The Court of Appeal has recently provided clarity on the meaning of "good arguable case" in the context of freezing injunctions, a topic that has been the subject of some confusion. 

Background 

To obtain a freezing injunction, a claimant must demonstrate (amongst other things) a “good arguable case” against the defendant. 

As summarised in our recent update, the meaning of “good arguable case” was considered by the High Court in one of our current cases. As explained, the meaning and threshold of this test has been subject to uncertainty. Traditionally, as established in The Niedersachsen case, it means a case that is more than just capable of serious argument but doesn't necessarily have a better than 50% chance of success. However, it was argued by some that in 2020, the Court of Appeal in Lakatamia Shipping Co. Ltd v Morimoto raised the threshold, aligning it with a three-stage test used for jurisdictional gateways, which involves comparing the strengths of each party's arguments.

In our recent case, the judge favoured the traditional approach from The Niedersachsen, expressing doubt that the Lakatamia judgment intended to change the test for freezing injunctions. 

The Court of Appeal has now confirmed that the threshold of the “good arguable case” in this context is as set out in The Niedersachsen case.

Court of Appeal: Issues

The case of Isabel dos Santos v Unitel S.A. [2024] EWCA Civ 1109 concerned an appeal by Isabel dos Santos against a Worldwide Freezing Order (WFO) granted in favour of Unitel S.A. 

The primary issue was the interpretation of the "good arguable case" standard required for granting a freezing injunction. The court had to determine whether the test for a good arguable case in the context of freezing orders should be the same as that applied in jurisdictional gateway cases, which involves a three-limb test derived from Brownlie v Four Seasons Holdings Inc.

The second issue was whether there is a general rule that the costs of a WFO application should be reserved, or if the judge was correct in awarding costs to Unitel. 

Court of Appeal:  Analysis

Good Arguable Case 

The court reviewed the historical context and various judicial interpretations of the "good arguable case" standard. It considered the decision in The Niedersachsen, where Mustill J described a good arguable case as "one which is more than barely capable of serious argument, but not necessarily one which the judge considers would have a better than 50 per cent chance of success." The court also examined the three-limb test from Brownlie, which involves determining whether the claimant has the better of the argument, assessing the reliability of the conclusion, and considering if there is a plausible evidential basis for the claim. 

The court noted that recent cases had diverged on whether the three-limb test should apply to freezing orders.  However, it concluded that the correct test for a good arguable case in the context of freezing orders is the one set out in The Niedersachsen.

The reasons for this decision included the fact that the lower threshold set out in The Niedersachsen applies in circumstances where the court will proceed to determine the merits at trial, whereas the assessment as to whether a case fell within a particular jurisdictional gateway would only be determined at the stage of the application to serve out. Further, it is difficult and unsatisfactory for the court to have to determine at such an early stage of proceedings, when a freezing order is usually sought, which party has “the better of the argument”. The court considered that the “weight of authority” supported the application of The Niedersachsen test. 

The court equated the “good arguable case” test for freezing injunctions with the “serious issue to be tried” part of the American Cyanamid test for interlocutory injunctions generally.  In his judgment, Popplewell LJ stated: 

…there is not, and should not be, any distinction to be drawn between the ‘good arguable case’ test for freezing orders and the test of ‘serious issue to be tried’ for other forms of interim injunctions. That being so, it would be preferable to use the latter in the context of freezing orders and to restrict the use of the expression ‘good arguable case’ to the context of jurisdictional gateways, where it bears a different meaning in accordance with the principles explained in Brownlie. It is obviously unsatisfactory for an expression used to define a merits test to mean something different in one context (freezing orders) from that in another (jurisdictional gateways); that is likely to give rise to confusion and misunderstanding…

Costs of the WFO Application

The court considered the principles governing costs in interim injunction applications. It noted that while costs are usually reserved in American Cyanamid cases when an injunction is granted in favour of the applicant, the situation is different for freezing orders. 

The court emphasised that a freezing order is not an interim measure dependent on the balance of convenience but a substantive order that remains in place until trial. Therefore, the general rule that the unsuccessful party should pay the costs of a contested interlocutory application applies. When considering the authorities, the court noted the further judgment in respect of costs in our case: Cancrie Investments Ltd v Haider [2024] EWHC 2302 (Comm). 

The court found that the judge was entitled to order the defendant to pay the costs of the WFO application, given that she had contested the application on every point and lost.

Conclusions

The Court of Appeal dismissed the appeal on both grounds. It upheld the judge's application of The Niedersachsen test for determining a good arguable case in the context of freezing orders and affirmed the decision to award costs to Unitel. 

By clarifying that the "good arguable case" standard for freezing orders, the court has provided welcome clarity in this area, which will prevent the need for the parties and the court having to prepare and apply their case according to two different thresholds, given the previous diverging state of the authorities.