Hall v Hargreaves & Anor

The court continued existing prohibitive and mandatory injunctive relief and a freezing injunction granted on a without-notice basis pending a full return hearing. The judge rejected the respondent's applications to discharge the injunctions on the grounds of material misstatement or non-disclosure, finding no established bad faith or deliberate material non-disclosure on the part of the petitioner for the purposes of the interim hearing.

The judge accepted that the petitioner had established a good arguable case that the first respondent had misappropriated company assets and taken steps to conceal and destroy evidence, giving rise to a real risk of dissipation of assets. The judge therefore concluded there were solid grounds to fear the first respondent might make himself judgment-proof and so continued the freezing relief until a full hearing; the court declined to extend the injunctions further at that hearing.

This was a first-instance return-day hearing of injunctions obtained on a without-notice basis in proceedings under section 994 of the Companies Act 2006, brought by the petitioner, Mr Sebastian Hall, against Mr Nicholas Hargreaves and Cloud Employee Limited. The two earlier interim orders had (1) preserved company assets and business pending the unfair prejudice petition and (2) granted a freezing injunction, the latter limited to assets within the jurisdiction and to £500,000.

Background and procedural posture: The petitioner sought continuation of both orders at the return date; the first respondent applied to set aside or discharge the orders on grounds of alleged material misstatement and failure of the petitioner to comply with the duty of full and frank disclosure on the ex parte applications. The first respondent also argued that the petition sought alternative remedies (buy-out or winding up) and had indicated willingness to accept winding up, such that freezing relief against him personally was unnecessary.

Nature of the relief sought: continuation of prohibitive and mandatory injunctive relief and continuation (and proposed extension) of the freezing injunction obtained without notice.

Issues framed by the court:

• whether there had been material non-disclosure or bad faith on the part of the petitioner sufficient to require discharge of the without-notice orders;
• whether the fact that the petition sought alternative remedies (including winding up) removed the basis for personal freezing relief; and
• whether there was solid evidence of a real risk of dissipation of the first respondent's assets entitling continuation of the freezing injunction.

Court’s reasoning and conclusions: The judge held that (i) the respondent’s criticisms of the way the matters were presented did not establish deliberate or material non-disclosure warranting discharge; (ii) the availability of winding up as an alternative did not render personal freezing relief inappropriate because the court retains discretion and a winding up would not preclude a buy-out or prevent enforcement against the respondent if appropriate; and (iii) the evidence demonstrated a good arguable case of dishonest appropriation of company monies and active concealment of conduct, which, together with the nature of the conduct, constituted solid evidence of a real risk of dissipation and a risk the respondent might make himself judgment-proof.

The result was that the existing freezing injunctions were continued until a full hearing, without any extension of scope being granted on that day and without setting further dates for provision of information.

At first instance the court ordered that the existing prohibitory and mandatory injunction and the freezing injunction should continue until the matter can be fully heard. The judge rejected applications to discharge the orders on grounds of material non-disclosure or misuse of evidence, finding no established bad faith for present interim purposes, and concluded there was solid evidence of a real risk of dissipation given a good arguable case of dishonest appropriation and concealment by the first respondent.