The Court of Appeal has recently given further guidance on the requirements for a worldwide freezing order ("WFO"); specifically the extent to which an applicant needs to show that the respondent has assets capable of being subject to the order.

Freezing order sought to support claims in Georgia

The appellants/applicants in this case were a number of manifestations of the sovereign wealth investment authority of Ras Al Khaimah ("RAK"), one of the emirates comprising the UAE. The applicants had sought a WFO, relying on section 25 of the Civil Jurisdiction and Judgments Act 1982 (the "1982 Act") in support of litigation in Georgia. They alleged that RAK entities had been the victims of fraud in relation to certain Georgian investments overseen by a Mr Mikadze.

The respondents to the WFO application were defendants in the Georgian proceedings and/or creature companies beneficially owned by Mr Mikadze and were said to hold assets which could be used to satisfy any judgment against Mr Mikadze in Georgia. Mr Mikadze was not present in England and Wales and hence was not made a respondent to the English WFO proceedings.

The Judge had refused the WFO application. Her grounds for doing so were that, inter alia, there was insufficient evidence that the respondents had assets on which a WFO could bite; the Judge held (although the Court of Appeal noted a degree of ambiguity in the judgment on this point) that the correct test was whether each respondent "has or is likely to have some assets somewhere in the world". The Judge also held that there was an insufficient risk of dissipation because: (a) the respondents had complied with English costs orders; and (b) there had been delay on the part of the applicants.

Court of Appeal – test for existence of assets

The applicants appealed on a number of grounds, the first of which being that the Judge erred in her characterisation of the test for the existence of assets. The Court of Appeal's decision on this question, following a considered review of the case law, is likely to be of interest to practitioners in this area. The Court held that the correct test is that an applicant must show that it has "grounds for belief" that there are assets upon which an order can bite (taken from the judgment of Robert Goff J in A v C [1981] 1 QB 956). This will now be the English law test required of applicants both for WFOs and also domestic freezing orders.

As the Court of Appeal recognised, this formulation strikes a balance between the difficulty typically experienced by applicants of demonstrating with precision where its opponent's assets are located and the need to discourage "kitchen sink" applications which name every entity associated with the alleged wrongdoer, irrespective of their true relevance.

The Court of Appeal also noted that, where respondents can adduce evidence that there is no money in their accounts (and the applicant cannot show that the account has been recently active) it might well be right to refuse relief. These remarks will clearly be reviewed carefully by those advising respondents.

Applying this test, the Court of Appeal reversed the Judge in part; granting a WFO in respect of three of the fourteen respondents on the basis that there was evidence that those three respondents had "recently had not insubstantial assets" (underlying added), including the fact that two of the three had sold shares to Mr Mikadze days after the service of the English WFO proceedings.

Respondents' compliance and applicants' delay

As to the other points in the appeal:

  • The Judge's decision that compliance with an order for an interim payment of costs can negative a risk of dissipation was overturned. The Court of Appeal said that whilst non-compliance with court orders is good prima facie evidence for the drawing of adverse inferences, it does not follow that compliance should negative a prior finding that there was a risk of dissipation.
  • Similarly, whilst noting that they would not normally interfere with a Judge's assessment of the risk of dissipation, the Court of Appeal found the Judge's approach to the question of delay to be "illogical" and so also overturned this part of her decision.
  • Finally, in an effort to ensure comity vis-à-vis the Georgian courts, the Court of Appeal ordered that the WFO not apply to any assets in Georgia.

With this judgment, the Court of Appeal has continued the trend of actively exercising its WFO jurisdiction under the 1982 Act in support of foreign proceedings and striking a balance between the needs of applicants and respondents.

Ras al Khaimah Investment Authority & Ors v Bestfort Developments LLP & Ors [2017] EWCA Civ 1014