Freezing orders: High Court grants concurrent proprietary and non-proprietary orders in fraud on barristers’ chambers (England & Wales)

Key Takeaways

1. It is possible to obtain both an interim proprietary and non-proprietary freezing order simultaneously against the same respondent, in this case the latter being granted to secure the position in case the applicant’s proprietary claims failed. However, applicants should be aware that if the Court thinks that a non-proprietary freezing order alone will achieve the same effect, then it might be unwilling to make a proprietary freezing order given the more invasive nature of such an order: see our briefing here on another recent case.
2. Where respondents to such interim injunctions admit to the alleged wrongdoing, applicants might be able to obtain further disclosure than would otherwise ordinarily be available at that stage, to locate their misappropriated property or its traceable proceeds.
3. Whilst it is possible for the Court to order interparty hearings to take place in private and to make anonymity orders, strong grounds are needed to displace the principle of open justice. Commercial concerns alone, such as the potential impact of publicity on a business, will not be sufficient.

Facts of the Case

A company (“C”) through which a barristers’ chambers conducts its business alleged that its former credit control manager (“D”) misappropriated around £2.75 million from its bank account over five years during which she controlled it (the “Funds”).

C successfully applied ex parte, at a hearing held in private, for a proprietary and non-proprietary freezing order against D, as well as an anonymity order to protect the identities of the parties. After being served with the injunctions, D gave an affidavit in which she admitted the alleged wrongdoing, said that she had spent all of the Funds on her lifestyle, and expressed remorse.

C applied to continue the injunctions against D to judgment or further order, to continue the anonymity order for a further four months, for additional disclosure orders requiring D to explain how the Funds had been used and where they (or their traceable proceeds) now were, and for the hearing of that application again to take place in private.

C’s rationale for the privacy orders was to avoid publicity which could: (i) distract its staff at a time when they were dealing with the alleged fraud; (ii) have financial implications at a time when liquidity was tight; and (iii) risk tipping-off third parties who have received proceeds of the wrongdoing, thereby enabling them to dissipate or conceal the relevant assets. C argued that this met several of the grounds for an order under CPR 39.2(3) for the Court to sit in private and, by extension, the anonymity order sought.

The Decision

At the hearing of C’s applications, and in view of D’s admissions, the Deputy Judge made the following orders:

• Privacy orders: the Deputy Judge refused C’s applications. He found that none of the CPR 39.2(3) grounds relied upon for sitting in private were met. In particular, the outcomes feared by C would not stand in the way of the proper administration of justice or defeat the object of the hearing, in circumstances where it was to seek the continuation of injunctions already made and notified to D some four weeks earlier (such that any further dissipation by D or third parties was likely already to have happened). For the same reasons, he was not prepared to make the continued anonymity order. None of C’s arguments displaced the principle of open justice.
• Continuing the interim injunctions: the Deputy Judge granted C’s application. As regards the proprietary freezing order, he found that there was a “very” serious issue to be tried and the balance of convenience favoured continuing the injunction. As regards the non-proprietary freezing order, he found that D’s affidavit did not provide a full explanation of her actions, and there was, therefore, a real risk of dissipation. He was content that, if and to the extent that C’s proprietary claim and any tracing based upon it failed, it was right and proper to seek to secure the position with a non-proprietary freezing order against D. He was, therefore, willing to make both forms of injunction simultaneously.
• Ordering further disclosure: the Deputy Judge granted C’s application. He found that it was not presently known which past members of C’s chambers had been affected by D’s wrongdoing and needed to be notified, and further disclosure would assist with that exercise. Furthermore, it was appropriate to order D to disclose how the Funds had been used and where they (or their traceable proceeds) now were, given that she had admitted to the wrongdoing alleged.