Freezing orders: Evidence of bad faith and dishonesty does not necessarily indicate a real risk of dissipation

In a recent High Court decision, a Worldwide Freezing Order (WFO) was discharged because the judge was not satisfied that there was a real risk of dissipation of the defendant’s assets.

The interesting part about this decision is that the defendant had displayed evidence of bad faith and dishonesty, which (the claimants suggested) could indicate a risk of dissipation. However, the court separated those issues, confirming that risk is a forward-looking concept, and distinct from previous behaviour.

While Deputy High Court Judge Charles Hollander KC had “some sympathy with the claimant” who had been subjected to a measure of being “strung along”, he distinguished this from the issue is risk of dissipation of assets, which he emphasised is “not the same issue.”

Read full judgment: CE Energy DMCC v Ultimate Oil and Gas DMCC & Anor [2024] EWHC 2846 (Comm)

Procedural background

The WFO was granted ex parte on 29 July 2024, in connection with proceedings against Mr Bashar and Ultimate. The WFO, against both defendants, was to the value of about $33m to cover monies due in relation to cargoes of oil and fuel. 

The claimant applied for a continuation of the freezing order, and the defendants applied to discharge the WFO. The High Court heard the application on 28 October 2024. 

The defendants accepted that the claimant had a good arguable case for claims to the value of the WFO. However, the central issue in the application was whether or not there was a real risk that the defendants would dissipate their assets.

Arguments to continue the WFO

The claimant pointed out several issues that indicated bad faith and dishonesty on the part of Mr Bashar:

1. He signed cheques which had been dishonoured
2. He is the subject of a criminal complaint arising out of the dishonoured cheques  and an arrest warrant has been issued against him
3. He made numerous promises of payment which have been broken
4. He has previously been committed to prison for contempt (although he later purged his contempt and never spent time in jail)

The defendants say there is no risk of dissipation

The defendants contended that there was no evidence which supported a risk of dissipation. Their reasons included: 

1. Mr Bashar has a large number of assets, to the value of around $105 million which exceed the sums covered by the WFO. Many of the assets real property, which will be difficult to dispose of quickly.
2. The cargoes are in storage in Nigeria and they have a substantial resale value. They cannot be removed without the consent of the claimant. 
3. The claimants carried on dealing with the defendants even though they were aware of the contempt of court proceedings in the previous case. 
4. It is not clear exactly why the bank dishonoured the cheques in question.

Separating indications of dishonesty from the risk of dissipation

The Judge agreed that the claimants were entitled to say that Mr Bashar’s conduct had been unsatisfactory. He also considered that the claimants have an “extremely strong case” against the defendants. He said that Mr Bashar’s conduct, particularly in relation to the dishonoured cheques, appears to have involved “stringing them along.”

However, those issues are not evidence of a risk of dissipation. Ultimately, the burden is on the applicant to satisfy the threshold for the risk of dissipation.

An important factor in the decision was that Mr Bashar had disclosed assets several times the value of the WFO limit. Much of the value of those assets is real property in the UAE, with which there would be “significant problems” in disposing of this large number of properties.

The position would be different if there was positive evidence which supports risk of dissipation, and that evidence was bolstered by other evidence which may suggest that the defendant is the sort of individual or entity which may dissipate assets. 

In those circumstances, a court may be able to take into account issues like low standards of morality, or evidence of a lack of frankness. Then inference can be made about the risk of dissipation.

However, in this case, the judge could find no primary evidence which shows the risk of dissipation. As such, the WFO was discharged. 

Comment

While the court does not approve of dishonest behaviour, it will not let it cloud its judgment on separate legal issues. The risk of dissipation is a concept that the applicant must be able to show, with compelling evidence, that there is an arguable case, or plausible evidential basis for the assertion. 

Issues of character and past conduct may come into play to bolster that assertion. But without the foundations of primary evidence showing the risk of dissipation, the court will not draw inferences based upon suggestions as to the defendant’s character and conduct.