Candy & Ors v Holyoake & Anor

An asset-wide notification injunction is a modified freezing order. It requires the same objectively assessed real risk, supported by solid evidence, that unjustifiable dissipation would prevent satisfaction of a future judgment. The threshold is binary. The intrusiveness of the proposed relief belongs to the separate assessment of justice and convenience. Applicants bear the burden and must establish the risk against each respondent. An explanation becomes necessary only once the evidence raises a prima facie case.

Insurance offered as reasonably satisfactory fortification of a cross-undertaking is assessed objectively. A reasonable apprehension that the insurer could avoid liability renders it unsatisfactory. General contractual language does not clearly exclude remedies for fraud in procuring the policy. Insurance may nevertheless provide adequate fortification in proceedings involving allegations of fraud.

Mark Holyoake and Hotblack Holdings Limited, a company ultimately owned by him, brought claims arising from a £12 million loan made to Mr Holyoake by CPC Group Limited. Christian Candy owned CPC, although the parties disputed whether his brother, Nicholas Candy, also owned or controlled it. The claimants alleged that the brothers, CPC and three CPC directors had conspired to intimidate them into disadvantageous agreements. The defendants relied on alleged defaults and a final compromise releasing the claims.

Nugee J imposed an interim notification injunction over the three appellants’ assets on 8 April 2016. On 29 April he continued a substantially modified injunction until trial and required £5 million fortification of the claimants’ cross-undertaking in damages. He excluded further evidence concerning dissipation and restricted the further evidence considered on justice and convenience. The appellants challenged those decisions.

After initially rejecting an insurance policy offered as fortification, Etherton C accepted an amended policy on 16 June. The appellants separately challenged its adequacy because the insurer might avoid liability for fraud in procuring it. The appeals concerned the threshold for asset-wide notification relief, the treatment of further evidence and the objective adequacy of insurance fortification.

1. Both appeals were allowed. Gloster LJ, with whom Jackson LJ agreed, held that the notification injunctions should be set aside and that the amended insurance policy was unsatisfactory fortification.

2. An asset-wide notification injunction was a modified freezing order. Its prohibitions, contempt machinery, commercial interference and reputational consequences justified the same threshold as a conventional freezing order. The applicant required a good arguable case and solid evidence of an objectively assessed real risk that unjustifiable dissipation would prevent satisfaction of a future judgment. The dissipation threshold was binary. A less intrusive order could not compensate for failure to meet it, although a simple notification requirement concerning specific property might stand differently.

3. The applicant bore the burden, and the evidence required holistic assessment. A respondent needed to explain matters only after evidence established a prima facie dissipation risk. The risk had to be established separately against each respondent. Here, the property transfer, apparent discrepancy between wealth and lifestyle, offshore structures and substantive allegations collectively fell substantially short. The opportunity to dissipate assets without doing so also weighed against the asserted risk.

4. Intrusiveness remained highly relevant to justice and convenience. Notification relief could be more onerous than conventional freezing relief through missing business exceptions, absent value caps or unrestricted territorial scope. Confidentiality, stigma and commercial disruption required consideration. The further evidence showed substantial domestic assets and at least £600 million in total assets against a £132.8 million claim. The injunction was disproportionate and its commercial interference outweighed its protective effect.

5. The judge had adjourned the final assessment of justice and convenience. He therefore had to consider the further evidence relevant to that unresolved question. Although unnecessary to the result, the court also considered that the unusually radical alteration of the relief sought required comparable latitude for the appellants to produce further dissipation evidence.

6. The requirement for reasonably satisfactory fortification imposed an objective standard. A reasonable apprehension that the insurer could avoid liability made the policy unsatisfactory. Applying HIH v Chase Manhattan Bank, clear and specific language was required to exclude remedies for fraud. The general waiver in clause 4.9 and express preservation of fraud-related rights in clause 4.18 left a real prospect of avoidance for fraud in placing the policy.

7. The court left the precise public policy restriction on contracting out of fraud unresolved. A real prospect of avoidance on that ground independently supported rejection of the policy. Insurance was not categorically unsuitable where fraud was alleged; sufficiently clear terms might provide adequate protection.

8. Whether fortification could or should be required after discharge had not been argued and was left open. Any renewed application was remitted to the Chancery Division.

1. Court of Appeal (Civil Division): In [2017] EWCA Civ 92 , both appeals were allowed. The court had announced on 6 October 2016 that the notification injunction would be set aside. It subsequently gave its reasons, rejected the insurance policy as satisfactory fortification and remitted any renewed fortification application to the Chancery Division.
2. High Court, Chancery Division, Etherton C: On 7 June 2016 the initial insurance policy was rejected and an unless order required compliant fortification. On 16 June the amended policy was accepted. The Court of Appeal reversed that assessment.
3. High Court, Chancery Division, Nugee J: An interim notification injunction was imposed on 8 April 2016. On 29 April a substantially modified injunction was continued until trial, with £5 million fortification required. Its terms were clarified on 10 May. The Court of Appeal set aside the notification relief.