Contract – Judgment debt – Freezing order – Claimant seeking freezing order over defendant’s assets to aid execution of judgment in its favour – Claimant seeking order prohibiting defendant from selling or disposing of leasehold interest in remaining flat on development – Whether claimant having good arguable case given existing judgment in its favour – Whether risk of dissipation of defendant’s only valuable asset – Application dismissed
The claimant entered into a construction contract with the defendant in respect of a development at High Firs, Gills Hill, Radlett, in Hertfordshire. When the defendant failed to pay the claimant’s August 2022 application for an interim payment, the claimant referred the dispute to adjudication. The adjudicator found that payment was due and ordered the defendant to pay £122,893.80 together with interest, costs and his own fees. When the defendant failed to make payment, the claimant brought proceedings to enforce the adjudicator’s decision.
By a consent order, the defendant was ordered to pay the judgment sum and costs, which together totalled £140,275.87, within 14 days. The defendant failed to make any payment. By a letter dated 20 June 2023, the defendant gave notice of its own intended claim in respect of alleged snagging and defective works in the total sum of £443,805.08.
In September 2023, the claimant applied for a freezing order over the assets of the defendant up to the value of £175,000 in order to aid the execution of the judgment in its favour. In particular, it sought an order that the defendant should not grant a leasehold interest by way of sale or disposal of the only unsold unit on the development. The application was made without notice.
Held: The application was dismissed.
(1) While, generally, giving notice might frustrate the purpose of applying for a freezing order, the position was less obvious where its primary target was not cash in a bank account but an interest in land. However, the order sought was not limited to real property and the court accepted reluctantly that there were good reasons for the application without notice.
(2) Injunctive relief was discretionary. The court could refuse relief where the applicant had delayed in making the application. Some modest delay was inevitable here while the claimant absorbed the letter of 20 June, investigated the defendants’ assets, sought legal advice and prepared the application. But the court would have expected the application to be made in early July and not September.
However, the application should not be dismissed solely on the grounds of delay. The claimant had a judgment in its favour and there was no evidence that the defendant had been prejudiced by the delay.
(3) In order to obtain a freezing order, the applicant had to show a good arguable case that the respondent owned or had some interest in assets, there was a real risk that any judgment would not be satisfied because of an unjustified dissipation of such assets, and it was just and convenient to grant relief.
Here, the claimant plainly had an unanswerable claim in that it already had judgment in its favour. Further, there was clear evidence that the defendant had a long leasehold interest in the development. However, the claimant also had to show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets by putting them out of reach of a judgment by concealment or transfer.
The risk of dissipation had to be established by solid evidence; mere inference or generalised assertion was not sufficient. It was not enough merely to establish a good arguable case that the defendant had been dishonest; it was necessary to scrutinise the evidence to see whether the dishonesty pointed to the conclusion that assets might be dissipated. It was also necessary to consider whether there appeared at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.
If the defendant was not threatening to change the existing way of handling their assets, it would not be sufficient to show that such continued conduct would prejudice the claimant’s ability to enforce a judgment. Each case was fact-specific and relevant factors had to be looked at cumulatively: Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm) and Lakatamia Shipping Co Ltd v Toshiko Morimoto [2019] EWCA Civ 2203 considered.
(4) While freezing orders were originally conceived as an interim remedy granted pre-judgment to prevent the injustice of a defendant dissipating assets to avoid the risk of having to satisfy a future judgment, the current application was made post-judgment. Freezing orders were granted post-judgment where necessary to prevent the removal or dissipation of assets before the process of execution could realise the value of the asset for the benefit of the judgment creditor: Camdex International Ltd v Bank of Zambia (No 2) [1997] 1 WLR 632 considered.
It was still necessary to consider whether there was a real risk of the judgment not being satisfied because of an unjustified dissipation of the defendant’s assets. What might have been justifiable before judgment might become unjustifiable once there was a judgment and the judgment creditor was entitled to be paid. Thus, the hurdle remained even if it was more easily overcome: Emmott v Michael Wilson & Partners Ltd [2019] EWCA Civ 219; [2019] 4 WLR 53 and Mobile Telesystems Finance SA v Nomihold Securities Inc [2011] EWCA Civ 1050; [2012] 1 Lloyd’s Rep 6 considered.
There was clear evidence before the court that the defendant intended to sell a long leasehold interest in the remaining flat. In the absence of any attempt by the claimant to investigate the marketing of the flat, it would be assumed in the defendant’s favour that it was openly marketing the unit for sale for full value for the primary purpose of realising its investment and not to defeat the claimant’s claim or to evade other creditors. There was no evidence before the court to establish that the sale and grant of a leasehold interest in the remaining unit would amount to an unjustified dissipation of the defendant’s assets. Accordingly, there were no proper grounds for restraining the marketing, sale or grant of such leasehold interest.
(5) Even if the court was wrong to decline relief, it was neither just nor convenient to grant a freezing order in circumstances where there had been ample time to obtain less draconian and more focused relief by applying for a charging order over the defendant’s leasehold interest in the development.
Mathias Cheung (instructed by Joelson LLP) appeared for the claimant. The defendant did not appear and was not represented.
Eileen O’Grady, barrister
Click here to read a transcript of John E Griggs & Sons Ltd v High Firs Penthouses Ltd
