Freezing orders: High Court confirms practice of including element for costs in sum frozen

Jerome Stedman

In considering an application to vary the terms of a freezing order to, amongst other things, increase the amount of the respondents’ assets to be frozen, Mr Jeremy Cousins QC (sitting as a Deputy Judge of the Chancery Division) confirmed in Thevarajah v Riordan and others that there is a well-established practice of including an element for costs when determining the sum to be frozen.

The applicant alleged that the variation was necessary to reflect costs ordered in his favour but not yet assessed, the anticipated further costs of enforcing the freezing order and the likely costs of the substantive respondents’ appeal to the Supreme Court against an order striking out their defence and counterclaim.

Following oral submissions, Mr Cousins QC invited counsel, for both the applicant and respondents, to consider the decision in Jet West Limited v Haddican [1992] 1 WLR 487.  Jet West is the authority for the proposition that a freezing order may be granted in support of an order for costs where they have been ordered in a party’s favour, but not yet assessed.

Mr Bailey, for the applicant, submitted that it had long been the practice of the High Court to permit, as a matter of principle, the inclusion of a sum in respect of future costs when determining the quantum aspect of a freezing order application.  He cited the judgment of Mr Edward Nugee QC in Charles Church Developments Plc v Cronin and others [1990] FSR 1, where he stated that: “since the object of a Mareva injunction is to ensure that if the plaintiff recovers judgment the judgment is not defeated by the defendants having removed their assets from the jurisdiction, it seems to me that there is a case for making some addition to the amounts secured in respect of costs which are likely to be recovered; but I think it should be a modest amount“.

Mr Letman, for the respondents, argued that there could be no inference in favour of the inclusion of costs, and that the rigour of pre-judgment freezing order principles (good arguable case, assets and risk of dissipation) must be applied.

Mr Cousins QC found for the applicant.  In his judgment, he stated that he could not see why it should be impermissible to include a costs element in a sum to be frozen, even where those costs are not yet incurred.  In support of this view, he noted that freezing orders are routinely made in respect of damages which have not been proven.  Addressing Mr Letman’s point on the need to apply the rigours of pre-judgment freezing order principles, Mr Cousins QC determined that as the Court of Appeal had decided in the applicant’s favour in striking out the respondents’ defence and counterclaim, he had a good arguable case.  Although the strike out order was now under appeal to the Supreme Court, the judge confirmed that the test for injunctive relief in this context was not that an unanswerable case has to be made out.  Further, he would not accept that seeking to vary the freezing order to take account of the prospective Supreme Court costs would amount to seeking to circumvent an outstanding application to that court for security of costs.

Consequently, as the judge was satisfied that the applicant had an arguable case and there was a risk that the applicant would suffer if no such provision was made, he was satisfied to include a moderate element for costs when ascertaining the sum to be frozen.

Thevarajah v Riordan and others [2015] EWHC 1949 (Ch).

The judgment in this case is available on Westlaw and Lexis.

Post By Jerome Stedman (3 Posts)

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