Injunctions: duty to make full and frank disclosure on without notice applications

When applying for a freezing injunction without notice, an applicant must comply with its obligation to make full and frank disclosure of all matters of fact and law which are or may be adverse to their case. In 381 Southwark Park Road RTM Co Ltd and others v Click St Andrews Ltd and others [2022] EWHC 2244 (TCC), the High Court was asked to determine whether an interim freezing injunction, obtained without notice, should continue. The respondents were part of a group company carrying on a property development business. The first respondent, Click St Andrews Ltd (CSA), was a special purpose vehicle incorporated to acquire and redevelop St Andrews House, Bermondsey, London. The second and third respondents were respectively the group’s holding company and operating company. The applicants were 10 leasehold owners of flats in the property, and 381 Southwark Park Road RTM Co Ltd (RTM) was the right to manage company established by the leaseholders to purchase the freehold. In 2020, CSA and RTM entered into an agreement for CSA to carry out development works to the property. On completion, CSA agreed to sell the freehold and headlease to RTM. RTM agreed to lease back the new rooftop flats to CSA on 999 leases to enable them to be sold. CSA also agreed to obtain insurance to cover the making good of any damage caused to the property during the works. In 2021, heavy rainfall during the course of the works resulted in substantial water ingress into the property and extensive damage to the flats. The rooftop works were subsequently completed, but remedial works to the flats were not. CSA maintained that issues with its insurers were the cause of the delays in carrying out the remedial works. In mid-2022, two of the new rooftop flats were sold by CSA. The applicants wrote to the respondents to notify them of their concern that there was a risk of dissipation of the proceeds of sale. The applicants requested further information in respect of the same and sought an undertaking from the respondents that they would not dissipate any funds. The respondents failed to respond and provide the information requested and claimed not to be dissipating funds. In July 2022, the applicants made a without notice application for a freezing injunction. An interim freezing injunction was subsequently made. The effect of the interim freezing injunction was to suspend the sale of the third rooftop flat that had been in progress. On the return date, the respondents argued that the applicants had failed to make full and frank disclosure and the interim freezing injunction should be discharged. The respondents asserted that it should have been obvious to the applicants from a search of the charges register of the requisite titles that the proceeds of sale from the rooftop flats had been used to discharge an existing loan facility used to fund the development and for which the property had been used as security. The existence of a security over the respondents’ assets was material because a freezing order can attach only to assets against which judgment can be executed and a freezing order could not put the applicants in a better position than legitimate secured creditors with a right to the proceeds of sale. Following an analysis of the applicable authorities, the High Court found that the appellants had not made full and frank disclosure. They had been too quick to conclude that the respondents had been attempting to dissipate assets without properly analysing the available evidence. Yet, the High Court found that the failure was not deliberate and was caused in part by the respondents’ own failure to provide a clear explanation as to how the proceeds of sale had been dealt with. On the evidence, the High Court found that there was an opacity in relation to the respondents’ intra-group accounting arrangements and the movement of funds. The freezing injunction was continued against CSA on the basis that there was a real risk that a judgment made against it may not be satisfied as a result of unjustified dealing with its assets. Elizabeth Dwomoh is a barrister at Lamb Chambers