Halifax Plc v Chandler

A freezing injunction preserves assets against improper dissipation. It does not provide security for the claimant or ordinarily prevent a defendant from meeting reasonable living, business or legal expenses from the defendant’s own assets.

Reasonable and bona fide legal expenditure on existing proceedings with a realistic prospect of success may therefore be permitted. The court should not balance that expenditure against the strength of the freezing-order claimant’s case or the resulting reduction in assets available to satisfy a future judgment.

An applicant must nevertheless present the full factual basis for the requested variation at one time. Successive applications founded on the same facts are an abuse of process. A later application remains possible where circumstances have materially changed.

The Halifax obtained a worldwide freezing order over Mr Chandler’s assets while pursuing rescission of a settlement allegedly induced by fraudulent misrepresentation. The order permitted limited legal expenditure but made no allowance for business expenses.

Mr Chandler was also pursuing separate proceedings concerning shares said to be worth more than £2 million. On 29 October 2001, Mitting J varied the freezing order to permit a mortgage over a Spanish villa, releasing up to approximately £60,000 for legal costs. No appeal was brought against that order.

Four days later, Mr Chandler sought permission to mortgage another property to raise further funds. The judge refused additional funding for the separate proceedings because the entire requirement should have been presented on the first application. Mr Chandler appealed only against that refusal. The central issues were whether reasonable legal expenditure in separate, pre-existing proceedings should ordinarily be permitted and whether the successive application was an abuse of process.

1. Appeal dismissed unanimously. Clarke LJ delivered the judgment, with which Dyson LJ agreed. Although the judge had erred in his approach to the permitted expenditure, he was entitled to refuse the second application because it repeated an application founded on the same facts.

2. A freezing injunction does not give the claimant security for its claim. Its purpose is to prevent improper dissipation, rather than to interfere with the defendant’s ordinary business or way of life. Where the claimant asserts no proprietary interest, the order ordinarily permits reasonable living, business and legal expenditure from the defendant’s own assets, provided the defendant shows that no other assets are available.

3. The proposed expenditure on the separate proceedings was reasonable and bona fide legal expenditure. Those proceedings pre-dated the Halifax action, had a realistic prospect of success and required substantial professional assistance. The freezing injunction should not in principle prevent that expenditure.

4. The judge had erred in balancing the expenditure against the strength of the Halifax’s claim and the possibility that unsuccessful litigation would reduce the assets available to satisfy a later judgment. Such depletion was not a legitimate reason for refusing otherwise reasonable expenditure because the injunction did not make the Halifax a secured creditor.

5. Nevertheless, a defendant seeking variation must present the full and fair factual basis for the relief sought. Where the same facts support a single requirement for legal or business expenditure, the defendant must seek appropriate relief once and once only. Separate applications based on those facts constitute an abuse of process.

6. The second application contained no adequate explanation of any change since the first hearing, and counsel accepted that there had been no material change. The evidence supporting the first application had implied that the permitted funds would meet the immediate problem. The judge was therefore justified in refusing further relief only days later.

7. Clarke LJ added that a renewed application could properly be made once the available funds were exhausted and liability for reasonable costs increased. A solicitor’s good-faith self-certification may cover sums due for completed work or, with the client’s agreement, future work. Other things being equal, the court may then permit payment from otherwise frozen assets. Costs were ordered to be costs in the case, and permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously. The refusal to release further assets was upheld because the successive application was an abuse of process, although the judge’s earlier balancing approach was held to be erroneous.

2. High Court, Queen’s Bench Division: Mitting J refused to permit further security over the New Romney property to fund the separate proceedings. He held that the relevant facts and requested relief should have been presented when he varied the freezing order four days earlier.

3. High Court, Queen’s Bench Division: On the earlier application, Mitting J varied the freezing order to permit a mortgage over the Spanish villa and the use of the resulting funds for legal advice and representation. Neither party appealed that order.