Supreme Court holds that use of a loan facility can amount to a breach of freezing injunction
In JSC BTA Bank v Ablyazov  UKSC 64 the Supreme Court considered whether the proceeds of loans fell within the definition of assets restrained by a freezing injunction.
The decision arises in long-running litigation instigated by the Claimant bank against its former chairman for the misappropriation of funds. The Claimant bank had obtained judgments against the Defendant Mr Ablyazov in the total sum of US$4.4 billion. It had subsequently sought and obtained a freezing injunction over the assets of the Defendant.
The Defendant had obtained four loan agreements in 2009 and 2010. After the imposition of the freezing order he exercised his right to draw down against the loan agreements by directing that various payments be made to third parties.
The Claimant sought a declaration from the High Court that the Defendant’s rights to draw down under the loan agreements were 'assets' for the purpose of the freezing injunction and could only be made if the exceptions under the order applied. Mr Justice Christopher Clarke rejected this argument as did the Court of Appeal.
The Supreme Court also rejected the argument the facility itself amounted to an asset of the Defendant. It followed from this that neither were the proceeds. However, the freezing injunction contained an extended definition of ‘assets’ which included assets over which the respondent controlled – as opposed to assets which were legally or beneficially owned. The terms of the draw-down facility gave the defendant the power to direct that a third party to transfer assets in a certain way (e.g. by paying a fourth party etc.).
The Court reminded itself that a constrictive rather than expansive approach must be taken to interpreting freezing injunctions, but agreed with the Claimant that in the instant case the definition of assets clearly included assets the Defendant had the power to control, regardless of a lack of legal or beneficial ownership.
A copy of the full judgment can be found here and a video of Lord Clarke’s summary of the judgment below:-
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Articles are intended as an introduction to the topic and do not constitute legal advice.