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Court of Appeal refuses to interfere with freezing order restrictions

Out-Law News | 01 Mar 2019 | 2:42 pm | 2 min. read

The Court of Appeal has upheld the terms of a post-judgment freezing order, preventing the person subject to that order from making payments 'in the ordinary course of business'.

A freezing order was granted against BVI law firm Michael Wilson and Partners (MWP) in 2014. Commercial partnership discussions between MWP and an Australian lawyer, John Emmott, had fallen apart, and an arbitrator had ordered MWP to pay Emmott significant sums. In 2017, the High Court removed the so-called 'Angel Bell' exception from the order, which would otherwise have allowed MWP to continue to make payments in the ordinary course of business while the order was in place.

MWP appealed the removal of this exception to the Court of Appeal. However, the Court of Appeal refused to do so. It found that the High Court judge had made no errors of law which could justify its interference with his "robust and principled" decision to remove the ordinary course of business exception.

Litigation expert Andrew Barns-Graham of Pinsent Masons, the law firm behind Out-Law.com, said that the decision was "a helpful reminder that freezing injunctions should not be overlooked in the enforcement context".

"Indeed, they represent one of the most powerful enforcement remedies in a judgment creditor's armoury," he said.

"A party who has won at trial and anticipates that the losing party will not pay the judgment debt should take swift action. A post-judgment freezing injunction is an excellent way of piling on the pressure, especially one which prohibits any payment of ordinary business expenses until the judgment debt has been satisfied. It is therefore essential for successful parties not to rest on their laurels; instead they should plan ahead and consider instructing freezing injunction specialists at the earliest opportunity," he said.

The High Court judge in this case had found a "clear case" for the removal of the ordinary course of business exception originally granted to MWP. He said that there was a difference between a freezing injunction granted after a judgment, once liability had been established, and one granted before. An injunction granted after judgment had been put in place "to facilitate enforcement of that liability which has been established"; a liability which, in this case, MWP had continuously refused to pay.

The judge took as his starting point a position that it was "not appropriate" to include an ordinary course of business exclusion in a freezing order granted once judgment had been given. The judge found no reason to depart from this starting point in the circumstances of this case and, indeed, a number of factors which strengthened the case for the removal of the exception, including MWP's "continuing resistance to enforcement" and the policy of the law, which was "plainly to lean in favour of enforcing judgments".

The Court of Appeal conceded that an ordinary course of business exception would not necessarily be inappropriate for a post-judgment freezing order. It could, however, be said that "it will sometimes and perhaps usually be inappropriate" to include such an exception.

"Given the policy of the law strongly in favour of the enforcement of judgments, as already remarked, it would indeed be curious were the position otherwise – leaving the judgment debtor free to carry on business and ignore the outstanding judgment," said Lord Justice Gross, giving the judgment of the Court of Appeal.

"I would prefer not to characterise refusal of the exception in a post-judgment [freezing order] as either a 'starting point' or a presumption … Instead, and while it strikes me as an obvious matter to consider when granting a post-judgment [freezing order], the appropriateness or otherwise of the exception in such [an order] should be treated as a question turning on all the facts in the individual case," he said.

In this context, the wording 'it will sometimes and perhaps usually be inappropriate' to include such an exception in a post-judgment freezing order "furnishes helpful and appropriately nuanced general guidance", the judge said.

"Thus analysed, the decision by a judge to permit or refuse its inclusion is a discretionary decision reached on a fact specific basis, with which this court will be slow to interfere," he said.