Court of Appeal sets out test for whether defendant has assets for a freezing order application and considers the impact of delay in applying

The judge refused to grant worldwide freezing orders in favour of the applicants (based in the UAE and Georgia) against the respondents (LLPs registered in England and Wales and owned by a Georgian national) in support of proceedings taking place overseas. Her decision was in part based on A v C [1981], which is authority for the proposition that a claimant will only be entitled to a freezing order if the defendant has assets which will be caught by the order – the court will not make an order which is futile. She was not satisfied that there were substantial assets held by the respondents anywhere in the world. She also held that there had been considerable delay in bringing the application, and therefore the defendant would have had ample opportunity to dissipate assets during that time had he been so inclined, and so the risk of dissipation could not be proven. The Court of Appeal has now allowed the appeal from that decision. It held as follows:

  1. The test for showing that a respondent has assets which will be caught by the order was not merely that the defendant is wealthy and therefore must have assets somewhere. Instead, the correct test is that there are "grounds for belief" that the respondent has (or is likely to have) assets: "That is not an excessive burden but if an order is sought against numerous companies or LLPs and those companies and LLPs can show that there is no money in their accounts and the claimant cannot show that the account has been recently active, it may well be right to refuse relief".
  2. Risk of dissipation. The Court of Appeal held that, whilst a failure to obey court orders might invite adverse inferences to be drawn, "it does not follow that compliance with a court order will negative a risk of dissipation if that risk has already been found to exist".

On the issue of delay, the Court of Appeal found that the delay in making the application had not been as long as the judge had found (ie it was in fact only about a month). That was far shorter than the delay in the case of Anglo-Financial v Goldberg, in which the delay had lasted several years), on which the judge had relied to find that delay had negatived the risk of dissipation.

The Court of Appeal noted that delay usually gives rise to two arguments:

(a) An applicant does not genuinely believe there is any risk of dissipation. The Court of Appeal said that that argument is open to the objection that it is the fact of the risk that matters, not whether the claimant believes in it; and

(b) A defendant who is prone to dissipate will have already done so by the time the court is asked to intervene. The Court of Appeal commented that this "argument assumes that a defendant is already of dubious probity and it is a curious principle that would allow such a defendant to rely on his own dubious probity to avoid an order being made against him".

The Court of Appeal found no reason on the facts here to counter the finding of a risk of dissipation because of delay.

COMMENT: The Court of Appeal's comments on the impact of delay on an application for a freezing order are noteworthy. Prior caselaw has tended to take this into account as a factor (depending on all the circumstances of the case), but usually for the reasons cited above which the Court of Appeal appears to have generally discounted. However, the Court of Appeal did not go so far as to hold that Anglo-Financial v Goldberg was wrongly decided: instead, it appears to have distinguished this case on the basis of the length of the delay.