Umbrella Care Ltd (In Provisional Liquidation) v Khair Un Nisa & Ors

At an interlocutory stage, a court may draw reasonable inferences when assessing whether there is a good arguable case, particularly where strong evidence supports related allegations and the defendants provide no immediate explanation. Evidence of substantial misappropriation may itself demonstrate a real risk of dissipation for the purposes of continuing a freezing injunction. Alternatively, a good arguable case may arise from permitting a company to continue trading and incur equivalent losses when it was insolvent or should have ceased trading. The injunction may therefore be continued and increased where the additional liability is sufficiently supported by the evidence.

The claimant company, acting through joint provisional liquidators, sought to increase the amount secured by a freezing injunction made against the first and second defendants by Miles J on 29 July 2020. The earlier order froze assets to just over £16.2 million, based on a good arguable case concerning payments made to the defendants and their associates.

The issue was whether there was also a good arguable case in respect of approximately £10 million in further liabilities claimed by HMRC. The liquidators lacked specific evidence that those amounts had been paid away at the defendants’ instigation, but invited the court to draw inferences from the surrounding evidence. The court also reconsidered the risk of dissipation and the continuation of the injunction.

1. The freezing injunction was continued and increased. The court was satisfied that the claimant had shown a good arguable case for increasing the protected amount to £26,892,537.19, with a further return hearing in 13 days.
2. At this stage, the court could draw the necessary inference that additional unpaid tax liabilities had been misappropriated. The inference was justified by the strong evidence concerning the original £16.2 million and the absence of any immediate explanation from the defendants for the transactions described in the liquidators’ evidence.
3. Alternatively, there was a good arguable case that the defendants had permitted the company to continue trading and incur losses equivalent to the additional liabilities when, because of its liabilities, the company was insolvent or should have ceased trading.
4. The court reconsidered the risk of dissipation afresh. The evidence of the nature of the alleged misappropriations itself demonstrated that risk, and nothing arising since the earlier without-notice hearing displaced that conclusion. The second defendant’s lack of legal assistance was taken into account but did not prevent the court from reaching the interlocutory conclusion on the evidence.

The judgment records that Miles J made the original order on 29 July 2020. This court reconsidered the matter on the return hearing, continued the injunction, and increased the frozen amount.