Summary

The continuation of a worldwide freezing order was refused where claims of wrongdoing were barred by the no reflective loss principle and a proprietary injunction was similarly refused as its invasive nature was not justified given that the strength of the claim was borderline.

Facts

The applicants (S) applied for the continuation of a without notice proprietary injunction restraining dealings with trust assets and a worldwide freezing order against the respondents (B).

S, who consisted of two personal applicants and their companies, had been granted a proprietary injunction restraining the use of trust assets B held and a worldwide freezing order restraining B's dealing with assets up to a value of £13 million. The first and second personal respondents owned the third and fourth respondent companies, which in turn beneficially owned the fifth respondent company (L). The trust funds were sums that L had received under agreements entered into in relation to two investment funds. A further sum of money L received from a third party company (T) in which one of those investment funds invested was also in dispute. S's allegations as to wrongdoing fell into three parts: part one alleged wrongdoing in relation to an agreement between L and the two investment funds; part two related to alleged wrongdoing in relation to an agreement or agreements with another investment fund and a claim for half of the relevant funds L received, and part three which related to a payment by T to L. The issues were whether (i) the test for the grant of a proprietary injunction was the same as that for a freezing injunction; (ii) S's claims to an entitlement to a freezing injunction based on the wrongdoing alleged in part one and part two were barred by the no reflective loss principle; (iii) there was a serious issue to be tried to justify the continuation of the proprietary injunction.

Held

(1) The requirements for establishing an entitlement to a freezing injunction and a proprietary injunction were conceptually distinct: a freezing injunction involved restraining a defendant from dealing with his own assets, and could only be obtained where a claimant could show he had a good arguable case, and where there were substantial grounds for concluding that there was a real risk of dissipation so that any judgment in a claimant's favour would be frustrated. A proprietary injunction, however, involved restraining a defendant from dealing with a claimant's assets or assets in which a claimant had an existing proprietary interest; although there was no express requirement to establish a risk of dissipation, the reality of such a threat was a relevant consideration and the principles to be applied were those in American Cyanamid Co v Ethicon Ltd (No.1) [1975] A.C. 396, American Cyanamid followed. It was irrelevant whether a claimant had a proprietary interest in the asset before the wrongdoing took place or only as a result of the wrongdoing; in either case, a claimant's case would be that it had a proprietary interest in the asset before the claim was made and before an injunction was sought (see para.10 of judgment). (2) S did not have a good arguable claim in relation to the losses claimed in respect of part one of the alleged wrongdoing; their claim was clearly barred by the no reflective loss principle, which also worked to bar S's claim in relation to part two of the alleged wrongdoing. As S did not have a good arguable case in relation to those claims, freezing injunctions were refused in relation to the sums claimed (paras 72, 74, 100). (3) In relation to whether there was a serious issue to be tried in relation to part one of the alleged wrongdoing, S's case was no more than borderline and the weakness of their case was relevant consideration in deciding whether to grant a proprietary injunction against B. As the proprietary injunctions claimed were very invasive, the court did not consider it justified to intervene on the basis of such weak claims (paras 72, 100).

Application refused