Mr Justice Nugee:
Introduction
- On 7 and 8 April 2016 I heard an application for an interlocutory injunction brought by the Claimants against three of the Defendants in this action, namely the First, Second and Sixth Defendants ("the Defendants"). As issued, the application sought to restrain them from disposing, dealing or otherwise engaging in transactions with their assets in the sum of or to the value of more than £1m without first giving the Claimants' solicitors 7 days advance notice in writing. As appears below, by the end of the hearing the relief sought had been significantly modified. I had previously indicated that I hoped to be able to give the parties at least the answer straight away, and in the event when argument finished on the afternoon of 8 April 2016 I indicated that I was satisfied that it was an appropriate case for some relief to be granted, but in the light of the late change to the nature of the relief sought I would adjourn the application for further evidence to be filed, granting a temporary injunction in the meantime. I gave my views on various matters which had been argued before me quite briefly and this judgment is intended to set out my reasons for the views which I then expressed.
Background
- I can take the background from a judgment delivered by Arnold J on 7 September 2015 when he refused an application by the Claimants for expedition. He said as follows:-
"1 The first claimant, Mr. Mark Holyoake, claims to be a successful businessman with a background in property development in the food industry. The second claimant, Hotblack Holdings Ltd, is a Jersey registered company with a BVI parent, ultimately owned by Mr. Holyoake.
2 In 2011, the claimants were seeking to purchase a substantial and valuable property in Grosvenor Gardens in order to develop it. They say they were expecting to make profits of more than £100 million by this venture. In October 2011, Mr. Holyoake approached the first defendant, Mr. Nicholas Candy, the well-known property developer and thought by Mr. Holyoake to be an old friend, for a loan of some £12 million required at 24 hours' notice to help complete the purchase and proceed with the redevelopment. A loan of £12 million under a written loan agreement was duly made to Mr. Holyoake by the sixth defendant, CPC Group Ltd ("CPC"), with a term of two years.
3 CPC is a Guernsey registered company which appears to be ultimately owned, or at least controlled, by Nicholas Candy and his brother, the second defendant, Mr. Christian Candy. The third, fourth and fifth defendants, Mr. Richard Williams, Mr. Steven Smith and Mr. Timothy Dean were directors of CPC at the material times.
4 It is the claimants' claim that thereafter Mr. Holyoake was subjected to a long-running, highly unpleasant and vitriolic campaign of threats, abuse, intimidation and coercion directed at himself and his family by the defendants. The claimants say that Mr. Holyoake was bullied and coerced into entering into a long series of further agreements with CPC and into procuring that Hotblack enter into certain of these agreements. The claimants say that these agreements were highly disadvantageous to them and highly advantageous to CPC. In the result, so the claimants say, Hotblack was eventually forced to sell the property in question at a loss in February 2014 and Mr. Holyoake was forced to pay a total of more than £37 million to CPC for his initial loan of £12 million. Accordingly, the claimants made no profit from the venture. On the contrary, they made a loss.
5 The claimants say that they have been the victims of a conspiracy on the part of the defendants. The conspiracy is categorised as an unlawful means conspiracy in which the unlawful means relied on are as follows: first, fraudulent misrepresentation; secondly, duress; thirdly, actual undue influence; fourthly, intimidation; fifthly, unlawful interference with business/economic interests; sixthly, extortion under colour of due process; seventhly, extortion simpliciter; and lastly, blackmail. The claimants also bring freestanding claims under the first six of those heads together with a claim for relief under s.140(a) and (b) of the Consumer Credit Act 1974.
6 The claimants' claim has been pleaded in extensive particulars of claim that run to no fewer than 208 paragraphs and, as counsel for the claimants fairly points out, are detailed and well particularised, at any rate at first blush. The claimants value their claims at in excess of £132 million, excluding aggravated or exemplary damages which they also seek.
7 Unsurprisingly, the defendants' perspective on these matters is rather different. At this stage, the defendants have yet to file their defences, but counsel for the defendants submits as follows in his skeleton argument. First, that on his own account Mr. Holyoake was a wealthy and experienced businessman. He claims to be worth in excess of £100 million. At all material times, he acted with the benefit of a raft of advisers, including investment professionals and sophisticated commercial lawyers. He was not an innocent in such matters, it is said.
8 Secondly, it is alleged that Mr. Holyoake defaulted on the loan from day one and that the resulting further security and loan extensions entered into by Mr. Holyoake were agreed by him in order to stave off enforcement and so that he could continue to pursue the huge profits which he anticipated making from the development.
9 Thirdly, it is alleged that Mr. Holyoake expressly acknowledged his default at the time. Now, he wishes to paint a different position, but it is contended by the defendants that the reality was as he acknowledged at the time, namely that he was in default. In any event, the defendants contend that it is sufficient for their purposes that they genuinely believed him to be in default, which they say they plainly did.
10 Fourthly - and this is a matter that is particularly germane to the present application - it is pointed out that Mr. Holyoake initially raised his complaints against CPC back in August 2013 and that led to a compromise of the dispute between Mr. Holyoake and CPC in a settlement deed dated 15 October 2013. The defendants say, moreover, that Mr. Holyoake affirmed that agreement on subsequent occasions.
11 Is it is plainly not possible or appropriate for me to express any view whatsoever as to the merits of these rival claims and counterclaims. It is sufficient at this stage for me to proceed on the basis that there is here a substantial claim made in particulars of claim which are lengthy and detailed and that there will no doubt be an equally lengthy and detailed defence."
- Since Arnold J's judgment the Defendants have filed a lengthy and detailed Defence which in summary not only relies on the Claimants having settled any claims which they might have had by the October 2013 Settlement Deed but also alleges that Mr Holyoake lied about his assets and the imminence of refinancing funds; that he deliberately misrepresented or failed to disclose various specific matters; that he was in breach of the loan agreement, with the result that events of default occurred, from the inception of the loan; and that all CPC did was seek lawfully to recover the money lent to Mr Holyoake shortly after the loan was advanced. It is specifically denied in the Defence that any unlawful or inappropriate threats were made or any threats of violence. It is accepted that sometimes idioms, metaphors and swearing were used, but it is said that these did not prevent the relationship being open and fair nor did they amount to unlawful and inappropriate threats, and it is said that the allegations made as to fraudulent misrepresentation and threats bear no resemblance either to what happened or to what Mr Holyoake understood to be happening.
- The Claimants have brought this application for an injunction because of concerns they have that the Defendants may make it difficult or impossible to enforce judgment against them if they are successful in the action. They have not however sought at this stage a freezing injunction; they have limited themselves to what might be called a "notification injunction" requiring the Defendants to notify them before disposing or dealing with their assets. As Mr Trace QC, who appears for the Claimants, put it, in doing so they contend that they are seeking no more relief than they consider reasonably necessary to protect their position, the primary purpose being that if the Defendants should attempt to enter into a transaction or transactions which the Claimants consider seriously damaging to their position, the Claimants will have the opportunity to apply to Court for a freezing injunction or take other steps to protect themselves.
Jurisdiction
- Mr McQuater QC, who appeared for the Defendants, argued that a notification injunction of the type sought was contrary to principle, and I was referred, albeit briefly, to a large number of authorities on both sides on the question whether a freestanding notification injunction (that is one not ancillary to another order such as a freezing injunction) was in principle something the Court could do.
- Mr Trace based his application squarely on s. 37 of the Senior Courts Act 1981, which reads:
"The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the Court to be just and convenient to do so"
His submissions rested on three propositions:
(1) The jurisdiction of the High Court under s. 37 was unfettered, and for this purpose he relied on what Lord Denning had said in Rasu Maritima SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [1978] 1 QB 644 at 660A where he said:
"…later decisions have made it clear that, when a statute gives a discretion, the Courts must not fetter it by rigid rules from which a Judge is never at liberty to depart."
(2) An order that could be made as ancillary to a freezing injunction may also be made as a freestanding order, referring to Maclaine Watson & Co Ltd v International Tin Council (No. 2) [1987] 1 WLR 1711 at 1716G-H per Millett J where he said:
"The ITC contend there is no jurisdiction to make such an order [an order for discovery of assets] in the absence of a Mareva injunction. It is, however, fallacious to reason from the fact that an order for discovery can be made as ancillary to a Mareva injunction to a conclusion that it cannot be made except as ancillary to such an injunction."
(3) A notification order is an order that can be made ancillary to a freezing injunction, and for this he referred to Lakatamia Shipping Co Ltd v Su [2014] EWCA Civ 636 where the judge had ordered a defendant to give the claimant notice of any proposed dealings with certain assets of non-defendant companies, and that was upheld by the Court of Appeal.
- Mr McQuater took issue with each of these three propositions. He says:
(1) The power in section 37 must be exercised in accordance with established principle.
(2) Maclaine Watson was a post-judgment case and does not support the grant of a freestanding notification injunction pre-judgment.
(3) Lakatamia was a case where a freezing order had already been made.
- Rather than discuss all the authorities put before me in turn, I propose to state my own understanding of the principles which apply:
(1) Although s. 37 is broad in its terms, it is fallacious to say that it is completely unfettered. This was established very soon after the Judicature Acts, as illustrated by one of the authorities cited by Mr Trace, Day v Brownrigg (1878) 10 Ch D 294. He cited it for the dictum by Sir George Jessel MR at 307 that "it must be "just" as well as "convenient" ", but it is apparent that what Sir George Jessel meant by that was that the Court could not grant an injunction whenever it seemed convenient but only in accordance with legal principle. In that case the Plaintiff complained that the Defendant, who lived in a house formerly called Ashford Villa, had recently changed the name of the house to Ashford Lodge, which for 60 years had been the name of the Plaintiff's adjoining house, and claimed an injunction to restrain the Defendant from continuing to use the name for his property. Malins V-C had refused a demurrer brought by the Defendant but the Court of Appeal allowed an appeal, holding that there was no legal right to the exclusive use of a name for a house, and that such a right is not known to the law. It was in that context that James LJ added a postscript to his judgment at 307 as follows:
"I think it right to add that the power given to the Court by sect. 25 sub-sect. 8, of the Judicature Act, 1873, to grant an injunction in all cases in which it shall appear to the Court to be "just or convenient" to do so, does not in the least alter the principles on which the Court should act".
It does not follow, as may have at one time been thought, that the Court's power under what is now s. 37 of the 1981 Act is limited to granting relief where it could have been granted before 1873: see Masri v Consolidated Contractors International (UK) Ltd (No.2) [2008] EWCA Civ 303 at [177] per Lawrence Collins LJ. If it had been, it is difficult to see that the Mareva injunction could ever have been developed; see at [181]-[183]. But it does not follow that the jurisdiction under s. 37 is completely unfettered; in the same case Lawrence Collins LJ says at [175] that:
"that does not mean that section 37(1) of the Supreme Court Act 1981 is to be taken as conferring an unfettered power"
and at [180], referring to the decision in Parker v Camden London Borough Council [1986] Ch 162, that:
"Browne-Wilkinson LJ agreed, at p 176, that the jurisdiction under section 37 to appoint a receiver was unlimited. But this decision is not a secure source of authority, since I doubt whether these dicta can stand with the rejection by the House of Lords in P v Liverpool Daily Post and Echo Newspapers plc [1991] 2 AC 370, 420-421 of similar statements by Lord Denning MR in Chief Constable of Kent v V [1983] QB 34, 42 in relation to the power to grant an injunction".
That statement by Lawrence Collins LJ was repeated by him as Lord Collins of Mapesbury in giving the opinion of the board of the Privy Council in Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman) Ltd [2011] UKPC 17 at [58].
(2) This judgment is not the place to examine the precise limits of the s. 37 power, something that (as appears from the cases referred to in Masri at [176]) is not yet settled at the Supreme Court level. What can be said is that in normal circumstances what is needed to persuade the Court to grant an injunction is a threat to do an act which constitutes an "invasion of a legal or equitable right" – see Maclaine Watson v ITC [1989] 1 Ch 286 at 303C per Kerr LJ, referring to what Lord Diplock had said in the Siskina case [1979] AC 210 at 256D and repeated by him in British Airways Board v Laker Airways Ltd [1985] AC 58 at 81B, and by Lord Brandon in South Carolina Insurance Co v Assurantie Maatschappij "De Zeven Provincien" NV [1987] AC 24 at 40C. The phrase itself can be traced back to the judgment of James LJ in Day v Brownrigg, where he said at 305:
"It appears to me there is no damage alleged, there is no legal right alleged, the violation of which was the cause of damage. That being so, it is not for this Court to say that because somebody is doing something which it thinks not quite right, a thing which ought not to be done by one person to another, it should interfere. This Court can only interfere where there is an invasion of a legal or equitable right."
Alternatively one can speak of a breach of an obligation owed to a claimant: see Maclaine Watson at [1989] 1 Ch 286 at 303D-E.
(3) Leaving aside the special case of a freezing injunction therefore, a claimant who seeks an injunction restraining a defendant from dealing with an asset will normally have to assert that such a dealing will be an invasion of some right of his, or a breach of some obligation owed to him. This may be for example because he asserts some proprietary right to the asset (for example a tracing claim) or because the defendant has contracted not to dispose of it, or, to take another example, because the defendant is under an obligation to dispose of it at a proper price and is threatening to dispose of it at what is asserted to be an undervalue. In all such cases there is ample jurisdiction conferred by s. 37 to restrain the threatened disposal.
(4) In such a case there is no reason why the Court cannot, instead of granting an injunction restraining the disposal altogether, grant a notification injunction, that is an injunction restraining the defendant from disposing of the asset without having given the claimant prior notice. That is plainly a less invasive interference with the defendant's rights than a simple injunction restraining all disposal. If the Court can do the latter it can plainly do the former; indeed, I have personal experience of such injunctions being sought and granted and I strongly suspect that they are routinely asked for and granted without the jurisdiction to do so ever being queried.
(5) In the case of a freezing injunction, the basis for exercising jurisdiction is different. The purpose of granting a freezing injunction is to prevent dissipation of assets: see for example TTMI Ltd of England v ASM Shipping Ltd of India [2005] EWHC 2666 (Comm) at [26] per Christopher Clarke J. That I think can be reconciled with the proposition that an injunction can be granted under s. 37 where there is a threatened invasion of the claimant's rights by treating threatened dissipation as a threat to breach an obligation owed to a claimant. A debtor is not obliged to keep his assets intact to meet a possible claim by a claimant and can continue to spend them in the ordinary course of business or on his ordinary living expenses, but he is not at liberty to dissipate them so as to render a judgment unenforceable, or indeed to dissipate them if that would be the effect. In such a case the Court will grant a freezing injunction in accordance with what is by now a very well established jurisprudence. See for example the statement of principle in Halifax Plc v Chandler [2001] EWCA Civ 1750 at [16]-[20]. In other words, a defendant must be regarded as owing an obligation to a claimant not to dissipate his assets for the purpose of, or with the effect of, rendering any judgment that may be given liable to be one that goes unsatisfied. That does not seem a surprising conclusion.
(6) Just as in the case where a threat to dispose of an asset would amount to a breach of the claimant's substantive rights, it must follow that if the Court can grant a freezing injunction restraining disposal on the ground of dissipation, it is also able to grant a modified form of restraint which only restrains disposal if made without prior notification. I see no difficulty in principle with this provided it is indeed in a form which is less onerous than a freezing injunction. If a claimant satisfies the Court that there is a risk of dissipation such as would justify a freezing injunction, the Court can in my judgment grant a notification injunction. The purpose of doing so is the same, to restrain a threatened dissipation of assets in breach of the defendant's obligation not to dissipate assets for the purpose of, or with the effect of, leaving a judgment unsatisfied. To that extent there seems to me clearly power under s. 37 to grant a notification injunction even if a full-blown freezing injunction is not asked for.
(7) In the present case Mr Trace has squarely submitted that there are good grounds for fearing a risk of dissipation. I will have to consider if he is right, but if he is, I see no jurisdictional difficulties in granting a notification injunction.
(8) If however there is no risk of dissipation, it is not obvious to me that the Court does have power to grant a free-standing notification injunction. Absent dissipation, a defendant is free to deal with his own property. Nor is he obliged to disclose to a claimant what his assets are, or what he proposes to do with them. A person contemplating suing someone has no right to find out before commencing proceedings whether the defendant is worth suing, and I am very doubtful if, after suing, a claimant is in any better position. I accept therefore that a claimant cannot obtain an order requiring a defendant to disclose his assets to him, or tell him what he proposes to do with them, just because he is interested in the answer: compare Parker v CS Structured Credit Fund Ltd [2003] EWHC 391 (Ch) where Mr Gabriel Moss QC was dealing with CPR r. 25.1(1)(g) which refers to the power of the Court to grant "an order directing a party to provide information about the location of relevant property or assets or to provide information about relevant property or assets which are or may be the subject of an application for a freezing injunction" and where he said at [23]:
"looking, first of all, as a matter of construction, at the language used it seems to me that it is dealing with a situation where there is either an application for a freezing injunction on foot or one where it is at least likely that there will be such an application. In other words, the provision assumes there is some credible material on which such an application might be based."
That was approved by the Court of Appeal recently in one of the many Pugachev judgments, that is JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139 at [49]-[52] per Lewison LJ, along with the decision of Henderson J in Lichter v Rubin [2008] EWHC 450 (Ch). The present application is not in fact put by Mr Trace on the basis of CPR r. 25.1(1)(g), but if it had been, it appears from those authorities that it would require some "credible material" on which the application for a freezing injunction might be based or in the words of Henderson J "a reasonable possibility, based on credible evidence". If that is the case for CPR r. 25.1(1)(g), I find it difficult to accept that the Court could have achieved the same effect under s. 37 in the absence of a credible basis for a freezing injunction.
(9) What I think this demonstrates is that in practice in order to obtain an injunction of the type sought in this case the claimant must either assert some substantive right to prevent the defendant disposing of an asset – something that is not suggested here – or at least some credible evidence of a threatened dissipation such as would justify a freezing injunction; but if he can do that, I see no reason why the Court should not grant a notification injunction as a freestanding injunction even if the claimant, no doubt for good reasons, has chosen not to apply for a full freezing injunction.
What is the threshold test?
- The next question that was argued was what the Claimants need to show so far as the merits of their substantive claims are concerned. There are actually two parts to this question:
(1) Is it enough, as Mr Trace submits, for the Claimants to demonstrate that there is a serious issue to be tried (as is the usual threshold test for the grant of any interlocutory injunction: see American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 407G per Lord Diplock); or do the Claimants have to show a good arguable case (as is the case for a freezing injunction: see The Niedersachsen [1983] 1 WLR 1412 at 1417E per Kerr LJ)?
(2) If the test is a good arguable case, what does this mean?
- On the first question Mr Trace says that there is authority that for the grant of a freezing injunction "a stronger case must be shown than would justify relief of a less stringent kind": per Millett LJ in Lewis v Freighthire Ltd (1 February 1996) cited by Warren J in Metropolitan Housing Trust Ltd v Taylor [2015] EWHC 2897 (Ch) at [21]. Since a notification injunction is less stringent than a freezing injunction Mr Trace submitted that it was enough if he could demonstrate a serious issue to be tried. I do not accept this submission. As I have already said, the claimant in a normal case has no right to know what the defendant's assets are or what he proposes to do with them. Although a notification injunction is in principle less invasive than a freezing injunction, it is still an invasive order and I think justifies more than a serious issue to be tried which, as appears from Lord Diplock's judgment in American Cyanamid, only really serves to cut out the frivolous or vexatious case. For the reasons I have already given the principles underlying the grant of a notification injunction are closely tied to the principles underlying the grant of a freezing injunction, and in my judgment what is needed to justify a freezing injunction in terms of the merits of the substantive claim is also needed to justify a notification injunction. I therefore hold that the Claimants need to demonstrate a good arguable case.
- On the second question Mr McQuater cited a number of authorities. The position seems to me to be this. When the Mareva injunction was first developed, the Court of Appeal decided that the required threshold was "a good arguable case": see Rasu Maritima at 661G per Lord Denning MR. That phrase was taken from the test applied for service out of the jurisdiction: see Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869. In The Niedersachsen at first instance [1983] 2 Ll Rep 600, Mustill J explained what he understood by a good arguable case in this context as follows:
"In these circumstances I consider that the right course is to adopt the test of a good arguable case, in the sense of a case which is more than barely capable of serious argument, yet not necessarily one which the Judge believes to have a better than a 50 per cent chance of success."
In the Court of Appeal in the same case the Court of Appeal again accepted the test of a good arguable case as the minimum to cross the threshold, as already referred to. The Court of Appeal in their judgment expressed no disagreement with Mustill J's explanation of what that phrase meant in this context.
- That was in 1983. In 1998 Waller LJ expanded on what a good arguable case meant in the context of service out of the jurisdiction in Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547 at 555, culminating in the statement that:
"It is also right to remember that the 'good arguable case' test, although obviously applicable to the ex parte stage, becomes of most significance at the inter partes stage where two arguments are being weighed in the interlocutory context which, as I have stressed, must not become a 'trial'. 'Good arguable case' reflects in that context that one side has a much better argument on the material available."
That was approved by the Privy Council in Bols Distilleries BV v Superior Yacht Services Ltd [2006] UKPC 45 at [28].
- That leads Mr McQuater to submit that the same applies in an application for a freezing injunction. He has the support of Roth J in The Complete Retreats Liquidating Trust v Logue [2010] EWHC 1864 (Ch) at [72] ("there seems no basis not to apply that observation in the context of a freezing order"), followed by Mr Andrew Sutcliffe QC in OJSC TNK-BP Holding v Beppler & Jacobson Ltd [2012] EWHC 3286 (Ch) at [83]. He also referred to what Toulson J said in Petroleum Investment Co Ltd v Kantupan Holdings Co Ltd [2002] 1 AER (Comm) 124, but in fact that judgment is more nuanced than Mr McQuater's reliance on it might suggest. It is true that at [37] Toulson J said that the same concept as applied by Waller LJ in the Canada Trust case is "equally helpful when considering whether to make a freezing order", but at [38] he continued as follows:
"The limitations inherent in the interlocutory process may vary from case to case according to the subject matter. Where the subject matter involves questions of fact on which the evidence is incomplete and contradictory, it may be very difficult for a court to form even a preliminary view as to the parties' rival strengths. Reading Waller LJ's judgment as a whole, I do not understand him to be suggesting that in such a case the court has to be satisfied that the evidence on the claimant's side is stronger than the evidence on the defendant's side in order for the claimant to make out a good arguable case, for that would be in effect to apply the civil standard of proof, which he emphasised is not applicable at the interlocutory stage. However, where the claim depends on the construction of a contractual document on which there is detailed argument at the inter partes stage, a court may well reach a conclusion that one side has a much better argument than the other, although it must remember that the ultimate decision would belong to the court of trial or arbitral tribunal."
That I must confess chimes with my own instinctive inclination. When the question is one of construction or one of law, and there is argument on the point, the Court may well be able to take a view as to who appears, albeit at the interlocutory stage, to have the better, or indeed much the better, of the argument. Where however the merits of the case turn on questions of fact it would impose a severe limitation on the Court's ability to grant effective relief if it had to be satisfied that the Claimant had much the better of the factual case. That is very often impossible to say at the interlocutory stage where the issues are pure factual issues, particularly if the question turns on the credibility of witnesses.
- Mr McQuater very properly referred me to the judgment of the Court of Appeal in Kazahkstan Kagazy plc v Arip [2014] EWCA Civ 381. Both Longmore LJ and Elias LJ expressed significant reservations about applying in the context of a freezing injunction the test of "much the better of the argument". Mr McQuater said that the Court of Appeal expressly did not decide the question so that this was obiter and not a decision, and no doubt he is technically right, but the judgments nevertheless contain powerful indications that Toulson J's views in the Petroleum Investment case and my instincts coincide with the views of two members of the Court of Appeal. Longmore LJ said at [25]:
"The second comment relates to the judge's decision that KK had "a much better argument" than Mr Arip. I would, with respect, say that this sets the hurdle a little too high. It was established in Pertamina [1978] QB 644 that the appropriate test to be met by a claimant seeking a freezing injunction was that of "good arguable case". We were not referred to any authority which has changed that test. "Much the better of the argument" has recently emerged as a test on applications for service out of the jurisdiction. But I see no reason why that test should apply to freezing injunctions where ex-hypothesi (or subject to any jurisdictional challenge) the defendant is properly before the court. But the fact that the Judge may have applied a slightly higher hurdle that he need have done does not in any way affect his conclusions."
Elias LJ at [63]-[68] expressed his own reservations as to the "much the better of the argument" test, referring to the traditional test laid down by Mustill J in The Niedersachsen and pointing out that that particular formulation was recently cited with approval by Longmore LJ in the Lakatamia case. He also said at [67]:
"although a claimant in both jurisdiction and freezing order cases must establish a "good arguable case", the policy considerations are different in the two situations and it is far from obvious that this inherently flexible concept must have the same meaning in each context."
- In these circumstances I hold that I am free to follow Toulson J in the Petroleum Investment case and the indications in the Court of Appeal in the Kazakhstan case and that I am not obliged to follow Roth J and Mr Sutcliffe in applying the "much the better of the argument" test to the question whether a good arguable case has been shown on the merits. In the case of purely factual questions, I consider that it is sufficient for the claimant to meet the traditional test laid down by Mustill J in The Niedersachsen that the claimant needs to show a good arguable case in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success. Indeed I would regard it as wholly invidious in a case of this type, which is likely to turn largely on the credibility of the principals on each side and their recollections of oral conversations, for a judge faced with nothing other than the pleaded cases and assertions that each side's pleaded case represents the truth, to have to form a view as to where the better of the argument on such issues might lie, let alone where much the better of the argument might lie. I find myself completely incapable, and indeed I would regard it as wholly inappropriate, to judge such matters on the basis of what are at this stage hotly disputed allegations on each side.
Has a good arguable case been shown?
- The next question is whether the Claimants have shown a good arguable case on the merits. I can take this quite shortly. In my judgment they have. Since as I have just said all these matters are hotly disputed and since they will remain for trial, it is not I think either appropriate or necessary to go into the merits in any detail. Suffice it to say that the Particulars of Claim detail serious allegations starting effectively with the suggestion that Mr Holyoake was misled into agreeing to give a net asset statement to CPC by false statements that it would not be relied on, whereas in fact CPC immediately after the loan relied on deficiencies or alleged deficiencies in the net asset statement as breaches of the loan agreement making the entire sum repayable immediately, followed by a series of aggressive threats of an unpleasant and wholly unjustifiable character. Of course that is only so if Mr Holyoake's allegations are true, and the Defendants have pleaded a detailed refutation of the allegations in the Defence, but the question whether Mr Holyoake's allegations (supported by a statement of truth given by him) are true or not is the very question which is incapable of resolution on this application. I certainly am not persuaded that they can be rejected at this stage as fanciful.
- Mr McQuater pointed to the fact that Mr Holyoake and his company settled any claims they may have had in 2013 and went so far as to say that in the light of that settlement agreement there was not even a serious issue to be tried. Mr Holyoake's case is that he was still facing threats from the Defendants until they had been fully paid off everything that they demanded. If Mr Holyoake is right, it does not seem, at this early stage of the case, at all impossible that that purported settlement, itself said to have been extracted by illegitimate threats, is not an answer to the claim.
- If I ask myself, having regard to what is asserted in the Particulars of Claim and to what is said in the Defence, whether this is a claim that at this stage is more than barely capable of serious argument although not necessarily one which I believe to have more than 50% chance of success, the answer is Yes. For this purpose it is not necessary to rely on the allegations made by Mr Logue in a claim he brought against the Defendants (a claim which I am told has since been settled) although I do not accept Mr McQuater's characterisation of this as of no value; it is true that Mr Logue's allegations are just that, but is it notable that Mr Logue, apparently entirely independently of Mr Holyoake, accused the Defendants of conduct that, although naturally differing in its detail, was quite similar in its overall thrust, namely that the Defendants engaged in threats and other unjustified behaviour in order to secure a commercial advantage in relation to properties in which Mr Logue was interested. I am satisfied therefore that a good arguable case within the meaning I have said that I would apply is here made out by the Claimants.
Risk of Dissipation
- The next question is whether the Claimants have demonstrated a risk of dissipation. There was no significant dispute about the principles. I was referred by Mr McQuater to a report of O'Regan v Iambic Productions Ltd [1989] 139 NLJ 1378 where Sir Peter Pain said:
"There are numerous paragraphs in the authorities relating to Mareva injunctions which make it plain that unsupported statements and expressions of fear carry very little, if any weight. The Court needs to act on objective facts from which the Court can infer that the Defendant is likely to move assets abroad or dissipate them within the jurisdiction."
- I certainly accept that: a freezing injunction is a type of what used to be called "quia timet" injunctions, and it is well established that a claimant cannot obtain such an injunction simply by saying "timeo" or "I fear". On the other hand what one is looking for is a risk of dissipation; at this stage it is not unusual for a claimant to be unable to prove that dissipation either has happened or will happen, but only that there are objective facts from which such a risk can be inferred.
- Mr McQuater also referred me to Mobil Cerro Negro Ltd v Petroleos de Venezuela SA [2008] EWHC 532 (Comm) where Timothy Walker J set out various principles in relation to dissipation at [35]-[43]. I will not set it all out but the principles he referred to include the following:
(1) Freezing orders are not granted in order to provide security for a claim [36];
(2) The risk of dissipation must involve a risk of impairing the Claimant's ability to enforce a judgment or award [37];
(3) The conduct in question must be unjustifiable [41];
(4) It follows that mere reorganisation of the way in which business was done is not by itself evidence of dissipation [42].
Again I accept these statements of principle.
- I propose to consider these matters under the following heads:
(1) The corporate structure of the Defendants.
(2) The nature of the Defendants' assets.
(3) Mr Christian Candy's interest in a property in Regent's Park.
(4) Mr Nicholas Candy's purchase of a luxury yacht.
(5) The nature of the allegations in the proceedings.
(6) The Defendants' reaction to the proceedings.
(1) Corporate Structure
- It is common ground that the Candy brothers have been open in media sources about their use of offshore structures since about 2008. The Claimants commissioned a report from S-RM Intelligence and Risk Consulting Ltd into publicly available information as to the entities owned by the Candy brothers, and the result of that was put before me in the form of a witness statement from a Ms Victoria Brudenell of S-RM. She exhibited a corporate structure diagram, or organogram, which demonstrates the information that she was able to obtain from corporate filings. This shows a very large number of companies (some 140 in all) which can be put together in three broad classifications: (1) the CPC group, which holds the property development businesses; (2) the Candy and Candy group, which encompasses interior design and consultancy businesses; and (3) the Omni group which is responsible for the provision of capital and retail finance for the wider groups' activities. A large number of companies are incorporated offshore including CPC (the Sixth Defendant), which was incorporated in Guernsey as are many of its subsidiaries, and as is CPC Omni Holdings (Guernsey) Ltd, the holding company of the Omni group; Candy and Candy Group Ltd is incorporated in the BVI. The organogram also shows extensive use of nominee companies, CPC being held by two nominee companies, Cosign Nominees Ltd and Spread Nominees Ltd. They are also shown (although these shareholdings are said to be unconfirmed) as holding CPC Omni Holdings (Guernsey) Ltd and a large number of other Guernsey companies. It appears that those nominee companies hold their shareholdings as fiduciary for another Guernsey company called Intertrust Group Holdings (Guernsey) Ltd and Ms Brudenell's diagram suggests that Intertrust holds its assets as nominee for Mr Christian Candy. Again however this is unconfirmed although she cites accounts for one subsidiary of CPC which refers to the ultimate parent company of CPC being under the control of Mr Christian Candy, described as "the majority shareholder". That can be contrasted with what Mr Andrew Smith, a partner in the solicitors for the Defendants, now called Gowling WLG, says in his witness statement in opposition to this application, which is that CPC is "wholly owned" by Mr Christian Candy. Ms Brudenell's witness statement also reveals that there had been a large number of companies either dissolved or formed in a short period. Her evidence is that approximately 30 group companies were dissolved between 2014 and 2016 and more than 50 companies were incorporated in Guernsey and the UK between 2014 and 2015. Ms Brudenell's witness statement also shows that Candy & Candy Holdings Ltd, a company owned by Mr Nicholas Candy, acquired in 2014 four companies from elsewhere in the group structure and put them into liquidation on the same day having received over £1m from these companies in advance of their winding up.
- On these facts Mr Trace's submissions were as follows. The structure that is revealed by the organogram is an unusually complex one and it is a particularly opaque one. Mr Stringfellow, a partner in the firm gunnercooke LLP, the Claimants' solicitors, described it as "labyrinthian" and says that although he has seen many group structures in 20 years of practice he has never seen anything as elaborate or complex as this one. Mr Trace said it has taken a lot of work even to get to the stage that Ms Brudenell has been able to get to, that the Claimants could not know if there had been changes since then, and that it was difficult to know where the value resided in the structure. He said that it lent itself to moving assets around without leaving any trace. He referred to the fact that a great many of the companies are incorporated offshore, the important point here being that the jurisdictions selected by the Defendants as a basis for substantial parts of their businesses impose very limited reporting requirements on companies. The evidence is that in Guernsey there is no requirement for companies to file annual accounts; Ms Brudenell also says that her enquiries with the Guernsey register confirmed that since 2008 Guernsey-incorporated companies have not been required to file information about shareholders. Mr Trace also refers to the extensive use of companies as nominees and fiduciary agents, the effect of this being to obscure the ownership structures of companies in the groups and to make it easy for the Defendants to switch the beneficial ownership of companies, and hence of the underlying assets, simply by giving instructions to the nominee or fiduciary companies, such changes being invisible in the public record. Mr Trace also refers to the corporate structure having apparently no "topco". That means that it is not possible to trace value up to a single entity. Indeed he says that the set up of three or more simultaneous corporate structures makes it easy to move assets around between groups and hence away from CPC. He also points to the extensive corporate restructurings which Ms Brudenell has uncovered; this illustrates that with a structure of this type it is possible to move assets around at short notice thereby making it more difficult for the Claimants to enforce any judgment that they might obtain.
- Mr McQuater says that the use of offshore structures is not in itself something that can be regarded as giving rise to a risk of dissipation. He points to the fact that Hotblack (the Second Claimant) is itself incorporated in Jersey and is held by Mr Holyoake through at least two BVI companies. Mr McQuater said that the mere use of offshore corporate structures was not something that implied a risk of dissipation since that was commonplace and legitimate for international businessmen; it would be different where there was a good arguable case that a person used a web of offshore structures to facilitate a fraud: see VTB Capital plc v Nutritrek International Corp [2011] EWHC 3107 (Ch), [2012] EWCA Civ 808 where at first instance Arnold J had said (at [233]) that:
"It is not uncommon for international businessmen, and indeed quoted UK companies, to use offshore vehicles for their operations particularly for tax reasons. This may make it difficult to enforce a judgment. But in that respect claimants such as VTB have to take defendants such as Mr Malofeev as they find them. More is required before the court will conclude that there is a risk of dissipation."
The Court of Appeal's comment on that, at [174] of the judgment of the Court given by Lloyd LJ, was:
"It seems to us that, while that may be a fair comment as regards international businessmen generally, the factor of a good arguable case as to fraud against the person in question, and the use of a web of offshore companies in connection with the fraud, could properly provide a basis for taking this into account in favour of the grant of an injunction."
Mr McQuater said that in this case, although there were allegations of fraudulent misrepresentation against the Defendants, they were not the heart of the case which was an allegation of conspiracy and duress, and that it was not suggested that any fraud was facilitated by the use of a network of offshore companies. That seems to me to take the Court of Appeal's words as if they represented a definitive statement of when the use of offshore companies could be regarded as giving rise to a risk of dissipation, which is I think a misreading.
- Mr McQuater pointed out that the Claimants' investigator was able to assemble a large amount of publicly available information about those companies within a couple of weeks. Although the number of companies owned indirectly, in particular by Mr Christian Candy, is very large, he described the corporate structure as in fact relatively simple, with everything ultimately owned by Mr Nicholas or Mr Christian Candy and the majority of the companies owned by Mr Christian Candy through CPC. He also said that a business reorganisation or change in the nature of business carried on does not by itself imply a risk of dissipation: see the Mobil case at [41]-[42]. The corporate reorganisation in 2014 to 2015 was not and could not be a dissipation of assets, the new companies all being owned by the existing Defendants. Nor did the fact that assets could be moved around the group prove anything, referring again to Mobil at [62], where Timothy Walker J said that the fact that funds could be easily transferred from one account to another and that shares in joint venture companies were easily transferable did not assist Mobil, there being nothing unusual about any of that. Mr McQuater said that the real complaint was that the Claimants could not see what assets the Defendants have got; he was not pretending that the Claimants could determine where the assets of the companies were but that was true of many companies and many individuals and did not prove anything. There was no suggestion of any fraud and it was not a legitimate complaint to say "I don't have visibility of your assets". He also referred to the fact that many of the newly incorporated companies were incorporated in England and Wales, that Mr Nicholas Candy lived in the UK, and that Mr Christian Candy, who had previously lived in Monaco, was now also living in the UK and tax resident and domiciled here. In other words the Defendants had strong, and strengthening, links with this jurisdiction.
- I accept entirely that the mere fact that a defendant holds their assets or businesses, or some of them, offshore through offshore structures, is not in itself evidence of a risk of dissipation. I accept also that the mere fact that there are a large number of companies is not by itself anything unusual; it is common for businessmen involved in a number of separate projects to use special purpose vehicles for each project, and this in my experience is neither atypical nor surprising in the case of those involved in the acquisition and development of property. I accept also that a large amount of information as to the structure was publicly available such that the Claimants' investigator could put together the organogram in a relatively short time and without too great difficulty. But I do not think that any of this fully meets the points made by Mr Trace. Those who use offshore structures, especially complex structures involving nominees and fiduciaries, may do so for entirely proper and bona fide reasons, but the experience of those who practise and sit in these Courts is that such structures do lend themselves to being abused. It is notorious that the use of offshore trusts, and companies incorporated in jurisdictions which do not require detailed financial reporting, and the use of fiduciaries and nominees which enable the beneficial ownership of assets to be switched easily and without visibility, are aspects of a structure that enables those who wish to move assets around or to hide them to do so more easily. It is perfectly true that a claimant does not have any entitlement to know what a defendant's assets are before suing him; but the fact that the defendant uses complex and opaque offshore structures (and despite Mr McQuater's submissions, I am satisfied that this is an unusually complex structure) which make it difficult to see where value resides in a corporate structure, and which enable assets to be moved easily from one part of the structure to another, is a factor which in my judgment can legitimately be taken into account. I conclude therefore on this aspect that although the complex, opaque and offshore structure of the Defendants' companies is not in itself grounds for inferring a risk of dissipation, it is capable of being regarded as contributing to the risk if there is other material on which to infer such a risk. I do not therefore accept Mr McQuater's submission that unless the case can be brought within the type of case described by Lloyd LJ in VTB v Nutritrek, the existence of offshore companies can always be ignored as irrelevant.
- So far as the corporate reorganisation is concerned, Mr Trace QC pointed to the fact that there had been a large number of companies dissolved and others incorporated since these proceedings were first intimated which was in May 2014, the suggestion being that the reorganisation might have had something to do with the threat of proceedings. Mr McQuater denied that that was a reasonable inference. As well as the fact, already referred to, that many of the newly incorporated companies were onshore, he referred me to the form which the May 2014 correspondence took. It starts with an e-mail on 2 May 2014 from Mr Holyoake to Mr Tim Dean of CPC requesting the appointment of an arbitrator and saying that if CPC had acted fairly then the arbitrator would no doubt "find in your favour" and "CPC should have nothing to hide or fear if as you say you have treated me properly and correctly". Mr Dean brushed off that suggestion. Mr Holyoake tried again with Mr Dean and when that did not work he e-mailed Mr Nicholas Candy directly, suggesting that the parties engage in an arbitration process and saying "if you guys are correct as you say then the arbitrator will rule in your favour and we will be bound by its findings". That led to a letter dated 6 May 2014 from the Defendants' solicitors, then called Wragge Lawrence Graham & Co LLP, to Mr Holyoake's solicitors in which they said they had been asked to write by "our clients CPC Group, Chris Candy and Nick Candy" and continued:
"Despite the issues between our respective clients being resolved with the benefit of legal representation from our respective firms, your client has taken to sending repeated emails to our clients. These emails suggest that the concluded matters are reopened by way of arbitration."
They then rejected the suggestion of arbitration and continued:
"In the event that your client wishes to pursue a claim of whatever nature he should do so by court proceedings. There is an exclusive jurisdiction clause citing the Courts of England and Wales. Our clients have nothing to hide."
Mr McQuater said that correspondence did not disclose a threat to bring proceedings against the Candy brothers personally but only against CPC; he also said that after Wragge's letter of 6 May nothing further was heard until December 2014. It was therefore not a reasonable inference that the reconstruction which took place late in 2014 was designed to avoid the impact of threatened proceedings.
- I do not find in this correspondence any clear indication that the threatened claim which Mr Holyoake might have would necessarily be confined to claims against CPC. It is true that he referred to CPC in his emails but the settlement agreement which was entered into on 15 October 2013 had been preceded, according to the Defence, by a threat from Collyer Bristow LLP that various agreements were void for duress, and the settlement agreement was drafted to release not just CPC but also its associates, including the individual Defendants, from claims including specifically "all claims for or arising out of or related to deliberate wrongdoing or breach of any obligation, dishonesty, bad faith, economic duress or fraudulent misrepresentation". In these circumstances when Mr Holyoake was seeking in May 2014 to resurrect a claim I think it distinctly possible that the Defendants might have feared that any such claim would not be limited to CPC itself but extend to the individual Defendants. It is noticeable that Wragges wrote on behalf of not only CPC but the Candy brothers. I am not therefore prepared to assume that the Candy brothers thought there was no risk of them personally being sued. There is no evidence from them to that effect.
- There is perhaps more force in Mr McQuater's suggestion that a letter having been written at the beginning of May 2014 inviting Mr Holyoake to take proceedings if he thought he had any claims, and nothing having been heard for many months, the Defendants might well have assumed that no proceedings were going to be brought. However, here again I do not in fact have any evidence on behalf of the Defendants saying that that is what they did believe. I in fact have no explanation from the Defendants as to why the corporate reorganisation was undertaken nor what its practical effect was. I cannot, on this state of the evidence, conclude that steps taken after May 2014 were taken because of the threat of proceedings but I cannot entirely rule that out as being a possible explanation.
(2) The nature of the Defendants' assets
- Mr McQuater said that many of the assets of the Defendants are in the form of real property and that such property is not susceptible to dissipation. Indeed he says that the fact that the Defendants have many assets in a form that cannot readily be dissipated ought by itself to be fatal to the allegation that there is a risk of dissipation to defeat enforcement of the Claimants' claims. I do not accept this. It is not in fact difficult to sell real property quite quickly, especially for those who are familiar with the property business. Mr Smith's own evidence on behalf of the Defendants is that they operate in a very fast-moving environment, and that "seven days is a long time in this high-end market". More significantly however, it is not necessary to sell real property in order for its value to be transferred. It is quite simple for example to transfer the shares in a corporate vehicle which holds real property. It is also the case that it is easy and quick to charge real property, or where, as is very often the case, real property is already subject to a charge, to draw down more on the existing facility. I would be surprised if those who make a business of dealing in property had not charged many of their assets, and there is no evidence before the Court of any real property assets that are unencumbered.
- Mr Smith refers to the properties owned by the Candy brothers in their own names, Mr Nicholas Candy being the owner of an apartment at One Hyde Park, a prestigious development undertaken by CPC, and Mr Christian Candy being the owner of a property at 20 Cornwall Terrace. In each case Mr Smith suggests that the properties are of very substantial value: in the case of One Hyde Park another penthouse apartment at the property sold for £140m and in the case of 20 Cornwall Terrace Mr Smith says that that property, together with two associated mews houses, was purchased for £31m. However I have no real evidence of the value of Mr Nicholas Candy's apartment, and, more pertinently the properties are each charged, that belonging to Mr Nicholas Candy to Credit Suisse (UK) Ltd, and that belonging to Mr Christian Candy to RBC Europe Ltd. In each case it is impossible to tell from the publicly available information how much is outstanding on the charges and it is therefore impossible to tell what equity the Defendants have in their respective properties. There is no evidence either from themselves, or from Mr Smith on instructions, either as to the current value of the properties or the current amount outstanding, so it is impossible for the Court to be confident that there is substantial equity currently available in either property. In any event in each case the charges are expressed to contain an obligation on the lender to make further advances, and it is quite impossible to know, in the absence of any evidence upon these matters, how likely or unlikely it is that any equity might be subsumed by further borrowings against the security of these properties. The mere fact that the Defendants are shown to be owners of valuable but charged freehold property is not something of itself that I find of much assistance.
(3) Cambridge Terrace/Chester Gate
- This concerns a row of houses in Regent's Park, namely Nos 6-10 Cambridge Terrace and Nos 1 and 2 Chester Gate. The evidence on this is nothing like as clear as it might be, but it does appear that the following is the position. In September 2014 an article appeared in the Evening Standard saying that Mr Christian Candy had bought an entire row of buildings by Regent's Park from a fellow developer, Mr Marcus Cooper, and was creating one of London's largest family mansions; friends of Mr Candy were said to have said that he wanted a permanent home in London for his family after his wife Emily gave birth to twins. A similar article appeared in the Mail Online at the same time. On 24 September 2014 Mr Christian Candy as borrower entered into a loan agreement with a number of lenders, the inference being that that was to complete the purchase. There are in evidence a number of titles from HM Land Registry, and Counsel were not able to explain them all, but what is clear is that Mrs Candy is now the registered proprietor of 6-10 Cambridge Terrace and that a lease for 150 years was granted on 15 July 2015 to her by the Crown Estate Commissioners. It is probable indeed that the properties had been put in her name rather earlier than that; I say that because there is in evidence a legal charge dated 23 December 2014 made between her as chargor and Credit Suisse (UK) Ltd as security agent, under which she charged a lease for a term of 150 years commencing on 30 September 2014 and relating to 6-10 Cambridge Terrace and 1-2 Chester Gate and some other properties as well. It is notable that that charge is described as a third party legal charge and its form suggests that it secured the amounts owing by Mr Christian Candy under the loan agreement of 24 September 2014. The current position however is that Mrs Candy only appears to be the registered proprietor of 6-10 Cambridge Terrace, 1 Chester Gate being owned by a company called 1 Chester Gate Ltd and 2 Chester Gate by 2 Chester Gate Ltd, in each case leases having been granted to the respective companies on 24 September 2014. When gunnercooke asked the Defendants' solicitors for an explanation in September 2015 as to why Mr Christian Candy was now seemingly carrying on a significant property development in Regent's Park in his wife's name, the answer was "the property referred to is in fact to be Mr and Mrs Candy's family home in London when construction work upon it has been completed." A subsequent very recent letter of 17 March 2016 indicated that although that was true at the time at which it was written, Mr and Mrs Candy have subsequently decided to move into another significant property elsewhere in London and as a result Cambridge Terrace is being redeveloped. It is said that the property will become the property of a partnership in which Mr Christian Candy will have the majority interest and CPC the minority interest.
- On these facts, Mr Trace submits that the position is unsatisfactory. He says the transfer into Mrs Candy's name was an actual dissipation by Mr Christian Candy, for which no explanation has been given. The Claimants' evidence is that Mrs Candy is not thought to be either a property developer or sufficiently wealthy in her own right to acquire the property or to redevelop it. The suspicion is that Mr Candy, having contracted, and borrowed the money, to buy the property himself, put the property in his wife's name at a stage when the Claimants had intimated that they considered that they had claims, as I have previously set out. Mr McQuater referred me to the judgment in Re Homedon [2015] EWHC 1614 (Ch) in which Mr Stuart Isaacs QC accepted the evidence of a respondent to an application for the continuation of a freezing order that a particular transaction in the form of an equity release was not a reaction to the threat of legal proceedings. He said I should adopt the same view here. However, as pointed out by Mr Trace, in that case the Deputy Judge had evidence from the respondent expressly deposing to the circumstances in which she entered into the relevant transaction. Here the Defendants have chosen not to give any such evidence. Instead all I have is the statements in the Defendants' solicitors' letters, and as Mr Trace says these are not in fact evidence. Mr McQuater says the explanation for why the property was put into Mrs Candy's name is that contained in Wragge's letter of September 2015, namely that it was to be their family home. Had there been evidence to that effect and had that explained why it was thought appropriate to put such apparently valuable property into Mrs Candy's name I might or might not have found that explanation one that I should accept. But even accepting the property was bought to be a family home, it does not explain why, and indeed I have in fact no explanation why, it was thought appropriate that it should be put into Mrs Candy's sole name. It is possible that there are entirely innocent explanations for Mr Candy having done this; but it is equally possible that one of the reasons why it was put into Mrs Candy's name was a concern by Mr Christian Candy that his family home should be immune from execution in relation to any judgment obtained against him or against any of his companies. Mr McQuater in his skeleton argument referred to the property as having been "sub-sold to Mrs Candy", something for which there is no evidence at all, and which seems to me to be prima facie unlikely; in oral argument he said that maybe Mr Candy made a gift of it to his wife because of his natural affection for her. That may be the explanation, but it illustrates the difficulties that Mr McQuater was in that he could not tell me, because he had no evidence as to what was the motivation for it being put into Mrs Candy's name. I agree with Mr Trace that prima facie the effect, even if not the intention, of doing this was to remove what might, depending on its value and the extent of the charge secured against it, be a valuable asset from Mr Candy's ownership to that of someone who is not a Defendant and could never have been expected to have become a Defendant to these proceedings. I agree that in the absence of any explanation which could be regarded as justification, there is here prima facie evidence of an act that can be characterised as dissipation. I should make it clear that I am not finding that this was Mr Candy's purpose or that there was anything improper in what he did; but simply that there is before the Court evidence of a transaction which has the prima facie effect of removing an asset of his from being taken in execution and which is, so far as the evidence is concerned, not explained.
(4) Yacht
- In January 2016 it was reported in the Mail Online that Mr Nicholas Candy had bought a yacht at a cost of £26m and given it to his wife, Holly Valance. Ms Brudenell's researches show that the yacht, called 11-11, was owned by a Maltese company, that company being owned as to 1199 shares by a holding company and as to 1 share by Mr Nicholas Candy's wife, and that Mr Nicholas Candy was listed as the sole shareholder of the company which held 1199 shares. It also revealed that the yacht was subject to a charge in favour of a credit finance provider. Mr Stringfellow's evidence is that a rule of thumb is that the running costs of a luxury yacht could amount to 10 percent of the purchase price each year, that is in this case some £2.6m per year; that is in addition to any finance charges payable on the loan used to purchase the yacht, the details of which are unknown to the Claimants. The reason this gives rise to concern, so far as the Claimants are concerned, is that it is impossible to discern from the publicly available information how Mr Nicholas Candy can afford what can aptly be described as a billionaire lifestyle. Mr Holyoake says that Mr Nicholas Candy, who had been a good and close friend of his since they were students together at Reading university, had informed him on numerous occasions that he and his brother Mr Christian Candy invariably worked together as partners on a 50/50 basis, and on the basis of that believes that Mr Nicholas Candy is in truth a 50 percent beneficial owner of CPC. This is denied by the Defendants who in their Defence say that Mr Christian Candy is and was at all times the ultimate beneficial owner of CPC (which was named after his initials) and that Mr Nicholas Candy is not and never has been an ultimate or other owner of CPC. Indeed the organogram produced by Ms Brudenell does not show Mr Nicholas Candy as having any ownership interest in CPC. Instead he is shown as having ownership interests in Candy & Candy Group Ltd. Mr Stringfellow's evidence is that a review of the available information as to the profits generated by the companies which can be shown to be owned by Mr Nicholas Candy shows one company with profits to June 2014 at just over £400,000 and the highest paid director, presumed to be Mr Nicholas Candy, being paid £375,000; but no other substantial profits.
- In these circumstances Mr Trace's submission is that it is very difficult to see, from the publicly available information on the sources of Mr Nicholas Candy's wealth, how he could possibly afford either to purchase or to run the yacht. Either the Claimants are right and Mr Nicholas Candy is in truth a 50 percent or other substantial beneficial owner in the property development businesses owned by CPC, in which case the Defendants have misrepresented the position by pretending that he has no interest in such companies; or in truth he does not have the assets to support a billionaire lifestyle, in which case there are very serious doubts as to how he does manage to fund such a lifestyle, and the purchase of a £26m yacht would appear to be an example of his spending money that he does not have. Mr Trace accepts that the Court may well not be in a position to decide which of these is correct at this stage, but says that on either view the Court should regard the apparent discrepancy or disconnect between what Mr Nicholas Candy spends and how he lives, and the available information as to his source of wealth and income, as giving rise to suspicion.
- Mr McQuater says that it is irrelevant whether the yacht was held largely by Mr Nicholas Candy or by his wife; he was entitled to give the whole yacht to his wife if he wanted; it was a gift made in the full glare of publicity; it had none of the quality of hidden transactions that were the hallmark of dissipation. A wealthy man was entitled to make a gift to his wife; he was not required simply because he was being sued to alter his lifestyle and a speculation about how he could afford that lifestyle was really irrelevant.
- In my judgment Mr McQuater's submissions underplayed the significance of this episode. I accept Mr Trace's submission that there is a disconnect between the lavish billionaire lifestyle that Mr Nicholas Candy appears to be able to afford, including living in an opulent apartment and purchasing a luxury yacht, and any apparent means to finance that lifestyle. It is not as if it is suggested that Mr Nicholas Candy has other businesses than those which are revealed on the organogram, or that he has inherited wealth or other sources of wealth other than the businesses which he and his brother have together developed. That disconnect suggests that the public position which he and his brother have put forward that he has no interest in the property development business, and that his interests are in the interior decorating business represented by Candy & Candy Holdings, may not tell the whole truth. Either his businesses generate far more income and wealth than the publicly available information reveals, or in truth he has derived some income and wealth from the CPC businesses despite saying that he has no interest in them, or the reality is that he does not have the income and wealth to support the lifestyle which he appears to enjoy. I agree with Mr Trace that the Court cannot, nor indeed do I think it should, seek to speculate on which of these possibilities is the truth. A noticeable fact is that there is no evidence before the Court from Mr Nicholas Candy or on his behalf which provides any sort of explanation at all, Mr McQuater taking refuge in the point that the Claimants have no right to know what Mr Nicholas Candy's assets are or how he finances his lifestyle. It may be that there are perfectly rational and justifiable explanations for this apparent disconnect. However, I agree with Mr Trace that in the absence of any evidence and in the absence of any apparent explanation, these matters do give rise to concern. A person who publicly flaunts his wealth, but whose declared holdings in his corporate interests do not begin to justify the wealth which he displays, is open to the charge that he is willing to say one thing and do something else. Those are precisely the sort of circumstances which give rise to a risk that a person who is prepared to do that might also be prepared, if judgment on a very large claim is given against him, to say that despite his apparent wealth he in truth has no assets against which execution could be levied. I must make it clear that I have not concluded, and cannot on this application conclude, that Mr Nicholas Candy has done anything improper at all; but what the Court is concerned with at this stage is the balancing of risks, and it does seem to me that Mr Trace is fully justified in his submissions that these matters give rise to a risk which is more than negligible, that Mr Nicholas Candy is prepared to be unforthcoming about his assets and conceal them; that does in my judgment give rise to a real risk that were he to face a judgment, the Claimants might find that his position was that he no longer had any assets to meet it.
(5) The substantive allegations
- Mr Trace also relies on the allegations made by Mr Holyoake in the substantive claim. Included in the allegations made by Mr Holyoake are that it was represented on behalf of CPC that Mr Holyoake's net asset statement was being sought purely as a formality and would never be relied upon by CPC, a statement which is said to have been false and fraudulent; representations by Mr Christian Candy that CPC or he and his brother were in discussions with a lender about a significant deal and that they were required to make disclosure of the loan agreement to Mr Holyoake to that lender; threats made at a meeting in Guernsey on 6 February 2012 at which Mr Christian Candy is said to have said that they would take a wrecking ball to Mr Holyoake's assets and leave him with nothing, that they would not stop at any lengths to get what they wanted, that Mr Holyoake had not so far seen anything like the extent to which they could ruin his life but they would do so; allegations that in certain telephone conversations Mr Christian Candy and Mr Williams said that they would use "the nuclear option" on Mr Holyoake, and that they would "nuclear bomb" him if he did not sign certain draft documents; and allegations that Mr Christian Candy spoke to a Mr William Pym, a banker then acting on Mr Holyoake's behalf, in which he threatened that he would "fuck up" Mr Holyoake's world, use "the nuclear option" and "destroy his world", and in a subsequent conversation that he would be "wiped out". Mr Trace said that taken together these were allegations that the Defendants would do everything they could to make life difficult for Mr Holyoake.
- Mr McQuater says that these are just allegations; they are both uncorroborated and hotly contested. In any event the threats amount to a threat that the Claimants would get nothing back from their investment in the property; they are not threats by the Defendants to do anything with their own assets, still less a threat to dissipate those assets to avoid a claim by the Claimants. He referred to the principle that where allegations in the claim itself are relied on as evidence of dishonesty on the part of the Defendants the Court must be astute to scrutinise the allegations to see whether the particular dishonesty alleged is of a sort which would justify an inference that there is a risk of dissipation: "what is required is dishonesty that is sufficiently proximate to the applicant's claim to give rise to a risk of dissipation" (White Book (Civil Procedure 2016) at note 25.1.25.5). He said that it was not enough for a claimant to allege that a defendant was capable of bad behaviour; it was necessary to show that the matters alleged against the defendant really did give rise to a real risk of dissipation.
- I accept that the thrust of the Claimants' complaints in this action are not of having been defrauded but of having been coerced by duress and illegitimate threats. I accept also that there is no allegation in the substantive claim of threats to deal with the Defendants' assets; the threats are to leave the Claimant with nothing. Nevertheless I do not think that matters can be regarded as simply as Mr McQuater suggests. I have already accepted that the Claimants have demonstrated a good arguable case in the sense which I have explained, and the risk of dissipation has to be addressed on the assumption that there is a real prospect of the Claimants making out their allegations and obtaining the judgment which they seek. If the Claimants obtain a judgment it will be because they have established that the Defendants engaged in the most appalling conduct. That includes an allegation that Mr Holyoake was inveigled into entering a loan agreement on the terms that he did by false assurances that it was a matter of form for him to give a net assets statement, and then that agreement being used to extract very large sums from him under threats of a most unpleasant character. In the course of that it is said that the Defendants threatened to destroy his life and leave him with nothing. If those allegations are made out I do not find it at all difficult to suppose that defendants who are capable of behaving in such a fashion might also be capable of arranging their affairs to ensure that the Claimants did not see the benefit of the judgment they had obtained. I repeat that what the Court is concerned with at this stage is a question of risk not a question of proof. I accept entirely that the allegations are just allegations and have not been proved; I accept further that even if the allegations are proved it does not follow that the Defendants will act in such a way as to evade or seek to evade a judgment. But I cannot find that there is in these circumstances no appreciable risk of that happening; those who are prepared, as it is alleged that the Defendants were prepared, to use the techniques which they are said to have used to obtain very substantial financial advantages at the expense of the Claimants might in my judgment realistically be thought to be prepared also to ensure that they did not see any benefit from suing them. I do not think that the requirement that any dishonesty be proximate means that it is only the fraudulent hiding of assets which counts; a contempt for due processes of law and ordinary standards of commercial morality can in appropriate cases amount to material from which a Court may infer a risk that defendants may take illegitimate steps to avoid the obligations of a judgment.
- In this context the allegations made by Mr Logue, although again only allegations which have not been proved and are now, it appears, unlikely ever to be proved, are not irrelevant. Those allegations include deliberate breaches of obligations of confidence and an abuse of the process of court by instigating an application for a freezing order in which serious and deliberate non-disclosures were made for ulterior purposes. Again I cannot and do not proceed on the basis that such allegations are true; what the Court is concerned with at this stage is risk, but it is striking that the broad thrust of the allegations is that the Defendants are persons who are prepared to act in a way that is commercially and legally unjustifiable and morally reprehensible.
- I do not find it unrealistic to suppose that if the Defendants were indeed guilty of the acts of which Mr Logue accused them, they might well be the sort of persons who would equally seek to defy judgments and seek to bring about a situation in which judgments would remain unsatisfied. In my judgment therefore the allegations made in these proceedings and the allegations made by Mr Logue in his proceedings, are, taken together, material which suggests that there is indeed a risk that if the Claimants are successful in obtaining judgment, they might find that the Defendants had taken steps to see that those judgments would not be met.
(6). Reactions to the proceedings
- Mr Trace also referred to the way in which the Defendants had reacted to the threat of proceedings, characterising it as evasive and slippery. I do not think it is necessary to discuss these matters in any detail; I have read the correspondence between the parties. What appears from that is that the Claimants previously instructed Jones Day who in December of 2014 sent draft Particulars of Claim; at that stage the draft Particulars, settled by other leading counsel, asserted a claim of some £20m against CPC alone. The Defendants' solicitors took the point that Jones Day had a conflict of interest and nothing further was heard from them after January 2015, and then in August 2015 the Claimants' current solicitors, gunnercooke, sent new draft Particulars of Claim against all six Defendants. That was in the holiday period, and it took some time for the Defendants' solicitors to confirm which Defendants they were retained by and to confirm whether they were instructed to accept service, with the result that the Claimants applied for leave to serve out of the jurisdiction. I think it can fairly be said that the Defendants did not lean over backwards to co-operate with the bringing of the proceedings against them; but I think it is a bit excessive to characterise their conduct of the proceedings as evasive or slippery. Mr Trace referred to various other matters in this connection, such as that they had been asked to give an undertaking to preserve documents, their solicitors' response to that being that they understood the obligation to preserve documents but did not see why they should give an undertaking; the fact that in the Defence it was said that the address of one of the Defendants was incorrect and that the correct address would be supplied in correspondence, but that when gunnercooke asked for this to be clarified in correspondence there was no response; and thirdly, that the Defendants, without co-operation with the Claimants, listed an application for further information at the same hearing as the injunction hearing, something which Mr Trace characterised as deliberately designed to cause him personally difficulties in preparing for the application. On the other side, the Defendants complained that the Claimants have been unforthcoming about various matters. It is apparent that this litigation, which contains very serious allegations on both sides and is a very large claim, is one which has been and will be hard-fought on both sides with precious little in the way of co-operation between the parties. That may be something that is not in the spirit, or in some cases the letter, of the CPR, but I do not regard it as material to the question whether there is evidence of a risk of dissipation.
(7). Other matters
- Mr McQuater relied on various miscellaneous other matters. He said that the Defendants had been very active in London in particular for many years, they are well-known in both business and social contexts, and it is implausible to suggest that they would jeopardise their businesses or reputations by seeking to evade enforcement of an English judgment. I do not think I can, and Mr McQuater did not ask me to, take judicial notice of the extent or quality of their reputations, and I do not think I can safely draw any conclusions from this particular factor.
- Mr McQuater also took what he described as the stable door point, namely that the whole reason that freezing orders are usually applied for ex parte is that the basis for the application is that if notice is given to the respondent, the respondent is likely to make off with his assets in the meantime: see for example Oaktree Financial Services v Hyam [2004] EWHC 2098 (Ch), where Laddie J said that an ex parte application by liquidators for a freezing order, after they had repeatedly warned the respondent in correspondence of their intention to do so, was "poorly thought through", although it is noticeable that he did in the event grant the relief sought. There is obvious force in the proposition that those who give notice to the other side run the risk that any order that is made is futile. Moreover, there is force in the proposition that if the Defendants were really of a mind to dissipate their assets they might have taken the necessary steps already, and the fact that they have not suggests that the risk is not a real one. Nevertheless, in a case such as the present, I do not think this can be a complete answer to the application. It would no doubt be a complex, lengthy and expensive process for the Defendants to rearrange their affairs in the way that the Claimants fear; and were the Defendants to be so minded, the fact that they have not yet, or at any rate cannot be shown yet, to have embarked on such a process, does not I think mean that the Court should conclude that there is no risk that they might seek to do so at a later stage as the proceedings got closer to trial, especially if it appeared that judgment was likely to be given against them.
Conclusion on risk of dissipation
- I am satisfied in all the circumstances that there is here material on which the Court should conclude that there is a risk of dissipation. In reaching this conclusion I have in mind particularly the unexplained transfer of a very substantial property into the name of Mr Christian Candy's wife, and the discrepancy between Mr Nicholas Candy's purchase of a very valuable yacht and any apparent means for him to be able to afford it. It is I think also relevant that the proposed notification injunction is less intrusive than a freezing order; I take the view that this is relevant to the degree of risk which needs to be shown before the Court can be persuaded to intervene. For the reasons I have given I am satisfied that there is such a risk of dissipation as to justify the Claimants' fears and to justify in principle the Claimants seeking and obtaining relief from the court in the form of a notification injunction.
Balance of convenience
- I received submissions from both sides as to where the balance of convenience lies, Mr Trace suggesting that the proposed notification injunction really involved very little inconvenience to the Defendants and was unlikely to give rise to any loss, Mr McQuater saying by contrast that the proposed regime set out in Mr Trace's draft order would cause serious disruption to the Defendants' business. After I expressed some concerns in argument that the inconvenience to the Defendants would be rather greater than Mr Trace had submitted, he put forward in reply a proposed modification of the order under which there would be no need for prior notification of transactions in relation to UK residential and commercial property; in those cases notice was to be given within three days after completion of the disposal or acquisition. There were some other minor modifications which it is not necessary to set out. The basis of Mr Trace's suggestion was that the evidence suggested that the Defendants' property dealings were largely in the UK market.
- Mr McQuater pointed out, with some justification, that he could scarcely be expected to deal with what was quite a radical proposed modification of the order which had first surfaced in Mr Trace's reply, and that he would wish to have time to adduce evidence as to the impact of the order in its modified form on his clients' businesses. That I regarded as appropriate, and I therefore adjourned the hearing to enable such evidence to be adduced and for Mr McQuater to consider with his clients the effect of the proposed modification; I did however make clear that I regarded the post-transaction notification regime suggested by Mr Trace as much less problematic than the pre-transaction notification which had originally been asked for. In those circumstances, I adjourned the application, granting a temporary injunction over the period of the adjournment in accordance with the modified form. In circumstances where the evidence was that the Defendants' businesses were largely UK based it did not seem to me that an injunction in the modified form over the short period of an adjournment would be likely to cause significant harm to the Defendants, and it would also have the added advantage that it would enable the operation of the Claimants' proposed modified notification regime to be tested to see what practical difficulties, if any, it gave rise to. That would mean the parties could come back on the adjourned hearing and argue the question of balance of convenience against the experience of operating the regime in the short intervening period. In those circumstances I do not propose to say any more in this judgment about where the balance of convenience lies; that will be a matter to be argued at the resumed hearing.
Fortification
- Mr McQuater asked for the Claimants' cross-undertaking in damages to be fortified. I agree that in principle fortification of the cross-undertaking in damages is a reasonable request; however, Mr Trace referred me to a note in the White Book at 25.1.25.10, which reads as follows: "It is for the Defendant to put forward in evidence a credible estimate of its future losses," the authority for that being RBG (Resources) Plc v Rastogi [2002] BPIR 1028 (Laddie J). That seems to me a sound principle; in this case Mr McQuater asked for fortification in the sum of £4m, but he did not really have any evidence at all as to the likely level of future losses, the sum of £4m being simply taken, as Mr McQuater candidly admitted, from the sum ordered by Floyd J in another case, Bloomsbury International Ltd v Holyoake [2010] EWHC 1150 (Ch), a case in which a freezing order was sought against Mr Holyoake himself. It is apparent however from Floyd J's judgment at [30] that the sum of £4m represented what he described as "a realistic assessment of the order of damages that the Defendants might suffer, although it is necessarily an unscientific one at this stage of the proceedings." In the present case I really have no material on which to make even an unscientific assessment of the order of damages, and in any event the amount of loss is likely to depend on the particular type of notification regime that might be put in place. In those circumstances I will adjourn the question of what fortification is appropriate to the adjourned hearing.
Conclusion
- For the reasons I have sought to give, I am satisfied (i) that there is jurisdiction to grant a notification injunction; (ii) that the Claimants have to show a good arguable case on the merits, not just a serious issue to be tried; (iii) that in a case like this a good arguable case requires a case that meets the test in The Niedersachsen; (iv) that the Claimants have shown a good arguable case to the level required; and (v) that there is a real risk of dissipation against which they are entitled in principle to be protected.
- I should make it clear that I do not regard any of these matters as being open for further argument on the adjourned hearing. The purpose of the adjourned hearing will be to resolve the precise form of notification regime which should be put in place, and the question of what fortification should be required. I have also made it clear that I have reserved the costs of the application to the adjourned hearing.
- I am very grateful to Counsel for their comprehensive submissions.
