Freezing orders: risk of dissipation? Get real
The High Court has issued an important reminder of the need for solid evidence of a real risk that the respondent will take steps to dissipate their assets to frustrate a judgment in applications to continue a worldwide freezing order (WFO). Evidence of dishonesty alone is not enough, and conduct falling short of dishonesty is less likely to suffice.
Sheikh Salah Hamdan Albluewi, a Saudi national, had been a member of a members' club and casino owned by Les Ambassadeurs for around 26 years. Given his longstanding membership, Les Ambassadeurs provided Mr Albluewi with a cheque cashing facility. In September 2019, this was extended to £2 million on a temporary basis and Mr Albluewi utilised the full amount.
However, these cheques were dishonoured and during Les Ambassadeurs' attempts to recover the outstanding amount over the following months, Mr Albluewi travelled back to Saudi Arabia where gambling debts are unenforceable. It also became apparent that Mr Albluewi had significant outstanding gambling debts with other casinos.
Les Ambassadeurs secured a WFO, which was subsequently continued at a hearing with the parties present. Les Ambassadeurs then applied to continue the WFO on the basis that was it necessary to prevent Mr Albluewi from dissipating his assets; Mr Albluewi applied to discharge the WFO because: (i) there was no real risk of dissipation; (ii) the WFO was not just and convenient; and (iii) Les Ambassadeurs had failed to make full and frank disclosure at the without notice application.
What did the court explore?
Was there a real risk of dissipation?
Les Ambassadeurs argued that there was a real risk of dissipation because:
- Mr Albluewi had provided 17 cheques, all of which were dishonoured;
- despite assurances, Mr Albluewi had made no payment in the four months since the debt arose;
- Mr Albluewi was a Saudi national whose assets and businesses were international, so he could easily move them around and make them unavailable for enforcement; and
- Mr Albluewi was a high-profile player at casinos around the world, who spent considerable sums and failed to repay gambling debts.
Mr Albluewi's behaviour was therefore indicative of a person lacking in "commercial probity" and these factors, when taken together, provided solid evidence from which a real risk of dissipation could be inferred.
Mr Albluewi argued that none of the individual factors identified by Les Ambassadeurs provided a basis to infer a real risk of dissipation. Even in a case based on fraud or dishonesty there was a question over whether that alone would provide a basis for real risk of dissipation. In this case, Les Ambassadeurs had confirmed that it was not alleging dishonesty but rather a lack of "commercial probity".
The Court stated that all the circumstances of the case must be considered together and that the key question was how far the alleged lack of commercial probity went and, critically, whether in all the circumstances it showed a real risk of dissipation. The further removed the allegations were from dishonesty in terms of low commercial morality, the more difficult it would be to rely upon the relevant conduct as giving risk to a real risk of dissipation. In this case, the lack of commercial probity was at the lower end of the scale. Les Ambassadeurs had therefore failed to establish a real risk of dissipation.
Further important considerations were that:
- Mr Albluewi had substantial assets outside of Saudi Arabia that could be enforced against due to reciprocal enforcement regimes;
- the nature of those assets was such that dissipation was not a risk (including because they amounted to tens of millions of pounds, which was much larger than the debt, and there had been no evidence of dissipation to date); and
- Mr Albluewi had very substantial connections with London.
Les Ambassadeurs' application to continue the WFO was therefore dismissed. The final two grounds therefore fell away; however, Mr Albluewi had alleged that Les Ambassadeurs had not given a fair presentation of the case at the without notice hearing by failing to provide the full and frank disclosure required in applications for WFOs.
Full and frank disclosure?
While the Court found that there had been two relevant breaches of the duty of full and frank disclosure, since no real risk of dissipation had been established there was no need for the Court to consider whether the WFO would be regranted if discharged on this basis.
The Court did note that it should be good practice in most cases for a transcript to be obtained by a party making an allegation of material non-disclosure so that the Court is properly equipped to deal with it. In most cases, absent particular urgency, the applicant's note of the hearing will not suffice.
This judgment is a valuable reminder of the importance of WFO applicants having robust evidence of a real risk of dissipation. Without it, the Court will discharge a WFO and order the applicant to pay the respondent's costs. It is well-established that evidence of dishonesty alone is not enough, and this case shows that conduct falling short of dishonesty (such as a lack of "commercial probity") is even less likely to suffice. This can be contrasted with cases where the alleged dishonesty goes to the heart of the question of the risk of dissipation, as was the case in Lakatamia Shipping Company Limited v Morimoto(1).
Two further important lessons arising from this judgment are:
- when considering the question of whether a WFO is just and convenient, the Court will expect to be provided with evidence of its utility going forward; and
- when making an allegation of material non-disclosure, it is good practice to obtain a transcript of the without notice hearing so that the Court is properly equipped to consider the issue.