AB v CD

Release of assets subject to a proprietary freezing injunction requires a staged inquiry. The applicant must show an arguable claim to the funds, an arguable claim to use them, and that no other significant assets are available. The court then conducts a careful and anxious balancing exercise between the claimant’s proprietary interest and the defendant’s ability to obtain a fair hearing.

Where the injunction was made by consent, the applicant must establish a significant and material change of circumstances which justifies variation. The court should respect the bargain embodied in the consent order and prevent interlocutory issues being re-litigated. Professional representation is a relevant factor, especially in complex litigation, but there is no automatic entitlement to use arguably proprietary funds. Any release may be limited and protected by conditions or security.

The claimants, companies in administration, brought complex fraud, fiduciary duty, dishonest assistance, knowing receipt and tracing claims against numerous defendants. Proprietary freezing orders had been made by consent against the Second and Tenth Defendants without an exception for legal fees.

The defendants applied to release funds subject to those orders so that they could fund their legal representation. They relied on the subsequent variation of criminal restraint orders and the exhaustion of a directors and officers insurance policy. The claimants opposed the application and offered limited security-backed access to funds. The issues were whether there had been a sufficient change of circumstances and, if so, whether the Marino staged test justified release and in what amount.

1. The application was granted in part. The court permitted release of £1.7 million plus VAT, covering costs from the date of the application until the end of trial. No release was permitted for accrued fees.

2. The applicable approach to release from a proprietary freezing injunction is staged: whether the claimant has an arguable proprietary claim; whether the defendant has arguable grounds for claiming the money; whether the defendant has shown that no other funds are available; and, if so, whether the balance of justice favours release. The burden at the third stage rests on the defendant.

3. The variation of the criminal restraint orders was not a material change, since the defendants could have sought that variation earlier. The exhaustion of the shared insurance policy was, however, a sufficient change. It was not realistically open to the defendants in 2021 to obtain an anticipatory release conditional on exhaustion of the policy, so the present application did not amount to abusive re-litigation.

4. The defendants accepted the claimants’ arguable proprietary claim and, for present purposes, their own arguable claim. The evidence established that they had no significant other available assets, taking account of the prior asset disclosure and the continuing effect of the criminal restraint orders.

5. At the discretionary stage, the court weighed the claimants’ proprietary prejudice, the size and complexity of the litigation, the seriousness of the allegations, the importance of professional representation, available security over property and chattels, existing costs safeguards, accrued and future costs, guideline rates and the need to limit expenditure. Professional representation was important but carried no predetermined weight. The court adopted a broad-brush assessment and required the defendants to match their expenditure to the funds available.