis, the English Court can and should adopt the same approach as the Australian High Court. Therefore the Court does have the legal power to grant a freezing order against Mr. L. Such an order is ‘incidental to’ the substantive right that the Claimant has against Mrs L. The order is also ‘dependent upon’ the substantive right that the Claimant has against Mrs L.”

In other words, Aikens J concluded that the Australian court had, in setting out the general principle that assets in hands of third parties could be frozen even when not beneficially owned by the potential judgment debtor, nonetheless required:

“… that there must be some causal link between the fact that the claimant has obtained a judgment against the principal defendant and thus has a legal right as a consequence of that liability giving rise to the judgment, to go against the assets of the third party”.

At the interlocutory stage in Dadourian Group International Inc. v Azury Ltd. [2005] EWHC 1768 (Ch), Deputy High Court Judge Bartley-Jones QC appeared to adopt a wider approach, harking back (at paragraph 26) to the statement of Cumming-Bruce LJ in In re a Company, at pp 337-8. Having cited C. Inc v L to the effect that “… generally it must be arguable that the assets even if in the third party's name, are in fact beneficially owned by the relevant defendant before a Chabra-type injunction” could be made, he went on:

“30.

For my part I do not believe it is necessary to establish beneficial ownership in the strict trust law sense. Clearly, if assets are held on a bare trust then the Chabra-type jurisdiction can be exercised. But, in my judgment, even if the relevant defendant of the substantive claim has no legal or equitable right to the assets in question (in the strict trust law sense) the Chabra-type jurisdiction can still be exercised if the defendant has some right in respect of, or control over, or other rights of access to the assets. The important issue, to my mind, is substantive control.”

The next case is HM Revenue and Customs v Egleton (supra). The claim arose out of a VAT carousel. An issue arose as to the legitimacy of a freezing order, where the respondent was not alleged to hold or have any custody of assets belonging to the defendant. Having considered Cardile and C. Inc v L, Briggs J concluded as follows:

In Yukos, David Steel J, having considered the relevant authorities, agreed with Briggs J in rejecting Aikens J’s purported requirement that there should be a “causative condition.” He said:

“25.

For my part, I am also un-persuaded that Cardile contained any ‘causation’ condition. Equally in company with Briggs J, although a sufficient degree of causation or connection was available on the facts in C Inc. v L, I consider that the application of such a test in all cases would be unduly rigid. Accordingly, I would accord a question of connection or causation as pertinent to the general question of discretion to which I now turn.

Discretion

26.

Absent any proprietary interest on the part of the defendant in assets held by a third party it is appropriate to consider the extent to which the defendant has some interest in or control over the asset going beyond an actual or potential cause of action against the third party. This must be the more where as here it is not suggested that there is any causative link or other connection between the claimant's claim (in the form of monies due under an arbitration award) and the assets in the third party's hands (formed of the sale proceeds for oil).

27.

Rosneft's interest in the funds in the third party's bank accounts is formidable:

i)

absent any exercise of the bank's security, the monies can only be paid to Rosneft.

ii)

indeed irrevocable instructions to that effect have been given by the bank to accomplish that.

iii)

the banks have never exercised any claim under the security documents.

iv)

RT are parties to a back to back sale of the oil shipments, but have no other role or involvement.

v)

transfer of the price apart, RT has no function as regards the sale or purchase: Rosneft acts as its agent in conducting the auction, selecting the winning bidder and preparing the documents: the buyer acts as his agent in regard to the buyer's role.

vi)

RT is held harmless from any liability in regard to the sale transactions (or otherwise).

28.

In short, the RT companies are special purpose vehicles with no business or assets of their own. They exist solely to provide a portal for transfer of the purchase price in a manner preserving the bank's security. RT have no interest in or control over the monies. Allowing for the bank's security, the money is, as submitted by Yukos , Rosneft's in all but name.”

David Steel J therefore would have continued the freezing orders against the RT companies had the case not settled. His decision to do so could on the facts of that case – see paragraph 28 of his judgment – almost, but not quite, have been justified on pure Chabra-type grounds, on the basis that the RT companies were effectively nominees for Rosneft. However, I do not think that in fact was the basis for David Steel J’s decision, because there were, in that case, no legitimate grounds for disregarding the separate corporate personalities of the RT companies.

In my view, the High Court of Australia, in paragraph 57(ii) of the majority judgment in the Cardile case, was not stipulating that a third party freezing order could only be made against third party C (i.e. a NCAD), in circumstances where principal defendant B’s receivable from C (or claim against C), arose out of, or had some casual connection with, claimant A’s claim against B. Nor do I think that Aikens J was actually saying so in paragraph 75(6), 76 and 77 of his judgment. If he was, then, with respect, I disagree with him, as did Briggs and David Steel JJ.

In my judgment, the principle recognised in the Cardile case, and applicable as a matter of English law, is a simple one. In circumstances where a defendant/judgment debtor (i.e. a cause of action defendant (“CAD”), against whom it is appropriate to make a freezing order at the suit of a claimant, has a debt, or other receivable owing to it by a third party NCAD, or a claim, or potential (Footnote: ⁴) claim, against a third party NCAD, the English court has jurisdiction (or “legal power” as Aikens J put it) to grant a freezing order against the third party NCAD, in appropriate circumstances, to restrain the NCAD from dissipating its assets up to the amount of its debt to, or the claim by, the CAD or judgment debtor. Such an order is doing no more than protecting the right, or contingent right, of the claimant (whether by a third party debt order, charging order, appointment of a receiver or liquidator etc.) to obtain satisfaction of its judgment debt against the defendant by means of attachment, or other collection, of the proceeds of the latter’s receivable from, or claim against, the third party. Whether the court grants such an order against the third party will be a matter for the exercise of its discretion, depending on the particular circumstances of the case. Normally, if there is no reason to doubt the propriety of the third party, it may well be sufficient, for example, to injunct the defendant from collecting the receivable, otherwise than by instructing the third party to pay it into a designated account. In other circumstances, it may be appropriate, at an interlocutory stage, to appoint a receiver over the receivable/claim against the third party in order to enable the receiver to collect it and pay it into court, or an escrow account, or otherwise preserve the receivable/claim from dissipation by the defendant/judgment debtor. But if, for example, the circumstances show collusion, or impropriety, or some participation, on the part of the third party, in attempts by the defendant/judgment debtor to render itself judgment proof, then it may be appropriate for a freezing order to be granted against the third party itself. (This rehearsal of circumstances which may give rise to the exercise of the court’s discretion is not meant to be in any way exhaustive.) Such an order does not involve any “piercing of the corporate veil”, nor, I venture to suggest, any major new development in English law. It is the type of order that has frequently been made in the years following Yukong.

At the hearing on 4 and 5 October 2011, I was additionally referred to the decision of Sir John Chadwick P, in a decision of the Court of Appeal of the Cayman Islands in Algosaibi v Saad Investment Company Ltd (CICA 1 of 2010), a judgment which was handed down on 15 February 2011. It provides an extensive analysis and summary of the recent English authorities and the Australian cases which the English courts have followed. Algosaibi was approved and adopted as a correct statement of the scope and limitation of the Chabra jurisdiction by Flaux J in Linsen International Ltd v Humpuss Sea Transport Pte Ltd [2011] EWHC 2339at paragraph 146. It would have been of considerably more use to me to have been provided with a copy of Sir John Chadwick’s judgment at the hearing in June 2011, or, at least, prior to the circulation of my draft judgment.

In paragraph 33 of his judgment, Sir John Chadwick P stated the principles upon which the court would grant a freezing injunction against a non-cause of action defendant in the following terms:

“The fact that the potential judgment debtor (the CAD) has substantial control over assets which are held by a party against whom no cause of action is alleged (the NCAD) - say, because the NCAD can be expected to act in accordance with the wishes or directions of the CAD (whether or not it could be compelled to do so) - is likely to be of critical importance in relation to the question whether there is a real risk that the assets will be dissipated or otherwise put beyond the reach of the claimant. But, as it seems to me, the existence of substantial control is not, of itself, enough to meet the first of the two requirements just mentioned. It is not enough that the CAD could, if it chose, cause the assets held by the NCAD to be used to satisfy the judgment. It is necessary that the court be satisfied that there is good reason to suppose either (i) that the CAD can be compelled (through some process of enforcement) to cause the assets held by the NCAD to be used for that purpose; or (ii) that there is some other process of enforcement by which the claimant can obtain recourse to the assets held by the NCAD.”

That analysis of the relevant principles reflects my analysis as set out above.

Applying the relevant principles to the facts of this case, and in the exercise of my discretion, I concluded, prior to the presentation of HSTPL’s further jurisdictional arguments, that it would be appropriate, in the circumstances of this case, to make a third party freezing order against HSTPL, restraining it from dealing with its assets up to an amount which is equal to the total amount of its indebtedness (of any kind) to Heritage and HIT respectively, subject to a maximum of US$ 30 million (the amount of the Award and the Judgments). On the evidence before me this appeared to be at least (i) US$ 7,271,488 owing to Heritage as shown in Heritage’s latest management accounts; and (ii) possibly, an unknown amount owing to HIT. HIT’s latest audited accounts as at 31 December 2010 show a total sum of Indonesian Rupiah 35,450,074,000 as due from “related parties”, and a sum of US$ 175.5 million attributable to HIT’s “ownership” interest in HSTPL; but it was not clear how much, if anything, was owing by way of inter-company indebtedness. I stated that I would require HSTPL to disclose the amount of its indebtedness to HIT.

I did not consider it appropriate to make a freezing order simply in the full amount of the Award and the judgments. Rather, I considered it appropriate to define the amount of the freezing order by reference to the amount of HSTPL’s indebtedness to Heritage and HIT, subject to a cap of US$ 30 million. My reasons for so doing were as follows.

This is not a case where it is legitimate to disregard the separate corporate personalities of HSTPL and its 100% subsidiary, Heritage, and treat the assets and liabilities of one company as the assets and liabilities of the other company, or the assets of HSTPL available to meet the liabilities of Heritage. To do so would not be in accordance with the principles enshrined in Salomon and Adams v Cape, nor would it satisfy the requirement set out in cases such as Ben Hashem v Ali Shayif (supra). This is not a situation where HSTPL “has been used as a device or façade for concealing the true facts, or for avoiding or concealing the liability or assets of the principal defendant”. The fact that Heritage appears to have been a special purpose vehicle does not mean that its separate corporate identity is to be disregarded. It appears to have operated commercially with more than one vessel over a number of years. Nor does the fact that it is a 100% subsidiary of HSTPL, and the latter’s employees in practice ran Heritage, mean that Heritage “was a mere façade” for HSTPL, or that Heritage was HSTPL’s “puppet”. To pierce the corporate veil in such circumstances, merely on the grounds of HSTPL’s control of Heritage, or that Heritage was a special purpose vehicle, would illegitimately undermine well-recognised group structures in many similar situations.

Nor is there any justification for the “short” reason put forward by Mr. Matthews as to why he submitted, in the present case, it was just and convenient to grant a freezing injunction over HSTPL’s assets up to the full amount of the Award/Judgments. The mere fact that HIT was HSTPL’s 100% shareholder did not justify a freezing order over HSTPL’s assets, even given the evidence suggesting that the Humpuss group as a whole had taken steps to render certain companies in the Group judgment proof, or at least to make it more difficult to enforce judgment against such entities. Again, to do so, would breach the principles of separate corporate personality. As Mr. Joseph pointed out, HIT’s asset was its shareholding in HSTPL; a freezing order against HIT would restrain it from dissipating the value of that asset. But the fact that the Humpuss group, as a whole, had taken steps to render certain companies in the Group judgment proof, did not per se justify an order against HSTPL – or indeed against any other subsidiary in the group.

However, given the evidence rehearsed above, in my judgment, at that stage, and prior to HSTPL’s further jurisdictional arguments, there was every justification for making a freezing order against HSTPL to restrain it from dissipating assets up to the amount of its indebtedness to Heritage and HIT (if any). There appeared to be no justification or explanation on the evidence before me as to why HSTPL had not repaid Heritage the substantial sums which Heritage had previously loaned or advanced HSTPL (whether from the surplus proceeds of the sub-charter hire of the Vessel, from the proceeds of sale of the vessel, Mediroma, or otherwise). There was no explanation as to the original commercial justification for such loans (if any), but, even if there were such a justification and Heritage had been in a position to pay its own debts at the time the loans were originally made, there was no reason put forward in the evidence to explain why the monies had not been repaid at a time when Heritage was insolvent and not able to pay its debts as they fell due. That, coupled with the evidence relating to the attempts by the group to render itself judgment proof, and the substantial evidence relating to the reduction in both Heritage’s and HSTPL’s assets in recent months provided grounds to suppose that, unless restrained, HSTPL might well take steps to put itself in a position where it could not repay its indebtedness to Heritage and any indebtedness to HIT, which it might have.

The foregoing conclusion was that which I reached in my draft judgment, before receiving further submissions from the parties, on 4 and 5 October 2011, in relation to HSTPL’s new jurisdictional arguments. It is to those arguments that I now turn.

In Linsen (2) the claimants applied at the return date of 5 July 2011 to continue the worldwide freezing injunctions granted, inter alia, against the third to thirteenth defendants on an ex parte basis by HHJ Mackie QC on 9 June 2011. Each of such defendants resided out of the jurisdiction and HHJ Mackie had given leave to serve out. At the return date before Flaux J, the third to thirteenth defendants made it clear that, in addition to opposing the continuation of the freezing injunctions, they would be challenging the jurisdiction of the English court. The first defendant was HSTPL who was liable to the claimant under various arbitral awards later converted into judgments. The second defendant was HIT, who had guaranteed HSTPL’s liability under the relevant charterparty, and was also subject to judgments of the English court in respect of that liability. The third defendant was HTK, which, as referred to above, was a company incorporated in Indonesia in which HIT held a 99% shareholding.

After a further hearing on 19 July 2011, Flaux J refused to continue the injunctions against the third to thirteenth defendants. Although he did not at that time give reasons for his order, from his later reserved judgment at [2011] EWHC 2339 (Comm), these were:

The claimant applied to the Court of Appeal for permission to appeal Flaux J’s order refusing to continue the injunctions pending a full written judgment and potential appeal, and for further injunctive relief in the meantime. After concluding, like Flaux J, that the corporate veil arguments were not available to the claimant, Lord Neuberger MR (with whom Stanley Burnton LJ agreed) said as follows:

“14.

Piercing the corporate veil not being available to the claimants, what about the argument based on the jurisdiction in the TSB v Chabra case?

15.

In my view, the only possible person who could be held liable under that jurisdiction is the third defendant. Effectively, you follow the assets. I accept that the authorities establish that the claim based on the TSB case would not necessarily involve the claimants having to establish that the first defendant had a proprietary interest in the assets transferred to the third defendants. But in my view it would require something akin thereto, although I accept the jurisdiction is wider.

…

19.

That brings me to the claim against the third defendant, which involves a different point. As it is an Indonesian company, which is not party to the contract, how can it be held to be susceptible to the jurisdiction of this court? In answer to that question, Mr Howard has taken us to practice direction 6B, "Service out of the jurisdiction". He relies on three sub-paragraphs of paragraph 3.1, namely 3.1(3), 3.1(6) and 3.1(10).

20.

Not unreasonably, although not necessarily conclusively, Mr Malek, who appears for the 11th and 12th defendants, and Mr Fenwick, who appears for the third, eighth and thirteenth defendants, rely on the fact that the point on which Mr Howard took his main stand in front of us (sub-paragraph 10) was one which he effectively abandoned before Flaux J.

21.

Mr Howard attractively says that the fact that he was persuaded to abandon it does not mean it was not a good point. I accept, and I think realistically Mr Fenwick and Mr Malek accept, that the fact he abandoned it below is not the end of the matter.

22.

Nonetheless, having heard what Mr Fenwick has to say, I am satisfied, having initially had my doubts, that Mr Howard was right to abandon it.

23.

Sub-paragraph 10 reads:

‘A claim is made to enforce any judgment or arbitral award.’

24.

The award was made under an English law contract and, therefore, once the award was made, it was properly registered and ‘converted’ into a judgment in this country. But what subparagraph (10) is concerned with is, as Mr Fenwick says, a claim being made ‘to enforce any judgment or arbitral award’. The third defendant has no assets in this country and what is sought to be done is to enforce the judgment against the first defendant, i.e. to follow assets which the first defendant has transferred to the third defendant. That enforcement cannot be in this country and must be abroad. Therefore, I accept the submission that sub-paragraph 10 cannot be relied on.

25.

Once one accepts that, it is easy to see that the same logic effectively applies to sub-paragraph 3 and sub-paragraph 6. Accordingly, it seems to me that there is no basis on which an order should be made against the third defendant.”

At paragraph 30, Stanley Burnton LJ agreed and added:

“… The main ground on which permission is sought to serve the third defendant out of the jurisdiction is paragraph 10 of practice direction 6B, paragraph 3.1. The object of that provision is to enable enforcement of a judgment against assets within this country that belong to a defendant who is out of the jurisdiction. It has no application to a case such as the present.”

Accordingly, the Court of Appeal dismissed the application for permission to appeal.

In his subsequent reasoned judgment, Flaux J said as follows in relation to the claimant’s arguments before him based on paragraph 3.1(3) and 3.1(10) of the Practice Direction:

“160.

At that hearing, Mr Howard QC relied primarily on paragraph 3.1(3) of Practice Direction 6B of the Civil Procedure Rules, which allows for service out of the jurisdiction where:

‘A claim is made against a person (“the defendant”) on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and –

(a)

there is between the claimant and the defendant a real issue which it is reasonable for the court to try; and

(b)

the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.’

161.

However, the difficulty which the claimants face in relying on this ‘necessary or proper party’ provision is that (in so far as they are seeking to found the Chabra jurisdiction against the third to thirteenth defendants in relation to assets held by them, which are arguably the first defendant’s assets or in which the first defendant is arguably beneficially interested), the application of paragraph 3.1(3) of the Practice Direction is limited to cases where the substantive dispute is before the English courts, because only in such a case will any ‘claim’ ever be tried between the claimant and the defendant who has been or will be served with the proceedings. In the present case, the claims of the claimant against the first defendant for breach of the charterparties will all be determined in London arbitration rather than by the English court.

162.

I considered this question of the limitation on the scope of paragraph 3.1(3) in Belletti v Morici [2009] EWHC 2316 (Comm); [2010] 1 All ER (Comm) 412. That was a case where the substantive dispute between the claimants and the first defendant was before the Italian courts and a worldwide freezing injunction against the first defendant had been granted by the English court, pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982, in support of those substantive Italian proceedings. At a later stage, the question arose as to whether the first defendant’s parents, who were resident in Italy, had, wittingly or unwittingly, assisted the first defendant to dissipate assets which were the subject of the injunction. An order was made ex parte joining them as defendants and granting an injunction against them on the basis of the Chabra jurisdiction.

163.

An application was made by the parents to set aside the order against them on the grounds that the English court had no jurisdiction over them. I allowed that application inter alia on the ground that paragraph 3.1(3) of the Practice Direction was not applicable. At paragraphs 36 to 39 of my judgment I said:

‘36. … In my judgment Mr Samek is correct in his submission that the application of paragraph 3.1(3) of the Practice Direction is limited to cases where the substantive dispute is before the English courts, because only in such a case is any “claim” going to be tried between the claimant and the defendant who has been or will be served with the proceedings. Where, as in the present case the substantive issue will be tried in Italy, there never will be any real issue between the claimants and the first defendant which this court will try.

37.

To the extent that it is suggested that [the decision of Aikens J in] C Inc plc v L [2001] EWHC 550 (Comm); 2 Lloyd's Rep 459] is authority for the proposition that jurisdiction under paragraph 3.1(3) of the Practice Direction can be founded against a party, even where the claim against that party is in interlocutory proceedings, it is important to have in mind that C Inc plc v L was a case where the substantive dispute against Mrs L was before the English court. It is one thing to say that, in such a case, where in the dispute concerning the freezing order in support of those proceedings, another party is a necessary or proper party to that dispute, permission to serve that party out of the jurisdiction can be obtained pursuant to paragraph 3.1(3). It is quite another to suggest that that provision can be invoked in a case where the substantive dispute is not before the English courts at all, but before a foreign court and the English jurisdiction has only been invoked in support of those foreign proceedings.

38.

In my judgment, paragraph 3.1(3) cannot be relied upon in a case such as the present, where the substantive dispute is before a foreign court and the jurisdiction of the English court against the principal defendant is only engaged by virtue of section 25 of the 1982 Act. Where the substantive dispute is before the Italian courts, the only basis for jurisdiction against the first defendant is section 25 and paragraph 3.1(5). Reliance on any of the other grounds of paragraph 3.1 would not have been possible, because the substantive dispute was to be litigated in Italy, not here. It would be bizarre in the extreme if there was jurisdiction to sue accessory parties such as the parents under the provisions of the remainder of paragraph 3.1, where there was no jurisdiction under those provisions against the primary defendant.

39.

Even if that analysis is wrong and paragraph 3.1(3) is capable of applying to the parents in principle, there are a number of other reasons why the provision does not apply. In reality, as matters stand, there is no dispute between the claimants and the first defendant, let alone between the claimants and the parents (who have not raised any contention yet about the assets) as to the ownership of the assets. Any contrary argument is wholly artificial. If the first defendant (or the parents) were to contend that the relevant assets in Monaco were in truth their assets and not their son's, at that stage the court might order an issue to be tried but unless and until that happened, there would be no "claim" to be tried. Again, the position here is different from that in C Inc plc v L where there was a real dispute between the claimant and Mrs L as to the appointment of a receiver.’

164.

That was a case where the substantive dispute was before the Italian courts, whereas in the present case the substantive dispute between the claimants and the first defendant is before arbitrators in London. However, in my judgment that distinction is of no consequence, nor was Mr Howard QC able to suggest in his submissions that it was. The critical point, which is the same in the present case as in that case, is that the substantive claim between the claimants and the first defendant will never be tried by the English court and that it should be is a pre-condition of the application of paragraph 3.1(3).

165.

The claimants rely upon the fact that, in contrast, the claims against the second defendant under the guarantees are before the English court. However, for the reasons I have already given, there is no suggestion that the second defendant has transferred its assets or that its asset base has been diminished, let alone that the third to thirteenth defendants have participated in any such transfer or diminution. Accordingly, there is no arguable basis for the Chabra jurisdiction against them in relation to the second defendant’s assets and thus no basis for saying that they are necessary or proper parties to the claim under the guarantees. Furthermore, the fact that the claim against the second defendant is before the English court is of no avail to the claimants in seeking to found Chabra jurisdiction under paragraph 3.1(3) of the Practice Direction, where the third to thirteenth defendants are said to be necessary or proper parties to the claim against the first defendant.

166.

Mr Howard QC accepted during the course of argument on 19 July 2011 that, although the claimants have obtained judgments against the first and second defendants (in the former case where interim arbitration awards have been converted into judgments), it was not possible to found jurisdiction against the third to thirteenth defendants on the basis of paragraph 3.1(10) of the Practice Direction. As noted above, on the hearing of the claimants’ subsequent application for permission to appeal, Mr Howard placed far more reliance on sub-paragraph (10) which provides:

‘A claim is made to enforce any judgment or arbitration award.’

167.

It seems to me that provision is not applicable for two reasons. First, by parity of reasoning with paragraph 42 of my judgment in Belletti, there is no claim against the third to thirteenth defendants to enforce those judgments. At most the claim against the third to thirteenth defendants would be for ancillary relief to assist the claimants to enforce the judgments against the first and second defendants, but any such claim falls outside sub-paragraph (10).

168.

Second, even if that is wrong and the claimants are seeking to enforce against the third to thirteenth defendants, then although the arbitration awards against the first defendant have been converted into judgments of this court, the sub-paragraph is concerned with enforcement of a judgment or award against assets in this jurisdiction of a defendant who is out of the jurisdiction.

169.

In this case the third to thirteenth defendants have no assets within the jurisdiction to which the claimants can point. To the extent that what the claimants are seeking to do is to ‘enforce’ against those defendants (essentially by following the assets of the first defendant which had been transferred to the third defendant) that enforcement can only take place abroad and not in this jurisdiction, so sub-paragraph (10) is not applicable. This is the reason why the Court of Appeal held that the court had no jurisdiction to grant permission to serve out and I agree with their analysis.”

In the light of the judgments of the Court of Appeal and Flaux J in Linsen (2), Mr. Joseph made the following submissions in support of HSTPL’s further jurisdictional arguments:

Mr. Matthews QC submitted as follows:

These arguments appear to me to raise the following issues:

The judgment of the Court of Appeal in Linsen (2), and, indeed, the reserved judgment of Flaux J in the same case, would appear to predicate that Issue i) should be answered in the negative: i.e. that the court has no jurisdiction (power) under paragraphs 3.1(3) or 3.1(10) of Practice Direction 6B to order service out of the jurisdiction of a claim for a worldwide freezing order against a NCAD where not only its assets, but also the debt it owes the CAD, are situated out of the jurisdiction.

Neither Aikens J’s decision in C v L (supra) nor that of the Court of Appeal’s previous decision in Tasarruf (supra) were, apparently, cited to the Court of Appeal in Linsen (2).

In C v L, the NCAD, Mr. L (a Guernsey resident), disputed that the court had territorial jurisdiction over him under what is now paragraph 3.1(3) of Practice Direction 6B, or that it was appropriate, as a matter of discretion, to make a freezing order against him. The argument, and Aikens J’s conclusion in relation to it, were as follows:

“92.

[Mr. Wood, Mr. L’s counsel, submitted that] … Mr. L cannot be a ‘proper’ party for two reasons. First because there is no substantive claim against him in the English Courts; secondly because the application for a freezing order is only indirectly connected with the appointment of a receiver. This is because the asset that the receiver has to get in is Mrs. L’s right to an indemnity from her husband. Once that asset is gathered in, the right must be exercised in the Guernsey Courts (as Miss Dias accepts); it is only if that claim succeeds that Mrs. L’s assets become relevant. He cannot be a ‘proper party’ if the link between the application for a receiver and the freezing order is so indirect.”

93.

Mr.  Wood further submits that even if he is wrong so far, the Court should not exercise its discretion under CPR Part 6.21(2A). This is because the practical effect of the freezing order is to catch assets to satisfy a claim for an indemnity that must be made in the Guernsey Court. It has no connection with the English Court. So any such order should only be made by the Guernsey Court.

94.

Conclusion on the territorial jurisdiction issue

I have concluded that the Court does have territorial jurisdiction over Mr. L, based on CPR Part 6.30(2) and Part 6.20(3). I have also concluded that it should exercise its discretion to give permission to serve the application notice on him. My reasons are as follows:

(1)

As there is not and cannot be any claim for substantive relief against Mr. L, it is inappropriate to issue and serve a claim form against him. The proper procedure is to issue and serve an application notice in the existing action, as Lord Mustill stated in the Mercedes-Benz case. It is accepted that CPR Part 6.30(2) applies in that case. In my view, on the proper construction of that provision, the claimant/applicant has to satisfy the Court that there is a ground within CPR Part 6.20 which gives the Court jurisdiction to grant permission to serve the application notice on the proposed defendant out of the jurisdiction.

(2)

So in this case the Court has to consider whether CPR Part 6.20(3) applies to the application notice that the claimant wishes to serve out of the jurisdiction on Mr. L.

(3)

It is not disputed that there has been an ‘application’ against ‘someone’ i.e. Mrs. L (for the appointment of a receiver) and the application has been or will be served on her. In my view unless Mrs. L has agreed to the appointment of a receiver - and she has not - then there is a ‘real issue which it is reasonable for the court to try’. The issue is whether the English Court should appoint a receiver to get in an asset, Mrs. L’s alleged right to an indemnity from her husband, in aid of the execution of the judgment debt against her.

(4)

The claimant does wish to serve the application notice on ‘another person’, i.e. Mr.  L.

(5)

He is a ‘proper party’ to ‘that claim’ i.e. the claim against Mrs. L for the appointment of a receiver. This is because ultimately the receiver will be making the claim for an indemnity against Mr. L. He therefore may have arguments to make on why the receiver should not be appointed by the English Court. Furthermore, it is Mr. L’s assets that would be used to satisfy the claim for an indemnity that the receiver is to pursue. It is accepted for present purposes that there is a risk of dissipation of those assets. Therefore it is proper for an application notice claiming a freezing order to be served on him out of the jurisdiction.

(6)

The Court should exercise its discretion to permit the service of the application notice because: (i) it is accepted that the Guernsey Court cannot appoint a receiver over the assets of Mrs. L, even those in Guernsey. So if any steps are to be taken to enforce the right of indemnity in aid of execution of the existing judgment debt, it could only be done by a receiver appointed by the English Court. (ii) Although the indemnity proceedings must be in Guernsey, if they are to be effective, the receiver appointed by the English Court must take steps to satisfy that judgment against Mr. L by executing on his assets. (iii) Those assets may be either in England and Wales or in Guernsey. (iv) Therefore as the application against Mr. L relates to the proposed actions of a receiver appointed by the English Court, England is the proper place in which to make the application for a freezing order against Mr. L.”

In Tasarruf, the claimant (who had obtained a judgment against the defendant in Turkey) brought an action at common law in England to enforce the Turkish judgment. At first instance, Lawrence Collins J (as he then was) maintained orders granting permission to serve the proceedings and an order out of the jurisdiction on the defendant, but discharged worldwide freezing injunctions against the defendant on the grounds that, although rightly made in the first instance, there was no point in their continuance, since the disclosure of information had been made, there were no assets in the jurisdiction, and their effectiveness as regards foreign assets was doubtful.

On appeal, the defendant contended that the court had no jurisdiction to permit service out of the jurisdiction on the true construction of what was then CPR 6.20(9) (the equivalent of the present paragraph 3.1(10) of Practice Direction 6B). At paragraphs 10 to 25 of the judgment of the Court (Sir Anthony Clarke MR, Arden and Hooper LJJ), the court, in upholding Lawrence Collins LJ’s decision at first instance, stated:

“10.

CPR 6.20(9), which we will call ‘the rule’, provides:

‘6.20 In any proceedings to which rule 6.19 does not apply, a claim form may be served out of the jurisdiction with the permission of the court if

….

(9)

a claim is made to enforce any judgment or arbitral award.’

These are not proceedings to which rule 6.19 applies because that rule applies to cases where the permission of the court is not required and this is not such a case.

11.

It is important to note that it is not sufficient for a claimant to show that his claim is a claim ‘made to enforce a judgment or arbitral award’ because, as is common ground between the parties, the rule expressly provides that in such a case a claim form may be served out of the jurisdiction of the court ‘with the permission of the court’. The rule does not specify the circumstances to be taken into account in the exercise of its discretion to grant permission. In addition, CPR 6.21(2A) provides for a further condition, namely that the court will not give permission unless satisfied that England and Wales is the proper forum in which to bring the claim.

12.

Mr Edward Cohen [counsel for the defendant] submitted to the judge and submits to us that jurisdiction to give permission to serve a claim form out of the jurisdiction to enforce a foreign judgment only exists where, at the time when the application is made, there are assets in England and Wales against which the judgment can be enforced or at least where the judgment is otherwise enforceable in England and Wales. An alternative formulation canvassed in the course of the argument was that at the time of the application there must be at least a real prospect of assets within the jurisdiction against which the judgment could be enforced within a reasonable time.

13.

Mr Cohen relies in this regard upon the well-known cases decided under RSC Order 11 and its predecessors. Perhaps the best-known of them is The Hagen [1908] P 189, where Farwell LJ said at page 201:

‘During these present sittings Vaughan Williams L.J. and myself have on more than one occasion had to consider Order xi, and we have had many authorities discussed and fully considered by the Court, and the conclusion to which the authorities led us I may put under three heads. First we adopted the statement of Pearson J, in Société Générale deParis v Dreyfus Brothers (1), that ‘it becomes a very serious question, and ought always to be considered a very serious question, whether or not, even in a case like that, it is necessary for the jurisdiction of the Court to be invoked, and whether this Court ought to put a foreigner, who owes no allegiance here, to the inconvenience and annoyance of being brought to contest his rights in this country, and I for one say, most distinctly, that I think this Court ought to be exceedingly careful before it allows a writ to be served out of the jurisdiction.’ The second point which we considered established by the cases was this, that, if on the construction of any of the sub-heads of Order xi. there was any doubt, it ought to be resolved in favour of the foreigner; and the third is that, inasmuch as the application is made ex parte, full and fair disclosure is necessary, as in all ex parte applications, and a failure to make such a full and fair disclosure would justify the Court in discharging the order, even although the party might afterwards be in a position to make an another application.’

It is the second point which is relevant or potentially relevant to the first ground of appeal.

14.

Mr Edward Cohen submits that, although the words of the rule are apparently unqualified, when they are construed in their context they are plainly qualified in one of the ways he has suggested. Alternatively, he submits that there is a doubt, which must be resolved in favour of the foreign defendant for the reasons given by Farwell LJ. Mr Lawrence Cohen [counsel for the claimant] submits by contrast that there is no room for doubt, that the words are unqualified and that they should be so construed.

15.

The judge accepted Mr Lawrence Cohen’s submission. He held that there is no ambiguity, that the words are clear and that there is no reason to imply a requirement that there must be assets in the jurisdiction (or any of the other formulations suggested on behalf of Mr Demirel) in order to permit service out of the jurisdiction under the rule.

16.

At [52] the judge, who has almost unrivalled experience in this area of the law, correctly said that the origin of the rule was RSC Order 11 rule 1(1)(m), which was added in 1985 to fill a gap revealed in cases where the judgment creditor wished to enforce the judgment against assets in England but there was no reciprocal enforcement arrangement enabling the foreign judgment to be registered in England. It is true, as Mr Edward Cohen observes, that it does not follow that the rule was intended to include actions to enforce judgment against those without assets in England. On the other hand, the draftsman did not limit the jurisdiction to cases where there were existing assets within the jurisdiction. He could readily have done so if he had wished. After all, as Mr Lawrence Cohen observes on behalf of TSMF, the phrase ‘within the jurisdiction’ is used no less than twelve times in the various sub-paragraphs of rule 6.20.

17.

It may well be that the reason the draftsman did not limit the rule was (as the judge observed at [53]) that there is nothing in the CPR Part 74 registration procedure that requires the presence of assets within the jurisdiction. We agree with the judge that it would be odd if the rule were so interpreted as to put the judgment creditor in this respect in a significantly worse position than in the case where a registration arrangement exists.

18.

We also agree with the judge that, whilst it is true that the rule uses the expression ‘to enforce’, which Mr Edward Cohen suggests presupposes assets within the jurisdiction, CPR Part 74 is itself headed ‘Enforcement of Judgments in Different Jurisdictions’ in circumstances where (as just stated) registration under Part 74 does not require the existence of assets within the jurisdiction. Moreover, we accept Mr Lawrence Cohen’s submission that enforcement of a judgment naturally includes enforcement by action: see Pritchett v English and Colony Syndicate [1899] 2 QB 428 at 434 and Godfrey v George [1896] 1 QB 48 at 51 per Lord Esher, where he said ‘… this is an order in a civil matter and … it may be enforced by action as if it were a judgment’.

19.

We note in passing that the note in the 1985 White Book, which was the first new edition after the introduction of RSC Order 11 rule 1(1)m includes the following:

‘This paragraph blocks a small but irritating loophole in the law.

The presence of assets within the jurisdiction does not in itself give the English Courts jurisdiction over a person outside the jurisdiction. Accordingly a foreign judgment could not be enforced against English assets in cases not falling within the provisions for the reciprocal enforcement of judgments legislation unless the debtor could be served in England or was ‘domiciled or ordinarily resident within the jurisdiction’. Now the foreign judgment or award is itself a sufficient ground for the grant of leave.’

The words which we have italicised have been in every edition of the White Book since 1985 and are still in the note on the rule in the 2007 edition. The statement that the foreign judgment is itself a sufficient ground for the grant of leave is to our mind inconsistent with the submission that it is necessary that there be assets within the jurisdiction.

20.

Finally we agree with the judge that there is nothing in Société Eram Shipping Co Ltd v Cie Internationale de Navigation [2004] 1 AC 260 which suggests or requires a different conclusion. Mr Edward Cohen relies upon the approach of the House of Lords to the construction of CPR 72.1(1), which the House did not construe literally. He relies upon the approach of Lord Hoffmann at [45] where Lord Hoffmann said this in the context of a reference to ‘all debts’ in RSC Order XLV rule 2:

‘It is true that the language is entirely general, but, as Millett J said in In re International Tin Council [1987] Ch 419, 450:

“It is one thing to give effect to plain and unambiguous language in a statute. It is quite another to insist that general words must invariably be given their fullest meaning and applied to every object which falls within their literal scope, regardless of the probable intentions of Parliament.”’

However, the correct approach in each case depends upon the context in which the particular rule is to be construed. Thus an important factor in the decision of the House of Lords was that the language of the rule being construed derived from language used in 1854. Lord Bingham said this at [27]:

‘The language used in 1854 has, until very recently, been reproduced with remarkably little change, and I think it rather unlikely that parliament in 1854 was directing its mind to garnishees served within the jurisdiction but owing debts to the judgment debtor abroad. Since no order attaching a foreign shows in action has been made in any reported case, there can have been no pressing need for the Rules Committee to clarify any suggested ambiguity in the rules.’

21.

As the judge put it at [54], the essence of that decision was that a territorial limitation should be read into the provisions for third party debt orders in order to prevent a conflict of jurisdiction and the risk of double payment, whereas in the present case there is no good ground for limiting the words. Moreover, there the garnishee order created a security over the debt and, as that debt was governed by the law of Hong Kong, it could only be discharged in accordance with the law of Hong Kong. No such considerations apply here.

22.

This is a very different case. In our opinion there is no ambiguity in the rule and we see no reason to give it other than its ordinary and natural meaning. In short we agree with the judge on the construction point, essentially for the reasons he gave.

23.

We would only add three points. The first is that Mr Edward Cohen had considerable difficulty in formulating the restriction which he submits is implicit in the rule. Should it require assets at the date of the issue of the proceedings or at some future date and, if so what? It is not easy to answer these questions, except by saying that it cannot have been intended that the words should be limited.

24.

The second point is that we see no reason to limit the jurisdiction of the court. It would, as Mr Lawrence Cohen observes, prevent the giving of permission to serve out in circumstances where there was a belief, hope or expectation that assets belonging to the defendant existed or would or might arrive within the jurisdiction but at the time of the application it was not possible to identify any assets actually within the jurisdiction. Or the claimant may wish to enforce a foreign judgment by compelling a person within the jurisdiction who has the right to call for assets of the defendant outside the jurisdiction to call for such assets.

25.

The third point is that there is no reason to give the rule an unnatural construction or to imply restrictions into it. The rule is discretionary so that the court will only grant permission if it is just to do so in all the circumstances of the case. As we see it, it is in connection with the exercise of the general discretion under CPR Rules 6.20 and with the application of 6.21(2A) that the court should have regard to the statements of principle in cases like The Hagen. We turn to the exercise of discretion.”

In other words, the Court of Appeal held that there was no need to construe the rule as limited to enforcement in relation to assets within the jurisdiction. Nor did they set aside the order for service out on discretionary grounds (on the basis of the argument that there neither were, nor ever had been, assets within the jurisdiction), because there might come a time in the future when the claimant might be able to make use of the various methods available to it to enforce its judgment (see the reasons at paragraphs 40-43).

Thus, it seems to me that the Court of Appeal’s approach in Linsen (2) to the construction of paragraph 3.1(3) of Practice Direction 6B (as per paragraph 25 of their judgment) is difficult to reconcile with Aikens J’s earlier analysis in C v L of the similar “necessary and proper party” provision in what was then CPR Part 20(3). Likewise, whilst the Court of Appeal’s earlier decision in Tasarruf can be distinguished from Linsen (2) on its facts (in that, in the former case, the Court of Appeal was only addressing the construction and scope of the service out of a claim against a CAD, whereas, in Linsen (2), the Court of Appeal was addressing the issue whether a claim for a Chabra-type injunction against a NCAD could be brought within paragraph 3.1(10)), nonetheless, there is clearly a difference in approach between the two constitutions to the question whether there is any territorial limitation to the provision “a claim is made to enforce any judgment or arbitral award”.

Fortunately, however, given my decision in relation to Issue ii), as set out below, I do not think it is necessary (or, indeed, appropriate) for me to come to any conclusion as to which of the respective Court of Appeal decisions I should follow.

I accept Mr. Matthews’ submission that it is no longer open to HSTPL to dispute that the court has in personam jurisdiction to determine the claims raised against it in the arbitration claim form and the application notice in 2011 Folio 424, or that it was validly served with the proceedings. That is not only because of the effect of Rule 58.7(1) of CPR Part 11, but also because at no stage, when, for example, agreeing to the continuation of the injunctions, making submissions to the court in June and July 2011, or otherwise participating in the proceedings, did HSTPL maintain any reservation of its right to dispute or challenge the court’s jurisdiction. I do not accept Mr. Joseph’s submission that HSTPL’s acceptance of the English court in personam jurisdiction was limited to an acceptance of its jurisdiction in relation to HSTPL’s assets within the jurisdiction. It was perfectly clear from the arbitration claim form and the application notice that Parbulk was seeking worldwide orders against HSTPL.

However, that is not, in my judgment, determinative of the matter. Notwithstanding that it is no longer open to HSTPL to challenge service of the arbitration claim form and application notice, or the basis upon which the court has asserted in personam jurisdiction, it remains open to HSTPL to contend that, given the views of the Court of Appeal in Linsen (2) as to the absence of jurisdiction under the relevant gateways, this court, as a matter of discretion, should not make any worldwide freezing orders against HSTPL.

It is to those issues that I now turn.

Even if, as here, the court has in personam jurisdiction over a NCAD, the court nonetheless has to consider whether it is appropriate in any given case to make an order injuncting the foreign assets of such a defendant, by reference to considerations of subject matter jurisdiction and principles of international comity.

This point was helpfully summarised by Lawrence Collins LJ in Masri (No 2) (supra) at paragraphs 30-39 of this judgment, as follows:

“Subject matter jurisdiction

30.

Subject matter jurisdiction is concerned, inter alia, with the extent to which the law or the court's orders applies extra-territorially. The expression "subject matter jurisdiction" was imported into English law from United States law by Hoffmann J in his important decision in Mackinnon v Donaldson, Lufkin & Jenrette [1986] Ch 482. Typically in the United States the question of subject matter jurisdiction arises when the court is asked to consider whether legislation applies to conduct abroad, for example whether the Securities Exchange Act applies to fraudulent misrepresentation in England (as in Leasco Data Processing Equipment Corp v Maxwell, 468 F 2d 1326 (2d Cir 1972), at 1329) or whether the Sherman Act applies to allegedly anti-competitive agreements concluded in the London insurance market (Hartford Fire Insurance Co v California, 509 US 764 (1993), at 796, 798) and to the manipulation of the copper market on the London Metal Exchange (Metallgesellschaft AG v Sumitomo Corp of America, 325 F 3d 836 (7^th Cir 2003), at 838).

31.

The same point has long been recognised in England, where it used to be said that there was a presumption that Parliament did not design its statutes to operate beyond the territorial limits of the United Kingdom. But nowadays the presumption has little force and it is simply a matter of construction: for a recent example see Office of Fair Trading v Lloyds TSB Bank plc [2007] UKHL 48, [2007] 3 WLR 733. But even where legislation is construed to apply without territorial limitation, the question whether the matter has a sufficient connection with England may be a highly material factor in the exercise of the court's powers, as for example under the Insolvency Act 1986, section 238 and 239 (transactions at undervalue and preferences) in Re Paramount Airways Ltd [1993] Ch 223, which Hoffmann J characterised as subject matter jurisdiction: Barclays Bank pc v Homan [1993] BCLC 680 (Hoffmann J and Court of Appeal) at 689.

32.

In Mackinnon v Donaldson, Lufkin & Jenrette [1986] Ch 482 the plaintiff in proceedings which were pending in London served an order under the Bankers’ Books Evidence Act 1879 on the London branch of Citibank NA, a New York bank, and a subpoena addressed to one of its officers to produce documents. The New York bank was subject to the in personam jurisdiction of the English court because it had a branch in London. The order and the subpoena were set aside because they were an exorbitant exercise of jurisdiction.

33.

Responding to the argument that the New York bank was subject to the personal jurisdiction of the English courts because it had a branch in England irrespective of the nature of the subpoena, Hoffmann J said (at 493):

‘I think this argument confuses personal jurisdiction, i.e. who can be bought before the court, with subject matter jurisdiction, i.e. to what extent the court can claim to regulate the conduct of those persons. It does not follow from the fact that a person is within the jurisdiction and liable to be served that there is no territorial limit to the matters which a court may properly apply its own rules or the things which it can order such a person to do. … The content of the subpoena and order is to require the production by a non-party of documents outside the jurisdiction concerning business which it has transacted outside the jurisdiction. In principle and on authority it seems to me that the court should not impose such a requirement upon a foreigner, and, in particular, on a foreign bank. The principle is that a state should refrain from demanding obedience to its sovereign authority by foreigners in respect of their conduct out of the jurisdiction.’

34.

This case, like Re Paramount Airways Ltd [1993] Ch 223, shows that what may be a sufficient connection with England to justify an order will vary with the circumstances. It does not decide that the court will never have jurisdiction to make orders under the Bankers’ Books Evidence Act 1879 against the London branch of a foreign bank in relation to papers held by head office, nor that it will never be possible to issue a witness summons against the bank's London branch officer in respect of head office transactions. The result might have been different if head office held papers relating to London transactions. What it says is that any power or discretion must be exercised in accordance with internationally recognised principles on the limits of the exercise of jurisdiction.

35.

Consequently the mere fact that an order is in personam and is directed towards someone who is subject to the personal jurisdiction of the English court does not exclude the possibility that the making of the order would be contrary to international law or comity, and outside the subject matter jurisdiction of the English court.

36.

That was why Lord Donaldson MR confirmed that the Mareva injunction should not conflict with ‘the ordinary principles of international law’ and that ‘considerations of comity require the courts of this country to refrain from making orders which infringe the exclusive jurisdiction of the courts of other countries’: Derby & Co Limited v Weldon (Nos. 3 & 4) [1990] Ch 65, 82. It was for this reason also that it has been suggested that the extension of the Mareva jurisdiction to assets abroad was justifiable in terms of international law and comity provided that the case had some appropriate connection with England, that the court did not purport to affect title to property abroad, and that the court did not seek to control the activities abroad of foreigners who were not subject to the personal jurisdiction of the English court: Collins, ‘The Territorial Reach of Mareva Injunctions’ (1989) 105 LQR 262, 299.

37.

In Babanaft International Co SA v Bassatne [1990] Ch 13, at 46, Nicholls LJ emphasised, in relation to the post-judgment worldwide Mareva injunction granted in that case

‘The enforcement of the judgment in other countries, by attachment or like process, in respect of assets which are situated there is not affected by the order … the English court is not attempting in any way to interfere with or control the enforcement process in respect of those assets.’

38.

It was concerns of international comity which led the Court of Appeal in Babanaft International Co SA v Bassatne  to limit the effect of the Mareva injunction on third parties abroad who may have notice of the injunction, by what became known as the Babanaft proviso, which Kerr LJ described (at 37) as ‘the internationally appropriate course’ and which Lord Donaldson MR indicated was designed to avoid ‘an excess of jurisdiction’: Derby & Co Limited v Weldon (Nos. 3 & 4) [1990] Ch at 82-83. The reason, as Nicholls LJ said in Babanaft International Co SA v Bassatne, at 44, was:

‘It would be wrong for an English court, by making an order in respect of overseas assets against a defendant amenable to its jurisdiction, to impose or attempt to impose obligations on persons not before the court in respect of acts to be done by them abroad regarding property outside the jurisdiction.  That, self-evidently, would be for the English court to claim an altogether exorbitant, extra-territorial jurisdiction.’

39.

Even if the third party with notice of the order is subject to the in personam jurisdiction of the English court, there may still be concerns relating to international comity, for example where the defendant has an account abroad at a foreign branch of an English bank, or an account at the head office or foreign branch of a foreign bank with a branch in England: Baltic Shipping Co v Translink Shipping Ltd [1995] 1 Lloyd's Rep 673.” (my emphasis)

Thus, in the light of HSTPL’s further jurisdictional submissions, I have had to consider whether, in subject matter jurisdictional terms, there is really a sufficient connection with this jurisdiction to justify the making of a worldwide freezing order against HSTPL, notwithstanding that any such order would be subject to Babanaft-type provisos, and whether, in all the circumstances, it would be appropriate to make any such order.

Contrary to the conclusion which I had reached at the time of the circulation of my draft judgment in August 2011, I have now decided that it would be inappropriate to continue the worldwide freezing orders against HSTPL. However, I do propose to continue the freezing injunctions against its assets within the jurisdiction. My reasons may be summarised as follows.

First, on the facts of this case, I do not consider that there were any substantial grounds for serving HSTPL out of the jurisdiction with either the claim form or the application notice in 2011 Folio 424. Despite the fact that HSTPL did not challenge the order for service out, I must be entitled to take such a factor into account in deciding whether nor not to continue the orders against HSTPL.

Thus, whatever may have been the factual position in C v L, as analysed by Aikens J in that case, I cannot see that, in the present case, the conditions stipulated in paragraph 3.1(3) of Practice Direction 6B were satisfied. First there is and was no “real issue” between the claimant, Parbulk, and the defendant, Heritage which “it is reasonable for the court to try”. Any “real” or substantive issue as between Parbulk and Heritage was determined in the arbitration, and therefore paragraph 3.1(3) would not have been applicable: see per Flaux J in Linsen (2) at paragraphs 161-165, citing his judgment in Belletti. But even if one could characterise the claim for ancillary relief made against Heritage in 2011 Folio 424 as a “real [in the sense of substantive] issue” as between Parbulk and Heritage, which I doubt, it is difficult (once the arguments on piercing the corporate veil have been dismissed) to see why HSTPL would have been a “necessary or proper party” to that issue. There was no dispute before me that HSTPL was a debtor of Heritage and that the loan to HSTPL had not been repaid. No application has to date been made for the appointment of a receiver over Heritage’s receivable, or HIT’s receivable, from HSTPL at the suit of Parbulk, by way of equitable execution. But even assuming an intention on the part of Parbulk to apply for such a remedy (which was apparent from Parbulk’s submissions) I do not see that HSTPL would be a necessary or proper party to any such application. That would be a matter to be determined exclusively between the judgment debtor, Heritage, and the judgment creditor, Parbulk.

Only when it came to the enforcement of a claim for repayment of such debt (at the suit of a receiver) would HSTPL be a necessary or proper party. And any such claim for enforcement would necessarily have to take place in the jurisdiction where the debt was situate, i.e. enforceable. On any basis, as was common ground, that would not be within the jurisdiction of this court.

Nor, in my judgment, would the conditions in paragraph 3.1(10) (“a claim is made to enforce any judgment or arbitral award”) have been satisfied. If the debt owed by HSTPL to Heritage had been situate within the jurisdiction, and therefore a third party debt order would have been a remedy available to Parbulk, one might have been able to characterise the claim or application against HSTPL as one “to enforce any judgment or arbitral award”. As to that feature, I agree with Flaux J’s reasoning in paragraph 167 of his judgment in Linsen (2) and paragraph 42 of his judgment in Belletti, that there is no actual claim against HSTPL to “enforce the arbitral award”. All there would be would be a claim for ancillary relief to assist Parbulk to enforce its judgment against Heritage and HIT, but any such claim would fall outwith subparagraph (10).

Second, the evidence does not suggest that Parbulk has, or would have, any direct claim against HSTPL based in tort, on an allegation of breach of constructive trust, or on some sort of conspiracy claim that it was party to a disposition in fraud of Heritage’s creditors, let alone a claim that was actionable in England. Mr. Matthews did not argue that there was any such direct claim. The high-water mark of the evidence in this respect is that set out in paragraphs 27(iii)-(xi) and 28 above (including the subparagraphs referring to the judgment of Christopher Clarke J in Linsen (1), and that summarised in paragraph 63. Such evidence, whilst demonstrating risk of dissipation in relation to all relevant group companies does not (except possibly in relation to the transfer of the profits of the Vessel’s subcharter to HSTPL) provide the evidential basis for a direct claim by Parbulk against HSTPL. Moreover, if payment of such profits, or non-repayment by HSTPL of Heritage’s loan, was colourable as not being a legitimate Humpuss group treasury function, but rather a transaction in fraud of, or prejudicial to, Heritage’s creditors, that is a matter that would be governed by Panamanian law and/or Singaporean law, and most likely to be actionable either in the Singaporean courts, or in the courts of the situs of HSTPL’s debt or obligations to Heritage.

Third, as Lawrence Collins LJ emphasised in paragraphs 38 and 39 of his judgment in Masri (No 2), quoted above, even if a third party is subject to the in personam jurisdiction of the English court, there may still be subject matter jurisdiction concerns if an English court seeks to impose obligations on such persons in relation to acts done abroad regarding property outside the jurisdiction.

In the light of HSTPL’s new submissions, and my review of the relevant authorities, I have real concerns as to subject matter jurisdiction and as to whether it would be appropriate for this court to continue the worldwide freezing orders against HSTPL. HSTPL’s connection to the English Court is minimal; it arises only as a result of its participation in these interlocutory proceedings, and the fact that it did not seek to challenge the jurisdiction of the English court. If it had done so, I (at any rate) would have discharged the order granting Parbulk permission to serve the arbitration claim form on HSTPL out of the jurisdiction. The fact that profits of the Vessel’s sub-charter hire may have been improperly diverted to HSTPL does not provide any link to this jurisdiction. Nor does the fact that HSTPL had not repaid its debt. If either of these matters were inappropriate corporate practice in the light of Heritage’s inability to pay hire to Parbulk, these are matters that would fall to be litigated in Singapore or elsewhere.

Fourth, there is no realistic ability on the part of this court to monitor HSTPL’s business activities and payments in Singapore, or wherever else in the world it carries on business. Any attempt to do so might trespass on a foreign court’s jurisdiction. In relation to HSTPL, the proposed worldwide freezing order is not subject to any Babanaft proviso because HSTPL is a defendant. In my view, that would be an exorbitant exercise of the court’s jurisdiction.

For those reasons, I decline to continue the worldwide freezing injunctions.

In the exercise of my discretion, however, I propose to continue the freezing injunction against HSTPL limited to its assets within the jurisdiction, up to the amount of its indebtedness to Heritage and HIT. My decision to do so is based upon the facts that:

At the October hearings I heard arguments as to costs. In my judgment, the appropriate order to make is that all three Respondents should pay the costs of and incidental to the June hearings up to the circulation of my draft judgment, and that Parbulk should pay two-thirds of the costs of and incidental to the October hearings from the date on which I circulated my draft judgment. This reflects the following:

It may be that the parties wish to make further submissions in the light of this judgment. As at present advised, however, and subject to any further submissions, I would be minded to require HSTPL to disclose: