Michael Wilson & ‘Partners’ Ltd -v- John Forster Emmott [2019] EWCA Civ 219

The Court of Appeal in this case considered an appeal brought by Michael Wilson & ‘Partners’Ltd (‘MWP’) regarding the removal of the Angel Bell exception, the carve out in a freezing order that allows a respondent to deal with assets in the ordinary course of its business, from a post-judgment Mareva (freezing) injunction. 

Factual background

MWP is an entity incorporated in the British Virgin Islands. The ultimate beneficial owner and controller of MWP is Mr Wilson, an English solicitor. John Forster Emmott (‘Mr Emmott’) is an Australian and English qualified solicitor.

The dispute between MWP and Mr Emmott dates back to an agreement dated 7 December 2001 made between Mr Emmott and MWP (the ‘Emmott agreement’). The Emmott agreement was intended to create a ‘quasi-partnership’ between Mr Emmott and Mr Wilson, whereby Mr Emmott was to receive a 33% shareholding in MWP and Mr Wilson was to retain a 67% shareholding.

On 20 December 2005, Mr Emmott entered into a secret agreement with two other MWP employees, providing for the establishment of a rival business, and ultimately left MWP to work at the rival business. The Emmott agreement was governed by English law and contained a London arbitration clause. Consequently, arbitration proceedings were commenced in the UK, along with proceedings in several other jurisdictions.

By way of a second interim award dated 19 February 2010 (the ‘SIA’), it was found that Mr Emmott had satisfied the conditions for obtaining his 33% shareholding in MWP, but that he had been guilty of deliberate, serious and dishonest breaches of his fiduciary obligations to MWP. By a third award dated 5 September 2014 which related to quantum (the ‘TQA’), it was held that the quantum of the former outweighed the latter and MWP was ordered to pay Mr Emmott approximately £3.2 million and US$841,000.

MWP failed to honour the terms of the TQA. Therefore, on 5 December 2014, HHJ Mackie QC granted Mr Emmott a freezing injunction against MWP (the ‘freezing injunction’). Para 13(2) of the freezing injunction contained the Angel Bell exception, MWP was not prohibited from ‘…dealing with or disposing of any of its assets in the ordinary and proper course of business.’ 

MWP made various challenges to and appeals against the TQA; however, by an order dated 26 June 2015, Burton J dismissed those challenges and gave leave to Mr Emmott to enforce the TQA ‘in the same manner as a judgment or order of this court’. Judgment was subsequently entered against MWP in the terms of the TQA and an application by MWP for a stay of enforcement of the TQA was dismissed. 

By his judgment and order dated 13 July 2017 (the ‘judgment and order’), Sir Jeremy Cooke subsequently removed the Angel Bell exception set out at Para 13(2) of the freezing injunction. Paragraph 4 of the order provided as follows:

‘The exception in paragraph 13(2) of the freezing order that formerly did not prohibit the respondent from dealing with or disposing of any assets in the ordinary and proper course of its business is hereby deleted so that MWP is not permitted to deal with or dispose of any of its assets as defined in paragraph 9 of the freezing order up to the values set out in paragraph 2 hereof.’

Legal issues

MWP appealed against Sir Jeremy Cooke’s judgment and order, stating that Sir Jeremy Cooke had erred in law:

1. In holding that the starting point in the case of a post-judgment Mareva is that there should be no ordinary course of business exception
2. In concluding that the exception should be removed from the Mareva in circumstances where it did not serve a freezing order’s legitimate purpose of being in aid of execution
3. In failing to consider that the removal of the exception should be the last resort
4. In considering that the question of enforcement in Kazakhstan was not of great materiality to the question of the removal of the ordinary course of business exception; and
5. In all the circumstances, in removing the ordinary course of business exception

Lord Justice Gross reviewed the relevant authorities and summarised the correct legal position as follows:

1. Mareva injunctions can no longer be described as rare and, whether they are pre or post-judgment, are not intended to confer a preference in insolvency. They are granted to facilitate execution, by guarding against a risk of dissipation over the period between judgment and the process of execution taking effect
2. By reason of its nature, a post-judgment Mareva will increase the pressure on a defendant to honour the judgment debt, but the mere increase in such pressure does not make it illegitimate or ‘in terrorem’
3. It cannot be said that (without more) the Angel Bell exception would be inappropriate in a post-judgment Mareva
4. It can be said, however, that it will sometimes and perhaps usually be inappropriate to include the exception in a post-judgment Mareva injunction
5. Refusal of the exception in a post-judgment Mareva is neither a starting point, a presumption, or a remedy of last resort, the appropriateness or otherwise of the exception should be treated as a question turning on all the facts in the individual case

Applying the legal position to the facts of this case, Lord Justice Gross dismissed MWP’s appeal, stating that he entertained no doubt that Sir Jeremey Cooke was amply entitled to remove the exception. 

Lord Justice Gross said that Sir Jeremy Cooke’s decision to remove the exception was a discretionary decision and that the Court of Appeal could not intervene unless MWP could establish some error of law or principle in the judgment. Lord Justice Gross also referred to the fact that this was not a case of ‘can’t pay’, but a case of ‘won’t pay’, and that every effort had been made by MWP to resist enforcement and make it more difficult. Further, Lord Justice Gross said that neither the judge nor the court takes lightly the suggested risk of the closing down of MWP’s business in consequence of the removal of the exception, but that the remedy was in MWP’s own hands and could be resolved by paying the judgment sum into court as security, resulting in the immediate discharge of the Mareva. 

Case comment 

In line with the principles set out in the Angel Bell case: Iraqi Ministry of Defence -v- Arcepey Shipping Co SA (The Angel Bell) [1981] QB 65, the courts have consistently acknowledged that allowing a defendant to make payments in the ordinary course of business is not inconsistent with the policy underlying a freezing injunction. 

Lord Justice Gross has clarified that the Angel Bell exception can equally apply to post-judgment freezing injunctions: It cannot be said that (without more) the Angel Bell exception would be inappropriate in a post-judgment Mareva. However, he has also clarified the fact that in some circumstances it may be appropriate to remove the exception: it will sometimes and perhaps usually be inappropriate to include the exception in a post-judgment Mareva injunction.

This article originally appeared in the April 2019 edition of shipping case digest. Other articles include:

Glencore Energy UK Ltd and Glencore Ltd -v- Freeport Holdings Ltd [2019] EWCA Civ 388

Lambert -v- VJ Glover Limited (1) and Friday (2): [2019] EWHC 776 (Admlty)