Friday, 7 June 2013

UK: England and Wales: company assets not controlled by sole director/shareholder for purposes of freezing order

Judgment was given yesterday in Group Seven Ltd v Allied Investment Corporation Ltd [2013] EWHC 1509 (Ch). At issue was whether an asset of a company, a chose in action, was to be treated as an asset of the company's sole director (also its only shareholder) for the purposes of a freezing order to which the director was subject. The freezing order was drafted so as to apply to all of the director's assets "whether or not they are in his own name ... For the purposes of this order the [director'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 trial judge held that a company with a sole director, who also owned all its shares, did not hold or control its assets in accordance with that director/shareholder's direct or indirect instructions within the terms of the freezing order. The judge stated that this finding was mandated by settled principles of company law, referring to the judgments of Rimer and Patten LJJ in Petrodel Resources Ltd v Prest [2012] EWCA Civ 1395, [2013] 2 WLR 557. His answer was, he stated, one that "may dilute the efficacy of the standard CPR form of freezing order, and surprise and unsettle not a few; but to my mind, there is no escape from it." (para. [65]).

Note: Petrodel was the subject of an appeal to the Supreme Court, heard by a panel of seven justices earlier this year. Judgment will be given next Wednesday.

Update (12 June 2013) - a summary of the case has been provided by the ICLR: see here.

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