The judgment of the Court of Appeal in Dos Santos v Unitel SA [2024] EWCA Civ 1109 contains, among other things, important new guidance on the test to be applied on the hearing of an application for a freezing injunction.
The appellant, Ms dos Santos, an entrepreneur and daughter of the former President of Angola, founded Unitel SA (Unitel), Angola’s largest mobile telecoms company in 1998. She was a director of the company until August 2020 and the beneficial owner of 25% of its shares via a BVI company until late 2020 when her stake, along with that of others, was appropriated by the Angolan government.
Unitel International Holdings BV (UIH), which was not connected with Unitel, was incorporated in 2012 in the Netherlands and was owned and controlled by Ms dos Santos. Between May 2012 and August 2013 Unitel made a series of loans to UIH amounting to €322,979,711 and US$43 million. In late 2019/early 2020, UIH stopped paying interest on the loans. On the basis of that and other alleged defaults, Unitel gave notice of acceleration and demanded repayment.
In October 2020 Unitel issued proceedings against UIH. In or around March/April 2022 its shareholders resolved also to make a claim against Ms dos Santos herself. It applied to join her to the UIH claim and amend its statements of case and also applied on notice for a worldwide freezing order against her. The joinder and amendment applications, along with an application to serve out of the jurisdiction, were granted by HHJ Pelling KC in May 2023.
The application for a worldwide freezing order was heard by Bright J, who made the order and also ordered Ms dos Santos to pay the costs and make a payment on account. Permission to appeal was granted by Arnold LJ in March 2024 on the basis that Ms Santos’s grounds of appeal raised important issues of law on which there had been a divergence of approach among High Court judges.
Ms dos Santos relied on two grounds of appeal:
(1) Bright J had been wrong to find that Unitel had a good arguable case on the merits and, therefore, to grant the order he had made. The judge, she submitted, should have concluded that Unitel did not have a good arguable case and that in fact she had “the better of the argument.”
(2) The judge had been wrong to award Unitel its costs. The ordinary costs order made when granting an interim injunction was costs reserved, and there was no reason to adopt a different approach in the case of a contested application or to make a different order on the facts of this case.
Unitel sought to uphold the judge’s judgment on additional grounds.
In a judgment of 121 paragraphs Sir Julian Flaux C dismissed the appeal.
A number of points emerge from his judgment, which contains a detailed analysis of the submissions and the case law.
In paragraph 96 he said:
“In my judgment, the correct test as to what constitutes a good arguable case for the purposes of the merits threshold for the grant of a freezing injunction is that formulated by Mustill J in [Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH] ‘The Niedersachsen’, applied by first instance judges many times over the last forty years and endorsed by at least three more recent decisions of this Court. A “good arguable case” in the freezing injunction context is not to be assessed by reference to the three-limb test derived from Brownlie [v Four Seasons Holdings Inc] to determine whether a claim falls within one or more of the jurisdictional gateways for the purposes of permission to serve out of the jurisdiction and the recent decisions in Harrington [& Charles Trading Co. Ltd. v Mehta] and Chowgule [& Co Pte Ltd v Shire]which adopt that test were wrong to do so.”
He drew a distinction between the threshold applicable to a jurisdictional gateway for the purpose of service out of the jurisdiction and the merits threshold applicable when considering whether to grant of freezing relief.
“In my judgment,” he said, “it is important to keep in mind that, in the case of freezing injunctions, the test is applied to satisfy a merits threshold in circumstances where the Court will (unless the case settles) determine the merits at trial, hence the relatively low threshold set by The Niedersachsen. In contrast, in many cases, although the evidence at trial may include what was before the Court on an application to serve out, the Court will only have to determine, applying the three-limb test, whether the case falls within one or more of the jurisdictional gateways at the stage of the application for permission to serve out. Whether or not the case does fall within a gateway does not involve applying a merits test as such.”
He also said:
“[A]s has been stated in a number of cases, particularly in cases where there is a dispute on the evidence, it is invidious for the Court, at the early stage at which a freezing injunction is usually sought, to have to determine which party has ‘the better of the argument’. This was pointed out by Nugee J in Holyoake v Candy […] The point was cogently developed by Butcher J in Magomedov [v TGP Group Holdings (SBS) LP].
In his view, “the weight of authority supports the application of The Niedersachsen test in determining the merits threshold for the grant of freezing injunctions. It is the test which has been consistently applied by judges in deciding whether to grant such injunctions in the intervening years, at least until Harrington and Chowgule. It is a test approved by the Court of Appeal in The Niedersachsen itself…and in several cases since.”
Popplewell LJ gave a separate but shorter judgment, agreeing that the appeal should be dismissed for the reasons given by the Chancellor, but adding some words of his own, “because the time has come, in my view, to recognise that the gateway merits test for a freezing order is and should be the same as that for interim injunctions generally, namely whether there is a serious issue to be tried. That is so both as a matter of principle and because it is no different in substance from the test applicable to freezing orders of ‘good arguable case’, in the sense defined in The Niedersachsen.”
He concluded (in paragraph 131):
“[T]here is not, and should not be, any distinction to be drawn between the ‘good arguable case’ test for freezing orders and the test of ‘serious issue to be tried’ for other forms of interim injunctions. That being so, it would be preferable to use the latter in the context of freezing orders and to restrict the use of the expression ‘good arguable case’ to the context of jurisdictional gateways, where it bears a different meaning in accordance with the principles explained in Brownlie. It is obviously unsatisfactory for an expression used to define a merits test to mean something different in one context (freezing orders) from that in another (jurisdictional gateways); that is likely to give rise to confusion and misunderstanding, as is well illustrated by the cases to which the Chancellor has referred.”
The case is an important one in as much as it resolves the divergence that persuaded Arnold LJ to give permission to appeal and disposes of the argument as to whether the “good arguable case” test imposes a higher burden than “serious issue to be tried.”