Listen to the judges in the fight against fraud

We received welcome news at the end of last year that the government had concluded the Online Fraud Charter, representing a commitment by online giants to tackle the sky-high rates of online fraud. However, to truly counter the current fraud epidemic, the high value of frauds (often transnational cases that involve public figures and interest) must also be addressed head on.

The English court remains a centre of excellence in confronting global fraud, with well-respected judges able to choose from a powerful toolkit, including the worldwide freezing order. However, the recent intervention of Mr Justice Bright in the Commercial Court is a valuable example of the need to remain vigilant to potential practical challenges. In delivering judgment on an application for a freezing injunction in the Unitel litigation (Unitel SA v Isabel dos Santos [2023] EWHC 3231 (Comm)), the judge highlighted a substantial risk of confusion with respect to the true test for the granting of a freezing order.

The proceedings arose as part of the extensive multinational litigation involving Isabel dos Santos, the daughter of the former president of the Republic of Angola, and her former business empire.

Crying out for clarification

The issue that Mr Justice Bright identified as requiring clarification is central to the freezing order jurisdiction. He delved into what is truly meant by the merits requirement for a freezing order to be granted.

The judge clearly identified a point of departure in recent and very high authorities that led him to remark that in his view ‘the law is in a confused state, which cries out for a definitive answer from the Court of Appeal’.

At the heart of the merits debate when seeking a freezing injunction is whether the applicant has a good arguable case. No matter how familiar that phrase may sound, Mr Justice Bright noted that there are now apparently contradictory lines of authority on what the phrase actually means.

On the one hand is the traditional formulation, from the 41-year-old Niedersachsen authority: ‘One which 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.’

On the other hand is a formulation with origins in the jurisdiction context, with a three-limbed test that includes a relative requirement that the applicant for the freezing order has the ‘better of the argument’ (that is, better than 50%).

The existence of these different approaches, endorsed by senior judges in oft-cited authorities, left the judge in Unitel little choice but to test the application for a freezing order under both potential formulations. Otherwise he would, in his view, be duty bound to grant permission to appeal, for: ‘It would be much better to consider the point afresh and from first principles. But only the Court of Appeal can have the luxury of doing this.’

Fortunately for the applicant, Mr Justice Bright considered a freezing order justified under either test in the particular circumstances of this case. This rendered moot, at least in Unitel, what ‘good’ really means in the ‘good arguable case’ test. However, such judicial encouragement for clarity to be brought forward is something that practitioners and the senior judiciary will take account of in equal measure.

Risks and opportunities

Both practitioners and the victims of fraud will hope that a Commercial Court judgment’s spotlight will be enough to see this issue addressed. As ever, the risks that attend also present some opportunities.

First, at a theoretical legal level, there is obvious attraction to a clarificatory judgment in this area. Other than for alleged fraudsters, there are no benefits to court users in ambiguity in such an important and fast-paced area. The law surrounding interim injunctions, as well as more widely, will benefit from greater clarity.

For example, if the Niedersachsen line of authority is correct then one would want to avoid any risk of it bleeding into and moulding the jurisdiction tests which have (potentially erroneously) been imported to the freezing order context.

Second, freezing orders and urgent remedies in fraud cases are the last place where further cost and resource risk is needed. However, such risks are bound to arise if there are clear grounds for appeal, unless the applicant can meet the stricter jurisdictional criteria. Urgent applications – as freezing injunctions inevitably are – will take longer to prepare and the Court of Appeal will be troubled too often.

Third, the possibility of looking at the test for freezing orders ‘afresh and from first principles’ presents a tantalising opportunity to update the jurisdiction yet further, focusing it on the digital, transnational and regrettably fraud-dominated stage it is so responsible for righting.

More to come

The English court is renowned around the world for being one of the key jurisdictions where the victims of fraud can receive urgent, globally enforceable and effective relief. The appropriately pitched, and claimant-friendly, test of the Niedersachsen authority on good arguable case has been an important aspect of that. However this discrepancy in the authorities is resolved, those who seek the assistance of the English court in dealing with such claims will hope that the Court of Appeal takes the issue up when the opportunity presents itself.

Philip Gardner is a senior associate at Peters & Peters, London