“Now I am become death, the destroyer of worlds.”
While this quote from the Bhagavad Gita, used by Oppenheimer to describe his horror at seeing the first detonation of an atomic bomb, might be an overstatement if applied to the law’s “nuclear weapon”, any respondent dealing with the immediate effect and fallout of a freezing injunction may well feel the sentiment resonates.
The freezing injunction has developed considerably from its origin as the Mareva injunction 50 years ago. The tests have shifted and the jurisdiction itself has expanded both in effect and perhaps in its frequency of use.
It is, no doubt, one aspect of what makes litigating in the Courts of England and Wales an attractive prospect for claimants. Its efficacy in constraining a defendant’s operations and ability to function is part of that attraction. However, the jurisdiction is inherently one-sided. It is intended to facilitate future enforcement, but no connection is required between the assets frozen and what might be required for or susceptible to enforcement.
As a reminder, in order to obtain a freezing injunction a claimant/applicant must demonstrate:
- a good arguable case on the merits of the underlying claim;
- a real risk of unjustified dissipation of assets;
- the existence of assets within the Court’s control, whether within the jurisdiction or, in the case of worldwide relief, assets capable of being restrained; and
- that it is just and convenient to grant the relief, having regard to all the circumstances.
What does a good arguable case mean?
In its decision in Dos Santos v Unitel SA [2024] EWCA Civ 1109 the Court of Appeal held that the correct test remains the classical Niedersachsen formulation: the claimant must show a case that is “more than barely capable of serious argument”, but not one the court must assess as having a more than 50% prospect of success. A merely speculative claim will fail but a claimant is not required to prove, or even persuade the court to predict, ultimate success.
The Court of Appeal confirmed that the Brownlie three‑limb test, applied when considering jurisdictional gateways, which requires, in effect, a relative assessment of which party has the “better” argument, has no place in the freezing injunction context. The Court of Appeal warned that its adoption would inevitably draw judges into premature, evidence‑heavy mini‑trials inconsistent with the urgency and purpose of the freezing injunction jurisdiction.
Popplewell LJ’s judgment in Dos Santos discusses the similarities between the Niedersachsen test and the threshold for surviving summary judgment of a “real prospect of success”. Popplewell LJ suggests that a claim which carries “some degree of conviction” in the summary judgment sense is, in substance, no different from one that is “more than barely capable of serious argument” for freezing injunction purposes. It is clear why these tests might be compared: both serve as filters against hopeless claims while stopping short of determining the dispute. The Court of Appeal in Dos Santos not only compared the two but advanced reasoning why there was no reason to consider that the merits threshold for a freezing injunction should be any higher than that for resisting summary judgment.
However, by making such a link to the test for summary judgment, the Court of Appeal’s decision is potentially impacted by an unlikely source: a competition decision of the Supreme Court. The Judgment in Evans v Barclays Bank Plc & Ors [2025] UKSC 48 included the Supreme Court’s view that “There is nothing illogical in finding that a claim is not susceptible of being struck out or summarily dismissed and yet finding also that the claim appears to be very weak.”
It is not obvious that this interpretation of the threshold for surviving summary judgment, was what Popplewell LJ was suggesting should be adopted as the meaning of a “good arguable case on the merits of the underlying claim” in Dos Santos.
As such, whilst the Court of Appeal decision in Dos Santos was welcomed as clarification of the position, it seems that with Evans the Supreme Court might have cast doubt on its adequacy.
Risk of Dissipation
Despite what some claimants aim to achieve, the purpose of a freezing injunction is not to provide security. Rather its aim is to prevent a defendant from improperly making itself judgment proof by the disposal or concealment of its assets. The word “improperly” is key. A freezing injunction is not intended to prevent a defendant from dealing with its own assets in the normal course of business or conducting its personal affairs in the usual way.
As such, the Court will require a claimant/applicant to have solid evidence to demonstrate that there is a real risk that the defendant will, unless restrained by injunction, dissipate its assets.
The question then becomes, what evidence is sufficient to demonstrate this risk? In Canada Inc v Sovereign Finance Holdings [2024] EWHC 2170 (Comm) Mr Paul Stanley KC (sitting as a Deputy High Court Judge) made a distinction between evidence of dissipation and evidence of means, opportunity and motive. The historical use of complex financial or offshore structures might provide means and opportunity to dissipate assets, but those were not evidence of a risk of dissipation without further evidence. However, proposed transfers, conduct within the claim, previous defaults, failures to disclose assets and allegations of criminal behaviour or dishonesty could count as sufficient evidence.
Full and Frank Disclosure: Duties and Breaches
It is well established that an application made on a without notice basis carries an obligation to make a full, fair and accurate disclosure of material information to the Court. This is because a decision made at the hearing of a without notice application is a decision made without having heard both sides, as is the norm. Such a departure from typical practice must involve the judge hearing the application having confidence that her attention will be drawn to information that might support an opposite conclusion to the one being championed by the applicant.
A failure of the duty of full and frank disclosure can result in the discharge of the order made. As such it is perhaps unsurprising that complaints about these failures often form the core of an application to discharge a freezing injunction at a return date.
A decade ago, in National Bank Trust v Yurov [2016] EWHC 1913 (Comm) Males J (as he then was) criticised the unfocused approach to complaints about failure of full and frank disclosure and directed that the defendants in that case identify the six principal failures on a single page. Males J made the point that a defendant who is unable to make good his case by reference to the six best points is unable to improve his position by adding further points.
This issue was revisited by the same judge, now a Lord Justice in the Court of Appeal decision of Mex Group Worldwide Limited v Ford [2024] EWCA Civ 959. This time Males LJ again encouraged applicants to exhibit a degree of restraint when making an application to discharge a freezing injunction on the grounds of a failure of full and frank disclosure. However, the Lord Justice went a step further, warning that a future Court, presented with an unabridged list of alleged failures, should decline to hear the issue at all.
Lord Justice Coulson, in the same decision, took up the same mantle, referring in his judgment to the law of diminishing returns. Coulson LJ commented that, if the big-ticket items are not considered sufficient or sufficiently material to justify the discharge of an injunction, smaller items will not bridge the gap.
Nonetheless, there will need to be a balancing exercise undertaken by a respondent’s legal team to ensure the best position is put forward, without antagonising the Court. Where there was, at the without notice hearing, an unfairly negative picture of a respondent built up by repeated overstatements or omissions on points of detail, there could be a very real cumulative effect made up of numerous small issues. Care will need to be taken to ensure the Court understands the insidious nature of the overstatements, without compiling the “shopping list” of complaints the Court has warned respondents to avoid.
Cross undertakings and fortification
One of the standard requirements designed to offer some protection to respondents in circumstances in which the Court is being asked to make an asymmetric order with potentially catastrophic effects is the requirement that the claimant/applicant give a cross undertaking in damages which the respondent can call on if it is later determined that the applicant was not entitled to the relief granted.
While the Court cannot compel an applicant to give an undertaking, it is commonly understood that the provision of an undertaking is the price a claimant/applicant pays for the grant of the injunction.
In certain jurisdictions, this goes further, and security based on a percentage of the value of the claim must be provided. That is not currently standard in the Courts of England and Wales. Instead a defendant/respondent can apply for fortification of the cross undertaking, requiring the applicant/claimant to pay funds into Court or provide some other form of security to demonstrate that the cross undertaking itself has value.
In LAX SA v JBC SA [2024] EWHC 2042 (Comm) the Court was faced with a claimant/applicant whose position was that, as a result of the breach complained of in the underlying claim, it was unable to provide fortification for the cross undertaking it had given in support of its application for a freezing injunction. Foxton J’s elegant solution was to require worldwide asset disclosure of the applicant’s assets up to a cumulative unencumbered value of $1million. In so doing the Judge also went some of the way towards balancing the asymmetrical position of early and comprehensive asset disclosure being provided by a respondent following a hearing at which he was not present, and before he is even able to state his case.
Disclosure of assets
The part of the standard format freezing injunction requiring a respondent to disclose assets was first included in such an order in 1980. It was included to ensure the total amount of assets frozen did not exceed the sum involved in the dispute. As such, it was intended to ensure that no more than the necessary assets were frozen, and that the potential liability under the cross undertaking was not unnecessarily increased.
As mentioned above, there is an inherent asymmetry in the provision by one party of the identity and location of all its assets over a certain value. Disclosure has to be provided quickly, in circumstances where the respondent’s side of the argument has not been heard, the respondent may be challenging the freezing injunction and the disclosure itself may go to the merits of the claim.
There is typically no stay of disclosure pending a challenge to an injunction, and the provision of disclosure is irrevocable: the claimant has the information even if the freezing injunction is ultimately discharged. The Court does not usually allow disclosure to be provided to a third party or to the Court. Rather, it is given to the claimant, who uses it to “police” the order: enabling endless interrogation of its adequacy and the ability to weaponise the process with threats of contempt proceedings or sanctions if the applicant finds the disclosure lacking.
Real world impact
The reality for a party whose assets are frozen is that it can be extremely difficult to function. Banks treat freezing injunctions extremely seriously and are typically nervous about allowing access to funds once they’ve been served. The longer-term impact can involve the withdrawal of facilities as banks become increasingly cautious about who they do business with. Likewise, it would be a very confident investor who would be willing to continue to deal with someone subject to a freezing injunction.
The fact that a freezing injunction is merely an interim measure, obtained without notice, based on the existence of a serious issue to be tried does not translate into the real world. There’s a taint, which goes well beyond the pages of the order granting the injunction and which can extend past a discharge. The reality is that being subject to a freezing injunction can be devastating on so many levels: perhaps not so far from Oppenheimer’s exclamation after all.
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