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Court endorses claims against 'innocent' parties

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United Kingdom

A recent judgment in Darnitsa v Metabay Import/Export Ltd [2021] EWHC 1441 (Comm) demonstrates the Court's appetite to support claimants in proceedings abroad from unscrupulous defendants who seek to shield assets using an international web of entities.

It has been a long established principle following TSB Bank International v Chabra that the English High Court can grant an injunction in respect of assets in possession of a third party which were held for and on behalf of the defendant to the substantive claim. 
 
The common scenario for a the Chabra injunction is where the scope of a freezing injunction is extended to include a company in which the defendant is a director and majority shareholder, even though that company is an 'innocent third party' in that the claimant had no cause of action against that entity.
 
The English Court has a power pursuant to s.25 of the Civil Jurisdiction and Judgments Act 1982 to grant Chabra injunctions in support of foreign substantive proceedings, including against 'innocent' defendants who are not present in England.
 
The most recent example in Darnitsa v Metabay Import/Export Ltd extends this valuable legal tool further.  In the Darnitsa case, a Ukrainian claimant held a 31% shareholding in another Ukrainian company (BCPP) whose controlling shareholders also owned 75% of the shares in Metabay.  The claimant alleged that there had been a substantial fraud on BCPP by the controlling shareholders and sought to freeze Metabay's assets to maximise the prospects of enforcing any judgment against the controlling shareholders.  The Court agreed that there was a risk of dissipation by the defendant and there was a good arguable case against the defendant via the controlling shareholder of BCPP's involvement as officers in Metabay. 
 
This decision should encourage victims of fraud to pursue claims where assets are transferred to seemingly innocent third parties.
 

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