Gerald Metals SA v Timis & Ors

Factual and Procedural Background

The Plaintiff, Gerald Metals SA ("Gerald"), advanced $50 million in financing to a company called TMCSL for the redevelopment of an iron ore mine. The ultimate beneficial owner or controller of TMCSL is the first Defendant, Mr Timis. To secure the loan, Gerald received a guarantee from Safeguard Management Inc ("Safeguard") as trustee of the Timis Trust, capped at $75 million. TMCSL defaulted, and Gerald called on the Guarantee. Safeguard failed to pay, leading Gerald to commence arbitration, which resulted in an award ordering Safeguard to pay $75 million plus interest and costs.

Gerald alleges dishonesty by Mr Timis and one of Safeguard's directors, Mr Martinez, as found by the arbitral tribunal. Despite Safeguard's assertion of sufficient assets, no payment has been made. Safeguard has not challenged the award in this jurisdiction but intends to contest enforcement in the British Virgin Islands (BVI).

Gerald obtained a worldwide freezing order ("FPC Freezing Order") against the fifth Defendant, FPC Management Inc ("FPC"), trustee of the FPC Capital Trust, after discovering that valuable Senegal oil interests, originally held by the Timis Trust, were transferred to FPC in August 2015. Gerald contends this transfer was intended to put assets beyond its reach, constituting an unlawful means conspiracy involving transactions at undervalue under insolvency legislation.

Gerald joined FPC as a defendant after identifying its trustees and directors, and secured a freezing order requiring disclosure of FPC's assets and identity. Disputes arose concerning the extent and nature of FPC’s assets, particularly regarding its interest in shares of Dorchester Overseas Limited ("Dorchester"), which holds shares in Timis Corporation, the direct owner of the Senegal oil interests. The legal ownership of Dorchester shares is held by CP Nominees SA as nominee for FPC, with FPC holding a beneficial interest.

Gerald applied for disclosure of two categories of documents from FPC: (1) the terms of the FPC Capital Trust ("Trust Terms Documents" or "FPC Trust Instrument"), and (2) indemnity documents said to have been given to Safeguard by FPC at the time of the transfer. The application was heard on short notice before the Commercial Court.

Legal Issues Presented

1. Whether FPC is required to disclose the terms of the FPC Capital Trust (the Trust Terms Documents) under paragraph 8(1) of the FPC Freezing Order as part of the "details" of its assets.
2. Whether FPC must disclose the indemnity documents given to Safeguard at the time of the transfer of assets.
3. The proper construction and scope of the disclosure obligations under paragraph 8(1) of the FPC Freezing Order.

Arguments of the Parties

Plaintiff's Arguments

• The Trust Terms Documents constitute "details" of FPC’s assets under paragraph 8(1) of the freezing order and must be disclosed to understand the nature and extent of FPC’s interest in Dorchester shares.
• It is insufficient for FPC to state it holds a beneficial interest without disclosing the terms defining that interest.
• Disclosure is necessary to police the freezing order and prevent circumvention or dissipation of assets.
• Alternatively, disclosure should be ordered under the principle in Gee on Commercial Injunctions to identify and preserve assets.
• The indemnity documents are relevant as they form part of the consideration for the transfer and impact the value and rights associated with FPC’s interest.

Defendant's Arguments

• The FPC Trust Instrument concerns the relationship between FPC and the beneficiaries of the trust, not the relationship between FPC and CP Nominees or the assets held.
• The Deed of Assignment and the fact that FPC holds a 100% beneficial interest in the Dorchester shares is sufficient disclosure under the freezing order.
• The indemnity documents are irrelevant to the relationship between FPC and CP Nominees or to the assets of FPC, and thus not relevant to the freezing order’s disclosure obligations.
• FPC’s directors have confirmed compliance with the freezing order and that CP Nominees is bound to comply with FPC’s directions.
• The application for advanced specific disclosure (indemnity documents) is not made out and should be refused.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining paragraph 8(1) of the FPC Freezing Order, which requires FPC to disclose all assets worldwide exceeding a set value, "giving the value, location and details of all such assets." The court emphasized the importance of the word "details" and applied established principles of strict and clear interpretation of freezing orders due to their penal consequences and risk of oppression.

The court accepted that the disclosure must be purposeful and include the nature and extent of FPC’s assets. While FPC disclosed a 100% beneficial interest in Dorchester shares held legally by CP Nominees SA, the court found that this alone was insufficient because the nature and extent of that beneficial interest depend on the terms of the FPC Capital Trust ("FPC Trust Instrument"). The Deed of Assignment expressly states that FPC holds the shares on the terms of the FPC Capital Trust, making the trust instrument integral to understanding the asset.

Consequently, the court held that disclosure of the FPC Trust Instrument is necessary to comply accurately with paragraph 8(1) of the freezing order and to enable proper policing of the injunction to prevent asset dissipation. The court distinguished this from the indemnity documents, which relate to the consideration for acquisition of the beneficial interest but do not affect the relationship between FPC and CP Nominees or the nature of the assets held. The court found no sufficient basis for ordering disclosure of the indemnity documents, especially given the principles governing advanced specific disclosure had not been fully addressed or established.

Therefore, the court ordered a variation of the freezing order to require disclosure of the FPC Trust Instrument but refused disclosure of the indemnity documents.

Holding and Implications

The court's final decision was to ORDER DISCLOSURE of the FPC Trust Instrument (the settlement dated 6 August 2015 establishing the FPC Capital Trust) by 4:00 pm on Friday, 1 December 2017.

The court REFUSED DISCLOSURE of the indemnity documents sought by the Plaintiff.

The costs of the hearing were summarily assessed at £32,500 to be paid by the Defendant (FPC) to the Plaintiff, with payment to be made within 21 days. The Plaintiff was deemed the successful party overall, albeit not wholly successful, and the costs order reflected this partial success.

This decision clarifies the scope of disclosure obligations under freezing orders, emphasizing the requirement to disclose documents that define the nature and extent of beneficial interests in assets subject to freezing orders. No new precedent was established beyond the application of existing principles of strict interpretation and asset policing under freezing injunctions.