Unfair Prejudice & Drag Along

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My analysis on Court of Appeal decision in Re Charterhouse Capital Limited; Arbuthnott v Bonnyman [2015] EWCA Civ 536 :

http://www.luptonfawcett.com/blog/unfair-prejudice-and-drag-along/

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Personal Pensions safer from creditors

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On 17 December 2014 Mr Robert Englehart QC sitting as Deputy Judge of the High Court delivered judgment in Horton v Henry[i]. He decided that uncrystallised pensions benefits can be protected from creditors. The judge declined to follow the previous decision, of Raithatha v Williamson[ii]. Instead he held that a trustee in bankruptcy could not gain access to pensions benefits that were not already in payment.

BACKGROUND

In Horton v Henry, Mr Henry’s trustee in bankruptcy was applying for an income payments order (“IPO”) against Mr Henry’s pensions policies that had not yet vested. The bankrupt had refused to crystallise them. The trustee was seeking an order requiring Mr Henry to draw down his:

  • 25% lump sum from his self-invested personal pension (“SIPP”);
  • 36 monthly payments in flexible drawdown
  • the annuity value of his personal pensions.
  • the trustee also sought the right to vary the IPO in future, after the new pensions access provisions apply.

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DECISION

The Judge declined to make an Income Payments Order over an uncrystallised pension compelling a bankrupt of pensionable age to draw down his pension. He considered that, contrary to the reasoning in Raithatha, there was no power vested in the court pursuant to section 310 of the Insolvency Act 1986 to make an income payments order in respect of an uncrystallised pension not yet in payment. The Judge said:

‘…I have most anxiously considered the decision in Raithatha but I have, albeit with considerable reluctance, come to a different conclusion. Mr Henry is not entitled to payment under his pensions “merely by asking for payment”. There is a considerable variety of options open to him. It would only be after he had made elections that any payment would be due to him. Only then would he become entitled to any payment. I do not consider that there is any power in the court under s310 or in the trustee to require Mr Henry to elect in any particular way…’

Raithatha v Wiliamson had decided that an order could be made. That case was subject to criticism, but was not appealed because the case settled.

The Judge explained:

‘…I regret having had to reach a different conclusion from that reached in Raithatha. But it is to be hoped that the Court of Appeal will soon have the opportunity of considering which of these two first instance decisions is correct….’

It is understood that permission to appeal has been granted, and the Court of Appeal is likely to hear the appeal in the Spring 2015, which will provide an opportunity to resolve which of the conflicting approaches is correct.

IMPLICATIONS

  • Pending clarification from the Court of Appeal, a trustee in bankruptcy can’t compel a bankrupt to draw down a pension not in payment.
  • However, if a bankrupt’s pension is in payment, a trustee in bankruptcy is still entitled to seek an IPO where appropriate.

[i] [2014] EWHC 4209 (Ch); [2014] WLR (D) 551;

http://www.taxbar.com/Henry_v_Horton.pdf.pdf

[ii] [2012] 1 WLR 3559

 

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Are you a Shadow or de facto director?

Latest Court of Appeal Guidance

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The Court of Appeal has provided guidance for deciding whether someone is a Shadow or de facto director: Smithton Ltd (formerly Hobart Capital Markets Ltd) v Naggar[i]

Under the Companies Act 2006, all duties owed by a director can apply to former directors, de facto directors and “shadow directors”. It is axiomatic that creditors or liquidators will look for someone to sue when a company collapses. Given the various extensions in directors’ duties and liabilities, and widening of the class of persons covered, questions arise e.g. regarding the majority shareholder’s vulnerability, and that of other parties including directors of companies that are directors of a subsidiary.

TERMS

  • De jure Director: A director at Law, registered at Companies House
  • De facto Director: A director in Fact, although not formally appointed, but who behaves as and is taken by the company and other directors to behave as a director
  • Shadow Director: “in accordance with whose directions or instructions the Board is accustomed to act”, not being a professional adviser retained to advise “real influence over the majority of board members”; [ii]

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Group Directors, Private funders and possibly venture capitalists could fall in to the trap of becoming “shadow directors”. What would happen to them on insolvency? This is tempered by such funders commonly requiring a directorship. Following Deverell,[iii] per Morritt J., a “nod and a wink” can amount to an “instruction”. A management consultant,[iv] a parent company,[v] and a “stakeholder”[vi] have all been held to be shadow directors. A bank could be a shadow director for example.

BACKGROUND

The Court of Appeal has upheld the decision of trial judge Rose J that the Defendant Guy Naggar, was not a de facto director or shadow director of Smithton Ltd, (formerly Hobart Capital Markets Ltd). Mr Naggar was a director of Hobart’s former holding company Dawnay Day, which operated under a joint venture agreement. Hobart entered into numerous transactions with clients introduced by Mr Naggar. Following the collapse of Dawnay Day, Hobart suffered losses around £4 million. Hobart sued Mr Naggar, seeking to recoup its losses claimingng an indemnity from him, contending that while he was not a duly appointed director of Hobart, he was a de facto or shadow director of Hobart and had acted in breach of his duties owed to Hobart.

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DECISION

  • The evidence suggested that Mr Nagar was acting as chairman of Dawnay Day, Hobart’s parent company.
  • There was nothing that went beyond the involvement normally expected of someone combining the roles of major client and chairman of the majority shareholder.
  • There was no evidence that Hobart’s board were accustomed to complying with Mr Naggar’s instructions.
  • There was no basis for setting aside the judge’s conclusion that Mr Naggar had been involved with Hobart’s affairs other than in his capacity as a director of Dawnay Day or some other capacity than that of director of Hobart.
  • The judgment of Arden LJ (Elias, Tomlinson LJJ concurring) included points of general principle, applying and reaffirming the leading case of Revenue and Customs Commissioners v Holland[vii]

GENERAL PRINCIPLES

  1. There is no one definitive test whether a person was a de facto director, the question is whether he was part of the corporate governance system of the company and whether he assumed the status and function of a director so as to make himself responsible as if he were a director.
  2. Someone could be a de facto director even where there was no invalid appointment. The question was whether he had assumed responsibility to act as a director, and in what capacity he was acting.
  3. The court had to examine what the director actually did and not any job title.
  4. The court would need to consider the corporate governance structure of the company so as to decide in relation to the company’s business whether the individual’s acts were directorial in nature.
  5. The court should look at the cumulative effect of the activities relied on and should look at all the circumstances in the round.
  6. Whether an individual acted as a director is decided objectively and irrespective of their motivation or belief. A defendant did not avoid liability if he showed that he in good faith thought he was not acting as a director.
  7. Even a single directorial act could lead to liability in an exceptional case
  8. It was also important to look at the acts in their context. Relevant factors included whether
  • the company considered him to be a director and held him out as such
  • third parties considered that he was a director
  • a person was consulted about directorial decisions or his approval did not in general make him a director because he was not making the decision
    1. Acts outside the period when he was said to have been a de facto director might throw light on whether he was a de facto director in the relevant period.
    2. An individual can be both a shadow director and a de facto director at the same time, and there can be overlap.
    3. A de facto or shadow director’s role doesn’t have to cover all the company’s activities.
    4. Whether a person was a de facto or shadow director is a question of fact and degree.

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CONCLUSION

  • Where someone is a director of a holding company which is its subsidiary’s corporate director, provided that what that individual does is wholly within the ambit of his duties and responsibilities as a director of the corporate director/holding company, his acts would not make him a de facto director of that subsidiary (as in the instant case).
  • Groups of companies, directors (and those who may fall within the definition of de facto or shadow director of a holding company) should consider whether the directors of the parent company are an integral part of the subsidiary’s corporate governance and would be exposed to being deemed either de facto or shadow directors, or both.
  • This case helpfully applies the general principles and puts them in context.

 

[i] [2014] EWCA Civ 939

[ii] 251(1) of the Companies Act 2006

[iii] Deverell [2001] Ch. 340 CA (Civ Div

[iv] Tasiban Ltd (No.3), Re [1991] B.C.C. 435; [1991] B.C.L.C. 792 Ch D.

[v] Hydrodam (Corby) Ltd, Re [1994] B.C.C. 161; [1994] 2 B.C.L.C. 180 Ch D

[vi] Deverell [2001] Ch. 340 CA (Civ Div).

[vii] [2010] 1 WLR 2793

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Back to “punishment to fit the crime”? Court of Appeal construes Mitchell

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The Court of Appeal has tried to clarify what happens when a party to Civil Litigation is late in complying with a court order. The decision in Denton on 4 July was eagerly awaited because lawyers, litigants (and the courts) have been in a quandary since last November’s landmark decision by the Court of Appeal in the case of Mitchell. That upheld deliberately sweeping sanctions, enforcing the “Jackson Reforms” of April 2013. 

In Mitchell, the former Chief Whip was suing a media group for defamation, arising out of the “Plebgate” saga. However, his lawyers were 5 days late in lodging at court a new detailed costs budget in “Form H” predicting costs for the entire case. Under “Jackson”, great importance is attached to this form, to be finalised by all sides, as soon as a Defence is filed.

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Because Form H was late, the court treated Mr Mitchell as having failed to serve any estimate. Consequently, his budget was restricted to court fees alone rather than the approximate £400,000 his solicitors estimated in the form. The other side estimated their costs in a similar range. As a result, even if Mr Mitchell won his claim he would have been unlikely to recover more than a fraction of his expected costs approaching £1/2M. Since that decision, courts and lawyers have been dealing with a perceived “zero tolerance” of failures to meet court deadlines. That is even though often the courts may be late in sending out forms and orders.

The upshot has been that the courts have been inundated with applications for “relief from sanctions”, usually well in advance of a deadline, because the message has been that delays, however short, may result in the case (or defence) being struck out. There have been contradictory decisions, some of which have been criticised as unduly harsh, and disregarding the justice of the individual case.

In an effort to stem the resulting tide of “satellite litigation” the Court of Appeal has argued in Denton that whilst Mitchell was correctly decided, it has been misunderstood and misapplied. There were 3 conjoined cases in Denton;

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Facts

Denton v TH White Ltd

This claim was against the installers of a milking parlour. Statements and expert reports were exchanged on time, but additional evidence was served in December 2013, just five weeks before the trial. At the pre-trial review the claimants obtained permission to rely on the statements and the court vacated the trial date. The defendant appealed to the Court of Appeal on the ground that the judge failed to apply, or misapplied, Mitchell and erred in the exercise of his case management discretion.

Decadent Vapours Ltd v Bevan

The claimant failed to comply with an order that “unless” they file a pre-trial checklist and pay the court fee by 4pm on 19 December 2013, the claim would be struck out. The checklist was filed by email on the afternoon of 19 December. Unfortunately the cheque for the fee was only sent that day and it was not cashed. It is not known when the cheque went missing, but it may have been lost at court. The failure to pay the fee wasn’t discovered until a hearing on 7 January, where the claimant’s failure to comply with the “unless” order meant that the claim was struck out. The fee was paid on 9 January 2014, shortly after it was learned that the cheque had been lost. The court rejected the claimant’s application for “relief from sanctions” to reinstate the claim.

Utilise TDS Ltd v Davies

The claimant failed to comply with an order that “unless” they file costs budgets by 4pm on 11 October 2013, they could only claim court fees by way of costs if they were successful. The claimant missed the deadline by 45 minutes. The order also granted a stay until 8 November and required the claimant to inform the court of the outcome of negotiations by 4pm on 15 November. However the claimant was 13 days late in reporting. The District Judge refused the claimant’s application for “relief from sanction”, and their appeal to the High Court was also dismissed.

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The issues before the Court of Appeal

The new Civil Procedure Rule 3.9, for applications made after 1 April 2013, dispensed with the previous nine factors for consideration (see below) and replaces them with two:

(1) the need for litigation to be conducted efficiently and at proportionate cost and (2) the need to enforce compliance with rules, practice directions and orders. As with the old rule 3.9, the court must also consider “all the circumstances”.

The three conjoined appeals were heard as a test case by the Master of the Rolls Lord Dyson, Jackson LJ, and Vos LJ. The Law Society and the Bar Council were allowed to make submissions as Intervenors regarding wide ranging issues in practice.

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The Court of Appeal decision in Denton

The Court of Appeal has and directed that this decision takes primacy and should be the only case to be considered from now regarding relief from sanctions. Mitchell, and the subsequent decisions, need not be referred to. The appeals were allowed in each of the three cases.

“…we think that the judgment in Mitchell has been misunderstood and is being misapplied by some courts. It is clear that it needs to be clarified and amplified in certain respects”.

The court differed as to the correct approach however. Lord Dyson MR and Vos LJ set out a three stage approach. Jackson LJ, agreed with the outcome in each appeal, but favoured a more direct approach at stage 3, and for the court to simply “deal justly with the application” and considering all of the relevant factors, but without regressing to excessive lenience with any breach being overcome by a costs penalty. That was the approach of the judge in Denton. Jackson LJ insisted that the judge was mistaken in not taking in to account the wider impact on litigants and the court when considering the justice of the case. Lord Dyson MR and Vos LJ criticised the treatment of Mitchell rather than Mitchell itself. On deciding an application for relief from sanctions Under CPR 3.9 ther three stage approach is:

Stage 1

Identify and assess the seriousness and significance of the failure. When considering stage 1, the court should not initially consider other unrelated failures that may have occurred in the past. In other words, no cumulative totting up of non-trivial, or insignificant breaches. If the breach is not serious or significant, the court is unlikely to need to spend much time on stages 2 and 3 and the prospects of relief being granted should be greater.

It is notable that the Court of Appeal has distanced itself from the terms “trivial” and “non-trivial”, preferring the words “serious” and “significant”.

Stage 2

Consider why the failure or default occurred? Unfortunately, the Court of Appeal gave no further guidance on this point, merely saying the guidance in Mitchell is not exhaustive. This spelt out that “pressure of work”, or being unable to get to the office due to inclement weather were not good reasons.

Stage 3

A re-emphasis of the provisions of CPR 3.9: when considering the application the Court should consider

“all the circumstances of the case, so as to enable it to deal justly with the application”,

including:

  1. Whether the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost; and
  2. The importance of complying with rules, practice directions and orders.

Dyson MR, and Vos LJ said the third stage required the Court to give particular consideration to all the circumstances of the case but with greater weight to be given to factors (a) and (b). Jackson LJ, whose report is the foundation of the reforms (and who was part of the Court of Appeal hearing the Mitchell case, dissented slightly, stating that, “the rule does not require that factor (a) or factor (b) be given greater weight than other considerations. What the rule requires is that the two factors be specifically considered in every case”. I.e., irrespective of any other factors, the court must consider (a) and (b). As the majority, Vos LJ and Dyson LJ disagreed, the guidance now is to simply attach greater weight to those factors.

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Comment

In any event, “all the circumstances” must be considered, rather than merely concentrating on the specific factors in the new CPR 3.9. This suggests that following Denton, relief from sanctions in similar circumstances is now more likely to be granted than applied post Mitchell, where there would be short shrift.

Comparison

Relief from sanctions applications were previously governed by CPR 3.9 with consideration of nine factors as follows:

“(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –

  • (a) the interests of the administration of justice;
  • (b) whether the application for relief has been made promptly;
  • (c) whether the failure to comply was intentional;
  • (d) whether there is a good explanation for the failure;
  • (e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol;
  • (f) whether the failure to comply was caused by the party or his legal representative;
  • (g) whether the trial date or the likely trial date can still be met if relief is granted;
  • (h) the effect which the failure to comply had on each party; and
  • (i) the effect which the granting of relief would have on each party.”

From 1 April 2013 this changed to a newly worded CPR 3.9:

“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

  • (a) for litigation to be conducted efficiently and at proportionate cost; and
  • (b) to enforce compliance with rules, practice directions and orders.”

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Punishment to fit the crime?

The shift of emphasis in Denton is to be welcomed, perhaps heralding a return to “proportionality” and the principle previously endorsed as “the punishment should fit the crime” (Beeforth). It is likely that this re-balancing in Denton following recent confusion will not see a reversion to courts failing to uphold sanctions without good reason.   

The Court of Appeal wanted more co-operation between parties (which had prevailed pre-Mitchell). Opportunistic attempts to take advantage of technical or trivial breaches will be met with heavy costs sanctions.

However, there is no guidance on what remedies if any there may be for litigants, their solicitors and insurers where a claim or defence has been struck out due to a misinterpretation of Mitchell.

Cases referred to

Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537

 Denton v TH White Ltd and another, Decadent Vapours Ltd v Bevan and others and Utilise TDS Ltd v Davies and others [2014] EWCA Civ 906

http://www.bailii.org/ew/cases/EWCA/Civ/2014/906.html

Beeforth v- Beeforth. Court of Appeal [1998] EWCA Civ 1151; The Times [17.9.1998]

 

Court of Appeal upholds power of English Court to commit a foreign director for contempt

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The Court of Appeal has unanimously upheld the High Court’s decision that the Managing Director of the Claimant (domiciled and resident in Saudi Arabia) could be served with committal proceedings for contempt of cour

BACKGROUND

In the lower court, the Claimant companies obtained a ‘without notice’ injunction against the Defendants. This was cancelled when the judge at first instance found that the Claimant companies were in breach of their obligations to give full disclosure. They had also misled the court and broken an undertaking to preserve evidence. Consequently one of the Defendants asked the court to punish the Claimant companies for contempt of court. Additionally, the Defendant made an application for committal (imprisonment) of  the Claimants’ Managing Director. This was on the basis that he was also in contempt of court , although he was not personally bringing the case in his name. The judge ordered service of the application for contempt on the director out of the jurisdiction.

The director appealed to the Court of Appeal. He argued that the Court had no power to make any order against him because he was outside the territorial jurisdiction.

CASE

Dar Al Arkan Real Estate Development Co & Anor V Al Refai & Ors [2014] EWCA Civ 715

http://www.bailii.org/ew/cases/EWCA/Civ/2014/715.html

 

COMMITTAL

Under CPR r81.4 a committal order can be made against the director of a company which is in breach of a judgment, order or undertaking.

The Court of Appeal accepted that the legislative intention behind the provision must include dealing with contempt of its orders by companies with foreign directors. Although CPR r81.4 does not specifically state that it is effective out of the jurisdiction, if this was not the case, the power of the English courts to ensure compliance with its orders would be

significantly weakened”.

The Court of Appeal distinguished the position where it had previously been decided that the English courts did not have jurisdiction to order the examination of a foreign director of a debtor company under CPR r71. The rationale was the nature of committal proceedings is very different from the power of the court under Part 71 to obtain information from judgment debtors.

The Court of Appeal upheld the Judge’s exercise of discretion to allow service out of the jurisdiction of the Notice of Committal. This was because the application constituted a “Claim Form” under the definition in CPR r6 as it commenced “proceedings”.

The Court of Appeal also referred to Article 22(5) of Regulation 44/2001 of the Brussels I Regulation. This states that, in proceedings concerned with the enforcement of judgments, the courts of the Member State in which the judgment has been or is to be enforced shall have exclusive jurisdiction,

regardless of domicile”.

The trial judge held that this Article did not apply because the director was not domiciled in a European Union Member State.

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The judge said that he was bound by the Court of Appeal’s decision in Choudhary & Ors v Bhatter & Ors [2009] EWCA Civ 1176. The Court of Appeal however indicated that, in view of ECJ decisions, there was a “compelling” argument that Choudhary was incorrectly decided and that the English courts did have jurisdiction under the Article, no matter where the defendant is domiciled.

As such, there was no reason not to extend the jurisdictional rule to parties and directors domiciled outside of the EU. Their non-domiciliary status is irrelevant and does not limit the Court’s powers to enforce its orders.

COMMENT

It would have been damaging for compliance with  the Overriding Objectives to deal with cases justly, and unfair if there was a weakened regime  for directors resident abroad, or directors of foreign companies.

The decision shows that the court is prepared to extend the reach of sanctions where this is in the public interest. Ultimately this could result in committal for contempt of court, even for a foreign director,  where there is continued disobedience of a court order.

 

Court of Appeal Decision: Assessing Damages on a Freezing Order Cross-Undertaking

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The Court of Appeal has for the first time given guidance on how damages are to be awarded on a cross-undertaking in damages on a freezing order. This clarifies recent uncertainty on the principles in first instance decisions.

Whenever the Court makes an interim order pending trial, such as a freezing order, search order or injunction, invariably the Court requires an undertaking from the Claimant. This “cross-undertaking” makes the Claimant pay damages to the Defendant if it is later decided that the Claimant should not have been granted the interim order.

The Court of Appeal has reiterated the analogy of contractual principles that should apply to assessment of damages under a cross-undertaking. That is with the proviso that there is in reality no contract and there has to be room for exceptions.

In Abbey Forwarding Ltd (in liquidation) and another v Hone and others (No 3) [2014] EWCA Civ 711; [2014] WLR (D) 236  giving the lead judgment of the Court of Appeal, McCombe LJ held

‘When determining questions of compensation for loss arising as a result of a freezing order and the undertaking in damages therein, the correct approach was that the remote consequences of obtaining an injunction were not to be taken into account in assessing damages but that logical and sensible adjustments might well be required simply because the court was not awarding damages for breach of contract but was compensating for loss caused by the injunction which was wrongly granted.’

This was the correct approach where a Defendant who is the victim of an unfair injunction should be compensated for their loss. However, a Claimant should not be fixed with liabilities that no reasonable person could have foreseen, unless the Claimant knew or ought to have known of other circumstances that were likely to give rise to that type of loss.

Terms such as “common law damages” and “equitable compensation” did not assist.

The aggreived Defendants contended that they had been successful entrepreneurs with a track record of commercial and investment success which had been impeded for some 20 months because of the wrongful freezing order.  On appeal it was confirmed that whilst principles of remoteness of damage in contract ought to apply in the circumstances, there should be flexibility so as to allow logical and sensible adjustments. This was because the Court was not awarding damages for breach of contract, but was compensating for loss caused by the injunction.

Vos LJ added that general damages could also be included within the cross-undertaking in some cases where appropiate, for stress, loss of reputation and general loss of business opportunities and disruption caused by inappropriate policing of the injunction.

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Freezing Injunction: Full & Frank Disclosure – Reflective Loss

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  • For a Freezing injunction, does a Claimant need “much the better of the argument”?
  • On Reflective Loss, what is a “good arguable case”?

Case

Kazakhstan Kagazy and others -v- Arip [2014 EWCA CIV 381]

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Key Points

  1. On a Freezing injunction, a “good arguable case” is more than barely capable of serious argument, but not necessarily better than 50% prospects of success.
  2. The parent company’s alleged loss was the same as those of its subsidiaries. Under the reflective loss principles the parent company had no good and arguable loss of its own.

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Background

The Court of Appeal has unanimously upheld a freezing injunction in a case involving alleged inter company frauds exceeding $150M.

The Court considered issues relating to limitation, reflective loss, and the obligation on the Claimants to give full and frank disclosure on without notice applications.

The Court of Appeal held that the “good arguable case” was the appropriate test, approving the traditional test laid down by Mustill J in Ninemia Maritime Corporation -v- Trave (The Neidersachsen) [1983] 2 Lloyd’s Rep 600;

“…in the sense of a case which is more than barley capable of serious argument, and yet not necessarily which the Judge believes to have a better than 50% chance of success…

The injunction had been granted by Judge Mackie QC in the Commercial Court adopting a somewhat higher test requiring the Claimants to show they had “much the better of the argument“.

The Court of Appeal emphasised the wide discretion of the lower Court, including all matters of alleged non-disclosure, and the Judge’s decision was well within the margins of discretion.

The Defendants deny any wrong doing. No defence had yet been required from the Defendants, and Jackson LJ commented that “… it is only by a narrow margin that (the Claimant’s) case is strong enough to support their entitlement to a freezing injunction…“. He referred to “a very real possibility that the Defendants’ limitation defence will prevail at trial on the basis of Kazakh law“. That stipulated a three year limitation period.

Elias LJ said in relation to the alleged non-disclosure and the date of knowledge from when limitation runs

… nobody should allege dishonestly lightly. The Court should not readily conclude that fraud ought to have been apparent unless it is satisfied that the evidence would plainly justify the allegations. That is all  a high hurdle…

It was also pointed our that it is inherently unattractive for the Defendant to submit that the fraud should have been manifestly obvious, and yet at the same time to assert that he had a complete defence to the allegation (on the basis of the proceedings having been issued too late).

Avoid Mini Trial

The Court of Appeal emphasised that applications to discharge freezing injunctions should not turn into mini trials. The High Court had considerable discretion regarding allegations of non-disclosure.

Any failures to give full and frank disclosure were unintentional and ultimately not material. The Court of Appeal commented that the question of when the Claimants had the relevant knowledge, which determines when the limitation period starts should not be usually be decided on an interlocutory basis unless the facts and circumstances were very clear.

Reflective Loss

Although the injunction was upheld for £72M and this stays until the trial, the Defendant was successful in the cross appeal. According to the “reflective loss” principle, a  shareholder cannot recover damages simply on the basis that the company in which the shareholder has an interest has suffered loss. Applying Johnson -v- Gore Wood [2000 UKHL65] Longmoor LJ found that it was well arguable that the claims were not time barred, but if they are, the subsidiaries ought to have been aware that their rights had been violated. In those circumstances the subsidiaries could not say that the inability to sue was no fault of their own. Accordingly, the parent company had no loss independant of the subsidiaries (the other Claimant companies).

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