Barclays Bank PLC v Scott Dylan & Ors

A freezing order requires a good arguable case, a real risk of dissipation, and proof that relief is just and convenient. The risk must be assessed separately for each defendant. Dishonesty and conduct connected with the claim may support an inference of dissipation, but an intention to defeat judgment need not be shown.

For restitution, coordinated transactions may be treated as a composite when their purpose, effect and causal links provide a plausible basis for saying that the defendant’s enrichment was at the claimant’s expense. A provisional liquidator may be appointed where a winding-up order is likely and the company’s assets, management integrity, books or records are in jeopardy. The court must also balance the serious consequences of that intrusive remedy.

Barclays Bank plc brought proceedings and related applications arising from substantial unauthorised overdrafts on accounts operated by companies within a corporate group. It alleged that funds were transferred through group companies to four individuals and sought freezing orders against them.

Barclays also sought the appointment of provisional liquidators over eleven companies. The applications concerned whether there was a good arguable case in deceit, procuring breach of contract or restitution; whether assets were at real risk of dissipation; whether the statutory threshold for provisional liquidation was met; and whether the remedies were just and proportionate.

1. Freezing orders. The court held that the familiar requirements were satisfied where applicable: a good arguable case, a real risk of dissipation, and a just and convenient order. Full and frank disclosure and an adequate cross-undertaking in damages were also required.
2. The deceit claim against the first defendant did not meet the good arguable case standard. Under the banking terms, the bank decided whether to process an instruction where there were insufficient funds. Giving an instruction therefore did not represent that an overdraft had been authorised or that sufficient funds existed.
3. The claim for procuring breach of contract also lacked a good arguable case. Processing a payment that created an unarranged overdraft was permitted by the contractual scheme. The customer’s obligation was to repay the overdraft on demand; giving the instruction, even without an immediate ability to repay, was not itself a contractual breach.
4. The restitution claim did meet the standard. Coordinated and carefully linked transactions may be considered together when determining whether enrichment was at the claimant’s expense. On the evidence, there was a plausible case that the payments formed a scheme to extract money from the bank and transfer it ultimately to the individuals without consideration: Investment Trust Companies (In Liquidation) v HMRC [2017] UKSC 29.
5. A real risk of dissipation was established separately against each defendant. Relevant matters included the apparent coordinated scheme, unexplained transfers, attempts to alter corporate control, questionable director appointments, the first defendant’s conduct and the close relationships between the defendants. The orders were just and convenient.
6. Provisional liquidation. Applying section 135 of the Insolvency Act 1986, the court held that each company was likely to be wound up because its undisputed overdraft debts remained unpaid. The principles in Commissioners for HMRC v Rochdale Drinks Distributors Limited [2011] EWCA Civ 1116 supported consideration of jeopardy to assets, management integrity, accounting and records.
7. The remedy’s intrusive nature required a balance of prejudice. Provisional liquidators were appointed for the first to tenth companies because of serious governance concerns and the need to investigate and preserve assets. The eleventh company stood differently because it appeared to have employees, net assets and less serious governance concerns; the same order was not made for it. The bank was permitted to present winding-up petitions without complying with conditions B and C in the amended Schedule 10 regime.