The Court of Appeal considered an appeal against the decision at a return date to set aside a worldwide freezing order made without notice, as against a number of defendants.
The freezing order was made pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982 ('the "CJJA") in aid of substantive proceedings in Scotland in which the claimant was advancing allegations of conspiracy against all defendants.
The Court considered, in particular, the circumstances in which a freezing injunction under section 25 of CCJA would be made, purely, in support of 'foreign' proceedings; "foreign" meaning in context: outside the jurisdiction of England and Wales. The Court of Appeal particularly focused on the 'inexpedient' limb of the test where the defendants were not resident in the jurisdiction and there were no assets within the jurisdiction.
The Court of Appeal also considered the duty of full and frank disclosure and how it applies to appeals, finding the failure to satisfy the duty provided an independent basis on which to refuse to continue a freezing order; appeals on new evidence should be discouraged where the duty has not been complied with.
Mex Group Worldwide Ltd v Ford and others [2024] EWCA Civ 959
What are the practical implications of this case?
The case will be of interest and practical importance to practitioners and others considering freezing injunction applications in England and Wales in support of foreign proceedings and of particular note is the position where substantive proceedings are in Scotland.
An arguable case can be evidenced by a relevant determination of the foreign court where the substantial proceedings are on foot – the Court of Appeal holding that there was no rule against the admissibility of such evidence for the purposes of an interlocutory hearing.
The ordinary rule or approach to section 25 of the CJJA applicable for many years remained despite Brexit. That rule dictated that save in the most exceptional circumstances, it would be generally inexpedient to grant a worldwide freezing order in support of foreign proceedings where the defendant had no residential connection to the jurisdiction (giving rise to jurisdictional control) or assets in the jurisdiction.
The need for a connection with England and Wales was not removed by the combined effect of the Privy Council's decision in Convoy Collateral Ltd v Broad Idea International Ltd [2021] UKPC 24, [2023] AC 389 and the withdrawal of the United Kingdom from the European Union.
The case serves as a reminder of the fundamental duty of full and frank disclosure at a without notice hearing.
What was the background?
The claimant had commenced proceedings in Scotland.
An application without notice (and despite significant delay) was renewed before the High Court in England and Wales. The application was granted without notice to the defendants but a continuation of that freezing order was refused at a return date hearing.
That the claimant had a good arguable case was accepted by the first instance judge, but the defendants challenged that conclusion by way of cross-appeal.
When considering an application pursuant to section 25 of the CJJA, the High Court applies a two-stage test:
- First, if the facts would warrant the relief sought if the substantive proceedings were brought in England; and
- Second, if so, whether the fact that the court has no jurisdiction apart from section 25 makes it inexpedient to grant the interim relief sought: see Refco Inc v Eastern Trading Co [1999] 1 Lloyd's Rep 159, 170-1)
The key reasons that a continuation of the freezing order was refused included:
- It was inexpedient to grant an order where there was a lack of connection with England and Wales: the defendants were not resident, the assets were not in the jurisdiction, and the underlying claim was brought in Scotland; and
- The lack of a viable evidential case on the risk of the respondents dissipating their assets – significant here was a delay in seeking the order in which time the respondents had taken no steps to remove assets from the reach of the Scottish Courts.
The claimant appealed these findings to the Court of Appeal and the defendants cross appealed as to the acceptance of a good arguable case.
The defendants' appeal challenged whether the first instance judge was entitled to find that the granting of an order at an ex parte hearing in Scotland meant it was common ground that there was an arguable case to satisfy the gateway to a freezing order in England. A subsidiary question became whether any subsequent finding of an arguable case in the Scottish Courts could be reliable evidence of an arguable case so as to satisfy the gateway requirement in the English Courts.
The claimant sought to adduce fresh evidence on appeal which had been obtained in part under a Scottish equivalent to a search order. The claimant also sought to rely on the judgments in the Scottish courts in respect of the making of orders equivalent to a freezing order and search order (the "Scottish Judgments").
What did the court decide?
The Court of Appeal allowed the additional evidence sought to be adduced by the claimant for the purposes of the appeal, applying the well-known principle in Ladd v Marshall [1954] 1 WLR 1489. The new evidence was relevant to both dissipation of assets and whether there was an arguable case.
Notwithstanding, the Court of Appeal found that the duty of full and frank disclosure had not been complied with at the without notice hearing – representing an independent basis to refuse to continue the freezing orders – and noted that appeals should not be encouraged to allow new evidence when the core duty of full and frank disclosure had not been complied with.
The defendants contended that the Scottish Judgments were inadmissible into evidence by reason of the principle that foreign judgments must not be seen to bind (or even influence) the trial judge's consideration of the case. The Court of Appeal rejected this submission noting that the point in issue, in the current appeal, was the arguability of the claim for the purposes of interlocutory remedies; as distinct from a final determination. In support, the Court of Appeal cited Motorola Credit Corpn v Uzan (No. 2) [2003] EWCA Civ 752, [2004] 1 WLR 113, where Lord Justice Potter (giving the judgment of the court) said that:
"105. ... Where there is available to the judge on an application under section 25 a reasoned judgment of a foreign court at an interlocutory stage upon the merits or arguability of the defendant's [sc. claimant's] claim, that judgment will inevitably form the judge's starting-point in relation to the question of "good arguable case" and, depending upon the apparent cogency of the reasoning and the force of any arguments raised by the defendant, is likely to prove conclusive. ...'
In a detailed consideration, the Court of Appeal found that the ex parte determination (being on hearing only one party) carried little weight in the English proceedings and that in any event the Scottish notion of arguable case – even at a return date – might set a different standard than the English equivalent. Therefore, the Court of Appeal considered the issue afresh on the fuller available evidence and found the gateway satisfied.
While the first instance judge had been correct (on the evidence) to find no risk of a dissipation of assets, on the (new) evidence before the Court of Appeal, a real risk of dissipation was found to exist.
However, the defendants were neither resident in England and Wales nor was there any evidence that they held assets in the UK. The Court of Appeal held that the long-established principle was that a worldwide freezing order would not ordinary be made in such circumstances. In the language of section 25 of the CJJA, it would almost always be inexpedient; the Court of Appeal noting "never, say never" but that quite exceptional circumstances would be required to justify making a freezing order in such circumstances.
The position was not altered by Brexit.
On the effect of Brexit, the Court of Appeal noted:
"It is therefore unnecessary to wrestle with the intricacies of the Brexit legislation .... I need only say that I found persuasive Mr Kalfon's submission that the case law on section 25 of the CJJA which I have summarised above constitutes .... (after 31st December 2023) 'assimilated domestic case law' as defined in section 6(7) of the Retained EU Law Act which continues to form part of English law."
Case details
- Court: Court of Appeal, Civil Division
- Judge: Sir Julian Flaux, Chancellor Of The High Court, Lord Justice Coulson and Lord Justice Males
- Date of judgment: 08/8/2024
first published by LexisNexis here.
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