Freezing injunctions and contribution claims

A nice point about freezing injunctions in the High Court today, in which Leggatt J provided some joy for honest but hard-pressed litigants. Kazakhstan Kagazy (KK), a British company with big interests in paper & recycling in Kazakhstan, sued a number of its subsidiaries’ employees, including A and Z, for dishonestly siphoning off something over $100 million to themselves and their chums in Central Asia (the serious litigation is booked for next year). KK settled with Z for what one suspects was a tidy sum plus an agreement to co-operate in chasing the other defendants. Proceedings against Z were duly stayed.

A issued a Pt 20 notice claiming contribution from Z in the event that he was held liable to KK. As an adjunct he also sought a freezing injunction against Z. In fact the contribution notice was bad for other reasons, but Z also raised an interesting argument on the freezing injunction. According to The Veracruz [1992] 1 Lloyd’s Rep 353, there can be no freezing injunction until you have a right against the defendant: it won’t do to say, however convincingly, that you almost certainly will have a right next week and that there won’t then be a cat in hell’s chance of making it good if the defendant can hide his assets. Well then, said Z: this must protect me. Any right A may have against me for contribution will arise only when A has been sued by, or settled with, KK; until then there is no right but merely the prospect of one.

Apparently logical: but if correct, this would effectively mean that freezing injunctions would be a dead letter in contribution claims. Leggatt J was having none of it. To get freezing relief, he said, all you needed was to have the ability to bring proceedings which wouldn’t automatically be struck out. Since you can Part 20 a third party as soon as you are sued, and indeed A had done just that, it followed that had the  contribution notice been good, there could have been an asset-freeze. As I say, much relief for hard-pressed litigants.

See Kazakhstan Kagazy Plc v Zhunus & Ors [2016] EWHC 1048 (Comm), available on BAILII.

Andrew Tettenborn