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Court's continuation of freezing order shows their value, says expert

ANALYSIS: A High Court ruling has demonstrated that freezing orders are useful tools in protecting claimants' rights even after judgment has been obtained.01 Feb 2017

The court confirmed that a worldwide freezing order relating to a Grain and Feed Trade Association (GAFTA) arbitration award should continue until a payment or further order is made.

India-based international commodity trader Touton Far East obtained an English freezing order in February 2016 against Shivnath Rai Harnarain, in support of the 2010 GAFTA arbitration award, which was worth over $4 million. The court then went on to extend that order indefinitely, until payment was made or a further order took its place.

Shivnath Rai Harnarain was given until March 2016 to apply to vary or discharge the order. It asked for an extension of time to appeal, and also argued that the freezing order should not be indefinite.

The court gave it no extra time, however, and ruled that the order should remain in place. While pre-judgment orders should be of limited duration, it said, "the situation here is that the judgment debts are of some age. The judgment was entered almost six years ago."

"I am satisfied that it is proper for the injunction to remain in place. It is the policy of English law that English judgments should be paid. The defendant is in a position to pay the judgment at any time. It is clear that it is a substantial company and it is choosing not to pay. It is not a case where it suggests that it is unable to pay. I am satisfied the injunction is in place for a legitimate purpose," it said.

In the recent judgment, Shivnath Rai Harnarain had applied to set aside the freezing order, while Touton Far East sought to have the management of Shivnath Rai Harnarain committed to prison for contempt of court.

The judgment found that Shivnath Rai Harnarain had not provided the information required and had deliberately disobeyed the court on disclosure of its assets. The company should have made its arguments last March, and the case cannot now be reopened.

It is great to see that the court is assisting claimants once judgment has been obtained by issuing worldwide freezing orders with disclosure obligations. All too often claimants obtain a judgment but it is a pyrrhic victory as enforcement is so difficult. This case demonstrates that claimants should always consider the use of freezing injunctions, even after judgment is given as a tool to enable it to obtain what is rightly theirs.

If claimants believe that there is any risk of dissipation they should always consider freezing orders as they do work and are enforced to protect the assets. All too often proceedings are commenced that result in judgments but ultimately no money being paid because the defendant avoids enforcement and makes themselves judgment proof.

It is of paramount importance to be proactive and use all the tools of the English court to ensure effective enforcement of judgments. Claimants should always seek advice from civil fraud lawyers that use these tools all the time before embarking on expensive and timely litigation, or even, as in this case, after the judgment has been awarded, to ensure judgments are enforced and the claimant receives the monies due to them.

Alan Sheeley is a civil fraud and asset recovery specialist with Pinsent Masons, the law firm behind Out-Law.com.