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Freezing Orders and the Risk of Dissipation

Author: Syedur Rahman  3 September 2021
3 min read

Posted in: Freezing Order.

Syedur Rahman of Rahman Ravelli details a case that highlights the criteria that need to be met to obtain a freezing order.

One of London’s most exclusive casinos, Les Ambassadeurs, is embroiled in a court battle to recover more than £10 million from a Chinese businessman whose cheques bounced. The case has recently illustrated the test that needs to be met in order for a freezing order to be granted.

The casino had applied for a freezing injunction against the businessman’s assets. But the application was unsuccessful and the refusal to grant the injunction by a lower court was upheld

The Case 

Les Ambassadeurs is based in the InterContinental Hotel on Park Lane, central London, and is famous for featuring in the James Bond film, Dr No. It began pursuing Yu Songbo after his cheques for £19 million in gambling chips bounced in 2018. 

The two sides had reached a settlement agreement under which the businessman promised to pay back a smaller amount in instalments. But the entire amount became due after he failed to make the first payment, and the casino owners launched legal action. Mr Songbo, who is chairman of the Chinese conglomerate the Herun Group, started to make payments and reduced his debt to £6.5 million after Les Ambassadeurs filed its lawsuit with the High Court in December 2018. But when he then seemed to have disappeared, the casino applied for the freezing order.

The Freezing Order Application

The initial application for a freezing order was refused by the lower courts. Les Ambassadeurs then sought to appeal this decision to the Court of Appeal of England and Wales. 

But the appeal court ruled that it was not convinced there was a real risk that a Chinese businessman with £6.5 million ($8.9 million) in gambling debts would shift money out of reach if the casino could not freeze his assets.

The Court of Appeal set out the reasons for its decision to uphold an order from May that refused the application by Les Ambassadeurs Club Ltd for the freezing injunction against the assets of Mr Songbo.

In explaining the reasoning for ruling in line with the lower court, Judge Geraldine Andrews said there was an important distinction "between a defendant who can pay but refuses to pay his debts until he is forced to do so, and a defendant who is so determined not to pay that he would take active steps to frustrate the recovery of sums due to his creditors by transferring or concealing assets or by some other form of unjustified dissipation."

It is the second time in as many years that Les Ambassadeurs has resorted to legal action to force wealthy foreign gamblers to honour alleged debts. The casino previously took legal action against Sheikh Salah Hamdan Albluewi, chairman of a Saudi Arabian construction and property empire, over claims he reneged on a £2 million debt by sending 17 cheques that bounced. A global freezing order imposed on his assets was lifted last year.

Conclusion

This case involving Mr Songbo is interesting as it highlights the high threshold set by the court when granting a freezing injunction, even when the matter is not raised by the respondent as he was not present or represented.   

The Test

To obtain the freezing order the claimant must demonstrate to the court that:

  1. It has a good arguable case
  2. The respondent has assets over which the freezing order can be made,
  3. There is a real risk that the respondent will dissipate their assets if the order is not granted,
  4. It will provide an undertaking in damages. 

In this case, the application fell on requirement number three: the appeal court was not satisfied that there was a real risk of dissipation of assets. Mr Songbo was not present at the appeal hearing, nor was he represented. But evidentially, it was not enough to show that Mr Songbo had refused to make payment - the casino would have to have demonstrated that he had also taken active steps to do this. While it appears Mr Songbo did not make any representations to the positive, the casino did not have sufficient evidence to satisfy this requirement and, therefore, the freezing order was refused. 

This is an important point that any claimants wishing to apply for a freezing order should consider. They will need to assess carefully whether they have, or can obtain, evidence to show sufficient risk of dissipation. 

Syedur Rahman C 09551

Syedur Rahman

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, civil recovery, cryptocurrency and high-stakes commercial disputes.

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