Bulletins | May 26, 2016

Notification Injunctions : As an alternative to Freezing Injunctions, Can they offer better security to Claimants against unenforceable judgments?

An early consideration in the course of litigation is whether a Judgment can ultimately be enforced and whether a Defendant is likely to disseminate assets in such a way to prevent enforcement.

Where there is a real risk that assets are going to be put beyond the reach of a Claimant, the Claimant can seek, pursuant to s37 of the Senior Courts Act 1981, interim protection in the shape of a freezing order, which restrains a Defendant from removing assets from the jurisdiction, or sometimes from dealing with them even when outside of the jurisdiction.

Due to the draconian nature of such orders they are not easy to obtain and there needs to be good evidence of a risk of dissipation. This evidence is crucial, as is the offering of a cross undertaking in damages by the Claimant in support of its application. This is effectively an undertaking to compensate the Defendant financially for any losses the presence of the injunction has caused and the Claimant has to often provide security to support its cross undertaking.

An inability to provide a satisfactory cross undertaking or insufficient evidence to establish that the risk of dissipation is real can prevent a Claimant from benefiting from obtaining an interim order and deprive it of the security a freezing order can provide.

Now, the Court has confirmed in Holyoake v Candy that pursuant to s37 of the Senior Courts Act 1981 it has the jurisdiction to grant an injunction requiring the Defendants to give notice of intended disposals of its assets, even if no freezing order was sought. This is being termed a ‘Notification Injunction’. Notification injunctions have been agreed in the past but this is the first time a free standing, independent injunction of this kind has been granted.  Upon receipt of the notification the Claimant then has the opportunity to apply for a full freezing order and establish the required case.

This is considerably less invasive than a freezing order and the Judge suggested that as a result of this a lower risk of dissipation of assets needs to be established. This could effectively introduce a new style of injunction, which does not have the same crippling effect on Defendants, but at the same time, is significantly easier to obtain, and requires less fortification in the form of the cross undertaking in damages.  It remains to be seen how the issue of the cross undertaking in damages will play out as the Court has adjourned the issue of security for now but this is an area of great interest. It offers a tailored solution with less risk to a Claimant simply trying to manage its exposure to an unenforceable judgment.