United States Securities & Exchange Commission v Manterfield

This is an application by the United States Securities and Exchange Commission (“SEC”), which is an arm of the United States Government, to continue a freezing order granted by Openshaw J. on 29^th March 2008 against the defendant, Mr. Glenn Anthony Manterfield, who is resident in England.

It is common ground that the first issue to be addressed is whether, applying conventional principles, the SEC has made out the case for the grant of a freezing injunction. This issue raises questions which include whether the SEC has established a good arguable case against Mr. Manterfield; whether there is a real risk that Mr. Manterfield will dissipate his assets if the order is not made and whether this is an appropriate case for dispensing with the requirement that the SEC should give the cross undertaking as to damages, which is the usual condition of obtaining a freezing order. If the SEC succeeds on this broad first issue I will next have to consider the second issue, which is whether the English court should nonetheless refuse to make the order on the ground that the SEC is seeking in these proceedings to enforce, directly or indirectly, a penal law of a foreign State, namely the United States.

There being no dispute between the parties as to the background facts so far as this hearing is concerned, I can take them from the skeleton argument of Mr. David Wolfson, who appears for the SEC on this application. In February 2006 Mr. Manterfield (the defendant) together with Mr. Evan Anderson (a resident of Boston in the United States) set up Lydia Capital LLC (“Lydia”). Lydia was a Delaware limited liability company with an office in Boston. It was registered as an investment adviser with the SEC. The two principals, Mr. Manterfield and Mr. Anderson, each owned 50 per cent of the company. The SEC alleges that the two principals used Lydia as a means to defraud investors in a hedge fund, namely Lydia Capital Alternative Investment Fund LP (“the Fund”).

The investors were told that the Fund’s assets would be used to acquire a portfolio of life insurance policies in the life settlement market. In order to induce investors to purchase interests in the Fund, the principals described the Fund’s planned investment activities and supposed associated risks. In a confidential private placement memorandum dated June 2006 it was stated that Lydia intended to use the Fund’s assets to:

“purchase life insurance policies in the life settlement after market on numerous insured individuals of 65 years of age or older … who have a life expectancy of between two and ten years.”

It also stated:

“Upon purchasing a policy in a life settlement after-market [the Fund] will be re-assigned all legal rights and responsibilities contained in the policy contract. Therefore, the [Fund] will legally assume all ownership rights to the policy and the death benefit [and] the responsibility for future premium payments …”

The June 2006 memorandum provided that the Fund’s revenues would be derived from the death benefit of the underlying life insurance policy or gains from the sale of the policy in the secondary life market.

During the period from June 2006 through to April 2007 Mr. Manterfield and Mr. Anderson induced over 60 investors, all of whom I think were Taiwanese, to purchase approximately $34 million in limited liability partnerships in the Fund. The SEC’s case is that the two of them materially misled investors about Lydia’s operations and misappropriated millions of dollars of investors’ funds. During the same short period the principals – that is to say Mr. Manterfield and Mr. Anderson – withdrew about US$8 million (about 25 per cent of the amount invested). The SEC alleges that Mr. Manterfield received US$ 2.35 from Lydia. In the corresponding paragraph of his Response in the US proceedings, Mr. Manterfield has either admitted the receipt of this sum, or at least does not deny it. He asserts, however, that all sums paid by Lydia were paid correctly and in accordance with disclosures made to investors.

On 12^th April 2007 the SEC filed a complaint against Lydia, Mr. Manterfield, and Mr. Anderson in the United States District Court, in the District of Massachusetts. The contents of the complaint were subsequently updated as the SEC gained more information about the allegedly fraudulent activities of Mr. Manterfield. The complaint was filed in conjunction with an emergency ex parte motion for a temporary restraining order, an order freezing assets, an order for other equitable relief, and upon further notice a preliminary injunction. On 12^th April 2007 a United States’ District Judge granted an ex parte temporary restraining order, an order freezing assets and other equitable relief. The SEC then filed an amended complaint on 1^st May 2007. On the same day Mr. Manterfield filed a motion to modify the temporary restraining order to which the SEC filed its opposition. On 2^nd May 2007 a hearing took place in the District Court proceedings where Mr. Manterfield was represented by legal counsel. The District Court made an order for a preliminary, that is to say an interim, injunction which continued the temporary injunction until trial. The District Court froze Mr. Manterfield’s assets, and also required him within five days to take such steps as were necessary to repatriate to the United States any funds obtained directly or indirectly from investors in Lydia. The form of the District Court Order was consented to by Mr. Manterfield’s legal counsel. Mr. Manterfield filed his response to the SEC’s complaint against him on 6^th September 2007.

Having summarised the material facts I now return to the first question which arises, namely whether the SEC can establish a good arguable case against

Mr. Manterfield has made a lengthy witness statement for the purposes of the present hearing. It runs to 36 pages and includes from para.28 onwards a detailed rebuttal of what he describes as the six principal allegations of fraudulent activities on the part of himself and Mr. Anderson through Lydia. The thrust of the witness statement is that Mr. Manterfield has a good arguable defence to the assertions made by the SEC. The issue is, however, not whether Mr. Manterfield has a good case on the merits, but rather whether the SEC can satisfy me that it has a good arguable case for the grant of a freezing order. These two propositions are not mutually exclusive. The fact that a defendant has a strong arguable case does not mean that the claimant does not have a good arguable case. That said, I readily accept that the apparent strength of a defendant’s case is one factor amongst others to be taken into account in deciding whether the relief sought should be granted. As Mr. Fisher readily and rightly accepted, I cannot possibly, on a hearing of the present kind, make findings of fact, least of all in a case where the transactions conducted by

In regard to the merits or otherwise of the present application, Mr. Fisher submitted in his skeleton argument that the SEC case against his client lacks the insignia of fraud. Mr. Fisher gives a number of illustrations of this proposition. He says first that, unlike most investor frauds where the investors’ funds are not invested in the manner represented, the investments in the present case were purchased and the value of the investments has been independently assessed at US$ 160 million. Secondly, he says that no investor has complained; the SEC became involved only after a suspicious activity report was lodged in the UK. No criminal proceedings have been brought by the UK or the US or the Bermuda authorities. Thirdly, he submits that there has not been what he describes as a “snatch and grab” of the investors’ funds. The payments to Mr. Manterfield were made from escrow accounts. Payments could not have been made unless the escrow attorney was satisfied that they were proper payments. The escrow attorney has not been joined as a party in the SEC proceedings. The moneys paid to Mr. Manterfield were entirely consistent with the value of the policies in the Fund at almost US$160 million – 5 per cent of $160 million is $8 million. The $8.16 million figure was, says Mr. Fisher, shown openly in Lydia’s financial accounts.

In addition, Mr. Fisher places strong reliance on a comment made by District Judge Stearns, who is the US Judge dealing with the SEC’s claim in the US District Court. Having dismissed an application by Mr. Manterfield to dismiss the proceedings against him, the District Judge said:

“Although the court urges the SEC in the strongest terms possible to give consideration to Manterfield’s offer rather than persist in pursuing litigation that is unlikely to achieve any more than what Manterfield is already prepared to give, the issues he raises, while relevant to settlement discussions, do not support a motion to dismiss. The SEC in its amended complaint has alleged with requisite detail a scheme perpetrated by Manterfield and his co-defendants to defraud fund investors, for present purposes the SEC has more than adequately pled “a plausible entitlement to relief”. The court is therefore required to permit the litigation to proceed.”

I confess that I find the District Judge’s comment about the SEC giving consideration to Mr. Manterfield’s offer somewhat puzzling. It seems that an offer had been made on behalf of Mr. Manterfield to submit to a permanent injunction against violating federal securities laws and to be barred from future association with any investment adviser. This was presumably the offer which the District Judge was urging the SEC to accept. What I find puzzling is that the District Judge makes no mention at all of the substantial sum claimed by the SEC in the US proceeding against Mr. Manterfield. I think that the answer must be – as Mr. Sylvestre Fontes, who is the principal witness on behalf of the SEC on this application says – that the District Judge offered the practical advice he did at a time when an order made by a UK Crown Court freezing Mr. Manterfield’s assets in the UK and a bank account in Switzerland was still in place. Mr. Manterfield had pointed out in the District Court proceedings that there would be no point in the SEC pursuing its case to trial in the US proceedings if it – the US Court – was unable to seize the already frozen assets.

However, I need spend no more time on the issue as to whether the SEC has a good arguable case against Mr. Manterfield because Mr. Fisher conceded, appropriately, in the course of his oral submissions that he could not say that the SEC does not have a good arguable case against his client. That concession is, in my opinion, rightly made. Moreover, I note that in the proceedings in the District Court the test to be applied in deciding whether to grant a freezing order approximates to the test which I must apply here.

Whilst the decision of the US Court is not, of course, binding on me I think

The next matter about which I must be satisfied is that there exists a real or solid risk that, absent the injunctive relief sought, Mr. Manterfield will dissipate his assets with the result that any judgement obtained against him in the United States would or might go unsatisfied. It is common ground that in this context dissipation means that Mr. Manterfield would or might use his assets in England otherwise than for the normal and proper purposes (see The “Niedersachsen” and Ketchum International v Group PR Holdings [1997] 1WLR 4 at 10).

Very shortly before the hearing of this application Mr. Manterfield made a further witness statement in which he refers to his “strong communal ties” to the UK and to the fact that he lives in Sheffield with his wife and three of his four daughters and has done so since October 2005. He says that his future remains in the UK. The case advanced by Mr. Manterfield is that there is no evidence of his having any plan to move his assets out of the reach of the court; nor is there any evidence of concealment of assets through the use of offshore companies or trusts, those being typical hallmarks of those engaged in an asset concealment scheme. Furthermore, he says there is no evidence of any sophisticated movement of money designed to obscure transparency and conceal the true origins of the money. Nor is there any question of money having been moved into the names of third parties or business vehicles, nor is there evidence here of dissipation of moneys through wasteful and extravagant high living. Finally, he points out that the Receiver in the United States, who has extensively investigated Mr. Manterfield’s financial affairs, makes no claim to have experienced difficulty in locating monies in the case.

Mr. Fisher submits that, just as the insignia of fraud are absent in the case, so too are the hallmarks of dissipation also absent. He contends that the Receiver located US$ 13 million in the United States; those moneys were held in trading/investment accounts, as had been represented. The risk of Mr. Manterfield leaving the UK is submitted to be extremely low. Reliance is placed on his evidence as to his family and community ties in this jurisdiction. In this connection Mr. Fisher referred me to Thane Investments v Tomlinson [2003] EWCA Civ. 1272, but I have to say I derived little assistance from that case which seems to me to have turned on its own somewhat peculiar facts. Finally Mr. Fisher agreed that there was nothing sinister about Mr. Manterfield’s visit to Cyprus.

Answering the case on dissipation, Mr. Wolfson indicated that the abortive trip to Cyprus is not and never has been the high watermark of the SEC’s case on dissipation. I should explain that there is evidence that Mr. Manterfield, accompanied by his wife and I think by his daughters, travelled on one-way tickets to Cyprus (although in the event they did return from that country to this). Mr. Wolfson says that the principal consideration to be taken into account is the fact that Mr. Manterfield stands accused of involvement in a major international fraud. As I have already found, in common with the United States Court there is a good arguable case that Mr. Manterfield was so involved. I was referred in this connection to the book by Mr. Stephen Gee QC entitled Commercial Injunctions at para. 12-040.

In addition the SEC relies on the following matters as evidencing the existence of a risk of dissipation of assets: first, the trip to Cyprus, which I have already described. Secondly, the fact that Mr. Manterfield was found to be driving a Maserati car outside the jurisdiction at a time when he was subject to an order not to remove it from this country. Thirdly, the admitted failure of Mr. Manterfield to comply with the order of the United States Court to repatriate his assets. Finally, reliance is placed on the fact that Mr. Manterfield has – or at any rate had – two Swiss bank accounts.

Although the last of these four points does not impress me, I am entirely satisfied that for the reasons advanced by Mr. Wolfson, the risk of dissipation of assets is clearly demonstrated to the requisite standard.

As Mr. Fisher rightly emphasises, the general rule is that the court will not grant injunctive relief in the absence of a cross-undertaking in damages given by the claimant. The contention on behalf of Mr. Manterfield is that there is no reason why this practice should not be followed in the present case.

It is clearly established and common ground on the present application that the court may, in a suitable case, dispense with the requirement of a

Mr. Fisher accepts that the authorities indicate that there is a discretionary power to dispense with the requirement of a cross-undertaking. However, he advances the bold and novel submission that the dispensation rule offends the principle of equality of arms under Article 6 of the European Convention on Human Rights. I describe the submission as novel, because the point does not appear to have been taken in any previous case. It is a bold submission because, if well-founded, it would alter the practice of applying the dispensation rule in selected cases which originated when Hoffmann was decided in 1974 and which, until now, appears to have survived the enactment of the Human Rights Act 1998.

The wording of Article 6(1) is as follows:

“In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.”

It is apparent from its wording that the emphasis in Article 6 is on the need for fairness, openness and expedition in all cases, but in particular in criminal cases. Subsequent Strasbourg case law has, I accept, construed the words of Article 6(1) widely. Mr. Fisher contends that the dispensation rule offends against the principle of equality of arms because it (a) provides the claimant with interim protection for his right, but (b) denies the defendant with equivalent protection for his rights in circumstances where (c) the denial of the defendant’s rights cannot be justified by reference to any legitimate objective.

In support of his argument Mr. Fisher cites Kaufman v Belgium [1986] 50DR 98 at 115. He says, in reliance on a dictum of Lord Bingham of Cornhill in Brown v Scott [2003] 1AC 681, that any restriction on the rights of an individual under Article 6 must represent “no greater a qualification than the situation calls for”. Mr. Fisher further submits that to permit the SEC to avail itself of the dispensation rule in the circumstances of the present case would be a disproportionate response and one which exceeds the minimum threshold for a limitation of Mr. Manterfield’s Article 6 rights. He points out correctly that if the claim by the SEC fails, Mr. Manterfield will inevitably suffer significant financial loss as a result of any interim freezing order. If no cross-undertaking is given he will be left without any legal redress in respect of that financial loss. Mr. Fisher contends that Mr. Manterfield’s Article 6 right of access to the court would be curtailed if the dispensation rule were to be applied in this case.

In support of his submission Mr. Fisher relies on the following passage in Golder v UK [1979 – 80] EHRR 524 at paras. 34 and 35. What was said in that case was this:

“In civil matters one can scarcely conceive of the rule of law without there being a possibility of access to the courts ...

The principle whereby a civil claim must be capable of being submitted to a judge ranks as one of the universally "recognised" fundamental principles of law; the same is true of the principle of international law which forbids the denial of justice. Article 6 (1) must be read in the light of these principles.”

Mr. Fisher has a fall back position: he submits that even if he is wrong in saying that the dispensation rule offends against Article 6 of the Convention, the court should nonetheless in the exercise of its discretion refuse to grant the injunction sought because the SEC is a foreign public body and accordingly the public interest in not subjecting it to the risk of paying damages is less persuasive given that:

I will deal with the latter submission first, and I can do so quite shortly. It is incontrovertible that fraudulent activity of the kind allegedly engaged in by Mr. Manterfield is an international problem requiring international

I return to the question of whether the application of the dispensation rule in the circumstances of this case would offend against Article 6 as suggested by Mr. Fisher. It is obviously true to say that the application of the dispensation rule would have the effect that Mr. Manterfield would be prevented from seeking damages from the SEC if it should turn out that the freezing order was wrongly made. Mr. Manterfield has had access to the court on this application but he can and does say he would be unable to return to court to seek compensation from the SEC in the event that it is held the freezing order should not have been made. But is that a contravention of Mr. Manterfield’s Article 6 rights? I do not think that it is. As Mr. Wolfson rightly submits Article 6 protects procedural rather than substantive rights. Its wording makes clear that it is focusing on the fairness and openness of the proceeding, it does not and could not purport to confer substantive rights. Mr. Manterfield does not have a “right” to an undertaking in damages, and Article 6 does not give him such a right. That this is the correct approach to Article 6 emerges from the speech of Lord Millett in Holland v Lampen-Wolfe [2000] 1WLR 1573. In that case the defendant contended that he was entitled to sovereign immunity. His claim to immunity was upheld, Article 6 notwithstanding. At pp.16 to 17 Lord Millett said:

“Article 6 of the Convention affords to everyone the right to a fair trial for the determination of his civil rights and obligations. This reflects the principle of English law to which Sir Thomas Bingham M.R. gave utterance in his celebrated and much quoted observation that the policy which has first claim on the loyalty of the law is that wrongs should be remedied: see X v. Bedfordshire County Council [1995] 2 A.C. 633 at p. 663.

It appears to me that if Mr. Fisher were correct in his submissions in the present case, claims to sovereign immunity would invariably be defeated by Article 6. It is accordingly unsurprising that Mr. Fisher is unable to cite any authority in which Article 6 has been construed as conferring the substantive right for which Mr. Manterfield is contending in this action. The present case is far removed on its facts from Golder. In that case a prisoner was denied the right to consult a solicitor about his claim that he had been defamed by a prison officer. The ground of the decision in favour of the prisoner in that case was that the practical effect of denying him the right to consult a solicitor was to deny him the right of access to a court. So the decision was essentially a procedural one based upon unfairness. It conferred no substantive right or remedy on the prisoner. Moreover there is English authority SIB v Lloyd Wright (already cited) to the effect that the court has a discretion not to require a cross undertaking in damages when granting a freezing order to a designated agency such as the SIB. Morritt J. (as he then was) said at 214B to E:

Finally on this aspect of the case I must deal with the question of whether or not it would be right for me in the exercise of my discretion to make the freezing order requested by the SEC. Even if, as I have held here, the conditions for granting a freezing order are satisfied, I must, as s.37(1) of the Supreme Court Act 1981 and s.25 of the Civil Jurisdiction and Judgments Act 1982 make clear, consider whether it is just, convenient and expedient to grant such relief. I accept, not least in the light of the observations made by Potter L.J. in Motorola Credit v Uzan No.2 [2003] EWCA Civ. 752, that the jurisdiction which I am being invited by the SEC to exercise in this case is a jurisdiction to be exercised with considerable caution. I am nevertheless of the clear view that the various matters prayed in aid by Mr. Fisher on behalf of his client do not, whether individually or collectively, constitute a good reason for me to exercise my discretion by refusing to make the order sought. As I have already said, I cannot form a view as to the strength or otherwise of the defence which, in his first witness statement, Mr. Manterfield says he has to the allegations of fraud made against him; nor do I feel able, for the reasons already spelled out, to construe the observations made by District Judge Stearns urging the SEC to settle the case against Mr. Manterfield, as constituting or evidencing his opinion that the case against Mr. Manterfield is a weak one. I do on the other hand accept that, as the SEC acknowledges, its case against Mr. Manterfield will take some three years to come on for trial in the United States Court. That is a lengthy period, although no longer than it takes for many commercial cases both in this jurisdiction and elsewhere in which freezing orders have been made to come on for trial.

Moreover, whilst I do not underestimate the difficulties which an order will no doubt cause for Mr. Manterfield, he has not adduced any evidence of any particular project which he has been or will be unable to undertake because of any freezing injunction. I readily accept that the defence of the SEC claim will be very expensive for him, but I do not think that is a reason for refusing to make a freezing order. The better course may be for Mr. Manterfield, as and when the need arises, to apply this court for the release of frozen assets to the extent necessary for him to finance his defence. At that stage the court will no doubt wish to know more about Mr. Manterfield’s financial position than

Looking at the matters more broadly I am satisfied that, the conditions for the grant of a freezing order having been made out, there is no reason for me to exercise my discretion by refusing to make the order sought.

It does not, however, by any means follow that the SEC is entitled to the relief sought on this application. That is because Mr. Fisher submits that for the English court to make the freezing order sought in the present case would be to enforce, directly or indirectly, the penal law of a foreign State and that is something which it is common ground the English court will not do. It is unnecessary for the purpose of the present application to enter into any analysis of the juridical basis for this principle. Its rationale is discussed in the Conflict of Laws 14^th Edition, edited by Dicey, Morris & Collins at

The first question which arises is whether the relevant foreign law which the SEC is seeking to enforce against Mr. Manterfield in the US proceedings is properly to be characterised as a penal law. In order to answer this question it is necessary to ascertain what is the jurisdictional basis upon which the various relief which the SEC is seeking against Mr. Manterfield in the US District Court. The position is not as clear cut as one might expect. After the conclusion of the oral hearing Mr. Wolfson provided me with the following summary of the position. I should quote that summary in full:

“1 The Securities Exchange Act 1934 (“the 1934 Act”) is the founding legislation of the SEC. It is available at http://www.sec.gov/about/laws/sea34.pdf .

2 The long title of the 1934 Act states:-

(5) Equitable Relief.

That summary has been approved and confirmed as correct by Mr. Fontes who, in addition to being the principal witness on this application on behalf of the SEC, is himself senior trial counsel in the proceedings against

The distinction between those two forms of relief can be seen clearly from the prayer in the SEC’s Complaint for Injunctive and Other Relief at paras. C and D. Although he makes no concession that the so-called civil penalties are properly to be characterised as criminal, Mr. Wolfson has undertaken on behalf of the SEC not to seek to enforce any such penalties as may be imposed by the District Court. That posture is one which, in my judgment, the SEC is entitled to adopt and Mr. Fisher did not suggest otherwise.

Accordingly the first issue which I have to decide is whether the disgorgement order is to be characterised as “penal”. This issue falls to be decided according to English law (see US v Inkley [1989] QB 255). It is clear from Barakat at para. 109 that the fact that the provision entitling the District Court to make a disgorgement order is contained within legislation which contains criminal sanctions does not mean that the disgorgement order is itself penal in nature.

Mr. Fisher sensibly accepted that the United States legislation is severable for the purposes of deciding this question. Mr. Fisher maintains that the disgorgement order is penal in nature and relied on several authorities in support of that contention, namely: Huntington v Attrill [1893] AC 150 at 156; Attorney General of New Zealand at 34 to 35, and Larkins v NUM [1985] IR 671. He further submits that a civil action would be treated as a criminal matter in circumstances where the proceedings are instituted by a public body with statutory powers of enforcement and where the imposition of any penalty is dependent on a finding of culpability: (see Benham v UK [1996] 22 EHRR 293). Mr. Fisher drew attention to what he described as the innate tension between the stance of the SEC on the first issue of its entitlement to a Freezing Order and its stance on the second issue whether the United States’ legislation is penal. He points out that the ability of the US courts to make a disgorgement order against Mr. Manterfield is dependent on proof of his guilt of fraud. He says that the SEC action as a whole is punitive in nature. He invites me to take a holistic view of the United States action.

My conclusion on this issue is that Mr. Wolfson is right when he says that the provision which entitles the SEC to seek a disgorgement order against

Since I have come to the conclusion that the relevant US legislation is not to be characterised as being penal, it is not necessary for me to turn to the question whether by its application to the English Court the SEC can be said to be seeking directly or indirectly to enforce the relevant US law. However, since the point was fully argued before me I should nevertheless express my conclusion on it.

It is common ground that the English court will decline jurisdiction if the relief sought amounts to the enforcement directly or indirectly of the penal law of a foreign State: (see the formulation of Rule 3 in Dicey Morris & Collins at 5R-019 and Attorney General of New Zealand v Ortiz per Ackner LJ at 34).

The starting point is to consider the nature of the relief which this court is being asked to grant and the purpose for which the relief is sought. A freezing order does not in my view “enforce” anything, still less any foreign law, although it is, of course, right to say that it is the US law which entitles the SEC to obtain a disgorgement order which in turn permits the SEC to come to the English court. What is the purpose of making the order? It is no more and no less than to ensure that such assets as Mr. Manterfield possesses within the jurisdiction will be available for distribution to the investors if a disgorgement order is ultimately made by the US court. A freezing order is essentially conservatory and is designed to hold the ring pending determination of the litigation in the United States courts.

A number of authorities were cited to me by both parties on the question whether the SEC is seeking to enforce US law. It is unnecessary for me to refer to all of them. In Re State of Norway’s Application [1991] AC 723 a letter of request issued by the Norwegian court and addressed to the English Court sought an order for the oral examination of two witnesses living in England. The evidence was required in order to enable the Norwegian State to recover taxes said to be due. Rejecting the contention that the English court should decline jurisdiction on the ground that it was being asked indirectly to enforce the Revenue laws of a foreign State, Lord Goff of Chieveley said at pp 809:

“I return to the rule in Government of India v Taylor [1955] A.C. 491.  It is of importance to observe that that rule is limited to cases of direct or indirect enforcement in this country of the revenue laws of a foreign state.  It is plain that the present case is not concerned with the direct enforcement of the revenue laws of the State of Norway.  Is it concerned with their indirect enforcement?  I do not think so.  It is stated in Dicey & Morris , at p. 103, that indirect enforcement occurs (1) where the foreign state (or its nominee) in form seeks a remedy which in substance is designed to give the foreign law extraterritorial effect, or (2) where a private party raises a defence based on the foreign law in order to vindicate or assert the right of the foreign state.  I have been unable to discover any case of indirect enforcement which goes beyond these two propositions.  Even so, since there is no authority directly in point to guide me, I have to consider whether a case such as the present should nevertheless be held to fall foul of the rule.  For my part, I cannot see that it should.  I cannot see any extraterritorial exercise of sovereign authority in seeking the assistance of the courts of this country in obtaining evidence which will be used for the enforcement of the revenue laws of Norway in Norway itself.  Let it be supposed, for example, that in Attorney-General of New Zealand v Ortiz [1984] A.C. 1, the case was not one of New Zealand seeking to enforce its claim in this country, but of seeking the assistance of the English courts to obtain evidence to enforce its claim in New Zealand.  I find it very difficult to imagine that such an application would have been refused.  Nor do I consider that refusal of the application of the State of Norway in the present case could easily be reconciled with the power of the courts of this country to exercise their jurisdiction under the Act of 1975 in criminal proceedings - for example, criminal proceedings in Norway in a case of tax evasion.”

In Schemmer v Property Resources [1975] Ch 273 it was held at First Instance that the English Court would not recognise the title of a receiver appointed by the United States court to get in the assets of a group of companies (based in the Bahamas) which had been used as the vehicle for the frauds which had taken place in that case in the 1970s. The basis of that part of the decision in Schemmer was that the receiver had been appointed pursuant to the United States Securities Exchange Act 1934, and that Act was a penal law.

However in Barakat the Court of Appeal commented at para.109 of its judgment that the judge in Schemmer appeared to have overlooked the fact that a provision is found within a law which contains criminal sanctions such as penalties or forfeiture does not mean that the provision itself is penal in nature. The Court of Appeal in Barakat further pointed out that the receiver in the case of Schemmer had not been appointed to enforce the penal provisions of the Act but rather to preserve and recover the property of the company. It seems to me that an analogy can be drawn between the act of a receiver appointed by a foreign State to preserve and recover the property of a company, and the act of the SEC in the present case in applying for a freezing order.

Finally, I should refer to the decision of the Supreme Court of New South Wales in Robb Evans v European Bank [2004] NSW (CA) 82. In that case the New South Wales Court of Appeal overruled the conclusion of the court below that the proceedings there could be characterised as being for the enforcement of a foreign penal or public law. It was held that a receiver appointed by the US Federal Trade Commission could sue in New South Wales to recover the proceeds of credit card fraud. As the Court of Appeal put it:

“In the sphere of consumer protection, regulatory regimes may serve a public interest and be classified as public laws, without constituting a governmental interest of the relevant kind and as a matter of substance it was a proceeding designed to compensate persons who had been defrauded."

Robb Evans was referred to with approval by the Court of Appeal in Barakat.

For the above reasons I have come to the conclusion that it cannot be said by this application for a freezing order the SEC is seeking directly or indirectly to enforce the relevant United States’ law.

It must follow that the freezing order made by Openshaw J. should be continued.