The appeal raised two main issues: the correct test for establishing a 'good arguable case' (a prerequisite to the granting of a freezing injunction), and whether the costs of the WFO application should be reserved (as a general rule).
It was common ground in proceedings before the High Court judge (Bright J) that an applicant for a freezing order must show:
(1) a good arguable case on the merits,
(2) a real risk, judged objectively, that judgment would not be met because of an unjustified dissipation of assets, and
(3) that the granting of the order would be just and convenient in all the circumstances.
The application, and the appeal, focused on the first limb.
Good arguable cause-
The appellant argued that the effect of the decision in Lakatamia Shipping Co. Ltd. v Morimoto [2019] EWCA Civ 2203 was to equiparate the 'good arguable case' test as it is applied in the freezing order context with that applied in the context of jurisdiction disputes.
Arguing for a higher threshold test - Ms dos Santos urged the court to apply the three-limb approach (to determine 'good arguable case') first postulated by Lord Sumption JSC in Brownlie v Four Seasons Holdings Inc [2017] UKSC 80. That approach, as was explained in Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV [2019] EWCA Civ 10, requires the court to form a view as to which party has the better of the argument. Ms dos Santos relied on some recent decisions that - in the context of freezing relief applications - had adopted the three-limb test (Edwin Johnson J in Harrington & Charles Trading Co Ltd v Mehta [2022] EWHC 2960 (Ch) and of Dias J in Chowgule & Co Pt. Ltd v Shire [2023] EWHC 2815 (Comm)).
However, the Court of Appeal (Sir Julian Flaux C) reaffirmed that the correct test for a 'good arguable case' in the context of freezing injunctions remains that set out by Mustill J in Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH (The Niedersachsen) [1983] 2 Lloyd’s Rep 600 at 605. The Niedersachsen test, which the court found is distinct from the test used for jurisdictional gateways, requires the applicant to satisfy a relatively low merits threshold - that the case should be more than barely capable of serious argument but not necessarily one with a better than 50% chance of success.
Costs implications-
The Niedersachsen test does not involve the relative assessment of the parties' positions. The clarification should discourage the parties to future disputes, from being drawn into expensive mini trials at which all available evidence is deployed.
Costs of WFO applications generally-
Ms dos Santos appealed against the award of the WFO application costs to Unitel. She argued inter alia that there is no principled reason to treat freezing relief costs differently to other interim injunction costs, where the ordinary order is costs reserved.
The court disagreed. A freezing injunction, the court explained, is not 'interim' and nor does it depend on the balance of convenience test like an American Cyanamid injunction; rather it simply reflects the presence of the three criteria (good arguable case, risk to judgment from unjust risk of dissipation, just and convenient). Unlike an American Cyanamid injunction, a freezing injunction cannot be made 'final' or 'permanent' at trial (although it may be extended); rather it exists only to facilitate the enforcement of any judgment that may be made. In contrast, in the case of an American Cyanamid injunction, where costs reserved is the usual order, the court allows the applicant to rely on a right or obligation, the existence of which has yet to be determined. If the outcome of the trial is that the right or obligation is not established, then it can generally be said that the interim injunction should not have been granted. For this reason, it is appropriate to reserve the costs of American Cyanamid injunctions to the trial judge. The same cannot be said of freezing injunctions; for even if the claim fails at trial, it does not follow that the relief was not correctly granted (on the basis that the applicant satisfied the three criteria).
Thus, the court found that the general rule for contested interlocutory applications, where the unsuccessful party pays the costs, should apply.
The judgment is available to download from the Courts and Tribunals Judiciary website: Isabel-dos-Santos-v-Unitel-30.09.24.pdf
