The Court has recently introduced an innovative and constructive form of injunction which gives a claimant prior notice if a defendant proposes to divest itself of assets without having to bear all the burdens that attach to a standard freezing order.
On 29 April 2016 in the case of Holyoake v Candy  EWHC 970 (Ch), Nugee J granted the first stand-alone notification injunction. These injunctions require a defendant to give notice to the claimant before disposing of or dealing with particular assets and are common ancillary orders to freezing injunctions. However, in this case, Nugee J was willing to grant a notification injunction without the usual combined order preventing defendants from actually dealing with those assets.
The underlying facts relate to a loan made by CPC, a company controlled by the renowned property developer, Christian Candy, to Mr Holyoake. Mr Holyoake alleges that Nick Candy also owns and controls CPC although this is disputed by Messrs Candy and CPC Group. Mr Holyoake alleges an unlawful means conspiracy against CPC and its directors and says that, as a result of being compelled to enter into further disadvantageous agreements, he ultimately repaid over £37 million to CPC in respect of an initial loan of £12 million.
Following concerns that CPC might dissipate assets in order to make enforcement of an order difficult, the claimants applied for a notification injunction. They did not seek a full freezing injunction on the basis that they were “seeking no more relief than they consider reasonably necessary to protect their position” and, if they were notified that the defendants were about to enter into a transaction, they could consider at that stage whether to apply for a freezing injunction or to take other protective steps.
The judge found that the court did have jurisdiction to grant a stand-alone notification injunction and that the test for such an injunction was the same as for a freezing injunction, namely the claimant must show a good arguable case and a risk of dissipation of assets. He found that there was a good arguable case and gave guidance on the meaning, stating that it was: “a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success”.
In respect of the risk of dissipation, this requires the claimant to be able to show that there are objective factors from which a risk can be inferred. In this regard the judge took into account the fact that CPC had an unusually complex and particularly opaque offshore corporate structure. He also referred to two unexplained high value transactions which could be innocent but, in the absence of an explanation, could also be instances of dissipation. One was a transfer of property from Christian Candy to his wife and the other was the purchase of a £26 million yacht by Nick Candy for his wife. All in all, these transactions together with CPC’s corporate structure meant, objectively, there was a risk of dissipation and the court granted the notification injunction.
It remains to be seen how much these stand-alone notification injunctions will be used in the future. However, there is one very clear advantage of applying for a notification injunction without the usual ancillary freezing order, and that relates to the cross-undertaking in damages.
In the grant of either type of injunction a claimant will have to undertake to the court to compensate the defendant if it is later found that the claimant was not entitled to the relief granted. In a freezing order, the consequences of a wrongly made order can be extremely wide ranging and financially disastrous. However, the scope for serious damage as a result of a wrongly made notification injunction is dramatically less and arguably minimal. This lesser remedy therefore has the important consequence that any cross-undertaking in damages is a much less draconian and unknown undertaking. Hence in circumstances where claimants are unable to pursue a freezing order due to their inability to give a cross-undertaking, they should be able to apply for a notification injunction and feel able to give a cross-undertaking in that regard.
So, if there are real risks of dissipation but either further information is needed before proceeding with an application for a full freezing order or a claimant is unable to give a suitable cross-undertaking, a notification injunction is a good alternative giving some protection in the interim.