Candy v Holyoake (2017)
When imposing a notification injunction on the defendants to an unlawful means conspiracy claim, a judge had applied an incorrect test in relation to the level of risk of dissipation of assets required to be shown. The injunction was set aside as there was not a real risk, supported by solid evidence, that a future judgment would not be met because of unjustifiable dissipation.
The defendants to an unlawful means conspiracy claim appealed against the imposition of a notification injunction restraining them from disposing or dealing with their assets.
They also appealed against the Chancellor's decision that an insurance policy was satisfactory fortification of the claimants' cross-undertaking in damages in relation to the injunction. The first claimant owned the second claimant company. The claimants had borrowed money from the defendants to purchase a property. The first claimant alleged that the defendants had subsequently conspired to intimidate him into entering into a series of disadvantageous agreements. The defendants' case was that the first claimant had lied in obtaining the loan and had repeatedly defaulted on it. The claimants sought the notification injunction. The judge found a risk of dissipation of assets and imposed an interim injunction, before imposing a significantly modified injunction three weeks later. The judge refused the defendants' application to adduce new evidence at the later hearing as contrary to principles of efficient case management. In respect of fortification, the Chancellor concluded that there was no objectively reasonable apprehension of risk of avoidance by the insurer.
(1) The question when determining whether to grant a freezing injunction was whether it was just and convenient to do so. There had to be a real risk, judged objectively, that a future judgment would not be met because of unjustifiable dissipation of assets, Metropolitan Housing Trust Ltd v Taylor  EWHC 2897 (Ch), Mediterranean Feeders LP v Schiffahrts unreported and Ninemia Maritime Corp v Trave Schiffahrts GmbH & Co KG (The Niedersachsen)  1 W.L.R. 1412 considered. Not every risk of a judgment being unsatisfied justified relief. Solid evidence would be required, though what that entailed in any given case would necessarily vary. The position was no different in respect of notification injunctions of the instant type. A notification injunction in such wide terms was in effect a modified version of a conventional freezing injunction. It was necessary to maintain the close regulation of the availability of injunctions which had the nuclear effect of prohibiting the affected party from dealing with his assets, Fourie v Le Roux  UKHL 1 followed. The claimants' case suggested that even if the threshold for a conventional freezing injunction could not be satisfied, there should be an appropriate modified form of order. Less intrusive variants of freezing injunctions would become the ubiquitous alternative to applications for freezing injunctions, with a significant increase in such applications. That would undermine the close regulation of such potent injunctions. The solution was to have a binary threshold, not a sliding scale, and for a risk of dissipation which did not satisfy that test to be inadequate to obtain a freezing injunction. There was a pragmatic concern that the test, if not a binary threshold, would need careful exposition to be workable. Otherwise, it would be impossible to anticipate or determine what level of variation from the conventional threshold would be appropriate for any given modification of a freezing injunction. No clear exposition of the test had been given by the judge. He had not applied the correct test in relation to the level of risk dissipation required to be shown. He accepted that a lesser degree of risk would suffice to obtain a notification injunction as opposed to a conventional freezing injunction (see paras 34-43 of judgment).
(2) The conclusion that all variants of freezing injunctions had to satisfy the same threshold in relation to risk of dissipation should not be taken to suggest that parties need only contemplate the most onerous form of freezing injunction, under the misapprehension that the intrusiveness of relief was immaterial. On the contrary, intrusiveness of relief would be a highly relevant factor when considering the overall justice and convenience of granting the proposed injunction. Even, therefore, if there was solid evidence of a real risk of unjustifiable dissipation, an applicant should consider what form of relief a court was likely to accept as just and convenient in all the circumstances. A court should not assume that a notification injunction was necessarily less onerous than a conventional freezing injunction (paras 44-47).
(3) When the interim injunction was imposed, there was not a real risk that a future judgment would not be met because of unjustifiable dissipation in relation to any of the defendants (paras 49-65). The defendants' further evidence in relation to risk of dissipation should have been admitted (paras 66-70). The judge had also erred in not admitting further evidence in relation to justice and convenience, LTE Scientific Ltd v Thomas  EWCA Civ 1622applied (paras 71-74). If the judge had properly taken the evidence into account and had applied the correct test to the risk of dissipation, the only proper conclusion was that there was no real risk and that the balance of convenience was strongly against the grant of the notification injunction (paras 75-77).
(4) The Chancellor had correctly treated the test in respect of fortification as an objective one on the wording of the order. However, there was a real prospect of the insurer properly arguing that as a matter of construction of the policy terms it would be under no liability in the case of fraud by the insured. That gave rise to an objectively reasonable apprehension of risk such as to render the policy an unsatisfactory form of fortification, HIH Casualty & General Insurance Ltd v Chase Manhattan Bank  UKHL 6 followed (paras 88-109).
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28 Feb 2017
Court of Appeal (Civil Division)
Gloster LJ, Jackson LJ
 EWCA Civ 92; LTL 28/2/2017