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You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> C v C & Anor [2015] EWHC 2795 (Fam) (30 September 2015) URL: https://www.bailii.org/ew/cases/EWHC/Fam/2015/2795.html Cite as: [2015] EWHC 2795 (Fam) |
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FAMILY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
C |
Applicant |
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- and - |
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C and anor |
Respondents |
____________________
Tim Amos QC (instructed by Charles Russell Speechleys) for the 1st Respondent
Daniel Lightman
(instructed by Boyes Turner LLP) for the 2nd Respondent
Hearing dates: 19th and 24th June 2015
____________________
Crown Copyright ©
Mrs Justice Roberts :
A. Introduction
(i) H seeks the continuation of the freezing order in a slightly modified form in accordance with a draft order which has been produced by Mr Amos. In the alternative he makes an open offer to maintain a moratorium in relation to all ongoing proceedings but only until 10 October 2015 which is the day after the FDR hearing. Thereafter he reserves the right to restore both the injunction proceedings and the ongoing litigation with N in the Queen's Bench Division;
(ii) W seeks the discharge of the freezing order on the basis that the commercial arrangements regarding the continuing operation of D Ltd and R Ltd can and should continue in accordance with the holding agreement sanctioned by Moor J. If H is unwilling to countenance that arrangement, she invites me to discharge the injunction because of its inherent procedural and legal defects. With N, she has made an open offer to give certain undertakings to which I shall come in due course;
(iii) N seeks the discharge of the injunction together with his costs. He is now working in a new business (Z CO) and contends that the terms of the freezing order currently sought by H not only inhibit the exercise of his fiduciary obligations as director of D Ltd and R Ltd; their reach is such that his new business is being adversely affected. He rejects the offer of a moratorium until 10 October 2015 not only because of these matters but because he has already incurred a very substantial liability in respect of legal costs and, if the issue cannot be resolved as between H and W now, he does not wish to incur a further round of costs.
B. Background : precipitating events
Transfer by W of the Berenberg funds and the Declaration of Trust made on 13 October 2014
H's removal of W and N as directors of C Ltd
D Ltd and R Ltd
i. the management and rent collection services previously provided to the two companies by C Ltd were to be terminated at the conclusion of four months' written notice;
ii. H's rent free occupation of a flat in north London (owned by one of the companies) was to be terminated at the conclusion of four months' notice but on the basis that he was to be able to continue to live there should he be willing to pay an open market rent;
iii. Four months' written notice would be served on C Ltd in respect of the business premises occupied by the company in north London. The company would be given the opportunity to enter into formal negotiations for a commercial lease which reflected the true market value of the property with priority being given to maximising value for the benefit of the shareholders;
iv. There were additional resolutions which sought to terminate the previous informal arrangements which had operated for the benefit of one of H's long-standing employees, Mr F, (the provision of a car leasing agreement and the withdrawal of an open mandate which allowed that individual to withdraw funds from the bank accounts operated by D Ltd and R Ltd); the companies were authorised to seek repayment of unauthorised loans to C Ltd including a sum of £20,000 which H had apparently withdrawn to pay his legal fees in the divorce proceedings.
'The principal reasons for all of the resolutions is a desire by the directors to run [D Ltd] in a manner that is commercially independent from [C Ltd] and to ensure that any future business relationship with [C Ltd] or [H] takes place on an arm's length basis, consistent with the wishes expressed by [H] in a Memorandum dated 7 November 2014 in which he requested that [N] "no longer mix the financial affairs of [C Ltd] with [D Ltd]" and commented that "[D Ltd] is a financially independent entity from [C Ltd]".'
The application made without notice on 12 February 2015
"W may be restrained, in her capacity as (i) wife and (ii) company director, under both s.37 MCA and s.37 SCA. [N], in his capacity as company director, may be restrained under s.37 SCA."
"It seems to me that there are a number of obvious considerations or principles. The first is that although the company is of course a separate legal entity, it is not an entity in which any other individual or non-family member has had any interest. All the shareholders are related either by blood or marriage. Secondly, this story seems to demonstrate the lack of wisdom with which human beings can react when they are going through the emotional turmoil of marital breakdown and contested financial proceedings. I am in no doubt at all that it is possible to detect a clear thread of strategic manoeuvring in the various steps that have been taken by the wife and in their timing. On the other hand it seems to me equally clear that there is a manifest connection, unconscious if not conscious, between the wife's endeavour to take charge and the summary dismissal of Mr Michael Lee.
Mr Irwin on behalf of the wife submits that any dispute regarding the function or control of the company must be resolved in the Companies Court. He submits that the Family Division has no jurisdiction to invade the proper territory of that court. I reject that submission which I regard as unrealistic and contrived. This is a family business which the family chose to incorporate. All current disputes within the family should be litigated in this one court.
The principle that sensibly applies in this division is that pending the final hearing every effort is made to preserve the status quo and to discourage or prevent either spouse from pre-emptive strike."
i. the forwarding to D Ltd within 7 days of all monies currently held by C Ltd on behalf of D Ltd;
ii. an account to D Ltd for all further rental and other income received in relation to D Ltd commencing on 28 February 2015 together with an account of any monies expended on the properties;
iii. a request for particulars or an estimate of funds which may be required in future in respect of any particular property owned by D Ltd.
"My aspiration today, I hope you will agree, is actually quite modest. It is only to hold the ring. We at the very early stages of these financial proceedings. The first appointment is coming up in a month's time and all we want to do is to stop the pretty obvious and transparent shenanigans that have been going on so that no one is seeking to outwit or undermine the other and we can just get on with what ought to be quite a simple case…… You will have read about the attempt to move £12 million out of the matrimonial pot, to hide it and disguise the ownership. You will have read about the declaration of trust, which attempted to move shareholdings out of the matrimonial pot and into the hands of the son. Now we are confronted with these letters, all received this week, all immediately after Form E ….".
"What this means is that the wife and [N] are immediately seeking access to the online accounts and we know what they did the last time they had access to matrimonial money, they shipped it to Lebanon and pretended it was the wife's sister's." [A:129]
"There are obviously in this case controversial elements and two sides to the story. I am not asking you to decide those points today, not at all, in fact, the opposite. What I am asking is that the court simply parks those issues whilst preserving the status quo. In that respect, I made clear at the end of my note that my client is prepared to give an undertaking, if you think it appropriate and necessary, that he will take no steps to affect the status quo of any of these companies within this case without a further order of the court, so that you can be satisfied that you are not restraining one half of the parties to the litigation and giving the other free hand. Our case, of course, is that the undertaking is unnecessary because my client has not done anything that would warrant him giving it, but it but it is right to say that the wife would not agree with that. She would make allegations and in those circumstances, if you want my client to give an undertaking to preserve the status quo and order the wife, effectively and [N] to maintain the status quo, that undertaking is forthcoming….". [A:130]
"to take any steps to obtain all or any of the data held by [C Ltd] in relation to any company including but not limited to [R Ltd] and [D Ltd]".
The inter partes hearing on 11 March 2015
'17. Until 16:00 on the Return Date or further order of the court the first respondent [W] and second respondent [N] are each forbidden to:
a. Take any steps to terminate the arrangement, or to give effect to any purported termination of the arrangement, whereby [C Ltd] provides property management services to any other company, including but not limited to [R Ltd] and [D Ltd];
b. Take any steps to alter in any way the working arrangements between [C Ltd] and any other company, including but not limited to [R Ltd] and [D Ltd];
c. Take any steps to remove the Joint Mandate[4], or to give effect to any purported removal of the Joint Mandate;
d. Use any of the online banking services or facilities in respect of the bank accounts of any company referred to in the schedule to include but not limited to [R Ltd] and [D Ltd] other than for the purposes of obtaining information as to the status and activity on the accounts and specifically not for executing any transactions in circumvention of the Joint Mandate;
e. Authorise or effect any transactions, including but not limited to withdrawals from bank accounts, by any company referred to in the schedule other than in the ordinary course of business.
18. Until further order of the court the respondent [W] is forbidden to:
a. Take any steps to change, or give effect to the purported change to, the company service providers of any company referred to in the schedule;
b. Take any steps, or to give effect to the purported change to, the identity of any directors of any company referred to in the schedule.'
The hearing before Moor J on 21 April 2015 : "the moratorium order"
'5. The terms upon which the parties and [A] have agreed to adjourn this hearing, such terms having effect until the Return Date only, are as follows:-
a. [C Ltd] shall continue to manage the properties of [D Ltd] and [R Ltd] on behalf of each of them respectively as before;
b. The rents collected by [C Ltd] in respect of [D Ltd]'s properties shall be paid promptly to [D Ltd]'s bank account in its own name [account details provided];
c. [H] will be permitted to occupy [the residential flat owned by D Ltd] rent-free, and the Respondents shall not take steps to evict [him] therefrom;
d. [C Ltd] will be permitted to occupy [the commercial premises owned by D Ltd] rent-free, and the Respondents shall not take steps to evict [the company] therefrom;
e. The arrangements for the offshore companies shall continue as previously, except only that the ownership of [a specified company] shall be transferred back into the joint names of [H] and [W], or one of them if that be agreed;
f. [H] will provide regular monthly information to the Respondents as to the rents being collected for [D Ltd] and [R Ltd] and as to any payments which are other than previously regular; and [H] will provide such further information relating to [D Ltd] and [R Ltd] as may reasonably be requested by [N];
g. Each of the Respondents will sign the [D Ltd] accounts forthwith and in any event by 4pm on 5 May 2015, provided that they are provided promptly with any information and/or documentation they reasonably require to enable them to do so;
h. There shall be a moratorium in the divorce proceedings in order to set out the purpose in paragraph 4 above …..' (i.e. to enable consideration to be given to a reconciliation and post-nuptial settlement);
i. Similarly there shall be a moratorium, whether by way of court process or inter-solicitor/-client correspondence, in relation to all disputes between on the one hand [H] and/or [C Ltd] and on the other hand [N], [Z CO] and/or [A], including [A]'s claim for approximately £3,000.'
The hearing on 19 June 2015
C. Competing arguments of the parties in relation to the law and merits
(i) Jurisdiction
(i) a modification of what was paragraph 17(c) to reflect the fact that 'the Joint Mandate' in respect of the banking arrangements for D Ltd and R Ltd is intended to reflect the existing status quo by which Mr F has sole control of the companies' bank accounts in terms of their day to day operation; and
(ii) a new sub-clause (f) which has the effect of forbidding W and N (or either of them) from 'altering the arrangements for the offshore companies as they have operated heretofore'.
'20.2 Orders for interim remedies
(1) The court may grant the following interim remedies –
(a) an interim injunction;
(b) …
(c) an order –
(i) for the detention, custody or preservation of relevant property;
(ii) …
(iii) …
(iv) …
(v) …
(vi) for the payment of income from relevant property until an application is decided;
(d) …
(e) …
(f) an order (referred to as a 'freezing injunction') –
(i) restraining a party from removing from the jurisdiction assets located there; or
(ii) restraining a party from dealing with any assets whether located within the jurisdiction or not.
(a) The Matrimonial Causes Act 1973 ('MCA 1973')
'37 Avoidance of transactions intended to prevent or reduce financial relief
(1) For the purposes of this section 'financial relief' means relief under any of the provisions of sections 22, 23, 24, 24B, 27, 31(except subsection (6)) and 35 above, and any reference in this section to defeating a person's claim for financial relief is a reference to preventing financial relief from being granted to that person, or to that person for the benefit of a child of the family, or reducing the amount of any financial relief which might be so granted or frustrating or impeding the enforcement of any order which might be or has been made at his instance under any of those provisions.
(2) Where proceedings for financial relief are brought by one person against another, the court may, on the application of the first-mentioned person –
(a) if it is satisfied that the other party to the proceedings is, with the intention of defeating the claim for financial relief, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;
(b) if it is satisfied that the other party has, with that intention, made a reviewable disposition and if that disposition were set aside financial relief or different financial relief would be granted to the applicant, make an order setting aside the disposition;
(c) if it is satisfied, in a case where an order has been obtained under any of the provisions mentioned in subsection (1) above by the applicant against the other party, that the other party has, with that intention, made a reviewable disposition, make an order setting aside the disposition;
and an application for the purposes of paragraph (b) above shall be made in the proceedings for the financial relief in question.
(3) Where the court makes an order under subsection 2(b) or (c) above setting aside a disposition it shall give such consequential directions as it thinks fit for giving effect to the order (including directions requiring the making of any payments or the disposal of any property).
(4) Any disposition made by the other party to the proceedings for financial relief in question (whether before or after the commencement of those proceedings) is a reviewable disposition for the purposes of subsection (2)(b) and (c) above unless it was made for valuable consideration (other than marriage) to a person who, at the time of the disposition, acted in relation to it in good faith and without notice of any intention on the part of the other party to defeat the applicant's claim for financial relief.
(5) Where any application is made under this section with respect to a disposition which took place less than three years before the date of the application or with respect to a disposition or other dealing with property which is about to take place and the court is satisfied –
(a) in a case falling within subsection 2(a) or (b) above, that the disposition or other dealing would (apart from this section) have the consequence, or
(b) in a case falling within subsection 2(c) above, that the disposition has had the consequence,
of defeating the applicant's claim for financial relief, it shall be presumed, unless the contrary is shown, that the person who disposed of or is about to dispose of or deal with the property did so or, as the case may be, is about to do so, with the intention of defeating the applicant's claim for financial relief.
(6) In this section "disposition" does not include any provision contained in a will or codicil but, with that exception, includes any conveyance, assurance or gift of property of any description, whether made by an instrument or otherwise.
(7) …'.
(b) The Senior Courts Act 1981 ('SCA 1981')
'37 Powers of High Court with respect to injunctions and receivers
(1) 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.
(2) Any such order may be made either unconditionally or on such terms and conditions as the court thinks just.
(3) The power of the High Court under subsection (1) to grant an interlocutory injunction restraining a party to any proceedings from removing from the jurisdiction of the High Court, or otherwise dealing with, assets located within that jurisdiction shall be exercisable in cases where that party is, as well as in cases where he is not, domiciled, resident or present within that jurisdiction.
(4) …;
(5) ….'
"Apart from section 37 [MCA 1973] and its predecessors the court has jurisdiction to preserve specific assets which are the subject matter of proceedings pending the determination of the issues involved, for example, an injunction restraining the other party from removing out of the jurisdiction liquid assets pending a hearing – for the obvious reasons that he or she could put the assets somewhere where they cannot be reached. Another example is in the Married Women's Property Act 1882 proceedings, where an interest is claimed in a house or chattels. It is common form to apply to the court for an order to preserve chattels or preserve the matrimonial home pending the hearing of proceedings. With respect to the learned judge, I think he was wrong in thinking that this was an application under section 37. It seems to me that it was an application under the general powers of the court to preserve specific assets which are the subject matter of proceedings pending the determination of those proceedings. Smith v Smith (1973) SJ 525 was also such a case. This is clearly a case where no hardship will be caused whatever to the husband by restraining him from disposing of part of the sum of damages, when he recovers them, provided the proceedings for ancillary relief are dealt with quickly. This court will take steps to see that that is done. I can see no reason why the court should not make such an order and the more the husband protests and refuses to give any assurance that he intends to leave some of this money in a liquid form, the more anxious the court is bound to be. One wonders why all this fuss is being made about such an order."
S 37 MCA 1973
(i) there was no basis for the court to have made an order under s 37 MCA 1973 because the expression "any property" in s 37(2)(a) is specifically anchored to "any property in which either or both of the parties to the marriage has or had a beneficial interest, either in possession or reversion". Its reach does not extend to "any property generally, regardless of whomever it may belong to". Thus, the section cannot be engaged to prevent a mere dealing with property belonging to a company;
(ii) in any event, s 37 MCA 1973 enables the court to restrict or prevent dealings by parties to a financial remedy application. In the absence of a finding that either of D Ltd or R Ltd was the alter ego of H and/or W, the companies retain their separate legal personalities and are not susceptible to the s 37 jurisdiction;
(iii) there was no evidence before the court that which would justify an order under s 37 MCA 1973. The court would have been unable to reach a conclusion that W was, with the intention of defeating H's claims for financial relief, about to make any disposition or transfer out of the jurisdiction, or otherwise deal with any property. There was no evidence that the order was necessary to prevent either W and/or N from taking that course, or otherwise for protecting H's claims.
S 37 SCA 1981
(iv) An injunction under s 37 SCA 1981 could only have been granted if the circumstances were such that an injunction would be likely to have been available as a remedy in either the Chancery or Queen's Bench Divisions of the High Court. H must establish as a prerequisite that there existed a cause of action, whether legal or equitable. No such cause of action existed as against N, notwithstanding that he had been joined as a party to the matrimonial proceedings; and
(v) even had such a cause of action been established, there was no objective evidence before the court that there was a likelihood of the movement or dissipation or transfer of the assets with the intention of defeating H's claims.
Failure to pay sufficient regard to the separate legal personality of the corporate entities which, with W and N, were the target of the injunction obtained
(vi) The injunction secured on 11 March 2015 secured interim relief on behalf of C Ltd which was neither a party to the litigation nor the applicant for the relief sought; and
(vii) its terms placed restrictions on the ordinary trading activities of D Ltd and R Ltd, neither of which were parties to the litigation. Insofar as orders were made against N personally, they had the effect to prevent the operation of his new business entity, Z CO, to which no reference was ever made when the original without notice application was put before the court.
Discussion
"It seems to me plain that any reference to property in s.37(2)(a) must be a reference to property which, as explained for instance in s. 24A, is property in which either or both of the parties to the marriage has or had a beneficial interest, either in possession or in reversion. It cannot mean any property generally, whomever it may belong to, because s.37 is concerned to supplement primary provisions in the earlier sections of the 1973 Act. Therefore, s.37 cannot itself attach to a mere dealing with the company's property.
Beyond that, however, the references in s. 37(2)(a) depend on the person concerned being about to make any disposition, or to transfer out of the jurisdiction or otherwise deal with any property. It is submitted that 'to deal with' ought to be construed widely so as to cover failure to deal with the property in a way which would be profitable to the other spouse or which would support and preserve the claim of the other spouse, but, in my judgment, the words 'deal with' refer to some positive dealing with the property and not to anything which is purely negative. In the present case Mr Crittenden does not appear at the moment to be dealing with the assets of the company, which anyhow are not, to my mind, property within this subsection, at all. He is objecting to the arrangement over the assets of the company which is proposed because of the obligation which it is sought to impose upon him personally."
"It is important for the court to grasp at the outset that it is a single business despite being operated through the mechanism of a number of limited companies. The vast majority of the assets in this case are made up of English commercial and residential properties which I, through the vehicles of limited companies, have purchased, developed and then let out or sold for profit. The manager of those properties is a separate English company called [C Ltd], of which I am sole shareholder and director. But when I refer to "the business" in this statement, I am actually referring to the arrangement as a whole. It is completely artificial to de-link [C Ltd] from the separate property owning companies; they have a symbiotic relationship and indicative of this is the fact that [C Ltd] has never charged the separate property-owning companies any fees for the vast amount of work the company undertakes on their behalf." [B:2] (The emphasis is H's own.)
Alter ego or separate legal personality ?
"[104] With respect to the judge, his "power equals property" reasoning is wrong. It is heretical to suggest that the total control that a single individual is (and will always be) entitled to exercise over the affairs of his one-man company is a feature resulting in the company's assets becoming assets to which he is "entitled" and, therefore, to which the company is not entitled. "Entitled" within the meaning of section 24(1)(a) [of the Matrimonial Causes Act 1973] can, as I have said, only mean beneficially entitled (the paragraph cannot, for example, extend to property vested in a spouse on trust for a third party). The logic of the judge's reasoning appears, therefore, to be that a one-man company can never own assets beneficially but can only ever hold its assets as the nominee of its sole controller. That is what Lord Wrenbury said is not the law.
[105] The flaw in the "power equals property" approach is that it ignores the fundamental principle that the only entity with the power to deal with assets held by it is the company. Those who control its affairs – even if the control is in a single individual – act merely as the company's agents. Their agency will include the authority to procure an exercise by the company of its dispositive powers in respect of its property, but those powers are still exclusively the company's own: they are not the agents' powers. When and if the agents act as such, and procure a corporate disposition, the property which immediately before the disposition belonged to the company will become the property of the disponee. Until then, it remains the property of the company and belongs beneficially to no one else. The judge's point that the agent is automatically the owner of all the company's assets by the mere fact of his authority to procure the company to dispose of them to himself is astonishing and does not begin to pass muster. And why should it ? The proposition was simply the fruit of a judicial attempt to shoehorn into section 24(1)(a) assets which manifestly do not fit there. The judge's finding that the husband's mastery of the companies meant that they and their assets were his, and that they were the equivalent of mere nominees or agents for him (see, for example, his para 225) could have been lifted directly from the argument of counsel for the respondents that was rejected in Salomon v A Salomon & Co Ltd [1897] AC 22, 28, 29."
"In the Court of Appeal, the three respondent companies challenged the orders made against them on the ground that there was no jurisdiction to order their property to be conveyed to the wife in satisfaction of the husband's judgment debt. This contention, which has been repeated before us, raises a question of some importance. For some years it has been the practice of the Family Division to treat the assets of companies substantially owned by one party to the marriage as available for distribution under section 24 of the Matrimonial Causes Act, provided that the remaining assets of the company are sufficient to satisfy its creditors. In the Court of Appeal, the practice was supported by Thorpe LJ, but the majority disagreed: ante, pp 421-467. Rimer LJ, delivering the leading judgment for the majority, held that the practice developed by the Family Division was beyond the jurisdiction of the court unless (i) the corporate personality of the company was being abused for a purpose which was in some relevant respect improper, or (ii) on the particular facts of the case it could be shown that an asset legally owned by the company was held in trust for the husband. He considered that the judge had rejected both of these possibilities on the facts, and that he ought not therefore to have made the order. In a short concurring judgment, Patten LJ, ante, p 467, para 161, said that the Family Division had developed "an approach to company owned assets in ancillary relief applications which amounts almost to a separate system of legal rules unaffected by the relevant principles of English property and company law". This practice, he concluded, "must now cease"."
"…. The language of [s 24(1)(a)] is clear. It empowers the court to order one party to the marriage to transfer to the other "property to which the first-mentioned party is entitled, either in possession or in reversion". An "entitlement" is a legal right in respect of the property in question. The words "in possession or reversion" show that the right in question is a proprietary right, legal or equitable. This section is invoking concepts with an established legal meaning and recognised legal incidents under the general law. Courts exercising family jurisdiction do not occupy a desert island in which general legal concepts are suspended or mean something different. If a right of property exists, it exists in every division of the High Court and in every jurisdiction of the county courts. If it does not exist, it does not exist anywhere. It is right to add that even where courts exercising family jurisdiction have claimed a wider jurisdiction to pierce the corporate veil than would be recognised under the general law, they have not usually suggested that this can be founded on section 24 of the Matrimonial Causes Act 1973. On the contrary, in Nicholas v Nicholas [1984] FLR 285, 288, Cumming-Bruce LJ said that it could not."
"Section 37 is a limited provision which is very far from being a complete answer to the problem, but it is as far as the legislature has been prepared to go."
- terminating the pre-existing arrangement whereby C Ltd provides management services to any other company, including D Ltd and R Ltd;
- altering the pre-existing working arrangements between any other company, including D Ltd and R Ltd;
- altering the pre-existing banking arrangements or the current mandate which authorises Mr F to control the bank accounts of D Ltd and R Ltd;
- making any use of the companies' online banking services or facilities other than for the purposes of obtaining information about the status of and activity on the accounts;
- authorising or effecting any transactions by any company (including D Ltd and R Ltd) other than in the ordinary course of business ("transactions" for these purposes including any withdrawal of funds from company bank accounts);
- altering pre-existing arrangements in relation to the offshore entities.
- changing the companies' service providers; and
- taking any steps to change the identity of any of the directors of any company referred to in the schedule.
(i) that W was, with the intention of defeating H's claim for financial relief, about to make any disposition or transfer out of the jurisdiction or otherwise deal with any property; or
(ii) that the order was necessary to restrain W and/or N from so doing or otherwise for protecting H's claim.
That submission concerns the underlying merits of the application and I shall return to it in due course once I have dealt with arguments about jurisdiction.
"7. The problem in the way of the wife is that there is, at least at present, no contractual or other basis arising out of express agreement in relation to which it is said that there is some cause of action against the husband. Of course, as a matter of general principle, an injunction, if it is to be granted under section 37 of the 1981 Act (in contrast to section 37 of the 1973 Act) can only be granted in this Division if the circumstances are such as would, in principle, enable an injunction to be granted in one of the other Divisions of the High Court; in other words, there has to be an appropriate cause of action in relation to which the injunctive relief is properly granted."
"So whilst the words used are different the language all points in the same direction, namely that there must be a good case put before the court, supported by objective facts, that there is a likelihood of the movement, or the dissipation, or the spiriting away, or the salting away, or the squirreling away, or the making of a disposition, or the transfer of assets, with the intention of defeating a claim. It all comes to the same thing." [my emphasis]
Poon v Poon
"58 I would not complicate the approach that a Family Division judge can legitimately adopt either by reference to company law authority on "lifting or piercing the corporate veil" or by questioning whether judges have used an alternative expression of the same principle when they have referred to ownership by an alter ego. The simple question is whether the individual is entitled to the property within the meaning of section 24(1)(a). The Family Division judges with particular expertise in this field (such as, Bodey, Coleridge and Mostyn JJ) have on many occasions stressed the need to get to the reality in determining the assets to which the husband is entitled. Indeed Mostyn J in an obiter passage in his judgment in Hope v Krejci [2012] EWHC 1780 (Fam), handed down on 29 June 2012, considered the impact of the decision in the VTB case. He concluded in para 22:
"I can easily see why these principles are critically necessary when the objective is that which was sought in the VTB case, namely to deem someone to be a party to a contract to which he is plainly not. But I have great difficulty in seeing why they must be satisfied for the form of piercing of the veil that is the telescoping order[6], which is almost invariably the situation confronted in financial remedy proceedings."
59. Moylan J, whose expertise in this area is no less, adopted that approach and thereby achieved justice for the applicant.
60 Mr Amos's submissions in this court are essentially the submissions advanced by Mr Wagstaff below [i.e. before Moylan J]. They were rightly rejected by the judge. Vital are the judge's findings as to the complete absence of boundaries between the husband and his companies observed by not only him, who is not an appellant, but also by the companies who are. On the exceptional facts of this case I conclude that the judge was entitled to order the husband to transfer or cause to be transferred the assets which he did."
And, later, in his closing remarks, Thorpe LJ said this:-
"65 Once the marriage broke down, the husband resorted to an array of strategies, of varying degrees of ingenuity and dishonesty, in order to deprive his wife of her accustomed affluence. Amongst them is his invocation of company law measures in an endeavour to achieve his irresponsible and selfish ends. If the law permits him to do so it defeats the Family Division judge's overriding duty to achieve a fair result."
Roche v Roche; Shipman v Shipman
Is the inherent jurisdiction to grant an injunction now governed by s 37 SCA 1981 ?
"Since the transfer to the Supreme Court of Judicature of all the jurisdiction previously exercised by the court of chancery and the courts of common law, the power of the High Court to grant interlocutory injunctions has been regulated by statute."
"If I am wrong in concluding that section 45 [of the Supreme Court of Judicature (Consolidation) Act 1925] provides the basis for the jurisdiction to make the type of ancillary order referred to above, then the question arises as to whether the court has an inherent or residual jurisdiction to make such an ancillary order. Insofar as Mr Stamler contends that there is inherent jurisdiction in the court to make effective the remedies that it grants, this seems to me merely another way of submitting that, where the power exists to grant the remedy, there must also be inherent in that power the power to make ancillary orders to make that remedy effective. This I have accepted. However, if and insofar as he contends that the courts have a general residual discretion to make any order necessary to ensure that justice is done between the parties, then in my judgment that is too wide and sweeping a contention to be acceptable. Such a proposition would see to come well within the criticism made by Lord Hailsham of St Marylebone, in the Siskina case [1979] A.C. 210, 262."
"Prior to 1967, the jurisdiction of the High Court to grant or withhold injunctions, final or interlocutory, was contained in what was then section 45 of the Supreme Court of Judicature (Consolidation) Act 1925. With the omission of the now inappropriate reference to mandamus, the section is now found in section 37 of the Supreme Court Act 1981 …. I do not consider it is necessary to proceed to consider whether, apart from the section, the court has any inherent jurisdiction. If it has, I believe it is indistinguishable in its application to the jurisdiction conferred by the section. I prefer to say that any inherent jurisdiction is to be absorbed by the section."
"It has long been recognised that the divorce court has an inherent power to protect parties and their children by the grant of interlocutory injunctive relief and that the power extends to the granting of an order excluding, if necessary, the husband from the home pending suit…. Statute, however, governs the exercise of this power. Section 45 [of the 1925 Act] which, of course, consolidated existing law, provided that the High Court may grant an injunction by interlocutory order in all cases in which it appears to the court to be just or convenient to do so. This section has now been replaced in substantially the same terms by section 37 of the Supreme Court Act 1981. There is, however, an important limitation upon the power: it can be exercised only if there is a right recognised by law independently of the Act: North London Railway Co. v Great Northern Railway Co. [1883] 11 QBD 30, 40 …".
"14. It can therefore be seen that the power to grant an injunction, while placed on a statutory footing by section 37 [SCA 1981], does not derive solely from the legislature. Rather it is a hybrid creation of the old equitable power and 19th century statutory intervention. Therefore, I do not consider that it is a solecism to refer to the power deriving from the inherent jurisdiction of the court. That said, the power is clearly defined and regulated by section 37 of the 1981 Act alone, and therefore its exercise can only be effected under that section and the authorities decided under it. There is no scope for the use of some other wider protean inherent power (even if such exists, which I doubt) whether in the Family Division or the other divisions. And the principles concerning the exercise of the power must be identical in whichever division the relief is sought." [my emphasis]
"24 Having stated these general principles, I return to Roche v Roche 11 Fam Law 243, and Shipman v Shipman [1991] 1 FLR 250 and to the speech of Lord Mustill in Harrow London Borough Council v Johnstone [1997] 1 WLR 459. Roche v Roche was a short extempore judgment by the Court of Appeal in a case where only the appellant had appeared. It concerned an application by a wife to freeze a large sum of damages for personal injury which the husband was likely to receive. In his judgment Ormrod LJ, with whom Sir Stanley Rees agreed, stated, at p 243":
[Mostyn J then set out the paragraph which I have already quoted in para 58 of my judgment, above.] He continued:
"26 It is certainly true that there has always existed a power to preserve in family proceedings the subject matter of the proceedings where they relate to tangible property as opposed to the chose in action that is money. That power is now reflected in FPR r 20.1(c)(i) which empowers the court to make an order for the detention, custody or preservation of relevant property. Such an order preserving a thing in specie can equally be made under section 37(2)(a) of the Matrimonial Causes Act 1973. But that power is generally used only to preserve things like chattels, it being usually unnecessary to invoke it in relation to land where the unilateral notice procedure under the Land Registration Act 2002 is available. For an illuminating discussion of this type of order and its differences to a freezing order: see In re MCA: Customs and Excise Comrs v A; A v A (Long intervening) [2002] 2 FLR 274, paras 99-102, per Munby J. Plainly this general power is not the subject of the principles and safeguards applicable to freezing orders. An order preserving a picture or a car or a field does not cause the economic paralysis that is the case where an order is made which freezes unspecified assets including money up to a certain figure. If a bank receives an order which freezes, as here, £20m of assets then even if there are exceptions relating to living expenses, legal costs, and trading in the normal course of business, it will normally freeze all the accounts for the simple reason that it will not know if these exceptions are being met from another account with another bank. Where there are a number of banks it normally takes many days dealing with the various legal departments to put the exceptions into operation by which time great damage both economically, and reputationally, may have been caused. Problems of this kind do not arise where the order merely freezes a particular tangible asset in specie. But it is open to the court to apply the principles and safeguards if the facts justify this.
27 It is noteworthy that in Roche v Roche 11 Fam Law 243 none of the Mareva (see Mareva Navigation Co Ltd v Canaria Armadora SA [1977] 1 Lloyd's Rep 368) jurisprudence was referred to by the Court of Appeal in its judgments. With some trepidation I conclude that the judgment was per incuriam the many principles governing Mareva injunctions, which even by then had developed.
28 In Shipman v Shipman [1991] 1 FLR 250 the wife sought an order under section 37 of the Matrimonial Causes Act 1973 restraining the husband in divorce proceedings from disposing of or dealing with $300,000 or one half of his severance pay, whichever was the greater, pending determination of the ancillary relief proceedings. Lincoln J held that the terms of section 37 had not been satisfied. But he went on to hold, expressly relying on Roche v Roche, that it was wrong to believe that "there is no longer any inherent jurisdiction to freeze assets which may be put beyond the reach of the applicant". He further went on to hold, at p 253:
"Counsel for the husband urges me to have regard to the many restrictions and safeguards surrounding the use of worldwide Mareva injunctions, and to assimilate the use of, and procedure for, injunctions in the Family Division to those in commercial law. In my view the matrimonial field calls for a different approach. To my mind the circumstances here call for the injunction to continue. If it were discharged, the husband could well change his intentions, however genuine and well disposed to the wife his present state of mind may be. Both he and the assets are out of the jurisdiction. Left without a job and with new responsibilities, he will be faced with a temptation to eat into the whole of the fund."
29. I have to say, with great respect, that in as much as this decision follows Roche v Roche it too was per incuriam. Further, I do not shrink from saying that to the extent that it suggests that the restrictions and safeguards developed in the Mareva jurisdiction do not apply in family proceedings then the decision is wrong."
"33 It can be seen that there was no discussion at all as to the scope of the "general statutory powers of granting injunctive relief to make orders protecting financial and proprietary remedies which may be awarded in the future", and that the decision in question was held not to have been made under them. It can also be seen that Lord Mustill expressed no view as to the correctness or otherwise of Shipman v Shipman [1991] 1 FLR 250 and Roche v Roche 11 Fam Law 243 inasmuch as they suggest that there exist general powers of the court to preserve specific assets (other than tangible assets such as chattels) which are the subject matter of proceedings pending the determination of those proceedings, which powers may be exercised in disregard of the principles and safeguards governing freezing order applications. As Lord Neuberger MR stated in Imerman v Tchenguiz [2011] Fam 116, para 129:
"The applicable principles, and the requirements which a claimant has to satisfy, where the court is invited to grant [freezing or search] relief are no different in the Family Division from those in the other two divisions of the High Court, although, of course, in all three divisions, the application of the principles has to be made to the facts and features of the particular case before the court."
"… The power of a judge sitting in the High Court to grant an injunction against a party to proceedings properly served is confirmed by, but does not derive from, section 37 of the Supreme Court Act 1981 and its statutory predecessors. It derives from the pre Judicature Act 1873 powers of the Chancery courts, and other courts, to grant injunctions (see s.16 of the 1873 Act and s.19(2)(b) of the 1981 Act). The issue is, in my opinion, not whether Park J had jurisdiction, in the strict sense, to make the freezing order but whether it was proper, in the circumstances as they stood at the time he made the order, for him to make it. This question does not in the least involve a review of the area of discretion available to any judge who is asked to grant injunctive relief. It involves an examination of the restrictions and limitations which have been placed by a combination of judicial precedent and rules of court on the circumstances in which the injunctive relief in question can properly be granted." [my emphasis]
(ii) Merits
(i) H had been running this business and was its driving force for some 34 years and has been continuing to do so under the terms of the holding or moratorium agreement put in place in April 2015;
(ii) Mr F, a qualified chartered surveyor, has managed the property department for 27 of those 34 years;
(iii) N is now running Z CO, a company which he has set up in direct competition with C Ltd;
(iv) N and M together have taken active steps to expel H from running C Ltd;
(v) N was the intended beneficiary of the Declaration of Trust dated 13 October 2014 which both H and W have agreed should be set aside;
(vi) the FDR hearing has been listed for 9 October 2015. If agreement is reached on that occasion, the freezing order sought will represent a short-term expedient remedy which will maintain the status quo;
(vii) the holding order has worked well during the moratorium period;
(viii) I am not constrained by statute; only by considerations of justice and the merits of the case. Any defects or technical objections to the without notice order made in February this year are historic and have been cured by the April holding order;
(ix) the undertakings offered by W and N are little more than blackmail;
(x) the undertakings offered by H is sufficient protection for both W and N if they can demonstrate any impropriety on H's part.
(i) to cause, or take any steps to cause, any of the companies of which they were a director or shareholder to deal with, dispose of, dissipate or diminish the value of any property or any other asset held by any of the companies other than in the ordinary course of business;
(ii) or, in similar terms, in relation to any property owned by them personally in any jurisdiction;
(iii) or in any way so as to deal with their respective shareholdings in any company in which they had such an interest or do anything deliberately to diminish the value of their shareholdings. [A:4]
H gave an additional undertaking that he would not seek to rely on any powers of attorney in W's name or the name of any of her family members.
"Pursuant to Article 14.1 of the Company's Articles of Association, as 100% shareholder of the Company I hereby give notice to the Company that [N] is removed with immediate effect as a director of the Company."
"18. I accept that I removed [W] as company secretary of [C Ltd] in December 2014, and of a company called [CC Ltd] (in which I own 99% of the shares, and [W] owns 1%, which I say she holds on trust for me) in November 2014. By the time I did this, I was aware that [W] had tried to siphon off the money in the Credit Agricole account, and had tried to give assets to [N] via a false Declaration of Trust. Removing her as company secretary did nothing to harm her financial position, and I simply could not trust her to remain in her post." [A:74]
Applications without service of application notice
"5.1 An application may be made without service of an application notice only –
(a) where there is exceptional urgency;
(b) where the overriding objective is best served by doing so;
(c) by consent of all parties;
(d) with the permission of the court;
(e) where paragraph 4.9 applies[9]; or
(f) where a court order, rule or practice direction permits.
"That seems to me to, on the face of it, cover the situation that I have been told about today. It may be there will be completely different arguments when the matter comes back for an inter partes hearing, but I am satisfied that on a short term emergency basis it is right for the court to take action to prevent [W] and [N] from taking the actions that they have attempted to do." [A:137]
"It is an absolutely elementary tenet of English law that save in an emergency a court should hear both sides before giving a ruling. The only recognised exception to this rule … is where there is a well founded belief that the giving of notice would lead to irretrievable prejudice being caused to the applicant for relief."
'[213] On the basis of the foregoing review of the authorities, I would summarise the main principles which should guide the court in the exercise of its discretion as follows:
(1) If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.
(2) Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.
(3) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.
(4) The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach is innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.
(5) The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.
(6) The court can weigh the merits of the plaintiff's claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff's case is allowed to undermine the policy objective of the principle.
(7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.
(8) The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.
(9) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.'
a. his new business taking over property management services which, as at 12 February 2015, C Ltd was providing to "any company" (para 19(a) and (b) of the without notice order; para 17(a) and (b) of the March 2015 order; para 18(a) and (b) of Mr Amos's proposed order);
b. the relationship between C Ltd and any company being altered in any way;
c. the mandate of C Ltd or any of its directors in respect of any company being terminated; or
d. any data held by C Ltd in relation to any such company being obtained from C Ltd.
'MR LIGHTMAN: Let us say there may be an existing customer of [C Ltd] who wants to transfer its property managing services to the new company; that would be covered by 19A in its current form.
THE DISTRICT JUDGE: Well, I think those are arguments for another day. I have said that I will list an urgent hearing. I am reserving the costs of today. This can go off to a day's hearing, and it is a matter for the judge at that hearing whether they choose to take what they have been told is the extraordinary step of hearing oral evidence or not. That leaves us with all the other matters, first appointment directions ….'
"14.5 Instead, you propose that, depending on the outcome of current without prejudice discussions between the divorcing parties (the nature of which, in view of their without prejudice nature, ought not to have been identified in your letter), the question whether ex parte injunctive relief which your client obtained against our client in the Family Division in the context of divorce proceedings should be set aside or continued should not now be determined by the Family Court next Tuesday but rather should be determined by another Court at some time in the future. That proposal is unacceptable. It seeks to perpetuate your client's abuse of the court process by obtaining a further continuation of an unwarranted restraint on our client's (and hence Z CO's) business activities imposed by an ex parte order made in the matrimonial proceedings between your client and his wife on inappropriately wide terms in the Family Court for the benefit of [C Ltd] and to the detriment of our client and Z CO."
"My intention, in making this order, as I did, on 12th February, was to give effect to what the parties themselves appear to have agreed in October 2014, which was that they would not take any steps which would prejudice the other. It seems to me that both parties could have been said to have manoeuvred in ways which were intended to put the other at a disadvantage, and it is not unusual, unfortunately, in these sorts of cases.
This is a very difficult family situation, but it does seem to me that what should happen is that the position in relation to the companies should not be altered any further, but there should be no opportunity to either party to gain an undue advantage, and certainly [H] should not be able to conceal anything that he is doing in [C Ltd], because that would have the effect of potentially disadvantaging, not only [W][10] and the party's [sic] son, but also the two companies. So there must be absolute transparency, and the order, as it must, I think, continue in the short term, should make a provision for that, but paragraph 19[11] must go."
"[H] states now that he wants to stop me using confidential information contained in the files of [C Ltd] to deprive it of its clients. This was never stated as a consideration or purpose for obtaining interim relief. Nor does he set out what the confidential information is said to be. I deny that I have taken any confidential information in any event. He also alleges that there is a danger of passing off. He exhibits in support an email from a longstanding client from [C Ltd] … apparently evidencing my misleading approach to winning business." [B:198]
(i) neither will cause either D Ltd or R Ltd to enter into any transactions or withdraw any monies from those companies' respective bank accounts other than in the ordinary course of business;
(ii) neither will draw any director's remuneration from R Ltd and W will not receive any director's remuneration from D Ltd;
(iii) N will restrict his own director's remuneration from D Ltd to the lesser of £2,500 per month (being the remuneration he received from that company until the without notice injunction in February 2015) and a salary to be determined by an accountant with reference to what a typical director of an equivalent company would earn in the open market;
(iv) neither will seek to implement the company resolutions requiring H to vacate the residential flat and/or C Ltd to vacate the premises it occupies, both properties being assets of the companies but, in the case of C Ltd, on the basis that a sum is paid in respect of a commercial rent, being either £10,000 per month or such sum as is determined by an independent estate agent.
D. My conclusions
Order accordingly
Note 1 I am aware that there has been subsequent correspondence between the parties’ solicitors in which further proposals have been made in an attempt to settle the case. On 14 July 2015 I received a letter from N’s solicitors which informed me that those negotiations had broken down and it would be necessary for me to rule on the applications which I heard on 19 and 24 June 2015. Whilst I have read the correspondence, I do not propose to comment upon the development of the negotiations since their failure means that the court is effectively dealing with the position as it was when the matter was before the court. [Back] Note 2 Whilst the family business had been operating for over thirty years, it appears from H’s evidence that C Ltd had been managing the properties owned by D Ltd and R Ltd for in excess of 20 years [A:73]. [Back] Note 3 formerly the Supreme Court Act 1981 [Back] Note 4 The ‘Joint Mandate’ was defined as ‘the present bank mandates in respect of [D Ltd] [which] are being exercised only on the joint instructions of the second respondent and Mr F’. [A:12] [Back] Note 5 N has produced several documents by way of an exhibit to his statement dated 15 April 2015 which demonstrate at least a prima facie case that he had H’s implied authority to conduct substantial property transactions in his father’s absence involving C Ltd and D Ltd, together with its corporate bankers and solicitors [B:249-262]. [Back] Note 6 The process of ‘telescoping’ involves ordering an individual not to transfer the property but to transfer shares in the company or to vote himself dividends or loans as a route to the property. Thorpe LJ took the view in Prest (CA) that this was an unnecessarily cumbersome, expensive and uncertain means to achieve the desired end. “It is to import the discipline of company law in to a situation where at all material times the individual has not respected or utilised that discipline” at page 431, para 61. [Back] Note 7 This was one of the three guiding principles formulated by Beatson LJ in JSC BTA Bank v Ablyazov [2013] EWCA Civ 928, [2014] 1 WLR 1414. [Back] Note 8 It is also worthy of note in this context that H now complains about having been given notice to vacate premises which he occupied but which were owned by D Ltd on the proviso that he could remain in occupation on payment of a commercial rent. That, he says, is part and parcel of W’s and N’s attempts to change the status quo. He omits to make any reference in his 12 February 2015 statement to the fact that he had taken the very same steps in relation to his elder son’s occupation over some three years of a residential property in north London. He appears to have had a 50% interest in that property and within the written material before the court is a letter written by solicitors serving formal notice to quit on A. That letter was written on 9 December 2014, the day before he removed W as a director of C Ltd. [Back] Note 9 FPR r 4.9 is of no application here. It concerns a situation where the court has already fixed a date for a hearing and one of the parties, usually the respondent to that application, wishes to abridge time for service of his own application. [Back] Note 10 The transcript at [B:312, line 20] refers to “Mr C” instead of “Mrs C”; this must be a transcribing error since the sentence would otherwise not make any sense. [Back] Note 11 Again, this appears to be a transcription error since it is clear from the previous page of the transcript at [B311, lines 36-39] that the District Judge was referring to paragraph 19(e) as the offending clause. That was the provision which prevented W and N from obtaining any information held by C Ltd in relation to D Ltd, R Ltd and any other company named in the schedule. [Back]