England and Wales High Court (Chancery Division) Decisions

HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		The Priory Courts 33 Bull Street Birmingham B4 6DS
		12th May 2011.

HIS HONOUR JUDGE BARKER, QC:

1. These proceedings were commenced more than seven years ago on 21^st January 2004. Mrs. Can Chen (the first Claimant) and Mr. An Xiang Du (the second Claimant) sought specific performance of an agreement made in 1999 with Mrs. Ge Chui (the first Defendant) and Mr. Ji Feng Ding (the second Defendant) concerning participation in and the ownership of Herb Magic UK Ltd. (the third Defendant).
2. Essentially, the Claimants claimed to be entitled to an equal shareholding in and to equal participation in Herb Magic. This claim was defended on the basis that the Claimants' contentions as to the agreement concerning Herb Magic were wrong, and that the Claimants had been lawfully and properly excluded from any participation in or employment by Herb Magic with effect from 23^rd March 2001 for breach of the agreement made in 1999 and for breach of duty.
3. Initial directions for the management of the case to trial were given in June 2004, which, if followed, would have led to a five-day trial shortly after 1^st November 2004. In the event, this was overtaken by:

i) a stay for mediation, initially for ten weeks from October 2004;

ii) arrangements for the appointment and facilitation of a report by an expert accountant during early 2005; and,

iii) an attempt at a court-facilitated mediation between September and November 2005; resolution by mediation finally failed on 30^th November 2005 and a case management conference was then listed for 3^rd February 2006.

4. Certain of the directions given at that case management conference were the subject of appeal, which appeal was finally determined in July 2006, and the case was then on track for a trial as from 16^th January 2007 with a revised estimate given by the parties of three days.
5. The trial duly commenced before HHJ McCahill QC, sitting as a high court judge in the Chancery Division, Birmingham District Registry on 16^th January 2007 and was then adjourned part-heard three days later on 18^th January. The time estimated for the trial had been materially underestimated by the parties and further hearings were scheduled during May for three days and September 2007 for a further five days.
6. Judgment was delivered by HHJ McCahill QC in September 2007 and the order was entered on 17^th October 2007. In short, the decision was in the Claimant's favour. HHJ McCahill QC held that there was an express oral agreement between the Claimants and the first and second Defendants that they would share equally in the ownership and control of Herb Magic and that the Claimants were entitled to, and to be registered as holders of, 50 per cent of the shares in Herb Magic.
7. A further hearing was fixed for costs and for other post-judgment matters. That hearing took place on 15^th November 2007 and an order was made by HHJ McCahill QC:

i) directing share transfers;

ii) giving permission to apply for an account of the profits made by Herb Magic;

iii) making a costs order substantially in the Claimants' favour;

iv) ordering payment out to the Claimants of monies then held in court (a sum of £30,000 and interest thereon^[1]); and

v) refusing permission to appeal.

8. On 29^th April 2008 the Claimants did apply for an account to be taken of Herb Magic's profits and for a further payment on account of their costs: this was on the basis that over the intervening period (that is from the previous November) it had not been possible to reach agreement with the first and second Defendants on either point. HHJ McCahill QC heard that application on 7^th May 2008 and made an order for information to be provided by the first and second Defendants and for recourse to be had to an expert accountant to progress the taking of the account. In addition, HHJ McCahill QC ordered:

i) the first and second Defendants to pay a further £30,000 on account of costs by 21^st May 2008;

ii) the first and second Defendants to pay the sum of £750 for the costs of the hearing on that day;

iii) a charging order nisi to be made in respect of the first and second Defendants' home at 10 Pioneer Close, Northampton and another property to secure payment of the costs orders. The charging order over the other property was later, on 15^th August 2008, made final: the first and second Defendants having failed to pay the sums due under the costs orders already made.

9. These orders of HHJ McCahill QC prompted a series of applications to the Court of Appeal for permission to appeal, all of which were unsuccessful with refusal orders being made on 23^rd April and 8^th May in respect of the October and November 2007 orders and 12^th August and 15^th December 2008 in respect of the 7^th May order.
10. Almost immediately thereafter, the first and second Defendants entered into a sale and leaseback or equity release arrangement with Mr. Paul Delaney who is the fourth Defendant. Mr. Delaney had known the first and second Defendants for some years and was or had been a businessman. He had also given evidence at the trial before HHJ McCahill QC. The Claimants were suspicious of the first and second Defendants when this transaction came to their attention and on 21^st July 2008 they issued an application for an order:

i) setting that transaction aside;

ii) freezing the alleged sale monies in the sum of £210,000;

iii) that Mr Delaney be joined as a party to the action (that is as the fourth Defendant); and

iv) for other directions to progress the taking of the account of the third Defendant Herb Magic's profit.

11. I pause here to note that there was no apparent concern by the Claimants' then lawyer that a formal pleading should be prepared, amended or served in relation to the joinder of Mr. Delaney as fourth Defendant. The reason for the application to join Mr. Delaney and for setting aside the transaction for the sale or transfer of 10 Pioneer Close and for the freezing order was that the transfer was "an attempt to frustrate the order of HHJ McCahill QC made on 7^th May 2008." On 28^th July 2008, Mr. Delaney undertook not to dispose of or charge 10 Pioneer Close pending determination of this issue raised by the Claimants and accepted that for that purpose it was proper that he should be added as a party.
12. The Claimants then turned their attention to the first and second Defendants' other property. In September 2008, they initiated proceedings for its sale which proceedings were finally determined by an order for sale made in June 2009; that property was later sold and the net proceeds duly applied towards the outstanding costs liabilities of the first and second Defendants to the claims.
13. The hearing of the Claimants' application challenging the transfer of 10 Pioneer Close to Mr. Delaney was first heard by a district judge in February 2009 who ordered that the transaction be set aside. However, this order was appealed by Mr. Delaney and the appeal was heard in the High Court at the Birmingham Distinct Registry by HHJ Purle QC on 8^th January last year. HHJ Purle QC allowed the appeal and ordered the Claimants to pay 85% of the costs of the application before the district judge and of the appeal, and further ordered a payment on account of costs of £15,500 by 29^th January 2010, and gave permission for an application for a further payment on account of costs to be made.
14. Not accepting that finding and still being suspicious of the transaction between Mr. Delaney and the first and second Defendants, the Claimants instructed leading counsel and sought permission for a second appeal to the Court of Appeal. On 13^th May 2010, Rimer LJ gave permission for an appeal, considering it to be properly arguable that the Claimants were victims of "a hastily implemented scheme, deliberately aimed at defeating their claims as creditors." In so doing, Rimer LJ also imposed a stay of execution on HHJ Purle QC's costs order. This appeal was heard by a full court comprising the Master of the Rolls, and Carnwath and Sullivan LJJ and, after hearing the arguments of Leading Counsel for both sides, dismissed on 16^th November last year. The Claimants were then ordered to pay the costs of the appeal and below and a further £15,000 as an interim payment on account of costs within 28 days of that date. Thus, as from 14^th December of last year, the Claimants have owed £30,500 to Mr. Delaney on account of his costs, all of which sum is unpaid. In addition Mr. Delaney is progressing the assessment of his full bill of costs.
15. The Claimants then made an application for permission to appeal to the Supreme Court in respect of the transaction between Mr. Delaney and the first and second Defendants; but, as there was no stay in place, they remained liable and overdue in respect of the payment of the £30,500 costs ordered against them in favour of Mr. Delaney. That application for permission to appeal was refused by the appeal panel on 20^th of April of this year.
16. In the meantime, in May of last year (that is some two years after HHJ McCahill QC's order that the first and second Defendants should pay £30,000 on account of the costs of the trial to the Claimants), and still being unpaid or substantially unpaid, the Claimants prepared and served a statutory demand on the second Defendant. The second Defendant applied unsuccessfully to have that statutory demand set aside. The refusal to set aside the statutory demand was the subject of an application for permission to appeal which came before me sitting in this Court in February of this year. I refused that application and gave further directions for further evidence in those bankruptcy proceedings. So far as I am aware, those proceedings are still pending before the county court in which they were issued.
17. That then is the litigation background giving rise to Mr. Delaney's entitlement to recover £30,500 on account of costs and further sums once his costs are agreed or assessed or in the event of a further application being made for a payment on account of costs.
18. As an initial step, Mr. Delaney issued a third-party debt application on 1^st December 2010. Technically, that was two weeks before the deadline for the payment of the £15,000 due under the Court of Appeal's order. The purpose of such an application is to obtain recourse against a third party (in this case the first and second Defendants) who owe money to the judgment debtor (here the Claimants) so that the debt as between the third party and the judgment debtor may be satisfied wholly or in part by a payment instead by the third party to the judgment creditor (here Mr. Delaney). An interim order was made on 13^th January this year with a correcting order being made on 9^th February. As a result there has been:

i) the fixing of a hearing date for consideration of the making of a final order; and,

ii) in the meantime, an order restraining the third party (the first and second Defendants) from paying any sum due to the judgment debtor (the Claimants) save insofar as that sum exceeds £30,600, the additional £100 being the issue fee for the third party debt order application.

19. The date for that final hearing is 20 May 2011. The precise amount of the debt due by the first and second Defendants to the Claimants has not been determined and is not clear at present. From Mr. Delaney's standpoint, as from 16^th November 2010:

i) his joinder as a Defendant on the Claimants' application had been held to be wrong in law by the Court of Appeal;

ii) the Claimants became liable to pay him his costs in being involved in those proceedings once agreed or assessed and the total bill is said to be some £88,000; and,

iii) the Claimants then became liable to pay and are now overdue in payment of a sum on account of costs totalling £30,500 plus interest at the judgment rate of 8% with effect from the due dates. Mr. Delaney wishes to enforce that judgment debt.

20. According to Mr. Delaney's evidence, he then instructed his solicitors to investigate the Claimants' assets for enforcement purposes and in particular their home at 37 Witnell Road, Coventry and their interests in a company known as Fu Kang UK Ltd., whose registered office is at their home address. These inquiries revealed in relation to the Claimants' home that:

i) a mortgage secured by a legal charge was cleared on 21^st January 2010;

ii) title was transferred to their son Mr. Boqian Du, now the fifth Defendant, on 27^th January 2010; and,

iii) the consideration for that transfer was recorded as "not for monetary value".

21. Coming as it did in the immediate aftermath of HHJ Purle QC's order on 8^th January 2010, which included a costs order for payment on account of costs, Mr. Delaney, regarded that transaction as questionable.
22. It also seems from documents filed at Companies House that following the release of HHJ Purle QC's judgment in draft on 23^rd December 2009 the Claimants appointed their son (the fifth Defendant) as the director of Fu Kang and transferred 84% of the shares in that company, which they had previously held, to him. This transfer seems to have been short-lived as the shares were transferred back on 25^th February 2010 and the first Claimant, Mrs. Chen, was reappointed the director of that company. She has since resigned as director and become company secretary. This was on 24^th April 2011 on which day all the shares in Fu Kang were transferred to a Mr. Ming Zhao for, it is said, a consideration of £100. On that day, Mr Zhao was appointed as the director of that company
23. Just as the timing and circumstances of the transfer of 10 Pioneer Close by the first and second Defendants to Mr. Delaney had raised the Claimants' suspicions, so too the timing and circumstances of the transfer of 37 Witnell Road, and the dealings with the ownership and control of Fu Kang raised Mr. Delaney's suspicions. Rather than launch into an application, Mr. Delaney's legal advisors wrote to the Claimants and to Mr Boqian Du on 18^th February 2011 setting out the facts that they then knew and asking a series of questions aimed at obtaining further information from which to decide whether or not to accept the transactions as genuine.
24. The Claimants, Mrs. Chen and Mr. An Xiang Du, replied on 23^rd February, challenging the juridical basis for such requests, asserting a convention that parties do not threaten enforcement action whilst the Supreme Court is seized of an application for permission to appeal, and pointing out that the appeal to the Court of Appeal was a second appeal for which permission is more sparingly granted and that there was no appeal from HHJ Purle QC's finding that the purpose of the transfer of 10 Pioneer Close was to put assets beyond the Claimants' reach.
25. Mr Boqian Du did not reply at all. Rather the letter to him was returned to Mr. Delaney's solicitors unopened, as undelivered mail.
26. By a letter dated 25^th February Mr Delaney's solicitors pointed out that the purpose of their questions was to provide an opportunity for the Claimants to give information and to avoid further proceedings. The Claimants' response to that letter was to assert that the purpose of the transaction between Mr. Delaney and the first and second Defendants was to defraud; and, instead of responding to the questions asked of them, the Claimants asked their own questions of Mr. Delaney. Mr. Delaney did then issue an application on 23^rd of March 2011 for a freezing injunction over specified assets held or previously held by the Claimants (that is their home at 37 Witnell Road and the Fu Kang shares) or over the proceeds of such assets and an order for the provision of information; that application came before me during the latter part of the afternoon of 28^th April of this year.
27. Earlier that day, shortly before 12.30, Mrs. Chen attended in person at court and issued an application on behalf of herself and her husband on the basis that she excepted Mr. Delaney's application to be made on the following Tuesday, 4^th May, and she sought an adjournment of that application to a later date. Mrs. Chen asked for her application to be issued with a return date for hearing on 4^th May. At the hearing of Mr. Delaney's application on 28^th April I refused to make an order for the provision of information on an ex parte basis, but considered the case as supported by evidence and explained by Mr. Anderson QC on behalf of Mr. Delaney to be sufficiently strong to join Mr. Boqian Du as fifth Defendant and to warrant the grant of an injunction against the Claimants and Mr. Boqian Du, as fifth Defendant, to restrain disposal of or dealing with the property at 37 Witnell Road and the shares in Fu Kang, and/or the proceeds thereof, before a return date fixed for 4^th May, on which date of course Mrs. Chen's application would also be heard. That order was sealed in final form at around 6.30pm that day and was served as soon as practicable thereafter that evening.
28. On the following day, the first and second Defendants and their two daughters were killed at their home, 10 Pioneer Close in Northampton, and the second Claimant, Mr. An Xiang Du, disappeared after going to work and later travelling by train and bus to a destination near to the first and second Defendants' home.
29. On 3^rd May, in compliance with an undertaking given on behalf of Mr. Delaney on 24^th April, Mr. Delaney's legal representatives prepared an amended application notice seeking the joinder of Mr. Boqian Du. At the return date hearing on 4^th May, Mr. Uddin appeared for the first Claimant and for Mr. Boqian Du, having been consulted to advise at some point over the course of the period from the evening of the 28^th April through to 3^rd May. After hearing argument from both Mr. Anderson QC for Mr. Delaney and Mr. Uddin for the first Claimant and for Mr. Boqian Du, and accepting that Mr. Uddin was not then in a position to argue fully against the continuation of the injunction or to advance Mrs. Chen's application issued on 28^th April, I continued the substantive provisions of the injunction order made on 28^th April and, subject thereto, adjourned the application against An Xiang Du. I also adjourned the hearing of Mrs. Chen's application to the 13^th of June 2011 and ordered on usual terms the provision of information by Mrs. Chen and by Mr. Boqian Du concerning their dealings with 37 Witnell Road and the Fu Kang shares and any proceeds of sale. I gave permission for Mrs. Chen and Mr. Boqian Du to apply to this Court on 11^th May, yesterday, to discharge or to vary that order, thereby allowing Mr. Uddin time to take and digest full instructions from his clients. I also reserved costs.
30. Mr. Uddin did obtain instructions to make an application for the discharge or variation of the order made on 4^th May, and did so yesterday. Mr. Uddin makes a number of legal, factual and practical submissions, and in so doing relies upon witness statements of Mrs. Chen and Mr. Boqian Du (both dated on 10^th May).
31. By her evidence, Mrs. Chen confirms or says that on 2^nd February 2010 she and her husband Mr. An Xiang Du transferred their home to their son Mr. Boqian Du who is their only child as a gift for no consideration. She acknowledges that on 14^th April of this year Mr. Boqian Du sold the property to a third party, whom she does not identify, and she acknowledges that she and her husband Mr. An Xiang Du gave their son Mr. Boqian Du, the fifth Defendant, 84 of the 100 shares in Fu Kang that they owned and that he was appointed as the director in Mrs. Chen's stead on 6^th January 2010, and that this gift and appointment were reversed in the following month, on 25^th February 2010. Mrs. Chen says that all of the shares in Fu Kang were sold to Mr. Ming Zhao on 9^th April of this year for £100.
32. In his evidence, Mr. Boqian Du confirms and exhibits documents to corroborate the matters as stated by his mother, including in his exhibits a completion statement apparently indicating that the proceeds of sale of 37 Witnell Road after legal costs were in the order of £99,500. In addition, Mr. Boqian Du says that until a case is pleaded against him by Mr. Delaney his, that is Mr. Boqian Du's, continued involvement in the proceedings breaches his rights under Article 6 and Article 8 of the European Convention on Human Rights. He further says that, "What I do with the money is a matter for me and I cannot be the subject of a draconian injunction like this without Mr. Delaney establishing a case in law". Mr. Boqian Du also says that he has been advised that the Civil Procedure Rules (Rule 19.4) must be complied with and that he does not become a party until an amended claim form has been served upon him.
33. As to the law, Mr. Uddin has submitted that (1) the application for an injunction is an abuse of process, and (2) alternatively, if that is not made out, that as a matter of discretion factors such as delay, the pursuit of alternative remedies (that is the third-party debt order) and the factual position at the time of the making of the injunction all militate against the making of an order or would render it nugatory or pointless.
34. As I understand it, the abuse of process argument has the following central strands:

i) before any freezing injunction is granted there must be a cause of action, the subject of existing or imminent proceedings, see Fourie v. Le Roux and Others [2007] UKHL 1;

ii) where an enjoined person is a non-party (as in the case of Mr. Boqian Du) this is all the more so and any such application must be refused unless and until CPR 19.4 has been complied with, which means that amended particulars of claims, setting out the case against the party to be added, must be available. As Mr. Uddin pithily put it, "no case can exist in the air, it must be on paper";

iii) this means that or put another way Article 6, which provides for the right to a fair trial, is engaged and defied where there is no pleaded case so that the fifth Defendant does not know what he is facing;

iv) both the property and the shares were disposed of to third parties for appropriate consideration before there was any indication of recourse being likely to be sought against these assets so there is nothing for an injunction to bite on and it is pointless to continue the injunction;

v) this means that, or put another way, Article 8, which provides for the right to respect for private and family life and the home, is engaged by an order which seeks to look into or interfere with transactions involving private property; and,

vi) finally, the application is unnecessary and inappropriate, because the fourth Defendant has elected to recover his debt by means of a third-party debt order and this injunction is a form of intentional harassment by Mr. Delaney.

35. I hope that that accurately summarises Mr. Uddin's submissions on the abuse point. The discretion-based alternative or fall-back argument relies again on these points, but adds additionally delay and American Cyanamid principles; that is a reference to testing whether there is a serious question to be tried, whether damages are an adequate remedy, and where the balance of convenience lies. Delay was initially argued on the basis that the application, if brought at all, should have been brought in the wake of HHJ Purle QC's order in January 2010 and therefore there was delay of more than a year. However, in fairness to Mr. Uddin, when making that argument he was unaware of the order that had been made by Rimer LJ, that I have referred to already, by which a stay was imposed. Once made aware of that order, Mr Uddin readily acknowledged that the clock for any delay did not really start until mid-December 2010. In my judgment, the course taken by the representatives of Mr. Delaney by writing in February 2011 and issuing in March 2011 cannot properly be criticised as delay. It might of course be a very different matter had the clock started more than a year earlier.
36. Turning to the other points and approaching them with both the abuse of process and exercise of discretion arguments in mind:
37. First of all, Fourie v. Le Roux, this was a case where, on the first return date, a freezing injunction was discharged by the judge because no proceedings for relief had been commenced or formulated and, so the judge held, the Applicant had no intention of issuing proceedings immediately or in the imminent future. The Court of Appeal upheld this decision, stating that the jurisdiction to make an interim order depends on its activation by the commencement of substantive proceedings or an undertaking so to do. In the House of Lords, their Lordships held that a court has jurisdiction in the strict sense to grant an injunction where it has in personam jurisdiction over the person against whom the order is sought, and that in general a freezing injunction would not properly be made on an application without notice in the absence of any formulation of the case for substantive relief which the Applicant intends to make.
38. There can be no doubt in this case but that both Mrs. Chen and Mr. Boqian Du are personally subject to the jurisdiction of the courts of England and Wales and so in the strict sense the jurisdiction exists.
39. It is important to remember that Fourie concerned an injunction sought and granted on an ex parte basis before the commencement of any proceedings at all. In this case, before the application was heard by me on 28^th of April of this year, there had been: (1) a fully contested and finally determined trial between the Claimants and the first and second Defendants about Herb Magic, and (2) fully contested and finally determined proceedings commenced by the Claimants against the first and second Defendants and Mr. Delaney who had been made a party to the action on the Claimants' application for determination of an issue (was the transfer of 10 Pioneer Close a transaction at an undervalue?).
40. The Claimants' transaction at an undervalue application had not been the subject of any pleading by the Claimants but had been determined by reference to the application notice which simply sought an order that the transfer be set aside and the proceeds frozen in the meantime.
41. The position by the 28^th April 2011 was that the Claimants had lost the application and were in breach of court orders for payments on account of costs, all due for payment by 14^th December 2010 at the latest.
42. From Mr. Delaney's standpoint, he was confronted by conduct on the part of the Claimants and Mr. Boqian Du which mirrored the wrongdoing they had accused him of being involved in. It appeared to him that they were seeking to put assets beyond his reach so as to defeat the costs order in his favour, which is in two parts: an overdue debt of more than £30,000 together with interest and an as yet unascertained debt of up to a further £58,000.
43. The form of the application and freezing order being sought by Mr. Delaney is not that most commonly encountered (one made in advance of or at an early stage of the proceedings), rather it is the less common but still well established form (one sought after and in aid of a judgment where a non-party's conduct or involvement is a material factor).
44. The general practice is to join that non-party as a defendant. This is for a number of reasons: some administrative, such as enabling the Court to ensure that orders are communicated to that person, and some procedural or substantive, such as to ensure that the determination of the issue concerning that person is binding upon that person and that that person is properly protected in the meantime by both a cross-undertaking in damages and in respect of costs.
45. Thus, one important aspect of the freezing order (formerly Mareva) jurisdiction is its availability to protect the due administration of justice, including against non-parties as a form of ancillary relief.
46. This is the basis upon which Mr. Delaney's application was made. Mr. Delaney was and is concerned that Mr. Boqian Du and possibly others are involved in sheltering Mrs. Chen's and Mr. An Xiang Du's assets in an attempt to put them beyond Mr. Delaney's and the Court's reach. Mr. Delaney's witness statement filed in support of his application to which I shall refer in more detail in a moment makes that clear; and, in my judgment, it must have been clear to the Claimants and to Mr. Boqian Du.
47. Mr. Delaney was and is also conscious of the fact that he was subject to the same suspicion and was put to considerable trouble and expense to validate his transaction with the first and second Defendants, and he wished and wishes to avoid escalating matters as between himself and the Claimants unnecessarily and to avoid incurring costs unnecessarily.
48. For those reasons, Mr. Delaney's advisors first sought information voluntarily from the Claimants and from Mr. Boqian Du by correspondence and now seek an order for the provision of information about recent dealings with 37 Witnell Road and Fu Kang shares and a freezing injunction limited in value to £100,000.
49. The making of such orders in appropriate circumstances is a well-established aspect of the freezing order jurisdiction. See, for example, Mercantile Group Europe AG v. Aiyela and Others [1994] QB 366, a decision of the Court of Appeal comprising the late Lord Bingham then as Sir Thomas Bingham MR, and Steyn and Hoffmann LJJ both of whom later became judicial members of the House of Lords. Their decision was that:

i) the involvement of a third party in a transaction in respect of which discovery is sought is sufficient to found the jurisdiction to make an order for discovery, provided there is prima facie evidence of involvement and it is just and equitable so to order; and,

ii) where the Applicant is a judgment debtor the right to an interim injunction is incidental to and dependent upon enforcement of that substantive right.

50. The submission that CPR 19.4 is invoked in such a way as to require the preparation and availability of at least a draft amended claim form or draft amended particulars of claim, setting out the case against the party to be joined is, in my judgment, misconceived. At this stage of the proceedings, what is required is an intention to apply to join the non-party so as to expose the Applicant to a risk in costs and any cross-undertaking in damages, and an explanation of the reason for seeking to join the non-party and, coupled with that, a proximate deadline for the formulation and issue of any application.
51. For Mr. Delaney, Mr. Anderson QC formally accepted and accepts both the risk in costs and the exposure to an inquiry as to damages caused by an injunction, if later set aside or found to have been wrongly granted. In addition, he accepts that very shortly after receipt of information Mr. Delaney must make his mind up as to whether or not he wishes to proceed against the Claimants and Mr. Boqian Du and possibly others and, if so, on what basis. In addition, Mr. Delaney's reasoning for joining Mr. Boqian Du and seeking injunctions against and information from Mrs. Chen and Mr. Boqian Du are based on the evidence and analysis that they have submitted, as well as of course that of Mr. Delaney, which includes:

i) his stated belief that for no apparent reason and at a time coinciding with their exposure to a significant increase in costs the Claimants transferred their home. This was to their adult son, who lives and works in London, who in turn appears to have sold it on to another person for the very same price that the Claimants had paid almost ten years previously. Mr Delaney's evidence also observes that the subsequent owners have permitted the Claimants to continue living there and carrying on a business (Fu Kang), of which Mrs. Chen remains an officer, from that address; and,

ii) again at a telling time in the proceedings, Fu Kang, the company owned and controlled by the Claimants, was: (1) passed to their adult son Mr. Boqian Du; (2) passed back; and (3) sold for a nominal sum to a person who is said to be a resident of China; but, nevertheless, the first Claimant, Mrs. Chen, remains an officer of the company and the company's address remains the property which the Claimants or at least Mrs. Chen continue to occupy as their home.

52. Unsurprisingly, Mr. Anderson QC says that these circumstances are out of the ordinary and cry out for explanation, but none has been given. Mr. Anderson QC also submits that Mr Delaney's solicitors had provided an opportunity for explanation to be given in correspondence without any recourse or resort to litigation, and that the Claimants have simply refused to answers questions reasonably put.
53. Thus, this is not a case hanging in the air. Mr. Delaney's concerns and potential claim are apparent from the evidence already filed and from the submissions and clarification given by Mr. Anderson QC. That the case to be met is understood both by Mrs. Chen and Mr. Boqian Du is, in my judgment, apparent from the evidence which they themselves have prepared and filed on 10^th of May of this year.
54. The third point raised by Mr. Uddin is the engagement of and non-compliance with Article 6, the right to a fair trial. Both Claimants and Mr. Boqian Du knew what they were facing when the order made on 28^th April was served and again at the hearing on the 4^th May of this year. On any fair reading of the February 2011 correspondence from the Mr Delaney's solicitors, his concerns were apparent. Further, in the light of the Claimants' own challenge to the fourth Defendant's purchase of the first and second Defendant's home at 10 Pioneer Close, Northampton, any submission that the Claimants or Mr. Boqian Du (the fifth Defendant) did not know what the fourth Defendant Mr. Delaney was driving at would be unrealistic.
55. The fourth point, disposal of the Claimants' home and Fu Kang shares before any indication was given of recourse being had to them: for Mr. Delaney, Mr. Anderson QC does not accept that either transaction or series of transactions is genuine and permanent. It is for that reason that information is sought and continuation of the injunction urged upon me. True it is that the Court will not act or make an order in vain, but there is a world of difference between declining to make an order where the full facts are apparent and discharging a freezing injunction because the enjoined party asserts that the order is pointless. That may turn out to be so; but, provided:

i) a sufficiently cogent case is set out for the grant of an injunction and order for information,

ii) any loss or damage to the enjoined parties compensatable in money and covered by a satisfactory cross-undertaking in damages and acceptance of the risk in costs,

iii) there are no factors of significance pointing against the grant of a freezing order, i.e., no injustice or inequity, and

iv) any necessary safeguards are incorporated as conditions of the order,

the proper exercise of the discretion is, in my judgment, to grant the order. Once proper information has been provided, it may be appropriate to reconsider and vary or discharge that freezing order.

56. The fifth point raised by Mr. Uddin is that of Article 8 and, as he submits, the engagement and violation of the right to respect for private and family life and the home. In my judgment, neither the information sought nor a freezing order of the sort granted violate or undermine the Article 8 right where, as here, the circumstances appear to have a cogent connection in both time and potential purpose to matters before the Court.
57. Sixthly, as the final point, Mr. Uddin raises the submission that an application and injunction or order for information are unnecessary and inappropriate given the third-party debt order. On the information presently available, it is not clear what debt is outstanding from the first and second Defendants or their estates to the Claimant. In any event, that debt falls materially short of the costs claimed by Mr. Delaney and it has long been a feature of Mareva or freezing injunction relief that provision may be included for costs to be incurred. That being so, it is properly within the jurisdiction to enjoin dissipation or sheltering of assets to frustrate orders for costs that have been incurred. As was said by Lord Bingham in Fourie (at paragraph 2) in a passage cited to me by Mr. Uddin: "Freezing orders are not granted to give advance security for a claim, although it is acknowledged that they may have that effect".
58. The characterisation of this injunction as harassment, causing additional burden and stress to Mrs. Chen and to Mr. Boqian Du, which is how Mrs. Chen sees the order (as appears from paragraph 6 of her witness statement) is regrettable but misconceived.
59. In relation to the property transfer, Mr. Anderson QC submits that it is a realistic concern that Xinyue Yi, the transferee, is a collaborator with the Claimants and/or Mr. Boqian Du and that the Claimants retain a beneficial interest of value in their home. On 4^th May, Mr. Anderson made clear that the fourth Defendant would not seek to preclude registration of Ms. Yi as the proprietor, but reserved Mr. Delaney's position in relation to any application that might nevertheless be made. Continued occupation by Mrs. Chen, submits Mr. Anderson QC, points to a substantial likelihood of a continuing interest, particularly given the refusal to explain any circumstances at all. In addition, Mr. Anderson QC submits that any proceeds of sale in the hands of Mrs. Chen or her son Mr. Boqian Du as from 28^th April require protection. Mr. Anderson QC also submits that the share and officer dealings in respect of Fu Kang are extraordinary and point to the realistic prospect that Mr Zhao is sheltering an asset of some value for the Claimants. On the information presently available, I accept these submissions (but of course make no finding of fact at this stage).
60. There is one point that Mr. Uddin made very forcefully and entirely appropriately. That is that the grant of a freezing injunction is not and is not to be allowed to become an end in itself. That is of course correct and any such injunction would be an abuse of process. Mr. Anderson QC did not submit to the contrary. This point may be properly addressed by requiring the issue and service and filing of an application notice on at least the first Claimant, Mrs. Chen, and the fifth Defendant, Mr. Boqian Du, stating any challenge to be made to the property or share transactions in question or any relief sought in respect of the proceeds of sale thereof promptly after the provision of witness statements, providing proper details in answer to the questions as required by paragraph 4 of the order made on 4^th May. Those answers are required by 25^th of May.
61. On the assumption that answers are properly given, any application to be made by Mr. Delaney should be formulated, issued, served and filed by 4.00pm on 2^nd June. That will leave more than one full week before the injunction return date.
62. Looking again at the orders made on 28^th April and 4^th May and bearing in mind that Mr. Anderson has not asked in terms for any freezing relief in respect of current costs being incurred by Mr. Delaney, and bearing in mind also that Mr. Delaney's total bill of costs in respect of which the Claimants have been adjudged liable is said to be approximately £88,000, it would be right to reduce the sum referred to at paragraph 8(a) of the order of 28^th April to £80,000 and to make clear that net sale monies (referred to at paragraphs 6(a) and 6(b) of that order) should also be limited to an aggregate sum of £80,000.
63. I should add that the Court may also of its own initiative further reduce the maximum sum of money enjoined after the hearing concerning the third party debt final order proceedings on 20^th May.
64. Subject to those provisos, I reject the application made by Mr. Uddin on behalf of the Claimant and the fifth Defendant.
_____________________________

Note 1   £31,076.34 in total    [Back]