Background
Alliance Petrochemical Investment (Singapore) Pte Ltd (API), a shareholder in an Iranian petrochemical producer, sued Francesco Mazzagatti and Francesco Dixit. API alleges that the defendants, while controlling API and its UAE subsidiary, diverted customer receipts and company funds, leaving API liable to its supplier for more than €143 million. The defendants dispute the allegations and say that others authorised the payments.
API also alleges that misappropriated money helped fund Viaro Energy Ltd’s 2020 acquisition of RockRose Energy plc, and that purported Abu Dhabi loan facilities used in connection with that acquisition were forged. The defendants applied to strike out those allegations. API separately sought disclosure from H&P Advisory Ltd, Viaro’s financial adviser on the acquisition, and sought a worldwide freezing order and proprietary injunction against the defendants.
The Court’s Holding
The Commercial Court dismissed the strike-out application. The RockRose and alleged loan-facility allegations were sufficiently connected to API’s pleaded case that misappropriated funds financed the acquisition. The fact that the facilities were not drawn did not make them irrelevant: API had a good arguable case that they formed an integral part of showing that the acquisition could be funded. The court also held that the allegations concerning Italian proceedings were arguably relevant to API’s fraud case.
The court granted API’s non-party disclosure application against H&P for the first eight document categories, finding the material potentially relevant and necessary to fairly dispose of the claim. It refused the ninth category as too broad. However, it dismissed API’s applications for a worldwide freezing order and proprietary injunction. API’s delay was fatal because it had not identified new evidence establishing a real risk of unjustified dissipation; it had also failed to show a serious issue that the assets targeted by the proprietary injunction were traceable proceeds of its funds.
Key Takeaways
- Allegations about unused financing arrangements may remain relevant where they form part of a pleaded case on the true funding of a transaction and alleged dishonesty.
- Third-party disclosure can be ordered before ordinary disclosure where the documents are likely to assist the case and are necessary for its fair disposal.
- A freezing order requires solid evidence of a current risk of unjustified dissipation; a long delay and unchanged allegations can be decisive against relief.
Why It Matters
The decision illustrates the distinction between allowing a fraud case to proceed on properly pleaded allegations and granting interim asset-preservation relief. The court accepted that API’s allegations warranted trial and targeted disclosure, but stressed that a freezing injunction is not security for a claim and requires evidence of a present enforcement risk.
It also confirms that disclosure from a transaction adviser may be appropriate where authenticity of transaction documents is genuinely in issue, particularly where the applicant has legitimate concerns about documents produced by parties to the litigation.