On April 29, 2016, in the case of Holyoake v. Candy [2016]
EWHC 970 (Ch), the England and Wales High Court granted that country's first stand-alone
“notification injunction”. Such an injunction requires a defendant to give notice
to the plaintiff or claimant before disposing of or dealing with particular assets. Previously, notification orders were given as ancillary remedies to freezing orders or Mareva injunctions. However, in this case, Justice Nugee of the High Court was willing to grant a
notification injunction without the usual combined order preventing the
defendants from actually dealing with those assets.
The underlying facts related to a loan made by
CPC, a company controlled by wealthy English property developers, Nick and Christian Candy, to
Mr. Holyoake. Holyoake alleged an unlawful means conspiracy against CPC
and its directors and complained that as a result of being compelled to enter
into further disadvantageous agreements, he ultimately repaid over
£37 million
to CPC in respect of an initial loan of £12 million.
Following concerns that CPC might dissipate assets in
order to make enforcement of an order difficult, Holyoake and
other claimants applied for a notification injunction. They did not seek a
full freezing (Mareva) injunction on the basis that they were “seeking no more relief
than they considered reasonably necessary to protect their position”. They argued that if
they were notified that the defendants were about to enter into a transaction,
they could consider at that stage whether to apply for a freezing injunction or
to take other protective steps.
The judge found that the court did have jurisdiction to
grant a stand-alone notification injunction and that the test for such an
injunction was the same as a freezing injunction, namely the claimant must show
a good arguable case and a risk of dissipation of assets. Justice Nugee found that
there was a good arguable case and gave guidance on the meaning, stating that
it was “a case which is more than barely capable of serious argument, and yet
not necessarily one which the judge believes to have better than 50 per cent chance of
success”.
In respect of the risk of dissipation of assets, the judge ruled that a claimant must be
able to show that there are objective factors from which risk can be
inferred. In this regard, the judge took into account that CPC had an
unusually complex and particularly opaque offshore corporate structure.
He also referred to two unexplained high value transactions which could be
innocent but, in the absence of an explanation could also be instances of
dissipation. One was a transfer of property from Christian Candy to his
wife and the other was a purchase of a £26 million yacht by Nick Candy for
his wife. All in all, these transactions together with CPC’s corporate
structure meant, objectively there was a risk of dissipation. The court
granted the notification injunction.
English commentators are unsure as to how these stand-alone notification injunctions will be used in the
future. However, in applying for such an injunction, it is clear that the
claimant will have to give an undertaking in damages i.e. undertake to the
court to compensate the defendant if it is later found that the claimant was
not entitled to the relief granted. In a freezing order, the consequences
of a wrongly made order can be extremely wide-ranging and financially
disastrous. However, the scope for serious damages in result of a wrongly
made notification injunction is dramatically less serious. Accordingly,
many suggest that in circumstances where claimants are unable to pursue
a freezing order due to their inability to give a cross undertaking, they should
be able to successfully apply for a notification injunction.
Take note. These stand-alone notification injunctions may be coming soon to a courthouse near you.
Take note. These stand-alone notification injunctions may be coming soon to a courthouse near you.
Regards,
Blair
