Global menu

Our global pages

Close

North Of England Coachworks LTD v Mohammed Asif Khan & Ors (2020) [2020] EWHC 1972 (QB)

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

21-10-2020

High Court refuses application to vary a freezing order to permit a defendant to sell frozen assets to fund legal fees and representation.

Facts of the case

  • The Applicant (“D1”) was the subject of a freezing order granted in relation to proceedings against him and others for fraud. The freezing order made provision in the usual way for D1 to spend a reasonable sum on legal advice and representation.
  • D1 applied to the court for inter alia a variation of the order to permit him to sell certain assets to enable him to fund such legal advice and representation.

The decision

  • Mrs Justice Lambert dismissed the application on the basis that D1 had failed to discharge the “burden of persuasion” that he had no alternative sources of funding.
  • Even taking into account that it was not necessary for D1 to establish the absence of alternative assets on the balance of probabilities, and the practical difficulties associated with proving a negative, Mrs Justice Lambert found that D1’s evidence in support of his application was “hopelessly deficient”, “not cogent” and in fact suggested there was a real prospect of him being able to obtain alternative funding.

Analysis and practical advice

  • In considering an application for permission to use assets subject to a freezing order to fund legal advice and representation, the court will have regard to the following principles:
    • that the court has already concluded that justice requires that the defendant’s freedom to dispose of its assets should be restrained;
    • that payments in the ordinary course of business are however permitted, even if the consequence of them will be that the defendant’s assets are completely depleted before the claimant is able to obtain its judgement;
    • a defendant is entitled to defend itself and, if necessary, to spend frozen funds on legal advice and representation in order to do so. This is reflected in the standard freezing order wording, but this entitlement is limited to expenditure of a “reasonable” sum;
    • even where the defendant has no other assets, its right to use frozen funds is only "the ordinary rule" and is capable of being outweighed in an appropriate case by other considerations;
    • before a freezing order will be varied, the defendant must prove that he has no other assets with which to fund the litigation, and put the relevant facts fully and fairly before the court.  This is known as the "burden of persuasion";
    • the court will undertake a factual inquiry not only conerning the defendant’s own assets, but whether there are others who may have be willing to assist him to obtain legal advice and representation and, in so doing, the court is entitled to harbour a "very healthy scepticism" about unsupported assertions made by a defendant about their absence of assets; and
    • the touchstone will be whether it is in the interest of justice to vary the terms of the freezing order.  Therefore, while the absence of assets is likely to be decisive, there may be exceptional cases where this alone is insufficient, e.g. where the defendant has failed to put the facts fully and fairly before the court.

For more information, please contact: