Emma Sayers & Anor v John Charles Dixon & Anor

Where disputed funds are subject to a proprietary claim and a defendant seeks their release for living expenses or litigation costs, the court should ask sequentially whether the claimant has an arguable proprietary claim, whether the defendant has an arguable defence, whether the defendant cannot effectively defend the proceedings without release, and where the balance of justice lies.

The court must balance the defendant’s need for effective participation against the risk of spending assets which may belong to creditors. Representation by lawyers is desirable but is not automatically necessary for an effective defence. Asset-freezing relief will not ordinarily be discharged where delay resulted from agreed settlement discussions and the circumstances do not materially resemble the authority relied upon.

The claimants, trustees in bankruptcy, pursued proprietary and other claims concerning assets held by Janet Dixon. Interim injunctions froze her assets while permitting specified sums for living expenses and legal costs.

Mrs Dixon applied to discharge or vary the injunction. She sought increased living expenses and further funding for legal advice, representation, trial preparation and settlement discussions. The trustees opposed the application, relying on depletion of the disputed assets, the existing allowances and the availability of self-representation or alternative funding.

The central issues were whether Mrs Dixon had shown that she could not effectively defend the proceedings without further release of funds, where the balance of justice lay, and whether the agreed delay justified discharge of the injunction.

1. Applicable test. The court applied the sequential approach in Independent Trustees Services Limited v GP Noble Trustees Limited & Ors [2009] EWHC 161, approved by the Court of Appeal in Frederick Marino v FM Capital Partners Limited [2016] EWCA Civ 1301. The questions were whether there was an arguable proprietary claim, whether there was an arguable defence, whether the defendant could not effectively defend without release of the funds, and where the balance of justice lay.
2. The first two questions were answered affirmatively. Mrs Dixon had not shown that the existing allowance was insufficient to maintain a basic level of dignity. The evidence showed that she could budget within the allowance, and the trustees had reasonably considered requests for exceptional expenditure.
3. The further legal expenditure was refused. Advice, assistance and witness statement preparation fell within the existing allowance. Settlement-related delay had been agreed by both parties and did not justify treating further expenditure as necessary. Directions and settlement discussions could be managed by the parties. Although representation at trial would be beneficial, Mrs Dixon had not shown that she could not effectively defend the proceedings without it.
4. The balance of justice favoured protecting the disputed assets. They might belong to the trustees for the benefit of creditors, and further expenditure would significantly deplete the remaining liquid assets. The court nevertheless made limited provision for a possible future application for up to £5,000 plus VAT for legal advice on the merits and trial conduct, if settlement failed and third-party assistance remained unavailable. No entitlement to that allowance was determined.
5. The application to discharge or vary the injunction was refused. The agreed delay, undertaken to facilitate settlement and further the overriding objective, did not justify discharge. Lloyds Bowmaker Ltd v Britannia Holdings plc [1998] 1 WLR 1337 was distinguished on its materially different facts.