The High Court has enhanced the options available to claimants concerned about a defendant dissipating assets to frustrate enforcement of judgments.
In Holyoake & Anr v Candy & Ors [2016] EWHC 970 (Ch) the court was asked to grant an order requiring the defendants to give notice before disposing of certain assets, referred to as a "notification order". This type of order, less invasive than a freezing order but still conferring meaningful protection on a claimant concerned about a defendant dissipating assets, was until this case the subject of little academic or judicial commentary. The court in Holyoake confirmed that statutory jurisdiction to make such an order exists, even if a freezing order is not also being sought. Accordingly, claimants now have an additional, freestanding, tool in their armoury where they fear a defendant will dissipate assets.
The test for a notification order is similar to that required for a freezing order. The claimant must show: (1) a good arguable case; and (2) a risk of dissipation (or that dissipation would interfere with a substantive right, although this was not argued in Holyoake). Where facts are disputed, which often happens where fraud or dishonesty is alleged and the risk of dissipation is therefore arguably highest, the court will not attempt to weigh up the relative strengths of each side's case, which is a matter for trial. The court will be satisfied where the claimant's pleaded case is not merely "fanciful", which is clearly helpful for claimants.
The court in Holyoake held that the less intrusive nature of notification orders (as compared with freezing injunctions) is relevant to the degree of risk of dissipation of assets which a claimant needs to show. This is potentially significant as it suggests that where a claimant may not be able to show a risk of dissipation to the standard required for a freezing injunction it may still be able to obtain protection by means of a notification order.
In Holyoake, the court relied on two key factors to find the necessary risk of dissipation: (1) the defendant had transferred a valuable property into his wife's sole name; and (2) he had purchased a luxury yacht whilst on paper lacking the requisite wealth. However, the claimants argued a number of further grounds which the court also found persuasive. It therefore remains to be seen how willing a court will be to grant a notification order where claimants' arguments are less compelling (or numerous).
The court also considered that the defendant's use of SPVs and offshore companies could indicate a risk of dissipation, but only where other evidence was present.
Prospective applicants for notification orders should however take note of the court's subsequent reworking of the order in Holyoake. At a later hearing, the court was persuaded on the specific facts to weaken the effect of the order, including by exempting transactions "in the ordinary course of business" from the notification requirement. It also ordered that the claimants fortify their cross undertaking in damages in an amount of GBP 5 million.
