High Court Rules on Freezing Order in Unitel SA v Unitel International Holdings BV - Assessing Director's Duties and Risk of Dissipation

Introduction

The High Court of Justice in the case of Unitel SA v Unitel International Holdings BV & Anor ([2023] EWHC 3231 (Comm)) assessed a claim involving alleged breach of director’s duties and the appropriateness of granting a freezing order. This article aims to dissect the intricacies of the legal principles and applications demonstrated in this case to offer clarity on the key issues debated before the court.

Key Facts

Unitel SA, an Angolan telecommunication company ultimately controlled by the Angolan State, pursued a claim against Unitel International Holdings BV (UIH), owned by Ms. Isabel dos Santos, and Ms. dos Santos herself. Unitel SA alleged that loans made under seven facility agreements to UIH were uncommercial, unsecured, and in potential breach of Ms. dos Santos’s directorial duties. Despite these loans being approved by Unitel’s board and shareholders, Unitel SA perceived them as procured for the personal benefit of Ms. dos Santos. After UIH defaulted on interest payments, Unitel sought repayment and ultimately claimed damages against Ms. dos Santos personally.

In response, Ms. dos Santos rejected Unitel’s allegations, arguing that the lending terms were commercial and approved competently, and that the legal proceedings arose from political conflict in Angola.

The critical legal question revolved around whether Unitel SA could freeze Ms. dos Santos’s assets, given the already existing various freezing orders from other jurisdictions.

Legal Principles

Good Arguable Case

Much debate focused on the requisite standard for a “good arguable case,” pivotal for granting the freezing order. Two competing perspectives were presented – the traditional Mustill J’s ‘Niedersachsen’ approach, which requires a case “more than barely capable of serious argument,” and the newer three-limb test from Brownlie, requiring a more intensive comparative assessment of the parties’ arguments or, alternatively, considering whether there’s “a plausible (albeit contested) evidential basis” if no reliable assessment can be formed.

Risk of Dissipation

The risk of dissipation is vital in freezing order applications. Unitel provided evidence of alleged wrongdoing related to funds diversion, namely the misuse of loans, suggesting a risk that Ms. dos Santos might dissipate her assets. The court considered Ms. dos Santos’s involvement and adverse findings from previous legal troubles, particularly in the Netherlands, and weighed whether the lapse of time without dissipation could negate the asserted risk.

Just and Convenient

The court assessed whether additional freezing orders would be just and convenient, taking into account the existing orders from other jurisdictions. The potential overlap, necessity, and proportionality of new freezing orders factored into this analysis.

Outcomes

The court determined that Unitel SA demonstrated a “good arguable case,” despite the complex discourse on the meaning and application of the phrase. The case was such that the point might not be determined finally at trial, leaving the matter open to further examination. On the risk of dissipation, the court found sufficient grounds to suggest that a real risk existed. Finally, the court opined that it was just and convenient to grant a further freezing order against Ms. dos Santos.

Conclusion

The court’s analysis in Unitel SA v Unitel International Holdings BV & Anor clarified the nuanced understanding of a “good arguable case” and demonstrated a pragmatic approach to assessing risk of dissipation. It underscored the court’s determination to safeguard against the potential for harm even where existing orders may cover many assets but leave uncertainty about their permanence. The decision emphasizes the court’s willingness to examine diverse factors in such applications thoroughly, while also revealing complications inherent in the evolving interpretations of central concepts like “good argable case.” This case serves to illustrate the balancing act courts must perform when considering freezing orders amidst complex international and commercial realities.