That does not just mean knowing that the defendant presently has assets, it means being confident that the defendant won’t re-arrange their affairs when sued to put assets beyond reach of execution of judgment. Where there is real risk that assets will be dissipated to defeat judgment a plaintiff has the option of seeking an order freezing assets pending the outcome of the law suit. That, however, is an intrusive remedy that requires good evidence of a risk of dissipation and requires the plaintiff to able to give a credible cross-undertaking (often backed by security) to make good any losses the order may cause. There are cases where an order cannot be obtained even though there is a genuine concern about dissipation because the plaintiff cannot produce sufficient evidence to satisfy the test applied by the court for proving that the risk is “real”. In other cases an order cannot be obtained because the plaintiff cannot provide security for the sometimes substantial sums that may be required to back up a cross-undertaking in damages. Following a recent judgment in England it seems that there is a new form of protection available – the Notification Injunction. This seems to require a lower standard of proof of dissipation risk and a lower liability on the cross-undertaking, removing some of the difficulties for the plaintiff.

On 29 April 2016 Mr Justice Nugee handed down a judgment, in the Chancery Division of the High Court of England & Wales, in which he considered whether as an alternative to a full blown freezing order the Court had jurisdiction to make an order that prevents a defendant from dealing with assets without first notifying the plaintiff. The purpose of the notification is to give the plaintiff, if so advised, the chance to make a full blown application to freeze the asset in question. The judge based his judgment on the fact that that court has power to prevent a party to litigation dissipating his assets so as to have the effect of rendering a later judgment to be one that goes unsatisfied. The judge actually concluded that a defendant owes a claimant an obligation not to behave in this way. This is a relatively novel idea and it remains to be seen how it will be received by other judges and higher courts. Novel though the premise may be, the conclusion that the court has power to restrain such behaviour as part of a broader package of restrictions is well founded.

The judge noted that it was well established that a full blown freezing order could properly include provisions requiring notification of intended transactions before they occurred and reasoned that this type of order was within the established arsenal of remedies that a court could grant to restrain potential dissipation. In order to grant a full blown freezing order the court must be satisfied that the plaintiff’s substantive case has merit – that it is a good arguable case. The court must also be satisfied that the plaintiff can establish that without a freezing order there is a real risk of dissipation of assets. The judge decided that both requirements had to be satisfied in order to obtain a notification injunction. If the matter had rested there then the notification injunction would be of little interest, because it would be just as easy (or as difficult) to obtain a freezing order as a notification injunction.

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Insight

Locations

Cayman Islands

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