But The Assets Are Already Frozen! Where Civil Freezing Orders And Criminal Restraint Orders Collide

• Published date: 12 August 2021
• Subject Matter: Litigation, Mediation & Arbitration, Criminal Law, Arbitration & Dispute Resolution, Court Procedure, White Collar Crime, Anti-Corruption & Fraud, Civil Law
• Law Firm: Gatehouse Chambers
• Author: Mr Michael Maris

Michael Maris takes a look at AA & Ors v BB & Anor [2021] EWCA Civ 1017

Background

The Claimants were two companies and their respective administrators, who alleged in the main proceedings that substantial sums had misappropriated, by or for the benefit of the Defendants, or otherwise in circumstances giving rise to liability on the part of the Defendants.

Independently of the present proceedings, criminal restraint orders ("CROs") had been made, on application by the Serious Fraud Office ("the SFO"), against the Defendants under the Proceeds of Crime Act 2002. The CROs restrained them from disposing of any of their assets, wheresoever situated, save for in accordance with the terms of the CROs. At the time of the present appeal, the CROs remained in force.

On 20 August 2020, after the CROs had been granted, the Claimants applied (without notice to either the Defendants or the SFO) for (i) worldwide freezing orders; and (ii) proprietary injunctions against the Defendants. By an ex tempore judgment on 25 August 2020, the Deputy Judge granted the freezing order, having satisfied himself that:

1. The Claimants had shown a good arguable case in respect of their proposed claims based on misappropriation of funds; and
2. That there was a good arguable case of a current risk of dissipation of assets by the Defendants.

The Deputy Judge declined to grant the proprietary injunction. Notwithstanding that he was satisfied there was a serious issue to be tried, he considered that the proposed orders lacked sufficient specificity in respect of the assets to be frozen.

The Claim Form was issued on 27 August 2020. The application, made on notice to the Defendants, to continue the freezing orders was heard on 7 September 2020. The Judge acceded to that application and granted the order sought. The Defendants had resisted the continuation of the freezing orders on the specific ground that, in light of the CROs, the Claimants could not establish a real risk of dissipation of their assets, and were granted permission to appeal by the Judge.

The Court of Appeal

David Richards LJ, with whom Simler and Nugee LJJ agreed, focused on the first ground of appeal, which he considered raised the point of principle: that the courts below should have refused to make the order on the grounds that the existence of a prior CRO removed any real risk of dissipation of assets. The existence therefore of a prior CRO was "fatal to any submission that there was a real risk of dissipation" and was a...