Case No HC 1999 00651

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

The Royal Courts of Justice
Strand
London WC2A 2LL

Date: Friday 26 February 1999

B e f o r e

MR JUSTICE NEUBERGER
B e t w e e n :
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	HM CUSTOMS & EXCISE	Plaintiff	
	-v-		
	ANCHOR FOODS LIMITED	Defendant	
	(No.2)		
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(Tape Transcription of Smith Bernal Reporting Limited
180 Fleet Street, London, EC4A 2HD
TEL:  0171 421-4040
Official Shorthand Writers to the Court
Member of the Tape Transcription Panel

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MR R MCCOMBE QC, MR P GIROLAMI and MISS A TIPPLES (Instructed by Solicitor for the Customs & Excise, London, SE1 9PJ) appeared on behalf of the Plaintiff.

MR D PANNICK QC, MR A LEWIS and MISS S BRISTOL (Instructed by Messrs Dibb Lupton Alsop, London, EC4) appeared on behalf of the Defendant.
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JUDGMENT

MR JUSTICE NEUBERGER:    
Introduction
This is the hearing of a motion by order under which the plaintiffs, The Commission of the Customs and Excise ("Customs"), seek a Mareva injunction restraining the defendant, Anchor Foods Limited ("AFL"), from selling or disposing of its assets otherwise than in the course of business and for ancillary relief.  The application is made because AFL is proposing to transfer effectively the whole of its undertaking to another company, New Zealand Milk (UK) Limited ("NZM"), for what it contends is the market value of that undertaking, £9m.  This would leave AFL with one asset, namely cash of £9m and one overall liability, namely the sum which Customs claim, which is in the region of £264m.  
The issues raised are of some general interest in that they include consideration of (1) the court's jurisdiction to grant a Mareva injunction, (2) the interrelationship of the Mareva jurisdiction and the insolvency legislation and (3) the discretion of the court to require a cross-undertaking in damages where the plaintiff is an emanation of the Crown.
Outline of the facts
Customs duty collected within the member states of the European Union form part of the European Union's own resources.  The United Kingdom owes obligations to account for and pay Customs duties incurred within the United Kingdom.  Customs are responsible on behalf of the United Kingdom for the collection of Customs' duties incurred within the United Kingdom.
AFL is, albeit indirectly, a wholly owned subsidiary of the New Zealand Dairy Board ("NZDB").  It processes, distributes and sells, under the "Anchor" name, butter and other dairy products from New Zealand, in the United Kingdom and elsewhere in the European Union.  It has just under 30 per cent, which is by a significant margin the largest, share of the UK market.  Its most recent audited accounts for the year ended 31 May 1998 show total sale revenues of over £195m.  Customs contends that it is owed by AFL a sum in the region of £264m in respect of Customs duty.  AFL had issued appeals to the VAT and Duties Tribunal ("the Tribunal") which may ultimately reduce or even extinguish AFL's liability.  Customs contends that by virtue of the provisions of the Finance Act 1994 such appeals do not in themselves prevent the whole of the duty claimed from being due and payable in the meantime.  Indeed Customs have issued the writ in these proceedings seeking payment of the £264m.  AFL, on the other hand say that the claim is unenforceable in respect of the whole of the £264m until the appeal procedure has been exhausted, but it accepts Customs has a good arguable claim.  AFL relies on the terms of the same Act and also on the provisions of the European Convention on Human Rights, Article 6.
AFL had intended to transfer on 6 February 1999, its entire business ("the business") to a new company, NZM, for a price of £9m in accordance with a valuation by Ernst & Young, the well known chartered accountants.  NZM is also a wholly owned subsidiary of NZDB and has been formed for the purpose of taking over the business.  Apart from the £9m, this would leave vested in AFL only such debt, if any, as it transpires it owes to Customs.  
On 5 February 1999 Hart J granted, ex parte, an injunction at the suit of Customs restraining the proposed transfer of the business over 9 February 1999.  The writ in these proceedings seeking payment of the sums alleged to be due to Customs was issued the following day.
At a contested hearing on 9 February 1999 Lindsay J decided that the injunction granted by Hart J, as slightly varied, should be continued over the hearing of Customs' application as a motion by order.  He also gave directions as to evidence.  AFL then indicated through counsel that it would prefer to give an undertaking to the court in lieu of an injunction, and such an undertaking has been given and accepted by the court.
Some relevant details
Since 7 March 1997 Customs has issued about 25 post clearance demand notes ("PCDNs") amounting in total to some £264m against AFL in respect of alleged arrears of Customs' duties due on butter and cheese imported into the EU and principally into the United Kingdom from New Zealand between 1994 and 1998.  These PCDNs were issued pursuant to Community Customs Code Council Regulation EEC 92/2913 ("the Code").  AFL has lodged appeals to the Tribunal against each of them. I have seen a brief summary in the first affidavit of Mr Graham Milne, a director, indeed the chairman, of AFL, as to the basis upon which Customs issued the PCDNs and the grounds upon which AFL has mounted its appeals.
The appeals are not yet listed for hearing as there is an issue between AFL and Customs as to whether AFL has provided sufficient security in the sum of £4.85m prior to the appeal pursuant to Article 244 of the Code.  That issue is due to be heard by the Tribunal over a 4-day hearing due to take place in about 9 or 10 weeks' time.  
In the meantime, NZDB has been considering transferring the business, indeed the entire undertaking, carried on by AFL ("the business") to a new company.  The reasons are explained in Mr Milne's first affidavit as follows: 
"The directors have determined to sell the business and assets of AFL as a consequence of the ....PCDNs.  Although all are disputed, the existence of the claims and the uncertainty concerning the possible outcome of the forthcoming application for a certificate of hardship pose a serious threat to the ability of AFL to continue to operate.  The proposed transaction, which is contemplated by the Ernst & Young valuation, whereby the business and assets are sold to NZM, will achieve the best possible outcome for all those with a legitimate interest in AFL, namely its undisputed creditors, its customers, it suppliers, its employees and its shareholders."
On 19 August 1998 a meeting took place between Mr Milne and Mr Cowley, the head of the Trade Policy Group at the Customs Policy Directorate, with a view to seeing if the disputes over the PCDNs could be resolved by agreement. At that meeting, Mr Milne told Mr Cowley of NZDB's intention to set up a new company to buy the business following which AFL would be wound up.  Mr Milne made reference to the business probably being worth less than £10m.  He said that he recognised that Customs would want to see an independent valuation before the sale went ahead.  At a subsequent meeting on 10 September 1988 Mr Milne told Mr Cowley that the business was going to be valued by one the "the big five" accountancy firms for the purposes of the proposed sale, and that an independent firm which had not dealings before with AFL or NZDB would be selected.  Mr Cowley understood Mr Milne to indicate that, if the transaction was in any way improper, it could be challenged by the liquidator once AFL had been placed in liquidation and that was understood by NZDB to be the Customs' remedy if the transfer took place at an undervalue.
At a further meeting of 12 October 1998 Mr Cowley referred to terms which had been put forward for settlement by AFL to Customs and indicated that Customs was unlikely to agree those terms.  He also told Mr Milne that, if a sale of the business was to take place, it should be "for proper consideration that should stand up to scrutiny".  
A week earlier, on 5 October 1998, Ernst & Young had been instructed by AFL's solicitors to prepare a valuation of the business.  In the letter of instruction AFL's solicitors stated that the valuation should be on a market value, vendor/willing purchaser basis.  They also stated that information would be provided to Ernst & Young by AFL, and the letter then said:
"Except to such extent as AFL may request and you may agree in writing that you will not seek to verify the accuracy of the information or explanations provided to you by or on behalf of AFL and for which information the provider will be solely responsible."
On 9 December 1998 Ernst & Young produced a report ("the Report") consisting of 44 pages together with 32 pages of appendices and charts.  At the beginning of the Report there is a passage headed "Limitation of Scope" which reads:
"For the purposes of this valuation we have:

(a)  used, without independent verification the audited accounts for the years ended 31 May 1993 to 1998, management accounts, budgets and strategic plan prepared by management.  We have relied upon documentary evidence provided by, and on discussions with certain directors of AFL and on our own researches into the market and industry;

(b)  assumed that NZDB will enter into a Supply Agreement with the proposed purchaser on terms similar to those which are currently operated between AFL and NZDB and that the 'Agreed Prices' arrived at under the agreement are on terms comparable with those which would derive in an arm's length arrangement between independent parties; 

(c)  assumed that NZDB as owner of the 'Anchor' trademark and brand name will enter into an arrangement with the proposed purchase which will permit the use of the 'Anchor' brand name on a similar basis to that currently enjoyed by AFL and that permission to use 'the name on the future dairy products will not be unreasonably withheld;

(d)  assumed that the future trading relationship between NZDB and the proposed purchaser will be on a commercial basis;

(e)  not taken into account any synergistic benefits which might accrue to a specific purchaser.  It is not possible to quantify with any degree of certainty the quantum of these benefits if any:"

The "Conclusion" of the Report was in the following terms:
"We set out in appendix 14 our calculation of the value of the enterprise based on the detailed cash flow projections.  The value determined on this basis is in the range of £7.9 million to £8.3 million.

Conclusions on value:

Our calculations of the current market value of the net assets and business of AFL using both the capitalisation of earnings and the discounted cash flow approaches are as follows:

Capitalisation of earnings 	
				£10 million - £11.5 million

DCF				£7.9 million - £8.3 million

Having regard to all of the matters discussed in this report, and in particular

AFL's modest growth prospects which will rely on its ability to develop and successfully launch sufficient new products to replace the expected downturn in the traditional packet butter business

the uncertainty at this date attaching to the continuity of supply of butter and cheese to AFL from New Zealand in the medium to longer term

we conclude that the current market value of the net assets and business of AFL lies in the range of £8 million to £10.5 million." 
On 12 January 1999 the Report was sent by Mr Milne to Mr Cowley under a covering letter, together with a pro forma balance sheet, as at December 1998, of AFL showing total assets of about £45.7m and total liabilities of about £37.7m.  The letter stated that it was the intention to transfer the business from AFL to NZM on 23 January at a price fixed in accordance with the Report and that the precise figure would be communicated to Mr Milne "at our next meeting scheduled for Friday 29 January".  
Mr Cowley then consulted an in-house accountant at Customs who came to the conclusion that the business was worth substantially more than the £8m - £11½m at which Ernst & Young had valued it.  The 29 January meeting, referred to in the 12 January letter, duly took place.  Mr Milne told Mr Cowley that the sale had not gone ahead but was due to take place on 6 February.  Thereafter, having considered the matter, together with their legal advisers, Customs decided to apply for the relief which is now sought before me and to issue the writ.
The Valuation Evidence
Customs have filed affidavits from two accountants, both partners in BDO Stoy Hawyard ("BDO").  They are Mr Christopher Swinson, who is the senior partner of BDO and the President of the Institute of Chartered Accountants of England and Wales, and Mr John Clemence who has had over 20 years' experience of valuing businesses and companies.  They each say that they have independently considered the Report and each have concluded that Ernst & Young's valuation is "fundamentally flawed".  Each of them considers that the value of the business is "substantially higher" than the value ascribed by the Report and Mr Swinson says that he "entertains no real doubt that £10.5m does not reflect AFL's value by a very considerable margin".  He also says that he should "be surprised if AFL's value were above £100m or below £30m".  Mr Clemence has sworn a much shorter affidavit indicating his agreement with Mr Swinson.
Mr Swinson identifies two main reasons for disagreeing with the Report.  First he is sceptical at the very low level of profit shown by AFL and suggests that it may be attributable to NZDB seeking to minimise the profit of AFL and, in effect, to repatriate that profit in New Zealand.  Secondly he suggests that the Report overlooks the special value of the business to NZDB, as a source of marketing a substantial quantity its dairy products in the EC and, in particular, the UK, and the special value to a competitor who might wish to get into this market, either from nothing or from some sort of base, effectively at the expense of NZDB.  Both Mr Swinson and Mr Clemence emphasise that their views have been based on two weeks' consideration of the Report without access to relevant documents relating to AFL or NZDB.  However, Mr Swinson emphasises that that does not mean "that I entertain any real doubt about the views I have formed".  
There is an affidavit in reply from Mr Eales, the partner of Ernst & Young's business valuation group.  He was responsible for the Report, and he says in his affidavit, that even £30m (which it will be recalled is the lowest figure ascribed to the business by Mr Swinson and Mr Clemence) is "far in excess of the open market value of AFL".  Mr Eales goes on to explain in his affidavit why he disagrees with Mr Swinson as to the doubts he expresses about the level of profits of AFL and why he considers Mr Swinson and indeed Mr Clemence, are labouring under misapprehensions when they criticise the Report for the second reason they put forward.
In summary, Mr Eales says:
"Although I have not had the opportunity in the time available to consider all of the points raised by Mr Swinson in his Affidavit my principal conclusions are:-

	(a)  that the basis of valuation adopted by Mr Swinson is fundamentally flawed as it is based upon assumptions and hypotheses which are not valid; and

	(b)  that the net margins assumed by Mr Swinson in arriving at his valuation range of £30 million to £100 million are not commercially realistic nor supported by the evidence contained in his Affidavit.

The above two points lead me to the conclusion that the opinion arrived at by Mr Swinson is not credible or supportable.

Nothing in Mr Swinson's Affidavit causes me to change my opinion that the current market value of the business and net assets of AFL as at the date of my report lies within the range of £8 million to £10.5 million."
His view is supported in a second affidavit of Mr Milne who sets out some of the facts, upon which Mr Eales relies, from first hand knowledge and experience of the market in which AFL operates; he also exhibits a bar chart and a graph supporting his evidence.  Subsequently Mr Clemence, having read in draft those two affidavits on behalf of AFL, has sworn a short further affidavit reiterating his view, saying that he has not been persuaded to change it by virtue of what Mr Eales and Mr Milne have said.
Prejudice alleged by AFL
Through Mr Milne, in his first affidavit, AFL contends that it will suffer real prejudice if the injunction is granted.  First he says that there is the inconvenience of delay, some delay having already occurred since the original date proposed of transfer of 23 January 1989.  There is an arrangement in place whereby NZM is the agent of AFL and Mr Milne says "the longer the business is run under this agreement the more likely the complications will occur.  While I cannot speculate as to their nature, they could involve considerable cost".  Secondly, he states that substantial costs, amounting to some £200,000, have already been spent in anticipation of the transfer: these costs are for art work, project management costs and the like.  Thirdly, he points out that AFL is "in the middle of a major information system upgrade", in particular to make its systems fully year 2000 compliant.  Fourthly, he observes that the 430 employees of AFL are placed at difficulty with the current uncertainty and apparent change of tack.  Fifthly he says there will be adverse publicity which could be extremely damaging to sales as a result of the injunction; this, he states, is particularly damaging in the context of what he describes as the "highly competitive market in which AFL competes".   Sixthly he says:
"Equally, should the injunction become public and therefore known to AFL's substantial suppliers of packing or marketing services, such companies would be likely to withdraw credit lines to the company.  Given AFL's previously mentioned losses in prior years, and the security it has had to provide to Customs and Excise, AFL's bankers are at the limit of their willingness to extend further credit to AFL.  Some credit agencies have already downgraded AFL's rating, following the filing of its audited accounts for the year ended 31 May 1998, a copy of which is at pages 39 - 61.  Further adverse publicity will have a damaging effect upon AFL's business."
I turn to the arguments which have been put forward.  They were in each case, both in writing and orally, effectively and efficiently advanced.  
Customs' Case
As put forward by Mr Richard McCombe QC, who appears with Mr Paul Girolami and Miss Amanda Tipples, the contentions of Customs can be summarised as follows.  First, they have, on their case, a present enforceable claim, albeit subject to AFL's rights of appeal, or, on AFL's case, a good arguable claim for £264m, against AFL.  Secondly, AFL is proposing to dispose of its entire undertaking, namely the business, for £9m and there is credible evidence, which is provided by independent and experienced accountants, that the business to be disposed of is worth substantially more than that.  Thirdly, the fact that there is no intention on the part of AFL to dissipate its assets, and in particular to sell its business at an undervalue is irrelevant: see The Niedersachsen [1983] 1 WLR 1412 and Gee on Mareva Injunctions and Anton Pillar relief, 4th ed, pages 189 - 193.  Fourthly, in these circumstances the essential ingredients which a plaintiff has to establish to obtain a Mareva injunction are present, namely a good arguable claim, assets within the jurisdiction, an objective risk of dissipation of those assets and a consequent risk to the plaintiff that he will not be able to recover on his judgment (or, strictly, that he will not be able to recover as much on his judgment as in the absence of such dissipation).  
Fifthly, if no injunction is granted, then the disposal of the business will take place and the ability of Customs to recover more than £9m will for ever be lost.  On the other hand, if the injunction sought is granted, then AFL will merely have suffered the delay of a transfer of the business to NZM.  The loss which Customs would suffer, if an injunction is refused, is therefore potentially very large and irreversible.  The loss which AFL would suffer, if an injunction is granted, if any, would be nebulous, and quite possibly temporary and temporary only.  In these circumstances the balance of convenience, or balance of injustice favours the grant of the injunction.  
Sixthly, no cross undertaking in damages should be required from Customs as it is an emanation of the Crown enforcing its statutory rights, indeed duties, on behalf of the public and on behalf of the European Union.  Furthermore, the absence of a cross-undertaking in damages is not, in principle, something which can be taken into account when considering whether to grant or refuse an injunction bearing in mind that the crime is not normally expected in these circumstances to give a cross-undertaking.  In the alternative, if it is something which can be taken into account, the absence of a cross-undertaking does not tip the balance of convenience or balance of injustice in this case against granting the injunction.  However, Mr McCombe did indicate that he would be prepared to give a cross undertaking on behalf of the Customs if I required it.
AFL's Case
On behalf of AFL, Mr David Pannick QC, who appears with Mr Adam Lewis and Miss Sandra Bristol, advances the following contentions.  First, it is inappropriate to invoke the Mareva injunction jurisdiction in circumstances where a defendant is proposing to effect a bona fide transfer of assets for a price fixed by reference to a full and considered valuation by an independent and respected firm of chartered accountants.  
Secondly, through sections 238 and 423 of the Insolvency Act 1986, Parliament has laid down the criteria which have to be satisfied, by a liquidator under section 238 or by the "victim of a transaction" under section 423, before the court will interfere or reverse a particular transaction.  If, as he says is the case here, Customs cannot, indeed do not, rely on the contention that either of these sections could be invoked in due course to impugn the sale of the business for £9m, it is not for the court to fill what Customs are effectively saying is a gap in the insolvency law.
Thirdly, on analysis, Customs' case, based as it is on the expert evidence of Mr Swinson and Mr Clemence to the effect that a sale of the business at £9m would be at a significant, indeed a very significant undervalue, amounts to nothing more than hasty and ill informed speculation, particularly when one compares it with the informed considered and detailed view of Ernst & Young, as set out in the Report, supported by Mr Eales' affidavit and Mr Milne's second affidavit.
These three points are said by Mr Pannick to go to the jurisdiction of the court.  
Fourthly, Mr Pannick contends that the balance of convenience, or the balance of injustice, is in favour of refusing the injunction.  Not only are the three factors to which I have just referred relied on, but there are the other prejudicial matters set out in Mr Milne's affidavit.  Mr Pannick says that by far the most powerful of those is that, if the transfer of the business is stopped for a significant period, there is a real risk that the business will decline or even collapse, bearing in mind the effect on employee morale, the effect on reputation and the effect on the availability of credit.  Not only would that have dire financial consequences, but it would also put in jeopardy the jobs of 430 employees.  
Fifthly he says that there has been delay on the part of Customs and, to make matters worse on the balance of inconvenience and injustice, that the absence of an offer of a cross-undertaking in damages makes it wholly inappropriate to grant the injunction.  
Sixthly, if, contrary to all his arguments so far, I consider it right to grant the injunction sought by Customs, then Mr Pannick says I should certainly require a cross-undertaking in damages for Customs. 
Discussion
The conclusions which I have reached on the various points which are in dispute between the parties are as follows:
1. I cannot say on the totality of the evidence that Customs' contention, to the effect that the proposed sale price of £9m is substantially lower than the real value of the market value of the business, will fail.  I put it in that negative way because, at least on the evidence so far available, I am a little sceptical about the views and valuations of Mr Swinson and Mr Clemence in light of the detailed facts and matters in the Report, the affidavit of Mr Eales and the second affidavit of Mr Milne.  Both Mr Eales and Mr Milne are better informed, and have had more time to develop their views, than Mr Swinson or Mr Clemence.  Nonetheless, Mr Swinson and Mr Clemence are accountants who are highly experienced, indeed eminent, in their field, and their views are expressed moderately but quite unequivocally.
Additionally, so far as the Report is concerned, Mr Eales' view must be seen in the light of his instructions, as recorded in the letter from AFL's solicitors, and the five points made at the beginning of the Report.  I am therefore of the view that there is a real, albeit, at this stage at least, a rather speculative, prospect of the proposed sale causing Customs a very substantial loss.  That loss would very probably be irrecoverable if the sale went ahead.  
2.  AFL's proposed sale of the business is a bona fide transaction at an independently verified price entered for a proper motive after open discussion with Customs.  
3.  However I do not accept that the fact that the proposed sale is at a price which is in accordance with the independent valuation of one of the top firms of chartered accountants prevents the court from granting an injunction to prevent it, if it considers that it would be appropriate to do so.  
A Mareva injunction, like any other injunction, can be granted if the court considers it "just and convenient" to do so (see section 37(1) of the Supreme Court of Judicature Act 1981).  I see no reason, whether in terms of legal principle, logic, or commercial common sense to fetter that jurisdiction.  The fact that the proposed transaction has the features described in paragraph 2 above is obviously a strong factor which can be relied upon by AFL on the issue of discretion.  The purpose of a Mareva injunction is to afford protection to a person with a claim which can be described at least as good and arguable. However the Mareva injunction jurisdiction is not to be used so as to impede or interfere with a defendant ordinary bona fide business transaction.  The grant of such an injunction represents a very serious interference with the defendant's freedom.  The court should certainly not be too ready to grant such relief in the context of any bona fide transaction, particularly when it is in the ordinary course of business.  
4.   This is not, however, a case of an arm's length sale by a defendant of an asset in the open market in the normal course of its business.  It is the transfer, albeit for value, of the whole of AFL's undertaking to a new company which has been formed for that purpose and which is owned by the same person who effectively owns AFL.  It is also a transfer effected because of the very existence of the claims on which the plaintiff relies in these proceedings.  It is not a claim in the open market, nor one which has even been tested by the open market.
5.  While the provisions of sections 238 and 423 of the  Insolvency Act 1986 are of some assistance to AFL on the question of discretion, they do not, in my judgment, go to the issue of jurisdiction.  The case cited by Mr Pannick in this connection is a decision of the Court of Appeal, KS/AS Admiral Shippers v Portlink Ferries Limited [1984] 2 LLoyd's Rep 166.  I adopt the view of Lindsay J, to whom that case was cited on 9 February 1999.  He said:
"Sir John Donaldson, MR, sitting with May and Purchas LJJ held, according to the headnote, that it was not the function of the court to rewrite the established law on insolvency either by giving the plaintiff some form of secured status which they did not have or indirectly achieving the same result by interfering with the payment to the defendants' trade creditors in giving the plaintiffs the power to wind up the company.  I do not see that observation to be applicable to this case. There is no attempt here, as I understand it, to give the plaintiff some form of secured status, nor given the exception in the proposed relief for payments out in the ordinary course of business with the ordinary payment of trade creditors being interrupted."  

The fact that relief would only be available after the transaction took place in certain limited circumstances according to statute does not mean that the court has no jurisdiction to grant relief before the transaction takes place unless those limited circumstances exist or are credibly said to exist.  Further, section 238 is only available to a liquidator and is only exercisable in relation to transactions which are entered into within a specified period before the liquidation.  Section 423 is only available where the transaction had a particular type of motive.  It would be surprising if the court had no jurisdiction to stop a transaction where, albeit in good faith, a potential or actual debtor was disposing of an asset at a very substantial undervalue to the creditor's detriment, particularly where, as here, it is the very existence of the actual (on Customs' case) or potential (on AFL's case) debt which he primarily prompted the proposed disposal.  Just as the Mareva injunction jurisdiction should not be invoked oppressively against a defendant, so should the circumstances in which it can be imposed not be unnecessarily fettered. 
6.  There would be a real possibility of prejudice to AFL if I grant the injunction.  There would be possible internal disadvantages in terms of morale of staff, distraction for senior staff in connection with Customs' claims, and general uncertainty.  There would also be external disadvantages in terms of reputation and ability to raise money in relation to the business if it remains in AFL as a company with a potential liability for a sum way in excess of its ability to pay on any view of the value of the business.
7.	I am, on the current state of the evidence, nonetheless doubtful whether there would be any substantial and permanent loss of, or diminution in, the value of the business in the foreseeable future if the injunction sought by Customs were granted.  The Report states: 
"AFL's management prepared a five-year strategic plan in October 1997 but management now considers this to be optimistic in the declining market.  AFL's management now consider that the volumes referred to in the strategic plans are over stated by at least 10 per cent due to its loss of market dominance overall until the substantial reduction in the anticipated sales of spreadable butter.  The principal thrust of the plan continues to be a return to profitable of AFL and the maintenance of Anchor as a premier consumer brand."
There is nothing in that passage to suggest that the five-year strategic plan in October 1997 considered that the effect of the PCDNs hanging over AFL's head would have a significant adverse effect on the business.  I have also seen the Annual Report and Accounts of AFL for the years ending 31 May 1997 and 31 May 1998.  Although there is reference in one of the director's reports to matters causing problems to the profitability of the business, there is nothing to suggest that the existence of the PCDNs has affected the profitability.  Similarly, although the auditors refer to the dispute with Customs in relation to the PCDNs there is no suggestion that that is affecting profitability.
So far as the first affidavit evidence of Mr Milne is concerned, there are no particulars as to how the ability of AFL to operate would be affected if the business could not be transferred to NZM.  The case of the bank's reluctance of the bank to increase lending limits appears to be attributed to AFL's losses and to the security it has had to provide for the appeals to the Tribunal against the PCDNs.  Nonetheless, the circumstances in which the banks are currently lending is not clear.  Further it does not seem from the evidence that, since mid-1996, since when some large PCDNs have been hanging over the head of AFL, any specific or identified problems have resulted.
None of the other items of alleged prejudice amount to more than comparatively minor inconvenience or expense.  Year 2000 compliancy would be necessary any way.  The uncertainty for employees is not very clear and does not seem to be substantiated by the letters written to employees explaining the reason for the proposed transfer of the business.  So too in relation to letters to customers.  As to future possible prejudice allegedly caused by the delay, if Mr Milne "cannot speculate" about it, I do not think that the court should do so.
So far as expenditure is concerned, there has been significant expenditure, but much, even all, of it may well turn out to be salvageable.  If the injunction is granted, there will nonetheless in due course be nothing to prevent the transfer of the business taking place.  There is a strong suggestion in the correspondence which I have seen that the transfer of the business to another company was contemplated in any event for another reason, which suggests that it will eventually go ahead anyway.
8.  I do not believe that Customs' alleged delay is an impressive factor, and to be fair to Mr Pannick he did not press it hard.  It appears that Customs did not know anything about the contents of the Report until 14 January, nor did they know what price it would recommend until then.  It took Customs three weeks to decide how to act; AFL had had the Report for several weeks (including, it is true, the Christmas and New Year period).  The fact that Customs had advance notice from August 1998 of what AFL were proposing to do is a significant factor in AFL's favour in the sense that AFL was open and frank with Customs, but I do not consider that it assists AFL on the question of delay.  Customs could have acted more quickly, but in the circumstances it seems to me that they should be absolved from any guilt for serious delay.  Quite apart from this, I am unimpressed by the suggestion that any such delay has caused any disadvantage to AFL.  It appears to me that the steps it relies on were virtually all taken before, or very shortly after, the Report was sent to Customs.
9.  I turn to the cross-undertaking.  In Securities & Investment Board v Lloyd-Wright [1993] 4 All ER 210, Morritt J set out the relevant law by reference to the authorities at 212J - 213F.  He said:
"The decision of Megarry-VC is adequately summarised in the headnote to Re Highfield Commodities Ltd [1984] BCLC 623:

	'Where the Secretary of State was seeking to enforce the law, or was acting selflessly in the performance of a public duty directly or impliedly imposed by statute, rather than asserting a proprietary claim of the Crown, an undertaking in damages would not be required as the price of obtaining the appointment of a provisional liquidator or of resisting his removal unless the company established special circumstances which justified the imposition of such a requirement.'

In the Kirklees case the decision of the House of Lords is adequately reflected in the following terms ([1993] AC 227 at 228):

	'....that there was no rule that the Crown was exempt from giving a cross-undertaking in damages in law enforcement proceedings, but that the court had a discretion not to require the undertaking and that the discretion extended to other public authorities exercising the function of law enforcement in appropriate circumstances....'

Lord Goff of Chieveley quoted extensively from the speech of Lord Diplock in the earlier case of Hoffmann-La Roche:

	'When, however, a statute provides that compliance with its provisions shall be enforceable by civil proceedings by the Crown for an injunction, and particularly if this is the only method of enforcement for which it provides, the Crown does owe a duty to the public at large to initiate proceedings to secure that the law is not flouted, and not simply to leave it to the chance that some relator may be willing to incur the expense and trouble of doing so.'  (See Kirklees BC v Wickes Building Supplies Ltd [1992] 3 All ER 717, [1993] AC 227 at 272-273.)"
In these circumstances, if I were to continue the leave and injunction I would have a discretion whether to seek a cross-undertaking in damages from Customs.  
When the matter was before him on 9 February this year, Lindsay J decided after argument not to require such a cross-undertaking.  It was suggested, albeit not strongly pressed, by Mr McCombe, that that decision effectively binds me.  I do not accept that.  Lindsay J was considering whether to require a cross-undertaking in circumstances where he had already decided that the injunction was to continue only for a short period, until Customs' motion could come on as a motion by order.  He was also considering the matter without the benefit of the affidavit of Mr Eales and the second affidavit of Mr Milne.  Accordingly I am satisfied that I have a discretion whether or not to require a cross-undertaking from Customs.
It appears to me that the question of whether or not to require such an undertaking is something which I can, and if I thought it right to do so, which I should, take into account when considering the balance of convenience or the balance of injustice.  I have some difficulty in seeing how one could carry out the balancing exercise which is almost always appropriate when considering whether to grant or refuse an interlocutory injunction, without taking into account the presence or absence of a cross-undertaking in damages or some other form of protection to the defendant in respect of the damage he suffered if it should transpire that the injunction has been wrongly granted.  Where, as here, the person seeking the injunction is an emanation of the Crown, it is, in my judgment, appropriate to take into account not only the absence of a cross-undertaking in damages, or other protection for the defendant, but also on the other side, the fact that the Crown is acting in the public interest, or at least in what it honestly believes to be the public interest.  The former is a factor which may weigh against the fact of an injunction in some cases: sometimes it might be decisive.  The latter will frequently be a favour of granting an injunction, although it is unlikely to be conclusive: it is ultimately for the court, not the Crown, to decide whether an injunction is appropriate.
Conclusion
The arguments are finely balanced.  In my judgment justice and convenience will best be served if I grant the injunction sought by Customs, provided (a) a cross-undertaking in damages is given; (b) there is express liberty to AFL to apply to vary or discharge the injunction in the event that it transpires that there is actual, or fairly imminent likely, serious damage to the business; (c) if AFL wish to make evidence available to Customs with a view to Mr Swinson and Mr Clemence reconsidering their views, then such reconsideration would have to take place. 	So far as the injunction is concerned, having decided that there is a real prospect of irreversible and very substantial damage to Customs if I refuse the injunction, provided I am satisfied that it would not be oppressive or unfair to AFL to grant the injunction, then, even taking into account the unusual facts of this case, I believe that I should grant the injunction.  The probable absence of any form of relief being available to Customs under the Insolvency Act 1986 should the transfer of the business go ahead at what subsequently transpires to be a substantial undervalue appears to me to be a major factor supporting the grant of an injunction.  Further, the proposed sale of the business is not an arm's length transaction or in the ordinary course of trade or, indeed, it is largely due to the claims of Customs.
As to the requirement of a cross-undertaking, it seems to me that on the spectrum of types of case where the Crown seeks relief, this is neither at the law enforcement extreme (as in Highfield Commodities) nor is it at the other, proprietary right enforcement, extreme (to adopt the expressions of Lindsay J), however, it is right to say that it is significantly nearer the former than the latter. I would accept that, in a more normal case than this. where Customs is seeking an injunction to prevent an arguable dissipation of assets by a person who does or may owe duty or VAT, it would ordinarily not be right to require a cross-undertaking in damages from Customs.  In principle Customs would be seeking to protect its ability to recover sums publicly due.  However on the unusual facts of this case, I consider that, in the absence of such a cross-undertaking in damages, it would be oppressive on AFL if I were to grant the Mareva injunction. I have in mind the speculative nature of Customs' case, the openness and absence of improper motive on the part of AFL, the independent valuations obtained of AFL; the risk of substantial and otherwise uncompensatable potential damage to AFL; and the fact that the relief is ancillary to Customs primary function.  
As to the second and third conditions, I have not discussed them with counsel and would only impose them if no valid objection is put forward after of further argument.  So far as the second proposed condition is concerned, I have explained that I am not satisfied on the basis of the evidence so far that there is, in the foreseeable future, a likelihood of substantial permanent damage to the business if the Mareva injunction is granted.  However it may be that the injunction I propose to grant will last for some significant time, particularly bearing in mind what is involved in the appeal process against the PCDNs. 
It would benefit no-one if the business started to decline detrimentally.  It would affect a number of people's jobs; it would also result in AFL losing a valuable asset, or having a valuable asset decline substantially in value; that would be to Customs disadvantage if it loses the PCDNs appeals, given that I propose to impose a cross-undertaking in damages; even if Customs win the appeals to a significant extent, it will be of no benefit to them if the asset preserved by the injunction, namely the business, has declined in value to a significant extent as a result of the injunction.  
While it may well be that AFL could apply in any event for a variation or discharge of the injunction I propose to grant, because of a change of circumstances, it appears to me that, in the present case, there should be express liberty to apply.
As to the third proposed condition, I have already expressed a degree of scepticism about the views of Mr Swinson and Mr Clemence.  Given the duty of these experts to the court, I consider it right to give AFL the opportunity, if it wishes to take it, to provide further information to Customs, to be passed on to Mr Swinson and Mr Clemence for them to reconsider their views.  It may be that they will want to alter their conclusions.  If they do so, I would regard them as under a duty to tell Customs at once, and Customs to be under a clear duty at once to inform AFL and the court.
This is a matter for AFL.  If it decided to provide Customs with further information, together with such other material as Mr Swinson and Mr Clemence may reasonably require, then it would seem to me right that Mr Swinson and Mr Clemence be required to reconsider their views. If, on doing so, they substantially agree with Mr Eales then the sooner the parties both know that the better: the consequences in terms of the injunction discharged (and, possibly, costs) seem to me to be pretty clear.  Even if they maintain their views, the costs incurred in this process would have to be incurred in any event as there will have to be a trial.  It may even be appropriate for AFL to suggest that Mr Eales meets with Mr Swinson and Mr Clemence if it elects to take this course. It would not involve unnecessary costs because, as I have said, the experts will have to consider the matter and meet in any event.  It may even turn out to be a satisfactory way of resolving issues without further reference to the court.
I repeat and emphasise that the respective duties of all three accountants is to the court, bearing in mind that they are now expert witnesses in proceedings.  Mr McCombe's reference to Cresswell J's observations in The Ikarian Reefer [1993] 2 LLoyd's Rep 68 about the duties of an expert, is apt and should be borne very in mind by all three accountants.  
The final matter with which I must deal is the form of the order.  I have been provided with a draft order by Mr McCombe.  There will have to be a cross-undertaking in damages.  Paragraph 1, which restrains transfer of the business or other assets sold in the ordinary course of trade, will be in the order.  There will have to be provision which reflects the two other conditions I am minded to impose subject to argument.  Paragraph 2 seeks further relief in connection with AFL having to provide ongoing information to Customs.  I do not think it right to grant this relief to Customs.  There is no doubt that AFL has kept Customs fully informed of its proposals in the past.  Rather unusually, in a case of this sort, there is no suggestion that AFL has acted other than in good faith, and to my mind it would be oppressive on AFL to order the relief sought in paragraph 2.  No good reason has been put forward as to why I should impose such terms on a defendant such as AFL whose conduct in the past has not been other than honest and straight forward.