BDW Trading Ltd v Fitzpatrick & Anor

A freezing injunction may be continued where there is a good arguable case, evidence of past dissipation and a sufficiently proximate risk that assets will be dissipated. Specific disclosure may be ordered before the close of pleadings where the documents are plainly relevant and early disclosure is practically necessary. The equitable jurisdiction to protect and trace trust assets is distinct from the Norwich Pharmacal jurisdiction. It permits appropriate information orders where there is a real prospect of locating or preserving assets, subject to proportionality. In a proprietary case, the ordinary-course-of-business exception to a freezing order may be restricted where the court cannot assess the legitimacy of the defendant’s business. Documents disclosed in the proceedings may be used for related tracing and disciplinary purposes where the interests of justice favour permission under CPR 31.22 and no serious injustice is caused.

BDW Trading Ltd alleged that its employee, Michael Neill Fitzpatrick, and his company, Top Construction Services Ltd, had received secret profits, bribes or commissions from subcontractors and had misused confidential information. Newey J had granted a freezing injunction and ancillary disclosure orders. On the return application, BDW sought continuation of the injunction, earlier bank statements, an order requiring information about the receipt and disposition of relevant assets, restriction of TCS’s ordinary-course-of-business exception, and permission to use disclosed information in tracing and disciplinary proceedings.

The central issues were whether the additional disclosure could be ordered under the equitable jurisdiction, whether the business-expense exception should remain, and whether the use restrictions attached to disclosed information should be relaxed.

1. Freezing injunction. The injunctions were continued. BDW had a good arguable case, and the evidence showed past dissipation through loans, gifts, cash withdrawals and an extravagant lifestyle. The alleged dishonesty was sufficiently proximate to establish a risk of dissipation, and continuation was just and convenient.
2. Bank statements. Immediate disclosure of statements from 30 September 2009 to 19 October 2014 was ordered under CPR 31.12. The request was not a fishing exercise. The existing evidence and unexplained payments exceeding £1 million showed that the statements were plainly relevant, and BDW had no realistic practical alternative to discovering the extent of the alleged scheme.
3. Information about assets. Following FHR Ventures v Cedar Capital [2015] AC 250, the parties accepted that bribes or secret commissions received by an agent were held on trust for the principal and gave rise to a proprietary remedy. The court held that the equitable jurisdiction to protect and trace trust money was distinct from the Norwich jurisdiction. The modified order, limited to payments exceeding £5,000 from 30 September 2009, was proportionate and justified because there was a real prospect of locating or preserving BDW’s assets. More stringent Norwich requirements did not govern the equitable jurisdiction.
4. Ordinary course of business. Because BDW had a proprietary claim and the respondents had not explained TCS’s legitimate activities, it was difficult to balance the competing injustices required by Halifax v Chandler [2001] EWCA Civ 1750. The exception was therefore removed, subject to payment of VAT and corporation tax and any later application concerning specifically identified expenses.
5. Use of information. Permission was granted under CPR 31.22 for BDW to use the information for tracing claims and disciplinary proceedings. The court balanced BDW’s interests against Mr Fitzpatrick’s interests and concluded that the proceedings and disciplinary process were closely connected, that the purpose of the relief was to enable appropriate action against wrongdoers, and that no serious injustice would result. The confidentiality-club restriction was consequently released.

This was a first-instance decision on the return application following the freezing injunction and ancillary orders made by Newey J on 19 October 2015, varied by consent order approved by Peter Smith J on 29 October 2015.