FM Capital Partners Ltd v Marino & Ors

On 9th October 2018, I dismissed the application by the Third Defendant (Mr Ohmura) for the discharge of a worldwide freezing order made by the Court on the Claimant’s application, holding that there was a real risk of dissipation of assets by Mr Ohmura. I also directed that the worldwide freezing order continue until further order. The freezing order was made following the entry of judgment in July 2018 against Mr Ohmura in respect of Mr Ohmura’s liability for dishonest assistance in the First Defendant’s breaches of fiduciary duty and bribery.

The worldwide freezing order is directed against Mr Ohmura (described in the order as the Respondent) and contains the following provisions:

“FREEZING INJUNCTION

4.

Until further order of the Court, the Respondent must not -

(1)

remove from England and Wales any of his assets which are in England and Wales up to the value of US$11,250,000; or

(2)

in any way dispose of, deal with or diminish the value of any of his assets whether they are in or outside England and Wales up to the same value.

5.

Paragraph 4 applies to all the Respondent’s assets whether or not they are in his own name and whether or not they are solely or jointly owned and whether the Respondent is interested in them legally, beneficially or otherwise. For the purpose of this order the Respondent’s assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The Respondent is to be regarded as having such power if a third party (which shall include a body corporate) holds or controls the asset in accordance with his direct or indirect instructions.

6.

This prohibition includes the following assets in particular (but without limitation) -

(1)

any interest the Respondent has retained in the property known as Villa Rive d’Or …

(2)

any money in the bank accounts:

a.

of the Respondent, including (without limitation) any account at UBS AG Bank, Zurich branch, Switzerland (or elsewhere in Switzerland) including … any bank account held in the United Arab Emirates …;

b.

of Conquest Financial Partners AG …

c.

of Rubicon Financial Holding Ltd …

d.

of Squadra Corse Ltd …

(3)

any shares or other interest in:

a.

Conquest Financial Partners AG;

b.

Rubicon Financial Holding Ltd;

c.

Squadra Corse Ltd;

d.

StileF Service Srl;

(4)

any pension;

(5)

the following cars …

(6)

any interest under any trust or similar entity including any interest which can arise by virtue of the exercise of any power of appointment, discretion or otherwise howsoever …

EXCEPTIONS TO THIS ORDER

9.

(1)

This order does not prohibit the Respondent from spending £1,000 a week towards his ordinary living expenses and also a reasonable sum on legal advice and representation. But before spending any money the Respondent must tell the Applicant’s legal representatives where the money is to come from.

(2)

This order does not prohibit the Respondent (or any company whose assets are frozen pursuant to paragraphs 5 or 6 above) from dealing with or disposing of any of his/its assets in the ordinary and proper course of business, but the Respondent must give the Applicant’s solicitors 2 clear working days’ notice of his intention of so doing in respect of any transaction (or series of connected transactions) exceeding £10,000 in value …”

The parties have produced for consideration by the Court a draft revised worldwide freezing order to reflect the Court’s judgment dated 9th October 2018. Accordingly, the paragraph numbering of the current draft order has changed. I shall for the purposes of this judgment continue to refer to the original paragraph numbering of the order.

The Claimant and Mr Ohmura each now apply for a variation of the worldwide freezing order. In addition, the Claimant applies for an order for further disclosure in respect of Mr Ohmura’s assets.

The more substantial application is made by Mr Ohmura, who seeks a variation of the worldwide freezing order, including in the following respects:

The Claimant applies for (a) a variation of the worldwide freezing order in order to reduce the value of a transaction or series of transactions which require notification under para. 9(2) of the order, and (b) an order for further disclosure in respect of Mr Ohmura’s assets.

Each of the parties also sought further variations to the wording of the worldwide freezing order, depending on the outcome of the issues which attracted the more substantial argument and which are determined by this judgment. Such potential variations will have to be addressed and considered in light of this judgment.

There was also some discussion about para. 9(1) of the order which permits Mr Ohmura to spend £1,000 on ordinary living expenses. However, as it was agreed between the parties that this provision would not embrace expenses incurred in the ordinary course of business (including expenses incurred personally by Mr Ohmura and reimbursed by the companies for business purposes), this provision was no longer disputed.

The reference in the order to Mr Ohmura’s companies is the most complex issue arising from the parties’ applications. It involves both the determination of issues concerning the interpretation of the worldwide freezing order as well as the consideration of the amendments which might be made to the order. Only Mr Ohmura applies to vary the order; the Claimant makes no application for a variation of the order in this respect.

Mr Ohmura’s application is based on the contention that the worldwide freezing order should not attach to the assets of the companies referred to in the order, namely:

As far as Rubicon, Conquest and Squadra are concerned, Mr Ohmura has a 100% direct or indirect shareholding and is a director, along with his sister.

Mr Ohmura applies for a variation of the worldwide freezing order insofar as it purports to apply, not to Mr Ohmura’s assets, but the assets of these four companies. Mr Laurence Emmett, who appeared with Mr James Fox on behalf of Mr Ohmura, submitted that the order should be varied to omit reference to these companies’ assets on the ground that the assets belong to and are in the control of third parties, not Mr Ohmura.

In answer to this, Mr Tim Akkouh on behalf of the Claimant argued that the companies’ assets are covered by the order, (1) indirectly because if a person who owns shares in a company procures that that company dissipates its assets, it reduces the value of Mr Ohmura’s shareholding in the companies, and (2) directly because of the extended definition of Mr Ohmura’s assets in the standard form freezing order which has been incorporated in the worldwide freezing order made in this case.

In support of the submission that the assets of Conquest and Squadra were controlled in accordance with Mr Ohmura’s direct or indirect instructions, Mr Akkouh also relies on the facts that (a) one of these companies, Conquest, has disbursed assets for Mr Ohmura’s benefit, in particular Conquest has been paying Mr Ohmura’s legal fees both in respect of this action as well as his separation and divorce proceedings in Switzerland (para. 91 of Mr Ohmura’s fourth witness statement), (b) Mr Ohmura gave a motor vehicle (an Alfa Romeo Giulietta) which was owned by Conquest to Mrs Ohmura as part of the separation settlement agreed in May 2016, and (c) Mr Ohmura used Conquest as a vehicle or front for some of the transactions which were the subject of the Claimant’s claim against Mr Ohmura (see, for example, Mrs Justice Cockerill’s judgment dated 11th July 2018, at para. 321-322). In addition, the Claimant questioned whether Conquest and Squadra have active trading businesses, having regard to the fact that Mr Ohmura has disclosed little detailed information in relation to the conduct of these companies’ businesses and that Conquest’s and Squadra’s websites have not been updated since 2010 and 2015 respectively.

In response, Mr Emmett referred to the fact that the motor vehicle provided to Mrs Ohmura was no more than a temporary loan, her use being limited only to the period while Mr and Mrs Ohmura were living separately pending their divorce. In any event, argued Mr Emmett, these facts scarcely demonstrate that Conquest’s and Squadra’s assets are in reality the assets of Mr Ohmura. Mr Akkouh riposted that he was not submitting that the companies’ assets were in reality Mr Ohmura’s assets; his submission concerned the control exerted by Mr Ohmura over those assets.

In considering these submissions, it should be borne in mind that the Court is engaged in two distinct exercises: first, the interpretation of the worldwide freezing order in its current form, in particular paragraph 5 of the order which defines Mr Ohmura’s assets which are captured by the order; second, determining whether a variation should be made to the order as sought by Mr Ohmura. It is worth recalling that the material provisions of paragraph 5 of the order are those set out in the standard form printed in Appendix 11 to the Commercial Court Guide and the Annex to Practice Direction 25A - Interim Injunctions, with one amendment (which I shall discuss below).

In this context, there are three principal decisions which I must consider. First, in Group Seven Ltd v Allied Investment Corpn Ltd [2013] EWHC 1509 (Ch); [2014] 1 WLR 735, the claimants obtained a freezing order against the third defendant, which incorporated the wording in the Annex to Practice Direction 25A, stating that for the purposes of the order the third defendant’s assets included “any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions”. These words have been described as “the extended definition” of a respondent’s assets by Christopher Clarke, J in JSC BTA Bank v Ablyazov (No 5) [2012] EWHC 1819 (Comm); [2012] 2 All ER (Comm) 1243, para. 32-34.

The third defendant was the sole shareholder and director of a company, Wealthstorm Ltd. One of that company’s assets was a debt of US$500,000 owed to it by a third party, which debt was compromised by the third defendant acting on behalf of that company in the sum of US$200,000. The claimants applied for an order for committal against the third defendant on the ground that the third defendant had wrongfully disposed of or dealt with an asset falling within the scope of the freezing order, arguing that the third defendant’s legal powers and control over the debt were such that it is obvious that Wealthstorm Ltd did indeed hold its assets in accordance with the third defendant’s instructions. Hildyard, J refused the application, on the ground that the company’s debt was not and was not deemed to be an asset of the third defendant within the meaning of the freezing order.

Hildyard, J began his analysis noting that the assets of Wealthstorm Ltd were not, as a matter of law, the assets of the third defendant, because the company and the third defendant were separate legal persons. Hildyard, J then proceeded to explain the purpose of a freezing order, namely to prevent a defendant from dissipating assets which would render the enforcement of any eventual judgment ineffective, and said (at para. 63(3)):

“That said, a freezing order is a precautionary measure taken urgently to protect the claimant against the risk of dissipation, disposal, reduction in value, or loss of assets pending a fuller examination as to what assets would in reality be available to the claimant for the purposes of enforcing a judgment. Accordingly, it may be perfectly consistent with the objectives of such relief to extend the scope of the phrase “his assets” to assets which the defendant may not appear to own but which may in truth be available to him for the purposes of enforcement; however, words extending the ordinary meaning will be strictly construed, and so as not to invest a meaning that the words cannot reasonably bear: thus, the wording must be clear and free of ambiguity”

There may be occasions when the corporate veil separating a company from its sole shareholder and director will be lifted, but the mere fact that there is such a shareholding and directorship will not on its own justify such a rendering of the corporate veil. As Hildyard, J held, when the corporate veil is pierced, that does not alter the incidence of ownership of the company’s assets, but it may well mean that the company’s assets fall within the scope of the freezing order (para. 63(9)-(10)).

In concluding that a company which has a sole director, who owns all of the shares in the company, does not hold or control its assets in accordance with the director/shareholder’s instructions, Hildyard, J referred to the decision of Rimer, LJ in Prest v Prest [2012] EWCA Civ 1395; [2013] 2 AC 415, at para. 104-105, to the effect that the mere fact that a director/shareholder is entitled to exercise control over the company’s affairs does not mean that the director/shareholder is entitled to the company’s assets; if it were otherwise, such a company would never hold its own assets beneficially. Rimer, LJ continued:

“The flaw in the ‘power equals property’ approach is that it ignores the fundamental principle that the only entity with the power to deal with its assets is the company . Those who control its affairs—even if the control is in a single individual—act merely as the company’s agents. Their agency will include the authority to procure an exercise by the company of its dispositive powers in respect of its property, but those powers are still exclusively the company's own: they are not the agents’ powers. When and if the agents act as such, and procure a company disposition, the property which immediately before the disposition belonged to the company will become the property of the disponee. Until then, it remains the property of the company and belongs beneficially to no one else.”

On this premise, Hildyard, J held that the third defendant, in compromising the debt owed to Wealthstorm Ltd, “was not, as a matter of law, instructing Wealthstorm Ltd either directly or indirectly; he was not telling a third party what to do, he was acting in right and on behalf of the company. He was the means whereby the company, as an artificial creation, acted” (para. 67).

Hildyard, J recognised that it is possible to extend the application of the freezing order to assets belonging to a company in which the respondent has the sole shareholding and is the sole director, but such an extension should be permitted only in exceptional circumstances. At para. 80-82, Hildyard, J concluded that:

“80 In my view, it may well be that where there is, or emerges in the context of disclosure, strong evidence that the respondent has or is likely to have assets in a non-trading body corporate which he wholly owns and controls, which do not have any active business, and which are in truth no more than pockets or wallets of that respondent, an extension to the ordinary form of order may be justified. Since it may be that the assets held within those corporate pockets may ultimately be required to be made available for the purposes of enforcement, relief specifically designed to preserve (or more accurately, perhaps, prevent the dissipation of) such assets may be appropriate. Exceptional circumstances would still have to be demonstrated; in many cases, restraint on any transactions diminishing the value of the respondent's sharers may well suffice.

81 In such exceptional circumstances, until at least the return date, and after disclosure of all shareholdings, the order might be crafted to restrain dealings in assets of bodies corporate having no or no substantial trading activities and which are wholly owned and controlled by the respondent. The claimant may then determine whether to seek relief directly against such bodies corporate under or by analogy with the so-called Chabra jurisdiction (see TSB Private Bank International SA v Chabra [1992] 1 WLR 231, per Mummery J and the commentary in Civil Procedure 2013, vol 2, para 15-63), or the continuation of the original restriction, with any appropriate exceptions (in either case) to enable any trading in the ordinary course which is demonstrated.

82 However, and as has often been emphasised, a freezing order is, even in its standard form, a substantial invasion of a respondent’s usual rights, to be made only to seek to ensure that the effective enforcement of orders of the court is not deliberately thwarted. Obviously, any extension in its application to legally separate third parties, which may be affected in ways that cannot necessarily or comprehensively be envisaged, can only be justified in exceptional circumstances.”

This reasoning was adopted by the Court of Appeal in Lakatamia Shipping Co Ltd v Su [2014] EWCA Civ 636; [2015] 1 WLR 291. In that case, a worldwide freezing order was made in terms which were materially similar to the terms of the order analysed in Group Seven Ltd v Allied Investment Corpn Ltd. The Court of Appeal considered whether the order had the effect of freezing the assets of three non-defendant companies of which the first defendant was the direct or indirect 100% shareholder and a director (being the sole director of at least two of these companies). This analysis was conducted having regard to the larger issue whether the judge at first instance was right to have imposed in the order a notice requirement in respect of dealings with assets which could not at the interlocutory stage be shown to be either legally or beneficially owned by the first defendant but where it was clear that such dealings could have the effect of diminishing the first defendant’s assets by diminishing the value of his shareholdings in the non-defendant companies.

The Court of Appeal distinguished on the one hand the assets belonging to the companies which were not assets of the first defendant as a matter of law and on the other hand the first defendant’s shareholding in the companies, which was an asset of the first defendant. In the latter respect, the respondent could not take steps which would dispose of or deal with or diminish the value of his shareholding in a manner prohibited by the order. At para. 43, Sir Bernard Rix said that:

“… even under the order’s existing wording, a company owner will not be permitted to deplete the assets of his companies, thereby diminishing the value of his own assets in the form of his shareholdings, unless he can bring such dispositions within an order’s exception for the ordinary course of business. It is unlikely however to be within the ordinary course of business for a shareholder to act so as to diminish the value of his shareholdings. In case of doubt, the matter can of course be debated before the court.”

Adopting this reasoning, Tomlinson, LJ said (at para. 23):

“Where, as here, the owner of a non-defendant company is subject to an injunction restraining any diminution in the value of this shareholding in that company, he is restrained from procuring the company to make a disposition likely to result in such a diminution. For practical purposes, as Sir Bernard points out, that is likely to mean that dispositions other than in the ordinary course of business are enjoined. That is not because the non-defendant companies are obliged to bring themselves within an exception to an order to which they are not subject. It is simply because transactions in the ordinary course of business of a company do not ordinarily result in a diminution in the value of shareholdings in that company.”

Accordingly, given that dispositions of or dealing with the assets of the non-defendant companies other than in the ordinary course of business could well affect the value of the first defendant’s shareholding, the Court of Appeal concluded that that consideration alone justified the imposition of the notice requirement by the judge at first instance (para. 24 of Tomlinson, LJ’s judgment).

This was sufficient to dispose of the appeal, as Tomlinson, LJ said at para. 25. Indeed, Rimer, LJ expressly disposed of the appeal on this ground alone (para. 44). Nevertheless, the Court proceeded to disapprove the reasoning of the judge at first instance in holding that, as the first defendant effectively controlled the companies’ assets, those assets fell within the scope of the freezing order, being an extended definition of the respondent’s assets for the application of the freezing order.

In this respect, the Court of Appeal approved the judgment of Hildyard, J in Group Seven Ltd v Allied Investment Corpn Ltd. At para. 30, Tomlinson, LJ considered that the issue being considered by the Court had impliedly been decided by the Court of Appeal in the earlier decision of JSC BTA Bank v Solodchenko [2010] EWCA Civ 1436; [2011] 1 WLR 888, where the Court held that the extended definition did not have the effect of rendering assets which the respondent held as trustee or nominee only (without any beneficial interest) as assets to which the freezing order applied. Patten, LJ said (at para. 26) that the extended definition

“makes it clear that the power to deal with or dispose of the asset as if it were his own is a reference to a case where the legal owner is not the defendant but a third party yet it is the defendant who retains the power to direct how the asset should be dealt with. This is not, in my view, a partial definition of the preceding words. It is a comprehensive one.”

In Lakatamia Shipping Co Ltd v Su, Tomlinson, LJ concluded (at para. 30) that the extended definition of a respondent’s assets was not intended to include the assets of another person, even where that person is a company controlled by the defendant. Expanding upon this, Sir Bernard Rix said (at para. 41-42):

“41 … The order as a whole is directed to a defendant’s assets, that is to say to the assets in which a defendant is beneficially interested. Although the language of the second sentence may look as if it extends much more widely, because of the expression “as if it were their own”, I am satisfied that what that language is primarily concerned with is the situation described in the third sentence of that paragraph, namely a form of trust where a third party holds or controls assets in accordance with a defendant’s instructions. However, it does not extend to a company’s assets just because of the powers which a director or shareholder may be able to exercise over them as such. The language “holds or controls the asset in accordance with their direct or indirect instructions” does not well fit the relationship of a company director or shareholder, even a sole director or 100% shareholder, to a company’s assets.

42 Therefore, if a claimant wishes to freeze company assets of a non-defendant, he must either be prepared to make a sufficient case that the company concerned is just the money-box of the defendant and holds assets to which the defendant is beneficially entitled, and/or it has to make that company a defendant itself under the Chabra jurisdiction. Where a defendant’s alleged liability is not merely that in the ordinary way of a party liable in debt or damages but is said to arise out of the misappropriation of funds or some such dishonesty, as in the Ablyazov litigation, it will often be possible to request the court to make orders in wider terms and/or to make the defendant’s corporate creatures defendants themselves. But in the more ordinary case, even where a freezing order is justified under its standard rationale, that does not extend to freezing the assets of other parties or corporate non-defendants.”

Agreeing with this approach, Rimer, LJ relied on Patten, LJ’s judgment (at para. 26) in JSC BTA Bank v Solodchenko and succinctly said (at para. 49-51) that:

“49 … I also interpret what Patten LJ said in para 26 as meaning that the third sentence of paragraph 3 will again extend only to assets held by a third party where the defendant is beneficially entitled to them and so can give instructions for them to be dealt with or disposed as he wishes.

50 The assets that Burton J was considering in para 16 were the assets of the companies. There is no suggestion that such assets belonged beneficially to anyone other than the companies; and it is trite law that a company’s assets so held do not belong beneficially to their shareholders, not even to a shareholder in the position of the first defendant who is, for all practical purposes, the sole owner of the companies …

51 … The owner is of course able to control the destiny of the company’s assets. But that does not make them his assets; and paragraph 3 is concerned only with assets which are his assets. Nor is any help the other way to be derived from the third sentence of paragraph 3 of the order. First, that is still only concerned with dispositions of assets belonging beneficially to the defendant, which these assets do not. Secondly, the first defendant has no authority to instruct the companies how to deal with their assets. All he has is the power, as an agent of the company, to procure the company to make dispositions of its assets. Such dispositions, when made, are made in consequence of decisions made by the organs of the company. They are not dispositions made by the company in compliance with instructions from the first defendant. That may seem to be a somewhat formal distinction. But it is a valid one: only the companies have authority to deal with and dispose of their assets …”

In my judgment, the decisions of Hildyard, J in Group Seven Ltd v Allied Investment Corpn Ltd and of the Court of Appeal in Lakatamia Shipping Co Ltd v Su established that:

However, Mr Akkouh on behalf of the Claimant submitted that the position established by the Court of Appeal in Lakatamia Shipping Co Ltd v Su has been impliedly overruled by the Supreme Court in a more recent decision in JSC BTA Bank v Ablyazov [2015] UKSC 64; [2015] 1 WLR 4754. In this case, a worldwide freezing order was made, on the application of the claimant bank, in respect of the defendant’s assets. The order included the Commercial Court words and the extended definition. After the freezing order was made, the defendant entered into a number of unsecured loan agreements, which provided for large sums to be made available to him. The loan agreements included a provision that “The proceeds of the loan facility shall be used at the borrower’s sole direction. The borrower may direct the lender to transfer the proceeds of the loan facility to any third party”. The defendant exercised this contractual right by directing payments by the lender to his lawyer, but also to corporate service providers associated with the defendant and to lawyers acting for other defendants to the bank’s claims. The bank applied for a declaration that, if the loan agreements were valid, the defendant’s rights under the loan agreements were assets for the purposes of the freezing order and any drawings under the loan agreements could lawfully be made only pursuant to the exceptions provision in the freezing order.

The Supreme Court held that the defendant’s contractual right as to the use of the proceeds under the loan agreements was not ordinarily to be regarded as an asset of the defendant, but constituted an asset by reason of the extended definition, because that extended definition had the effect of capturing assets which were not owned legally or beneficially by the defendant, but over which the defendant had control.

In considering this appeal, the Supreme Court analysed each of the principles identified by Beatson, LJ in the Court of Appeal below ([2013] EWCA Civ 928; [2014] 1 WLR 1414), namely (1) the enforcement principle, by which the purpose of a freezing order is to stop the respondent from dissipating or disposing of property which could be the subject of enforcement of any judgment obtained against the respondent, (2) the flexibility principle, by which the Court’s jurisdiction to make a freezing order should be exercised flexibly, adapting to new situations and new ways developed by wily respondents to avoid the operation of a freezing order, and (3) the strict construction principle, whereby because of the seriousness of not complying with a penal order such as a freezing order, its terms must be clear and unequivocal and should be strictly construed in favour of the respondent.

In delivering the judgment of the Supreme Court, Lord Clarke rejected the flexibility principle (para. 17-18). Consistently with this, at para. 19, Lord Clarke approved the strict construction principle. At para. 20 and 34-35, Lord Clarke held that the enforcement principle underlies the origin of the Court’s jurisdiction to make a freezing order, but it is not absolute. I understand this to suggest that there may be freezing orders which target assets which would not be available for the execution of a judgment against a respondent (for example, in an exceptional case, the assets of a third party beneficiary which the respondent holds only as a trustee: para. 28), but disposing of or dealing with which might diminish the value of assets which would otherwise be available for execution.

At para. 46 of his judgment, Lord Clarke said that the extended definition is “designed to catch assets which are not owned legally or beneficially, but over which the defendant has control”. At para. 48-49, Lord Clarke added that:

“48 … As stated in para 46 above, the whole point of the extended definition of “assets” is to catch rights which would not otherwise have been caught and, in particular, the “defendants’ assets include any asset which they have power, directly or indirectly, to dispose of, or deal with as if it were their own”. On the facts of this case, as I see it, the defendant did not own the relevant assets but under the loan agreements had power directly or indirectly to dispose of, or deal with them, as if they were his own.

49 The whole focus of the second and third sentences of the paragraph is the defendant’s power to deal with the lender’s assets as if they were his own. It follows that the focus of the second sentence of paragraph 5 is not on assets which the defendant owns (whether legally or beneficially) but on assets which he does not own but which he has power to dispose of or deal with as if he did. Further, as I see it, the fact that he incurs a liability at some stage to reimburse the lender is immaterial. Finally, I do not read the last sentence of paragraph 5 as a restriction on the scope of the second sentence but (as Lord Hodge JSC suggested in the course of the argument) as expansionary.”

Given the enforcement principle, the question arises what justification is there to permit a freezing order to embrace assets which would not otherwise be available for execution in respect of any judgment made against the respondent. In JSC BTA Bank v Solodchenko [2010] EWCA Civ 1436; [2011] 1 WLR 888, Patten, LJ said that the Commercial Court words, which extend the operation of the freezing order to assets held by the respondent as a trustee, even if he or she has no beneficial interest in such assets, should be included only with justification. At para. 49, Patten, LJ said:

“Nothing in this judgment is intended to cast any doubt upon the established principles which underlie the grant of all freezing orders. I refer in particular to the fact that the only purpose of such an injunction is to prevent the dissipation of assets which would otherwise be available to meet a judgment. The inclusion of trust assets is therefore only justifiable if there are proper grounds for believing that assets ostensibly held by the defendant on trust or as a nominee for a third party in fact belong to him (or to another person whose assets are also frozen). Absent such circumstances, I can see no possible justification for including in the order assets which belong beneficially to a third party and are not therefore the property of the defendant.”

Accordingly, this would suggest that the Commercial Court words should be included in order to adhere to the enforcement principle. On the facts in JSC BTA Bank v Ablyazov, the application of the extended definition would appear to adhere to an expanded version of the enforcement principle. Beatson, LJ’s enforcement principle sought to prevent a respondent from dissipating or disposing of property which could be the subject of enforcement of any judgment obtained against the respondent, but this principle can in an expanded form apply to any conduct which could reduce the risk of executing a judgment against the respondent’s assets, for example by diminishing the value of those assets other than by disposing of or dealing with those assets.

Even though a freezing order, without the extended definition, would not apply to a contractual right under a loan agreement (as Lord Clarke found, and which he was not willing to reverse, because it had formed an established part of the interpretation of the freezing order for many years: para. 38), the extended definition does have the advantage of preventing the defendant from distributing funds to which he was contractually entitled, with the effect of increasing his indebtedness, thus diminishing the value of his assets (para. 29).

Mr Akkouh submitted, in common with the opinion of Mr Gee QC in Commercial Injunctions, (6th ed., 2016), at para. 19-011 - 19-012,that the Supreme Court’s decision impliedly overturned the decision of the Court of Appeal in Lakatamia Shipping Co Ltd v Su.

Mr Emmett, on behalf of Mr Ohmura, observed that the Supreme Court was not concerned with the factual situation where the relevant asset belonged legally and beneficially to a company, of which the respondent was the sole shareholder and a director, and that there was no express suggestion by the Supreme Court that it was intending to overrule the Court of Appeal’s decision in Lakatamia Shipping Co Ltd v Su. Although Lord Clarke referred to the Court of Appeal’s decision, it did so merely as one of a list of authorities relied on by counsel before the Court (para. 23).

Nevertheless, that does not mean that the Supreme Court did not impliedly overrule the decision of the Court of Appeal in Lakatamia Shipping Co Ltd v Su (Cross and Harris, Precedent in English Law, (4th ed., 1991), 128-129).

Mr Emmett further submitted that it was not open to the High Court to determine whether a decision of the Court of Appeal has been impliedly overruled by a later decision of the Supreme Court. In this respect, Mr Emmett referred me to the decision of Jay, J in Henderson v Dorset Healthcare University NHS Foundation Trust [2016] EWHC 3275 (QB), in which the claimant, who had a history of paranoid schizophrenia, had been detained under section 3 of the Mental Health Act 1983, but was discharged and placed on a community treatment order managed by the defendant NHS Trust. The claimant began to experience a relapse of her psychiatric condition and soon afterwards killed her mother. The claimant pleaded guilty to manslaughter on the ground of diminished responsibility and was ordered to be detained. The claimant claimed damages against the defendant NHS Trust in negligence. Although the defendant admitted that there had been a breach of its duty of care towards the claimant, it submitted that the claim was irrecoverable on illegality or public policy grounds. Jay, J upheld this defence, applying the Court of Appeal’s decision in Clunis v Camden and Islington Health Authority [1998] QB 978 and the House of Lords’ decision in Gray v Thames Trains Ltd [2009] UKHL 33; [2009] AC 1339.

It had been argued by the claimant before Jay, J that in Gray v Thames Trains Ltd, the majority of the members of the Committee reserved their judgment in respect of a claimant who has characteristics shared by the claimant in Henderson v Dorset Healthcare University NHS Foundation Trust, and that the decision in Clunis v Camden and Islington Health Authority had been overruled by the decision of the Supreme Court in Patel v Mirza [2016] UKSC 42; [2016] 3 WLR 399. Having reviewed the authorities, Jay, J held that there was no express criticism by the Supreme Court of the decisions in Clunis or Gray. Moreover, Jay, J held that the decision in Clunis should not be regarded as flatly inconsistent with the Supreme Court’s decision in Patel v Mirza (para. 89). At para. 90-91, Jay, J said:

“90 … For Clunis’s case to be frankly inconsistent with the Supreme Court, Mr Bowen has to point to reasoning in Patel’s case which is based expressly on like or materially similar facts to Clunis’s case; and I consider that there is no such reasoning. The doctrine of precedent is about the identification and then the application of the explicit reasoning of a higher court upon actual or assumed facts; it is not about attempting to draw logical inferences from statements of general application, or anticipating how that higher court might decide the case at issue with the benefit of full argument upon it. Thus, the highest that Mr Bowen’s submission can realistically be put is that the application of Lord Toulson JSC’s multifactorial approach to these facts might lead to a different outcome. I cannot accept that it does, or must, lead to a different outcome. The distinction between “might” and “does” is critical. The former anticipates Mr Bowen’s prospects on appeal; the latter affirms that he has no prospect of success at this juncture. In this regard I am giving full weight to the whole of the Earl of Halsbury LC's dictum in Quinn v Leathem [1901] AC 495.

91 Mr Bowen has to bring this case within the second category in Young v Bristol Aeroplane Co Ltd [1944] KB 718 and persuade me that, although Clunis’s case has not been expressly overruled, it “cannot stand” with a decision of the Supreme Court. For the reasons I have given, he has failed to persuade me of that. In any event, I would hold that in this sort of case it is not open to a first instance judge to be so bold. Young’s case only addresses how the Court of Appeal should deal with a previous decision of its own.”

Mr Emmett argued that Jay, J’s comment in para. 91 that it was not open to a first instance judge to rule that a decision of the Court of Appeal was impliedly overruled by a later decision of the Supreme Court “in this sort of case” supported his submission that the High Court should not determine whether an earlier decision of the Court of Appeal has been impliedly overruled by a later decision of the Supreme Court. It was not entirely clear what Jay, J meant by “this sort of case”. On appeal ([2018] EWCA Civ 1841), the Court of Appeal dismissed the appeal and held that the decisions in Clunis or Gray were not overruled by the Supreme Court’s decision in Patel v Mirza (para. 89).

In my judgment, there is no rule of law which prohibits a judge of the High Court, as opposed to the Court of Appeal, from deciding that a decision of the Court of Appeal has been impliedly overruled by a later decision of the Supreme Court, because there is no material difference between the position of the Court of Appeal and the High Court in this regard in that both are bound by the earlier Court of Appeal’s decision unless that decision is overruled. If the position were otherwise and if the implied overruling was clear and unambiguous, it would lead to the odd result that the High Court would have to ignore the later decision of the Supreme Court in favour of the earlier, inconsistent Court of Appeal decision unless and until the Court of Appeal ruled accordingly. I do not see how the High Court could ignore a decision of the Supreme Court in those circumstances. As Lord Greene, MR said in Young v Bristol Aeroplane Company Limited [1944] KB 718, 725-726, “the court is merely giving effect to what it considers to have been a decision of the House of Lords by which it is bound”. Further, I do not see that there is any material difference between an express overruling and an implied overruling by the Supreme Court of an earlier decision of the Court of Appeal. If the High Court can interpret the bounds of a decision expressly overturning an earlier decision of the Court of Appeal, there is no reason it cannot do so if that earlier decision has been impliedly overturned.

In addition, Mr Akkouh relied on the decision of Oliver, J in Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] 1 Ch 384, where a judge of the High Court held, at page 432, that the decision of the Court of Appeal in Groom v Crocker [1939] 1 KB 194, was inconsistent with the later decision of the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, and followed the later decision. At page 405, Oliver, J said:

“The task of a judge of first instance faced with this situation is not an easy one. Our system of courts is hierarchical and he must on the one hand follow and apply those principles of law which have been clearly laid down by higher authority whilst, at the same time, avoiding the risk of arrogating to himself a function which properly belongs only to a higher tribunal and which he has no power to exercise even where reason might tempt him to do so. Even the principles which he should follow when confronted by apparently conflicting decisions of superior courts are not always clear and, where they are clear, they are not always easy to apply, for their application may itself depend upon a disputable interpretation of a decision of a superior court. The principles so far as relevant to the present case appear to me to be these and I adopt them in my approach to Mr. Harman’s submissions.

(1)

A decision of the House of Lords resting upon or establishing a general doctrine binds all inferior courts and represents the law of the land until it is altered by legislation or, nowadays, departed from by the House itself: see Great Western Railway Co. v. S.S. Mostyn (Owners) [1928] A.C. 57, 82 and Wilkinson v. Sibley [1932] 1 K.B. 194, 200.

(2)

A decision of an inferior court may be treated as having been overruled by a decision of a superior court with which it is shown to be inconsistent, although it has not been expressly so stated by those who concur in such a decision: Consett Industrial and Provident Society Ltd. v. Consett Iron Co. Ltd. [1922] 2 Ch. 135, 173, 174 …

(4)

Where there are conflicting decisions of the Court of Appeal, that court is free to choose which it will follow: Young v. Bristol Aeroplane Co. Ltd. [1946] A.C. 163. The position of a judge at first instance when faced with such a conflict is not clear. He must, I think, be equally free to choose unless it is to be suggested that he must follow that decision which is latest in point of time.”

In these circumstances, insofar as the decision of the Supreme Court in its ratio in JSC BTA Bank v Ablyazov is inconsistent with the earlier decision (the ratio decidendi) of the Court of Appeal in Lakatamia Shipping Co Ltd v Su, I am free to apply the later decision of the Supreme Court.

That of course begs the question whether the Supreme Court impliedly overruled the earlier decision of the Court of Appeal. In Lakatamia Shipping Co Ltd v Su, the Court of Appeal dismissed the appeal. Tomlinson, LJ decided to dismiss the appeal on two separate grounds, namely that, first, the notice terms of the freezing order were justified having regard to the impact of any disposition of the company’s assets upon the value of the first defendant’s shareholding in the company (para. 24-25), and second in addition a pragmatic approach should be adopted where there is reason to believe that the assets of the company may ultimately be required to be made available for the purposes of enforcement against the first defendant (para. 35-36). By contrast, Rimer, LJ disposed of the appeal only on the first of these grounds (para. 44). The third member of the Court, Sir Bernard Rix, decided to dismiss the appeal “for the reasons contained in the judgment of Tomlinson LJ, as emphasised in the judgment of Rimer LJ” (para 40). The first ground relied on by Tomlinson, LJ plainly forms part of the ratio decidendi in that it was a necessary step in reaching the Court’s conclusion (Cross and Harris, Precedent in English Law, (4th ed., 1991), 72). It seems unlikely that the Court’s interpretation of the extended definition of the order resulted in the Court of Appeal’s decision on the appeal in that it identified an error in the decision of the judge at first instance, which by itself would have resulted in the appeal being allowed, not dismissed.

Accordingly, I do not consider that the Supreme Court’s decision in JSC BTA Bank v Ablyazov overrules the ratio of the Court of Appeal’s earlier decision in Lakatamia Shipping Co Ltd v Su. Nevertheless, the question arises whether there is an inconsistency between the two decisions. Having regard to the principles I extracted from the Court of Appeal’s decision, as summarised in paragraph 32 above, I do consider that there is an inconsistency between the first two of the principles summarised and the Supreme Court’s decision in that:

Therefore, the extended definition does apply to assets over which the respondent has control but which the respondent does not legally or beneficially own. Insofar as the Court of Appeal in Lakatamia Shipping Co Ltd v Su held otherwise, that decision cannot stand given the decision of the Supreme Court in JSC BTA Bank v Ablyazov.

That said, I do not regard the Supreme Court’s decision to be inconsistent with or to have overruled the other principles I extracted from the Court of Appeal’s decision set out above at paragraph 32. In particular, the Court of Appeal in Lakatamia Shipping Co Ltd v Su and Hildyard, J in Group Seven Ltd v Allied Investment Corpn Ltd held that the mere fact that the respondent was the sole shareholder and director of a company did not mean that the respondent had “control” over the company’s assets for the purposes of the extended definition, because any decision taken by the respondent as to the disposition of or dealing with the company’s assets was not taken by the respondent in his or her own right, but was taken in his or her capacity as an organ or agent of the company. This analysis does not change merely because the application of the extended definition is as the Supreme Court has held it to be.

In my judgment, therefore, para. 5 of the order (which incorporates the extended definition) does not, by its terms, apply to the assets of the companies in which Mr Ohmura has a direct or indirect shareholding.

There are, however, additional provisions in the worldwide freezing order to consider, in particular:

In addition, Mr Ohmura submitted that the Commercial Court words in the first sentence of the order (“Paragraph 4 applies to all the Respondent’s assets whether or not they are in his own name and whether or not they are solely or jointly owned and whether the Respondent is interested in them legally, beneficially or otherwise”) should be removed, because there is no evidence that Mr Ohmura owns any assets as a trustee or nominee or indeed on any basis other than as the owner of the legal and beneficial interest. I accept this submission. There is no such evidence nor is there evidence that “there are proper grounds for believing that assets ostensibly held by the defendant on trust or as a nominee for a third party in fact belong to him”. In such circumstances, I do not consider that these words should be included in the order (see Patten, LJ’s judgment in JSC BTA Bank v Solodchenko [2010] EWCA Civ 1436; [2011] 1 WLR 888, para. 49, as quoted above).

A further variation sought by Mr Ohmura is for the removal of the Swiss Property from para. 6(1) of the worldwide freezing order. The circumstances surrounding the transfer of the Swiss Property were the subject of argument in connection with Mr Ohmura’s application to discharge the worldwide freezing order, which I dismissed on 9th October 2018. The underlying premise of the parties’ arguments in relation to that application was that the Swiss Property had been transferred. In those circumstances, given my decision that there was nothing to indicate that that transfer was less than legitimate and genuine, I do not see how para. 6(1) of the worldwide freezing order can be maintained. However, if the Claimant is able to demonstrate that Mr Ohmura has retained an interest in the Swiss Property, the worldwide freezing order would still apply to such an interest and the Claimant could apply to the Court for an appropriate variation of the order.

Therefore, the worldwide freezing order must be varied as follows:

There is also the ordinary course of business exception in para. 9(2) of the order to consider. Para. 9(2) provides that “This order does not prohibit the Respondent (or any company whose assets are frozen pursuant to paragraphs 5 or 6 above) from dealing with or disposing of any of his/its assets in the ordinary and proper course of business, but the Respondent must give the Applicant’s solicitors 2 clear working days’ notice of his intention of so doing in respect of any transaction (or series of connected transactions) exceeding £10,000 in value”.

Mr Ohmura seeks to remove from the order reference to (a) the freezing of the companies’ assets and (b) the notification requirement insofar as it concerns the companies’ assets (other than in respect of the companies’ motor vehicles).

For the reasons explained above, the worldwide freezing order should not apply to restrict the disposal of or dealing with the companies’ assets. Accordingly, the words “(or any company whose assets are frozen pursuant to paragraphs 5 or 6 above)” should be omitted from the order.

The notification requirement however gives rise to different considerations. In my judgment, given that the disposal of or dealing with the companies’ assets may affect the value of Mr Ohmura’s shareholding in the companies and that judgment has been entered against Mr Ohmura which remains unsatisfied, there is a sound reason for requiring Mr Ohmura to give notice of any intention to deal with or dispose of the assets belonging to Rubicon, Conquest or Squadra (see the Court of Appeal’s judgment in Lakatamia Shipping Co Ltd v Su [2014] EWCA Civ 636; [2015] 1 WLR 291, at para. 24-25). Such dealings and dispositions would be matters within the knowledge of Mr Ohmura, being the person who would authorise such transactions, and he is well placed to provide such notification.

This will require a more substantial amendment to para. 9(2). I await to hear the parties’ submissions on the terms of the varied order. There is an issue between the parties as to the minimum value of the transaction requiring notification. The current version of the order requires notification where the transaction or a series of connected transactions exceeds £10,000. The Claimant submitted that this should be reduced to £5,000 and Mr Ohmura submitted that this should be increased to £50,000 (in respect of Conquest) and £30,000 (in respect of Squadra). Mr Ohmura argued that this provision left as it is would place undue pressure and burden on Conquest and Squadra. Although Mr Ohmura stated that expenditures by Conquest and Squadra either “typically” or “regularly” exceed £10,000 (para. 67 and 70 of Mr Ohmura’s fourth witness statement), there is no concrete evidence in the form of financial statements which evidence actual expenditures by these companies or the specific nature of any pressure or burden relied on by Mr Ohmura. Indeed, as Mr Akkouh observed, Mr Ohmura has not to date provided any notification in accordance with the order since the order was made on 13th September 2018. Although Mr Ohmura’s evidence was that such transactions were seasonal, I have not seen sufficient evidence to conclude that the order would operate in an unduly oppressive fashion to warrant any variation as sought by Mr Ohmura.

The Claimant applies for a reduction in the value of the transaction triggering a notification from £10,000 to £5,000, because Mr Ohmura has given scanty information in relation to the operations of Conquest and Squadra and his assets. Nevertheless, there is no evidence to suggest that the value of the limit should be reduced. Accordingly, in my judgment, the limit of £10,000 should be retained as the relevant trigger for any notice of disposals or dealings in respect of the companies’ assets.

I understand, however, that there is an issue concerning compliance with Swiss data protection legislation and the parties are agreed or are largely agreed in this respect. I shall consider the formulation of the order in light of this consideration when I receive the parties’ further submissions on the terms of the order.

Para. 8 of the worldwide freezing order imposed an obligation on Mr Ohmura to disclose by his solicitors’ notification and later by affidavit the value, location and details of his assets exceeding £10,000 in value.

As I explained in my judgment dated 9th October 2018, Mr Ohmura complied with this order for disclosure, save in one respect in that Mr Ohmura failed to disclose an estimated value of his shareholdings in the relevant companies.

The Claimant seeks an order for further disclosure, namely of (a) information relating to all transfers of more than a specified limit in a variety of currencies (e.g. £10,000, US$10,000, etc) made from Mr Ohmura’s, Conquest’s and Squadra’s bank accounts since 12th November 2015 (when Mr Ohmura was added as a defendant to these proceedings), (b) details of the turnover and profit made by each of Squadra, Conquest and StileF, together with accounts or other records confirming the same, since 12th November 2015, and (c) certain other information requested in solicitors’ correspondence.

In JSC BTA Bank v Ablyazov [2018] EWHC 1368 (Comm), at para. 13-16, Ms Patricia Robertson QC (sitting as a Deputy High Court Judge), after a review of the relevant authorities, said that a disclosure order can be justified to police the operation of a freezing order if there is a real risk that the assets are being used contrary to the terms of the freezing order (see also JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139; [2016] 1 WLR 160, para. 46-52).

Mr Akkouh on behalf of the Claimant submitted that the further information sought would enable an adequate policing of the worldwide freezing order and enable the Claimant to identify the nature and extent of Mr Ohmura’s interest in assets and to decide whether and what further steps should be taken to protect its position (as Ms Joanna Smith QC, sitting as a Deputy High Court Judge, said in PSJC Commercial Bank Privatbank v Kolomoisky [2018] EWHC 482 (Ch), para. 33, 52).

Mr Akkouh submitted that on the facts of this case the disclosure order sought is justified because (1) there is a significant disparity between the value of Mr Ohmura’s assets as disclosed (approximately £650,000) and what is known about his earnings and lifestyle (given that he is an experienced banker with an expensive motor-racing hobby), in particular it was found in the Court’s judgment dated 11th July 2018 that Mr Ohmura’s companies received and retained approximately US$2.91 million, and (2) in my judgment dated 9th October 2018, I found that Mr Ohmura failed to comply with the full terms of the disclosure order made on 13th September 2018.

In my judgment, further disclosure is justified in respect of information of the transfers made from Mr Ohmura’s, Conquest’s and Squadra’s bank accounts since 12th November 2015 and details of the turnover and profit made by each of Squadra and Conquest, together with accounts or other records confirming the same, since 12th November 2015, for the reasons given by Mr Akkouh:

I do not consider that the order for disclosure should extend to the turnover and profit of StileF because this was not a company as to which Mr Ohmura had a majority shareholding or control over its day-to-day activities.

As to the disclosure sought by the Claimant as to certain other information requested in solicitors’ correspondence, I did not hear oral argument in this respect. Before making any decisions on this aspect of the Claimant’s disclosure application, I shall have to hear the parties’ respective positions on these further categories.

For the reasons explained above, I have concluded as follows:

The precise terms of the worldwide freezing order will require further consideration. I await the parties’ submissions in this respect.

I am grateful for both counsels’ succinct and helpful submissions on the issues arising in the determination of the parties’ applications for variation of the worldwide freezing order.