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dos Santos v Unitel SA
Factual and Procedural Background
The appeal concerns two issues arising from a Worldwide Freezing Order ("WFO") granted by Bright J against the Appellant, an engineer and entrepreneur who founded Company A, a major telecoms company in The State. The Appellant was a director and beneficial owner of a stake in Company A until late 2020, when the stake was appropriated by the state. The First Defendant, Company B, incorporated in the Netherlands and controlled by the Appellant, received substantial loans from Company A, which defaulted on interest payments from late 2019/early 2020. Company A accelerated repayment demands and issued proceedings against Company B in this jurisdiction in October 2020 ("the Company B Claim").
In early 2022, Company A's shareholders passed a resolution to make a claim against the Appellant personally. Company A applied in October 2022 to join the Appellant to the Company B Claim and for a WFO against her. Permission to serve out of jurisdiction was granted in January 2023. The joinder, amendment, and service applications were partly granted in May 2023, and the claim against the Appellant was served in June 2023. Permission to appeal that order was refused in October 2023 but later granted in March 2024 on important points of law.
The WFO application was heard in November 2023, and judgment granting the WFO was handed down in December 2023, with costs ordered against the Appellant. Permission to appeal was refused initially but later granted.
Legal Issues Presented
- The meaning of the "good arguable case" element of the test for granting a freezing injunction and whether the judge was correct in finding that Company A had such a case.
- Whether there is a general rule that the costs of a WFO application should be reserved.
Arguments of the Parties
Appellant's Arguments
- The "good arguable case" test should be understood as the three-limb test derived from jurisdictional gateway cases (Brownlie test), requiring the claimant to have "the better of the argument" rather than the traditional Niedersachsen test.
- The claim against the Appellant was brought too late under the relevant Commercial Companies Law ("CCL") of The State, particularly relying on Article 80(1) of the CCL, which requires an indemnity action to be filed within six months of a shareholder resolution.
- The judge was wrong to order the Appellant to pay costs of the WFO application; the ordinary rule is that costs should be reserved for interim injunctions, including freezing injunctions, absent special circumstances.
Respondent's Arguments
- The traditional "good arguable case" test as formulated in The Niedersachsen remains good law and is appropriate for freezing injunctions; the three-limb jurisdictional test should not apply.
- Company A had a good arguable case on the merits, supported by expert evidence that the filing of the joinder application was equivalent to filing a claim within the statutory six-month period under Article 80(1) of the CCL.
- The Appellant had fought the WFO application on every point and lost, justifying an order for costs against her rather than costs being reserved.
- The nature of freezing injunctions differs from other interim injunctions, supporting a different approach to costs.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH ("The Niedersachsen") [1983] 2 Lloyd's Rep 600 | Definition of "good arguable case" as more than barely capable of serious argument, not requiring better than 50% chance of success. | Endorsed as the correct test for freezing injunctions merits threshold, distinguishing from jurisdictional gateway test. |
| Lakatamia Shipping Co. Ltd. v Morimoto [2019] EWCA Civ 2203 | Consideration of whether the "good arguable case" test in freezing injunctions aligns with jurisdictional gateway test. | Held not to have changed the law; the Niedersachsen test remains appropriate for freezing injunctions. |
| Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV [2019] EWCA Civ 10 | Clarification of the three-limb approach for jurisdictional gateway tests and relative merits assessment. | Distinguished from freezing injunction context; three-limb test not applicable to freezing injunction merits threshold. |
| Kazakhstan Kagazy plc v Arip [2014] EWCA Civ 381 | Distinction between freezing injunction merits test and jurisdictional gateway test; "good arguable case" is lower threshold. | Supported the view that freezing injunction test differs from jurisdictional gateway test. |
| Brownlie v Four Seasons Holdings Inc [2017] UKSC 80 | Three-limb test for jurisdictional gateway including relative merits assessment. | Held not to be suitable for freezing injunctions; test differs. |
| Goldman Sachs International v Novo Banco SA [2018] UKSC 34 | Reiteration of the three-limb jurisdictional gateway test. | Distinguished from freezing injunction context. |
| Harrington & Charles Trading Co. Ltd. v Mehta [2022] EWHC 2960 (Ch) | Application of jurisdictional gateway test to freezing injunctions. | Rejected by the court in the present case as incorrect. |
| Chowgule & Co Pte. Ltd. v Shire [2023] EWHC 2815 (Comm) | Similar to Harrington; freezing injunction test equated with jurisdictional gateway test. | Rejected by the court in the present case. |
| Magomedov v TGP Group Holdings (SBS) LP [2023] EWHC 3134 (Comm) | Freezing injunction test remains the Niedersachsen test. | Approved by the court as the correct approach. |
| Vitkovice Horni a Hutni Tezirstvo v Korner [1951] AC 869 | Origin of the "good arguable case" phrase in jurisdictional gateway context. | Referred to in submissions on the meaning of "good arguable case". |
| American Cyanamid Co v Ethicon Ltd [1975] AC 396 | Test for interim injunctions based on "serious issue to be tried" and balance of convenience. | Distinguished from freezing injunction test but used for comparison. |
| Canada Trust v Stolzenberg (No. 2) [1998] 1 WLR 547 | Clarification of "good arguable case" test and its application in jurisdictional gateway context. | Held to set too high a hurdle for freezing injunctions. |
| Rasu Maritima v Pertamina [1978] 1 QB 644 | Early adoption of "good arguable case" test for Mareva injunctions. | Recognized as foundation for freezing injunction test. |
| Bravo v Amerisur Resources [2020] EWHC 2279 (QB) | Distinction between freezing injunction and American Cyanamid injunction costs regimes. | Considered in costs submissions; freezing injunction costs regime different. |
| Richardson v Desquenne et Giral UK Ltd [2001] FSR 1 | Costs in interlocutory injunctions generally reserved to trial absent special factors. | Relied upon in costs argument for reserving costs in freezing injunctions. |
| Picnic at Ascot v Derigs [2001] FSR 2 | Costs reserved in interlocutory injunctions unless special factors apply. | Relied upon in costs submissions. |
| Melford Capital Partners (Holdings) LLP v Wingfield Digby [2020] EWCA Civ 1647 | Costs in interim injunctions normally reserved; special factors may justify costs orders. | Applied to freezing injunction costs discussion. |
| Kumar v Sharma [2022] EWHC 1008 (Ch) | Costs generally reserved in freezing injunction cases; discussion of "free shot" argument. | Considered in costs submissions. |
| Al Assam v Tsouvelekakis [2022] EWHC 2137 (Ch) | Costs of freezing injunction hearing reserved to trial judge. | Discussed in costs submissions. |
| Broad Idea International v Convoy Collateral [2021] UKPC 24 | Nature and purpose of freezing injunctions explained; distinction from other injunctions. | Relied upon in costs and merits arguments. |
| Madoff Securities Ltd v Raven [2011] EWHC 3102 (Comm) | Confirmation of the Niedersachsen test for freezing injunctions. | Applied by the court in support of traditional test. |
| Holyoake v Candy [2016] EWHC 970 (Ch) | Survey of "good arguable case" test in freezing injunction context; endorsed Niedersachsen test. | Applied and relied upon by the court. |
| Seaconsar Ltd v Bank Markazi [1994] 1 AC 438 | Serious issue to be tried test in jurisdictional gateway context. | Referenced in distinguishing tests. |
| Lansing Linde Ltd v Kerr [1991] 1 WLR 251 | Consideration of merits and just and convenient test in interlocutory injunctions. | Referenced in analysis of freezing injunction principles. |
| National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] 1 WLR 1405 | Similar principles on interlocutory injunctions and freezing orders. | Referenced by the court. |
| Planon Ltd v Gilligan [2023] EWCA Civ 113 | Serious issue to be tried test for interim injunctions. | Referenced in discussion of merits test equivalency. |
| Sportsdirect.com Retail Ltd v Newcastle United Football Club Ltd [2024] EWCA Civ 532 | Equating serious issue to be tried with real prospect of success. | Referenced in merits test discussion. |
| ED & F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 | Clarification of real prospect of success test. | Referenced in merits test equivalency. |
| AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 | Principles on summary judgment and real prospect of success. | Referenced in merits test discussion. |
| Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) | Summary judgment principles. | Referenced in merits test discussion. |
| Bank Mellat v Nikpour [1985] FSR 87 | Description of freezing injunctions as highly invasive. | Referenced in context of the nature of freezing injunctions. |
| Mercedes-Benz AG v Herbert Heinz Horst Leiduck Co (Hong Kong) [1995] UKPC 31 | Nature of freezing injunctions distinguished from other interlocutory relief. | Relied on in costs and merits analysis. |
| Seaconsar Ltd v Bank Markazi [1994] 1 AC 438 | Jurisdictional gateway test. | Referenced in distinction of tests. |
| Bouvier v Accent Delight International Ltd [2015] 5 SLR 558 | Singapore Court of Appeal approval of Niedersachsen test. | Referenced in international jurisprudence supporting Niedersachsen test. |
| Delco Participation BV v Chiho Tiande Group Ltd [2019] HKCFI 2646 | Hong Kong courts approval of Niedersachsen test and rejection of jurisdictional gateway test. | Referenced in international jurisprudence. |
| Multibank FX International Corporation v Von Der Heydt Invest SA (2023) | Eastern Caribbean Court of Appeal application of Niedersachsen test. | Referenced in international jurisprudence. |
| Svirsky v Oyekenov (2023) | Eastern Caribbean Court of Appeal application of Niedersachsen test. | Referenced in international jurisprudence. |
| Cardile v LED Builders Pty Ltd [1999] HCA 18 | Australian High Court articulation of merits test as reasonably arguable case. | Referenced in Commonwealth jurisprudence supporting Niedersachsen test. |
| Guardian Melbourne Pty Ltd v Carlei [2016] FCA 72 | Australian Federal Court endorsement of Niedersachsen test. | Referenced in Commonwealth jurisprudence. |
| Protelight Pharmaceuticals v Wen [2024] FCA 581 | Recent confirmation of the merits test in Australia. | Referenced in Commonwealth jurisprudence. |
| Gao v Deng [2023] NZCA 200 | New Zealand Court of Appeal interpretation of good arguable case test. | Referenced in Commonwealth jurisprudence. |
| Lakatamia Shipping v Nobu Su [2012] EWCA Civ 1195 and [2014] EWCA Civ 636 | Endorsement of Niedersachsen test in freezing injunction context; rejection of higher hurdle tests. | Applied by the court as authoritative. |
Court's Reasoning and Analysis
The court addressed the two main issues raised on appeal: the meaning of the "good arguable case" test in freezing injunctions and the approach to costs in WFO applications.
On the merits threshold, the court analysed competing legal authorities and expert evidence concerning the relevant foreign law (Article 80(1) of the Commercial Companies Law). The court acknowledged divergent views on whether the "good arguable case" test for freezing injunctions should align with the three-limb test used for jurisdictional gateways or remain as the traditional Niedersachsen test.
The court found the law on the meaning of "good arguable case" in freezing injunctions to be confused but concluded firmly that the correct test remains that formulated by Mustill J in The Niedersachsen: a case that is more than barely capable of serious argument, without requiring the claimant to have the better of the argument or a greater than 50% chance of success. The three-limb jurisdictional test was rejected as inappropriate for freezing injunctions because it risks mini-trials and imposes a higher threshold not suitable at the interlocutory stage.
The court applied the Niedersachsen test to the facts and held that Company A had a good arguable case on the key point of foreign law, supported by credible expert evidence. The court rejected the assertion that the expert evidence was unreliable or that the claim was time-barred under Article 80(1).
Regarding costs, the court distinguished freezing injunctions from other interim injunctions, noting that freezing injunctions are not "interim" in the same sense and remain in place until trial. The court held that the usual approach of reserving costs in interim injunctions does not automatically apply to freezing injunctions. Given the Appellant's full and unsuccessful contest of the application, the court found it appropriate for her to pay Company A's costs of the WFO application. The court emphasized that the discretion to reserve costs remains but is not the norm in contested freezing injunction applications.
The court also considered the broader jurisprudential context, including Commonwealth authorities, and found widespread support for the Niedersachsen test as the appropriate merits threshold for freezing injunctions.
Finally, the court agreed with the view that the "good arguable case" test in freezing injunctions is effectively equivalent to the "serious issue to be tried" test applied in other interlocutory injunction contexts, advocating for clarity and consistency in terminology and application.
Holding and Implications
The court DISMISSED the appeal on both grounds.
The holding confirms that the "good arguable case" test for the grant of freezing injunctions remains the traditional Niedersachsen test and does not adopt the three-limb jurisdictional gateway test. The court upheld the judge's finding that Company A had a good arguable case on the merits, including on the foreign law limitation point.
On costs, the court upheld the order that the Appellant pay the costs of the WFO application, clarifying that the usual costs-reserved approach for interim injunctions does not automatically apply to freezing injunctions, especially where the respondent contests the application fully and unsuccessfully.
No new precedent was set beyond confirming the established legal principles and clarifying the costs approach in freezing injunction applications. The decision reinforces the established legal framework for freezing injunctions and provides guidance on the appropriate application of the merits threshold and costs discretion in such cases.
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