In dos Santos v. Unitel S.A.,[1] the Court of Appeal helpfully cut through some conflicting authorities and restated a key requirement that applicants must satisfy to be granted freezing injunctions.
The orthodoxy held that applicants for freezing injunctions must satisfy the merits test first articulated in The Niedersachsen[2] that the applicant has a case that is ‘more than barely capable of serious argument but not necessarily one which the judge considers would have a better than 50 per cent chance of success’. However, the dial had started to move in more recent High Court authorities, where it was held that The Niedersachsen merits test ought to be stricter and perhaps more closely aligned with the merits test for permission to serve proceedings out of the jurisdiction – namely, that the applicant had a ‘serious issue to be tried’ which was interpreted to mean ‘the better of the argument’.
The Court of Appeal has now reaffirmed The Niedersachsen test and further held that the test for obtaining a freezing injunction is now the same as – or at least indistinguishable from – the test for interim injunctions more generally.
Background
Isabel dos Santos is the daughter of the former president of Angola and a serial entrepreneur. She founded Unitel S.A. as Angola’s largest mobile telecoms company in 1998 and was a director from its inception until August 2020. She also incorporated Unitel International Holdings (UIH) in the Netherlands, which she entirely owned and controlled.
Between May 2012 and August 2013, Unitel S.A. made a series of loans to UIH amounting to 322,979,711 euros and US$43,000,000. UIH stopped paying interest on those loans in early 2020, and on the basis of that, and other alleged defaults, Unitel S.A. gave notice of acceleration and demanded repayment.
In October 2020, Unitel S.A. brought proceedings against UIH. Later, Unitel S.A.’s shareholders also resolved to make a claim against dos Santos personally. It applied to join her to the UIH claim and also applied on notice for a worldwide freezing order (WFO) against her. The joinder and amendment applications were granted by the High Court in May 2023. The WFO application was granted with an accompanying order that dos Santos pay Unitel S.A’.s costs for the application.
The Court of Appeal granted dos Santos permission to appeal on the basis that the appeal raised important issues of law on which there had been divergence amongst High Court judges, and that she had a real prospect of success.
Key considerations
The Court of Appeal was asked to consider two questions by dos Santos:
- What is the meaning of the ‘good arguable case’ element of the test required for the grant of a freezing injunction, and (whatever the test) was the judge at first instance right to find that Unitel S.A. had a good arguable case?
- Is there a general rule that the costs of a WFO should be reserved?
Court of Appeal decision
Good arguable case
The Court of Appeal held that the correct test as to what constitutes a ‘good arguable case’ is that formulated by Mr. Justice Michael Mustill in The Niedersachsen – namely, ‘a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success’.
The Court of Appeal acknowledged that the vast weight of authorities supported that position, being the test applied for almost 40 years in the High Court and in several other Court of Appeal decisions. In particular, the Court of Appeal highlighted that it would be unwelcome for the courts, at the early stages of proceedings when freezing injunctions are typically sought, to be required to determine which party had ‘the better of the argument’. In addition, it was considered that a relatively low merit test threshold for the grant of a freezing injunction was proper in circumstances where the merits of the arguments will be fully determined at trial.
Further, the Court of Appeal affirmed that the ‘good arguable case’ test applied in the grant of freezing injunctions is the same as – or at least indistinguishable from – the ‘serious issue to be tried’ test applied in the context of other interim injunctions.
Costs
The Court of Appeal did not consider that it should interfere with the first instance ruling on costs. It was held that, in so far as there was a general rule on the costs of contested interim applications, it was that the party contesting an application should be ordered to pay the costs of the successful party at the conclusion of the application. Particular reliance was placed on Civil Procedure Rule 44.2(2) which simply states:
‘If the court decides to make an order about costs –
- (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
- (b) the court may make a different order’.
In all the circumstances, dos Santos’ appeal was dismissed on both grounds.
Takeaway
This case is a helpful touchstone for any applicant seeking a freezing injunction. The merits test to be satisfied is now clearly stated with the authority of the Court of Appeal behind it, and the High Court trend that was recently noted that sought to raise the threshold of the applicable merits test has been firmly reversed.
[1] [2024] EWCA Civ 1109.
[2] [1983] 2 Lloyds Rep 600.
Contributors
Ben Sharrock-Mason