Introduction

The case of AA & Ors v. BB & Anor ([2021] EWCA Civ 1017) heard in the England and Wales Court of Appeal (Civil Division) on July 7, 2021, addresses critical issues surrounding the intersection of criminal restraint orders (CROs) and civil freezing orders under the Proceeds of Crime Act 2002 (POCA). The appellants, who were subject to existing CROs, contested the continuation of worldwide freezing orders imposed by the claimants, alleging that the CROs should negate any real risk of asset dissipation. This commentary delves into the background, judicial reasoning, and the significant legal precedents that influenced the court's decision, ultimately shaping the landscape for future asset restraint proceedings.

Summary of the Judgment

The appeals centered on the claimants' request to maintain worldwide freezing orders against five defendants, four of whom held director roles in the claimant companies. The appellants argued that existing CROs under POCA sufficiently restrained their assets, negating any real risk of dissipation and, therefore, justifying the lifting of the freezing orders. The Court of Appeal, however, upheld the lower court's decision to continue the freezing orders, emphasizing that CROs do not inherently eliminate the risk of asset dissipation. The judgment underscored the necessity of freezing orders in safeguarding claimants' interests, especially when there is uncertainty regarding the continuity or enforcement of CROs.

Analysis

Precedents Cited

The judgment extensively referenced several key cases that shaped the court's approach to balancing CROs with civil freezing orders:

• Holyoake v Candy [2017] EWCA Civ 92: Established that a real, objective risk of asset dissipation must be demonstrated for a freezing order, irrespective of other existing restraints.
• Faya Ltd v Butt [2010] EWHC 3461 (Ch): Clarified that existing CROs do not automatically negate the need for additional freezing orders in civil proceedings.
• Cancer Research UK Ltd v Morris [2008] EWHC 2678 (QB): Distinguished between criminal restraint proceedings and civil freezing orders, emphasizing that the latter serve distinct purposes.
• Re Stanford International Bank Ltd [2010] EWCA Civ 137: Highlighted the complexities in joint management of CROs and freezing orders, particularly in cases involving multiple jurisdictions and supervisory bodies.

Legal Reasoning

The court acknowledged that while CROs provide significant restraint on asset disposal, they do not offer absolute protection against asset dissipation. Key points in the legal reasoning include:

• Non-Exclusivity of CROs: CROs do not cover all potential avenues for asset dissipation, especially in the absence of comprehensive oversight mechanisms.
• Risk of Variation or Discharge: There is inherent uncertainty regarding the duration and enforceability of CROs, making freezing orders a necessary supplementary measure.
• Main Interest Protection: Civil freezing orders prioritize the claimant's interests, which may diverge from the public interest focus of CROs administered by bodies like the Serious Fraud Office (SFO).
• Judicial Discretion: The court exercised its discretion to assess the real and non-trivial risk of asset dissipation, considering the specific circumstances of the case.

Impact

This judgment sets a significant precedent by affirming that CROs alone are insufficient to negate the necessity for civil freezing orders. The implications are manifold:

• Enhanced Protective Measures: Claimants can pursue freezing orders even when defendants are under CROs, ensuring better protection of assets during litigation.
• Judicial Scrutiny: Courts will continue to independently evaluate the risk of asset dissipation, regardless of existing restraints.
• Procedural Adjustments: Emphasizes the need for improved coordination between criminal and civil proceedings to mitigate overlapping restraints and administrative burdens.
• Future Legislation Considerations: May prompt legislative bodies to refine the interplay between CROs and freezing orders to streamline asset protection mechanisms.

Complex Concepts Simplified

Conclusion

The decision in AA & Ors v. BB & Anor underscores the judiciary's commitment to ensuring that asset dissipation risks are adequately mitigated in civil proceedings, even in the presence of existing criminal restraints. By affirming that CROs do not inherently eliminate the need for freezing orders, the Court of Appeal has fortified the legal tools available to claimants seeking to protect their financial interests. This judgment not only clarifies the nuanced relationship between different types of asset restraints but also sets a robust precedent for future cases dealing with complex asset protection scenarios.