Freestream Aircraft Limited v Seven Hundred Limited & Ors

A freezing injunction is not a means of securing a claimant’s prospective judgment. The applicant must establish a serious issue to be tried, solid evidence of a real risk that a future judgment will go unsatisfied because of unjustified dissipation, and that relief is just and convenient.

A bona fide arm’s-length sale for full value, with the proceeds retained by the respondent, does not ordinarily amount to unjustified dissipation merely because the respondent changes its business or proposes new investments. A transaction need not fall within the respondent’s ordinary course of business to be legitimate. The absence of detailed information about future investments is not, without more, solid evidence of dissipation.

Freestream claimed commission and associated liabilities arising from the sale of a private jet. It sought a domestic freezing injunction against the second defendant, which had sold its existing brokerage business, changed its name and received cash and shares as consideration.

The sale was accepted for the application as bona fide, arm’s length, unrelated to the litigation and not a sham. The central issues were whether Freestream had a serious issue to be tried, whether there was a real risk of unjustified dissipation, and whether relief was just and convenient.

1. Application refused. Freestream failed to establish the requirements for a freezing injunction.
2. The applicable test required a serious issue to be tried, good evidence of a real risk that a future judgment would not be met because of unjustified dissipation, and that it would be just and convenient to grant relief. The burden rested on Freestream.
3. Freestream had established a serious issue to be tried on its proposed amended case. The alleged inducement was sufficiently causatively connected to the alleged breach without requiring an allegation that the contracting party had acted dishonestly. Particulars of Freestream’s role in coordinating the sale had been provided. An alternative case based on unilateral termination was reasonably arguable, but acceptance of repudiatory breach through the Particulars of Claim was not, because the pleaded sale preceded termination.
4. Freestream had not raised even a prima facie case of unjustified dissipation. The evidence pointed to a legitimate arm’s-length sale at market value, with the consideration received by the respondent. The respondent remained a UK company, was not closing down, intended to continue trading in a new direction, and had substantial net assets.
5. It was unnecessary to prove an intention to put assets beyond creditors’ reach, but the objective effect still had to be unjustified dissipation. A legitimate explanation for the sale substantially undermined that case absent an additional feature, such as the respondent not receiving the proceeds or closing down.
6. The reasoning in Guerrero v Monterrico Metals Plc and Bravo v Amerisur Resources Plc was distinguishable because those cases involved the closure or relocation of the English business and no retained sale consideration. Organic Grape Spirit Ltd v Nueva IQT SL concerned the scope of the ordinary-course exception in an existing order and did not establish that every transaction outside that course was dissipation.
7. A new venture without an established ordinary course of business could nevertheless be legitimate. Retaining sale proceeds for new ventures did not create a future risk of unjustified dissipation without more. Nor did unwillingness to disclose commercially sensitive transaction details or future investment intentions justify an inference of risk where no prima facie case had otherwise been raised.
8. Since the dissipation requirement failed, it was unnecessary to determine whether relief was just and convenient. The application was refused.