Fourie v Le Roux and others

This appeal concerned the grant, without notice, of a Mareva (freezing) injunction by Park J in support of unformulated and unissued substantive proceedings. The House held that while the High Court had in personam jurisdiction to grant such an interlocutory order, the court must take care before making a without-notice freezing order to ensure appropriate safeguards for the defendant. Those safeguards include an identifiable substantive cause of action or a clear undertaking and evidence of the proceedings to be pursued; full, fair and accurate disclosure; and appropriate directions as to the prompt institution of substantive proceedings. Where those safeguards were absent the judge was wrong to make the freezing order and it was proper for the deputy judge to discharge it. The House also considered costs and cross-undertaking issues: the indemnity costs order made below was not interfered with, but directions for immediate enforcement of the cross-undertaking in damages were set aside as wrong in principle in the circumstances.

The appellant, acting as liquidator of two South African companies, applied ex parte to an English judge (Park J) for a freezing order against the respondent majority shareholder and an English company controlled by him. The liquidator alleged that the respondents had fraudulently stripped assets from the South African companies and transferred assets or proceeds to England. Park J granted a freezing order without the respondents being present. The respondents obtained discharge of that order from deputy judge Jarvis QC on the ground that there were no formulated or pending substantive proceedings in respect of which the freezing order could be ancillary. The deputy judge also ordered indemnity costs and gave directions for immediate enforcement of the applicant's cross-undertaking in damages. The Court of Appeal dismissed the applicant's appeal; the applicant appealed to the House of Lords.

Nature of the application: an ex parte Mareva (freezing) injunction sought by a liquidator to prevent dissipation of assets in aid of recovery proceedings (either in England or South Africa).

Issues framed by the court:

• Whether Park J had jurisdiction and, if so, whether it was proper to grant a freezing order in the absence of any formulated substantive proceedings or an undertaking to commence them;
• Whether the award of costs on an indemnity basis against the appellant was justified;
• Whether directions for immediate enforcement of the cross-undertaking in damages were proper.

Court’s reasoning (concise): The House distinguished between strict jurisdiction (in personam jurisdiction over a served defendant) and the proper exercise of discretion to grant interim relief. It concluded that Park J did have jurisdiction in the strict sense (the Civil Jurisdiction and Judgments Act 1982 and equivalent rules permitted interim relief linked to foreign proceedings), but that the grant of a without-notice freezing order in the circumstances was improper because the claimant had not identified or formulated the substantive relief to be pursued and had not provided the usual protections for defendants (clear identification of the claim, promptness in instituting proceedings, full disclosure). The House therefore dismissed the appeal against discharge. On costs, the House declined to interfere with the Court of Appeal's affirmation of costs on an indemnity basis, noting the discretion given by the Civil Procedure Rules. On the cross-undertaking, the House held that immediate enforcement directions were wrong in principle where the claimant had made reasonably arguable fraud allegations and the question of compensation should await the outcome of the substantive litigation.

Appeal dismissed as to the discharge of Park J's freezing order and the indemnity costs order; the House held that although the court had in personam jurisdiction to grant an interlocutory freezing order, it was improper to do so ex parte in the absence of any formulated substantive proceedings or adequate directions and safeguards. However the House set aside the deputy judge's directions for immediate enforcement of the cross-undertaking in damages.

Park J granted the freezing order (9 July 2004). Deputy judge Jarvis QC discharged that order and ordered indemnity costs and enforcement directions (30 September 2004). The Vice-Chancellor (Court of Appeal, with Mance LJ and Jonathan Parker LJ) dismissed the appeal from Jarvis QC ([2005] EWCA Civ 204, 7 March 2005). The appeal to the House of Lords was dismissed ([2007] UKHL 1).