+44(0)20 7638 9271

Freezing order discharged—lack of solid evidence of risk of dissipation of assets (Ivy Technology v Martin)

02/10/2019

Dispute Resolution analysis: This case illustrates clearly that an applicant must provide solid evidence of a current and real risk of dissipation of assets in order to obtain and maintain a freezing injunction. Satisfying the court that the applicant has a good arguable case of conspiracy to make fraudulent misrepresentations and evidence of past dishonesty by the defendant are in themselves insufficient to support an inference of a risk of dissipation. Evidence of a real risk of dissipation must be based on objective facts relative to the issues in the case and dishonesty in the past on unrelated matters is not sufficient. The fact that the defendant had demonstrated substantial assets within the UK far in excess of the amount claimed, against which a judgment could be enforced, militated against a finding of a current risk of dissipation without solid evidence.

By Victoria Novikova, senior associate, and Charles Spragge, partner, at Druces LLP.

Ivy Technology v Martin and others  [2019] EWHC 2510 (Comm), [2019] All ER (D) 78 (Sep)

 

What are the practical implications of this case?

In considering whether to apply for freezing order relief against a defendant, practitioners should consider whether they can provide the court with solid evidence of a current and real risk of dissipation. Where the defendant has substantial assets in the UK and there is no evidence of the defendant moving their assets or monies, particularly through a complex web of international companies, the existence of a good arguable case involving fraudulent misrepresentations and evidence of past unrelated dishonesty is not sufficient in itself to prove a current and real risk of dissipation.

 

What was the background?

Paul Bell (Bell) was one of three defendants against whom a freezing order requiring them not to remove from the jurisdiction or dispose of assets up to the value of £4m was granted by Knowles J. At the return date hearing before Andrew Henshaw QC, Bell applied to discharge the order against him on the basis that there was no good arguable case against him and no risk of dissipation, and that there was material non-disclosure by the claimant Ivy Technology (Ivy) at the hearing before Knowles J. The other defendants either consented to the continuation of the order or did not appear on the return date.

The claim arose in connection with the sale of an online gambling business by Barry Martin (Martin) to Ivy. Bell was not a party to the SPA but was a 50% beneficial owner of the business. Ivy alleged that he conspired with Martin to make misrepresentations in connection with the sale and to breach a non-competition covenant in the SPA, and that he procured Martin’s breach of the non–competition covenant and/or is liable for unlawful means conspiracy to injure Ivy.

 

What did the court decide?

At the return date hearing, Ivy had to show a good arguable case against Bell (to the Ninemia Maritime v Trave Schiffartgesellschaft [1983] Lloyd’s Rep 600, [1984] 1 All ER 398 standard) including pleading to a high standard conspiracy to injure, as it included allegations of dishonesty. On the facts, the court found that Ivy’s claims have passed the good arguable case test. However, the court rejected Ivy’s argument that there was a risk of dissipation of assets by Bell.

In its analysis of such risk the court referred to considerations summarised by Popplewell J in Fundo Soberano de Angola v Jose Filomeno dos Santos  [2018] EWHC 2199 (Comm), [2018] All ER (D) 58 (Sep) and to further statements of principle based on relevant cases referred to in the judgment. These included the principles that:

  • the inference that the defendant is likely to move or dissipate assets should be based on objective facts
  • although the fact of the dishonesty may sometimes justify an inference of risk of dissipation, in each case, the court should scrutinise with care whether there is a current and real risk of dissipation
  • the relevant factors include the nature, location and liquidity of the defendant’s assets, and his behaviour in response to the claim or anticipated claim and whether he takes any steps to dissipate his assets
  • past events may be evidently relevant but only if they demonstrate a current risk of dissipation of assets now held

 

Ivy submitted that the risk of dissipation was evidenced, among others, by the facts that Bell was arrested in 2015 in the UK and the Isle of Man in connection with an investigation into a £21m VAT fraud and money laundering, and that in 2017 the Deputy High Bailiff of the Isle of Man made a confiscation order in relation to cash at Bell’s home and business premises and a finding of a VAT fraud against Bell.

The court noted that the alleged dishonesty was not in the nature of a dissipation or concealment of assets, that there was no evidence of any actual dissipation of or a threat to dissipate assets by Bell and no evidence that he had changed his behaviour, following the assertion of a claim, to justify an inference of risk of dissipation. Bell had also disclosed substantial assets worth over £100m, including a house and other assets in the UK against which a judgment might be enforced, far exceeding £4m.

Although the court found that, given the Bailiff’s conclusions and other facts, there was at least a strong suspicion that Bell has been involved in organised criminal activity, it was significant that Bell had never been charged or convicted, and that the matters relied on by Ivy were four years old and unrelated to the case and did not directly indicate a propensity to dissipate assets.

The court distinguished the facts in Ivy from VTB Capital plc v Nutritek International Corp [2012] EWCA Civ 808,  [2012] All ER (D) 147 (Jun) as there was no suggestion that the alleged conspiracy by Bell involved a complex international web of companies into which the funds at issue disappeared rendering the enforce- ment of any judgment difficult. It was of importance that there was no nexus between Ivy’s allegations and the alleged VAT fraud described in the Bailiff’s findings, in terms of direct connection or modus operandi. An important factor was also that Bell had substantial assets in the jurisdiction.

The court held that Ivy did not demonstrate solid evidence of a risk of dissipation of assets such as to justify the continuation of the freezing order against Bell.

Although, given its finding on risk of dissipation, the court did not deal with the issue of non-disclosure in detail, it reinforced the established principle that full and frank disclosure must be made by the applicant for without notice relief. Andrew Henshaw QC stated that (had the issue arisen) he would have concluded that even though each one individually of seven of Ivy’s misrepresentations and shortcomings identified in his judgment may not have been sufficient, and even if they were all inadvertent, when taken as a whole, they would have been sufficiently serious to justify the discharge of the freezing injunction.

 

Case details

  • Court: High Court, Queen’s Bench Division (Commercial Court)
  • Judge: Andrew Henshaw QC (sitting as High Court Judge)
  • Date of judgment: 26 September 2019

Victoria Novikova is a senior associate, and Charles Spragge is a partner at Druces LLP. If you have any questions about membership of LexisPSL’s Case Analysis Expert Panels, please contact  caseanalysis@lexisnexis.co.uk.