Stephens McBride Piercy Taylor Ltd v McBride [2014] EWHC 1231 (QB)

[2014] EWHC 1231 (QB)Case No HQ13X02635
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 16/04/2014
Before
THE HONOURABLE MRS JUSTICE SLADE DBE
Between
STEPHENS MCBRIDE PIERCY TAYLOR LIMITEDClaimant/JAMES MCBRIDEDefendant/
Jeremy Nicholson QC and Simon Goldstone (instructed by Berrymans Lace Mawer LLP) for Claimant/RespondentMichael Douglas QC and Thomas Crangle (instructed by Howell and Co.) for Defendant/ApplicantHearing Hearing date: 23 January 2014
Judgment
[1]By Notice of Application issued on 20 December 2013 Mr McBride applies to discharge a freezing injunction obtained against him by Stephens McBride Piercy Taylor Limited (‘SMPT’) without notice on 8 May 2013 and continued by consent by Order on 15 May 2013. The underlying proceedings are a subrogated claim by SMPT against Mr McBride to recover the sum of £1,537,082.34 met by their professional indemnity insurers, Royal and Sun Alliance (‘RSA’), paid to lenders who alleged they had suffered losses by making loans in reliance on valuations by Mr McBride as SMPT’s valuer which were alleged to have been negligent. SMPT claims damages against Mr McBride, as director and employee, for fraudulent and dishonest breaches of duty in providing lenders with reports which stated values for properties far in excess of their true values. It is said that by his actions Mr McBride exposed SMPT to a series of claims which it had to settle causing it to sustain very substantial losses. The total sum claimed by SMPT from Mr McBride is about £1.5 million.

The background facts

[2]SMPT is a company whose business included that of surveyors of which Mr McBride was a founder member and at all material times a shareholder, director and employee. He carried out valuations of properties for SMPT. Claims for damages for professional negligence were brought against SMPT arising out of valuations carried out by Mr McBride in the period 2003-2005. Mr McBride carried out valuations of four residential properties for Lloyds TSB (‘Lloyds’) in 2004 and 2005 and of one residential property for Royal Bank of Scotland (‘RBS’) in 2003. A Schedule was produced of the values given to those properties, 22 Stockdale Place, 29 Stockdale Place, 1 Ormsby Court, 57 High Point and 7 West Point which showed that Mr McBride’s valuations were over 80% higher than the retrospective valuations of the experts appointed by Lloyds, RBS, SMPT and their insurers, RSA. In each case, the rental income attributed by Mr McBride to those properties was far higher than the figures given by the other valuers. In the case of each property it was alleged that on the basis of Mr McBride’s valuations the banks lent sums in excess of the market value of the property. When the borrower defaulted the banks were unable to recover the full amount of the loans.[3]In November 2005 Mr McBride gave a valuation of £2.6 million for night club premises at 52 Gas Street, Birmingham, on the basis of which it was said that Allied Irish Bank (‘AIB’) made a loan of £1.75 million. When the borrower defaulted on the loan, AIB determined that it would be more economic to surrender the lease and therefore recovered nothing.[4]In 2010 AIB made a claim against SMPT in respect of the valuation of 52 Gas Street. SMPT made a claim under their professional indemnity insurance. The insurers, RSA, called a meeting with Mr McBride on 7 December 2010 at which he was asked questions about the valuation of 52 Gas Street. The meeting lasted almost a day. A note was taken and a copy supplied to Mr McBride. In support of his application to discharge the Freezing Order, Mr McBride relies on passages recording questions by Mr Nicholson QC, acting for SMPT’s insurers, RSA. The questions showed that it was made clear to him at the meeting on 7 December 2010 that he was suspected of making a fraudulent valuation.[5]It appears from the note of the meeting of 7 December 2010 that Mr Jennings, FRICS, whom the solicitor for SMPT described in his affidavit of 7 May 2013 as an expert surveyor and valuer specialising in night club and other leisure properties, attended on behalf of RSA. Mr Jennings as well as Mr Nicholson QC asked Mr McBride a number of questions about his valuation of 52 Gas Street.[6]The claim by AIB was settled on 9 May 2011 for the sum of £900,000.[7]The lenders on the residential properties, the subject of the claim by SMPT against Mr McBride, also brought proceedings in respect of those properties against SMPT. RBS commenced proceedings in respect of 7 West Point on 1 April 2010 and Lloyds in respect of 22 Stockdale Place, 29 Stockdale Place, 1 Ormsby Court and 57 High Point on 24 November 2010.[8]RSA settled the claim by RBS on 30 March 2012 for £90,000 and that made by Lloyds on 17 March 2012 for £395,000.[9]Mr Jensen, solicitor for SMPT, said in his second affidavit sworn on 21 January 2014 that following the settlements it was necessary for SMPT and their solicitors to decide whether to pursue contributions claims against the solicitors acting for the lenders. It was said that it was not until October 2012 that it was decided not to pursue any of the lenders’ solicitors.[10]On 20 February 2013 a claim was issued by United National Bank Limited (‘UNB’) against SMPT and Mr McBride for damages for breach of contract and/or negligence in respect of the valuation of property at 90 Great Hampton Street, Birmingham. Particulars of Claim were served on 13 June 2013. The claim was based on a valuation made by Mr McBride in a report dated 22 February 2007 and in a further letter of 21 February 2008. The claim which was for over £800,000 was in respect of the loss the UNB alleged they suffered on default by the borrowers and the bank’s inability to recover the amount of the loan from sale of the property which realised far less than the value attributed to it by the defendants.[11]Mr McBride explained in paragraph 96 of his affidavit of 18 December 2013 that SMPT have not acknowledged service or filed a defence in those proceedings. He understands that SMPT have no professional indemnity insurance to resist this claim. They would be unlikely to be able to satisfy any judgment. The claim is based on a difference between Mr McBride’s valuation of the property of £1.7 million (reduced to £1.5 million) and a valuation alleged to be correct of £950,000 to £1 million. A loan of £1.2 million was advanced, asserted to have been on the basis of Mr McBride’s valuations.[12]On 8 May 2013 SMPT obtained a freezing injunction over assets up to the value of £2,037,082 at a hearing without notice before Mr Justice Leggatt. Mr Nicholson QC with junior counsel appeared for SMPT on the application and relied on the affidavit of Martin Jensen the solicitor for SMPT sworn on 7 May 2013. A return date of 16 May 2013 was fixed. It appears from the note of the hearing that the Judge was of the view that on the basis of the Particulars of Claim and the affidavit of Martin Jensen there was a clearly arguable case of fraud which supported the granting of the injunction. The Judge observed that the test (for a Freezing Order) seemed to be well satisfied. Mr Justice Leggatt commented that it was understandable that SMPT delayed whilst the lenders’ claims were continuing before bringing the application but had a little more difficulty in understanding why the application had not been brought sooner. The reply was that it was not until October 2012 that SMPT decided not to pursue a contribution claim against the lenders’ solicitors. It was then that the decision was taken to instruct experts. Mr Justice Leggatt noted that the insurers would not have wanted to incur costs before the underlying claims had been resolved. He referred to the fact that delay was an important factor going to the court’s discretion, but only one such factor. Given all the other circumstances of the case, the Judge was unable to see any reason why not to grant the injunction.[13]After the Freezing Order was granted, as ordered by Mr Justice Leggatt, Mr McBride provided information about his assets and swore his first affidavit on 13 May 2013 exhibiting relevant material. After questions about the first affidavit raised by SMPT’s solicitors, Mr McBride’s solicitors on 15 May 2013 provided a response from him which includes the following statement about one of his properties, Oakleigh:
“…after my late wife … died in 1991, the property was put into Trust in favour of my two daughters … and myself and at some later date, I believe in the late 1990’s, I without consulting them or the Trustees persuaded the Bank to take the property out of the Trust and into my own name to which the girls objected and hence the Declaration of Trust.”
However in his second affidavit sworn on 18 December 2013 in support of his application to discharge the Freezing Order, Mr McBride wrote at paragraph 102:
“At the end of 2001, AIB’s branch in Solihull persuaded me to take out a Current Account Mortgage with them. However in order to take out this account, the property had to be in my sole name. Accordingly, the property was transferred from the Trustees to me and was registered at the Land Registry.”
[14]The declaration of assets made by Mr McBride in 15 May 2013 included a Schedule of Properties held by Mary Ann Properties Ltd. This contains the following note:
“In addition, the company has a subsidiary, Completedocument Ltd, which owns a site at Houndsfield Lane, Wythall, Nr Birmingham, which is valued in the region of £50,000…”
In his third affidavit of 22 January 2014, at paragraph 7 Mr McBride corrected the note. Completedocument Ltd is not a subsidiary of Mary Ann Properties Ltd. The shares are owned by Mr McBride and his wife. Mr McBride commented that this has no effect on the share of his legal interest in the property. He did not intend to mislead.[15]There was no substantive hearing on the return date of 16 May 2013 for the without notice injunction. Mr McBride consented to the continuation of the freezing injunction with liberty to apply. By letter dated 10 May 2013 his solicitors wrote to the solicitors for SMPT stating that given that as well as the “voluminous documents handed to our client late on the evening of the 8 May…” there must be substantial other documentation dating back years:
“…it would be fanciful to believe that we could research the history of this matter and be in a position to deal substantively with your application for a continuation of the Freezing Injunction by Thursday next week.”
The solicitors were therefore prepared to consent to a continuation of the injunction. An Order was made by consent on 16 May 2013 by Mr Justice Singh.[16]In his affidavit of 18 December 2013, Mr McBride said at paragraph 9 that it was in order to allow him to focus on the preparation of his defence that it was agreed that the freezing injunction should continue with liberty to vary or discharge the Order.[17]The Defence of Mr McBride was served on or about 7 August 2013. Mr McBride denied dishonesty and did not admit negligence.[18]On 24 September 2013 SMPT served their Reply.[19]On 14 November 2013 Master Leslie gave agreed directions including for service of further information by Mr McBride. Standard disclosure was to be made by 20 December 2013.[20]On 17 December 2013 at a costs and case management conference Master Leslie gave further directions including that trial of the action take place in Trinity Term 2014 with a time estimate of five days.[21]On 23 December 2013 Mr McBride’s application to discharge the Freezing Order was served together with his second affidavit of 18 December 2013.[22]On 21 January 2014 Mr Jensen swore a second affidavit and on 22 January 2014 Mr McBride swore a third affidavit in which he gave the explanation as to why the Wythall site was shown in a note to the list of properties owned by Mary Ann Properties Ltd in his declaration of assets in May 2013 rather than separately as an asset of Completedocument Ltd in which the shares were owned by him and his wife.[23]Mr Douglas QC who appeared with Mr Crangle for Mr McBride made it clear at the outset that it was accepted that the allegations of dishonesty against Mr McBride were not so flimsy that they could be struck out. It was accepted that Mr McBride had a case to answer.[24]The principal challenge to the Freezing Order was that the evidence did not support a conclusion that there was a real risk that Mr McBride would dissipate his assets. Further, it was said that SMPT had failed to make full disclosure when applying for the Freezing Order without notice.[25]Mr Douglas QC pointed out that it was made clear to Mr McBride in the indemnity conference on 7December 2010 that SMPT were making allegations of fraud against him. Mr Douglas QC relied on the following passages from the note of the meeting:
“JN: The problem for us is the valuation of £2.6 million goes against every other professional view given. Christie & Co say that it was worth £200,000 with vacant possession or £800,000 as a trading entity. The AIB now say it was worth £700,000, not £1.2 million. Gerald Eve think it was worth £990,000. These are enormous discrepancies. If the difference was a sum of 20%, then we might consider it to be an ordinary negligence case. But, the fact that your valuation is excessive by over 100% is really worrying. Frankly, was this an honest valuation? Did you really think that the value was £2.6 million? Or did SG give you the figure he wanted and you went along with it? … JN: There are essentially six points of concern about your 2005 valuation: (1) there was no proper inspection of the property, and there appear to be doubts over whether any inspection at all took place; (2) there were no proper measurements taken of the property; (3) there was no mention of the level of disrepair; (4) you were asked to provide a trading valuation, but you didn’t ask for any trading accounts; (5) you were heavily reliant on information provided by the borrower; (6) your valuation of £2.6 million was 160% more than the highest supportable value. Your figure of £2.6 million looks suspiciously close to the off-the-cuff figure of £2.5 million which SG and the bank were expecting. So, was that figure of £2.6 million really your objective and honest view of what the property was worth? JM: My objective, honest view was that the property was worth in the region of £2.6 million.”
[26]Despite Mr McBride being made aware two and a half years before the without notice application for a freezing injunction that SMPT were making an allegation of fraud against him Mr Douglas QC contended that there is no evidence that he sought to put his assets beyond reach. It was said that there was no basis for the assertions made by Mr Jensen in his affidavit relied upon in the without notice hearing before Mr

Justice Leggatt that:

“…if Mr McBride was told that the application was to be made, he would do his best to dispose of, conceal or dissipate assets before being formally notified or served with an injunction. … …if SMPT was simply to sue Mr McBride then he would hive off assets in order to make himself judgment proof for the reasons expanded upon below.”
[27]Insofar as Mr Jensen relied upon the allegations of fraud as showing a risk of dissipation, Mr Douglas QC contended that the assertion that these were of “consistent and repeated dishonesty … over a period of a number of years” was an exaggeration. The allegations were limited to a period between 2003 and 2005. The latest such allegation was eight years before the application for the Freezing Order. This did not indicate a continuing pattern of dishonesty which gives rise to a risk of dissipation of assets.[28]Further, Mr Douglas QC contended that the suggestion in Mr Jensen’s first affidavit of “the obvious possibility that [Mr McBride] gained in assisting [the vender, Mr Khan and the borrower, Ms Naz] in their frauds on the lenders in question” was made without foundation. There was no evidence that Mr McBride had benefited from the loans made. Mr McBride stated in his affidavit that he did not receive any payment from Mr Khan or Ms Naz.[29]Mr McBride is a qualified surveyor, a professional man of good standing. Mr Douglas QC suggested that this should be taken into account in assessing whether his actions gave rise to a risk that he would dissipate his assets.[30]Mr Douglas QC submitted that the absence of evidence of a risk of dissipation of assets is fatal to SMPT’s attempt to maintain the freezing injunction. It should be discharged.[31]Insofar as SMPT placed reliance on the allegations of fraud to found an inference of a risk of dissipation, Mr Douglas QC contended that they had failed to draw Mr Justice Leggatt’s attention to Thane Investments Ltd v Tomlinson [2003] EWCA Civ 1272 when quoting in their skeleton argument what appeared to be a passage from Gee on Commercial Injunctions 5th Edition paragraph 12.040. Thane is referred to in a footnote to that passage. Lord Justice Peter Gibson observed at paragraph 28 of a practice of relying on some dishonesty as sufficient to enable to court to make a freezing order, that if that had become the practice then the practice should be reconsidered. Lord Justice Peter Gibson held:
“It is appropriate in each case for the court to scrutinise with care whether what is alleged to have been the dishonesty of the person against whom the order is sought in itself really justifies the inference that the person has assets which he is likely to dissipate unless restricted.”
[32]It was said that the allegations of fraud in this case would not justify drawing the inference that there was a risk that Mr McBride would dissipate his assets.[33]Mr Douglas QC contended that a further reason for discharging the injunction is that there was a period of over two and a half years between SMPT satisfying themselves that they had sufficient material to allege fraud against Mr McBride and then applying for the injunction. The contention in Mr Jensen’s affidavit that there was delay after settlement had been reached with the lenders was attributable to the decision taken in October 2012 not to seek a contribution on the basis of negligence of their solicitors and because SMPT needed to instruct experts before proceeding did not stand scrutiny. By the time of the indemnity meeting on 7 December 2010 Mr Julian Jennings of Gerald Eve LLP, surveyors, had been instructed by SMPT or their insurers.[34]Further, it was said that the nature of the questioning of Mr McBride at the indemnity meeting and the clear allegation of fraud made suggested that by December 2010 SMPT were satisfied they had sufficient information to do so. Mr Douglas QC contended that no evidence had been provided as to why SMPT could not have commenced proceedings against Mr McBride and sought an injunction against him until after a decision had been taken not to pursue a contribution claim against the lender’s solicitors.[35]Mr Justice Leggatt had raised the question of delay in issuing proceedings against Mr McBride with Mr Nicholson QC. The Judge was told that it had taken some time to finalise the expert evidence and that in any event the delay had caused no prejudice to Mr McBride.[36]Mr Douglas QC submitted that the reasons relied upon by SMPT do not amount to a sufficient justification for the delay. The fact that there was delay indicated that SMPT did not consider there was a real risk that Mr McBride would dissipate his assets.[37]It was said that the two matters of concern about Mr McBride raised in the second affidavit of Mr Jensen sworn after the granting of the injunction had been answered by him. Mr McBride had given a full explanation of how it was that the Oakleigh property had been transferred into his name from the Trust in which it was held. He now holds it on trust for his daughters. Further, it was said that in giving a statement of his assets, Mr McBride did not seek to conceal property owned by Completedocument Ltd. This was referred to in a note to the list of properties held by Mary Ann Properties Ltd. Mr McBride explained that he mistakenly included it in the listing of Mary Ann Properties Ltd. Completedocument Ltd was not a subsidiary of Mary Ann Properties Ltd but was owned by him and his wife. However the financial effect was the same as he had a half share in Mary Ann Properties Ltd. It was said by Mr Douglas QC that these matters raised by Mr Jensen did not give rise to an inference of risk that Mr McBride would dissipate his assets.[38]Mr Jensen refers in his second affidavit to an increased risk of dissipation because UNB have issued proceedings against Mr McBride in his personal capacity. That claim was made in February 2013. Mr Douglas QC pointed out that this was three to four months before the current claim was made against him by SMPT.[39]Mr Douglas QC drew attention to the high duty placed on applicants for ex party relief to make full disclosure to the Judge. He referred in particular to a passage in the judgment of Lord Justice Mummery in Memory Corporation v Sidhu (No 2) [2000] 1 WLR 1443-1460 cited by Mr Justice Clarke (as he then was) in Millhouse Capital UK Ltd and Others v Sibir Energy plc and Others [2008] EWHC 2614 paragraph 68. Lord Justice Mummery held:
“It cannot be emphasised too strongly that at an urgent without notice hearing for a freezing order, as well as for a search order or any other form of interim injunction, there is a 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. It is the particular duty of the advocate 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…”
[40]It was contended that at the without notice hearing on 8 May 2013, the attention of the Judge was not drawn to material matters of law and fact. It appears that the Judge reached his decision that there was a real risk of Mr McBride dissipating his assets on the basis of the allegations of fraud in the Particulars of Claim. Paragraph 18.4 of the skeleton argument on behalf of SMPT appeared to quote from a passage in Gee paragraph 12.040. However reference was not made to footnote 64 to that paragraph which referred to paragraph 28 of the judgment of the Court of Appeal in Thane. Lord Justice Peter Gibson emphasised that it was necessary in each case to consider whether the particular dishonesty alleged against the respondent justifies the inference of risk of dissipation.[41]Mr Douglas QC submitted that the apparent omission to refer to Thane is significant in this case as the dishonesty alleged against Mr McBride does not support the suggestion that he would remove or protect his assets. Further, whilst there was a suggestion in the affidavit of Mr Jensen that Mr McBride is likely to have benefited financially from the alleged dishonest overvaluations, there was no evidence to support this proposition. The absence of such evidence is highly relevant to the question of whether or not he would take steps to protect his assets from any judgment.[42]Mr Douglas QC submitted that Mr Justice Leggatt was rightly troubled by the delay of SMPT in seeking the injunction. As for the reasons advanced for delay, SMPT and RSA must have had sufficient material by the date of the indemnity conference on 7 December 2010 to make allegations of fraud. It appears from the note of the indemnity meeting that Mr Jennings of Gerald Eve LLP surveyors had already been instructed. He participated in the questioning of Mr McBride. The Judge’s attention was not drawn to this. Mr Jensen referred in his affidavit in support of the without notice application to a valuation report by Mr Jennings dated 30 April 2013 but made no mention of the fact that he had also produced a valuation on Gas Street some two years earlier. Further Mr Jensen’s affidavit in support of the without notice application makes no mention of delay caused by the need to consider contribution claims against the lender’s legal advisors.[43]Mr Douglas QC submitted that even if SMPT’s explanations for delay in applying for injunctive relief had been satisfactory there was considerable delay. SMPT had taken the risk that Mr McBride may have dissipated his assets. There is no evidence that this had occurred. As no real risk of dissipation can be inferred from the evidence or the allegations in the Particulars of Claim, coupled with failure to bring material matters to the attention of Mr Justice Leggatt and delay in applying for the injunction it was submitted that the injunction should be discharged.[44]Mr Douglas QC submitted that the fact that Mr McBride had consented to the continuation of the Freezing Order did not preclude him from applying to discharge it. Ryan v Friction Dynamics Ltd [2001] CP Rep 75 and Chanel v FN Woolwoth & Co Ltd [1981] 1 WLR 485 upon which Mr Nicholson QC relied for the proposition that there had to be a change of circumstances before an injunction continued by consent would be discharged were to be distinguished from the present case. The Orders in Ryan and Chanel were made after inter partes hearings at which the defendant/respondents had the opportunity to advance their arguments. There had been no inter partes hearing before the Consent Order was made in Mr McBride’s case. The ex parte Order could be discharged without there being a change of circumstance since it was made or continued by consent.[45]There had been some delay in making the application to discharge the injunction. Mr Douglas QC submitted that the reason for the timing of the application was the need to put in a Defence to the claim by SMPT. This was lodged at the beginning of the summer vacation. There was a delay in October and November but it must be acknowledged that Mr McBride’s resources were limited and that he had a problem with documents which were not in his possession but with SMPT.[46]Mr Douglas QC acknowledged that if there was a risk now of Mr McBride dissipating his assets the court was entitled to refuse to discharge the injunction. However he contended that no such risk existed.[47]Mr Nicholson QC who appeared with Mr Goldstone for SMPT questioned why the application for discharge of the injunction was being made at this stage. The application was made eight months since the injunction was granted and was heard less than six months before trial. The trial date has now been put back to the end of October but this was not known at the date of the application or hearing. Mr Nicholson QC drew attention to the fact that Mr McBride has not deposed to any prejudice he is under as a result of the injunction. The delay and the absence of a reason for applying for discharge of the injunction now go to the risk of dissipation.[48]Mr Nicholson QC submitted that the passage in Gee paragraph 12.040 best encapsulates the approach to risk of dissipation of assets in cases such as this. Before Mr Justice Leggatt SMPT relied upon the pleaded case against Mr McBride of dishonesty and fraud. There is no suggestion that there is no arguable case of fraud. Those allegations were sufficient material from which to drawn an inference of risk of dissipation as did Mr Justice Leggatt.[49]In addition to the allegations of fraud made in the Particulars of Claim, SMPT now relied on further matters which confirm the risk of dissipation of assets. Mr Nicholson QC submitted that in almost every case where there was a good arguable case of fraud the court should draw the inference that there was a risk of dissipation. In the case of Mr McBride there were not just one but six different transactions which were alleged to have been fraudulent. Mr Justice Leggatt drew the right inference from the material before him that there was a risk that Mr McBride would dissipate his assets.[50]Mr Nicholson QC drew attention to some of the features of the allegations of fraud. The valuations of the residential properties made by Mr McBride differed considerably from those of expert surveyors Mr Crump, Mr Johnson, Mr Raine, Mr Farrow and Mr Rutledge, as did his valuation of Gas Street from that carried out by Mr Jennings. The failures of Mr McBride in carrying out the valuations which included not checking on tenants of rented properties and not looking at comparables, indicate that the wildly inconsistent valuations were not just the result of negligence but of dishonesty. Mr Nicholson QC pointed out that the failures in carrying out the valuations are accepted by Mr McBride. The only issue is whether dishonesty is to be inferred. Comment was made by Counsel on the absence of any expert evidence in support of Mr McBride’s defence.[51]Mr Nicholson QC gave some particular examples of features pointed out by the experts of the valuations which he contended give rise to a suspicion of fraud. The tenancy agreement for Flat 57 High Point shows rent too high to be sustained. It is far in excess of the market rental. So too was the rental figure on 29 Stockdale Place used by Mr McBride to calculate his valuation. Mr Nicholson QC referred to the report of Mr Crump, a surveyor who concluded that the residential property valuations by Mr McBride were far in excess of the true value of the properties. They were significantly in excess of recent valuations Mr McBride himself had made of 22 and 29 Stockdale Place and 57 High Point. Mr Nicholson QC contended that such serious and repeated dishonesty between June 2003 and November 2005 gives rise to a risk of dissipation of assets.[52]Three matters were relied upon by Mr Nicholson QC in addition to the allegations in the Particulars of Claim which were before Mr Justice Leggatt. On 14 June 2013 Particulars of Claim were served on SMPT and Mr McBride in the claim by UNB. On 22 February 2007 Mr McBride provided a valuation of £1.7 million for certain leasehold commercial property. It is alleged that the bank had offered to lend the sum on £1.2 million to the borrowers on the basis that the value of the property was £1.7 million in circumstances where the purchase price was £950,000 which was less than the amount of the bank’s advance. UNB claimed at least £800,000. At paragraph 52 of the Particulars of Claim, UNB reserved the right to amend its pleadings:
“…pending full disclosure and/or investigation of the circumstances in which the defendants confirmed that the value of the Property was £1.7 million, and that the purchase price of £950,000 had no impact upon value. In the absence of a cogent explanation for these failures, the Bank may be entitled to infer that this was no mere oversight/negligent failure.”
Mr Nicholson QC submitted that this paragraph should be read as a clear indication that the pleading may be amended to allege fraud. SMPT have not entered a defence to the claim and have no professional indemnity insurance cover to meet the claim. Accordingly it is likely that Mr McBride would personally be pursued for about £800,000. It is said that this increases the likelihood that Mr McBride will dissipate his assets.[53]Since the hearing before Mr Justice Leggatt, SMPT had discovered that in breach of trust Mr McBride procured the transfer of Oakleigh, the family home, into his sole name. He did this in order to raise a loan. His own account of events shows that he did so without first consulting the trustees or his daughters, the co-beneficiaries.[54]Further, Mr Nicholson QC relied upon the inaccuracy with which Mr McBride declared his assets in accordance with the requirement of the Order made by Mr Justice Leggatt. He did not list his 50% shareholding in Completedocument Ltd.[55]It was contended that these three matters reinforced the risk of dissipation of his assets by Mr McBride.[56]Mr Nicholson QC resisted the suggestion that there had been inadequate disclosure when advancing the application for the injunction before Mr Justice Leggatt. Mr Nicholson QC drew attention to paragraph 18.4 of his skeleton argument for the hearing on 8 May 2013 which stated:
“18.4. Mr Jensen accepts, frankly, that there is no specific evidence demonstrating that Mr McBride will take steps to put assets beyond reach or otherwise dissipate them. However it is unnecessary to do so in order to justify the injunction. The Court is able to take into account the extent and nature of Mr McBride’s dishonesty to date in assessing the risk of dissipation.”
A passage which appears to be from Gee paragraph 12.040 was then cited. Mr Nicholson QC submitted that the Judge was made aware that there was no direct evidence of risk of dissipation and was invited to proceed on the basis of inference from the fraud alleged against Mr McBride. It was said that this was a perfectly proper course to adopt.[57]Further Mr Nicholson QC stated in his skeleton argument that SMPT made it clear to the court on 8 May 2013 that they did not have any clear evidence that Mr McBride had benefited from the fraud alleged against him. Accordingly it was said that SMPT did not fail to draw this matter to the attention of the Judge on 8 May 2013.[58]Whilst there had been some delay in applying for the injunction, Mr Justice Leggatt was well aware of this and of the reasons advanced in explanation. It was said that the delay was largely justified: not starting proceedings against Mr McBride until after necessary expert surveyors’ evidence had been obtained and until after the decision was taken not to pursue a contribution claim against the lenders’ solicitors. That decision was taken in October 2012. As Mr Justice Leggatt observed on 8 May 2013, delay was just one factor to be taken into account in deciding whether to grant injunctive relief.[59]Mr Nicholson QC contended that the delay by Mr McBride in seeking to discharge the injunction is significant and militates against granting the application. There appears to be no reason for the delay. Further, Mr Nicholson QC contended that the delay is inconsistent with any genuine belief that the injunction ought not to have been granted. Mr Nicholson QC questioned why the application for discharge of the injunction was made at this stage and so long after it had been ordered. Counsel submitted that it was more to do with the then impending trial which in November 2013 was to be listed for the Trinity Term. There are increasing grounds for concern about dissipation of his assets as Mr McBride imminently faces judgments for large sums. This is a significant reason why he may want to put his assets beyond reach.[60]Mr Nicholson QC submitted that, having consented to the continuation of the freezing injunction, Mr McBride is precluded from succeeding in obtaining its discharge unless he can show that there has been a change in circumstances since the Consent Order. Counsel relied on the judgment of the Court of Appeal in Chanel and that of Mr Justice Neuberger (as he then was) in Ryan in support of that proposition. It was said that Mr McBride had not shown any change in circumstances such as to justify the discharge of the Order.

Discussion and conclusion

[61]At the outset of the hearing of the application to discharge the Freezing Order originally made without notice by Mr Justice Leggatt on 8 May 2013 and continued by consent on 15 May 2013, it was rightly agreed by Counsel for Mr McBride that the Particulars of Claim on the basis of which the original Order was largely based set out allegations which were not so flimsy that they could be struck out. The allegations were that Mr McBride as a director and employee of SMPT had carried out actions which were fraudulent and dishonest breaches of duty. Mr McBride is a surveyor who carried out property valuations for SMPT. His actions were summarised as:
“…providing lenders with valuation reports which stated values for properties far in excess of their true values: thus exposing the Claimant to a series of claims which it had to deal with and settle, and causing it to sustain very substantial losses.”
[62]By a Defence served on or about 7 August 2013 Mr McBride denies dishonesty and does not admit negligence. It is not the function of the court on this application to attempt to pre-judge the outcome of the trial. However there are two features of the claims made which are said to be relevant. First that the allegedly dishonest valuations were made between 2003 and 2005 which was many years ago. Second that there is no allegation that Mr McBride personally benefited from the alleged frauds.[63]The principal basis for the application to discharge the injunction is that there was insufficient evidence before Mr Justice Leggatt on 8 May 2013 and no further relevant evidence of risk of dissipation to justify the continuation of an Order against Mr McBride.[64]In my judgment the serious and systematic fraud alleged against Mr McBride was grounds for “a feeling of uneasiness about the defendant” which could justify an inference that there is a real risk that he would dissipate his assets. It is appropriate, as was held by

Lord Justice Peter Gibson in Thane at paragraph 28:

“…to scrutinise with care whether what is alleged to have been the dishonesty of the person against whom the order is sought in itself really justifies the inference that that person has assets which he is likely to dissipate unless restricted.”
Mr McBride had the opportunity at a proposed inter partes hearing to adduce evidence and advance argument to challenge the inference that he would be likely to dissipate his assets. He did not seek to do so until making the application on 20 December 2013 to discharge the injunction.[65]The evidence now before the court reinforces rather than dispels the inference of a risk that Mr McBride would, unless subject to a restraint, dissipate his assets. Although these matters individually may not be regarded as indicative of any ingrained characteristic of doubtful probity together they do.[66]The Particulars of Claim in proceedings by UNB against SMPT and Mr McBride were served on 13 June 2013. They bear striking similarities with the claims made in the proceedings by SMPT against Mr McBride. It is alleged that the Defendants valued a warehouse space in the amount of £1.7 million which was the value needed to secure a loan of £1.2 million. The purchase price of the property and its value was £950,000. The bank has made a claim for £800,000 in breach of contract and negligence whilst leaving open the possibility that allegations that the valuation was fraudulent and dishonest may be made.[67]One of the submissions made on behalf of Mr McBride is that there had been no allegations of fraudulent behaviour against him after the valuation of Gas Street in November 2005. Whilst no allegation of fraud has so far been made against Mr McBride in the UNB proceedings, the allegations which have been made in those proceedings are similar to the allegations of dishonesty in the SMPT proceedings. The making of a similar claim which is of a valuation made twenty-one months after the last valuation in the SMPT proceedings is relevant to whether behaviour by Mr McBride giving rise to a reasonable inference of questionable conduct continued until more recently than 2005. Further, the liability for a further substantial claim may increase the risk of Mr McBride seeking to protect his assets by dissipating them.[68]The way in which Mr McBride dealt with the Oakleigh property and also how he explained his dealings with that property in his affidavits in these proceedings gives rise to serious concerns about his integrity. The very fact of dealing with trust property without consulting the trustees by putting it into his own name in order to obtain a loan is serious. The accounts Mr McBride gives in his affidavits about his dealings with the Oakleigh property are opaque. In his first affidavit Mr McBride said that he persuaded the bank to take Oakleigh out of the Trust and put it into his own name. In his second affidavit he said that the bank persuaded him to take out a current account mortgage. These admitted acts show that Mr McBride acted without probity to break a trust for his own benefit. Although these actions took place in 2001 they do not stand alone as examples of lack of probity by Mr McBride. They support an inference of a current risk that he would dissipate his assets.[69]The declaration of assets made in accordance with the Order of Mr Justice Leggatt on 8 May 2013 displays a cavalier attitude to accuracy in information given to the court. Mr McBride was ordered to inform SMPT’s solicitors of all his assets worldwide. In a note in a subsequent statement of assets Mr McBride wrongly stated that Completedocument Ltd was a subsidiary of Mary Ann Properties Ltd when the company was owned by himself and his wife in equal shares. Completedocument Ltd owned property to the value of £50,000. Mr McBride in his third affidavit seeks to minimise his error by stating that it makes no difference in practice. However the significance of Mr McBride’s mistake and his attitude to it is that little trust could be placed in his sworn declaration.[70]Mr Justice Leggatt was troubled by the delay in SMPT applying for the Freezing Order. He stated that once the claims against SMPT had been concluded it was open to the Claimant to bring proceedings against Mr McBride. The Judge was told that it had taken some time to finalise the expert evidence in support. This was taken by the Judge as implying that the insurers would not have wanted to incur costs before the underlying claims had been resolved. It is clear that the insurers and SMPT had instructed Mr Jennings, a surveyor, to give an expert opinion of the valuation of Gas Street before the indemnity meeting with Mr McBride on 7 December 2010. Mr Justice Leggatt should have been informed that such instructions had been given. In his first affidavit of 7 May 2013, which was relied upon to obtain the ex parte injunction, Mr Jensen referred at paragraph 27 to a report by Mr Jennings on 30 April 2013 but omitted reference to earlier expert advice Mr Jennings must have given in 2010. Further it appears that no reference was made before Mr Justice Leggatt to the making of an allegation of dishonesty against Mr McBride as long ago as at the meeting on 7 December 2010.[71]In my judgment complaint can justifiably be made of the failure to refer to these matters at the hearing before Mr Justice Leggatt. The instruction of Mr Jennings in 2010 to give an opinion on the valuation of Gas Street and the making of an allegation to Mr McBride at the meeting on 7 December 2010 that he had been dishonest are relevant to the reason for delay by SMPT in applying for injunctive relief and to their attitude to the risk of dissipation.[72]The failure to direct Mr Justice Leggatt to the judgment of Lord Justice Peter Gibson in Thane is of lesser significance. The observation that: “It is appropriate in each case for the court to scrutinise with care whether what is alleged to have been the dishonesty of the person against whom the order is sought in itself really justifies the inference that that person has assets which he is likely to dissipate unless restricted.” is an important reminder to apply common sense in considering the relevance of particular dishonest conduct to the risk of dissipation of assets. However it is highly unlikely that Mr Justice Leggatt would not have been astute to the need for the allegedly dishonest conduct to be relevant to drawing an inference of risk of dissipation. In my judgment no criticism can be made of the failure to draw the Judge’s attention to Thane.[73]Mr Justice Leggatt observed that delay was an important factor going to the court’s discretion in deciding whether to grant an injunction but it was only one such factor. In my judgment the failure to mention the Jennings report of 2010 cannot be said to have affected the assessment of the delay in applying for an injunction. That report was concerned with one of the six properties, the subject of the claim, albeit giving rise to the largest claim. Reports had yet to be obtained in respect of the five residential properties. The advancing of an additional reason for delay in the second affidavit of Mr Jensen after the hearing before Mr Justice Leggatt does not affect the assessment by the Judge of its significance. The assertion that another reason for delay was that the decision not to pursue a contribution claim against the lenders’ solicitors was not taken until October 2012 could not be said to undermine the reason for delay advanced at the hearing before Mr Justice Leggatt. It added to it.[74]Delay after having sufficient material to put an allegation of fraud to Mr McBride in relation to one property at the indemnity meeting in 2010 could be said to indicate a view then taken that there was little or no risk of dissipation of assets. However, in my judgment, it did not negate the reasons for granting relief relied upon by Mr Justice Leggatt.[75]The without notice Order was made on 8 May 2013 with a hearing on notice fixed for 16 May 2013. Mr McBride’s solicitors wrote to those acting for SMPT on 10 May 2013 giving as a reason for consenting to the continuation of the Order of 8 May that:
“…it would be fanciful to believe that we could research the history of this matter and be in a position to deal substantively with your application for a continuation of the Freezing Injunction by Thursday of next week.” “They were therefore prepared to consent on our client’s behalf to a continuation of the Freezing Injunction beyond the 16 May 2013. We suggest that the continuation be until a hearing before a High Court Judge on not less than seven days’ notice by either side.”
[76]The Order made by Mr

Justice Leggatt was varied to include in place of the return date:

“…to the judge next hearing any application to vary or enforce or disclose this order or if no such application is made prior to the trial of this matter, to the trial judge.”
[77]No application to discharge the injunction was made until 20 December 2013 which was after a time was fixed for the hearing of the trial of the action. Mr McBride has advanced no reason in his affidavits for seeking then to discharge the Order. Mr McBride stated that his delay in seeking to discharge the injunction was because he had to prepare his defence. In my judgment the need to lodge a Defence which was served on or about 7 August 2013 is not a good reason for delay. Matters investigated and pleaded in the Defence no doubt overlap with the issue of whether the allegations of dishonesty raised in the Particulars of Claim and which formed the basis of the inference of risk of dissipation and the Order by Mr Justice Leggatt could be challenged.[78]Mr McBride had the opportunity of an inter partes hearing of the application for the continuation of the injunction obtained without notice before Mr Justice Leggatt. By consent the injunction was continued without such a hearing. Mr Douglas QC sought to distinguish Chanel and Ryan on the basis that in those cases there had been an inter partes hearing in which arguments advanced by the Defendant/Respondent had been considered and rejected so that there had to be a change in circumstances before the Order would be discharged. It appears that there was no inter partes hearing before the Consent Order made in Chanel. The Consent Order was made on the return date of the ex parte Order. The Order in that case made no express reference to the right to apply to discharge it however Lord Justice Buckley held at page 492D:
“In my judgment, an order or an undertaking to the court expressed to be until further order by implication gives a right to the party bound by the order or undertaking to apply to the court to have the order or undertaking discharged or modified if grounds for doing so are shown.”
The express reference in the Consent Order in the case of Mr McBride to the right to apply to discharge the Order is not a distinguishing feature. Nor is the fact that agreement to the Consent Order was reached the day before the date fixed for the inter partes hearing. In Chanel as in this case there was no inter partes hearing of the continuation of the injunction. In Ryan a Freezing Order granted without notice was continued by consent on the return date “…until the disposal of the [US proceedings] or until further order.” As in this case and Chanel there was no inter partes hearing of the application for the injunction.[79]In my judgment Chanel supports the proposition advanced by Mr Nicholson QC that having consented to the continuation of the Order made by Mr Justice Leggatt, Mr McBride can only succeed in its discharge if there has been a material change in the relevant circumstances. Lord Justice Buckley held at page 492G to 493A:
“The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over against a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party’s position.”
In Ryan Mr Justice Neuberger (as he then was) held that there had been just enough change in circumstances to justify making the application to discharge the Order but not enough to succeed.[80]In this case no material changes in circumstances have been advanced to justify the discharge of the injunction granted by Mr Justice Leggatt. Nor has any reason been advanced to explain why its discharge is being sought now so long after it was made. These reasons are sufficient to dismiss the application.[81]If SMPT had been guilty of material non-disclosures in the hearing before Mr Justice Leggatt, the injunction would have been discharged notwithstanding the delay in making the application and the consent to its continuation. The instructions to the surveyor in 2010 and the accusation of dishonesty at the indemnity meeting should have been drawn to the attention of the Judge. However, regrettable though they are, these omissions are not sufficiently serious to lead to the discharge of the Order.[82]Even if there were no requirement to establish a change in circumstances to obtain the discharge of an injunction, in any event the injunction would have remained in place. In my judgment the material now before the court gives rise to an inference that there is a real risk that Mr McBride would dissipate his assets unless restrained from doing so. There has been delay on both sides but the material consideration which tips the balance in favour of continuing the injunction is the real risk of dissipation of assets. The application to discharge the Freezing Order made by Mr Justice Leggatt on 8 May 2013 is dismissed.