Dinglis Properties Ltd & Anor v Dinglis Management Litd & Ors

The court considered an application to discharge a without-notice freezing order. The established criteria for a freezing order (good arguable case, real risk of dissipation and that it is just and convenient to grant relief) were applied, drawing on the guidance in Thane Investments v Tomlinson and subsequent authorities. The defendants had conceded a good arguable case on the pleaded claims, but there was no solid evidence of actual dissipation and the pleaded facts alone did not demonstrate a propensity to dissipate. The court held that any inference of propensity was rebutted by the defendants' conduct since 2012 and by the practical inability of the defendants to strip economic value from their minority shareholdings in the principal company. In addition, the claimants had committed a serious failure of full and fair disclosure in relation to alleged dissipation (notably failing to disclose that certain payments were to the claimants themselves, that at least one payment to Apollo was legitimate, and the existence of an unlimited guarantee by Paul), though there was no finding that the failure was deliberate. For these reasons the freezing order was discharged.

Background and parties: The dispute arose from a family breakdown within the Dinglis family and concerned a property business carried on by family companies. The principal parties included Andreas Dinglis, his children Paul and Cheryl, various family companies (including the first claimant DPL, the second claimant Gatemark and the first defendant DML) and Eagle Shareholdings (held by Cheryl). Paul and Eagle had intimated s.994 Companies Act 2006 proceedings but had not commenced them. The first claimant and Gatemark alleged that DML had failed to account for rents and that Paul and Cheryl breached directors' duties and were liable for knowing receipt.

Procedural posture and relief sought: On 10 July 2015 Asplin J granted, without notice, a freezing order preventing the defendants from dealing with assets below a £4 million threshold. The defendants applied on 13 November 2015 to discharge that freezing order.

Issues framed: (i) Whether the claimants had a good arguable case (the defendants accepted there was a good arguable case for the purpose of the hearing); (ii) whether there was a real risk that the defendants would dissipate assets otherwise than in the ordinary course of business so as to frustrate any judgment; (iii) whether it was just and convenient to continue the order; and (iv) whether the claimants had breached the duty of full and fair disclosure in the without-notice application.

Court's reasoning:

• The judge reiterated that a freezing order requires solid evidence of the likelihood (a real, not fanciful, risk) of dissipation and that the claimant must show both propensity and ability to dissipate.
• Although the defendants had admitted a good arguable case on the pleadings, that admission did not automatically supply evidence of a propensity to dissipate unless the pleaded facts inexorably pointed to dishonesty. If the pleaded facts were consistent with innocent breach, further evidence would be required to show propensity.
• The court accepted the claimants' earlier reliance on alleged evidence of actual dissipation had fallen away: there was in fact no evidence of actual dissipation. That diminished materially the case for propensity. The defendants’ conduct since 2012, and the absence of steps to move assets offshore or otherwise dissipate them, rebutted any inference of propensity.
• On ability, the judge analysed the practical effect of the defendants' minority shareholdings (each 12% of DPL) and concluded that, in practice, the minority shareholders could not strip the economic value from those shareholdings because of the majority control retained by Andreas, constraints on dividends, the difficulty of realising capital and the need for registration to transfer shares. Additional assets (DEL shareholdings etc.) reinforced the conclusion that there was no real risk of dissipation below £4 million.
• On disclosure, the court identified a serious failure to disclose material matters relevant to the risk of dissipation: (a) several payments alleged as to undisclosed payees were in fact payments to the claimants; (b) at least one payment to Apollo was legitimate; and (c) Paul had given an unlimited guarantee of DPL’s liabilities. The failures were serious and should have been disclosed, though there was insufficient evidence to conclude deliberate misconduct by the claimants.

Result: The judge discharged the freezing order on the principal ground that there was no sufficient risk of dissipation to the level stated in the order. He added that, had that conclusion not been reached, he would have discharged the order for serious and culpable non-disclosure.

The court discharged the without-notice freezing order. The primary rationale was that there was insufficient evidence of a real risk of dissipation: there was no evidence of actual dissipation, any inference of dishonest propensity from the pleadings was rebutted by the defendants' conduct and by the practical inability of the defendants to dissipate the economic value of their minority shareholdings. Further, the claimants had committed a serious failure of full and fair disclosure in relation to alleged dissipation, which independently supported discharge (though the failure was not found to be deliberately dishonest).