In JSC BTA Bank v Mukhtar Ablyazov [2015] UKSC 64 the Supreme Court considered whether the proceeds of a loan agreement constituted “assets” as defined in the Commercial Court form of freezing order.

JSC BTA Bank appealed against an earlier Court of Appeal decision that the respondent’s contractual rights to draw down under certain loan facilities were not “assets” for the purposes of a freezing injunction. The Supreme Court confirmed that the terms of a freezing injunction will always be strictly construed but that the ability of a person subject to a freezing injunction to direct a lender to pay proceeds of a loan to a third party could breach the terms of a standard form Commercial Court freezing order.

The bank obtained a freezing order against Mukhtar Ablyazov, the former chairman and majority shareholder of the bank, for allegedly misappropriating money for his personal benefit. The freezing order, which was in the standard Commercial Court form of freezing order contained in the Admiralty and Commercial Courts Guide, prevented Mr Ablyazov from disposing of, dealing with or diminishing the value of his assets. The freezing order included an extended definition of “assets” added to the standard form of order in the Civil Procedure Rules in 2002. The extended definition indicated that assets included any assets that the respondent had the power to dispose of or deal with, directly or indirectly, as if it were his own.

Mr Ablyazov had taken out four loans which enabled him to draw down on the loans by directing the lenders to make payments directly to third parties and he had made such directions in respect of the entire sum borrowed.

In allowing the appeal in part, the Supreme Court held that a loan afforded the borrower the ability to deal with or dispose of the lender’s assets as if they were his own and a borrower who instructed a lender to pay the lender’s money to a third party was dealing with the lender’s assets as if they were his own. The purpose of the extended definition of assets in the current standard form used in the Commercial Court was to catch assets over which the respondent had control. Therefore, the proceeds of the loan agreements were assets within the meaning of the extended definition.

A copy of the judgment is available. http://bit.ly/1kVmLnG