IAHP Group Holdings Limited (in Liquidation), Re

On a without-notice application, the court may grant proprietary and worldwide freezing injunctions where the applicant shows a good arguable case, justiciability, assets within the jurisdiction, a real risk of unjustified dissipation, and that relief is just and convenient.

The risk of dissipation is assessed objectively. Dishonesty alone is insufficient, but wrongdoing relevant to dissipation may strongly support the inference. Delay does not necessarily defeat relief where investigation and funding difficulties explain the timing. Asset disclosure must police the injunction rather than investigate the substantive claim. A liquidator’s cross-undertaking may be capped where the office-holder has no personal interest and adequate insurance provides protection.

Joint liquidators applied without notice against the former directors and shareholders of IAHP Group Holdings Limited. They alleged that company funds had been diverted for the respondents’ personal benefit and sought a proprietary injunction, a worldwide freezing order, and ancillary asset disclosure.

The application arose in the company’s liquidation. The underlying claim was brought under section 212 of the Insolvency Act 1986 for alleged misfeasance and breach of directors’ duties. The respondents contended that payments into the company were shareholder loans which could be set off against payments out.

The issues were whether there was a good arguable case, a real risk of unjustified dissipation, sufficient assets, and whether the relief was just and convenient, including the appropriate cross-undertaking in damages.

1. The proprietary injunction and worldwide freezing order were granted without notice. The respondents retained the usual right to apply on notice to set aside or vary the order.
2. The liquidators had a good arguable case. The pleaded evidence strongly suggested that substantial company payments were personal expenditure or withdrawals, while the alleged shareholder loans were unsupported by contemporaneous documentation. The court applied the substance-over-form approach to unlawful distributions identified in Progress Property v Moore [2011] 1 WLR 1 (SC).
3. The claim was justiciable in England because it arose from an English liquidation and the liquidators were officers of the court performing statutory functions under the Insolvency Act 1986.
4. A real risk of unjustified dissipation was established. Dissipation is assessed objectively. Dishonesty is not sufficient by itself, but evidence of wrongdoing relevant to dissipation may be powerful evidence of risk. The court applied the principles in Abu Dhabi Commercial Bank PJSC v Shetty [2020] EWHC 3423 (Comm), Holyoake v Candy [2017] EWCA Civ 92 and Lakatamia Shipping v Morimoto [2019] EWCA Civ 2203.
5. The delay did not disentitle the liquidators to relief. The investigation, tracing exercise, correspondence, funding arrangements and insurance requirements explained why the application was made when it was. The court applied Antonio Gramsci Shipping Corporation v Recoletos Limited [2011] EWHC 2242 (Comm) and Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm).
6. The disclosure order was ancillary to and necessary for policing the freezing order, rather than for investigating the substantive claim. The cross-undertaking was capped at £200,000, reflecting the liquidators’ lack of personal interest and the available cross-undertaking insurance.
7. The freezing order was made in the sum of £5,159,709.28. A proprietary injunction was granted over sums received from the company and assets representing those sums, together with worldwide disclosure of assets exceeding £5,000 in value.