Infamously described as ‘nuclear weapons’ of the law, several recent cases have provided important lessons for practitioners concerning Worldwide Freezing Orders (WFOs), from how they are applied, to the criteria the courts will take into account and the potential extent of the order that will be granted.
Wright v McCormack [2024] EWHC 1735 (KB)
Mr Justice Mellor granted a WFO in relation to costs of £1.548m against Australian computer scientist Dr Craig Wright (pictured), and in favour of the defendant to Dr Wright’s defamation claim, podcaster Mr McCormack. He had stated that Dr Wright was not Satoshi Nakamoto – the pseudonymous name used by the founder of bitcoin.
While Wright won his claim, the case unravelled when the court found in separate proceedings (Crypto Open Patent Alliance v Wright [2024] EWHC 1198 (Ch)) that Wright was not ‘Satoshi’ and had backed up his fraudulent claim with forged documents.
The judge was critical of the respondent’s arguments on good arguable case, stating that it descended into the ‘minutiae’ and ignored the ‘big picture’ – the fact that the defamation claim was ‘founded on a lie’.
Moreover, the judge found a real risk of dissipation because the evidence of Wright’s assets and financial backers was ‘extremely shadowy’ and because Wright had failed to engage with previous WFO applications (even though he had made payments into court). Wright had even boasted of being ‘judgment-proof’.
Thus, opaque funding arrangements and bombastic comments about being able to avoid paying court orders will endanger a respondent’s defence on real risk of dissipation.
Mex Group Worldwide Ltd v Ford & Ors [2024] EWCA Civ 959
In this notable Court of Appeal case, a Hong Kong-based company sought a WFO in support of proceedings in Scotland pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982.
To obtain a WFO, an applicant must show: (1) a good arguable case; (2) that there is a real risk of dissipation; and (3), that it is just and convenient to grant the order.
Despite finding for the claimant on good arguable case and real risk of dissipation, their lordships considered it ‘inexpedient’ to grant the order on the basis there was no ‘connecting link’ between the defendants and the jurisdiction.
This judgment highlights the challenges for parties pursuing substantive proceedings in Scotland, where the courts can grant extra-territorial relief but do not do so as a matter of policy. For applicants, it is ultimately irrelevant if courts can grant relief as a matter of law but do not do so as a matter of policy.
Moreover, the court accepted that freezing relief would not interfere with the Scottish proceedings yet refused to treat Scotland differently from overseas jurisdictions.
This sits uncomfortably with both the courts’ power to grant freezing relief and stated enmity towards the English courts acting as ‘international policeman’. Thus, the court’s approach to its statutory discretion arguably set the bar undesirably high for obtaining justice. Nonetheless, the case clarified that obtaining a WFO requires the respondents to be domiciled or to have assets in the jurisdiction save in possibly the rarest circumstances.
Ras Al Khaimah Investment Authority v Azima [2024] EWHC 1511 (Ch)
In this high-profile dispute between state investment entity Ras Al Khaimah Investment Authority (RAKIA) and US airline tycoon Mr Farhad Azima, Mr Justice Michael Green granted a post-judgment order to enforce over £20m which the defendant was owed. The order was upheld by Mr Justice Zacaroli on 24 June 2024.
Although RAKIA had initially brought successful proceedings against the defendant, it was later found to have obtained judgments from the High Court by fraud and to have mounted a ‘full scale’ hacking operation against the defendant.
When considering the question of a real risk of dissipation, the court viewed RAKIA as attempting to make itself ‘judgment-proof’ by purportedly selling a hotel owned by a subsidiary to a company with the same directors and transferring shares in a Georgian company for no consideration. The court observed that assets could have been dissipated already but that a ‘horse has bolted’ argument was irrelevant if there was still some prospect that assets remained within RAKIA’s control.
In determining whether the order was just and convenient, the judge placed considerable weight on the fact a WFO would not impact ongoing related proceedings that Azima had brought in Georgia but would rather be ‘complementary’.
Moreover, the judge extended the order to cover RAKIA’s wholly owned subsidiaries and allowed Azima to enforce the order in Georgia without first seeking the court’s permission.
This case provides a striking illustration that courts may tailor freezing relief even where evidence of dissipation is uncertain, militating against the risk a party will use corporate structures to shield assets from enforcement.
Isabel dos Santos v Unitel SA [2024] EWCA Civ 1109
Isabel dos Santos founded Unitel in 1998 and remained a director and part-beneficial owner until 2020. The underlying dispute concerned defaults on a series of loans which Unitel had made to Unitel International Holdings B.V. (UIH), a company owned and controlled by Ms dos Santos. Bright J granted a WFO against dos Santos in December 2023, freezing £580m of her assets.
The key issue in dos Santos’s appeal was the test to determine whether the applicant had a ‘good arguable case’.
The longstanding test was formulated in The Niedersachsen [1984]: whether the applicant’s case is more than barely capable of serious argument yet not necessarily one which the judge believes has more than a 50% chance of success.
However, two recent cases – Harrington [2022] and Chowgule [2023] – had applied the three-limb test used in jurisdictional gateway cases, as formulated in Brownlie v Four Seasons Holdings Inc [2017]. This requires the court to reliably conclude that the applicant has the better of the arguments.
Rejecting dos Santos’s appeal that Brownlie applies to freezing orders, the Court of Appeal reaffirmed The Niedersachsen and equated the merits threshold in WFOs with that in interlocutory injunctions: whether there is a serious issue to be tried.
This is arguably unsurprising: the divergence in recent case law marked an unusual departure from decades of case law, and there is effectively no difference between The Niedersachsen test and ‘a serious issue to be tried’.
The decision serves the purpose of protecting prospective rights, particularly given anything approaching a ‘mini trial’ over which party has the better case would have potentially risked dissipation in the interim. Nonetheless, the court observed that the ‘just and convenient’ limb may invite greater judicial scrutiny, potentially creating a new arena to challenge the existence and extent of a WFO.
Finally, the court stated that there is no general rule that the costs should be reserved in WFO cases.
Moving forward
The above cases provide key reflections:
- Unless the respondents have a connecting residency or asset link to England and Wales, the courts will not grant freezing relief save in possibly the rarest cases.
- The courts will consider the question of good arguable case in the round and prioritise the ‘big picture’. The merits threshold is the same as interim injunctions generally: whether there is a serious issue to be tried.
- Even if a respondent has made payments into court, where they have the opportunity to dissipate their assets and have apparently taken steps (or suggested they had) to shield assets, a real risk of dissipation will likely be found even if the evidence is not entirely clear-cut.
- Worldwide freezing relief can be made more draconian where circumstances justify it, including covering subsidiaries and including permission to enforce the order in foreign jurisdictions.
- There is no general rule that costs of a contested freezing order application should be reserved.
- Future disputes may focus on the ‘just and convenient’ limb.
Mark Hastings is a partner and Kieran Bailey a paralegal at Quillon Law, London
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