Practice and procedure – Notification injunction – Dissipation of assets – Claimants entering into business contracts with defendants – Claimants alleging intimidation and threats to enter further contracts resulting in loss – Claimants seeking to recover loss and damages – Claimants fearing dissipation of assets by defendants and applying for notification injunction – Whether claimants having to demonstrate serious issue to be tried or good arguable case – Whether claimants establishing risk of dissipation of assets – Whether claimants making out case to requisite standard – Application granted
The first claimant was a businessman who owned the second claimant company. In 2011, the claimants were seeking to purchase a substantial and valuable property in Grosvenor Gardens, London for development. They were expecting to make profits of more than £100m and approached the first defendant for a loan of £12m required at 24 hours’ notice to help complete the purchase and proceed with the redevelopment. The loan was made under a written loan agreement by the sixth defendant. The first to fifth defendants were either directors of the sixth defendant or closely linked to it.
The first claimant alleged that he had been subjected to a campaign of threats, intimidation and coercion directed at himself and his family by the defendants to persuade the claimants to enter into further agreements with the sixth defendant, which were highly disadvantageous to them. They said that, as a result, the second claimant had been forced to sell the property at a loss and the first claimant had made a substantial loss.
The claimants brought proceedings against the defendants seeking to recoup their losses in excess of £132m, excluding aggravated or exemplary damages. The claimants contended that they had been the victims of an unlawful means conspiracy comprising fraudulent misrepresentation, duress, actual undue influence, intimidation, unlawful interference with business and economic interests, extortion under colour of due process, extortion simpliciter and blackmail.
Because of their concerns that the defendants might make it difficult or impossible to enforce judgment against them if they were successful, the claimants applied for a “notification injunction” under section 37 of the Senior Courts Act 1981 requiring the defendants to notify them before disposing or dealing with their assets.
Held: The application was granted.
(1) Although section 37 of the 1981 Act was broad in its terms, it was not completely unfettered. In normal circumstances, what was needed to persuade the court to grant an injunction was a threat to do an act which constituted an invasion of a legal or equitable right; alternatively, a breach of an obligation owed to the claimant. Leaving aside the special case of a freezing injunction, a claimant who sought an injunction restraining a defendant from dealing with an asset would normally have to assert that such a dealing would be an invasion of his rights or a breach of some obligation owed to him. In such a case there was no reason why the court could not, instead of granting an injunction restraining the disposal altogether, grant a notification injunction. The balance for exercising jurisdiction was different in the case of a freezing injunction to a notification injunction. Just as in the case where a threat to dispose of an asset would amount to a breach of the claimant’s substantive rights, if the court could grant a freezing injunction restraining disposal on the ground of dissipation, it was also able to grant a modified form of restraint which only restrained disposal if made without prior notification. If a claimant satisfied the court that there was a risk of dissipation such as would justify a freezing injunction, the court could grant a notification injunction. To that extent there was power under section 37 to grant a notification injunction even if a full-blown freezing injunction was not asked for. If there was no risk of dissipation, it was not obvious that the court had power to grant a free-standing notification injunction. Absent dissipation, a defendant was free to deal with his own property. Therefore, in practice, in order to obtain a notification injunction, a claimant had to either assert some substantive right to prevent the defendant disposing of an asset, or at least some credible evidence: British Airways Board v Laker Airways Ltd [1985] AC 58, Parker v Camden London Borough Council [1986] Ch 162, South Carolina Insurance Co v Assurantie Maatschappij de Zeven Provincien NV [1987] AC 24, Maclaine Watson and Co Ltd v International Tin Council [1989] 1 Ch 286, Halifax plc v Chandler [2001] EWCA Civ 1750, Parker v CS Structured Credit Fund Ltd [2003] EWHC 391 (Ch), TTMI Ltd of England v ASM Shipping Ltd of India [2005] EWHC 2666 (Comm), Masri v Consolidated Contractors International Co SAL [2008] EWCA Civ 303 and JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139 considered.
(2) Although a notification injunction was in principle less invasive than a freezing injunction, it was still an invasive order and justified more than a serious issue to be tried, which only really served to cut out the frivolous or vexatious case. The principles underlying the grant of a notification injunction were closely tied to the principles underlying the grant of a freezing injunction, and what was needed to justify a freezing injunction in terms of the merits of the substantive claim was also needed to justify a notification injunction. Therefore, claimants needed to demonstrate a good arguable case. When the question was one of construction or one of law, and there was argument on the point, the court might take a view as to who appeared, albeit at the interlocutory stage, to have the better argument. Where however the merits of the case turned on questions of fact, it would impose a severe limitation on the court’s ability to grant effective relief if it had to be satisfied that the claimant had much the better of the factual case. That was often impossible to say at the interlocutory stage where the issues were purely factual, particularly if the question turned on the credibility of witnesses. It was sufficient for the claimant to meet the traditional test that the claimant needed to show a good arguable case in the sense of a case which was more than barely capable of serious argument, and yet not necessarily one which the judge believed to have a better than 50% chance of success: The Niedersachsen [1983] 1 WLR 1412 applied. Petroleum Investment Co Ltd v Kantupan Holdings Co Ltd [2002] 1 All ER (Comm) 124, Complete Retreats Liquidating Trust v Logue [2010] EWHC 1864 (Ch), OJSC TNK-BP Holding v Beppler & Jacobson Ltd [2012] EWHC 3286 (Ch) and Metropolitan Housing Trust Ltd v Taylor [2015] EWHC 2897 (Ch) considered.
(3) In the present case, on the merits, the claimants had shown a good arguable case. The particulars of claim detailed serious allegations that could not be rejected at the this stage as fanciful as it did not seem impossible that a purported settlement, said to have been extracted by illegitimate means, was not an answer to the claim. At this stage, the claim was more than barely capable of serious argument, although not necessarily one which had more than a 50% chance of success. On the evidence, and taking into account that the proposed notification injunction was less intrusive than a freezing order, it was right to conclude that there was a risk of dissipation.
Anthony Trace QC and Richard Fowler (instructed by gunnercooke llp) appeared for the claimants; Ewan McQuater QC, Adam Kramer and Alexander Polley (instructed by Gowling WLG (UK) LLP) appeared for the defendants.
Eileen O’Grady, barrister
