St Vincent European General Partner Ltd v Robinson & Ors (Rev 1)

The court refused to continue a worldwide freezing order granted on a without notice basis and set that order aside. The claimant failed to show a good arguable case and failed to demonstrate a real risk of dissipation of assets. Key legal principles applied were the claimant's burden on a continuation of a freezing injunction to show (i) a good arguable case; and (ii) a real risk of dissipation; the strict duty of full and frank disclosure in without notice injunction applications; and the principle against recovery of reflective loss by a shareholder where the company itself has the primary cause of action.

The court found the claimant's central contentions inadequate: there was no arguable case that an unconditional tender was made which extinguished the security, and no basis for implying a contractual duty requiring creditor cooperation to the extent alleged (the decision relied on the strict test for implying terms). The claimant's claim for loss arising from asset stripping was vulnerable to the reflective loss doctrine and to the availability of derivative remedies. The claimant's significant delay and failure to identify present assets undermined the risk of dissipation. Finally, material legal and factual weaknesses and the contextual Joint Venture Agreement were not disclosed on the without notice application, breaching the duty of disclosure and rendering the original freezing order liable to be set aside.

Background and nature of the proceedings.

St Vincent, an Isle of Man incorporated property investor, sought continuation of a worldwide freezing order (WFO) obtained without notice against Mr Robinson, PTE and PPL arising from allegations relating to the control and disposal of shares in HHL and its Polish subsidiary HDP (the Cross Point Development). The WFO had been granted on 16 February 2017; St Vincent applied to continue it on notice and the defendants applied to set it aside. The judge also considered an application for cross-examination on a sworn assets affidavit.

Procedural posture.

• WFO originally granted by HHJ Waksman QC on a without notice application.
• Continuation application and set aside application heard together before Mr Justice Phillips in the Commercial Court.

Issues for decision.

• Whether St Vincent demonstrated a good arguable case against Mr Robinson and PPL on the pleaded heads relied upon for the injunction (notably repudiation/tender in relation to the Share Pledge and wrongful realisation/asset stripping).
• Whether there was a real risk of dissipation of assets if the injunction were not continued.
• Whether it was just and convenient, in the exercise of the court's discretion, to continue the WFO in light of delay and proportionality.
• Whether there had been material non-disclosure on the without notice application such as would require the WFO to be set aside.

Court's reasoning and findings.

• The court concluded St Vincent did not have a good arguable case on the key pleaded heads. On the tender/repudiation point the court found St Vincent made no actual unconditional tender of payment and that the communications and the Joint Venture Agreement showed the parties were negotiating a broader commercial deal conditional on agreed terms; there was no basis for implying the alleged cooperative term into the Share Pledge (the strict test for implying terms was applied).
• On the asset stripping claim the court held the claimant's alleged loss was primarily reflective of loss to HHL and therefore engaged the reflective loss principle articulated in Prudential v Newman and Johnson v Gore-Wood; the appropriate remedy for HHL (including derivative proceedings) made St Vincent's direct recovery unlikely to be maintainable.
• The court found that the substantial delay in seeking a freezing order, together with the absence of evidence of significant present assets and of current risk of dissipation, significantly weakened the claimant's case on risk of dissipation.
• There was a failure to make full and frank disclosure on the without notice application: important factual and legal weaknesses (including the Joint Venture Agreement and reflective loss arguments) were not sufficiently disclosed and would have materially affected the earlier judge's exercise of discretion. That failure justified setting aside the WFO.

Relief sought. Continuation of the WFO on notice and permission to cross-examine on assets; defendants sought the WFO to be set aside and undertakings released.

Outcome. The WFO was set aside and the Continuation Application dismissed. The Cross-Examination Application therefore did not arise for decision.

At first instance the court set aside the worldwide freezing order and dismissed the application to continue it. The judge held that the claimant had not established a good arguable case on the main pleaded grounds, had not shown a real risk of dissipation given delay and lack of identifiable assets, and had failed in the duty of full and frank disclosure on the without notice application; on those bases the injunction was unjustified and was discharged.