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Variation of Crown Court Restraint Order to fund liquidation

On 16 January 2012 Mrs Justice Gloster DBE gave approved judgment setting out her reasons for granting a variation to a Restraint Order allowing the release of 20 million Us dollars to the liquidators of stanford International Bank Ltd (sIB v serious Fraud Office LTL 18/1/12)on 4 August 2011. The liquidator of sIB had sought a variation of the Restraint Order granted by the Court of Appeal in February 2010 (see re: sIB, Janvey v Wastell, sFO v Wastell 2010 EWCA 137) to permit a draw down of 20 million Us dollars from assets restrained in the UK (totalling approximately 110 million). The Restraint Order had been granted by HHJ Kramer QC pursuant to Article 8 of the Proceeds of Crime Act (External Requests and Orders) Order 2005 and variation was sought under 8(2) which makes provision for ˜living expenses. In effect, it was the liquidators case that it was desperate for funding to assist with various aspects of  the liquidation and that other sources of funding were very expensive and thus contrary to the interests of the creditors. Mrs Justice Gloster was critical of the approach of the sFO who, in open correspondence, had agreed to the variation until imposing an unacceptable condition at the last minute forcing the application. Once the application had been issued, it abruptly changed tack opposing the application in its entirety through evidence served very late in the day. The liquidator made the following case for release the funds: a) there were attempts to dissipate assets and funding was required to for legal action to prevent this; b) the requirement for realisation of assets at their optimal value; c) the ongoing management of risk of assets in the UK and switzerland; d) the need to trace assets and pursue third party claims.  The sFO opposed the application on the basis that the Department of Justice in the Us fundamentally disagreed with the release of any assets and that there were real concerns that the proposed action plan of the liquidators would be successful. Given the undertakings that the liquidator was prepared to make regarding repayment of the funds following liquidation of the assets, Gloster J found that the release of 20 million was reasonable and proportionate balancing the competing interests of the parties. she specified seven factors in support of her judgment on the issue: i) the Court of Appeal itself had expressly provided exception for sIBs ˜living expenses; ii) it was reasonably arguable that the creditors had an interest in the restrained assets; iii) the funds were almost certain to be repaid; iv) the liquidators action plan was realistic and proportionate; v) alternative funding would be hugely expensive to the detriment of the creditors; vi) the restrained assets needed to be actively managed and vii) evidence relating to the distribution process of repatriated assets in the Us.


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