Freezing injunctions - the latest developments

Ice patterns freezing water crystals frozenMuch has changed in the world of freezing injunctions in the 50-something years since these remedies were developed by the courts. The first reported instance of the court granting this type of relief was in the Court of Appeal in Mareva in 1975. Not long after the Court of Appeal granted a similar relief in Nippon Yusen Kaisha and by the time the matter was considered by the House of Lords in The Siskina in 1979, Kerr J had coined the phrase “Mareva type of order.”

Not only has the name changed over the years.

The court now has jurisdiction to injunct a respondent against whom the applicant asserts no cause of action, following Mummery J’s decision in Chabra. The types of ‘assets’ which will be caught by a freezing order have widened significantly from a ship in The Siskina to proceeds of loan agreements entered into by the respondent with third party lenders in Ablyazov. And the courts have developed methods of policing freezing injunctions, such as the imposition of disclosure orders and travel restrictions (for example Bayer).

Two recent High Court cases signal further change in this area of law.

Should the applicant have to show an existing cause of action against the respondent?

In Kazakhstan Kagazy v Zhunus Leggatt J suggested that the established line of authority requiring the applicant to establish an accrued cause of action (ie the right to bring proceedings for substantive relief must have arisen) against the respondent was ‘ripe for reconsideration’. This was in the context of a contribution claim between co-defendants accused of fraud, in which Leggatt J held (obiter) that in principle the court does have jurisdiction to grant an injunction in aid of a contribution claim.

Leggatt J’s point was that the requirement for an existing cause of action had come about almost by accident. This principle had first been referred to in Lord Diplock's dicta in the House of Lords in The Siskina. This dicta had been followed in subsequent cases as laying down a requirement for a pre-existing cause of action—Siporex, Thackur Shipping and The Veracruz, when in fact (as Leggatt J suggested) that was not Lord Diplock’s intention in The Siskina.

As Leggatt J pointed out, it is now possible for the court to grant an injunction against a respondent against whom the applicant asserts no cause of action at all, pursuant to the so called ‘Chabra’ jurisdiction. In light of this and other developments, Leggatt J suggested that this line of authority was ripe for reconsideration (but he was bound by higher authority).

It will be interesting to see what the Supreme Court makes of this requirement when the matter next arises there.

Notification injunctions- another option?

Another interesting development came just a week earlier from Nugee J sitting in the Chancery Division. This case concerned the well- known property developers, Nick and Chris Candy. A friend of Nick Candy, Mr Holyoake had asked him for a £12m loan to assist in the purchase of a property in London for re-development. The loan was duly made by the Candy property development business. Mr Holyoake alleged that he was thereafter subjected to a long-running, highly unpleasant and vitriolic campaign of threats, abuse, intimidation, coercion, extortion and blackmail on the part of the Candy brothers, with the result that he was forced to enter into a series of further agreements which were highly disadvantageous to him and highly advantageous to the Candy brothers. The result was that he was forced to sell the development at a loss and repay the Candy brothers £37m on an initial loan of £12m. Mr Holyoake claimed damages in excess of £132m.

Mr Holyoake became concerned that the Candy brothers would move around their assets so as to frustrate enforcement of any judgment against them. However, rather than applying for a freezing injunction, Mr Holyoake applied for an injunction which would restrain the Candy brothers from disposing, dealing or otherwise engaging in transactions with their assets over a certain limit without first giving the his solicitors seven days advance notice in writing. Counsel for Mr Holyoake explained that his client was seeking no more relief than he considered reasonably necessary to protect his position, the primary purpose of such ‘notification injunction’ being that if the Candy brothers should attempt to enter into transactions which Mr Holyoake considered seriously damaging to his position, he would have the opportunity to apply to the court for a freezing injunction or take other steps to protect himself.

This approach was looked on favourably by Nugee J who held that the court did have power to grant such an injunction provided that the applicant could establish a good arguable case, a risk of dissipation and that the balance of convenience was in favour of granting the injunction. Significantly however, Nugee J suggested, when considering Mr Holyoake’s submissions on risk of dissipation, that as the proposed notification injunction was less intrusive than a freezing order, this was relevant to the degree of risk which needed to be shown before the court could be persuaded to intervene. Further, Nugee J’s approach seemed even more amenable where a post-transaction rather than pre-transaction notification was proposed.

It will be interesting to see level of uptake for ‘notification injunctions’ following this decision.

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