Notification Injunctions: a lower evidential threshold for risk of dissipation?
A notification injunction is an order which prohibits the respondent from dealing with or disposing of assets without first providing advance notice to the applicant. It thus gives the applicant an opportunity to examine the proposed transaction and decide whether to apply for an injunction prohibiting it. The courts have recently considered the evidential threshold for notification injunctions – and in particular the question whether it is different from the threshold for freezing injunctions – in the dispute between Mark Holyoake and the Candy brothers.
In April last year Mr Holyoake, having obtained an interim injunction, applied on the return date for an injunction requiring the Candys to give him 7 days’ advance notice in writing before entering into any transaction with a value exceeding £5 million, subject to certain exceptions. Nugee J granted the injunction ( EWHC 970 (Ch)). He held that an applicant for a notification injunction, as with a freezing injunction, must still prove a good arguable case and that the order would be just and convenient. However, he held that, because the notification injunction sought by Mr Holyoake was “less intrusive” than a conventional freezing injunction, a lower standard of evidence of risk of dissipation was required.
This finding briefly generated a degree of enthusiasm for notification injunctions among the fraud lawyer community, as it suggested that a client who was struggling to find the evidence of risk of dissipation required for a freezing injunction might be better off seeking a notification injunction instead. However, there were serious flaws in Nugee J’s reasoning that the notification injunction which he granted was any less onerous or intrusive than a conventional freezing injunction. Exactly like a freezing injunction, it was aimed at restricting the respondents’ ability to deal freely with their assets and was accompanied by a penal notice, which was binding not only on the respondents but also on any third parties notified of the order who knowingly assisted or permitted a breach. Moreover, in some respects the injunction was even more onerous than a conventional freezing injunction – for example, it applied to all of the respondents’ assets and not only those up to a prescribed value.
Unsurprisingly, the Candys appealed to the Court of Appeal ( EWCA Civ 92). Gloster LJ granted their appeal, finding that the notification injunction granted by Nugee J was “in reality merely a modified version of a conventional freezing order” and that there was therefore no reason to lower the evidential threshold as to the risk of dissipation. She also held, as a matter of general principle, that there is no “spectrum” of thresholds which one can “match with a sufficiently diluted version of a conventional freezing order”; rather, there is a “binary threshold”, which applies not only to the conventional freezing injunction, but also to its “less intrusive variants” and “modified forms” (including notification injunctions).
Nugee J, in lowering the threshold, had relied on Lewison LJ’s decision in Pugachev  1 WLR 160 that the evidential threshold for an application for disclosure of information about assets that may assist the applicant to decide whether to apply for a freezing injunction is lower than the threshold for a freezing injunction application, on the grounds that it is a “far less intrusive remedy”. However, Gloster LJ distinguished Pugachev, on the grounds that it involved merely an order for disclosure and not a restriction on dealing with assets.
Intriguingly, Gloster LJ made the following obiter finding: “(I accept that the position might well be different in relation to a simple order requiring notice to be given of a proposed disposition of a specific property.)” This appears to leave the door open to the argument that a sufficiently simple notification injunction might not amount to a “variant” or “modified form” of a freezing injunction, but rather a different species of relief entirely involving less stringent evidential requirements. Gloster LJ does not spell out the finer details of the “simple order” which she had in mind but, given the tenour of the rest of her judgment, it is likely to be one with limited scope, and certainly one which would offer far less protection than a freezing injunction.
Andrew is a barrister who joined the civil litigation team in November 2012. He specialises in general commercial litigation, with a particular emphasis on fraud, breach of fiduciary duty and professional negligence claims.