Cherney & Ors v Neuman & Ors

A worldwide freezing order requires solid evidence of a real risk that a future judgment will remain unsatisfied because assets may be dissipated or secreted. It is not available merely to provide security for a claim. Substantial unexplained delay may undermine both the alleged risk and the practical usefulness of the order.

The approach to proprietary relief is different. Under the equitable jurisdiction and CPR 25.1(1)(c), the court may preserve specifically identified or claimed assets where it is just and convenient to do so. A general risk of dissipation is unnecessary, provided there is a good arguable proprietary claim and the relief is appropriately limited.

The claimants sought interim relief against Mr Neuman in proceedings concerning business and property dealings. They alleged that he held proceeds of the sale of Arlington Street, including a £4m side-payment, on trust for Mr Cherney, and that a further £1m received for refurbishment purposes was unauthorised or unaccounted for.

They applied for worldwide freezing relief, proprietary injunctions and disclosure. Proceedings had been issued about eight months before the applications. The central issues were whether there was a good arguable case, whether there was a real risk of dissipation or secretion, how delay affected the application, and whether specific proprietary relief should be granted.

1. Worldwide freezing order refused. The applicants had to show a real risk that a judgment would remain unsatisfied because assets might be dissipated, secreted or otherwise dealt with. The evidence had to be solid. A freezing order could not be used simply as security for the claims, applying the principles in Ketchum v Group Public Relations [1997] 1 WLR 4, Derby v Weldon [1990] Ch 48, Thane v Tomlinson [2003] EWCA Civ 1272 and Laemthong v Artis [2005] 1 Lloyds Rep 100.
2. Delay was a significant discretionary factor. The unexplained eight-month delay after issuing proceedings called into question whether the claimants genuinely believed that there was a continuing real risk of dissipation. Alternatively, if such a risk had existed, it might already have materialised. The court adopted the approach to delay discussed in Dubai Bank v Galadari [1990] 1 Lloyds Rep 120 and Fiona Trust v Privalov [2007] EWHC 1217.
3. There was a good arguable case on the Thornley claim. The documents and surrounding circumstances supported the case that the acquisition was intended for Mr Cherney’s benefit. The £4m side-payment, any additional related payment and any VAT reclaim paid to Mr Neuman were therefore arguably trust monies.
4. The claim concerning the £3.3m refurbishment expenditure was not strongly arguable on the evidence, because Mr Neuman produced detailed evidence of extensive works and the claimants did not rebut it. An account of expenditure could nevertheless be ordered.
5. There was a good arguable case concerning the separate £1m shortfall. Mr Neuman had provided no specific evidential answer. The court therefore granted a proprietary injunction covering the side-payment, the £1m, their proceeds and any related VAT reclaim, together with an affidavit identifying their location and history. Further directions were to be given concerning an account of the refurbishment expenditure and the cross-undertaking in damages.