Court of Appeal decision clarifies the approach for obtaining freezing injunctions

At the end of September, the Court of Appeal handed down a judgment in Dos Santos v Unitel which has confirmed the approach for the correct test to apply when obtaining a freezing injunction.

Prior to the decision, there were conflicting authorities on the question of which test a judge should apply when deciding whether an application for a freezing injunction had a ‘good arguable case’. It was therefore not clear whether a judge in such applications should apply a three-limb test to assess whether there is a ‘good arguable case’, or if it was instead sufficient to apply the much simpler test which had been set out in The Niedersachsen case. The Appellant argued that the case of Moritomo had changed the law so as that the three-limb test is the correct test to apply.

What are freezing injunctions?

There are a number of different types of injunction, but a freezing injunction is essentially a court order which prevents an individual or company from disposing of their assets  or otherwise dealing with them to put them beyond the reach of the other party. Whilst freezing injunctions are most commonly in relation to ‘domestic’ assets, which are located within England and Wales, but they can also be in relation to worldwide assets.

What was decided?

The Court of Appeal decision details a “clear and firm conclusion” that the correct test for assessing what constitutes a ‘good arguable case’, for reaching the merits threshold for a freezing injunction, is that as formulated in the case of The Niedersachsen.

This means that a “good arguable case” is “…one which is more than barely capable of serious argument, and yet not necessarily one which the Judge believes to have a better than a 50% chance of success”. In comparison to the three-limb test, first outlined in Brownlie v Four Seasons Holdings Inc, this means that applicants will have a much lower threshold to meet in order to succeed in obtaining a freezing injunction. The Court also outlined that the test for a “good arguable case” should be equated with the “serious issue to be tried” test applied in American Cyanamid for other interim injunctions.

The reasoning that was given for this decision was that, unlike some other similar applications, where a freezing injunction is applied for, the merits of a claim will be determined at trial. A high threshold is not required in such circumstances, and it is therefore not necessary for a judge, when considering an application for a freezing injunction, to assess the merits of a case in depth.

If an in-depth review of merits was required, it was deemed that this could lead to ‘mini-trials’ essentially taking place. The Court of Appeal found that the merits bar would otherwise be too high to serve the interests of justice, especially given the sort of cases in which freezing injunctions are sought.

How Ellis Jones can help

Our specialist Litigation team has substantial experience assisting clients in relation to complex litigation against individuals and companies. The team have also previously successfully obtained Freezing Injunctions, as well as succeeding with other High Court injunction application, for clients.

If you would like to discuss obtaining a freezing injunction, please call the team on 01202 525333 or email injunctions@ellisjones.co.uk. We are happy to provide you with information about how we can assist with your particular circumstances.