Claimants Listed in Schedule 1 v Spence & Ors

The court granted interlocutory relief on an ex parte basis in part. The judge applied the established test for a worldwide freezing order under section 37 of the Senior Courts Act 1981 as explained in Lakatamia and Thane Investments, requiring (i) a good arguable case, (ii) a real risk of dissipation of assets and (iii) that it would be just and convenient to grant the order.

On the evidence before the court the claimants had a good arguable case in deceit and unlawful means conspiracy based on promotional materials and marketing representations (including fixed returns of 8–12%), valuation and administrator reports (CBRE and Quantuma) suggesting the returns were not deliverable and that the schemes had the hallmarks of a pyramid scheme, and contemporaneous correspondence indicating awareness of flaws. The judge found there was a plausible evidential basis to infer falsity and that the principal defendants knew, lacked honest belief in, or were reckless as to, the truth of the representations.

The judge also found a real risk of unjustified dissipation: assets were identified (notably properties and other assets in Florida and the United Kingdom), suspicious transfers and dividend payments had been made, defendants had resigned directorships and some funds could not be traced. Given those findings and appropriate safeguards (a cross-undertaking in damages supported by insurance), the court granted a worldwide freezing order and ancillary disclosure and service/enforcement relief in Florida against the first, second and third defendants, but refused the ex parte permission to bring a claim against the fourth and seventh defendants on the material before the court.

Background and parties: The claimants are a group of investors who purchased holiday and student accommodation marketed by companies within the Alpha Group between 2012 and 2019. The injunction respondents were three individuals who owned, controlled or directed the Alpha Group and related companies; other corporate defendants included marketing agents, developer companies and management companies. The claimants were represented by a Group Action Committee.

Nature of application: An ex parte application for a worldwide freezing order, disclosure orders and permission to serve out and to enforce the injunction in Florida. The claimants alleged deceit, unlawful means conspiracy and negligence and sought preservation of assets pending the substantive claim.

Issues before the court:

• whether the claimants established a good arguable case in deceit and conspiracy on the material before the court;
• whether there was a real risk of dissipation of assets sufficient to justify a worldwide freezing order;
• whether it was just and convenient to grant the injunction with appropriate safeguards;
• whether permission should be given to serve out and to permit parallel enforcement in Florida; and
• whether ex parte permission should be given to bring claims against certain corporate defendants then in insolvency or liquidation.

Key factual and evidential material: Promotional brochures and emails marketed fixed returns (8–12%); CBRE valuations and Quantuma administrator reports indicated the developments could not generate the represented yields and suggested returns were funded by incoming investor funds; contemporaneous emails from a defendant acknowledged business-model flaws; company accounts and dividend movements showed substantial payments leaving entities implicated in the schemes; assets in Florida and the United Kingdom were identified.

Court's reasoning: Applying the three-part freezing order test the judge concluded (i) there was a good arguable case in deceit and unlawful means conspiracy because representations were made in marketing materials and communications, those representations were likely false, and the defendants knew or were reckless as to their truth; (ii) the risk of dissipation was established objectively and separately for each of the first three defendants given the nature of the alleged fraud, asset movements, property purchases in Florida and the timing of resignations and liquidations; and (iii) it was just and convenient to grant relief subject to a protective cross-undertaking in damages (backed by insurance) and provision for the defendants to apply promptly to discharge the orders.

Disposition: The court granted, on an ex parte basis, a worldwide freezing order and ancillary disclosure and service/enforcement relief in Florida against the first, second and third defendants and provided for service out where necessary. The court did not grant ex parte permission to join or pursue claims against the fourth defendant conditionally without hearing from the liquidators, and was not minded to grant the application in respect of the seventh defendant on this ex parte material.

Wider context: The judge observed these are serious allegations involving many investors and substantial sums and emphasised that interlocutory relief of this kind requires proper safeguards including a cross-undertaking and timely opportunity for the defendants to be heard.

Application allowed in part. The court granted an ex parte worldwide freezing order, disclosure and ancillary relief against the first, second and third defendants and permission to serve out and to seek parallel enforcement in Florida, on the basis that the claimants had a good arguable case in deceit and unlawful means conspiracy, there was a real risk of dissipation and that it was just and convenient to grant relief with safeguards. The court refused ex parte permission to bring a claim against the fourth defendant on the conditional basis proposed and declined to grant permission against the seventh defendant on the material before it.