Cardium Law Ltd v Kew Holdings Ltd

A freezing order requires a real risk of unjustified dissipation. The court assesses all relevant circumstances together. A special-purpose vehicle with a single asset, offshore ownership structures, deliberate non-payment of established liabilities, access to funds, and failure to offer security may cumulatively establish that risk, although no factor is necessarily sufficient alone. The risk need not be tied to an imminent sale or immediate distribution of proceeds. A without-notice application requires separate justification: a real risk may justify a freezing order without being sufficiently imminent to justify proceeding without notice. The applicant must make full and frank disclosure of material facts, including correspondence bearing on imminence. Material non-disclosure may affect costs and procedure without requiring discharge where no prejudice is shown.

Cardium Law Ltd had acted for Kew Holdings Ltd in professional-negligence proceedings under a hybrid conditional fee agreement. After Kew stopped paying invoices, Cardium terminated the retainer and sought relief under Solicitors Act 1974, including payment of approximately £468,344. Cardium obtained a without-notice limited freezing order over Kew’s interest in a property and part of its sale proceeds.

Kew applied to set aside or discharge the order. It contended that there was no real risk of dissipation, that the application should have been made on notice, and that Cardium had failed in its duty of full and frank disclosure. The issues were whether the freezing order remained justified and what consequences followed from the disclosure failure.

1. Order continued. The limited freezing order was continued until trial or further order, subject to redrafting of paragraphs 5 and 6 to give Kew greater flexibility. Kew could deal with the property if it retained an equity of redemption, or uncharged sale proceeds, of at least £525,000 and gave Cardium written notice before entering any legal commitment. The parties were directed to agree suitable wording.
2. The governing question was whether there was a real risk that Kew would unjustifiably dissipate assets so as to become judgment-proof. The purpose of a freezing order is not to provide security, but to restrain evasion of enforcement. The burden remained on Cardium, and solid evidence was required.
3. The court had to stand back and assess the whole picture. Kew’s status as a Cayman Islands special-purpose vehicle with a single asset was relevant but insufficient alone. Its significance increased because its controller had substantial wealth held outside the jurisdiction through corporate structures. Kew’s history of serious and deliberate non-payment, including non-compliance with court orders, and evidence that its controller had access to funds but chose not to use them, materially supported the risk.
4. Kew’s failure to offer security was insufficient by itself. In context, its status as a single-asset, non-trading company and its failure to identify commercial detriment strengthened the concern that it might render itself judgment-proof. The later payment of the judgment debt owed to DIA removed the immediate sale-related feature but did not eliminate the wider risk.
5. The duty of full and frank disclosure on a without-notice application is high and extends to material facts, relevant procedural matters, and the significance of documents. The correspondence, particularly the 7 December email, should have been disclosed because it bore on the imminence of dissipation and whether notice should be given. The omission was material to the without-notice decision, but did not affect the underlying risk of dissipation or cause prejudice sufficient to discharge the order.
6. A freezing order may be justified without notice only where the risk is sufficiently imminent to justify that procedure. The fact that such applications are commonly made without notice is not itself sufficient. Here, the order was retained, but Cardium was denied its costs of the without-notice hearing because full disclosure might have led to notice being required.