XX and Others v YY and Others: ChD 2 Jul 2021

The first defendant applies for an order that the claimants are not entitled to pursue legal action against his lawyers in respect of funds over which the claimants claim a proprietary interest and paid to the first defendant’s lawyers as legal fees in defence of the claim.
Held: Where a claimant brings a proprietary claim against a defendant and the defendant uses the claimed assets to pay a solicitor to defend the claim, the solicitor will be a purchaser for value. (When referring below to solicitors I should also be taken to include counsel also instructed in the defence of the claims.) It is possible that the claimant will nonetheless seek to maintain a claim against the solicitors in respect of the fees as a knowing recipient of the claimed assets.
Held: The order was refused. A similar application for an increase in allowed living expenses was also refused.
‘When deciding whether to allow the payment of legal expenses the court has to balance the risks of irremediable injustice in conditions of uncertainty about the outcome of the proprietary claim. The court does not know whether the claimant or defendant will end up owning the assets. It seeks to weigh the risk of the claimant’s property being (wrongly) spent by the defendant against that of the defendant being (wrongly) enjoined from using its property to defend itself. The court does the best it can to balance the risks of irremediable harm. But the order now sought is of an entirely different character: it would have the practical effect of extinguishing the claimants’ claims. The claimants would be prevented from asserting a cause of action, whatever the circumstances. The court would not be deciding how to hold the ring pending the determination of the parties’ rights; it would be making a proleptic determination of the claimants’ substantive rights.’
Mr Justice Miles
[2021] EWHC 1833 (Ch)
Senior Courts Act 1981 37(1)
England and Wales
CitedLa Roche v Armstrong KBD 1922
Lush J said: ‘Here the solicitor has received a sum of money from his client for the purpose of his resisting on her behalf a claim by A, who says it is trust money and that the client is under a duty to return it. Under such circumstances I should . .
Still Good LawCarl Zeiss Stiftung v Herbert Smith No.2 CA 1969
There had been long running disputes between the plaintiffs and a defendant in which the plaintiffs claimed that all of the defendant’s assets were held for the plaintiffs on trust. Before those claims had been resolved the plaintiff brought a . .
CitedThe Serious Fraud Office and Another v Litigation Capital Ltd and Others ComC 18-May-2021
. .
CitedSinclair Investments (UK) Ltd v Versailles Trade Finance Ltd and Others ChD 30-Jun-2010
Lord Neuberger MR said that Carl Zeiss ‘supports the proposition that notice of a claim is not the same as notice of a right’. . .
CitedBank of Credit and Commerce International (Overseas) Ltd and Another v Akindele CA 22-Jun-2000
The test of whether a person who received funds held them on constructive trust, was not whether he himself was dishonest, but rather whether he had knowledge of circumstances which made it unconscionable to hold on to the money received. In respect . .
CitedSundt Wrigley Co Ltd v Wrigley CA 23-Jun-1993
In an asset freezing order, where the defendant seeks leave to discharge liabilities, the nature of the plaintiff’s interest makes a difference. The court distinguished between cases where the plaintiff has a proprietary claim in the frozen assets . .
CitedOstrich Farming Corportation Limited v Ketchell CA 10-Dec-1997
The court considered the principles to be applied on injunction applications within proprietary claims.
Held: Millett LJ explained the difference between a proprietary injunction and a Mareva freezing injunction: ‘The courts have always . .
CitedMarino v FM Capital Partners Ltd CA 2016
The test for proprietary injunctions the courts impose a stricter test on defendants wishing to use assets falling within the scope of the injunction to pay legal fees. . .
CitedTidewater Marine International Inc v Phoenixtide Offshore Nigeria Ltd and Others ComC 6-Oct-2015
Interpretation of world wide asset freezing order – access to funds paid as costs to solicitor – requirement to advise of source of funds. . .
CitedA J Bekhor and Co Ltd v Bilton CA 6-Feb-1981
The plaintiff had applied for disclosure of assets under the Rules of the Supreme Court in support of a Mareva freezing order. The rules were held not to provide any such power: disclosure of assets could not be obtained as part of discovery as the . .
CitedMaclaine Watson and Co Ltd v International Tin Council (No. 2) CA 1988
When the ITC did not satisfy an arbitral award made against it, the judgment creditor sought to discover where its assets could be found. Application to the Court was made under RSC 0.48 of the Supreme Court Act 1981 and under the Court’s inherent . .
CitedUnited Mizrahi Bank Ltd v Doherty and Others ChD 15-Dec-1997
The defendant had obtained leave to use disputed funds to meet its legal costs. It sought an order (in the nature of a declaration) that such use of the funds would not make them constructive trustees. Mr Burton QC held that where leave is given to . .
CitedSmith v Peters ChD 24-Jun-1875
Where an agreement has been entered into for the sale of a house at a fixed price, and of the fixtures and furniture therein at a valuation by a person named by both parties, and he undertakes the valuation, but if refused permission by the vendor . .
CitedBayer v Winter CA 1986
Fox LJ said: ‘Bearing in mind we are exercising a jurisdiction which is statutory, and which is expressed in terms of considerable width, it seems to me that the court should not shrink if it is of the opinion that an injunction is necessary for the . .
CitedHouse of Spring Gardens v Waite CA 1991
The principle of abuse of process is capable of applying where the relevant earlier proceedings have taken place before a foreign court (Ireland). In this case the defendants argued that the judgment obtained in Ireland had been obtained . .
CitedIndependent Trustee Services Ltd v GP Noble Trustees Ltd and Others ChD 26-Jan-2009
Application to vary a freezing order made on a without notice application.
Held: Lewison J set out the proper approach at para. 6 by setting out the four questions which should be addressed: ‘(1) does the claimant have an arguable proprietary . .

Lists of cited by and citing cases may be incomplete.
Updated: 30 October 2021; Ref: scu.668750