Judgments - Fourie (Appellant) v. Le Roux and others (Respondents)

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    22.  Park J made the freezing order, subject to the usual cross-undertaking in damages, over 23 July 2004. When the matter came back before the court it was dealt with by Judge Norris QC, sitting as an additional judge of the Chancery Division. He renewed the freezing order for a further four months or thereabouts. Counsel for the respondents told him that an application to discharge the freezing order was in the pipeline. No additional elucidation of the details or nature of the eventual proceedings for substantive relief were proffered by counsel for Mr Fourie.

    23.  Mr Le Roux's and Fintrade's discharge application was dealt with by deputy judge Jarvis QC in the morning of 30 September 2004. The freezing order made by Park J was discharged. Mr Fourie and his lawyers immediately set about formulating a claim for substantive relief that could support a freezing order. They went back before the deputy judge in the afternoon of 30 September, armed with a proposed claim form, and renewed the application for a freezing order. The deputy judge, on their undertaking to issue and serve particulars of claim within 7 days, made a freezing order against Mr Le Roux and Fintrade in the same terms as the order he had discharged in the morning save that the protection was reduced to a sum of £1million for each respondent. Counsel for the respondents, who had succeeded in obtaining the discharge of the first freezing order, were present during the afternoon hearing but took no part. This second freezing order and, later, a third freezing order were the subject of several subsequent applications relating, mainly, to the amount of the protection. These applications culminated in a hearing before the Court of Appeal on the same occasion as that at which Mr Fourie's appeal against the discharge of the first freezing order was dealt with. The Court of Appeal upheld the third freezing order with a limit of £900,000. This freezing order remains in place and is not at the moment under challenge by either side.

    24.  In the appeal now before the House Mr Fourie does not seek the re-instatement of the first freezing order, or any increase in the amount of the protection above the £900,000 fixed by the Court of Appeal for the third and current freezing order. Instead he seeks a declaration that Park J did have power and jurisdiction to grant the first freezing order and an order setting aside the determination to the contrary by deputy judge Jarvis QC and the Court of Appeal. Since there is no challenge to the third freezing order and Mr Fourie does not ask for an increase of the £900,000, the question arises as to why he is seeking to invalidate the discharge of the first freezing order. The answer must be that, if he succeeds, the indemnity costs order must go and, too, the directions for the enforcement of the cross-undertaking in damages must be set aside. These last two desiderata (from Mr Fourie's point of view) are, presumably, the reason why this appeal is being prosecuted. The challenge to the discharge of the first freezing order is no more than a vehicle for their attainment.

The first issue

    25.  Both the deputy judge and the Vice-Chancellor referred to the issue as one of "jurisdiction". But jurisdiction is a word of some ambiguity. The ambiguity was referred to by Pickford LJ in Guaranty Trust Co of New York v Hannay & Co [1915] 2 KB 536 at 563. He said:

    "The first and, in my opinion, the only really correct sense of the expression that the Court has no jurisdiction is that it has no power to deal with and decide the dispute as to the subject matter before it, no matter in what form or by whom it is raised. But there is another sense in which it is often used, i.e., that, although the Court has power to decide the question it will not according to its settled practice do so except in a certain way and under certain circumstances."

The same point was made by Diplock LJ in Garthwaite v Garthwaite [1964] P.356 at 387, citing with approval Pickford LJ's remarks (see also Edge v Pensions Ombudsman [2000] Ch.602 at 642/3 and Tehrani v Secretary of State for the Home Department [2006] UKHL 47; [2006] 3 WLR 699, 718-719, paras.66 to 68 to the same effect). The references to jurisdiction made both by the Vice-Chancellor and by the deputy judge (see paras.3 and 4 above) read as though they had in mind jurisdiction in the strict sense. If they did, then I think they were wrong. It seems to me clear that Park J had jurisdiction, in the strict sense, to grant an injunction against Mr Le Roux and Fintrade. Both were within the territorial jurisdiction of the court at the time the freezing order was made. Both were, shortly after the freezing order had been made, served with an originating summons in which relief in the form of the freezing order was sought. There is no challenge to the propriety or the efficacy of the service on them. The power of a judge sitting in the High Court to grant an injunction against a party to proceedings properly served is confirmed by, but does not derive from, section 37 of the Supreme Court Act 1981 and its statutory predecessors. It derives from the pre Judicature Act 1873 powers of the Chancery courts, and other courts, to grant injunctions (see s.16 of the 1873 Act and s.19(2)(b) of the 1981 Act). The issue is, in my opinion, not whether Park J had jurisdiction, in the strict sense, to make the freezing order but whether it was proper, in the circumstances as they stood at the time he made the order, for him to make it. This question does not in the least involve a review of the area of discretion available to any judge who is asked to grant injunctive relief. It involves an examination of the restrictions and limitations which have been placed by a combination of judicial precedent and rules of court on the circumstances in which the injunctive relief in question can properly be granted. The various matters taken into account by the deputy judge and the Vice-Chancellor respectively in holding that Park J had no jurisdiction to make the freezing order were really, in my respectful opinion, their reasons for concluding that, in the circumstances as they stood when the matter was before him, it had not been proper for Park J to have made the order. That, in my opinion, is the real issue.

    26.  The line of authority on the power of the court to grant an injunction under section 37 of the 1981 Act, starting from The Siskina [1979] AC 210 and ending with Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334, to which your Lordships have been referred by both sides on this appeal, needs, in my opinion, to be examined bearing in mind the ambiguity attendant upon references to the jurisdiction of the court to which Pickford LJ had referred. The Siskina is a very well known case and it is unnecessary for me to describe in any detail how the issue about the court's power to grant an injunction arose. Put briefly, a Mareva type injunction was sought against a Panamanian ship-owning company to restrain it from disposing of a fund, consisting of insurance proceeds, in England. The claimant for the injunction was suing the company in a Cyprus court for damages and believed the company to have no other assets from which to meet the hoped-for damages award than the fund in England. No proprietary claim was, or could have been, made by the claimant to the fund. The issue in the case was whether the "long-arm" jurisdiction of the court under R.S.C. Order 11 rule 1 could be invoked. If it could not be invoked, the proceedings claiming the injunction could not properly have been served on the Panamanian company. The claimant relied on sub-rule (i) which permitted the service of proceedings on a defendant out of the jurisdiction if a claim were made for "an injunction .… ordering the defendant to do or refrain from doing anything within the jurisdiction …". The leading judgment, when the case came to this House, was given by Lord Diplock. He referred to section 45(1) of the Judicature Act 1925 (the predecessor of section 37(1) of the 1981 Act) and said at 254:

    "That sub-section, speaking as it does of interlocutory orders, presupposes the existence of an action, actual or potential, claiming substantive relief which the High Court has jurisdiction to grant and to which the interlocutory orders referred to are but ancillary. This factor has been present in all previous cases in which Mareva injunctions have been granted …. it is not present in this."

Lord Diplock went on (at 256) to say of Order 11 rule 1(i) that the words used in the sub-rule were "terms of legal art" and that the reference to "an injunction" "presupposes the existence of a cause of action on which to found the 'action'". He continued

    "A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction"

and concluded that

    "To come within the sub-rule the injunction sought in the action must be part of the substantive relief to which the plaintiff's cause of action entitles him; and the thing that it is sought to restrain the foreign defendant from doing in England must amount to an invasion of some legal or equitable right belonging to the plaintiff in this country and enforceable here by a final judgment for an injunction."

The effect of this, concurred in by the other members of the Appellate Committee, was that the case could not be brought with Order 11 rule 1(i) and service of the writ on the Panamanian company had to be set aside. At which point there was, unarguably, an absence of any jurisdiction, in the strict sense, to grant any injunction against the company.

    27.  Castanho v Brown & Root (UK) Ltd [1981] AC 557 and British Airways Board v Laker Airways Ltd [1985] AC 58 both involved claims for anti-suit injunctions. In Castanho Lord Scarman referred to what Lord Diplock had said in The Siskina at 256 and commented at 573:

    "No doubt, in practice, most cases fall within one or other of these two classes. But the width and flexibility of equity are not to be undermined by categorisation. Caution in the exercise of the jurisdiction is certainly needed: but the way in which the judges have expressed themselves from 1821 onwards amply supports the view for which the defendants contend that the injunction can be granted against a party properly before the Court, where it is appropriate to avoid injustice."

His remarks were concurred in by the other members of the Appellate Committee, who included Lord Diplock. In British Airways Board v Laker Airways Ltd, where considerable reliance was placed by the unsuccessful respondents on Lord Scarman's dictum in Castanho, cited above, Lord Diplock, at 81, referred to what he had said in The Siskina at 256 but agreed that the "statement of principle in the stark terms in which [he] expressed it in The Siskina" needed to be qualified by what Lord Scarman had said in Castanho. And Lord Scarman, in the British Airways case at 95, emphasised that his remark in Castanho about an injunction being an available remedy "against a party properly before the court, where it is appropriate to avoid injustice" stated "an approach and a principle which are of general application". It is to be noted that in The Siskina the Panamanian company had not been "a party properly before the court".

    28.  In South Carolina Insurance Co. v Assurantie NV [1987] 1 AC 24, another anti-suit injunction case, Lord Brandon of Oakbrook referred to section 37 of the 1981 Act and to the three cases in this House to which I have just referred and continued at 40:

    "The effect of these authorities, so far as material to the present case, can be summarised by saying that the power of the High Court to grant injunctions is, subject to two exceptions to which I shall refer shortly, limited to two situations. Situation (1) is when one party to an action can show that the other party has either invaded, or threatens to invade, a legal or equitable right of the former for the enforcement of which the latter is amenable to the jurisdiction of the court. Situation (2) is where one party to an action has behaved, or threatens to behave, in a manner which is unconscionable."

But Lord Goff of Chieveley, while agreeing with Lord Brandon's conclusion, expressed a reservation (with which Lord Mackay of Clashfern associated himself). Lord Goff said this, at 44:

    "I am reluctant to accept the proposition that the power of the court to grant injunctions is restricted to certain exclusive categories. That power is unfettered by statute; and it is impossible for us now to foresee every circumstance in which it may be thought right to make the remedy available."

    29.  And, finally, in the Channel Tunnel case [1993] AC 334, the House rejected the proposition that an English court can never grant an interlocutory injunction where the cause of action is being litigated in arbitration proceedings abroad (see Lord Mustill at 361/362). Lord Browne-Wilkinson, at 342, said this:

    "Although the respondents have been validly served (i.e., there is jurisdiction in the court) and there is an alleged invasion of the appellants' contractual rights (i.e., there is a cause of action in English law), since the final relief (if any) will be granted by the arbitrators and not by the English court, the English court, it is said, has no power to grant the interlocutory injunction. In my judgment that submission is not well founded."

And, at 343, he concluded that

    "… the court has power to grant interlocutory relief based on a cause of action recognised by English law against a defendant duly served where such relief is ancillary to a final order whether to be granted by the English court or by some other court or abitral body."

    30.  My Lords, these authorities show, in my opinion, that, provided the court has in personam jurisdiction over the person against whom an injunction, whether interlocutory or final, is sought, the court has jurisdiction, in the strict sense, to grant it. The practice regarding the grant of injunctions, as established by judicial precedent and rules of court, has not stood still since The Siskina was decided and is unrecognisable from the practice to which Cotton LJ was referring in North London Railway Co v The Great Northern Railway Co (1883) 11 QBD 30 at 39-40 and to which Lord Diplock referred in The Siskina at 256. Mareva injunctions could not have been developed and become established if Cotton LJ's proposition still held good. In The Siskina the jurisdiction of the court over the defendant depended upon the ability of the plaintiff to obtain leave to serve the defendant out of the jurisdiction. Once the leave that had been granted had been set aside there was no jurisdictional basis on which the grant of the injunction could be sustained. On the other hand, if the leave had been upheld, or if the defendant had submitted to the jurisdiction, it would still have been open to the defendant to argue that the grant of a Mareva injunction in aid of the foreign proceedings in Cyprus was impermissible, not on strict jurisdictional grounds, but because such injunctions should not be granted otherwise than as ancillary to substantive proceedings in England. In 1977 Mareva injunctions were in their infancy and the House might well have agreed (c/f Mercedes Benz AG v Leiduck [1996] AC 284).

    31.  Whatever might have been the impact if that point had been raised in 1977 it would, today, fail. The effect of section 25 of the Civil Jurisdiction and Judgments Act 1982, as extended by the Civil Jurisdiction and Judgments Act 1982 (Interim Relief) Order 1997, is to enable the High Court "to grant interim relief" in relation to "proceedings" that have been or are about to be commenced in a foreign state, for example, South Africa. The consequence of this, in relation to the present case, is in my opinion to settle the question of jurisdiction, in its strict sense. Whether the interlocutory freezing order made by Park J was to protect the ability of Mr Fourie, or HEE, to recover money awards they might succeed in obtaining in proceedings in England, or to recover money awards they might succeed in recovering in proceedings in South Africa, there was, in my opinion, jurisdiction, in the strict sense, for the order to be made.

    32.  In paragraph 38 of his judgment in the Court of Appeal the Vice-Chancellor referred to the need for there to be an "activation of the jurisdiction [to make the freezing order] whether by the issue of substantive proceedings in England or an undertaking to do so." I would agree that, without the issue of substantive proceedings or an undertaking to do so, the propriety of the grant of an interlocutory injunction would be difficult to defend. An interlocutory injunction, like any other interim order, is intended to be of temporary duration, dependent on the institution and progress of some proceedings for substantive relief. But it is not in dispute that in suitable circumstances a freezing order may be, and often is, granted and served on the respondent before substantive proceedings have been instituted. Such an order is not a nullity. It is of immediate effect. If proceedings for substantive relief are not instituted, the freezing order may lapse in accordance with its own terms or, on an application by the respondent, may be discharged. But none of this indicates that the court had no jurisdiction to make the order. No "activation" of the jurisdiction is needed.

    33.  Whenever an interlocutory injunction is applied for, the judge, if otherwise minded to make the order, should, as a matter of good practice, pay careful attention to the substantive relief that is, or will be, sought. The interlocutory injunction in aid of the substantive relief should not place a greater burden on the respondent than is necessary. The yardstick in section 37(1) of the 1981 Act, "just and convenient", must be applied having regard to the interests not only of the claimant but also of the defendant. This is particularly so in the case of freezing orders applied for without notice. Assets of the defendant to which the claimant has no proprietary claim whatever are to be frozen so as to constitute a source from which the claimant can hope to satisfy the money judgment that, in the substantive proceedings, he hopes to obtain. The frozen assets are removed for the time being from any beneficial use by their owner, the defendant. This is a draconian remedy and the strict rules relating to full disclosure by the claimant are a recognition of the nature of the remedy and its potential for causing injustice to the defendant.

    34.  In Memory Corporation Plc v Sidhu (No.2) [2000] 1 WLR 1443 Mummery LJ referred at 1460 to the

    "… high duty to make full, fair and accurate disclosure of material information to the court and to draw the court's attention to significant factual, legal and procedural aspects of the case."

He went on to say this:

    "It is the particular duty of the advocate to see that the correct legal procedures and forms are used; ….; and that at the hearing the court's attention is drawn by him to unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be observed."

    35.  In the present case no claim for substantive relief was formulated and shown to Park J, nor for that matter to Judge Norris QC, nor to deputy judge Jarvis QC until the afternoon of 30 September 2004. I find it very difficult to visualise a case where the grant of a freezing order, made without notice, could be said to be properly made in the absence of any formulation of the case for substantive relief that the applicant for the order intended to institute. It has to be inferred that, at the time of the application to Park J, Mr Fourie's counsel were unclear whether the substantive proceedings would be proceedings in South Africa or in England and, in either case, unclear what the cause or causes of action would be. But at the least a draft claim form could have been prepared claiming an inquiry as to what Mr Le Roux and Fintrade had done with the assets they had seized under the Germiston order and for the return of those assets or damages for their conversion. It seems to me significant that, when the freezing order was discharged in the morning of 30 September 2004, an adequate claim form was produced by that afternoon.

    36.  In my opinion, in the circumstances as they stood before Park J, the protection for the defendant that ought to be associated with the grant of a without notice freezing order was absent. The protection ought to include directions about the institution of proceedings for substantive relief. Here there were none. In the circumstances a challenge to the propriety of the making of the order was entitled to succeed, and to succeed for much the same reasons as were relied on by the deputy judge and the Vice-Chancellor for their conclusion that Park J had lacked jurisdiction to make the order. I disagree with that conclusion but am in respectful agreement with them about the deficiencies in the case for the freezing order that had been laid before Park J.

    37.  I am, nonetheless, uneasy about the discharge by the deputy judge of the freezing order. It may be that he did not know when he announced his decision on the discharge application that he would, an hour or so later, be dealing with an application for a renewed freezing order fortified by a draft claim form. If he did know that, I think it would have been sensible to postpone his conclusion on the discharge application until he had heard the renewed application. It is often said that nature does nothing in vain and I think that courts of equity should follow suit. But, since the deputy judge, when he discharged the freezing order, may not have realised that he was likely in a short time to grant another, I will quell my doubts and concur in the dismissal of Mr Fourie's appeal against the discharge.

Indemnity costs

    38.  There is, in the Record, a very short Note of the deputy judge's decision to award indemnity costs against Mr Fourie. Mr Isaacs QC is recorded as having relied on three matters:

    "1.  the English claims were not thought out;

    2. non-compliance with the practice direction [concerning issue of a claim form];

    3. failure to comply with warning of Mummery LJ in the Memory case"

The Note then records the judge as saying

    "… It seems to me that when [a freezing] order is granted on a wrong basis which could have been avoided … indemnity costs"

The Vice-Chancellor, dismissing Mr Fourie's appeal, explained his decision by saying this:

    "The question is not whether I would have made the same order as Mr Jarvis did, but whether he erred in principle in the exercise of his discretion. I see no error in principle. The judge plainly had all material facts in mind and those facts justified the conclusions he reached."

    39.  My Lords, I think it needs to be understood that the difference between costs at the standard rate and costs on an indemnity basis is, according to the language of the relevant rules, not very great. According to CPR 44.5(1), where costs are assessed on the standard basis the payee can expect to recover costs "proportionately and reasonably incurred" or "proportionate and reasonable in amount"; and where costs are assessed on the indemnity basis the payee can expect to recover all his costs except those that were "unreasonably incurred" or were "unreasonable in amount". It is difficult to see much difference between the two sets of criteria, save that where an indemnity basis has been ordered the onus must lie on the payer to show any unreasonableness. The criterion of proportionality, which applies only to standard basis costs, seems to me to add very little to the reasonableness criterion. The concept of costs that were unreasonably but proportionately incurred or are unreasonable but proportionate in amount, or vice versa, is one that I find difficult to comprehend.

    40.  For my part I find it difficult to identify why the procedural deficiencies of the application for the freezing order before Park J should have warranted an indemnity costs order against the applicant. However CPR 43 and 44 are a product of Lord Woolf's civil justice reforms, one object of which was to produce greater flexibility in awards of costs. It was, I believe, contemplated that greater use would be made of the discretion to award costs on an indemnity basis than had previously been the practice. Costs awards, as with most matters of practice and procedure, are primarily the responsibility of first instance judges with the Court of Appeal available to correct obvious errors. In the present case the Court of Appeal has affirmed the deputy judge's award on the ground that no error of principle could be discerned. I do not think your Lordships should interfere. I would dismiss the appeal on this point too.

The directions regarding the cross-undertaking

    41.  There was no appeal directed to the deputy judge's directions for the immediate enforcement of Mr Fourie's cross-undertaking in damages but they seem to me so plainly wrong in principle that I do not think your Lordships should let them stand.

    42.  The cross-undertaking was expressed in these terms:

    "If the court later finds that this order has caused loss to [a] Respondent, and decides that the Respondent should be compensated for that loss, the Applicant will comply with any order the court may make."

The gravamen of Mr Fourie's complaint against Mr Le Roux and Fintrade, namely, that each had taken part in fraudulently stripping HEE of its assets, had been made clear to Park J and, later, to the deputy judge. The deputy judge knew, therefore, that there were substantial claims that Mr Fourie, or HEE, had against Mr Le Roux and Fintrade, and that the claims were at least reasonably arguable. To the extent that the Park J freezing order did no more than prevent them from disposing of or dealing with assets, or the proceeds of assets, that they had fraudulently obtained from HEE, or from dealing with a sum of money representing the amount of damages payable by them on account of the fraud, it seems to me very highly questionable whether it can be right that they should be enabled to obtain compensation for loss caused to them by being so prevented. In a case of this sort it seems to me that a decision as to what, if anything, should be paid to Mr Le Roux and Fintrade for loss caused to them by the freezing order over the period 12 July 2004 to 30 September 2004 should not be taken until the result of the litigation is known. To take the decision at the stage the deputy judge took it was, in my opinion, in the circumstances of this case, wrong in principle. I think the directions for the immediate enforcement of the cross-undertaking should be set aside.


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