London Capital & Finance Plc (in Administration) & Ors v Michael Andrew Thomson & Ors

A proprietary freezing injunction does not carry a presumption that the defendant may use assets which may belong to the claimant. The defendant must show, by comprehensive disclosure, that no other assets are available for legal expenses. If that burden is met, the court balances the potential injustice to both sides, giving particular weight to the defendant’s ability to obtain professional representation.

Delay is relevant through prejudice caused to the defendant, rather than by removing any supposed benefit gained by the claimant. The interests of unsecured creditors, including solicitors acting on credit, ordinarily carry little or no weight. A proprietary claim to land may be protected by a restriction, but not by a unilateral notice where the claim is an interest under a trust of land.

The claimants, companies in administration and their administrators, brought proprietary and other claims arising from alleged misuse of funds raised by London Capital & Finance Plc. The fifth defendant, Paul Careless, sought withdrawal of a unilateral notice affecting a property near Lechlade. The claimants sought a proprietary freezing injunction over traceable proceeds, including the property.

The parties agreed that the injunction should be imposed and that the claimants had an arguable proprietary claim. The dispute concerned whether the defendant should be permitted to use the sale proceeds for accrued legal fees and living expenses, and whether the claimants’ delay and application for the unilateral notice affected that discretion.

1. The proprietary freezing injunction was granted in the terms sought by the claimants, subject to minor points to be resolved if necessary. The court proceeded on the agreed basis that the claimants had a serious issue to be tried and that the defendant had an arguable defence.
2. The staged approach in Marino v FM Capital Partners Limited [2016] EWCA Civ 1301 applied. The defendant bore the burden at the third stage of demonstrating that he had no other assets available to meet his legal fees. His disclosure was inadequate. It did not explain what had happened to substantial sums received through Surge, identify the extent to which disclosed assets were subject to the proprietary claims, give sufficient details of loans exceeding £600,000, or provide an evidential basis for the valuation of shares.
3. The third-stage conclusion was sufficient to refuse release of the property proceeds. In any event, the fourth-stage balance of justice favoured the claimants. The purpose of releasing arguably proprietary funds is to prevent the defendant being unjustly deprived of professional representation. The defendant had already received professional representation and completed the trial. Any resulting prejudice was principally to his solicitors, who had acted on credit, and not to the defendant’s ability to present his case.
4. Delay was relevant because of any prejudice it caused the defendant. It was not appropriate to remove a notional benefit obtained by the claimants through delay. Here, the delay caused no relevant prejudice. The claimants’ mistaken application for the unilateral notice was made in good faith and did not amount to a lack of clean hands.
5. Under sections 33, 34 and 87 of the Land Registration Act 2002, read with section 1 of the Trusts of Land and Appointments of Trustees Act 1996, the proprietary claim was an interest under a trust of land. The unilateral notice was therefore impermissible. A restriction provided the coherent form of protection for an interim or finally declared proprietary claim.

First-instance decision. The judgment states that the substantive trial had concluded and judgment was reserved, but gives no appellate history.