The Court of Appeal has issued important guidance on the meaning of “real risk of dissipation”, in determining whether to grant a freezing injunction, in the recent case of Les Ambassadeurs Club Ltd v Yu [2021] EWCA Civ 1310.
Les Ambassadeurs Club Ltd (LAC), a casino operator, sought a post-judgment worldwide freezing order against Mr Yu, a businessman based in China. At first instance the injunction was refused and LAC appealed to the Court of Appeal.
The ‘Test’ for a Freezing Injunction
There are four requirements that an application for any freezing order must establish (i) that there is a good case on the merits (ii) that there is a real risk of dissipation (iii) that there are assets held by, or on behalf of, the respondent to the application within the geographical scope of the proposed injunction and (iv) that the injunction is just and convenient in all of the circumstances.
The Court was satisfied that grounds (i), (iii) and (iv) were met in this case. The issue in question was whether LAC had shown that there was a real risk of Mr Yu dissipating his assets, in order to avoid payment of the Judgment.
A Test of Real Risk of Dissipation
The Grounds to be Established
The Court of Appeal held that the focus should be whether, on the facts and circumstances of each case, the evidence objectively demonstrates a real risk of unjustified dissipation which, in all the circumstances, was sufficient to make it just and convenient to grant the freezing order.
The Court of Appeal stressed that the often used gloss of ‘more than fanciful, theoretical or significant’ was not synonymous with a ‘real risk of dissipation’.
Guidance on Evidence
The Court of Appeal gave the following helpful evidential criteria:-
- The wherewithal to easily move assets does not itself demonstrate a real risk that assets will be dissipated.
- Evidence of a disinclination to pay a judgment debt unless compelled by enforcement proceedings, is also not sufficient to establish a real risk of dissipation.
Timing
Whether a freezing order is sought pre or post judgment, has no impact upon the test that must be conducted and the level of risk of dissipation that must be established. Whilst a judgment may provide an incentive for a defendant to dissipate his assets that does not in itself evidence that there is a real risk that a defendant may take such a step.
Insight
The case provides helpful if potentially unwelcome clarification of the test for seeking a freezing injunction. However, in practice, the bar for obtaining a freezing injunction has always been relatively high, and in our view rightly so, given the severity of the order if granted. Although this judgment could be taken as the English Courts dramatically reigning in the availability of freezing injunctions, we remain confident that freezing injunctions will continue to be routinely sought and granted on the basis of cogent evidence of a real risk of dissipation.