Summary

In the circumstances the procedural deficiencies in a without notice application for a freezing injunction were such as to entitle the successful respondent to his costs on an indemnity basis.

Facts

The applicant liquidator (F) applied for a freezing injunction against the first respondent (S) and S applied for his costs on an indemnity basis. F was the liquidator of a United Kingdom company that had been compulsorily wound up with a deficiency for creditors of around £35 million. S, a French national who lived in Paris, had been the sole director of that company. F had obtained a judgment for over £5 million plus interest and costs against S in wrongful trading proceedings. F then obtained without notice a freezing injunction in respect of part of the proceeds of sale of a property in London by a Panamanian company (M). F had obtained information that indicated that the proceeds were to be remitted overseas to the trustees (T) of an offshore trust of which S was a beneficiary. The evidence served by M and T indicated that the trust was a discretionary trust in which S had no interest except as a discretionary beneficiary and that therefore F would not be able to enforce the judgment debt against the proceeds of sale of the property. F therefore agreed to the discharge of the original freezing injunction but sought a freezing injunction in respect of three Spanish properties allegedly belonging to S and a Spanish bank account. S sought his costs of the original injunction proceedings on an indemnity basis. S submitted that the original application was devoid of merit, improperly prosecuted without notice, procedurally flawed, reliant on improperly obtained evidence and pursued on the instructions of and for the benefit of a third party funder whose interests were different from those of a normal liquidator.

Held

(1) F's case, accepted by the judge on the without notice application, was that there were reasonable grounds for supposing that the proceeds of sale were susceptible to execution by F as a judgment creditor of S. There was just sufficient material to justify a reasonable inference that S might have had control over the proceeds of sale of the property notwithstanding the trust structure in which it was apparently held. Therefore F had had a good arguable case on the merits. There were obviously assets within the jurisdiction in respect of which a freezing order could be made and evidence from which a risk of dissipation could be inferred. However, the application should have been made, if at all, on notice. The application also suffered from procedural flaws and the duty of full and frank disclosure to the court on a without notice application had been breached in respect of the funding of the proceedings and in respect of obtaining evidence by use of enquiry agents. The cumulative effect of those deficiencies justified an award of costs on an indemnity basis. (2) There was no special reason for not ordering the costs to be set off against the judgment debt. The costs were incurred in an unsuccessful attempt to recover the judgment debt, and in the same proceedings. The connection between the debt and the costs could hardly be closer. (3) The general merits were strongly in favour of the grant of the proposed injunction over the Spanish assets. The judgment debt remained unsatisfied. There was a good arguable case that S was the owner of the assets and that there was a risk of dissipation. S was subject to the in personam jurisdiction of the English court and it was open to the English court to make an order against him provided that it was ancillary to and did not impinge upon the enforcement of the judgment in Spain. The appropriate way to achieve that objective was to provide that any injunction granted by the English court would lapse once Spanish protective measures sought by F were in place. The public policy requiring full disclosure on without notice applications, and the need for a suitable deterrent, could be sufficiently met by an award of indemnity costs and the deficiencies in the original application were not so grave that the court should refuse to grant the more limited injunction sought in respect of the Spanish assets. An injunction was granted in the exercise of the court's discretion.

Application granted