On 29 April 2016 Nugee J granted an interlocutory application to restrain Defendants in on-going proceedings from disposing, dealing or otherwise engaging in transactions with any assets of £1m or above without giving the Claimants’ solicitors 7 days advance notice in writing, a ‘notification’ injunction.
The case of Holyoake & Anor v Candy & Ors  EWHC 970 (Ch) deals with allegations of an unlawful means conspiracy involving fraudulent misrepresentation, duress, intimidation and blackmail. The allegations are that through this conspiracy the Claimants were compelled to enter into a series of disadvantageous agreements with the Defendants causing the Claimants to suffer damages which are valued in excess of £132m. The Claimants applied for a notification injunction because they had concerns that the Defendants might make it difficult or impossible to enforce any judgment made against them.
The questions which Nugee J considered in his judgment were:
- Is it possible to grant a free-standing notification injunction?
- What threshold had to be met in respect of the strength of the substantive claim?
- Had that threshold been met?
- Was there a risk of dissipation of assets?
Is it possible to grant a free-standing notification injunction?
S.37 Senior Courts Act 1981 was considered, with Nugee J noting that the Court’s jurisdiction under that legislation is not entirely unfettered, but declining to examine its precise limits. Instead he noted that what was usually required to persuade the Court to grant an injunction was a risk of invasion of a claimant’s legal or equitable rights. Such rights might include proprietary rights in a tracing claim or a contractual right.
A notification injunction was described as being less invasive than a freezing injunction, and Nugee J therefore concluded that in circumstances in which the requirements to obtain a freezing injunction had been met, it would also be possible to grant a notification injunction.
What threshold had to be met in respect of the strength of the substantive claim?
The question considered by the Court was whether the test was that of a serious issue to be tried (the test usually applied to avoid frivolous or vexatious claims) or that of a good arguable case.
Although a notification injunction is less invasive than a freezing injunction, the Court noted that it was still invasive, and therefore there was justification for a threshold of more than just a serious issue to be tried.
Nugee J therefore concluded that the threshold which needed to be met for a notification injunction was the same as for a freezing injunction: that is, that the Claimant must demonstrate a good arguable case.
Had that threshold been met?
An associated question was therefore what was meant by a good arguable case.
The Court considered whether there was a need to assess the arguments of both parties in an attempt to determine which side had the stronger argument. The conclusion was reached that in cases where the dispute related to the construction of a document or matters of law, that might be possible but where there were disputes about the facts of a case, which would be dealt with through witness evidence, this could not be what the Court was being asked to do.
As such, Nugee J determined that what was meant by a good arguable case was a case which was more than barely capable of serious argument, but did not have to be a case which the Court could assess at that stage as having a greater than 50% chance of success. On this basis Nugee J held that the Claimants did have a good arguable case.
Was there a risk of dissipation of assets?
The decision making process in respect of whether there had been a dissipation of assets involved discussions of the complex, opaque and offshore structure of the corporate Defendants. Whilst this was determined not to be conclusive of a risk of dissipation, it was held to contribute to such a risk.
An unexplained transfer of a high value property by one of the individual Defendants to his wife was highlighted by the Court as something which could have an entirely innocent explanation. However, the Court commented that, without any explanation being provided, such a transfer could in fact be interpreted as dissipation of that asset. Likewise the well-publicised purchase by a Defendant of a £26m yacht as a gift for his wife demonstrated a discrepancy between that Defendant’s stated means and his apparent lifestyle, again with no explanation being provided to the Court.
The Court concluded that there was a risk of dissipation, paying particular mind to these issues. Nugee J also commented that he considered a notification injunction to be appropriate to the degree of risk.
In circumstances in which the threshold to be met for a notification injunction is the same as a freezing injunction, why would a claimant opt for the less invasive option?
One reason is touched upon in the judgment: the extent of any cross-undertaking in damages. The Defendants in this action requested that the cross-undertaking be fortified. This would usually be by way of a bank guarantee, parent or related company or individual undertaking, a payment into Court or the provision of some other form of security. Nugee J declined to determine the level of fortification as no proper calculation of the likely damages had been provided. However, it is hard to imagine circumstances in which the requirement to provide notice would cause significant damage, particularly compared to the potentially catastrophic damage that can be caused by a freezing injunction. This may therefore be a more manageable undertaking for a claimant seeking an injunction against a much larger defendant.
Where Defendants are public figures with reputations to manage and protect, the risk of being found to be in contempt of Court for failure to notify, and the publicity that may attract might be sufficient protection for the Claimant, and obviate the need to freeze assets to avoid dissipation.