HT-2022-000254 - [2025] EWHC 105 (TCC)

As Mr Moraes made clear, the applicants’ primary case is that the properties are simply not within the terms of the freezing injunction. He submits that it is for the respondents, if they assert that Click St Andrews has some interest in the properties, to make out that case; further that the Receivers have no power or control over the books or records of the Borrower; and that the burden does not lie with the Receivers to investigate. For the last of those propositions, the Receivers rely on the decision in Z Ltd. v A-Z [1982] 1 QB 558 at 575D-H. There, in the context of an innocent third party given notice of a Mareva injunction, Lord Denning said that the third party should be told with as much certainty as possible what he was to do or not do and what assets were affected and that the applicant for the injunction could ask the third party to conduct a search to see whether it held any assets. It seems to me that that submission goes a little too far in the circumstances of this case. This is not a case in which the respondents have done nothing – they have repeatedly attempted to obtain information to enable them to identify Click St Andrews’ assets. In addition, they have made proposals to the Receivers as to steps that they could take, including a further application for disclosure, to obtain such information.

In all these circumstances, I cannot see that it would be right for the court to say that, because the respondents cannot at present prove that the sale of the properties would involve the disposal of an asset of Click St Andrews, that is a reason to now declare that it does not do so because there is no such interest. As the respondents have consistently said, they do not know. That said, I have already observed that, on the available facts as to the transfer of funds from Click St Andrews to Mews Ltd., it seems improbable that any beneficial interest in the properties would arise.

Given my decision in relation to the priority issue, it is, however, not necessary to determine this issue or make the declaration that the Receivers seek. The making of a declaration is always a matter for the court and usually sought pursuant to Part 8 proceedings. In this case, I would not exercise my discretion to make the declaration. I bear in mind that there is a continuing issue as to the adequacy of disclosure in accordance with the terms of the freezing injunction and subsequent orders and that the liquidators of Click St Andrews have played no part in this application.

The alternative, and rather further reaching, submission that the injunction should be discharged in its entirety was advanced on two grounds. One was that Click St Andrews was now in insolvent liquidation and the liquidators had control of its assets so that there was no longer any risk of dissipation. The applicants referred to the decision in Eco Quest plc v GFI Consultants Ltd. and others [2014] EWHC 4329 (QB). In that case, the Deputy High Court Judge, accepted that the statement in Gee on Commercial Injunctions was a correct statement of the law, namely that a freezing injunction could be continued after a winding up order had been made, provided its purposes is to preserve the assets held by or for the defendant for the creditors as a whole. The rationale for that proposition is that the liquidators’ obligations are to realise the assets for the benefit of all creditors and the liquidators ought to be able to deal with the assets of the company in accordance with the liquidation rather than with certain assets preserved for the benefit of one or more unsecured creditors.

There is considerable force in that submission but it seems to me that that is a matter for the liquidators. It is not Click St Andrews and its liquidators who seek to discharge the injunction and the injunction has, in fact, remained in effect since 2022 and for well over a year since the winding up. It would be unusual to discharge an injunction on the application of a third party and, in particular, one whose primary position is that the injunction does not apply to any property held by that third party.

A further argument was made against the background of correspondence from the respondents’ solicitors which, put at its lowest, raised the possibility that the disposal of the properties would amount to a contempt of court.

From thecorrespondence before the court, it is apparent that Adam Benedict Ltd. wrote to the Receivers by e-mail dated 13 December 2023 stating that the respondents had obtained a freezing injunction against Click Group Holdings and that the properties, being property of Mews Ltd., was subject to the injunction. I would assume that statement was made because Click Group Holdings was and is the holding company for the Click group of companies. A copy of the interim injunction made by Waksman J was provided. By that time, the further hearing before O’Farrell J had already taken place, over a year earlier, and the freezing injunction against Click Group Holdings had been discharged. That error is accepted and was quickly corrected and a copy of the judgment of O’Farrell J and further orders were provided on 15 December 2023.

I do not set out in full the inter-solicitor correspondence that ensued on 14 and 15 December. However, TWM first pointed out that Mews Ltd. was not party to the injunction. The response to that was that the injunction attached to Click St Andrews and that it was conceivable that monies transferred to Click St Andrews had been used to acquire assets of Mews Ltd., although the respondents did not know that. It was also said that the respondents suspected that Click St Andrews’ assets had been intermingled with those of Mews Ltd. In an e-mail sent on 15 December 2023, Mr Creasey said that it was for the “third party creditor” to satisfy itself that it was not assisting a breach of the terms of the injunction once it was known about and “[o]therwise the third party may itself be liable for contempt as an accessory to breach of the freezing order”. TWM responded on 18 December setting out the factual background to the leases and the security of VCT and asserting that Mews Ltd. could not have used any of Click St Andrews’ funds for the purchase of the properties or the works.

In the course of January and February 2024 there was further correspondence. I would summarise the position adopted by the respondents as being that they did not know whether Click St Andrews had any interest in the properties and they were not seeking to prevent the sale but it was for the Receivers to decide whether or not to dispose of the properties and, expressly or by implication, whether or not to take the risk that that would be in breach of the freezing injunction. A consent order in effect permitting the sale was proposed by the applicants and the respondents made a proposal to ringfence the proceeds of sale to the extent of the sums identified as transferred from Click St Andrews to Mews Ltd. In April 2024, TWM sought a more concrete response and indicated again the possibility that they would have to make an application. In the absence of any further substantive response, the Receivers made this application.

Mr Moraes submitted that the effect of this correspondence was that the freezing injunction was, and/or the respondents asserted that the freezing injunction was, so uncertain that an innocent third party given notice of the injunction could not know its terms and, on the respondents’ case, then bore the burden of interpreting the injunction. He submitted that that demonstrated that the injunction lacked the clarity required of a freezing injunction and ought to be discharged. I do not accept that submission. The injunction was made by Waksman J without notice but clearly with due consideration of its terms and with provision for the disclosure of information which would enable the assets to which it applied to be identified. It was continued by O’Farrell J on similar terms and following the disclosure of information even if the respondents remain dissatisfied with that disclosure. At the hearing before her, all parties were represented by counsel and the Order was no doubt drawn up and agreed by counsel, in light of the judgment, for approval by the court. It would be remarkable if this court, nearly two years later, were to determine that the injunction were so unclear that it ought never to have been made in the terms that it was.

The further alternative relief sought was an undertaking as to damages. The injunction contained no undertaking as to damages to a third party. Paragraph 5.2 of PD 25A provides that, when the court makes an order for an injunction, it should consider whether to require an undertaking by the applicant to pay damages suffered by a party other than the respondent as a result of the injunction. The transcript of the hearing before Waksman J demonstrated that the issue had been raised by the judge but no undertaking required. The applicants seek to infer that that was because the court had never been told that notice of the injunction would be given to third parties.

There is only a portion of the transcript of that hearing before me but I am not satisfied that that is an inference that can be drawn. Counsel’s exchange with the judge is one in which the judge observed that there was no undertaking as to damages at all in the draft Order and asked whether that had been left out deliberately. Counsel replied that it had been omitted deliberately and referred to two sentences in the standard form, the first being the undertaking to the respondents to that application and the second being the undertaking to third parties. The judge responded that the second one was fine by which he clearly meant that the omission of the second one was fine. There was no further discussion of the reasons for its omission but it is something of a leap to infer that the judge considered that “fine” because he had not been told of an intention to notify on any third party. Indeed, as Mr Levenstein pointed out, very shortly after, the judge commented that the applicants would obviously give notice of the injunction to whoever they thought appropriate. In circumstances where RTM and the leaseholders were saying and continued to say that they did not know whether assets of the Click companies against whom the injunction application was made had been transferred to others so as to give rise to beneficial interest, the inference is even harder to draw.

In any event, Mr Moraes submitted, the decision in Z Ltd. v A-Z was authority for the proposition that, once notice was given, there was an implied undertaking:

“… when the plaintiff give notice of the injunction to the bank or innocent third party, he impliedly requests them to freeze the account or otherwise do whatever is necessary or reasonable to secure the observance of the injunction. This implied request gives rise to an implied promise to recoup any expense and to indemnity and to indemnify against any liability. … In addition, in support of this implied promise, so as to ease the mind of the third party, the judge, when he grants the injunction, may require the plaintiff to give an undertaking in such terms as to secure that the bank or other innocent third party does not suffer in any way by having to assist and support the course of justice prescribed by the injunction…. ” (at 575A-D).

Whilst an implied undertaking may have been the common position, the court is now required by the Practice Direction to consider whether to require such an undertaking – which was not the case at the time of the decision in Z v AZ - and it is not coherent to find an implied undertaking when the court has given that consideration, however briefly, and agreed to that undertaking not being included in the Order.

The applicants asked that, if the court did not permit them to deal with the properties at this stage, the draft Order should provide an express cross-undertaking to pay the reasonable costs of the Receivers and/or VCT which have been incurred as a result of the freezing injunction, including the costs of finding out whether they hold any of Click St Andrews’ assets. The terms of the cross-undertaking were at least capable of being construed as a retrospective undertaking in respect of losses already incurred. The difficulty with that is the applicants’ primary case, namely that the properties are not the subject of the injunction. It is fair to say that the respondents have flagged the risk that disposing of the properties would be in breach of the injunction but, if that has caused the Receivers not to dispose of the properties and as a result they have suffered loss, it is that and not the injunction itself that has caused any loss.

Mr Levenstein, in any event, relied on the decision of Lewison J in SmithKline Beecham v Apotex Europe [2005] EWHC 1655 as authority for the proposition that a cross-undertaking should not be imposed retrospectively, going so far as to submit that the court has no jurisdiction to do so. In that case, which was not concerned with a freezing order, Lewison J charted the history of cross-undertakings in damages to third parties. At [56] and drawing the threads together, he said that, as at 2022, cross-undertakings for the benefit of third parties were routinely required in freezing order cases but not in other cases; if not given, such a cross-undertaking should not be imposed and certainly not retrospectively; but a third party adversely affected by the injunction could apply for the injunction to be discharged unless the cross-undertaking was extended for its benefit. The decision was the subject of an appeal which varied the first instance decision to some extent but did not cast doubt on Lewison J’s summary.

Lewison J’s observations are a clear steer that the court should not require an undertaking with retrospective effect. I do not conclude that it cannot be done but it would require very clear facts for the court to consider that an appropriate course, all the more so when the issue had been considered and no undertaking required. However, the position in relation to a prospective undertaking is different and, had I reached a different decision, I would have considered it open to me to require such an undertaking. As it is, that issue does not arise.