Revenue & Customs v Cozens & Ors

A freezing order is an exceptional remedy. The applicant must show a good arguable case, evidence from which it is reasonable to infer that the defendant has assets within the order, and a real risk of dissipation. Dishonesty alone, coupled with a denial of assets, does not establish the existence of assets. The “double inference” approach in security for costs cases cannot dispense with that requirement. The absence of immediate prejudice to the defendant is not itself a ground for granting relief, although it may support continuation once the substantive requirements are met. The order may remain proportionate even where it is likely to secure only part of the claim.

HMRC obtained a worldwide freezing order without notice against Mr Cozens in support of proposed excise-duty assessments arising from an alleged inward diversion fraud involving duty-suspended alcohol. Mr Cozens applied to discharge the order.

The evidence subsequently showed that the property relied upon as a substantial asset belonged to an unrelated person. HMRC also relied on bank transactions, business interests and other circumstances as evidence of assets and a risk of dissipation. The issues were whether HMRC had shown a good arguable case, assets on which the order could bite, a real risk of dissipation, material non-disclosure, and a proportionate basis for continuing the order.

1. The application to discharge was dismissed. The worldwide freezing order was continued in its existing form, subject to argument on its precise terms.
2. HMRC had shown a good arguable case. Although limitation under section 12(4)(b) of the Finance Act 1994 remained arguable and required investigation by the First-tier Tribunal, evidence that the relevant AADs were not received until January 2010 was sufficient for present purposes.
3. A freezing order requires material from which the court can reasonably infer that the defendant has assets on which the order will bite. The evidence need not identify assets precisely, but the court must avoid acting in vain. The mistaken reliance on the Burley Hill property required the position to be reassessed, but evidence of Mr Cozens’s admitted interest in Globel Travel, possible interests in other businesses and unexplained financial activity supplied the necessary material.
4. The “double inference” discussed in Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC [2011] EWCA Civ 761 arose in the security for costs context and did not remove the need for evidence of assets in a freezing-order application. The court could not infer assets merely because a dishonest defendant denied having them.
5. The evidence established a real danger that any assets would be placed beyond HMRC’s reach. The alleged dishonest conduct was relevant, but it was not necessary to establish that Mr Cozens controlled the whole scheme or received its proceeds.
6. Following Flightwise Travel Service v Gill [2003] EWHC 3082 (Ch), absence of serious prejudice was not an independent ground for relief. It was nevertheless a relevant factor after the substantive requirements had been established. The likely partial recovery and the defects in HMRC’s evidence did not make continuation disproportionate.