Yuzu Hair & Beauty Ltd v Selvathiraviam

This was an application to continue (or to grant afresh) a freezing order previously made without notice. The judge was satisfied on the evidence that the defendant (the company\'s former accountant) had defrauded the company of in excess of £300,000 and had caused the company to be struck off. The central legal question was whether a dissolved company could be the applicant for a freezing order pending restoration under section 1029 of the Companies Act 2006.

The court held that, rather than making orders on the application of a legal person that did not at that time exist, the court had jurisdiction under section 37 of the Senior Courts Act 1981 to make a freezing order on the application of the director/shareholder in the context of her proceedings to restore the company. Relying on authority (in particular HMRC v Eglinton and decisions cited therein), the judge concluded that interim relief could be granted to preserve assets for the benefit of the company if restored.

The court therefore continued and moulded the relief by adding the director as applicant, ordered disclosure and account enquiries (including an order under section 39 permitting execution by a Master if the defendant failed to execute documents), and made a limited passport/leave-the-jurisdiction order tied to compliance with disclosure. Costs were summarily assessed at £44,000.

Background and parties: Yuzu Hair & Beauty Ltd (dissolved) sought continuation of a freezing order obtained without notice against Akilan Selvathiraviam. There was compelling evidence of fraud of over £300,000 and that the defendant, the company\'s accountant, had by omission caused the company to be struck off.

Nature of the application: An application to continue a Mareva-type freezing order (or grant a fresh order) and for ancillary relief: disclosure of assets, bank account details (including from Nationwide), an order under section 39 to permit execution by a court officer if the defendant refused to execute documents, and a passport/leave-the-jurisdiction order. There was a pending application to restore the company under section 1029 of the Companies Act 2006; the Treasury Solicitor had not yet been served.

Issues framed:

• Whether a dissolved company can validly apply for or be granted a freezing order prior to restoration;
• Whether the court has jurisdiction (under section 37 Senior Courts Act 1981) to grant freezing relief to an applicant (the director/shareholder) in restoration proceedings to preserve assets for a company if and when it is restored;
• The appropriateness of ancillary orders: bank disclosure, an order under section 39 permitting execution by a Master, and a passport/leave order limited in time to secure compliance;
• Costs of the applications.

Court\'s reasoning: The judge accepted there were difficulties in making orders in the name of a legal entity that did not exist at the time of the application and that restoration might not be granted. However, the court could, under the wide powers in section 37 of the Senior Courts Act 1981, grant interim relief to a director who was pursuing restoration so as to preserve assets which the company, if restored, would assert as its own. The judge relied on the reasoning in HMRC v Eglinton (and other authorities including Cardile and Bayer AG v Winter) that freezing jurisdiction can extend to third parties in relation to whom the company (or its officeholder) would have claims and that the jurisdiction should be exercised rarely but was appropriate where no alternative (such as provisional liquidation) existed.

The judge therefore ordered that the director/shareholder be added as applicant and made orders continuing/renewing freezing relief, ordered disclosure and an order under section 39 permitting execution by a Master if the defendant failed to execute required documents, and granted a limited passport/leave-the-jurisdiction order tied to compliance with disclosure. The judge summarily assessed the applicants\' costs in the sum of £44,000. The Treasury Solicitor was to be involved in any restoration application but had not yet been served.

First instance: The court granted the relief sought in substance. The judge held that a dissolved company should not be the immediate applicant for a freezing order prior to restoration but that the court had jurisdiction under section 37 of the Senior Courts Act 1981 to grant interim freezing relief to the director/shareholder in the context of her application to restore the company under section 1029 Companies Act 2006. The director was added as applicant, the freezing order and ancillary disclosure and bank-enquiry orders were continued/made, an order under section 39 permitting execution by a Master was made, a limited passport/leave-the-jurisdiction order was granted pending compliance with disclosure, and costs were summarily assessed at £44,000.