L & S Accounting Firm Umbrella Limited v Idusogie Laurel Oronsaye & Ors

A defendant seeking release of funds subject to a proprietary freezing injunction must first establish that no assets unaffected by the proprietary claim are available for living and legal expenses. Only then does the court balance the parties’ competing interests, including the defendant’s right to a fair hearing under article 6 and the claimant’s proprietary rights. That two-stage approach is compatible with article 6. A late adjournment of a fixed summary judgment hearing requires exceptionally strong justification. The court must consider the delay, the explanation given, prejudice to the opposing party and creditors, wasted court resources, and the interests of other court users. Where the defendants have delayed without satisfactory explanation and have produced substantial evidence and incurred substantial legal costs, an adjournment may properly be refused.

The claimant, a company in liquidation, brought claims alleging large-scale labour supply fraud, misapplication of funds, knowing receipt and dishonest assistance against two individuals and three companies. Freezing and proprietary freezing injunctions had been made, and a summary judgment application had been listed for a three-day hearing.

Shortly before the hearing, the defendants applied for release of funds to obtain legal advice and representation, an adjournment, and any necessary validation orders under section 127 of the Insolvency Act 1986. They relied principally on article 6 and asserted that they could not effectively defend the complex application without funding. The central issues were whether the defendants satisfied the test for release of proprietary funds and whether the late adjournment application should succeed.

1. Release of proprietary funds. The court applied the two-stage approach in Marino v FM Capital Partners Limited [2016] EWCA Civ 1301. First, the defendants bore the onus of establishing that they had no assets unaffected by proprietary claims from which to meet living and legal expenses. Secondly, if that threshold were met, the court would make a careful and anxious judgment balancing the defendants’ need to spend funds against the claimant’s arguable proprietary claim.
2. Article 6. The Marino approach was compatible with article 6. Article 6 was engaged at the second stage, once the defendant had established the need to resort to proprietary funds for legal advice and representation. The defendants had not reached that stage. They had failed to provide satisfactory evidence of the absence of other assets, including by failing to produce requested bank statements. The apparent falsification of invoices and continuing non-disclosure reinforced that conclusion. The court also had regard to the claimant’s property rights under article 1 of the First Protocol.
3. Adjournment. The application was made at the last moment, despite the defendants’ prior knowledge of the hearing and their existing legal representation. No satisfactory explanation for the delay was provided. The defendants had filed substantial evidence and had incurred legal costs of almost £150,000, which undermined their assertion that they could not defend the application. An adjournment would waste court time, cause prejudice to the claimant’s creditors and inconvenience other court users. The overriding objective therefore required the application to be refused.
4. The defendants’ application was dismissed. The summary judgment hearing was to proceed. Permission to appeal was refused because the decision was a case management decision with no real prospect of success and no compelling reason for an appeal. The defendants were ordered to pay the claimant’s costs of the application, subject to assessment if not agreed.

This was a first-instance case management decision. The court dismissed the defendants’ application and directed that the listed summary judgment hearing proceed.