Lakatamia has pursued the notorious fraudster Nobu Su, (Su), his associates Ms Tseng and his daughter Ms Morimoto for debts due under judgments and breaching a worldwide freezing order. Mr Su had been committed to prison for 21 months by Sir Michael Burton GBE for his many breaches of the order.

At a further hearing Bryan J decided that a group of individuals and companies associated with (but not including) Su had conspired to breach the freezing order by failing to disclose his interest in two Monegasque properties owned by Cresta Overseas Ltd (Cresta). The properties were sold and the proceeds sent to UP Shipping Corporation (UP Shipping).

None of the defendants in this trial, Su, Chang Tai-Chou, (Chang), and Arnauld Zabaldano (Zabaldano), were defendants in the trial before Bryan J. The claim was largely undefended owing to the failure of Su to comply with orders for disclosure and Chang and Zabaldano’s refusal to acknowledge service.

The Claimant claimed that all three defendants were involved in an unlawful means conspiracy to dissipate the proceeds of the property sales by sending them from Cresta to UP Shipping, and that Chang and Zabaldano were liable under the Marex tort, of inducing a breach of a judgment by doing so.

An unlawful means conspiracy is an arrangement between two or more people with the intended or inevitable consequence of injuring another by taking concerted action using unlawful means. The Marex tort involves proving the entry of a judgement in the claimant’s favour, a breach of the rights under the judgment, the procurement of the breach by the defendant who had knowledge of the judgment’s existence and a realisaton by the defendant that he was procuring a breach.

Zabaldano was instructed by Chang (on the order of Su) to transfer the funds, which were subject to the freezing order, from Cresta to UP Shipping. The Judge concluded that Chang, acting as a lowly functionary, could not be shown to have had the requisite knowledge of either the freezing order or other judgments against Su, and therefore was not liable under either the unlawful means conspiracy or the Marex tort.

Zabaldano however knew of the freezing orders and judgments although none of them were successfully registered in Monaco until a year after the transfer took place. The Judge felt himself bound by the decision in Racing Partnership Ltd v Done Bros  to find Zabaldano liable for unlawful means conspiracy despite his honest belief that he was under a duty as Su’s lawyer to transfer the funds as the judgment remained unregistered in Monaco.

The judge then went on to examine the so-called Babanaft Clause on the face of the freezing injunction, a statement to persons outside England and Wales which is in standard form and begins; “the terms of this Order do not affect or concern anyone outside the jurisdiction of this Court.”

The Claimant argued that this clause should be interpreted to mean that it excused anyone outside the jurisdiction from criminal penalties such as imprisonment only, and that Supreme Court precedent in Ablyazov (No.14)  [2017] EWCA Civ 40 (Ablyazov) definitively stated at paragraph 56 that civil liability was not excluded by the Babanaft clause.

However, the Judge held that the end of the relevant paragraph, which reads “I consider that it is strongly arguable that justice is in favour of the imposition of civil liability on the co-conspirator”, did not decide the point, and that the Supreme Court was discussing whether the issues in Ablyazov (No. 14)  qualified as unlawful means conspiracy. He then analysed the relevant case law in great detail.

The Judge concluded that Zabaldano was entitled to rely on the Babanaft clause to avoid liability for both unlawful means conspiracy and Marex tort. He cited the failure to register the judgment in Monaco prior to the transfer of funds as a justification defence, that Zabaldano had an equal or higher duty to his client to follow his clear instructions in the absence of any recognised prohibition on doing so. When worldwide freezing orders were created it was clear that the Courts had been consistent in avoiding the temptation to usurp the jurisdiction of a foreign court.

The judge’s decision to allow a justification defence to the Marex tort seems at odds with Bryan J’s conclusion in a previous case in this litigation that held at first instance that there can be no defence of justification to the tort of breaching a judgment right.

Harneys does not advise on matters of English law; however, the two competing judgments at first instance are likely to be closely studied in the courts of the Overseas Territories. The question of whether the Babanaft clause confers a defence in tort outside the jurisdiction of the courts of England and Wales will be closely studied and practitioners will no doubt note the enhanced need to quickly register judgments in any jurisdiction in which assets may exist against the risk of worldwide freezing orders being avoided.