AA & Others v BB
| Jurisdiction | England & Wales |
| Judge | Lady Justice Simler,Lord Justice David Richards,Lord Justice Nugee |
| Judgment Date | 07 July 2021 |
| Neutral Citation | [2021] EWCA Civ 1017 |
| Docket Number | Case No: A3/2020/1580 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1017
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (CH D)
Mr Justice Meade
B1/2020/001343
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice David Richards
Lady Justice Simler
and
Lord Justice Nugee
Case No: A3/2020/1580
Charles Béar QC and Laura John QC (instructed by Stokoe Partnership Solicitors) for the First Appellant
Tim James-Matthews (instructed by Byrne and Partners LLP) for the Second Appellant
Stephen Robins, Matthew Abraham and Andrew Shaw (instructed by Mishcon de Reya LLP) for the Respondents
Hearing date: 31 March 2021
Approved Judgment
These are appeals against the continuation of worldwide freezing orders made on 7 September 2020 until trial or further order. The principal ground of appeal is that, because criminal restraint orders extending to all the assets of the appellants had been made under the Proceeds of Crime Act 2002 (as amended) ( POCA) and remained in force, the respondents were unable to show that there was a real risk of dissipation of their assets such as to justify the making of freezing orders.
Reporting restrictions have previously been imposed in relation to these proceedings. This version of the judgments of the court has been prepared for publication, in a form to prevent identification of the parties. Any publication of the identity of the parties, or publication of information likely to lead to their identification, remains subject to those restrictions.
The claimants, who are the respondents to the appeal, are two companies and their respective administrators. They allege in these proceedings that substantial sums have been misappropriated, by or for the benefit of the defendants or otherwise in circumstances giving rise to liability on the part of the defendants.
Freezing orders were made against five defendants, of whom four are alleged to have been directors or de facto directors of one or other of the claimant companies. The appeal is brought by two of those defendants.
Before the freezing orders were made, criminal restraint orders (CROs) had been made, on the application of the Serious Fraud Office (the SFO), against the appellants, restraining them from disposing of any of their assets, wherever situated, save in accordance with the terms of the orders. Those orders have since continued in force.
On 20 August 2020, the claimants applied, without notice to the defendants or to the SFO, for worldwide freezing orders against the five defendants to whom I have referred. The application was supported by a very substantial witness statement of over 230 pages and several bundles of exhibits running to thousands of pages, as well as the proposed claim form and particulars of claim. The application was heard on 24 August 2020 by Edwin Johnson QC, sitting as a Deputy High Court Judge in the Chancery Division. The deputy judge recorded in his ex tempore judgment that he had considered and taken account of all the evidence and other information provided in support of the application, as well as the written and oral submissions made on behalf of the claimants. He was satisfied that the claimants had shown a good arguable case in respect of their proposed claims based on misappropriation of funds. He was also satisfied that there was a good arguable case of a current risk of dissipation of assets by the defendants. He concluded that it was appropriate to make worldwide freezing orders. He declined to make proprietary injunctions. He accepted that there was a serious issue to be tried in respect of the intended proprietary claims but the proposed orders lacked sufficient detail of the specific assets to be frozen.
The claim form was issued on 27 August 2020 and notice of the application to continue the freezing orders was given to the relevant defendants, all of whom were represented at the hearing of the application on 7 September 2020 before Meade J in the Chancery Division. Given the volume of evidence in support of the application, it is not surprising that none of the defendants was in a position fully to contest the application on its merits, in particular as to whether a good arguable case had been shown in respect of the claims made against them. They each reserved their position in this respect. As Meade J recorded in his judgment at [13]: “Pragmatically, and I am sure rightly, Mr Béar [counsel, then as now, for the first appellant] did not submit for today's purposes that there was not a reasonably arguable case, although he does not admit that there is”. Nor did any of the defendants make submissions in answer to the claimants' case that the nature of their alleged dishonest acts, and the alleged disposals of assets made by them after investigations were started but before the CROs were made, gave rise to a reasonable inference that they might try to dissipate their assets, if they were not subject to a CRO or freezing order: again, see the judgment at [13].
While the other defendants against whom the freezing orders had been made did not resist the continuation of the orders, the appellants resisted the continuation of the orders against them on the specific ground that, in the light of the CROs against them, the claimants were unable to establish a real risk of dissipation of their assets.
After hearing submissions on that issue, the judge gave an ex tempore judgment in which he clearly and concisely gave his reasons for concluding that, notwithstanding the CROs, the claimants had shown a real risk of dissipation and for continuing the freezing orders against the appellants until trial or further order in the meantime.
The judge first mentioned some first instance decisions, to which I later refer, which, as he put it, “contain broad statements of principle that the existence of a CRO does not stand in the way of the grant of a worldwide freezing order or, in itself, remove the risk of dissipation of assets by a defendant who is the subject of it”. After referring to Mr Béar's submissions on those cases, the judge said at [22]:
“As a matter of theory, I can accept that it might be possible, in the right circumstances, and with careful liaison and preparation, that a CRO might be so watertight and so cogent that it removes the need for a worldwide freezing order. But the statements of principle by the judges in the cases that I have identified make clear that, for pragmatic and systemic reasons, this will be very unlikely at best.”
After citing passages from the judgments in two of the first instance decisions, the judge continued:
“25. So although, as I say, I accept at least, for the purposes of this judgment, that in theory there might be a CRO so arranged that there is no risk of dissipation justifying a worldwide freezing order, I think it would be a very unusual case.
26. It is perhaps a tenable view of the above authorities that as a matter of principle a CRO can never stand in the way of the grant or continuance of a worldwide freezing order, but I do not find it necessary to decide that, because on the facts of this case, which I will now turn to consider, the CROs are not an adequate or complete substitute.
27. In this case, there is no provision which would ensure that if the CROs were to be discharged or varied the claimants would find out or find out in enough time to apply for a worldwide freezing order. It may be that right now, today, that is relatively unlikely, since the SFO proceedings are at a stage where they have quite a long way to run, but the issue is that neither I nor the claimants have visibility of what might happen to the SFO proceedings. This is no criticism of the SFO, but there is no reason to suppose that in the time for which the worldwide freezing order might be in force there would not be a variation of the CRO or the prosecution or investigation might cease for some reason. And there are specific reasons to consider that this could happen.
28. Two matters illustrate this. First of all, it is not in dispute, in circumstances set out in paragraph 23 of the annex to the claimants' supplemental skeleton, that [AA] applied to discharge the restraint orders. Neither [AA], nor the SFO, it is common ground, told the claimants about the application – I am not suggesting that they had to – or the appeal against the dismissal of the application. In fact the claimants found out by chance, as is related by Mr Hardman in paragraph 642 of his affidavit in support of the worldwide freezing order.
29. It is conceivable that these problems could be patched up by some sort of undertaking to keep the claimants informed of the criminal proceedings and the SFO's investigation, but that would be a piecemeal approach which I think would be vulnerable to failure. Certainly, as matters stand before me today, there is nothing remotely to suggest a rigorous regime would ensure that that would happen. The inherent difficulty in doing this, if it is ever to be possible, is one of the reasons underlying the judgments to which I have referred above.
30. The second incident which illustrates the position is that there was an issue raised at the hearing of the application for the worldwide freezing order before the deputy judge about the sale of [an asset] engineered, it is alleged, by [AA].
31. I need not go into the detail of this. As it turns out, and as the claimants now accept, the SFO, in fact, consented to the sale of the [asset]. Mr Robins suggested that they had insufficient information about the sale and, in...
To continue reading
Request your trial
-
But The Assets Are Already Frozen! Where Civil Freezing Orders And Criminal Restraint Orders Collide
...takes a look at AA & Ors v BB & Anor [2021] EWCA Civ 1017 Background The Claimants were two companies and their respective administrators, who alleged in the main proceedings that substantial sums had misappropriated, by or for the benefit of the Defendants, or otherwise in circumstances gi......
-
But The Assets Are Already Frozen! Where Civil Freezing Orders And Criminal Restraint Orders Collide
...takes a look at AA & Ors v BB & Anor [2021] EWCA Civ 1017 Background The Claimants were two companies and their respective administrators, who alleged in the main proceedings that substantial sums had misappropriated, by or for the benefit of the Defendants, or otherwise in circumstances gi......