The Commissioners for HMRC v Parul Keshavlal Malde

When a claimant has lost at first instance but has permission to appeal, continuation of a freezing injunction requires a real prospect of appellate success and a fresh assessment of all relevant circumstances. Permission to appeal does not itself satisfy that threshold. The court must weigh the hardship to both sides, the risk that dissipation would render the appeal nugatory, and the need to enable the appellate court to do justice.

Where the claimant is a public authority, the usual rule is that no cross-undertaking in damages is required. That rule may be displaced where the duration and administration of the injunction, together with the authority’s conduct, make its continuation oppressive. A forward-looking undertaking may then be required, although backdating it is not automatic.

HMRC brought a substantial claim against Mr Malde based on personal and director liability notices arising from alleged alcohol diversion fraud by two companies. Mr Malde succeeded before the First-tier Tribunal, leaving no outstanding assessments against him, but HMRC had permission to appeal to the Upper Tribunal.

Mr Malde applied to discharge a freezing injunction imposed in 2015. He argued that HMRC’s appeal lacked a real prospect of success, that the balance of hardship favoured discharge, and that continued restraint breached the reasonable-time guarantee in Article 6 of the European Convention on Human Rights. The issues were whether the injunction should continue, whether HMRC should provide a cross-undertaking in damages, and what variations were appropriate.

1. Application refused in substance. The freezing injunction was not discharged. There remained a real risk of dissipation and HMRC’s appeal had a real prospect of success on most grounds.
2. Permission to appeal was not conclusive. The threshold under Novartis AG v Hospira (UK) Ltd was higher than the merely arguable case required for permission. The court nevertheless found real prospects on the burden of proof, compartmentalisation of evidence, the cover-load and mirror-load analysis, the effect of the Pegasus Birds guidance, and adequacy of reasons. The challenge to the best-of-judgment findings, considered alone, was weak because it concerned factual findings supported by the FTT’s reasoning.
3. Article 6(1) applied to the freezing injunction because the underlying penalty proceedings were criminal for Convention purposes. The reasonable-time question depended on the complexity of the case, what was at stake, the conduct of Mr Malde, HMRC and HMCTS, and the number of jurisdictions involved. The period to the anticipated Upper Tribunal decision did not yet breach Article 6(1), although the position might require later review.
4. The balance of hardship favoured continuation because discharge could make any successful appeal nugatory. The court would reconsider the injunction’s terms to reduce its burden.
5. Following Sinaloa, HMRC ordinarily need not give a cross-undertaking. Here, the injunction’s exceptional duration, trenchant criticism of HMRC’s conduct and failures to respond promptly made continuation without an undertaking oppressive. A forward-looking undertaking was therefore appropriate, but backdating was unjustified.
6. Consequential directions were ordered for a less burdensome form of injunction, potentially including a capped undertaking, automatic expiry after the Upper Tribunal decision, a quarterly allowance and specified dealings without prior HMRC approval. Costs were reserved.

The judgment records that Mr Malde succeeded before the First-tier Tribunal and that HMRC had permission to appeal to the Upper Tribunal. The present court determined the interim application pending that appeal; it did not determine the merits of HMRC’s appeal.