Court of Appeal rules that the threshold for risk of dissipation is the same for conventional freezing orders and notification orders

• United Kingdom

• Financial services disputes and investigations
• Litigation and dispute management - Freezing Orders

02-05-2017

Candy & Others v Holyoake & Another [2017] EWCA Civ 92

Facts of the case

– the Claimants (“Cs”) obtained an order requiring the Defendants (“Ds”) to give advance notice of any dealings with assets worth more than £1 million (later varied to £5 million)

– the Ds appealed on various grounds, including that the Cs had failed to meet the correct threshold in relation to the risk of dissipation. The Ds argued that it should be the same as for a conventional freezing order, namely “solid evidence of unjustifiable dissipation of assets so as to evidence a real risk that a judgment would go unsatisfied”. In response, the Cs argued that the notification injunction sought was “less onerous” than a conventional freezing order and so it could be granted on the basis of “less strong evidence”

– it was common ground that, when determining whether to grant a conventional freezing order, the Court must ask whether it is just and convenient to do so and that an applicant must show a good arguable case on the underlying merits

– the Ds also appealed a related decision that an insurance policy taken out by the Cs had satisfactorily fortified their cross-undertaking in damages

The decision

– the Court of Appeal allowed both appeals

– it found that the particular form of notification injunction in this case was in effect a modified version of a conventional freezing order. It therefore did not accept that the threshold for dissipation risk was less than for a conventional freezing order, and rejected the idea that there is “a spectrum of the level of risk of dissipation”

– in relation to fortification of the cross undertaking, it was held that the Cs’ insurance policy was not a satisfactory form of fortification as there was a real risk that the insurer could seek to avoid liability in the event of fraud by the insured.

Analysis and practical advice

– in reaching its finding, the Court of Appeal appears to have been particularly persuaded by the “wide terms” of this particular notification order which did not, for example, as a conventional freezing order would, contain a value cap on transactions or, in the order’s original form, an exception for transactions in the ordinary and proper course of business. Notification orders in this form are not therefore necessarily less onerous than conventional freezing orders. However, a lower threshold in relation to risk of dissipation may still apply in the case of a simple order requiring notice to be given of a proposed disposition of, for example, a specific property on the basis that this would involve a less draconian interference with the rights of the respondent to deal with their personal or business assets

– in its judgment, the Court of Appeal also cautioned applicants against only contemplating the most onerous form of freezing order in light of its finding that all variants of freezing order must satisfy the same threshold in relation to risk of dissipation. This is because an applicant would still need to satisfy the court that it was just and convenient in all the circumstances to make the order, including the scope of exceptions to the prohibition on dispositions