A recent decision from the Court of Appeal (1) reminds us of the nature of the evidence required for the English Court to wield their most powerful weapon, namely to freeze the assets available to a potential defendant until such time as the litigation against them has been resolved.
The granting of a freezing order has been described as a draconian measure. The Courts are generally reluctant to make such orders unless there is solid evidence of a real risk that the potential defendant will dissipate assets that might otherwise be available to the claimant when it comes to enforcement.
The recent decision of the Court of Appeal relates to attempts made by Greek shipowner Lakatamia Shipping (controlled by Polys Haji-Ioannou) to enforce a US$57M award against former Taiwanese shipowner Nobu Su. Lakatamia already has a global freezing order in place against Su, but the recent litigation dealt with attempts to secure a freezing order over the assets of Su’s mother, Toshiko Morimoto. Earlier this year, it was alleged that she had helped Su to frustrate the global freeze on his assets by advancing him funds from the sale of two villas in Monaco. The High Court gave permission for Lakatamia to bring a claim against Morimoto in the English Courts but declined to make an order freezing her assets. That decision was overturned by the Court of Appeal which has now granted the freezing order over Morimoto’s assets.
The judgment makes for interesting reading and it may be suggested that it seeks to update the test to be applied by the Court when considering applications for freezing orders. Lord Justice Haddon-Cave emphasised that all the applicant has to show to establish its case on risk of dissipation is that there is a “good arguable case” that there is such a risk. He also expressed the view that this test is “not a particularly onerous one” which suggests a lowering of the threshold previously applied. It remains to be seen whether this case will make its way to the Supreme Court. It is notable that Lord Justice McCombe was hesitant to overturn the High Court decision but ultimately he went along with Lord Justice Haddon-Cave and Lord Justice Richards in reinstating the freezing order over Morimoto’s assets.
We expect to see some commentary on this over the next few weeks. Short of obtaining security over actual assets via arrest or attachment, freezing orders are the next best thing for clients who have a good arguable claim, but face the risk that they may be left with a judgment or award against a company or person with no assets. The indication that the Courts may be prepared to lower the threshold for obtaining such orders is good news for claimants and bad news for those on the receiving end of such orders.
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