Skatteforvaltningen (The Danish Customs And Tax Administration) v Barac & Ors

In an application to vary a proprietary injunction, a defendant may use funds arguably belonging to the claimant only after satisfying a three-stage test: an arguable case denying the proprietary claim; proper evidence that unaffected assets are absent or inadequate; and a careful balance of justice. The court should consider assets that can be sold or borrowed against, the need for professional representation, the risk of wasted expenditure, and whether payments are necessary for the defence. There is no automatic entitlement to use proprietary funds. For privacy, the general rule is a public hearing. A private hearing requires necessity, freedom of expression and proportionality. Clear reporting restrictions may protect confidential financial information while preserving open justice.

A tax authority brought proceedings concerning alleged fraudulent withholding-tax refunds and obtained a proprietary injunction against one defendant. He sought access to further funds for living and legal expenses. The court also considered whether the hearing should be private or subject to reporting restrictions. The authority sought to amend its particulars of claim, but that application was dealt with during argument and its reasons were not repeated. The central issues were whether confidentiality required a private hearing, whether a public hearing with reporting restrictions was proportionate, and whether the defendant had satisfied the three-stage test for varying the injunction.

Disposition. The hearing remained in public, subject to reporting restrictions concerning financial information and assets. The proprietary injunction was varied to permit expenditure on living and legal expenses until the July 2020 case management conference. The order was to require records of costs and disbursements.

1. Privacy. Under CPR r39.2, the general rule is that hearings are public. A private hearing requires both an applicable ground and necessity for the proper administration of justice. The court also had to consider freedom of expression under the European Convention of Human Rights and whether a less restrictive measure would suffice. Confidential personal financial information engaged CPR r39.2(3)(c), but reporting restrictions were a proportionate intermediate measure. They protected confidentiality while preserving the open justice principle. The relevant provisions of the Contempt of Court Act 1981 and the CPR permitted such an order.
2. Variation of the proprietary injunction. The court applied the three-stage framework summarised in GFH Capital Limited v Haigh [2018] EWHC 1187 (Comm) and treated as consistent with Marino v FM Capital Partners Limited [2016] EWCA Civ 1301:
   1. The defendant must show an arguable case that the funds do not belong to the claimant.
   2. The defendant must establish by proper evidence that unaffected assets are absent or inadequate. Assets capable of sale or borrowing against must be taken into account and used first.
   3. If that burden is met, the court must make a careful assessment of the balance of justice. There is no automatic entitlement to use proprietary funds. Relevant considerations include professional representation, the distinction between incurred and future legal costs, the risk of wasted expenditure, reasonable living expenses, and any undertaking to replenish funds.
3. The appropriate assessment period ran from the hearing to the July 2020 case management conference. The longer-term position was too uncertain because the form and timing of any trial had not been determined. The first stage was accepted. At the second stage, necessary expenses exceeded available unaffected assets by £69,589.
4. At the third stage, the court considered that the interests of justice favoured continued appropriate legal representation in complex, large-scale litigation. The potential prejudice to the claimant from using funds subject to the injunction was outweighed, for the immediate period, by the risk of injustice to the defendant if he could not defend himself with professional assistance. The position was to be reconsidered at the July conference.

This was a first-instance interlocutory decision. The judgment recorded that Jacobs J made the worldwide freezing order and proprietary injunction on 27 June 2018, which were continued on 13 July 2018 and by Cockerill J on 12 October 2018. A Consent Order dated 9 March 2019 permitted limited access to funds. Andrew Baker J made further case-management orders in February 2020, including provision for a July 2020 case management conference.