Claremont Group Interiors v Boultbee (Marylebone) Ltd

A freezing injunction requires a good arguable case and a real risk that assets will be dissipated unjustifiably. The possibility that assets may be dealt with in the ordinary course of business is insufficient. The court must assess whether the proposed dissipation is objectively unjustifiable, supported by solid evidence. The use of special purpose vehicles or offshore companies does not, without more, establish such a risk. Where a questionable intra-group security threatens to remove the only residual asset available to meet a judgment, the court may permit a sale but require the net proceeds to be preserved pending determination of the underlying claim.

The claimant contractor sought continuation of a without-notice freezing injunction over the respondent’s remaining development property. The underlying claim concerned approximately £884,000 allegedly due for construction work. The respondent proposed selling the property and applying the residual proceeds towards an intra-group debenture granted to its parent company. The central issues were whether the claimant had a good arguable case, whether there was a real risk of unjustifiable dissipation, and what form of interim protection was appropriate.

1. Good arguable case. The claimant satisfied the threshold. The existence of a serious and contested underlying dispute, and the earlier adjudicator’s refusal to award the relevant sum, did not prevent that conclusion.
2. Risk of dissipation. The claimant also established a real risk of unjustifiable dissipation. The ordinary use of corporate structures and special purpose vehicles was not, by itself, sufficient. The relevant question was whether the proposed dealing with the asset was objectively unjustifiable.
3. The debenture in favour of the respondent’s parent company raised serious questions. It had been created after practical completion and after the claimant had intimated substantial claims. The respondent’s solicitors had represented that the sale proceeds would leave a surplus of approximately £784,000, apparently inconsistent with the asserted priority and amount of the debenture. The absence of underlying evidence concerning the negotiations further weakened the respondent’s explanation.
4. If the debenture were used to divert the residual proceeds to an associated company in preference to the claimant, that could potentially engage sections 423 or 238 of the Insolvency Act. Such a payment would not necessarily be in the ordinary course of business.
5. The court therefore continued the injunction in a tailored form. The property could be sold, but the net proceeds remaining after repayment of Interbay and payment of necessary fees and disbursements had to be paid into court or held in a dedicated account by the conveyancing solicitors until judgment in the underlying trial or further order.
6. The respondent was ordered within seven days to provide documentary evidence of the sums owed to Interbay and the parent company, together with the completion statement. Costs were reserved.

The application was the return hearing of a without-notice freezing injunction granted by O’Farrell J on 1 November 2018. The injunction was continued in modified form.