Battailon v Shone

For a freezing injunction to support a claim under section 423 of the Insolvency Act, the relevant state of mind is that of the transferor. A transfer may have several purposes; it remains relevant if putting assets beyond creditors was also an objective. Non-disclosure justifies discharge only where it is material, assessed in the context of the evidence already before the court. Even where non-disclosure is established, the court retains a discretion not to discharge the injunction, particularly where it was innocent, the merits and dissipation risk remain unchallenged, and the respondent’s evidence raises continuing concerns.

The claimants sought continuation of a freezing injunction against Mrs Shone, who was not a defendant to the substantive claim but had received substantial assets transferred by Mr Shone. The injunction had been granted without notice on 12 February. Mrs Shone applied to discharge it, alleging that the claimants had failed to disclose emails showing serious marital difficulties between the parties.

The parties accepted that there was at least a good arguable case under section 423 of the Insolvency Act and a risk of dissipation. The central issue was whether the omitted emails constituted material non-disclosure and, if so, whether the injunction should nevertheless continue.

1. Application refused and injunction continued. The court held that the emails were not materially non-disclosable in the circumstances. The evidence filed for the without-notice application had already disclosed marital difficulties, separation, Mr Shone’s relationship with Ms Taverner, and the possibility that Mrs Shone would rely on the marriage or related arrangements to explain the transfers.
2. The additional emails would have provided a fuller and more graphic picture of the marital problems, but they did not explain the challenged property transfers or show that the assets were transferred for Mrs Shone’s benefit, as part of a gift, or pursuant to a settlement. They therefore would not have altered the fundamental issues before the court.
3. For the section 423 claim, the relevant state of mind was that of the transferor, Mr Shone. The existence of another concurrent purpose, such as protecting family interests, would not prevent the claim if an objective of putting assets beyond creditors also remained.
4. In any event, even if there had been material non-disclosure, the court would have exercised its discretion not to discharge the injunction. The non-disclosure was not deliberate; there was no challenge to the continuation of the injunction based on the absence of a good arguable case or risk of dissipation; and Mrs Shone’s evidence raised significant unanswered questions about the transfers and her involvement in them.
5. The claimants were entitled to their costs of the continuation and discharge applications, subject to any discrete issues concerning matters such as living expenses. An interim payment of £20,000 on account of costs was ordered, payable by 4 pm on 9 July. A directions hearing was listed for 24 July.