Thursday, June 2, 2016

English Court Issues Stand-Alone "Notifcation Injunction"

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.



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