Jenington International INC & Ors v Kanat Shaikhanovish Assaubayev & 6 Ors (2010)
An order for limited cross-examination as to assets disclosed following the making of a worldwide freezing order was warranted where there were significant and serious issues that justified further explanation, in circumstances where the defendants had not provided consistently accurate information, and one of whom had left the jurisdiction.
The applicant companies (J) applied for permission to cross-examine the first and fourth respondents (X) on disclosures made as to their assets following a worldwide freezing order. The first applicant company had acquired majority shareholdings in the second applicant (KG), which in turn owned the third applicant company (KA). Prior to their acquisition, KG and KA had been controlled by the respondents. After the first applicant took control it discovered alleged defalcations, and brought proceedings claiming the diversion of funds through sham contracts, breaches of fiduciary duty in respect of contracts with companies in whom the respondents had an interest, and damages for allegedly fraudulent misrepresentations regarding KG's production and sales figures, and its working capital expenditure. In order to frustrate potential dissipation of assets either owned or allegedly owned by the respondents, a worldwide freezing order was made, together with orders to disclose the whereabouts and details of assets. X had also surrendered their passports to J's solicitors. X submitted that they had cooperated throughout the already extensive disclosure process, with limited exceptions, and that any cross-examination would be disproportionate and oppressive.
(1) The court possessed a broad and unfettered discretionary power to make an order for cross-examination pursuant to the Senior Courts Act 1981 s.37, if it was "just and convenient to do so". Cross-examination in aid of asset disclosure was exceptional and would be ordered where it furthered the purpose of the order, namely to prevent the dissipation of assets which could frustrate ultimate orders. Cross-examination had to be proportionate and just; it could not be undertaken for an ulterior motive nor be oppressive. Accordingly, there had to be serious or significant deficiencies in the disclosure given. It could also be appropriate despite assets already having been disclosed in excess of the value of the claim, House of Spring Gardens Ltd v Waite (No1) (1985) FSR 173 CA (Civ Div), CBS United Kingdom Ltd v Perry (1985) FSR 421 Ch D, Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (The Rialto) (Mareva Proceedings: Cross Examination) Times, October 22, 1996 CA (Civ Div) and Motorola Credit Corp v Uzan (No6) (2003) EWCA Civ 752, (2004) 1 WLR 113 applied (see para.22 of judgment). (2) There was a fine line between a genuine scepticism about the veracity of asset disclosure and a refusal to accept the truth of any statements made by a mistrusted defendant. J's disbelief at every disclosure did not cross the line of reasonableness in the instant case given the allegations of fraud, and the difficulty of knowing what was true in the context of the respondent's offshore empire. Some limited cross-examination, focusing on identifying the respondent's assets against which the freezing order could bite, was just and convenient in the circumstances of the history of the matter. Some of J's questions raised significant and serious issues that justified further explanation, and the third respondent had left the jurisdiction in circumstances that raised serious suspicions that it was an attempt to avoid the consequences of the freezing order and asset disclosure. There was a serious risk that once their passports were returned X might not return to England either to give evidence or to answer questions about their assets. It was possible that X might simply confirm the positions adopted in their written evidence, but many of those positions were implausible; it was incumbent on them to explain the discrepancies in their asset disclosure, and such explanations could only now be conveniently undertaken orally (paras 58, 65-68).