Forcing Asset Disclosure: When Even Committal Proceedings are Not Enough

Emily Gillett and Lucas Arnold

In Lakatamia Shipping Company Ltd v Su [2020] EWHC 865 (Comm), the English Commercial Court has recently supplemented the arsenal of the claimant against a defendant who refuses to produce asset disclosure. It did so by granting an order that required the judgment debtor, Mr Su, to direct his social media and email providers to grant access to those accounts to an independent lawyer, appointed by the Court to review and give discovery of non-privileged documents to the judgment creditor, Lakatamia. The availability of such an order offers claimants another route to obtaining disclosure of a defendant’s assets when other routes have failed.

As fraud litigators well know, a defrauded claimant has a number of civil procedure tools available to obtain relief against a recalcitrant defendant. Freezing and search orders are two of the most powerful and effective applications available. Such orders can be obtained urgently and without notice; they can be wide-reaching and can operate cross-border. Failure to comply with such orders can result in further applications being made, including for the defendant to be cross-examined, to surrender his or her passport and, in the event of ongoing non-compliance, committal for contempt of court.

However, even committal for contempt only achieves so much. In extreme cases or cases where the recalcitrant defendant is already physically outside the court’s jurisdiction, imprisonment for contempt may not result in the production of documents and information. Such a scenario faced Lakatamia in its long-running litigation against Mr Su.

Background to the application

In 2011, whilst litigating the substantive claim, Lakatamia obtained a worldwide freezing order against Mr Su. Then, in 2015, Lakatamia obtained a judgment for over US$50 million against Mr Su and has been seeking to enforce that judgment.  Lakatamia’s concerted enforcement efforts have been thwarted by Mr Su.  He has failed to provide information as to his assets; he dissipated his assets; and he fled the jurisdiction in breach of a non-travel order.  Various orders including for cross-examination, for the surrender of his passport and for the extension of the freezing orders to associates of Mr Su have failed to bring about his cooperation. In 2019, he was jailed for 21 months for contempt. Yet further contempt proceedings for ongoing breaches of court orders are pending.

Gaining access to Mr Su’s social media and email accounts

Against this history, Lakatamia sought an order requiring Mr Su to identify his social media and email accounts and invited the Court to appoint an independent lawyer (Independent Lawyer) to review the materials accessible in those accounts and to produce to Lakatamia only those documents which were not subject to a claim for either legal professional privilege or privilege against self-incrimination.

Foxton J found that the Court had jurisdiction to make such an order:

  • Under section 37(1) of the Senior Courts Act 1981, on the basis that such an order was just and convenient as a necessary adjunct to the injunctions and orders for the giving of information and production of documents already made against Mr Su; and
  • Under the court’s inherent jurisdiction to ensure compliance with its orders that had already been made against Mr Su.

The judge noted the similarity between the order sought in this instance and the jurisdiction to grant an Anton Piller/search order for the preservation of evidence.

Despite the application being made post-judgment, Foxton J was invited by Lakatamia to approach the application by applying the more exacting test for obtaining a pre-judgment search order.

The four factors which make up that test are:

  • That there is an extremely strong prima facie case;
  • The damage or potential damage to the claimant must be serious (this includes the ongoing costs of seeking to enforce the order);
  • There must be evidence that the defendant has in its possession incriminating documents and a real possibility that they may destroy such documents; and
  • The harm caused by the order must not be excessive or disproportionate to the legitimate object of the order.

In Lakatamia’s case, these factors were readily satisfied.  It already had a large enforceable judgment against Mr Su and there was ample evidence that he had substantial assets to go towards satisfying that judgment. However, Mr Su had failed to provide disclosure as to the whereabouts of his assets and had engaged in a persistent campaign to flout court orders.

The mandate order

However, Mr Su attempted to erect a further hurdle in Lakatamia’s path.  He said that he could not remember the passwords for his social media and email accounts. In response, Lakatamia sought an order that required Mr Su to sign mandates to be provided to the email and social media providers of Mr Su’s last known accounts requiring them: (a) to provide details of the accounts to Lakatamia and the Independent Lawyer; and (b) to provide the Independent Lawyer with access to the accounts.

Applying reasoning similar to when ordering disclosure of the social media and email accounts themselves, Foxton J held he had jurisdiction pursuant to section 37(1) of the Senior Courts Act 1981 to order that the mandates be signed by Mr Su.  Foxton J drew an analogy with the line of authorities ordering a respondent to sign mandates directing a bank to disclose information to a claimant, stemming from the decision in Bayer AG v Winter [1986] FSR 357.

Foxton J also considered whether the Independent Lawyer should apply a relevance review before making disclosure of the material in the accounts to Lakatamia. Lakatamia argued it would not be practical for someone not intimately involved in the case to conduct such a review. This was because even seemingly insignificant information, for example the destinations Mr Su had visited, could lead to a train of enquiry, including searching property registers in that particular location, or conducting investigations of people with whom Mr Su had communicated. Foxton J, again noting that Mr Su had brought the application upon himself by his continued failure to comply with court orders, applied the following limited safeguards to the Independent Lawyer’s review:

  • The Independent Lawyer should not hand over non-privileged documents to Lakatamia which the Independent Lawyer concluded were obviously irrelevant to the identification of assets against which the judgment might be enforced (with relevance to be judged on the wider ‘train of enquiry’ test); and
  • Lakatamia may only use documents obtained from the Independent Lawyer for the purpose of enforcing the judgments of the Court (unless other uses were permitted by the Court).

It is important to note that the orders made were not directed against the third party social media and email providers; rather, they were directed to Mr Su, requiring him to request access to his own accounts.  However, Foxton J did also observe that the court had jurisdiction to direct that a document is to be signed by a person nominated by the High Court (see the Messiniaki Tolmi [1983] 2 AC 787).

Given the application was served on Mr Su (who appeared in person) shortly before the application was heard by Foxton J, it was treated as being made without notice and subject to a return date at which Mr Su could apply to set aside the order.  So as not to undermine the fairness intended by this, the Court ordered that no documents obtained by the Independent Lawyer from Mr Su’s social media or email accounts would be provided to Lakatamia prior to the return date hearing. The return date hearing was due to take place on 22 April 2020 but was adjourned for 28 days so that Mr Su’s new legal team could get up to speed. However, liberty was granted to Lakatamia to restore the hearing sooner if the Independent Lawyer received non-privileged material from the social media or email accounts or if Mr Su’s new legal team ceased to be instructed.  We are not aware of any such application being made.

The Conditions Application

Mr Su’s prison sentence for contempt is coming to an end. Whilst the terms of his release are already subject to various notification, residence and non-travel conditions, Lakatamia invited the Court to impose additional conditions, including that Mr Su be subject to electronic monitoring following his release.

In considering whether the Court had jurisdiction to make such an order, Foxton J considered the application of curfew and electronic monitoring in other jurisdictions, including family law matters, criminal cases and immigration proceedings. However, he was not persuaded that the Court had jurisdiction under section 37(1) of the Senior Courts Act 1981 to impose a curfew order with electronic monitoring, noting the “significantly penal character” of such a requirement. However, finding on the evidence that Mr Su represented a flight risk, Foxton J did order that, upon release: (i) Mr Su must provide the address at which he will reside to both Lakatamia’s instructing solicitors and the Court Tipstaff; and (ii) a Ports Alert be issued in relation to Mr Su (predominantly used as an urgent remedy in child abduction cases, a Ports Alert is a broadcast message sent to every international port in the UK directing police officers to be vigilant in detecting and preventing the subject’s potential attempts to leave the jurisdiction).

Comment

This decision continues the line of cases in which the High Court has been prepared to grant creative interim orders in fraud cases to tackle defendants who are habitually obstructive. This case offers comfort to a claimant who is concerned that a fraudulent defendant will contumaciously refuse to abide by court orders before or after judgment. The prospect of obtaining access to social media and email accounts should be considered as part of a defrauded claimant’s strategy when faced with a disobedient defendant. Claimants and their lawyers should also consider other third parties that are likely to hold relevant information or evidence, such as cryptocurrency exchanges, cloud computing storage providers, document sharing platforms or virtual meeting/communication platforms.

Even if a defendant refuses to execute the mandate which he has been ordered to provide, claimants can take solace in the fact that the court has the power to execute it in his or her name pursuant to section 39 of the Senior Courts Act 1981, as ordered by Zacaroli J in Yuzu Hair & Beauty Ltd v Selvathiraviam [2019] EWHC 772 (Ch).

Lakatamia’s applications before Foxton J were heard by Skype, whilst Mr Su was in jail, and during the COVID-19 prevention measures presently in force in the United Kingdom. Even in the current difficult climate, it is clear that urgent and pragmatic interim relief is available from the English High Court to combat civil fraud.

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