CRO v REC & Anor

A freezing order must state clearly what the respondent is required to do, particularly where breach may lead to contempt proceedings. A standard legal-expenses exception containing a source proviso requires disclosure of the source of funds used for legal expenses. It does not, without express words, require disclosure of the amount spent. Purposive considerations cannot supply an invasive reporting obligation absent sufficiently clear language. The standard wording is ordinarily directed to funding the proceedings for which the freezing order was made, although other legal expenditure may fall within separate exceptions or be addressed by variation.

The claimant obtained a freezing order containing the standard exception permitting expenditure of a reasonable sum on legal advice and representation. The order also required the respondents, before spending money, to tell the claimant’s legal representatives where the money was to come from.

The claimant sought to establish that the source proviso required the respondents to disclose both the source and the amount of legal expenditure. The respondents disputed that construction. The central issue was whether the wording of the freezing order imposed an obligation to notify the claimant of the amounts spent on legal expenses.

1. The application was dismissed on the substantive issue. The freezing order did not oblige the respondents to notify the claimant of the amounts spent on legal expenses.
2. An injunction must be expressed in unambiguous language, especially because breach may expose the respondent to contempt proceedings. The court should not leave the scope of the obligation to be determined later in contempt proceedings. The standard wording did not expressly require notification of amounts spent, and the alleged obligation could not properly be implied.
3. The source proviso required identification of the source from which funds used for legal expenses originated. Its evident purposes were to enable scrutiny of whether the funds came from disclosed assets and, particularly in a worldwide freezing order, to prevent preferential consumption of assets more readily amenable to enforcement. Those purposes did not require continuing disclosure of expenditure.
4. A requirement to report each payment made towards legal fees would be highly invasive and would require clear express language. The light-touch control supplied by the reasonable-expenses limitation could instead operate through the conduct of the litigation, costs budgeting, costs schedules, security for costs applications, and the solicitor’s professional obligations.
5. The court did not accept the broader analysis in Cantor Index Ltd v Lister [2002] CP Rep 25, insofar as it treated disclosure of the source as inherently requiring disclosure of the amount. The judge also considered that the standard legal-expenses exception was principally directed to the proceedings in which the freezing order was made, though other expenditure might fall within the ordinary-course-of-business or living-expenses exceptions, and any uncertainty could be addressed by variation.