English courts are prepared to grant injunctive relief on worldwide assets in support of foreign proceedings, where a case based on international fraud can be made out, provided the requisite conditions for the grant of such relief are met and the applicant has not delayed in seeking such relief.
Certain decisions delivered over the past two years perfectly illustrate some of the key remedies available before the English courts, the checks and balances employed by them, and how such orders might be made in respect of foreign assets.
The first, TBD (Owen Holland) Limited v Andrew Simons & Others (2020) EWHC Civ 1182, sets out the Court of Appeal’s guidance on obtaining search and imaging orders (aka Anton Piller orders). English courts have long had the power to grant orders permitting an applicant to conduct a search of the premises of the defendant so as to recover and preserve evidence relevant to proceedings. The criteria applied are those set out in the case of Anton Piller, namely:
The TBD case concerned claims of copyright infringement and misuse of confidential information and trade secrets brought by TBD against Mr Simons, a former employee of TBD who had left to join a competitor company (and his new company G2A). TBD alleged copyright infringement on the basis that G2A was approaching its customers using TBD’s photographs and technical materials.
Having obtained search and disclosure orders against Mr Simons and the defendant companies, TBD retrieved a volume of documentation as well as images of the electronic media found during the search. TBD had, through its solicitors and forensic experts, proceeded to inspect some of the electronic media using keywords in order to extract information. It used this to contact customers with whom the respondents had been in touch. Relying on this information, they also brought committal proceedings for alleged breach of the disclosure order. The Court of Appeal had to determine appeals from TBD against an order requiring it to destroy some of the evidence in its possession as a result of these searches from one of the defendants asserting litigation privilege in transcripts of text messages and against committal for contempt.
The Court of Appeal reiterated that the primary purpose of search orders was to preserve evidence. Such an order had to be distinguished from without notice orders to disclose and inspect documents or to provide information. It was important that the two types of orders were sought on their merits and required proper safeguards to protect the interests of a defendant. This was particularly the case where complete copies or images of electronic devices were obtained from a respondent to such an order.
The court said that an order granting permission for the imaging of a party’s digital devices and cloud storage might be the most effective means of preserving evidence. If an imaging order was granted, it might make a traditional search order unnecessary or limited as most information these days tends to be in digital format. Courts faced with without notice applications seeking both a search order and an imaging order should first consider whether to grant an imaging order. If an imaging order was granted, then there was a presumption, absent evidence to the contrary, that a search order was unnecessary.
The court added that when granting an imaging order, the court and those representing the applicant needed to put in place appropriate safeguards to protect the interests of respondents. A basic safeguard was for the images to be kept by the forensic computer expert appointed by the applicant (but not shared with it), and for the copy not to be searched or inspected until the return date. Any departure from this required the court’s specific and explicit approval and would need to be justified.
There should be no unilateral searching of the images by or on behalf of the applicant, whether using keywords or otherwise. The search methodology should either be agreed between the parties or approved by the court.
This case shows that the courts will seek to ensure that appropriate checks and balances are built into an order made to preserve evidence so as not to prejudice the interests of the respondent.
The second case concerns the highly publicised and long running dispute between Arcelor Mittal USA LLC (AMUSA) and the Essar Group. This case has involved ICC arbitration and court and insolvency proceedings in multiple forums and jurisdictions including India, Mauritius, Cayman, Minnesota, Delaware, Canada, UAE and the UK. The background to the matter was a ten year agreement between AMUSA and Essar Steel Minnesota LLC for the supply of iron ore from Essar SML’s Minnesota plant. In March last year, Mr Justice Jacob, sitting as a judge in the Commercial Court, continued a worldwide freezing injunction, search and Norwich Pharmacal orders granted without notice, in support of enforcement of an arbitration award of a Minnesota seated ICC arbitral tribunal against Essar Steel Limited - Arcelormittal USA LLC v Essar Steel Limited & Others (2019) EWHC 724 (Comm).
In doing so, Mr Justice Jacob relied upon findings of fact by various tribunals, including the ICC tribunal, the Ontario Court and the Indian Supreme Court, which he considered supported a conclusion that there was a real risk of dissipation of assets, it was just and convenient to make the worldwide freezing order and it was appropriate to make the search and Norwich Pharmacal orders, so as to preserve documents. The findings of the Supreme Court of India, which held that Numetal was a company controlled by the promoters of Essar and was prohibited from regaining control of it without paying off its debts, pursuant to s29A (c) of the Insolvency and Bankruptcy Code from acquiring the assets of Essar Steel India, was one such factor relied upon.
Interestingly, a year later, Mr Justice Henshaw heard AMUSA’s application for an on notice worldwide freezing injunction and ancillary orders against various defendants including EGFL, the Cayman domiciled principal Essar Group holding company, on the basis of a case of unlawful means conspiracy - ArcelorMittal USA LLC v Mr Ravi Ruia and others  EWHC 740 (Comm). In doing so, he had to consider whether the key conditions to be satisfied by an applicant for a freezing injunction had been made out in this case. These are:
Further, any delay by an applicant in making the application may prejudice its ability to obtain injunctive relief.
Mr Justice Henshaw considered these factors not to have been made out in the applicant’s favour and dismissed the application. His reasons for doing so were that:
These decisions show that the English courts are prepared to grant injunctive relief on worldwide assets in support of foreign proceedings, where a case based on international fraud can be made out - provided the requisite conditions for the grant of such relief are met and the applicant has not delayed in seeking such relief. However, the court will proceed with caution and decline to make such orders where it considers these conditions are not met.
This article was published in Legal Era Magazine in December 2020.