10 April 2020 - Article
Facts of the Case
The Claimants had previously obtained a Freezing Order freezing the Defendants’ assets pending the trial of an action relating to an alleged fraudulent investment scheme. The Defendants were involved in a scheme to purchase vouchers and options in the shares of a state owned oil company in Azerbaijan. The Claimants were investors in the scheme. The Defendant company was appointed agent to buy vouchers and options from the Azeri Government. It was not intended that the Defendant company should make a profit, rather the intention was that the investors should ultimately be able to acquire a controlling interest in the oil company once it was privatised. The privatisation did not proceed and the Claimants lost their investment. The Claimants discovered that the options had not been acquired from the Azeri Government but from companies controlled by the Defendants. The Claimants sued for deceit and fraudulent misrepresentation. It was also discovered that the Defendants had agreed to give a 2/3rds participation to Azeri officials as a bribe both to ensure further options and vouchers and to encourage privatisation. In criminal proceedings in the United States, the Defendants were found guilty of corruption. A director of the Claimant company admitted he knew of the arrangements and was also convicted. The Defendants argued the Claimants had no case because (1) the action for deceit would fail since the Claimant company knew through its director of the illegal arrangements; (2) the Claimants knew the Defendants had preferential access to government officials which was contrary to public policy; and (3) the Claimants had failed to make full disclosure to the Court when obtaining their Freezing Order.
The Judge refused to discharge the Freezing Order, holding that it was for the trial judge to decide whether the Claimants were in fact aware of the corrupt dealings with the Azeri Government. The fact that one of the Defendants had good relations with the Azeri Government did not of itself make the arrangements contrary to public policy. It was unclear exactly what the Claimants’ state of knowledge was when they first applied for a Freezing Order and hence whether they had made full disclosure. The issues were simply too complex to be determined at the summary stage.
Points of Interest
Freezing Orders (previously known as Mareva Injunctions) are designed to prevent a Defendant against whom there is a good arguable case from dissipating his assets and so denying a successful Claimant the fruits of his judgment. The case illustrates the difficulties faced by a Defendant against whom such an order has been made, in seeking to overturn the order before trial. In this case, the Court clearly felt the issues were too complex to be determined in any forum short of a full trial. The Judge may also have been influenced by the fact that it was almost certain that one of the Defendants had bribed officials at the highest levels of the Azeri Government. The Judge also referred to a previous hearing in this case when another Judge had found the principal Defendant to be untruthful.