Key Facts
- •Application by liquidators of Smith & Partner Ltd (in liquidation) to continue freezing orders against respondents.
- •First respondent was former director and shareholder; second respondent a company he solely controls; third respondent alleged to be a former de facto director.
- •Claims against respondents under sections 212 and 213 of the Insolvency Act 1986 for fraudulent trading and misappropriation.
- •Company allegedly ran a fraudulent art investment scheme causing significant investor losses (over £9 million in proved debts).
- •First respondent challenges the continuation of the freezing order on the grounds of lack of good arguable case, no risk of dissipation, and failure of full and frank disclosure.
- •Extensive evidence (7000 documents) presented to the court.
Legal Principles
Three criteria for freezing orders: good arguable case, real risk of dissipation, and just and convenient.
Unitel SA v dos Santos [2023] EWHC 3231 (Comm)
Good arguable case test: more than barely capable of serious argument, but not necessarily better than 50% chance of success.
Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH (“The Niedersachsen”) [1983] 2 Lloyd’s Rep 600
Interlocutory applications should not become mini-trials.
Magomedov v TGP Group Holdings [2023] EWHC 3134 (Comm)
Risk of dissipation must be established by solid evidence; mere inference insufficient. Dishonesty must point to likely dissipation.
Fundo Soberano De Angola v dos Santos [2018] EWHC 2199 (Comm)
Good arguable case of respondent's wrongdoing strongly supports risk of dissipation.
Lakatamia Shipping Co Ltd v Morimoto [2019] EWCA Civ 2203
Duty of full and frank disclosure: high duty to disclose all material facts, even those potentially favourable to the respondent.
Tugushev v Orlov & Ors [2019] EWHC 2031 (Comm)
Outcomes
Freezing order continued until trial or further order.
Applicants met the criteria for a freezing order: good arguable case on the merits, real risk of dissipation, and it was just and convenient.