Defendants liable in tort further to dissipation of assets in context of a worldwide freezing order and judgment debt

Facts of the case

• Lakatamia Shipping Co Ltd (the “Claimant”) was granted a worldwide freezing order (“WFO”) and subsequent judgement (the “Judgement Debt”) against shipping magnate Nobu Su (“Mr Su”).
• Following the sale by Mr Su of two Monegasque villas and a private jet (the “Assets”), and dissipation of the sale proceeds, the Claimant brought claims against Mr Su, his mother Nobu Morimoto (“Madam Su”) and various affiliated corporate entities (collectively the “Defendants”) for:
  
  • unlawful means conspiracy, on the basis that the sale of the Assets was in breach of the terms of the WFO; and
  • the intentional violation of the Claimant’s rights under the Judgement Debt.

The Decision

• The Court gave judgment for the Claimant, finding that the Defendants:
  
  • knew that Mr Su was subject to the WFO and had conspired together to injure the Claimant by breaching its terms; and
  • also knew of the Judgment Debt and by the dissipation of the Assets sought to make it more difficult for the Claimant to enforce the Judgment Debt.
• As such, the Claimant was awarded the net-sale proceeds of the Assets, in addition to interest and costs in the case. However, the Claimant was denied punitive damages on the grounds that:

1. the Defendants’ conduct was not sufficiently egregious to justify a punitive response, including because it was not different in type and extent to many fraud cases in relation to which compensatory damages are awarded, and which also involve underlying breaches of court orders such as freezing orders; and

2. compensatory damages were considered an adequate punishment and sufficient future deterrent to the Defendants.

• The Claimant was also denied damages in respect of its costs of enforcement of the Judgement Debt because (i) the court found that these costs would have been incurred in any event and (ii) the amount claimed was insufficiently particularised, such as to prevent any reliable assessment of damages.

Analysis and Practical Advice

• The standard form freezing order contains at clause 19 the so-called “Babanaft” provisio, which confirms that it is of no effect or concern to anyone outside of the jurisdiction (other than the Respondent or its officer or agents), save in certain specific circumstances.
• While a third party may not as a result be subject to personal penal sanctions, this case is a reminder that where such third party participates with others in deliberate action to undermine a freezing order so as to defeat the rights of a claimant, an action may nevertheless lie in the tort of unlawful means conspiracy, on the basis that contempt of court amounts to unlawful means for these purposes.
• Furthermore, where judgement has been given vindicating the claimant’s contractual right to payment, such actions may also give rise to an action in the tort of inducing or procuring a violation of rights under a judgement (the so-called “Marex Tort”, further to the decision in Marex Financial Limited v Sevilleja [2017] EWHC 918 (Comm)). This is because, given inducing a breach of contractual rights is actionable, it would be counterintuitive if it were not also tortious to procure a violation of rights in a judgment debt founded on a contract.
• Together, these two torts provide potential alternative bases on which to seek damages from claimants which have intervened to stymie the orders and judgments of the court.