Dodoun v Collings & Anor

The claimant obtained an ex parte freezing and disclosure order from Falk J. and sought its continuation, together with permission to amend the pleadings to add derivative claims by Coppin Collings Investments Limited ("CCI"). The court held there was a good arguable case that monies paid into bank accounts (described by the claimant as client/investor funds and as a separate €300,000 from Medtag) were the subject of serious questions to be tried, and that the claimant had standing to seek derivative relief (Companies Act 2006, s.260(5) relied on for standing).

On the applications the court allowed amendment to add CCI and to pursue derivative claims, but concluded that the continuing freezing order should not be maintained in full. The sums corresponding to the remaining client/investor balances were ordered to be paid into a blocked solicitor's/escrow account pending trial or further order; the wider freezing injunction (in particular in respect of the Medtag funds) was discharged on the facts because the applicant had not demonstrated a sufficient risk of dissipation and the balance of convenience did not favour continuation. The judge applied the usual principles governing freezing orders: good arguable case, real risk of dissipation and the balance of convenience, and considered competing prejudice including the effect of a cross-undertaking in damages.

Background and parties: The claimant, an "introducer" of merchant payment business, alleged that payments from merchants' customers and a €300,000 payment from Medtag were paid into bank accounts which were represented to him as corporate accounts of CCI but in fact were in the first defendant's (Mr Collings) name. Falk J. granted a worldwide freezing and disclosure order on 16 May 2019; this judgment concerns the return date applications to continue the injunction and to amend the claim to add CCI and assert derivative and proprietary claims.

Nature of the applications: The claimant sought continuation of the freezing order pending trial, amendment of the claim to add CCI and to pursue derivative claims for breach of fiduciary duty, dishonest assistance, receipt and unjust enrichment, to assert proprietary/ tracing claims in respect of identifiable funds, and to reduce the weekly living allowance fixed for Mr Collings. The defendants sought discharge of the injunction and resisted the amendments.

Issues framed by the court:

• Whether the claimant had standing to bring a derivative claim and whether the proposed amendments disclosed a good arguable case;
• Whether there was a real risk of dissipation of assets such as to justify continuation of a freezing order (and, separately, whether proprietary injunctive relief protecting traceable funds should be granted);
• What was the appropriate manner of preserving the contested balances pending trial (continuation of freezing order, transfer into blocked account, or discharge).

Reasoning and conclusions: The judge found there to be a good arguable case on the merits in respect of both the client/investor payments and the Medtag payments, and that clause 1.2 of the SPA together with Companies Act 2006 s.260(5) gave sufficient basis for permission to pursue a derivative claim by CCI. However, continuation of a non-proprietary freezing order in respect of the Medtag funds was refused: the claimant had not proved a sufficiently solid risk of dissipation nor did the balance of convenience favour continued restraint given the defendant's personal circumstances and limited remaining resources and the practical effect of freezing on his ability to defend the proceedings. For the client/investor balances the court considered it appropriate, given uncertainty about the underlying merchant transactions and the parties' positions, to require sums corresponding to those balances to be paid into a blocked solicitor's/escrow account pending trial; if those sums are so secured the need for a broader freezing order becomes moot. The court therefore permitted the proposed amendments, ordered the blocked account payment, and discharged the freezing order except as to the blocked sums. Counsel were asked to agree an order reflecting the judgment.

The court allowed the claimant's application in part: permission was granted to amend the pleadings and to add CCI as a party and to pursue derivative claims (pursuant to Companies Act 2006 s.260(5)). The court found good arguable cases on both the client/investor and Medtag funds but refused to continue the freezing injunction in full. Sums corresponding to the outstanding client/investor balances were ordered into a blocked solicitor's/escrow account pending trial or further order; the broader freezing order (including in respect of the Medtag funds) was discharged because the claimant had not demonstrated a sufficient risk of dissipation and the balance of convenience favoured discharge.