Wednesday, 5 August 2015

What must an Applicant show to obtain a Freezing Injunction? Part 1

It has a good or properly arguable case.
However, this is a relatively low threshold for the Applicant to get over. Recent judicial commentary states “the right course is to adopt the test of a good arguable case, in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which a Judge believes to have a better than 50% chance of success”.
It is not a requirement at the initial hearing that the Court has to form a provisional view that the Claimant will probably succeed at trial in its underlying substantive claim. However, the Court will take into account the apparent strengths and weaknesses of the case when deciding whether the Claimant’s case is sufficiently strong to reach the appropriate threshold. This will include assessing the apparent plausibility of statements in affidavits in support of the application. However, the test is not particularly an onerous one for the Claimant to pass.
That there must be a risk, or a real risk, of the Respondent dissipating or hiding his Assets
This is normally the most important factor the Court will look at when deciding whether to grant a Freezing Injunction. If the Applicant can satisfy the test, it is then for the Court to determine whether it is just and convenient to grant the injunction (as it is a discretionary remedy). There is a sufficient risk of dissipation if it can be shown that:-
- There is a real risk that a Judgement or award will go unsatisfied, in the sense of a real risk that, unless restrained by injunction, the Defendant will dissipate or dispose of his assets other than in the ordinary course of business.
- Unless the Respondent is restrained by injunction, assets are likely to be dealt with in such a way as to make enforcement of any award or judgement more difficult, unless those dealings can be justified for normal and proper business purposes.
The legal authorities suggest that the following factors are relevant when determining if an Applicant should be granted a Freezing Injunction:
(i) The nature of the Respondent’s assets. The more liquid and disposable the assets, the easier they are for the Respondent to dissipate and hence the greater the need for a Freezing Injunction to be granted.
(ii) The nature and financial standing of the Respondent’s business including its length of establishment. The less established and more precarious the business, the more likely the Court is to grant the Order.
(iii) What the Respondent has said about dealing with its/their assets in the past. This is often indicative of the Respondent’s likely intentions in respect of possible dissipation of assets.
(iv) Whether the Respondent is living or has a company incorporated in a jurisdiction known to be a tax haven with lax or difficult to follow company law.
(v) Whether English Judgements are actually enforceable in the place where the Respondent has substantial assets. The more enforceable the place of jurisdiction, the less likely the order will be granted – for example the EU compared to somewhere such as the Cayman Islands.
(vi) Whether the underlying claim involves dishonesty, even if fraud itself is not pleaded.
(vii) Whether the response to the Applicant has previously been evasive, or implausible reasons or explanations have been provided to information, or questions asked.
(viii) Whether there is any evidence of other dishonesty beyond the current claim.
(ix) Whether the Respondent has a past history of not paying debts or association with an insolvent company or other legal entities.
(x) Whether there is any evidence of actual or threatened removal of assets from the jurisdiction.
(xi) Whether there is a past history of failing to comply with court Orders.
(xii) Whether there is a past history of failing to disclose assets.
It is often thought that the mere fact of an allegation of fraud in the actual or intended claim is sufficient for the granting of a Freezing Injunction. This is not the formal position of the Courts, although in reality, it is often enough to obtain and maintain injunctions if the underlying claim discloses a good arguable case of fraud.