Shepherd Construction Ltd v Berners (BVI) Ltd & Anor

A freezing order may be justified where there is solid evidence of a real risk that assets will be dissipated to avoid enforcement of a judgment. Broken promises to pay, repeated non-payment, dishonoured cheques, corporate structures outside the jurisdiction, unclear asset information and failures to comply with court orders may cumulatively establish that risk. Communications labelled “without prejudice” are not privileged merely because they bear that label. The rule does not apply to open communications dealing only with payment of an admitted liability, rather than negotiations for settlement.

The claimant obtained a freezing order against the defendants, limited to £1.75 million, following repeated failures to pay sums due under adjudication decisions, judgments in default and a Tomlin order. The defendants accepted that there was a good arguable case on the underlying debt but sought discharge of the order on the ground that there was no good and arguable case of a risk of dissipation.

The court considered whether communications promising imminent payment were protected by without-prejudice privilege, whether the evidence established a real risk of dissipation, and whether the order should remain worldwide or be confined to assets in the United Kingdom.

1. The freezing order was maintained. The claimant had established solid evidence of a real risk of dissipation.
2. Communications concerning when agreed and overdue sums would be paid were not without-prejudice negotiations. They contained no offer to compromise a disputed liability and were not made in an attempt to settle litigation. The communications were therefore admissible to show repeated broken promises and continuing non-payment. The approach in Bradford & Bingley PLC v Rashid [2006] UKHL 37 was directly applicable.
3. The defendants’ evidence created two alternative inferences. If the asserted cash-flow difficulties prevented payment, the repeated promises were made when the maker knew or should have known they would not be kept. If the promises were genuine, money intended for the claimant had been spent elsewhere. Either inference supported a risk of dissipation.
4. The relevant evidence included the broken promises, the defendants’ corporate structures and payment history, repeated failures to comply with judgments and court orders, dishonoured cheques, and the disparity between the defendants’ alleged assets and their failure to pay comparatively modest sums. The court applied the approach in Ninemia Maritime Corporation v Trave Schiffahrtsgellschaft MbH [1983] 2 Lloyd’s Reports 600 and followed the closely analogous reasoning in Chorus Group v Berners (BVI) Ltd & JJW Ltd [2006] EWHC 3622 (TCC).
5. The court also reached the same conclusion by applying the six considerations relied on from O’Regan v Iambic Productions (1989) 139 NLG, including the nature of the assets, the defendants’ financial standing, statements of intention, the nature of the substantive claim and previous compliance with court orders.
6. The order was not amended in respect of Berners. Net book value was not the appropriate measure of available assets, and the asserted figures were unsupported and potentially volatile. JJW was required to provide evidence of property values and related mortgages, loans and charges. JJW had liberty to apply for the order to be confined to United Kingdom assets if that evidence demonstrated a significant gap between value and borrowings.