European antifreeze

There were some who thought that the human rights legislation in the European Convention on Human Rights would only have a limited effect, and would perhaps be felt most in relation to the affairs of individuals rather than the affairs of corporate giants. However, that is proving to be far from the truth, as illustrated by the latest decision of the Scottish courts in Fab-tek Engineering vs Carillion Construction.

As we will see, Carillion benefited from the implementation of article one of the European Convention on Human Rights, which says that "no one should be deprived of his property or possessions … except in the public interests and as provided by law".

This case developed the asset-freezing themes previously seen in Karl Construction vs Palisade Properties (see Tony Bingham's article in Building, 8 March 2002). The difference was that Karl concerned an inhibition, a device by which all of the defendant's property is frozen, seriously affecting the defendant's trade. Such an extreme measure was always likely to be questionable in the face of the human rights regime. Fab-tek concerned a less onerous order, common in Scottish litigation, called an arrestment order, which the claimant had placed on Carillion.

The arrestment order merely attaches to monies and is not, therefore, generally as fatal to the defendant's trading prospects as is an inhibition order.

However, the court in Fab-tek ruled that the human rights legislation applied, and that this arrestment order was unlawful. This is because, by section 6 (1) of the Human Rights Act 1998, it is unlawful for a public authority to act in a way that was incompatible with the convention.

In this instance, the court itself was deemed to be a public authority and thus it felt it had a duty to ensure that its remedies and orders were compliant with the convention.

Any party seeking to deprive another ‘of his property or possessions’ will need to proceed with caution

In this case, as was hitherto customary, the arrestment order had been obtained without a hearing. The court was concerned by this. A hearing would have allowed the court to hear arguments to justify why the order was necessary. Each party in Fab-tek argued that it was the responsibility of the other to prove why an arrestment order should or should not be made. Fab-tek sought to argue that it was up to the defendant to assert that the order was unnecessary; Carillion said the onus was on the claimant to prove that the order was justified.

It was interesting to note that the impact of "Europeanisation" and the relationship between Scottish law and that in other European countries influenced the judge in Fab-tek. The court noted that in other European Union jurisdictions, assets would generally only be secured by an order of the court if there was a real risk that the defendant might improperly remove, dissipate or conceal such assets. The willingness of a domestic court to compare its procedures and remedies to those of other European countries and courts was both unusual and interesting.

The judge took the view in Fab-tek's case that, in future, a claimant would need to show that there was a debt and a specific need for the arrestment order. Mirroring English procedures, the court also decided that the claimant, when applying for such an order, would have to give an undertaking or promise to the court to pay damages for any loss that it caused as a result of obtaining the order, if it subsequently proved that the debt was not due or that it was not entitled to the order in question. The giving of such an undertaking with its major consequences tends to cause most parties to stop and think a little before proceeding further.

Historically, Scottish law has been slightly unusual in terms of the facility to obtain arrestments or inhibitions. That said, English law offers similar remedies in certain circumstances such as the Anton Pillar order and the Mareva injunction (now renamed search orders and freezing orders). Fab-tek strongly suggests that any party seeking to deprive another "of his property or possessions" will need to proceed with a good degree of caution to persuade the court that the convention has not been breached and the balance is in favour of the order being made.