Dodoun v Collings & Anor

At an interim stage, a claimant need show only a good arguable case for proposed claims and amendments. The court must then assess separately whether continuation of a freezing or proprietary injunction is justified.

A freezing order requires evidence of a real risk of dissipation, together with consideration of justice and convenience. A proprietary injunction requires an arguable proprietary claim, but the court must balance the risk of prejudice to each party, including the risk that the defendant will be unable to meet living expenses or legal costs and therefore defend the proceedings effectively.

Where disputed funds are not safely returnable before trial, they may instead be paid into a blocked account.

The claimant alleged that funds paid by clients and by Medtag Ltd into accounts presented as corporate accounts of Coppin Collings Investments Ltd were misappropriated by the defendants. The accounts were in fact personal accounts of the first defendant.

A freezing and disclosure order had previously been granted and continued pending a return hearing. The claimant sought continuation of the injunction, amendments to the claim, and permission to pursue derivative proceedings on behalf of CCI. The defendants disputed the merits, alleged that the Medtag funds were a personal loan, and sought discharge of the injunction.

The issues were whether the proposed claims were sufficiently arguable, whether CCI could be added and a derivative claim pursued, and whether the freezing or proprietary relief should continue.

1. Proposed claims and amendments. The claimant showed a good arguable case concerning both the client/investor payments and the Medtag payments. The court was not conducting a trial or mini-trial. The conflicting evidence, including the first defendant’s contemporaneous letter, WhatsApp messages, loan agreement and later affidavits, raised issues requiring investigation at trial. The proposed amendments were therefore permitted.
2. Derivative claim. Clause 1.2 of the sale agreement was sufficient to give the claimant standing to seek permission to bring a derivative claim. This followed from Companies Act 2006, section 260(5)(c), which includes a person to whom shares have been transferred or transmitted by operation of law within the relevant reference to a company member.
3. Client/investor funds. Although the parties disputed the underlying claims, neither party substantially disputed that the remaining balances should be preserved pending clarification. The appropriate course was to require sums corresponding to those balances to be paid into a blocked solicitor’s or escrow account pending trial or further order. The freezing-order issue was consequently moot in relation to those sums.
4. Freezing relief for the Medtag claims. The claimant did not establish by solid evidence a real risk of dissipation. The first defendant had substantial UK connections, there was no evidence of offshore dissipation, and the disclosed payments appeared largely to concern ordinary personal or domestic expenditure. The justice and convenience of continuing the order were also doubtful, given the limited assets remaining and the risk that restrictions would prevent the first defendant meeting living expenses and legal costs. The non-proprietary freezing order was therefore discharged.
5. Proprietary relief. Even assuming an arguable case that traceable Medtag funds belonged to CCI, the balance of convenience favoured refusing a proprietary injunction. The potential prejudice to the first defendant, including financial difficulty or inability to defend the claims, was not adequately addressed by a cross-undertaking in damages. The proprietary injunction was accordingly refused.
6. CCI was added as a party, permission to pursue the derivative claim and to amend the pleadings was granted, the outstanding client/investor balances were directed into a blocked account, and otherwise the existing freezing order was discharged.