In our previous blog, we discussed one requirement for obtaining a freezing injunction – the real risk of dissipation of assets. Another requirement that the applicant needs to satisfy is the ‘good arguable case’ test, which was established by the case of Ninemia Maritime Corpn v Trave Schiffahrtsgesellschaft mbH & Co KG, The Niedersachen [1984] 1 All ER 398 as:
‘… one which is more than barely capable of serious argument, and yet not necessarily one which the Judge believes to have a better than 50% chance of success’.
This test is re-endorsed in the case of Isabel dos Santos v Unitel [2024] EWCA Civ 1109 with the Court stating that it remains to be the correct test and:
- There is no material distinction between the ‘good arguable case’ test and the ‘serious issue to be tried’ test applied in the context of other interim injunctions and it does not impose a higher threshold;
The ‘serious issue to be tried’ test was established in the case of American Cyanamid Co (No 1) v Ethicon Ltd [1975] UKHL 1:
- The applicant’s case must not be frivolous/vexatious; and
- At the time of the application being brought, there must be an actual or threatened breach of the applicant’s rights. There must therefore be a real risk that the defendant will in the future do the thing which the applicant seeks to prevent by means of the injunction.
- For freezing orders, unless the case gets settled, the Court will determine the merits at trial, so a high merits bar is unlikely to serve the interests of justice; and
- A freezing injunction application hearing is not a mini-trial for determining which party has the best of the arguments as it would add an extra burden on already stretched Courts.
Fraud/dishonesty
Although the ‘good arguable case’ test or the ‘serious issue to be tried’ test appears to be a low threshold, when dealing with fraud/dishonesty claims, it can still be especially difficult to prove that there is a good arguable case, especially at an early stage and prior to disclosure, because mere allegations of fraud/dishonesty will be insufficient to obtain a freezing injunction.
Noting that the Court is prepared to take a flexible approach to cases involving allegations of fraud/dishonesty so potential victims of wrongdoing are not denied the interim protection that the freezing injunction has been designed to provide. In the case of Finurba Corporate Finance Ltd v Sipp SA [2011] EWCA Civ 465, the Court stated that:
‘… [i]n the light of the increasing sophistication of fraudsters, and their extensive use of companies and other entities to mask their activities and assets, the court should adopt a robust and realistic approach to technical points of substantive law or evidence raised against the grant of freezing order, in cases where there is good reason to believe that the fraud has occurred.’
How can we help?
Ronny Tang is an Associate in our expert Dispute Resolution team, specialising in defamation claims, contentious probate and inheritance claims, Trusts of Land and Appointment of Trustees Act 1996 claims, Equality Act 2010 claims and Protection From Harassment 1997 claims.
If you need any advice concerning the subject discussed in this article, please do not hesitate to contact Ronny or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
Contact us