DEFINITION OF “ASSETS”
Authored by: Andrew Ayres KC (Barrister) - Twenty Essex & Andrew Barns-Graham (Barrister) - 3 Hare Court
This year marks the golden anniversary of Lord Denning’s seminal decision on freezing injunctions in Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213. (The case was reported in 1980, but the hearing took place on 23 June 1975.) To mark the occasion, Andrew Ayres KC of Twenty Essex and Andrew Barns-Graham of 3 Hare Court have published this series of articles, in which they explore the boundaries of freezing injunctions and provide their tactical and drafting recommendations. This is the sixth article in the series.
Introduction
Freezing injunctions are designed to preserve assets from illegitimate dissipation by the defendant, so that they remain available for execution if the claimant ultimately succeeds at trial.
Freezing injunctions are accordingly circumscribed, first in that they are always directed towards a specific person,1 and, like most court orders, they act only in personam; and secondly
because they only affect those assets which are strictly identified by the terms of the order.
In this article, we address two issues: (a) the definition of “assets” and how it has evolved over time, and (b) the interaction of the evolving definition of “assets” with the development of the court’s Chabra jurisdiction to grant freezing injunctions against third party respondents.
The Evolving Definition of “Assets”
The term “assets” has its ordinary, natural meaning. It includes physical assets, intangible assets, and choses in action (including monies credited to a bank account and rights under loan and receivables contracts).
In many cases during the 1980s and 1990s, the focus of injuncted assets was on ownership by the defendant, whether legal or beneficial. After all, one could not expect to enforce against assets not owned by the defendant. But a focus on legal or beneficial ownership quickly became understood as inadequate for the job, partly because they are Anglocentric, common law concepts in a world of transnational litigation, and partly because they are restricted to the concept of ownership.
This did not deal properly with the way in which some people, including fraudsters, handle the assets of which they are able to make use. Defendants can hold and control assets without necessarily falling within the strict concepts of legal or beneficial ownership, for example as beneficiaries under a discretionary trust or a host of other elaborate “structures”.
So, wording was often added by thoughtful applicants to deal with the concept of control or the ability to give instructions for the transfer of assets –in other words, ownership in all but name, albeit falling short of the strict concept of ownership in English law.
1 The ability to seek to commit third parties for contempt for assisting the respondent to commit breaches of a freezing injunction exists, but the focus of any order is obviously the person to whom it is directed.
An example of wording used in a specific 1990s case is set out in the footnote.2 The model order annexed to Practice Direction 25A includes the following more succinct formulation:
“Paragraph 5 applies to all the Respondent’s assets whether or not they are in his own name and whether they are solely or jointly owned. For the purpose of this order the Respondent’s assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. The Respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.”
The model order annexed to the Commercial Court Guide previously also contained the above formulation, but it was updated in 2009 to include the following additional squarebracketed wording after “solely or jointly owned”: “[and whether the respondent is interested in them legally, beneficially or otherwise]”.
What is meant by the words “or otherwise”? It has been held that they are intended to address the situation where the defendant holds assets on trust for a third party,3 but it is difficult to see what this adds to the word “legally”.
In our view, the words may instead encompass:
(1) interests under discretionary trusts (or similar structures), which are neither existing legal nor beneficial interests but rather are merely potential interests, in the sense that whether or not they will ever materialise is contingent upon a future exercise of a discretion or power in the defendant’s favour;4
(2) situations where the defendant holds an asset but denies (for whatever reason) that they hold any legal or beneficial interest in it – in such a case, the interest should be disclosed and the asset frozen, so that the claimant has an opportunity to dispute the defendant’s position, if appropriate; and
(3) interests in assets which arise under foreign law and do not neatly fall into the common law scheme of legal or beneficial ownership.
The square-bracketed wording is accompanied by the following footnote: “Whether this wording should be included in relation to the Order and/ or the provision of information will be considered on a case by case basis. The wider form of Order should not be sought as a matter of course, and its inclusion must be justified.” The introduction to the annex similarly cautions claimants against including the wording as a matter of “routine”.
In practice, to justify the inclusion of the wording, a claimant will usually need either to point to specific evidence that the defendant uses asset-holding structures which may involve the alienation of legal and beneficial interests or, failing this, to demonstrate that the defendant is a sophisticated operator who can reasonably be expected to have established complex structures for holding their assets (or shielding them from enforcement).
There is therefore a significant difference between the Commercial Court Guide model order and the
Practice Direction 25A model order, in that the former includes an optional additional wording which is intended to encompass a broader range of assetholding structures than the latter.
However, as noted in previous articles in this series, on 6 April 2025 the Practice Direction 25A model order will be replaced with a new model order, as part of the changes being implemented pursuant to the Civil Procedure (Amendment) Rules 2025 (SI 2025/106). The drafters have taken the opportunity to update the definition of “assets” in the new model order, so that it now includes the “legally, beneficially or otherwise” wording and the accompanying footnote, and thus is largely identical to the Commercial Court Guide wording.5
This is a welcome development. The “legally, beneficially or otherwise” wording can, in some cases, be of critical importance for preserving assets held within complex structures. The modification in the new model order will thus serve as a useful reminder to claimants – not only in Commercial Court cases but in all cases in which freezing injunctions are sought – to consider whether to seek the inclusion of the wording.
The Chabra jurisdiction
The case of TSB Private Bank International SA v Chabra6 did considerable work to alleviate the outward pressure on the definition of “assets” and to bridge the gap between strict ownership and assets held loosely or indistinctly for the defendant.
2 The Fourth Defendant must not, whether by herself or her servants or agents, in relation to any trust, foundation, Stiftung or any other like juridical device (hereafter in this order, collectively “Trust”) of which she is a protector, beneficiary or a member of a class of discretionary beneficiaries or in respect of which the trustees or officers are accustomed to act in accordance with her wishes, or to which the Fourth Defendant has transferred assets or from which she might otherwise reasonably expect to benefit:
(1)Exercise as officer or such protector, beneficiary or member any influence in respect of the disposition of property of any such Trust or transfer, diminish or deal with the property of any such Trust or part thereof wherever situated; or
(2) Induce any person, by any means, to transfer, charge, diminish or deal with the property of any such Trust or any part thereof wherever situated; or
(3) Alter the persons or classes of persons who are beneficiaries or who may benefit from any such Trust or induce others to do so
3 JSC BTA v Solodchenko [2010] EWCA Civ 1436.
4 See JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 136, at [15] and [24].
5 The only material difference between the definitions of “assets” in the Commercial Court Guide model order and the new model order is that, in the new model order, the words “The Respondent is to be regarded as having such power if a third party holds or controls the asset in accordance with the Respondent’s direct or indirect instructions” appear in square brackets, whereas in the Commercial Court Guide model order they do not. It would thus appear that, outside the Commercial Court, claimants who wish this wording to be included will need to draw this to the Court’s specific attention and justify the inclusion in their evidence and submissions.
6 [1992] 1 WLR 231.
As is well known, the Chabra jurisdiction allows third parties, against whom no cause of action is alleged, to be joined as defendants for the purpose of being subject to a freezing injunction. The key concept relates to there being a proper basis at the interim stage for asserting that assets, even if held by a third party, might ultimately be found at trial to be the defendant’s assets and therefore available for enforcement purposes.
The court does not want to invite multiple applications from third parties complaining that their assets have wrongly become entangled within a freezing injunction.7 However, where there is good reason to suppose that relevant assets may become available to satisfy any judgment, the balance may be appropriately struck by including those assets within the order, even though they are frozen at an early and interim stage, prior to trial and the resolution of any issue about ownership and enforceability.
the modern definition of “assets” encompasses the concept of practical control does not, of itself, justify a conflation of a company’s assets with the defendant’s assets. Something more is needed to warrant a piercing of the corporate veil, such as a finding that the company is nothing more than the defendant’s alter ego or “wallet”, or that the defendant has abused the company’s separate legal personality with a view to evading or frustrating enforcement, or that the nature of the defendant’s power or control over the company’s assets is such as to entitle them to bring the asset into their personal ownership at a later date.8
On the other hand, a defendant who is the controlling shareholder of a company may breach a freezing injunction if they procure the company to dissipate its assets for no or inadequate consideration, if this has the consequence of diminishing the value of the defendant’s shareholding (which is indisputably the defendant’s own asset).9
If there are reasons to believe that the defendant may have used discretionary trusts or other similar structures, then the claimant may wish to ask the court to include the optional wording in the model orders (“whether the Respondent is interested in them legally, beneficially or otherwise”) or other bespoke wording.10
The interaction between the definition of “assets” and the Chabra jurisdiction
The development of the Chabra jurisdiction has taken some of the weight from worrying about the definition of “assets”.
For example, there has been considerable debate over whether assets owned by a body corporate, particularly a non-trading one which is wholly owned and controlled by the defendant, are the defendant’s “assets” within the meaning of that term in standard freezing injunctions
In this regard, the prevailing authority supports the view that the fact that
7 S.C.F. Finance Co Ltd v Masri [1985] 1 WLR 876.
It is therefore possible, in certain circumstances, to demonstrate that a company’s assets are also the “assets” of a defendant who owns and controls that company. However, the position may be complex and uncertain. If so, a claimant’s best option may be to avail themselves of the Chabra jurisdiction and join the company itself as a respondent to the freezing injunction, as a means of preserving the company’s assets pending the resolution of the issues at trial.
On the other hand, claimants do not always have the evidence or inclination to bring third parties into the ambit of an existing freezing injunction. They may not even know of the existence of the third party and the relevant asset, or there may be problems serving the third party out of the jurisdiction, or the joining of the third party may not be justifiable on a cost-benefit basis.
The best practical course in such a case is to seek maximum clarity about what is and is not caught by the definition of “assets”. Specific assets which are known about at the time of the ex parte application should be identified in the order or in a schedule thereto.
On the basis of the current authorities, even without Chabra, there is plenty of scope to ask for a “wide net”11 to be cast in relation to the assets with which a defendant may be associated. The question of actually rendering those assets available for enforcement is another matter, and may involve not just issues of sham, nomineeship, and section 423, but also matters of foreign law and often foreign courts. However, the court is not blind to the inventive methods deployed by defendants to hold (or ostensibly alienate) their assets. Claimants should therefore be adaptable and consider tailoring the definition of “assets” to meet the specific needs of the case, rather than always relying on the definition in the model orders.
Copyright © 2025 Andrew Ayres KC and Andrew Barns-Graham
This article does not contain legal advice. Anyone seeking advice on English freezing injunctions may contact the authors at aayres@twentyessex.com and andrewbarnsgraham@3harecourt.com.
8 See JSC BTA Bank v Solodchenko [2010] EWCA Civ 1436; Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17; Group Seven Ltd v Allied Ivestment Corporation Ltd [2013] EWHC 1509 (Ch); Prest v Petrodel Resources Ltd [2013] UKSC 34; Lakatamia Chipping Co Ltd v Su [2014] EWCA Civ 636; JSC VTB Bank v Skurikhin [2015] EWHC 2131 (Comm) (albeit this case concerned the appointment of a receiver, rather than a freezing injunction); for a helpful summary, see [22]-[26] of Foxton J’s decision in Civiello v Brodahl [2024] EWHC 707 (Comm).
9 Lakatamia Shipping Company v Su (cit. sup.).
10 If so, this must be raised with the Court as a matter of full and frank disclosure.
11 JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2014] EWHC 3547 (Ch) at [4].
ABOUT THE AUTHORS
Andrew Ayres KC Barrister
Twenty Essex
Andrew Ayres KC has been obtaining and defending freezing and search orders since 1997.
He advises on all aspects of civil fraud litigation, including early pre-emptive remedies through to enforcement, in frauds of all kinds, including trade finance, MTIC, employee, advance fee, Ponzi and crypto.
He has an established commercial disputes practice, with a core of advocacy before courts and tribunals across the globe.
He has been recommended in the legal directories in the following areas: commercial litigation, banking & finance, civil fraud, company & partnership and commercial chancery. He was also nominated for “Chancery Silk of the Year” at the 2024 Legal 500 UK Bar Awards.
Andrew has strong multi-jurisdictional connections, particularly in the Asia Pacific region, the Caribbean and within the offshore community closer to the UK. He is a leading Cayman and Eastern Caribbean advocate and adviser, focusing on all aspects of fraud, commercial, company, insolvency and trusts litigation.
Andrew has a breadth of expertise across a range of sectors and services, including aviation, banking and finance, construction and engineering, energy and natural resources, international trade, joint ventures and partnership, professional liability and risk, structured products and derivatives and TMT.
Andrew Ayres KC - Twenty Essex
Andrew Barns-Graham Barrister
3 Hare Court
Andrew Barns-Graham is a civil fraud specialist who has acted on some of the most high-profile civil fraud cases of the last decade.
The cases on his CV include National Trust Bank v Yurov, Privatbank v Kolomoisky, and Skatteforvaltningen v Sanjay Shah, all of which are have appeared in The Lawyer’s annual lists of the ‘Top 20 cases’ and have given rise to leading authorities on freezing injunctions and other civil fraud matters.
Andrew’s areas of expertise include the various causes of action associated with civil fraud, freezing injunctions (both personal and proprietary), search orders, disclosure orders (e.g. the Norwich Pharmacal and Bankers Trust jurisdictions), conflicts of laws, jurisdiction disputes, asset tracing, and enforcement remedies.
A large proportion of Andrew’s practice is international and he has worked with clients and lawyers from numerous jurisdictions around the world. He is well-versed in the challenges which arise in complex multi-jurisdictional cases involving foreign law issues or related/parallel overseas proceedings.
Andrew Barns-Graham - 3 Hare Court