COURT OF APPEAL (CIVIL DIVISION)
LORD JUSTICE JONATHAN PARKER
JUDGMENT: APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS)
Lord Justice Jonathan Parker:
1. This is the judgment of the court. 2. This is an appeal by Mr Nicholas Edwards and Mr James Smith, as provisional liquidators of Swissair Schweizerische Luftverkehr-Aktiengesellshaft (“the Company”), against an order made by Neuberger J in the Chancery Division, Companies Court, on 2 August 2002 granting leave to Flightline Limited (“Flightline”) pursuant to section 130(2) of the Insolvency Act 1986 (“the 1986 Act”) to continue an action which it had commenced against the Company in the Queens Bench Division on 16 January 2002. In the action, Flightline claims some £4.2M as money owed to it by the Company, alternatively it claims damages. The judge granted permission to appeal.
3. The judge's judgment is reported at [2002] 1 WLR 2535, and for the purposes of this judgment we shall take it as read.
4. The substantive issue before the judge, as before us, is whether (as Flightline contends) Flightline has, as against the appellants, a valid charge over monies standing to the credit of an account at the Bishopsgate Branch of the NatWest Bank in the joint names of Messrs Allen & Overy and Messrs Field Fisher Waterhouse, respectively the former solicitors for the Company and the solicitors for Flightline, limited to £3.325M of those monies. If Flightline has such a charge, with the consequence that it is a secured creditor in respect of any judgment which it may obtain in the action up to a maximum of £3.325M, then it is accepted by the appellants that leave to continue the action should be granted. Conversely, if it has not, then Flightline accepts that such leave should be refused.
5. The judge concluded that Flightline has a charge over the modes in the joint account to secure any judgment which it may obtain in the action up to a maximum of £3.325M, and he accordingly granted Flightline leave pursuant to section 130(2) to continue the action.
6. Before the judge, argument was directed solely to the question whether the effect of what took place in relation to the setting up of the joint account was to create the charge for which Flightline contends. On this appeal, however, the appellants seek to raise a further argument, viz. that even if a charge was created, such charge is nevertheless void as against the appellants for non-registration pursuant to sections 395 and 396 of the Companies Act 1985.
7. After hearing full argument on the primary issue as to whether a charge was created, we concluded that that issue should be decided in favour of the appellants and that the appeal should accordingly be allowed. We therefore indicated to Mr Martin Pascoe QC (for the appellants) and Mr Gabriel Moss QC (for Flightline) that we did not need to hear argument on the secondary issue as to non-registration, and that we would give our reasons for allowing the appeal on the primary issue in writing and hand down our judgments in due course. This judgment is accordingly concerned only with the primary issue as to whether a charge was created.
8. The Company was incorporated in Switzerland. It formed part of the Swissair Group, which provided commercial air services in Switzerland and elsewhere. Flightline operated certain routes on behalf of the Company.
9. In October 2001 the group collapsed, and the Company repudiated its arrangements with Flightline. Flightline then commenced two actions against the Company. The first action related to the period prior to October 2001, and has since been compromised. The second action, which relates to the period after October 2001, is the action with which these proceedings are concerned. As already noted, this action was commenced on 16 January 2002, and seeks recovery of a sum of £4.2M. The claim is primarily in debt, but with an alternative claim for damages.
10. In the meantime, in October 2001 insolvency proceedings were taken against the group in Switzerland. On 5 October 2001 the Swiss court appointed a provisional administrator of the group, and in December 2001 it granted a debt re-structuring moratorium, the effect of which (under Swiss law) was to restrict the bringing or continuing of actions against companies in the group. We are told that that moratorium is still in place, and that unless some kind of debt-restructuring scheme is put in place, the eventual liquidation of the group is inevitable.
11. On the commencement of the action on 16 January 2002, Flightline applied without notice for, and was granted, a freezing order until 6 February 2002 restraining the Company from dealing with its assets in England and Wales, up to the value of £4.2M. The order was expressed to extend to the Company's interest in any account held by the International Air Transport Association (“IATA'), which at that time owed substantial sums of money to the Company. Notwithstanding that the standard from of freezing order as set out in paragraph 14 of the Practice Direction supplementing rule 25 of the Civil Procedure Rules (see, now, page 552 of Vol 1 of Civil Procedure (Autumn 2002 edition)) provides expressly (in paragraph 11 (4)) that the freezing order shall cease to have effect if the respondent provides security in a sum to be specified in the order, either by means of a payment into court or by some other agreed method, the freezing order as granted (and as subsequently continued) contained no such express provision.
12. The Company indicated that on the return date (6 February 2002) it intended not only to oppose any continuation of the freezing order but also to apply to discharge the order. The application to discharge, if successful ' would of course have exposed Flightline to liability under its cross-undertakings in the freezing order.
13. On 6 February 2002 the matter was adjourned to 14 February 2002 with an estimated length of hearing of half a day.
14. On 14 February 2002 the matter came before McCombe J, but there was not time to complete the argument on that day. Accordingly, by his order dated 14 February 2002 (“.the February Order”) McCombe J, by consent, adjourned the matter to a date to be fixed and continued the freezing order in the meantime, on agreed terms.
15. As at 14 February 2002 the Company was expecting to receive from IATA, within the next few days, a payment in excess of £4.2M. The Company was concerned that the entirety of the IATA monies should not be frozen, pending the adjourned hearing. In the event it was agreed that, pending the adjourned hearing, IATA should be at liberty to pay a sum of £4.2M out of monies owed by it to the Company into an account in the joint names of the parties' solicitors, and having done so to release to the Company the balance of any monies owed to the Company, and that thereupon the freezing order should immediately cease to have effect. These terms were duly incorporated in paragraphs 3 and 4 of the February Order. Paragraph 5 of the February Order was in the following terms:
- “If the sum of [£4.2M] is paid into such joint bank account as referred to in paragraph 3 of this Order, it shall be retained in such account and no sums shall be withdrawn therefrom pending further order of the court or the written consent of both [firms of solicitors].”
16. Shortly after the making of the February Order the two firms of solicitors opened the joint account, which was designated by the Bank as a “Solicitors' Reserve Account”. It was entitled “Allen & Overy and Field Fisher Waterhouse Joint Escrow General Client Account”. On 18 February 2002 £4.2M was paid by IATA to Allen & Overy and held by Allen & Overy in its client account. On 20 February 2002 Allen & Overy paid that sum into the joint account.
17. The date fixed for the adjourned hearing of the matter was 13 March 2002. In the meantime, however, the parties had reached agreement on terms of compromise of the interlocutory dispute. These terms were incorporated in a further consent order made by McCombe J on 13 March 2002 (“the March Order”).
18. The March Order was expressed to be made on undertakings by the parties. Flightline undertook not to apply for a further freezing order over the Company's assets without giving 2 clear days' written notice of the application. The Company's undertaking was in the following terms (set out in the Second Schedule to the March Order):
- 'Not to withdraw or in any way dispose of or deal with or encumber its interest in the monies in the [joint account] up to a limit of £3,325,000 pending further order of the court or the written consent of [the two firms of solicitors].”
19. The body of the March Order (which was expressed to be made by consent) provided merely that the freezing order be discharged; that the Company's application to discharge it be dismissed; and that there be no order as to costs. It also contained general liberty to apply.
20. On 4 April 2002 the appellants were appointed provisional liquidators of the Company. On 16 October 2002 the Company was compulsorily wound up and the appellants were appointed liquidators of the company by the Secretary of State. It is common ground that at all material times the Company was in serious financial difficulties, and that such difficulties were known to Flightline.
21. On 28 May 2002 Flightline issued its application pursuant to section 130(2) of the 1986 Act for leave to continue its action against the Company.
SECTION 130(2) OF THE 1986 ACT
22. Section 130(2) of the 1986 Act provides as follows:
- `When a winding up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by the leave of the court and subject to such terms as the court may impose.”
23. After setting out the factual and procedural background, the judge referred to the two distinct lines of authority which had been cited to him. One such line of authority (exemplified by In re Ford [1900] 2 QB 211, W. A. Sherratt Ltd v. John Bromley (Church Stretton) Ltd [1985] 1 QB 1038 CA, Halvanon Co Lid v. Central Reinsurance Corpn [1988] 1 WLR 1122, and Re Mordant [1996] 1 FLR 334) establishes that where money is paid into court by a defendant as a condition of the grant of permission to defend the action or as an offer of compromise under the relevant procedural rules, or where it is paid into an account out of court but with the intention that the same consequences shall follow as if it had been paid into court, the claimant has a charge on the money so paid to secure any judgment obtained by him in the action. The other line of authority (exemplified by Cretanor Maritime Co Lid v. Irish Marine Ltd [1978] 1 WLR 966 and Re Multi Guarantee Co Ltd
24. The judge continued (in paragraphs 26 and 27 of the judgment):
- “26. The present case is something of a hybrid. On the one hand, as in all the cases where the money (whether in Court or in a bank account) has been held to be security for claim, it is, subject to the parties agreeing otherwise, under the control of the Court which must mean the Court which is seized of the action in relation to which the payment has been made. In all those cases the money had been treated as security. On the other hand, unlike those cases, in this case the money has been paid to discharge, or in substitution for, an order which is non- proprietary. That can therefore be said to support the contention that, in accordance with the part of the reasoning in Multi Guarantee, the money should not be treated as security for the claimant.
- 27. It would therefore be idle to suggest that the argument raised by Mr Pascoe on behalf of the [provisional liquidators]. to the effect that [Flightline] cannot claim that the money in the joint account is to be treated as security for its claim, has no force. On the contrary, it is an attractive argument, which was attractively advanced. Nonetheless, I have reached the conclusion that [Flightline's] case is correct, and that the money held in the joint account pursuant to the March order is indeed security for any judgment which the applicant may obtain, whether by consent or otherwise, in the claim.”
25. The judge went on to express his reasons for reaching this conclusion.
26. In the first place, the judge noted that the effect of the March Order was that the money was to be held in the account subject only to what the court might order (the judge took the view that the reference to the parties' consent added nothing in this respect, since it is always open to the parties to agree how to deal with money paid in connection with an action). The judge went on (in paragraph 28 of his judgment):
- “The effect of the March Order is, therefore, that the £3.325M is sterilised and is beyond the reach of the Company, unless and until the Court orders otherwise. On the face of it, therefore, as with a payment into Court (or into a joint bank account) in circumstances such as those in Ford, Sherratt or Mordant, the money will remain in the joint account until the claim is disposed of One would therefore expect it to be available to satisfy any judgment in the applicant's favour...”
27. In paragraphs 29 and 30 of the judgment the judge said this:
- “29. The retention of the £3,325M in the joint account pursuant to the Company's undertaking in the March order was agreed in order to discharge the freezing order. The purpose of the freezing order was to protect the applicant from the risk of being unable to [obtain satisfaction of] any judgment it obtained on the claim, owing to a dissipation of the Company's assets. It seems to me that, on a sensible, commercial view, what the parties intended by agreeing the March order was that the freezing order was no longer necessary because the applicant had security for its claim, in the form of the money in Court. The perceived danger of the Company dissipating its assets remained, but following the March order (and indeed following the February order), the applicant had no ground for maintaining the freezing order because it was protected by the payment of the money into the joint account.
- 30. It is true that there is nothing in the Company's undertaking in the March Order which indicates how the Court is to exercise its power to control the money in the joint account. There is therefore obviously substantial room for argument that the fact that the money is to be effectively controlled by the Court means that the Court should regard it in the same way as it would regard assets frozen by the freezing order, particularly as the money was paid into the joint account effectively in substitution for, or to discharge, the freezing order. However, if that is what the parties had intended, then, particularly in the light of the authorities which I have referred to dealing with payments into Court or into accounts which were in some way to be controlled by the Court, in the context of cases which are already under way, one would have expected them to spell it out. Thus, it does not seem likely that, after the March order, the applicant or the Company would have intended the Court to be able to permit the Company to use the monies in Court to discharge its legal costs and expenses in connection with the claim: if that had been their intention, it would have been only too easy to say so. “
28. The judge's second reason for concluding that the money in the joint account stands as security for Flightline's claim was the existence in the standard form of freezing order of a provision that the freezing order shall cease to have effect if the respondent provides “security” by paying money into court or by some other agreed method. The judge accepted, however, that this point was weakened by the fact that the freezing order in question did not contain such a provision. The judge went on (in paragraph 31 of the judgment):
- “As the freezing order will, ex hypothesi, have been discharged as a result of the payment of such “security”, it appears to me that the natural inference is that such payment would be security for the claimant's claim. Accordingly, I consider that the notion that a payment into Court or into a joint account in the names of both parties' solicitors to discharge or buy off a freezing injunction should then be treated as security for any judgment which the claimant subsequently obtains, is not by any means inherently inconsistent with the notion of a freezing order.”
29. The judge's third reason for his conclusion was that he considered that, on analysis, the decision of this court in Multi Guarantee provided no significant support for the appellants' argument, since in Multi Guarantee at the time when the money was paid into a joint account proceedings had not yet been commenced, albeit they had been threatened. The judge considered that there was “a very substantial difference” between a payment into a joint account when there were no legal proceedings pending, and one which is made in the context of litigation which is already under way. Further, in so far as Nourse LJ (who gave the leading judgment in Multi Guarantee) relied on the fact that the payment was made in the context of a possible application for a freezing order, the judge noted that the Court of Appeal did not appear to have considered the provision in the standard form of freezing order to which reference has already been made, and that the fact that the background in that case included the possibility of a freezing order was merely one of the factors which weighed with the Court of Appeal. The judge suggested that equal, if not more, weight appeared to have been placed by the Court of Appeal on the negotiations between the parties, and the absence of any express agreement as to the basis upon which the money in the joint account in that case was to be held.
30. Fourthly, the judge considered that the fact that a payment of money into Court or into a joint bank account in order to discharge a freezing order converts the claimant pro tanto into a secured creditor in respect of his claim was not such a surprising result as might at first appear. The judge went on to point to what he regarded as similarities between the position of a claimant in such a case and that of a claimant who has obtained the benefit of a payment into court. The judge took the view that there was no intrinsic reason why a claimant who has obtained a freezing order, and in the process has incurred risk and expense, should not be in a better position than other creditors, either by being paid or by having the benefit of security. However, the judge went on (in paragraph 35 of the judgment) to acknowledge:
- “...... that it is arguable that a creditor who applies for summary judgment and, as it were, only fails by a short head, as a result of which there is a payment into Court, has, by his action, justified his secured status rather more obviously than a creditor who achieves that status through a payment into Court to discharge a freezing injunction. “
31. Finally, the judge referred to three other matters relied on by Flightline which, in the judge's view, provided some further support for the conclusion which he had reached: first, the fact that the joint account was described as an “escrow” account; secondly, the 20 per cent or so reduction in the amount to be paid into the joint account; and thirdly the fact that at the material time the Company was in serious financial difficulties. In connection with this last matter, the judge commented that it must have been reasonably foreseeable that the Company would go into some form of liquidation in the near future. He considered that in those circumstances it was rather more likely that the parties would have agreed the provision of security rather than merely a mechanism for the replacement of the freezing order.
32. Mr Pascoe submits that having concluded (in paragraph 30 of the judgment) that the terms embodied in the March Order - including the Company's undertaking - were “effectively in substitution for, or to discharge, the freezing order”. the judge ought to have gone on to conclude that just as the freezing order created no security rights neither did the March Order.
33. Whilst accepting, as he must (see ICS Ltd v. West Bromwich Building Society [1998] 1 WLR 986 at 913A-13 per Lord Hoffmann), that in determining the effect of the March Order regard may not be had to “the previous negotiations of the parties or their declarations of subjective intent”. Mr Pascoe submits that it is not only legitimate but essential for the Court to consider the effect of the March Order against the background of the February Order. He submits that the terms and effect of the February Order afford strong support for the conclusion that the effect of the March Order was merely to provide an alternative form of freezing relief pending trial. Thus he submits firstly that there is nothing on the face of the February Order to suggest that the parties intended to do more than provide an alternative mechanism of a 'freezing' nature. Secondly, he points out that the February Order was to continue only until the adjourned hearing of the interlocutory proceedings - proceedings in which the Company was not only opposing any continuation of the freezing order but was also intending to seek the discharge of the freezing order ab initio, with consequential exposure of Flightline to liability under its cross-undertakings. Viewing the February Order in that context, it is (he submits) inherently extremely improbable that the parties would have intended to create security rights in favour of Flightline.
34. Turning to the March Order, Mr Pascoe submits that (as in the case of the February Order) there in nothing on the face of the March Order to indicate that in compromising the interlocutory proceedings the parties intended to do more than substitute an alternative mechanism of a '.freezing' nature, albeit (in contrast to the February Order) a mechanism which was intended to continue until trial or further order. He submits that the words “pending further order of the court” in the Company's undertaking in the March Order are entirely consistent with an arrangement for the freezing of the monies in the joint account (up to the specified limit), as is the grant in the body of the March Order of liberty to apply. Secondly, he submits that that conclusion is reinforced when the March Order is viewed against the background of the February Order, which (as he submits, see above) plainly created no security rights.
35. Mr Pascoe submits that it is nothing to the point that the freezing order as granted on 16 January 2002 and as subsequently extended did not include the provision as to security which appears in the standard form of freezing order.
36. In the course of argument we invited Mr Pascoe to comment on the well-known passage in the judgment of the Privy Council in Palmer v. Carey [1926] AC 703 at 706-7, to which we drew his attention (and to which further reference will be made below), to the effect that in order for an equitable charge to be created over a specific fund it is necessary to find not merely a restriction on disposal of the fund by the debtor but also an obligation on the debtor to pay the debt out of the fund. In response to that invitation, Mr Pascoe submitted that in the instant case there was nothing in the March Order to support the existence of such an obligation.
37. Mr Moss submits that the resolution of the issue whether the March Order created security rights involves the two-stage process identified by Lord Millett in Agnew & Anor. v. CIR [2001] 2 AC 710 at 725 (paragraph 32). The first stage is to ascertain from the language which the parties have used the nature of the rights and obligations which they intended to create: the second stage is to consider whether, as a matter of law, those rights and obligations give rise to a charge. So, he submits, the question to be addressed in the instant case is not 'Did the parties intend that the March Order should create a security?', but rather 'As a matter of law, does the March Order have the effect of creating a security?'.
38. As to the first stage in the two-stage process, Mr Moss submits that as a matter of construction of the March Order it was intended that the monies in the joint account be available to Flightline to satisfy any judgment which it might obtain in the action, up to the specified limit of £3.325M. He relies in this connection (more strongly here than below, it would appear) on the fact that the title to the joint account includes the word 'escrow'. He referred us to one of the dictionary meanings of the word as 'a deposit held in trust or as security'. He also referred us to a passage in Halsbury's Laws of England, 4th Edn, Vol 36 at para 36 where the technical conveyancing meaning of the word is explained. Thus a deed which is delivered 'in escrow' will not become, binding on the party delivering it unless and until some specified event happens or some specified condition is fulfilled. Mr Moss submits that notwithstanding that the word 'escrow' in the title to the joint account is plainly not used in its strict technical sense, nevertheless the flavour of word points towards the existence of some kind of security rights and the fact that the parties have seen fit to include that word in the title to the joint account is an indicator that they regarded the March Order as having created a security.
39. Mr Moss submits that it is of central importance that under the March Order (as under the February Order) the monies in the joint account were placed under the control of the court. - He accepts that-that is not in itself sufficient to take the instant case out of the category of freezing order cases and to place it in the same category as cases where money is paid into cowl, since the control of the court is present in each category of case; but he submits that what is crucial in the instant case is that under the terms of the March Order the court may direct that the monies in the joint account (up to the specified maximum) by paid out to Flightline in or towards satisfaction of any judgment which it may obtain in the action. That additional feature, he submits, is sufficient to place the instant case in the same category as cases where money is paid into court.
40. As to Palmer v. Carey, Mr Moss submits that the security created by the March Order is not a security in the nature of an equitable assignment but is rather in the nature of what Professor Roy Goode, in his book Commercial Law (2nd edition), categorises as c procedural securities' (see ibid. pp.671-3). Professor Goode includes in that category the payment of money into court, whether in fulfilment of a condition of leave to defend or in satisfaction of the claimant's claim, or in compliance with an order for security for costs. Professor Goode goes on to contrast an order, such as a freezing order, which merely restrains the defendant from dealing with his assets without attaching them in any way and which creates no proprietary rights.
41. Mr Moss submits that the effect of the March Order, as a matter of law, is to be determined without reference to the February Order. Alternatively, if it be legitimate for this purpose to have regard to the terms of the February Order, Mr Moss submits that it is by no means clear that the February Order was not intended to create rights and obligations extending beyond the date of the adjourned hearing. He submits that, from a commercial point of view, there is good reason to suppose that in agreeing the terms of the February Order the parties were intending that the monies in the account should be available to satisfy any judgment which Flightline might obtain in the action. At all events, he submits that that is the only sensible commercial interpretation of the terms of the March Order, and that the judge was right so to conclude.
42. Mr Moss also points to the absence from both the February Order and the March Order of many of the detailed, but essential, provisions of the freezing order as originally granted on 16 January 2002, including in particular the power for the respondent to vary or discharge the order. He submits that the judge was right to conclude that had it been intended that the March Order was intended to do no more than provide a substitute for the freezing order, the parties would have been likely to say so in clear terms.
43. In Palmer v. Carey a lender agreed to finance the activities of a trader in goods, on terms that the proceeds of sale of the goods be paid into an account in the name of the lender, and that the lender recoup himself on a monthly basis in respect of sums advanced, with the balance being released to the trader subject to a right for the lender to retain a sum representing an agreed share of the trader's profit. The trader subsequently became bankrupt. At the date of the bankruptcy, a substantial sum was owing to the lender in respect of sums advanced. The lender claimed security over goods and proceeds of sale in the hands of the trader. The Privy Council, reversing the decision of the High Court of Australia (Knox CJ dissenting),.held that the lender had no such security. In the course of its judgment (delivered by Lord Wrenbury), the Privy Council said this:
- “The law as to equitable assignment, as stated by Lord Truro in Rodick v. Gandell, is this: 'The extent of the principle to be deduced is that an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor, will create a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers.'
- An agreement for valuable consideration that a fund shall be applied in a particular way may found an injunction to restrain its application in another way. But if there be nothing more, such a stipulation will not amount to an equitable assignment. It is necessary to find, further, that an obligation has been imposed in favour of the creditor to pay the debt out of the fund. This is but an instance of the familiar doctrine of equity that a contract for valuable consideration to transfer or charge a subject matter passes a beneficial interest by way of property in that subject matter if the contract is one of which a Court of equity will decree specific performance.” (Emphasis supplied.)
44. The above statement of principle was adopted verbatim by the House of Lords in Swiss Bank Corporation v. Lloyds Bank Ltd and others [1982] AC 584 at 613A-E per Lord Wilberforce.
45. The judgment in Palmer v. Carey then turns to the provisions of the agreement between the lender and the trader in that case, and in particular the provision in article 3 of the agreement that the proceeds of sale of the goods be paid into an account in the name of the lender. The judgment continues:
- “Under art. 3, however, the proceeds are to be paid to the lender's credit at his bank. This gives the lender a most efficient hold to prevent the misapplication of the proceeds, but there is nothing in that article to give him a property by way of security or otherwise in the moneys of the borrower before or after he, the lender, has them in his charge.”
46. The judgment goes on to express the agreement of the Privy Council with the following passage from the dissenting judgment of the Chief Justice in the court below:
- “The words of the agreement on which the appellant relies are apt to express a contract by the bankrupt to apply the money in the purchase of goods, to sell those goods, and to pay the proceeds of sale into the appellant's bank account, but I can see nothing in them to indicate that the intention was to assign any interest in the goods purchased by the bankrupt or to create either a charge over- or. a trust of such goods in favour of the appellant.”
47. Although Palmer v. Carey concerned contractual arrangements made between the parties out of court, in our judgment Lord Wrenbury's statement of principle applies directly to consent orders, such as the February Order and the March Order, which embody terms agreed between the parties; and also indirectly, by analogy, to other court orders. Thus, the reason why a freezing order does not create a security right over the assets from time to time subject to it is, in my judgment, that a freezing order - without more - does not impose an obligation on the part of the respondent to satisfy any judgment debt out of those assets. Rather, a freezing order provides what Lord Wrenbury described (in the passage quoted above) as “a most efficient hold to prevent the misapplication [of those assets]”. As Lord Wrenbury makes clear, that is not enough to create a security right. On the other hand, cases in Professor Goode's category of 'procedural securities' are cases in which the clear purpose of the order is to afford a claimant an element of security in the satisfaction of his claim. Hence, by analogy with the principle stated by Lord Wrenbury, a security right is created.
48. The question in the instant case, then, is whether one can spell out of the terms of the March Order a provision (albeit not expressed in terms) to the effect that the Company must satisfy any judgment obtained by Flightline (up to the specified maximum of £3.325M) out of the monies in the joint account; or, to put it the other way round, a provision to the effect that if Flightline is successful in obtaining a judgment in the action it is entitled to payment out of such monies (or of so much thereof as is required to satisfy the judgment) as a matter of right.
49. We find ourselves wholly unable to spell out of the March Order any such provision. Firstly, we can see nothing on the fate of the March Order (without at this stage bringing into account any background facts) to indicate that anything other than continuing interim protection of a 'freezing' nature was intended to be provided. In particular, the terms of the Company's undertaking, as contained in the Second Schedule to the March Order, seem to me to be entirely consistent with the continuance of interim protection of a 'freezing' nature until trial or further order. As Mr Moss accepted, the mere fact that the monies in the account were under the control of the court does not serve to take the case out of the freezing order category. Secondly, when one takes account by way of background of the terms of the February Order, the conclusion that the March Order confers no security rights is in my judgment reinforced. We agree with Mr Pascoe that the February Order plainly did not achieve anything more than the continuation of interim protection of a 'freezing' nature until the date of the adjourned hearing.
50. Nor are we persuaded that Mr Moss's reliance on the inclusion of the word 'escrow' in the title of the joint account has the significance which he seeks to give it. In our judgment there is no satisfactory basis for inferring (because there is no direct evidence about it) that the use of that word indicates that the parties for their part understood the March Order to create a security right. In any event, as Mr Moss himself asserts, the question whether the March Order created a security right is ultimately a question of law.
51. Equally, it seems to us to be nothing to the point that the freezing order as granted on 16 January 2002 does not contain the subparagraph in the standard form relating to the provision of security.
52. As to the figure of £3.325M which appears in the Company's undertaking in the March Order, as compared with the figure of £4.2M which appears in the February Order, given that the March Order represented a compromise of the interlocutory dispute (including the Company's application to discharge the freezing order ab initio) we find it impossible to draw any relevant inference from the fact that the £4.2M was reduced to £3.325M. Nor does the background of the Company's serious financial difficulties seem to us to afford any reliable indication as to whether the March Order created a security right.
53. In respectful disagreement with the judge, therefore, we conclude that the March Order did not confer any security right on Flightline and that the appeal should accordingly be allowed on the primary issue.