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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> London and Quadrant Housing Trust v Prestige Properties Ltd [2013] EWCA Civ 130 (14 January 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/130.html Cite as: [2013] EWCA Civ 130

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CLERKENWELL & SHOREDITCH COUNTY COURT
(HIS HONOUR JUDGE CRYAN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		14th January 2013

Lord Justice Kitchin:

1. This is an appeal against paragraph 3 of the order of HHJ Cryan made in these proceedings on 13 January 2012. This paragraph of the order embodies a freezing injunction following judgment and in support of an order for costs. Permission to appeal was granted by Etherton LJ at an oral hearing on 11 July 2012 on two grounds only namely, the meaning of the order is uncertain and it is excessive in its scope.
2. The relevant background may be summarised as follows. In these proceedings, the claimant, a charity, sought forfeiture of a former public house known as the Old Ivy, of which the claimant was the freehold owner and the first defendant the lessee. The claim for forfeiture was based upon alleged breaches of two covenants: the first, that the premises should be used as a public house; and the second, that the premises should be occupied as a single unit. It was the claimant's case that, in breach of these covenants, the first defendant ceased using the premises as a public house and sub-let part of the premises to third parties for residential purposes. The first defendant resisted the claim, but also sought relief from forfeiture on the basis that any breaches could and would be rectified. The trial of the claim was listed for one day, but that proved a hopeless underestimate, and in the event it occupied some nine days of court time, primarily as a result of the factual enquiries that had to be made, not only into the alleged breaches of covenant but also in relation to the claim for relief against forfeiture.
3. The factual matrix proved difficult to establish, largely because of the conduct of the first defendant through its director, the second defendant, and his brother, the third defendant, who for much of the time operated as a shadow director despite having been made bankrupt.
4. In a long and careful judgment delivered on 22 December 2011, the judge decided the first defendant was in breach of both covenants and that it was inappropriate to grant relief against forfeiture. He also awarded costs against the first defendant. On that same day, the claimant sought to join the second and third defendants for the purpose of pursuing an order for costs against them personally. The judge thought that, having regard to his findings, it was appropriate that they be joined as defendants and he then stood the matter over until 12 January 2012 for further consideration. In the meantime, the claimant sought and was granted an injunction in the following terms:

"5. The Defendants Prestige Properties Ltd and or Eugene Burke shall be prohibited from disposing of or dealing with any leasehold or freehold property in which Prestige Properties Ltd have a vested or contingent interest and or which Eugene Burke believes or should believe has such interest, until the conclusion of the hearing on 12 January 2012 or further order.

6. Liberty to the Defendant to apply to vary or discharge Paragraph 5 above on 24 hours written notice to the Claimant's solicitors (such notice to exclude public holidays)."

This form of wording was agreed between counsel for the claimant and counsel then acting for the defendants, once the judge had decided that, as a matter of principle, it was appropriate to grant injunctive relief.

5. The matter duly came back before the judge on 12 January 2012. In a further long and careful judgment given on 13 January 2012, the judge concluded that this was a highly exceptional case and that the factual matrix had proved difficult to establish, primarily because of the conduct of the first defendant, through its director, the second defendant, and his brother, the third defendant, who, as I have said, for much of the time operated as a shadow director; that the action was conducted in accordance with their instructions; and that their evidence was highly dishonest. Indeed the judge found the allegations and assertions they made in their evidence to be quite brazen in their dishonesty and that they told preposterous lies which formed the basis of the first defendant's defence to the claim. Moreover the judge found the financial affairs of the defendants to be tangled and complex. The following passages in the judgment give some flavour of the judge's overall findings:

"16... I accept that there is a tangled and complex web of affairs here. In the course of the trial efforts were made to try to understand the various companies and holdings of the second and third defendants, and to establish who was controlling what. It was an extremely difficult exercise, and what was apparent was that the second and third defendants were cavalier in their approach to the conduct of companies. For their own purposes they were prepared to become involved and deal with the companies, and the first defendant in particular, in ways which were highly irregular. I have already indicated that there is no evidence of the rents ever being paid directly to the first defendant albeit that the first defendant was the leaseholder. No accounts for the first defendant were ever produced, as I have already said. No evidence has been produced as to how the first defendant funded this action. It seems only to have had £100 in its account. No evidence has been produced to show that the first defendant is a company of substance. It would seem from what the court was informed, but without evidence, that the first defendant has valuable properties, but it is clear that each of those properties is charged and the extent of the charges to the Bank of Cyprus, for example, is not known. In short, there was no evidence of the solvency of the first defendant and, having regard to the conduct of Barrington Burke and Eugene Burke, I would be surprised, indeed I regard it as unlikely, that the claimant charity would find it easy to enforce their order for costs against the first defendant. It is perhaps notable that the first defendant has no liquid funds and has, I was told yesterday, made no offer as to the payment of any sum on account of the costs order made against them.

17. In the context of the deliberately obscure picture created by the second and third defendants and their own cavalier conduct in relation to the first defendant, and their demonstrated capacity for dishonesty before this court, it is not at all clear how the claimants will succeed in any pursuit of the first defendant for funds..."

6. Similarly, a little later the judge said this:

"30...It seems to be generally accepted now that there are some properties, probably three in number, which are in the first defendant's name, but the net value of those properties is totally unknown. The management of the properties is something about which nothing is known and, in the absence of accounts, it is not possible to know whether the first defendant company is solvent or otherwise and, having regard to the conduct of those managing the company, there must be grave concerns as to the true situation."

7. The judge concluded:

"34. … I am satisfied from all that I have said that the conduct of it by Barrington Burke and Eugene Burke is so extreme, frankly so outrageous in its dishonesty, that the overall interests of justice require that this claimant is not restricted to what would be likely to be a tortuous and possibly fruitless pursuit of its costs against the first defendant, but is also entitled to recover, if it can, against Barrington Burke and Eugene Burke. Any other course would be to defend Barrington Burke and Eugene Burke against being responsible for their own dishonest and entirely inappropriate conduct of these proceedings."

8. The judge then made an order for costs in the following terms:

"2. The Second and Third Defendant shall be ordered to pay the Claimant's costs of the claim and of the application on an indemnity basis in addition to the First Defendant's liability for costs as ordered by the Court on 22 December 2011. All of the defendants are jointly liable for the costs of the claim on an indemnity basis."

9. The judge was also invited to make a further freezing order against all the defendants until the costs order was satisfied or further order. The claimant's counsel proposed a form of wording to which counsel then acting for the defendants did not object. The judge therefore made the order the subject of this appeal. It reads:

"3. The Defendants shall be prohibited from disposing of or dealing with any leasehold or freehold property in which they have a vested or contingent interest, in whole or in part, and or which Eugene or Barry Burke believe or should believe has such interest, until the costs order is satisfied or until further order or unless the Claimant's solicitors agree in writing to steps proposed to be taken by any or all of the Defendants."

10. That brings me to the first ground of appeal for which the defendants have permission, namely that the order is defective because it is not clear what it means. But before addressing the particular respects in which it is contended that the order is uncertain, I would make the following preliminary observations. First, and importantly, I recognise and accept that any order for an injunction must set out clearly what the respondent must do or not do. Such is apparent from paragraph 5.3 of the Practice Direction supplementing CPR Part 25.
11. Second, it is, however, striking that the form of injunction contained within the order of 22 December 2011 made pending the hearing on 12 January 2012 is very similar in terms to the order made on 13 January 2012 which is the subject of this appeal. Its wording was agreed between counsel for the claimant and counsel then acting for the defendants once the judge had rejected the defendants' submission that no injunction should be granted at all. Further, despite there being express liberty to apply to vary or discharge the order, no such application was made and indeed no suggestion was ever made that the order was uncertain in its terms or created any difficulty in any other way.
12. Third, at the hearing on 12 and 13 January 2012, no objection was made by counsel then acting for the defendants to the form of wording proposed by the claimants and ultimately adopted by the judge in paragraph 3 of the order the subject of this appeal, a fact which is perhaps hardly surprising since he had agreed to the very similar wording in the earlier order of 22 December 2011. If the defendants had raised any issue or concern at the time, the judge would no doubt have addressed the matter.
13. Fourth, not only did the defendants not raise any issue or concern at the hearing, they have made no application to the judge at any time since the hearing for a variation of the order on the basis that it is causing them some unforeseen difficulty. Indeed, we understand that the claimant invited the defendants to suggest for its consideration any alternative form of wording which would meet their concerns, but none was forthcoming prior to this hearing, at which counsel now acting for the defendants has provided to us and to the claimant a proposed revised order.
14. Against this background, I therefore come to consider the particular respects in which the defendants say the order is uncertain. Only one is identified in the Grounds of Appeal, namely that it is not apparent what a "vested or contingent interest" means. The defendants' skeleton argument raises three others. I will address them all in turn.
15. The defendants say that the expression "vested or contingent interest" is not in wide use and calls for an explanation or definition. I am unable to accept this submission. In context, I understand a vested interest to be a right in property which already subsists and has vested in one or more of the defendants, and a contingent interest to be one which has not yet vested, and will not do so unless and until some future event happens. Moreover I can quite see why the judge made such an order in this case. The second and third defendants have been found guilty of blatant dishonesty; the first defendant seems to have no liquid funds, yet apparently has an interest in valuable properties; and the second and third defendants have created a tangled and complex web of affairs and have been cavalier in their approach to the conduct of the companies in which they have an interest.
16. In all these circumstances, the judge was naturally of the view that the defendants would take steps to frustrate and avoid any attempt by the claimant to recover its costs. Indeed, as the judge himself put it, the deliberately obscure picture created by the second and third defendants and their demonstrated capacity for dishonesty meant it was not at all clear how the claimant would succeed in its pursuit of funds. Nothing has changed since that time. The defendants have paid nothing by way of any contribution under the costs order made against them and have made no disclosure of their assets. Having regard to all these matters I have no doubt the judge was entitled to frame this aspect of the order as he did.
17. Second, the defendants say that the order is unsatisfactory because it is not clear whether it only freezes property in which the defendants all have an interest or whether it extends to property in which any one or more of them has an interest. I am satisfied that the judge intended the latter, and indeed I understood counsel acting for the defendants during the course of submissions to us this morning to accept that that was so. The judge ordered costs against all the defendants jointly. Each is therefore liable for all the costs. The purpose of the injunction was to prevent the defendants from disposing of any of their property interests in an attempt to avoid this liability. That purpose would plainly be frustrated if the order applied only to those properties in which all three defendants had an interest. Indeed, we are told by counsel for the claimant that the claimant believes there may be no such property at all. Accordingly, and to avoid any possible further argument, it seems to me desirable that the order be amended to reflect what all parties before us now accept was the judge's intention.
18. Third, the defendants submit that it is not clear what "in whole or in part" means. But, as counsel for the defendants accepted, this point really stands or falls with the second point and adds nothing to it. I need therefore say no more about it.
19. Finally, the defendants complain that it is not at all clear what is meant by the phrase "and or which Eugene or Barry Burke believe or should believe has such interest". Once again, I have no doubt that the order was framed in this way in the light of the blatant dishonesty of the second and third defendants, and their cavalier approach to the running of their companies. Nevertheless, it seems to me that the injunction can only properly bite on properties in which any of the defendants do in fact have an interest, irrespective of their state of mind. Thus, this aspect of the order does, in my view, require amendment. But it is an amendment of a kind which, I believe, could and should have been sorted out before the judge.
20. That brings me to the second ground of appeal for which the defendants have permission, namely that the order is defective and unjust because it purports to freeze the defendants' assets without any financial limit. The defendants submit that the judge ought rather to have made an order preventing the defendants from disposing of or dealing with their assets in England and Wales up to a specific value. Moreover, counsel for the defendants has submitted to us this morning that the judge plainly did not direct his mind to the usual practice, and consequently we must infer and conclude that the exercise of his discretion was flawed.
21. I recognise that a court will normally insert a maximum sum into a freezing order to avoid any unnecessary interference with a defendant's freedom to deal with his assets as he wishes. But this is a most unusual case. It is one where the second and third defendants controlled the first defendant and rendered it impossible properly to discern important aspects of its affairs; deliberately sought to obscure the truth about the first defendant's financial position; gave brazen and dishonest evidence and failed to disclose anything about the value of the property interests which any of them held. Moreover, as I have said, the defendants raised no objection to the terms of the order when it was made; declined to respond positively to requests for any suggestion they may have as to how it should be amended until this appeal hearing; and have never revealed the extent of their assets or how the order may be interfering with the defendants' legitimate enjoyment of those assets. Further, it is, I think, relevant that the injunction is only directed to freehold or leasehold property in which any of the defendants have an interest. It does not impact in any way upon their freedom to deal with any other assets they may own. In all these respects, the case is, in my judgment, a highly unusual one and, in my view, it cannot be said that the judge fell into error in failing to impose a financial limit on his order. Nor can it be inferred that he failed to direct his mind to the usual practice.
22. In my judgment, all the matters to which I have referred ought to have been raised before the judge at the original hearing or by application to the judge subsequently. However, the matter is now before us, and for pragmatic reasons it makes sense to make the corrections to which I have referred.
23. I would therefore allow the appeal only to the very limited extent I have indicated: that is to say, first, by making it clear the injunction applies to any property in which any of the defendants has an interest and, secondly, by deleting the words "and or which Eugene or Barry Burke believe or should believe has such interest".

Lord Justice Hughes:

24. I agree, and I would just like to emphasise this: although this appeal has been allowed to the extent of correcting some infelicities of wording in the injunction, that involves, on the facts of this case, no criticism of the trial judge whatever. The wording of the injunction followed wording which was agreed before him between experienced counsel, both on 22 December at the end of a very long hearing and on 13 January at the end of a substantial hearing about costs in which the judge gave a second careful judgment.
25. Secondly, I am for my part entirely satisfied that an appeal on this point, that is to say on the wording of the injunction, should never have been brought to this court, whether or not an application was being made for permission to appeal the judge's substantive order, as in fact it was. These infelicities of wording should have been dealt with by what would have been an extremely brief application to the trial judge, either at the end of the hearing or subsequently, when it could probably have been made in writing and by consent. So to say is not a criticism of counsel now acting for the defendants, who has been instructed late and perhaps not altogether uninterrupted; it is a criticism of the defendants.
26. However, for the reasons that Kitchin LJ has so clearly explained, now that we are here, it seems to me to be in the interests of justice, on entirely pragmatic grounds, that corrections should be made here rather than that yet a further hearing of any kind should be imposed on the parties and particularly on the claimants.

Order: Appeal allowed in part