LTE Scientific Ltd. v Thomas & Anor [2005] EWCA Civ 1177

Case No A2/2005/1558[2005] EWCA Civ 1177
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
Mr Justice Davis
Venue Royal Courts of JusticeDate Wednesday, 27 July 2005
Strand
London, WC2
B E F O R E:
LORD JUSTICE AULD
LORD JUSTICE TUCKEY
Between
LTE SCIENTIFIC LTDAppellant-v-
Between
THOMAS and AnotherRespondent
(Computer-Aided Transcript of the Stenograph Notes ofSmith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
MISS SONIA NOLTEN (instructed by Gateley Wareing ) appeared for Appellant for The Respondent was not represented and did not attend
J U D G M E N T

LORD JUSTICE AULD:

[1]This is an application by LTE Scientific Limited for permission to appeal the refusal by Mr Justice Davis to grant, on an application without notice, a freezing order because, in his view, there was no urgency and the application could and should have been made on notice.[2]The applicant company contends that, in the light of the history in the proceedings preceding this ex parte application, the judge wrongly concluded that there was no sufficient urgency to justify it. On the contrary, it maintains that the history demonstrates extreme urgency because the respondent, Mr Thomas, in particular is very likely to take steps to dissipate his assets if he is given notice.[3]The background to and history of proceedings preceding the application to the judge may be stated shortly. In 2001 the respondents, Mr and Mrs Thomas, sold the goodwill and assets of their company, Autoclave Control & Engineering Limited, which dealt with sterilisation equipment to the applicant company which had a similar business. Following that sale, Mr Thomas took employment with the applicant as its technical director and remained so employed until March 2004. Mrs Roberts who had previously worked for the applicant company - as a sales administrator - continued to do so on a full-time and then a part-time basis until shortly after Mr Thomas ceased employment with it.[4]Mr Thomas's contract of employment with the company included a number of restrictive covenants, one of which restrained him for a period of 12 months from his leaving the company in March 2004 from involvement in any business in competition with it. The applicant company claims in these proceedings that he breached that restrictive covenant by undertaking work on a consultant basis with a competitor and that, before leaving his employment with the company, he had attempted to solicit some of its custom for another competitor.[5]In September 2004 the applicant company applied without notice for and was granted a disclosure order against Mr Thomas. In contempt proceedings subsequently instituted by the company, Mr Justice Richards found him to have breached that order for refusing to deliver up a computer, the subject of the order, and having deliberately deleted files on its hard drive. He also found that he had aggravated the contempt by attempting to evade service. It was a very serious series of contempts. In the meantime, in October 2004, the applicant company issued proceedings in the High Court claiming injunctive relief, delivery up of confidential information and an account and damages for breaches of restrictive covenant and breaches of contract and a duty of confidentiality. In November 2004 Mr and Mrs Thomas served a defence denying any such breaches.[6]The main battle lines in this matter were drawn up some eight months ago. The matter giving rise to this application without notice for a freezing order, the subject of the application for permission to appeal today, was the applicant company's discovery, as recently as the end of June 2005, that Mr and Mrs Thomas had put their home on the market for sale. The applicant company enquired of them why they were selling, and were not encouraged seemingly by the reply, which was the breakdown of their marriage. The applicant company's solicitors then - nearly two to three weeks later - by letter of 19 July sought an undertaking from Mr and Mrs Thomas not to dispose of the property or deal with it in a way so as to diminish the value of their assets. In the letter the solicitors stated that, in the event of Mr Thomas failing to supply such an undertaking, they had instructions to apply immediately for a freezing order. Mr and Mrs Roberts have not so far replied.[7]On 21 July the judge refused to make a freezing order because he did not regard the matter as sufficiently urgent for the applicant company to proceed without notice to Mr or Mrs Thomas. He said that if they wanted a freezing order they would have to apply on notice. He prefaced his short judgment by saying that, on the pleadings, the applicant company had a good arguable case and that its concern about Mr Thomas's previous contempts and the rejection by Mr Justice Richards of his evidence in the contempt proceedings was justified. However the Judge added:
" ..... the thought of a freezing injunction only occurred to the claimant when it became aware that his home was for sale at the end of June. The first and second defendants were put on notice. An undertaking was sought, therefore notification of the claimant's concerns was given. It is fanciful to think that three days' notice could not be given. The first defendant has indicated that he put the house on the market due to the breakdown of his marriage. There was nothing to indicate that the house could be sold within 2 days, as no offers have yet been received. Miss Nolten alludes darkly to the possibility of a trust being set up or a charge being executed. If that is what the first defendant intended to do, then he would have done it some time ago."

The Judge went on to remark after that passage:

"It is generally a fundamental requirement that the respondent to an application should be heard. Ex parte applications are an exception to that rule. However the reasons for granting an ex parte hearing do not exist here and so I will not grant an ex parte injunction."
[8]Miss Sonia Nolten, on behalf of the applicant company, maintains this morning, principally by reference to Mr Thomas's conduct giving rise to the contempt proceedings some six or more months ago, that he would be likely to respond to a three-day notice of this application by putting his assets beyond reach of any order that might be made. She suggests that his and his wife's principal asset - their home - could be disposed of within a matter of days, again suggesting by way of a deed of trust or legal charge. Hence she maintains that there is a need to protect the applicant company from a risk of dissipation by them and that it is a matter of urgency to deal with that risk. She suggests that the Judge's reasoning was inconsistent in his finding that there was a real risk of dissipation but that yet it was not a real urgency. That, in my view, is to mis-characterise the judge's succinct and well expressed reasoning. His view clearly was that it may well have been a matter of some urgency, but not such as to justify, on the facts, an application for a freezing order without notice.[9]Such an order for interim relief may only be granted without notice in a case of exceptional urgency. In the context of a freezing order application, that is when there is a real risk of immediate dissipation if the intention of the applicant were made known to the proposed subject of the order, making it a matter of extreme urgency for the applicant to proceed in that way.[10]I agree with the Judge that the facts of this case do not meet the high threshold of urgency to justify the grant of a freezing order without first allowing Mr and/or Mrs Thomas to be heard. As the judge said, if Mr Roberts had been minded to respond in the way suggested by the applicants, notwithstanding the bruising response to his acts of contempt some months ago, he has had plenty of time in which to do so. The applicant company did not seemingly consider that his attitude then and since warranted an application for a freezing order, with or without notice, until prompted by learning towards the end of June that he and his wife had put their house up for sale.[11]As the Judge observed, the applicant company has put Mr and Mrs Thomas on notice of its concern, first, by asking why and receiving at least a plausible explanation. The company then put them on notice again, some three weeks after their discovery of the marketing of the house, by solicitors' letter threatening an application for a freezing order in the absence of an undertaking. Why, in the circumstances, the company, having alerted Mr and Mrs Thomas to its concerns and intention, should now consider it necessary to test those concerns by an application without notice is difficult to understand.[12]Apparently Mr and Mrs Thomas have not yet had an offer for the house. They clearly could not dispose of it in any conventional way within the three-day period that it would require to bring the matter before the court on notice. As the Judge said, if Mr Thomas had had the ingenuity and the will to dispose of the property in some such unconventional way as suggested by Miss Nolten, he has already had plenty of time and notice in which to do so.[13]Accordingly I agree with the Judge that this is not a case of exceptional urgency requiring departure from the general rule that such an application should be made on notice. I would therefore refuse this application.

LORD JUSTICE TUCKEY: So do I.

Order

Application refused