Chen & Ors v Chui & Ors (Rev 1)

A freezing injunction may be granted after judgment to protect the administration of justice and enforcement of an existing costs liability, including against a non-party whose involvement in asset dissipation is materially alleged. Fourie v Le Roux [2007] UKHL 1 does not require draft amended pleadings before such relief is granted. It is sufficient that there is an intention to seek joinder, a clear explanation for doing so and a proximate deadline for formulating the claim.

The court must be satisfied that the case is sufficiently cogent, that loss is covered by a cross-undertaking in damages, that no significant injustice or inequity points against relief, and that appropriate safeguards are included. The injunction must not become an end in itself.

The claimants had succeeded in earlier proceedings concerning their alleged equal ownership and control of Herb Magic UK Ltd. Following later proceedings concerning a property transaction, the fourth defendant obtained substantial costs orders against the claimants.

He subsequently sought information and a freezing injunction concerning the claimants’ home and shares in Fu Kang UK Ltd, alleging that assets had been transferred to their son and then to others to frustrate enforcement. Interim relief was granted and the son was joined as a defendant. The first claimant and her son applied to discharge or vary the order.

The central issues were whether the application was an abuse of process, whether Civil Procedure Rules rule 19.4 required draft pleadings before joinder, and whether the injunction was justified having regard to delay, alternative remedies and Articles 6 and 8 of the European Convention on Human Rights.

1. The application to discharge or vary the freezing injunction was rejected, subject to reducing the protected sum to £80,000 and clarifying that net sale proceeds were subject to the same aggregate limit.

2. The jurisdiction to grant a freezing injunction existed. The case was materially different from Fourie v Le Roux [2007] UKHL 1, which concerned relief sought before any substantive proceedings had been commenced or formulated. Here there had been fully contested proceedings, an established costs liability and an application made in aid of enforcement and the administration of justice.

3. Where relief is sought against a non-party after judgment, the usual course is to join that person as a defendant. The court need not have draft amended pleadings before granting interim relief. The applicant must show an intention to apply for joinder, explain why joinder is sought, accept the associated costs and cross-undertaking risks, and identify a proximate deadline for formulating and issuing the application.

4. The freezing-order jurisdiction may protect enforcement of judgment debts, including costs already incurred. Mercantile Group Europe AG v Aiyela [1994] QB 366 supported the availability of ancillary relief where there was prima facie evidence of third-party involvement and it was just and equitable to make the order.

5. The discretion was properly exercised. The timing and circumstances of the transfers, the continuing occupation of the property and the dealings with the company shares provided a sufficiently cogent case for interim protection. The court made no final finding of fact. The possibility that assets had already been transferred did not make the injunction pointless, since information might establish a continuing beneficial interest or traceable proceeds.

6. Article 6 was not infringed because the claimants and the fifth defendant understood the substance of the case against them. Article 8 was not infringed because the information order and freezing injunction had a cogent connection with matters before the court. The existence of a third-party debt application did not make the injunction inappropriate, particularly because the debt available through that route was uncertain and insufficient to meet the fourth defendant’s costs liability.

7. A freezing injunction must not become an end in itself. The applicant was required promptly to formulate, issue, serve and file any substantive application after receiving the ordered information. The injunction was therefore continued with safeguards and a revised monetary limit.

The judgment records earlier first-instance proceedings, subsequent appeals concerning costs and asset transactions, and unsuccessful applications for permission to appeal. Those matters formed the procedural background to the present application, which was determined at first instance in the High Court.