Reliance on hearsay evidence in a freezing order application and proving the risk of dissipation

http://www.bailii.org/ew/cases/EWHC/Ch/2014/4336.html

The respondent sought the discharge of a freezing order against him. Various issues were considered  in the case, including the following:

  1. Can hearsay evidence be relied on when applying for a freezing order if the source is not  identified? PD 32 provides that an affidavit must indicate “the source for any matters of  information or belief”. The respondent argued that it is unacceptable to base an application for a  freezing order on evidence which does not conform to the requirements for identifying sources (ie without an  identified source, the affidavit by the claimant’s solicitor should be given less weight). Here,  the claimant’s solicitor had indicated that  his affidavit was prepared following discussions with  a number of people (and he had provided the names of some of those people).

Mann J held that once information has been disclosed, privilege no longer exists and so there can  be nothing objectionable in a solicitor identifying the source of what is now non-privileged  information: “If [a litigant] wishes to rely on this information, then the price is that the source  is no longer privileged”. However, the judge went on to find that it would have made no difference  to the respondent’s case had he known precisely which individual from the group had held a  particular belief.

  1. Is the risk of dissipation proven if the respondent uses corporate structures and offshore  companies? Mann J  agreed that the mere holding of assets in offshore structures would not be  enough in itself. However, in some cases the quality and nature of the arrangements may be a  “pointer” towards a risk of dissipation. Here, there was evidence (albeit not conclusive evidence)  that elaborate structures had been set up in order to shield assets from view. Looking at the  available material as a whole, the judge found that the risk  of dissipation had been proven.

COMMENT: Although a risk of dissipation was established on the facts here, this case continues the  line of authority that the use of offshore companies alone will not suffice in itself. For example,  in VTB Capital v Nutritek (Weekly Update 43/11), the fact that the defendant operated a “complex  web of companies in a number of jurisdictions” did not suffice, with the judge saying: “It is not  uncommon for international businessmen,  and indeed quoted UK companies, to use offshore vehicles  for their operations, particularly for tax reasons. This may make it difficult to enforce a  judgment. But in that respect claimants ....have to take defendants ....as they find them.” Similarly, in  UL v BK (Weekly Update 25/13),  Mostyn J commented that holding assets in off-shore structures will not of itself amount to an  unjustified dealing of assets and Morgan J also agreed in Sukhoruchkin & Ors v Van Bestein & Ors  (Weekly Update 26/13) that it was a “less powerful” argument that the defendants had created an  “elaborate and sophisticated structure” using off- shore companies and nominee shareholdings.