“The law is in a confused state” – a judicial plea for clarity in the fight against fraud
Late 2023 brought a welcome development in the fight against fraud, as the UK government concluded the Online Fraud Charter with various industry representatives. The Charter represents a practical step by which online giants can move towards countering the extremely high proportion of online fraud.
To take on the current fraud epidemic, however, it will be necessary to target all forms of this insidious wrongdoing. That includes very high-value frauds, notably those that are transnational and regrettably all too often engage public figures and interests.
The UK’s strong anti-corruption and anti-fraud rhetoric has traditionally been bolstered by a highly respected judiciary, which has shown enormous support to the victims of fraud. This includes through an armoury of powerful civil procedural weapons, chief among them the worldwide freezing order.
Another procedural weapon
To ensure the ongoing value of those procedural weapons against fraud, careful consideration will have to be given to the recent decision of Mr Justice Bright in Unitel in the Commercial Court. The Unitel proceedings arise as part of the sprawling multinational litigation which has engulfed Isabel dos Santos (the daughter of the former President of the Republic of Angola) and her former business empire.
However, it is not the alleged wrongdoing that will be of particular interest to those concerned with countering fraud through the English courts. Rather, Mr Justice Bright’s important and obvious concern for the (potential) lack of clarity as to the true test for the granting of a freezing order should be reflected on, to avoid the risk of complicating the bringing of these typically time-sensitive applications for interim relief.
The issue that Mr Justice Bright identified as requiring clarification, most likely from a higher court, is central to the freezing order jurisdiction. Specifically, it is what is truly meant by the merits requirement for a freezing order to be granted, of a “good arguable case”.
Notwithstanding that this would often be a relatively uncontroversial legal standard in many freezing order applications (with the oft-repeated authorities well-known to fraud specialists), the judge clearly identified a point of departure in recent and very high authorities that led him to remark that, in his view, ”the law is in a confused state, which cries out for a definitive answer from the Court of Appeal”.
A good arguable case?
The central debate can be summarised as follows. Does a “good arguable case” mean:
1. “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” arising from The Niedersachsen case of 1983; or
2. The same as in the jurisdiction context, as could be understood from the Court of Appeal’s decision in Lakatamia Shipping Co Ltd v Morimoto  EWCA Civ 2203, which takes account of two major UK Supreme Court decisions1 and would result in a three-limbed test which includes a relative requirement that the applicant for the freezing order has the ”better of the argument” (ie, better than 50% ).
The implications of the differing lines of authority led Mr Justice Bright to conclude that he would effectively have to test the application for a freezing order under both potential formulations, as otherwise he would be duty bound to grant permission to appeal, for “It would be much better to consider the point afresh and from first principles. But only the Court of Appeal can have the luxury of doing this”.
The judge therefore considered both tests and concluded that, in the particular circumstances of this case, he was satisfied that the threshold was met whichever formulation was correct. That hurdle was therefore cleared and, while beyond the scope of this article, the freezing order was to be granted as the other aspects of the test were similarly satisfied.
Clarity, practicality, opportunity
Mr Justice Bright’s careful judgment in this regard should give rise to at least three considerations with respect to the test for a freezing order:
1. Clarity: It is obviously desirable that there is clarity, in so far as possible, as to the state of the law. No one, other than potential targets of fraud claims who wish to hide in legal ambiguity, benefits when a meticulous High Court judge in the elite Commercial Court identifies immediate grounds of appeal in such a fundamental test.
2. Practicality: Absent clarification of this point, there is a real risk of wasted resources. Victims of fraud will have to engage in more complex legal analysis with respect to interim applications which are by their nature urgent. Courts and judges, already under substantial pressure, will be burdened by alternative formulations of the same point and the risk of a growing volume of appeals (with consequential costs) will please no one.
3. Opportunity: The common law, and its ability to adapt, develop and, if necessary, self-correct, is something that makes the English court one of the centres of global litigation. While the lack of clarity that exists and consequential inefficiencies are unfortunate, they also represent an opportunity for a higher court to review the freezing order jurisdiction and hone it further for the digital, transnational and regrettably fraud-dominated stage it now inhabits.
Fraud victims and the expert professionals who assist them will have to take account of this complexity while watching with interest as to how a higher court will address it. In light of the recent trend in favour of a slightly more restrictive approach to freezing orders and their continuation, notably where material non-disclosure is identified and a clear-eyed assessment of the risk of dissipation, those combating fraud are likely to prefer the lower burden of The Niedersachsen to carry the day.
1 Brownlie v Four Seasons Holdings Inc  UKSC 80 and repeated in Goldman Sachs International v Novo Banco SA  UKSC 34.