Cooke Anor v Venulum Property Investments Ltd & Ors

A freezing injunction requires an existing cause of action for the relief whose enforcement it is intended to protect. The possibility of a future order for costs does not constitute such a cause of action. Where a costs order has already been made, the court may protect the resulting entitlement, and may ordinarily include a reasonable allowance for future costs when freezing assets in support of an existing monetary claim. That practice does not permit freezing relief to be used as security for litigation costs where no order for costs or present entitlement exists. Ex parte relief should be sought only where fully justified, having regard to the risk of injustice and the availability of an inter partes hearing.

The claimants were pursuing county court proceedings concerning a disputed right of way against Venulum Property Investments Ltd and Mr Cadman. After the relevant property was transferred to Venulum Manor Works Ltd, the claimants obtained an ex parte freezing order against the third defendant in the High Court. The order was sought to protect the possibility of recovering their county court costs, although no costs order had yet been made.

On the return hearing, the third defendant challenged the court’s jurisdiction, the ex parte procedure, the evidence of dissipation and the form and service of the order. The central issue was whether freezing relief could secure a possible future costs entitlement.

1. Disposition. The court declined to continue the freezing order and dismissed the High Court action. The claimants were given liberty to apply in respect of the undertaking in damages and were ordered to pay the third defendant’s costs on the indemnity basis.
2. Jurisdiction. A freezing injunction protects an existing cause of action for monetary or other relief. The claimants had no existing cause of action against the third defendant for their county court costs. They had only the possibility of obtaining a costs order in the future. The court therefore lacked jurisdiction to grant or continue the order.
3. Costs orders and future costs. The position differs where an order for costs has already been made. Before the amount is quantified, the court may protect the entitlement created by that order. When freezing relief is otherwise available in support of an existing monetary claim, the court may also include reasonable amounts for interest and future costs. That practice cannot be extended to a case in which the only relief sought is security for costs and no costs order or present entitlement exists.
4. Relevant authorities. The general jurisdictional principle was supported by The Steamship Mutual Underwriting Association (Bermuda) Limited v Thakur Shipping Company Limited [1986] 2 Lloyd’s Rep 439 and Veracruz Transportation Inc. v VC Shipping Company Inc. [1992] 1 Lloyd’s Rep 353. Jet West Limited v Haddican [1992] 1 WLR 487 illustrated the different position where a costs order existed. The discussion of adding costs to a freezing order was supported by Atlas Maritime Company SA v Avalon Maritime Limited (No. 3) [1991] 1 WLR 917.
5. Procedure and costs. The original ex parte application was inappropriate because there was no grave risk of disadvantage in notifying the intended third defendant. The claimants also failed properly to draw the jurisdictional issue, the deletion of standard safeguards, the risk of dissipation and service deficiencies to the judge’s attention. Those matters made the case exceptional and justified indemnity costs.