The Lord Chancellor v Blavo

An interim freezing order requires a three-stage inquiry: whether the claimant has a good arguable case, whether there is a real risk that a judgment will go unsatisfied because assets will be dissipated, and whether granting the order is just and convenient. Dishonesty may support an inference of dissipation, but the court must examine the particular conduct and the respondent concerned. Past extravagant spending, without more, does not establish a risk of future dissipation. Ordinary commercial dealings, including paying undisputed creditors or avoiding bankruptcy, are not ordinarily prohibited. In contrast, misleading disclosure to the court and transfers apparently intended to put assets beyond reach may support continuation of the order.

The Lord Chancellor sought continuation of a freezing order against John Blavo. The order had initially been made without notice and later continued as a short-term holding measure. The underlying claim concerned alleged breaches of legal aid contracts and guarantees following an investigation into claims submitted by Blavo & Co. Solicitors Ltd, which had entered compulsory liquidation. The central issue was whether there was a real risk that any judgment against Mr Blavo would go unsatisfied because of dissipation of assets, and whether continuation of the order was just and convenient.

The interim freezing order was continued.

1. The court applied the three-stage test identified in Thane Investments Ltd v Tomlinson [2003] EWCA Civ 1272: a good arguable case; a real risk that judgment would go unsatisfied through disposal of assets unless restrained; and whether it was just and convenient to grant relief.
2. Mr Blavo conceded, for present purposes, that there was a good arguable case on the pleaded contractual claim. The critical issue was risk of dissipation.
3. The allegations of dishonesty were sufficiently focused and went to the heart of the claim. Applying the principle discussed in Jarvis Field Press Ltd v Chelton [2003] EWHC 2674 (Ch), dishonesty is not by itself enough. The court must consider the particular allegations and whether they justify an inference of dissipation. On the evidence, the alleged false claims, the failure to produce supporting files, and Mr Blavo’s close involvement with the relevant work provided real grounds for suspecting dishonesty and were relevant to that risk.
4. The approach in Congentra AG v Sixteen Thirteen Marine SA [2008] EWHC 1615 (Comm) was applied. The risk may arise from dissipation outside the ordinary course of business or from dealings making enforcement more difficult, unless justified for normal and proper business purposes.
5. Past purchases of expensive properties, cars and watches did not establish a risk of future dissipation. Nor did selling property to pay undisputed creditors or avoid bankruptcy. However, inaccurate disclosure concerning liabilities and ownership, together with a transfer of property apparently inconsistent with the explanation given, supported the inference of risk.
6. The court expressly confined its decision to the interlocutory questions. It made no definitive findings of fraud, dishonesty or deliberate impropriety. Those issues remained for trial after proper pleading, tested evidence and cross-examination.

The judgment records earlier interim stages in the same proceedings:

• High Court: Nicola Davis J made a without-notice freezing order on 26 November 2015.
• High Court: Coulson J continued the order on 3 December 2015 as a short-term holding operation pending an inter partes hearing.
• High Court (Queen’s Bench Division): Mr Justice Garnham continued the injunction on amended terms pending judgment and ordered that it continue, subject to final terms being settled.