Understanding Freezing Orders and Recent Court Clarifications – Insights from Dos Santos v Unitel SA [2024] EWCA Civ 1109

Understanding Freezing Orders and Recent Court Clarifications – Insights from Dos Santos v Unitel SA [2024] EWCA Civ 1109

In Dos Santos v Unitel SA [2024] EWCA Civ 1109, the Court of Appeal examined key elements surrounding freezing orders, specifically refining the “good arguable case” standard and its interaction with broader interim injunction standards. This article delves into these rulings, their impact on asset preservation orders, and how they may shape future applications for freezing injunctions.

Background of the Case and Core Issues

This case involved a dispute between Ms. Isabel dos Santos and Unitel SA, arising from non-payment on loans Unitel provided to entities linked to Ms. Dos Santos. In response, Unitel sought a worldwide freezing injunction to prevent asset dissipation, ensuring assets would be available for potential recovery.

The Court of Appeal was asked to rule on two core issues:

1. The “Good Arguable Case” Standard: This centered on whether the test set in The Niedersachsen or the stricter three-limb “better of the argument” standard from Brownlie v Four Seasons Holdings Inc [2017] UKSC 80 should apply in freezing order cases.
2. Cost Allocation for Freezing Orders: The court considered if the costs of freezing order applications should routinely be reserved for the conclusion of substantive proceedings.

Clarifying the “Good Arguable Case” Requirement

The “good arguable case” standard is crucial in determining if a claimant has sufficient grounds to secure a freezing order. Historically, The Niedersachsen standard has been that the claimant’s case must be more than barely arguable, although not necessarily likely to succeed. Recent cases, however, applied the Brownlie “better of the argument” test, a more demanding standard used in jurisdictional gateway cases.
The Court of Appeal’s Decision: The Court rejected the application of the Brownlie test in freezing orders, affirming that The Niedersachsen standard should apply. The Court reasoned that freezing orders do not demand that applicants establish a likelihood of success but only show that their claims are more than just arguable. In this light, the Court emphasized that prior cases applying Brownlie to freezing orders were incorrect, reinforcing the more accessible Niedersachsen standard for these applications.

“Good Arguable Case” vs. “Serious Issue to Be Tried” – Harmonizing Standards

An additional consideration was whether the “good arguable case” test differs substantially from the “serious issue to be tried” threshold under American Cyanamid principles, used in other interim injunctions. Many legal commentators have regarded the “good arguable case” as a higher threshold due to the invasive nature of freezing orders. However, the Court of Appeal concluded that the two tests should be treated as equivalent, with no substantial difference in substance or purpose.

Rationale: The Court pointed out that freezing orders, though invasive, are akin to other interim injunctions in their function – protecting claimants from irreparable harm. It is therefore logical to apply the same “serious issue to be tried” standard across different types of injunctions. The court suggested that any perceived invasiveness of a freezing order could instead be managed through safeguards and the “just and convenient” requirement, rather than by imposing a higher threshold at the “good arguable case” stage.

The Court concluded that it would be preferable to refer to freezing orders as requiring a “serious issue to be tried” rather than “good arguable case.” This terminology shift avoids interpretive discrepancies, preserving consistency across different types of interim relief.

Implications for Future Freezing Order Applications

This decision provides a more streamlined approach for legal practitioners and applicants, offering clear guidance on standards for freezing orders. With the reaffirmation of The Niedersachsen test, claimants are not required to meet the demanding “better of the argument” standard for obtaining a freezing injunction. This change is likely to increase access to freezing orders, especially in international cases involving asset preservation.

The judgment also underscores that freezing orders are preventive rather than merit-based measures, serving to ensure asset availability without making a judgment on the case’s overall strength. This clarification should encourage parties to focus on demonstrating serious risk of asset dissipation, while reassuring applicants that freezing orders are not subject to higher burdens than necessary.

Cost Allocation for Freezing Order Applications

The Court of Appeal also addressed whether costs of freezing orders should typically be reserved for the final proceedings. Given that freezing orders often accompany complex litigation, reserving costs until a final ruling provides flexibility in proportioning costs relative to the outcome. This approach ensures that costs associated with interim relief reflect the broader case outcome, which may further benefit litigants dealing with drawn-out or multifaceted disputes.

How KTS Legal Can Help

At KTS Legal, we understand the complexities surrounding freezing injunctions and asset preservation. For clients facing potential asset dissipation risks, we can assess whether a freezing order is appropriate and guide you through the application process, ensuring compliance with legal standards as clarified in Dos Santos v Unitel SA. Our team is well-equipped to handle international and domestic asset protection measures, preserving your interests throughout litigation.

For clients subject to a freezing order, we provide advice on compliance and help identify any grounds for contesting the order. Whether you’re an individual or corporate entity involved in high-stakes litigation, we offer strategic advice to protect your assets and position in litigation. Our experience with the latest legal developments allows us to deliver effective solutions tailored to each client’s unique circumstances.

By staying at the forefront of legal trends, KTS Legal is committed to guiding clients through each stage of litigation, including the nuanced requirements for interim orders like freezing injunctions.