The recent decision of LAX SA v JBC SA concerned a worldwide freezing order granted in favour of LAX on an ex parte basis pursuant to s. 44 of the Arbitration Act 1996, in the context of claims against JBC concerning a drilling contract.1 That order had been granted despite the fact that LAX did not have any assets within the jurisdiction and had been unable to provide fortification (typically payment of funds into court or issuance of a bank guarantee) in respect of its undertaking in damages, purportedly on the basis that it was undergoing a restructuring exercise.
JBC applied to vary the injunction to require the provision by LAX of fortification of the undertaking in damages, on the basis that JBC stood to suffer significant loss in relation to its involvement in a drilling project as a result of the injunction.
In considering JBC's application, Mr Justice Foxton noted the following relevant legal principles:
1. The general practice is for a party seeking an interim injunction to adduce evidence of its ability to honour the cross-undertaking in damages;2
2. Where the applicant is unable to show sufficient assets within the jurisdiction to provide substance to any undertakings given, it may be required to give security; and
3. In determining whether and in what amount to require fortification of a cross-undertaking in damages, the court will seek to arrive at an “intelligent estimate” of the amount of loss the respondent might suffer from the granting of the injunction, and be persuaded that there is good arguable case of the loss occurring.3
Despite holding that JBC had failed to provide sufficient evidence to prove that it would suffer loss as a result of the injunction, and/or to establish the approximate amount of such loss, Mr Justice Foxton held that requiring LAX to provide some form of asset disclosure would serve to ameliorate (at least in part) the consequences of its inability to identify assets within the jurisdiction or provide fortification for its cross-undertaking in damages in the manner normally required for the purposes of obtaining interim injunctive relief.
As such, Mr Justice Foxton considered that the parties' interests would be appropriately balanced by an order requiring inter alia that LAX provide disclosure of its assets worldwide exceeding US $10,000 in value, with such disclosure to include a brief description of the assets disclosed and their estimated value, including the location of any real property, shareholdings or bank accounts (but not of any equipment). This order was made on condition that JBC undertook only to utilise such disclosure for the purposes of the proceedings in question.
Mr Justice Foxton further acknowledged that a future application for fortification at a later date may be appropriate in the event that JBC's loss became more apparent and/or LAX's financial position changed.
This case illustrates (i) the court's desire to achieve a balance between the interests of applicants and respondents, particularly in circumstances where onerous interim measures are sought; and (ii) the court's willingness to order asset disclosure to achieve that balance.
1 [2024] All ER (D)
2 Smo v Hywel Dda University Health Board [2019] EWHC 1973 (QB), [76]
3 Phoenix Group Foundation v Cochrane [2018] EWHC 2179 (Comm) and Energy Venture Partners Ltd v Malabu [2015] 1 WLR 2309
