The Court of Appeal considers freezing orders and whether a payment was in the "ordinary course of business"
A freezing order made against the appellant contained the usual exception allowing assets to be dealt with, or disposed of, "in the ordinary and proper course of business". The appellant made two payments to associated companies – one to repay part of a loan and one to cover outstanding rent arrears. At first instance the judge held that the payments breached the freezing order and the appellant appealed.
The Court of Appeal has confirmed the following:
- It is the course of business, and not the payments, which must be "ordinary".
- It is not helpful to substitute "ordinary course of business" with other synonyms like "routine" or "recurring". The fact that a payment does not happen every day does not stop it being made in the ordinary course of business.
- Just because a payment is not dissipatory in nature does not make it one in the ordinary course of business.
- The exception is not restricted to payments to trade creditors.
- However, Gloster LJ stressed that this issue is highly fact-sensitive.
In relation to the payments made in this case, the Court of Appeal held that the judge had been wrong to focus on the amount of the payment: "although the amount of the payment may well be relevant where what is in issue is discretionary spending or investment, it is of much less significance when the repayment in question is obligatory and related to liabilities which long pre-dated the making of the freezing order. In such a case it is the nature of the obligation which is more weighty". It did not matter that the loan repayment had been particularly large since earlier repayments had totalled amounts in excess of that figure. Nor did it matter that there had been a lengthy gap since the last payment, as there had been similar time gaps before. Also, the appellant had not repaid the entire loan. In relation to the rent payment, arrears had been allowed to accumulate in the past this liability pre-dated the award in favour of the respondent. Accordingly, the appeal was allowed.