In this article we take a look at the surprising analysis by the Court of Appeal in the case of Holyoake & Anr v Candy & Ors [2016] EWHC 970 (Ch). Read our update on the risk of dissipation in the context of injunctions applications.

In a previous article, we noted the High Court's decision in Holyoake & Anr v Candy & Ors [2016] EWHC 970 (Ch) in which Nugee J granted an injunction requiring the defendants to give notice before disposing of certain assets, known as a "notification order". In granting the order, Nugee J held that an applicant for a notification order would not be required to show a risk of dissipation to the same standard as for a conventional freezing order, given what he considered was the less intrusive nature of the notification order.

The defendants appealed Nugee J's finding that the test for risk of dissipation for a notification injunction was lower than for a conventional freezing order. Gloster LJ, giving the judgment of the Court of Appeal ([2017] EWCA Civ 92]), agreed with the appellants that the test for the risk of dissipation in an application for a notification order is the same as for a traditional freezing order – namely that there must be solid evidence of a real risk, judged objectively, that a future judgment will not be met because of an unjustifiable dissipation of assets. Gloster LJ went on to say that a notification order is not therefore a separate species of injunction but is merely a "modified version of a conventional freezing order".

Central to the Court of Appeal's decision was their view that there is in fact no material distinction between notification orders and standard freezing orders, in terms of their "function, operation and machinery" or the "Draconian interference with the right of businessmen or corporate entities to deal with their personal or business assets". Furthermore, the Court of Appeal found, there is no material difference between the two forms of injunction from the perspective of a third party, whose only safe course when dealing with a person subject to either form of injunction would be to require evidence that the proposed transaction falls within an exception to the prohibition in the order.

Some will find the Court of Appeal's analysis surprising. A third party proposing to deal with a person subject to a notification order could get evidence that an appropriate notification had been made and that consent had been given or that the (short) time for the other party to take preventative action had expired. This route is not available in the context of a standard freezing order and marks a material distinction between the two forms of order in terms of their onerousness from the perspective both of the subject of the order and third parties intending to deal with them. It might be said that this would constitute a good basis for a difference in the threshold test for applicants. However, if the Court of Appeal was alive to this point, it was unmoved by it.

Perhaps the real reason for the Court of Appeal's decision was their fear of opening the floodgates to applications for notification orders, which it was concerned could become the "default" form of freezing order if there were a lower test for risk of dissipation. Whether or not this fear is well founded, the fact is that notification orders, at least in the sense of being a separate species of freezing injunction with different requirements for obtaining them, have been dealt a significant and probably fatal blow.

The Court of Appeal's judgment has recently been followed, without apparent hesitation, by HH Judge Waksman QC in the case of ICICI Bank PLC v Mehta & Ors [2017] EWHC 1030 (Comm) (8 May 2017). In relation to the risk of dissipation test, although obiter, two aspects of the case are worth mentioning.

First, the applicant Bank initially argued that the risk of dissipation could be assessed against all the defendants jointly, relying as against all of them on the fact that one defendant had a relevant previous conviction. The Judge held that the requisite risk of dissipation must be established as against each proposed defendant who would be bound by the order.

Second, the Judge also considered the relevance of the Bank's delay (of approximately seven months) in seeking the freezing order against one defendant, apparently due to its belief that the matter could be settled without the need to commence proceedings. The Judge, whilst confirming that delay is not automatically fatal to an application for a freezing order, nevertheless concluded that on the facts before him the delay was indicative of the Bank's lack of concern that the risk of dissipation was real and that this would have been fatal to the Bank's application.