Kea Investments Ltd v Watson & Ors

Where a judgment creditor seeks equitable execution against an asset held by an ostensible owner alleged to be the judgment debtor’s nominee, an injunction preserving that asset is analogous to a proprietary injunction. The ostensible owner must ordinarily show that alternative funding is unavailable before using the disputed fund for legal costs. The court must then balance the injustice to the claimant if the fund is depleted against the injustice of denying a potentially successful defence.

An interlocutory discretionary ruling does not itself create an issue estoppel. The Chanel principle nevertheless prevents serial re-litigation without a material change of circumstances. It does not prevent a respondent from relying on the correct legal principle when the other party seeks a fresh variation of the injunction.

Kea Investments Ltd, an unpaid judgment creditor of Mr Watson, alleged that assets held by Ivory Castle Ltd and certain assets held by Mr Gibson were in truth held as nominees for Mr Watson. Kea sought equitable execution over those assets and had obtained notification and preservation injunctions.

Ivory Castle and Mr Gibson applied for unrestricted access to funds held through Aegean LP to meet their legal costs. Kea applied to preserve a proposed payment from Cottian Ltd and to strengthen the injunction affecting assets held by Mr Gibson. The central issue was whether the defendants had to use Mr Gibson’s own or family assets before using funds whose beneficial ownership was disputed.

1. Application (2) was refused, save for a limited preservation order. Kea could not reopen the existing regime permitting Ivory Castle to use the Cottian monies for legal costs. The later availability of a substantial sum, further evidence supporting Kea’s substantive case, and two problematic invoices did not amount to a material change justifying that variation. The equivalent of US$27,500 was nevertheless to be preserved pending satisfactory evidence that the two Vistra invoices had been properly paid.

2. Application (1) was adjourned and no present access to the Aegean monies was granted. The claim that Ivory Castle held assets for Mr Watson, coupled with Kea’s claim for a receiver by equitable execution, made the case analogous to a proprietary claim. The court followed JSC BTA Bank v Ablyazov [2015] EWHC 3871 (Comm) and distinguished HMRC v Begum [2010] EWHC 2186 (Ch). The disputed assets could not simply be treated as Ivory Castle’s unrestricted property.

3. Applying the four questions in Independent Trustee Services Ltd v GP Noble Trustees Ltd [2009] EWHC 161 (Ch), Kea had an arguable analogous proprietary claim and Ivory Castle had an arguable claim to ownership. Ivory Castle should first use its remaining cash. The decisive discretionary balance favoured funding the aligned defences from Mr Gibson’s assets or family assets, rather than at the risk of the disputed fund.

4. The court invited a mechanism under which Mr Gibson could undertake to reimburse an equivalent sum with interest if Kea succeeded, supported by adequate security. It also held that costs drawn from disputed funds should be subject to control for reasonableness and proportionality.

5. Application (3) succeeded in part. The return-date application was not barred by the Chanel principle. There was a good arguable case that the Berenberg and Nationwide Capital funds were nominee assets. Mr Gibson was therefore restrained from spending them pending further consideration of Application (1).

This was a first-instance determination of interim applications. The judgment records the following related procedural history.

• High Court: In Glenn v Watson [2018] EWHC 2016 (Ch), Kea obtained substantive relief against Mr Watson.
• Court of Appeal: Mr Watson’s appeal concerning the interest rate was dismissed in Watson v Kea Investments Ltd [2019] EWCA Civ 1759.
• High Court: The court had previously continued the injunctions against Ivory Castle in Kea Investments Ltd v Ivory Castle Ltd [2019] EWHC 309 (Ch).