Abbey Forwarding Ltd. v Hone & Ors

A freezing order may be varied where, having regard to the interests and overall justice of the case, the purpose and policy of the order, the consequences of granting or refusing relief, and the availability of alternative funds, variation is just. The fact that frozen assets remain the respondent’s property is material, but does not itself justify release. A proposed payment is within an order permitting dealings in the ordinary and proper course of business only if it reflects an established business practice. A transaction which is proper but unprecedented in the respondent’s business falls outside that exception. Relief may be granted on a limited basis and subject to safeguards, including repayment or restoration if circumstances change.

Abbey Forwarding Limited, acting through its provisional liquidator, had obtained freezing injunctions against three former directors. The second and third defendants, Patrick Daniel Owen and William James Owen, applied to vary the order so that they could lend more than £50,000 to Wingpitch Limited.

Wingpitch held the long lease of warehouses previously occupied by Abbey. After Abbey ceased trading and its interest was disclaimed, Wingpitch had vacant premises, no rental income and substantial business-rate liabilities. The proposed loan was intended to meet those liabilities and preserve the lease pending possible reletting and the trial of Abbey’s claim against the directors.

The issues were whether the payment was already permitted as a dealing in the ordinary and proper course of business and, if not, whether the freezing order should be varied.

1. Ordinary course of business. The proposed loan was proper, since it was not a device to dissipate assets. It was not, however, in the ordinary course of the defendants’ business. Wingpitch had previously generated income and returned funds to its directors and shareholders; the defendants had not previously lent money to it. The proposed transaction therefore fell outside paragraph 10(2) of the freezing order.
2. Variation principles. Applying the principles identified in Noga and Others v Australia and New Zealand Banking Group and Others [2006] EWHC 602 (Comm), the court considered the interests of justice, the purpose and policy of a freezing order, the consequences of granting or refusing relief, and the availability of alternative sources of funds. The court also took account of the fact that the frozen money remained the defendants’ property and that the underlying claim had not been determined.
3. The evidence did not establish that Wingpitch or the defendants could readily obtain funds elsewhere. The possibility of borrowing against the defendants’ homes was uncertain, and the defendants had not provided all the evidence that might have been expected. Balancing the competing considerations, it was just, by a narrow margin, to permit a limited release.
4. The defendants were permitted to use frozen funds to pay £25,469 and business rates for April, May and June 2010, subject to reducing the rates calculation to reflect only 38,000 of the 47,000 square feet and deducting £8,000 attributable to Abbey Fireplaces. July was excluded because reletting might alter the liability and produce income. The order was to include appropriate repayment or restoration safeguards. There was no order as to costs.

The judgment concerned a part-heard first-instance application to vary a freezing order made by Blackburne J on 4 February. The underlying claim was to proceed to trial. The present court granted limited variation of the freezing order.