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Notification injunctions to preserve assets: An overview by Marc Delehanty

A notification injunction is a variant of a conventional freezing injunction.  Broadly speaking, it provides that the respondent cannot deal with or dispose of his assets without first providing advance notice of the proposed dealings to the applicant.

A notification injunction differs from a conventional freezing (Mareva) injunction as it does not provide for a blanket ban on dealings: for the dealing to be lawful nothing more is required beyond providing advance notice.  Yet it is far more substantial than an order requiring disclosure of information related to asset dealings.  This is because, in the absence of the giving of requisite advance notice, it is the act of asset dealing itself which would be in breach of the notification injunction – rather than the omission to give advance notice.  This distinction is important as the consequence is that providing late disclosure may not be sufficient to cure the breach and the applicant could seek an order compelling the respondent to (so far as is possible) reverse the dealing.

The utility of a notification injunction is that it gives the applicant an opportunity to assess the proposed dealing (e.g., the sale of shares or the pledging of shares as security for a loan) so that it can raise objections, if necessary, it can apply to Court to prevent the respondent from carrying out the proposed dealing.  The order also gives the applicant visibility on the respondent’s dealings with his assets in general over a period of time.  This would enable the applicant to spot any patterns in, or features of, the respondent’s asset dealings which suggest that he is engaged in asset dissipation to frustrate execution of any future judgment (such as would justify a full freezing injunction prohibiting dealings with assets altogether). 

What is the test to meet to get a notification injunction?

In the recent case of Holyoake v Candy [2017] EWCA Civ 92, the Court of Appeal held that a notification injunction was a less onerous version of a conventional freezing order rather than some distinct species of relief.  It is draconian relief which carries a reputational stigma for the respondent subject to it.  On that basis, when formulating the correct test for the grant of a notification injunction, the Court of Appeal hewed closely to the usual test for the grant of a freezing order:

• First, a good arguable case: the applicant has to demonstrate that it has a “good arguable case” in respect of its claim against the respondent.  Even though the order is less onerous than a full freezing order, it is not sufficient to show that there is a “serious issue to be tried” – the lower threshold test usually applicable in respect of interim injunctions (from the American Cyanamid case).

• Secondly, a real risk of dissipation: the applicant must show that there is a real risk, judged objectively and supported by solid evidence, that a future judgment would not be met because of unjustifiable dissipation of assets.  Precisely what “solid evidence” entails will necessarily vary according to the particular circumstances of a given case.  The Court of Appeal expressly rejected any “sliding scale” approach to the test for risk of dissipation whereby an applicant could obtain a notification injunction if it can show some risk of dissipation but cannot show enough risk to justify a conventional freezing injunction.  There is a binary test: either there is a risk sufficient to justify a freezing injunction (whether conventional or a notification variant) or there is not.

• Thirdly, where it is just and convenient to make the order: the intrusiveness of the relief sought will be a highly relevant factor when considering the overall justice and convenience of granting the proposed injunction.  In this regard, the Court of Appeal noted that, depending on its terms, a notification injunction can actually be more onerous than a regular freezing injunction in some respects. E.g., in the initial interim notification order made in the Candy v Holyoake case, there was no exception for transactions done in the ordinary course of business.  Moreover, there was no overall value cap on the order with the effect that transactions anywhere in the world had to be notified in advance even if those transactions did not affect an asset base of the respondents within England which exceeded the value of the claim.  Furthermore, notification orders can create real practical difficulties for respondents – including confidentiality issues concerning the third parties to proposed transactions.  Although the Court of Appeal held that there was to be a single threshold test for the risk of dissipation for freezing injunctions (whether conventional or in notification forms), it also held that the extent to which that threshold is exceeded is relevant to the question of whether it is just and convenient to grant the form of relief sought or whether less intrusive relief would be more appropriate.  Essentially, applicants seeking a conventional freezing injunction will need to be prepared to justify why a notification injunction would afford insufficient protection.

Finally, it is important to note that Gloster LJ accepted that the test might well differ where the applicant is seeking a simple order requiring notice to be given of a proposed disposition of a specific property (i.e., rather than a blanket notification order affecting all assets).

The Legal 500 directory recommends Marc Delehanty as one of the country’s leading junior barristers for Civil Fraud law, describing him as “a very clever lawyer with massive knowledge of the law“.