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Securing and Discharging Worldwide Freezing Orders

Author: Nicola Sharp  23 June 2023
4 min read

Nicola Sharp of Rahman Ravelli details recent WFO case law.

Worldwide freezing orders (WFOs) are a powerful tool to protect assets fraudulently obtained. They are a form of interim relief that can freeze stolen assets anywhere in the world. Given their expansive impact, WFOs are only granted in extreme situations, or exceptional cases.

An applicant seeking a WFO will need to demonstrate to the Court that:

  • It has a good arguable case against the respondent.
  • There is a real risk of dissipation of the assets.
  • The order is just and convenient in all the circumstances.
  • It has given full and frank disclosure of all the material facts and potential defences that the respondent might raise if it were present at the hearing.

The duty to make full and frank disclosure is often subject to challenge. That’s due to the inherent urgency involved in applying for a WFO. In order to move quickly in response to fraud, there is limited time to gather facts and information.

The principles for establishing full and frank disclosure were summarised in Brink’s Mat Ltd v Elcombe [1998] 1 WLR 1350. One of the principles is that “proper inquiries must be made before making the application, and the duty of disclosure applies not only to facts known to the claimant but to those which he would have known if he had made proper inquiries.” Looking at just that one aspect of the test, it is clear that it is a high standard.

A WFO is an equitable remedy, which means that the applicant must comply with the principles of equity. One of those principles is that the applicant must come to Court with ‘clean hands’. In other words, the applicant must be free from wrongdoing.

Discharging a WFO

Once a WFO is granted, the defendant can apply to discharge it, on the grounds that the applicant failed to (i) establish the risk of the assets being dissipated or (ii) disclose all the relevant facts.

If the defendant is relying on a material non-disclosure by the claimant (the second of the two grounds above), then they must clearly identify the alleged failures. Judges will not allow a ‘scattergun’ approach to non-disclosure. There must be a clear and material point that the defendant can highlight which the claimant chose to withhold from the court.

Innocent non-disclosures are not sufficient to discharge a WFO. It’s only if the claimant was aware of facts that hamper their application and they chose to keep such facts from the court that the discharge application may be successful. In any event, if the judge deems that they would have granted the WFO anyway - even if the court knew the facts allegedly withheld - then the WFO will remain in place.

Recent case law

The High Court recently heard a discharge application in the case of Saeed Akbar v Mohammad Sajaed Ghaffar & anor [2023] EWHC 1275 (Ch)

The WFO was first granted on 11 August 2022 during a without notice application. The order was extended by consent five times, with the last extension granted on 8 December 2022.

In the witness statement in support of the discharge application, the defendant put forward the following arguments:

  • Key evidence in support of the application had been procured by a fraud.
  • The claimant’s solicitors prevented the defendant from making progress to resolve the claims.

At the hearing, the defendant also sought to establish that the claimant:

  • Failed to identify material facts at the application hearing and this non-disclosure was not innocent.
  • Did not come to the court with clean hands.
  • Failed to identify potential defences that the defendant would have raised had he been present at the hearing.

The facts

The claimant thought he had been defrauded out of £1.833 million. He had given this money to the defendant (who is his cousin) for specific investments, which the defendant allegedly misappropriated.

The claimant entrusted the money to the defendant for investments in or with Richmond Point Capital (RPC). It is alleged that the sums were paid by Mr Ghaffar (the defendant) to RPC, but without any reference being made to Mr Akbar (the claimant) as the investor. Then the sums were paid away by RPC to a person or persons unknown. Some of the £1.8 million was not paid to RPC but dissipated by Mr Ghaffar otherwise than for the benefit of Mr Akbar.

In the course of trying to extract information from RPC, the claimant’s solicitors wrote to RPC, intimating that both Mr Akbar (the claimant) and Mr Ghaffar (the defendant) were their clients. While there was no engagement letter with Mr Ghaffar, the reason he was included in the letter was that RPC had only ever engaged with Mr Ghaffar on Mr Akbar’s behalf. They would not have recognised Mr Akbar alone as the investor.

The claimant’s solicitors say that there was no intention to mislead RPC, whether fraudulently or otherwise, but merely to get across that Mr Akbar was seeking information with the authority of Mr Ghaffar, given that Mr Ghaffar had dealt with RPC in the past.

At the discharge application, the defendants alleged that this was dishonest, and a way for the solicitors to interpose themselves between Mr Ghaffar and RPC.

The decision

The court considered the solicitor’s 30 years’ experience and his unblemished professional record and reminded the parties that the allegations against him involved serious allegations of dishonesty. In such a serious allegation, the court held that “more cogent evidence will be required to overcome the inherent unlikelihood of what is alleged.” The discharge application was dismissed and the WFO remained in place.

Analysis

WFOs are difficult to come by. But once in place, they can freeze the respondent’s assets for significant periods of time (10 months and counting in this case). To discharge the WFO, the defendant should frame the application around disproving one the four key elements for granting the WFO in the first place, namely:

  1. The claimant has a good arguable case against the respondent.
  2. iThere is a real risk of dissipation of the assets.
  3. iThe order is just and convenient in all the circumstances.
  4. The claimant has given full and frank disclosure of all the material facts and potential defences that the respondent might raise if it were present at the hearing.

As in any case involving fraud, judges will expect a high standard of evidence to justify the serious allegations. In this case the defendant sought to rely on the alleged dishonest actions of a solicitor of long good-standing. This was considered not sufficiently proven to discharge the WFO.

 

Nicola Sharp C 09983

Nicola Sharp

Partner

nicola.sharp@rahmanravelli.co.uk
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Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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