Canada Inc v Sovereign Financial Holdings Ltd & others

Background

The Claimant had a judgment debt against the Respondents for their failures to pay sums owed to the Claimant under a settlement agreement. The Respondents had breached their obligations and had also breached assurances that they would pay. On 4 July 2024, the Claimant applied without notice for a freezing order having discovered evidence suggesting that the Respondents’ London property was in the process of being sold. A worldwide freezing order was granted, with the usual asset disclosure orders made against the Respondents. However, after the without notice freezing order was granted, evidence came to light indicating that the sale of the property was not an act of dissipation in response to the proceedings or judgment debt, but rather a sale initiated by a mortgagee bank. Accordingly, a plank of the Claimant’s original case on risk of dissipation had fallen away by the return date. However, the Respondents had failed to comply with the asset disclosure orders made against them.

The Judgment

The Judgment provides a useful distillation of how to approach the question of risk of dissipation, identifying at paragraphs 24-31 a number of factors to be considered. The Judgment also provides the following valuable analysis (paragraphs 32-34):

“One possible way of thinking about these various factors, many as they are, not as water-tight legal categories but as a way of organising analysis, in terms of means and opportunity, motive and propensity. Matters such as the existence of sophisticated structures go as such mostly to means and opportunity. That is undoubtedly relevant but in itself insufficient to establish a risk of dissipation. It becomes relevant only in conjunction with other factors.

As to motive, most litigants have in the abstract a motive to dissipate, but the significance to be attached to that may vary depending on the particular litigant’s proven track record in relation to commercial obligations and its dealings with the court. Motive is the more telling, and begins to crossover into the next category I describe, where a litigant has shown that he or she is in fact intent on avoiding established or undoubted obligations.

What is likely to be most telling is any evidence which points to some actual plan or propensity to dissipate. The clearest case would be a known plan to do something that would amount to dissipation, an asset placed on the market or instructions given to a bank or trustee. Other quite common cases are those in which there is an established track record either of attempting to dissipate in a particular case or of doing so in other similar cases. The least telling inference is that which really amounts to little more than a suggestion in general terms that the respondent is the kind of person who might be inclined to dissipate. That can sometimes be an invitation to draw unacceptable stereotypes about particular types of defendant and sometimes a way of giving unfocused allegations of dishonesty a voice that they do not rationally deserve. It is important, in my judgment, to focus on the particular case and on the concrete facts of that case.”

The Court also observed that it is not an “indispensable element” for an applicant to identify specific transfers that amount to dissipation, since “[r]isk is inherently a forward-looking concept” (paragraph 48).

The Court concluded that the Claimant had established a real risk of dissipation, having regard in particular to evidence of the Respondents’ evasive conduct which – more than showing means or opportunity – was evidence of an intention to make enforcement more difficult (paragraphs 37, 39). In light of this, the Court was permitted to and did draw adverse inferences from the Respondents’ failure to provide asset disclosure. See paragraphs 43-44.

Luka Krsljanin acted for the successful Claimant/Applicant both at the without notice hearing and at the return date.

A copy of the judgment is here.