4VVV Limited & Ors v Nicholas Spence & Ors

A freezing order requires a good arguable case on the merits, a real risk of unjustified dissipation, and justice and convenience. The risk must be supported by solid evidence and assessed separately against each respondent, with relevant factors considered cumulatively. A mini-trial is inappropriate. Dishonesty at the heart of the underlying claim may support an inference of dissipation, but unfocused allegations of dishonesty do not suffice. Unjustified failures to comply with asset-disclosure obligations may themselves support an inference of dissipation by concealment. Chabra relief may be granted where there is a good reason to suppose that assets held by a third party are beneficially owned by the defendant or are recoverable under section 423 of the Insolvency Act 1986. Further fortification requires an informed and realistic estimate of loss, a good arguable case of risk, and causation.

The claimants, investors in property schemes, sought continuation of worldwide freezing orders against the first and third defendants, further fortification of the cross-undertaking in damages, and Chabra relief against companies associated with the third defendant.

The defendants argued that there was insufficient evidence of a good arguable case, real risk of dissipation, or material non-disclosure. The third defendant also sought additional fortification based on alleged losses affecting property development, pension and cryptocurrency assets. The central issues were whether the evidential threshold for continuation of the freezing orders was met, whether the associated companies held assets as nominees or assets vulnerable to avoidance under section 423 of the Insolvency Act 1986, and whether further fortification was justified.

1. Discharge applications. The applications by the first and third defendants to discharge the worldwide freezing orders failed. The claimants had a good arguable case against each applying defendant and had shown a real risk of dissipation. The evidence was to be assessed cumulatively and by reference to realistic arguability, not by conducting a mini-trial.
2. The alleged fraud was relevant to dissipation because it was realistically arguable that the first defendant had promoted schemes in which later investors’ capital funded earlier returns. Complex corporate structures did not, by themselves, justify an inference of dissipation, but their alleged use in carrying out the scheme did. The first defendant’s failures, without reasonable excuse, to disclose bank accounts, loans and interests in property pursuant to freezing-order obligations provided further evidence of dissipation by concealment.
3. In relation to the third defendant, the material concerning misleading marketing, legal advice, the absence of meaningful due diligence, dividend payments and the subsequent use of associated companies provided a plausible evidential basis for concluding that there was a real risk of dissipation.
4. Full and frank disclosure. The claimants had not materially failed in their duty. Any errors were innocent and fell within the margin for error recognised in OJSC ANK Yugraneft v Sibir Energy. The freezing orders should in any event be continued.
5. Chabra relief. The application succeeded. There was a realistically arguable case that assets held by the XIP companies were held as nominees for the third defendant and that dividends paid by the fourth defendant were vulnerable under section 423 of the Insolvency Act 1986. It was just and convenient to restrain dealings with those assets, subject to appropriate safeguards and a cross-undertaking.
6. Fortification. The third defendant’s application failed. The evidence did not establish an informed and realistic estimate of loss or the necessary causal link between the freezing order and the alleged losses.

Not stated in the judgment. The judgment refers to related appellate and interlocutory decisions, including [2022] EWCA Civ 500 and [2022] EWHC 2398 (Comm), but those decisions concerned earlier stages of the same litigation.