Candy & Ors v Holyoake & Anor

A wide notification injunction is a modified form of freezing order, rather than a lesser and distinct remedy. The applicant must therefore show a good arguable case and a real risk, supported by solid evidence, that unjustifiable dissipation will prevent satisfaction of a future judgment. The intrusiveness of the proposed order affects whether relief is just and convenient, but does not lower that threshold.

The applicant bears that burden. A respondent need not explain its financial affairs unless the evidence first supports an inference of dissipation. Fortification described as reasonably satisfactory to the defendants is assessed objectively. An insurance policy is inadequate if there is an objectively reasonable risk that the insurer may avoid liability, particularly where its terms do not clearly exclude fraud-based avoidance.

The respondents brought claims arising from a £12 million loan and alleged that the appellants had conspired to intimidate them into oppressive agreements. The appellants denied the allegations and relied on an alleged final compromise.

Nugee J granted, and later continued in modified form, notification injunctions requiring notice of substantial dealings with the appellants’ assets. He also required £5 million fortification of the respondents’ cross-undertaking in damages. The Chancellor held that an amended insurance policy supplied satisfactory fortification.

The appellants appealed both the notification injunctions and the ruling on fortification. The central issues were the dissipation threshold for a wide notification injunction, the treatment of further evidence, and whether the insurance policy exposed the appellants to a reasonable risk of avoidance.

1. Notification injunction appeal allowed. A notification injunction in the wide form used here was a modified conventional freezing order. Its function, coercive effect, effect on third parties, and commercial stigma were substantially the same. It therefore required a good arguable case and solid evidence of a real, objectively assessed risk that unjustifiable dissipation would leave a future judgment unsatisfied. A less restrictive form of order did not permit a sliding scale or reduced threshold.

2. The respondents had not established even a prima facie case of that risk against any appellant. The transfer of a valuable property to a spouse, the alleged mismatch between one appellant’s lifestyle and publicly apparent means, and the existence of complex offshore structures did not, separately or cumulatively, justify reversing the burden of proof. Complex structures may enable dissipation, but do not evidence a risk that a party will use them improperly. The absence of prior dissipation despite a long-running dispute also weighed strongly against the alleged risk.

3. The form and scope of relief remained relevant to whether an injunction was just and convenient under Senior Courts Act 1981, section 37(1). The injunctions were highly intrusive, applied to global assets without a value cap, and in some respects were more onerous than a conventional freezing order. The absence of a real risk was sufficient to require the refusal of both injunctions.

4. The court also held that the further evidence should have been admitted. In the unusual fast-moving circumstances, the radical interim order had serious business consequences and the evidence bore directly on risk and justice and convenience. On the fuller evidence, including substantial assets within the jurisdiction, the 29 April injunction was disproportionate.

5. Fortification appeal allowed. Whether fortification is reasonably satisfactory to defendants is an objective question. The amended policy did not clearly exclude the insurer’s right to avoid for fraud in the policy’s placement. There was therefore an objectively reasonable apprehension that the insurer could deny liability if the respondents’ claim failed through dishonest conduct. The policy was not satisfactory fortification.

6. The court declined to decide whether fortification could now be required after discharge of the injunction. Any renewed application was remitted to the Chancery Division.

• Court of Appeal (Civil Division): Allowed the appeals, set aside the notification injunctions, held the insurance policy inadequate as fortification, and remitted any renewed fortification application to the Chancery Division.
• High Court, Chancery Division (Nugee J): Granted notification injunctions on 8 and 29 April 2016 and ordered £5 million fortification of the respondents’ cross-undertaking in damages.
• High Court, Chancery Division (the Chancellor): Held on 16 June 2016 that the amended insurance policy was compliant fortification.