Erlam v Rahman

A freezing order is not security for a debt and must not improve the applicant’s position over that of other creditors. It is justified where there is a real risk that a judgment will go unsatisfied because assets may be dissipated or disposed of otherwise than in the ordinary course of business, or dealt with so as to make enforcement materially more difficult without normal and proper business justification. The court must assess the evidence realistically, including unexplained transactions, inconsistent disclosure and lack of candour. Ancillary freezing-order proceedings should not duplicate disclosure or determine issues reserved for related charging-order proceedings. Relief should be time-limited and managed proportionately, with liberty to apply.

The claimant sought continuation of an interim freezing and disclosure order made in support of enforcement of an unpaid costs judgment arising from election proceedings. The defendant had challenged the underlying election decision by judicial review, so the claimant sought time-limited relief while enforcement remained uncertain.

The application concerned alleged incomplete disclosure about property interests, rental income, bank accounts, expenditure, third-party funding and other assets. The central issues were whether there remained a sufficiently demonstrated risk of dissipation, what further disclosure was appropriate, and for how long the freezing order should continue.

1. Freezing order continued. The claimant had established a continuing risk that, unless restrained, the defendant would dissipate assets and frustrate enforcement of the judgment debt. The defendant’s evidence was not sufficiently cogent to displace that risk. His inconsistent accounts of property ownership, unexplained payments, uncertain funding arrangements and failure to identify the destination of substantial cheques justified adverse inferences, although the court made no final findings of fact or ruling on contempt.
2. A freezing order is not granted to provide security for a claim. The claimant must show either a real risk that a judgment or award will go unsatisfied because the defendant may dissipate or dispose of assets otherwise than in the ordinary course of business, or that assets may be dealt with so as to make enforcement more difficult without normal and proper business justification.
3. The order would expire at midnight on 31 January 2016, rather than continue for the requested two years. The duration had to reflect the forthcoming trial of the related charging-order proceedings, with liberty to apply if those proceedings were not concluded.
4. Further disclosure was ordered concerning rental-income documents, alleged loans and funding, bank statements from 1 January 2010, substantial moveable assets and specified expenditure. Further disclosure concerning the beneficial ownership of the properties was refused because it duplicated directions already made in the charging-order proceedings.
5. The court applied the overriding objective by seeking to avoid repeated applications. The defendant was permitted monthly drawings of £2,020.81 from a nominated account, conditional on all income being paid into it. No allowance was made for legal expenses because the defendant had represented that those costs would be funded by third parties. Any application to draw frozen funds required cogent, complete and candid evidence.

Not an appeal. The judgment determined an application on the return date of an interim freezing and disclosure order.