Earlier this year, the English Court of Appeal in Isabel dos Santos v Unitel S.A. [2024] EWCA Civ 1109 unanimously approved the test for granting freezing orders.
The Court found that the merits threshold for granting a freezing order is the ‘good arguable case’ test as asserted in The Niedersachsen (Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH [1983] 2 Lloyd’s Rep 600).
At first instance in 2023, the Niedersachsen test was adopted by Mr Justice Bright in granting a worldwide freezing order to Unitel over £580m of Ms dos Santos’ assets. The full test is:
- That there was a good arguable case on the merits;
- That there was a real, objective risk that a future judgment would not be met because of an unjustified dissipation of assets; and
- Considering all the circumstances, it would be just and convenient to grant the freezing order.
Ms dos Santos, who was also subject to a costs order, appealed this decision on two grounds.
Appeal grounds:
- Whether the ‘good arguable case’ merits test was indeed the test as set out in The Niedersachsen, or whether a three-limb test applied in the context of jurisdiction, as set out in Brownlie, was correct.
- Whether, whichever of the tests the Court of Appeal found to be correct, the test was satisfied by Unitel.
Ms dos Santos failed in her appeal. The Court of Appeal upheld the principles decided in first instance. It found that the ‘good arguable case’ test was the test set out in The Niedersachsen and should also be better expressed as a ‘serious issue to be tried’.
Ms dos Santos relied on the cases of Chowgule & Co Pte. Ltd v Shire 2023 and Harrington & Charles Trading Co. Ltd v Mehta 2022 in her appeal, which applied the Brownlie test to grant freezing orders. However, the Court held these cases were wrong to apply the merits test of Brownlie, as this would require the Court to assess which party had ‘the better of the argument’, which is undesirable for courts as it allows hearings for freezing orders to be vulnerable to turn into ‘mini trials’. Therefore, the Niedersachsen test is the correct test in relation to freezing orders.
The Court also found that even if the three-limb test from Brownlie was appropriate here, Ms dos Santos would have still failed on appeal, as Unitel had the better of the argument regardless.
The Niedersachsen test was also discussed and applied in the recent Manx case of Skatteforvaltningen (21 August 2024). Citing the 2023 first instance decision in dos Santos, His Honour Deemster Corlett referred to the ‘confused state of the law on good arguable case’. However, the First Deemster went on to hold (just as the English Court of Appeal subsequently did) that ‘the Niedersachsentest has been applied consistently for many years and this is the test which I shall apply.’ The decision in Skatteforvaltningen provides confirmation that the legal principles applicable to the grant of freezing orders in the Isle of Man continue to align with the position in England & Wales.
For further information on how Maher Law’s specialist dispute resolution team can assist in relation to freezing orders, please contact Tom Maher at tom@maher.im.
17 December 2024
