What is the test for "a good arguable case" in a freezing order application? An issue crying out for clarification

Following several recent High Court decisions, there are now two directly conflicting lines of authority on the question of what test a judge should apply when assessing whether an applicant for a freezing injunction has met the requirement to have a "good arguable case" on its substantive claim. The judge in the most recent High Court decision considered that this issue was crying out for a definitive answer and should be addressed from first principles by the Court of Appeal.

Essentially, the faultline between the conflicting authorities is whether:

• the test remains the long-established "Niedersachsen test" – under which the applicant's case does not necessarily have to have a better than fifty per cent chance of success but needs to be "more than barely capable of serious argument"
  or
• that test has been replaced by the three-limb approach that applies when assessing whether there is a good arguable case that one of the jurisdictional gateways for service out of the jurisdiction applies (derived from the Supreme Court's decision in Brownlie v Four Seasons Holdings International [2017] UKSC 80 – discussed here). That approach will ordinarily involve a comparative assessment of the parties' arguments, and may be more difficult for an applicant to satisfy.

While the difference between the competing tests may in many cases not affect the outcome of the application, parties will wish to consider the potential impact on their case.  It may be appropriate for parties to address the issue when: (i) framing their submissions - particularly on without notice applications where there is a duty of full and frank disclosure and (ii) deciding what evidence they should adduce – bearing in mind a suggestion in the recent caselaw that the Brownlie-derived approach may require more extensive evidence than is typically involved in such applications (though that view may not be shared by other judges).

The competing tests

Historically, the meaning of "good arguable case" in this context has been generally accepted to be as stated by Mr Justice Mustill in Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH ("The Niedersachsen") [1984] 1 All ER 398 ) –  namely, that the applicant's claim must be

 "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 Niedersachsen test)

The trigger for the current uncertainty was the Court of Appeal's 2019 decision in Lakatamia Shipping Co Ltd v Toshiko Morimoto [2019] EWCA Civ 2203.  In briefly discussing the good arguable case requirement in freezing order applications, Haddon-Cave LJ cited the Niedersachsen test but also referred to the Supreme Court's decision in Brownlie.

In Brownlie, Lord Sumption laid down the following three-limb test for establishing a good arguable case that one of the jurisdictional gateways applies:

(i)  The applicant must show a plausible evidential basis for the application of the gateway;

(ii)  If there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so;

(iii)  But, if the nature of the issue and the limitations of the material available at the interlocutory stage are such that no reliable assessment can be made, a plausible (albeit contested) evidential basis for the gateway's application will be sufficient to establish a good arguable case.

Limbs (i) and (ii) of that approach have been interpreted by the Court of Appeal as involving a comparative exercise, in which the court must attempt to decide which party has the better of the argument on the issue (Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV [2019] EWCA Civ 10 – discussed here).

The conflicting authorities

In the last two years, four High Court decisions have specifically considered whether the effect of Haddon-Cave LJ's judgment in Lakatamia was that the good arguable case test in the context of freezing applications is now the same as in the context of the jurisdictional gateways, as derived from Brownlie.  Those decisions have been split evenly 2-2 on that question.

Edwin Johnson J in Harrington & Charles Trading Co Ltd v Mehta [2022] EWHC 2960 held that that was the effect of Haddon-Cave LJ's judgment, and that the test in freezing order applications is now the three-limb Brownlie approach. That decision was followed (with less analysis) by Dias J in Chowgule & Co Pte Ltd v Shire [2023] EWHC 2815 (Comm).

However, Butcher J in Magomedov v TGP Group Holdings (SBS) LP [2023] EWHC 3134 (Comm) disagreed with those decisions and reached the opposite conclusion, holding that the test in the context of freezing orders remains as stated in The Niedersachsen.  In his view:

• There was no support in the wider authorities or texts for the approach to the jurisdictional gateways being applied as the merits test in freezing applications. The contexts were different and the tests were directed to different ends.

• The Brownlie approach requires a comparative assessment of the parties' positions akin to a mini-trial, which is problematic in interlocutory applications and would further burden the courts.

• While the gravity of a freezing order requires a merits test of more than simple arguability, the Brownlie approach would set the bar too high and could inappropriately restrict the operation of this important jurisdiction.

• Applying the Brownlie approach to freezing orders would widen, without apparent reason, the gap between the merits test for freezing orders and that for proprietary injunctions (the American Cyanamid test of "serious issue to be tried").

Shortly afterward, Bright J in Unitel SA v Unitel International Holdings BV and another [2023] EWHC 3231 (Comm) agreed with that conclusion, for essentially the same reasons.

However, Bright J acknowledged that "the law is in a confused state, which cries out for a definitive answer from the Court of Appeal". He observed that Haddon-Cave LJ’s judgment dealt with this point only "briefly, elliptically and ambiguously", in a case where there was no live issue as to whether there was good arguable case on the merits.  Rather than trying to squeeze more meaning from those few words, he considered that the issue should be considered afresh and from first principles – which only the Court of Appeal could do.  In the present case, if he had concluded that the choice of test affected the outcome of the application he would have felt bound to grant permission to appeal.

A different evidential requirement?

In Unitel, Bright J raised a particular concern about applying the Brownlie approach in the context of freezing order applications.

In his view, the three-limb approach as interpreted in Kaefer requires a court to not only (a) attempt to decide which party has the better of the argument on an issue but also (b) in cases where it feels it can reach a decision on that, to then undertake a further exercise to "try to assess the reliability of its conclusion on that point".

He observed that such an assessment of reliability was inherently difficult at this stage, and particularly problematic where the issue being decided is one that will fall to be determined finally at trial (as will often be the case in freezing applications). It would be trespassing on matters that should be left to the trial judge if he

".. were to express a settled view as to the reliability of the evidence I have received and particularly if I were to say that it is so reliable that the strength of [the applicant's] case on the point is above 50%...".

Further, he commented, if applicants for freezing orders "are told that they must provide evidence that reliably demonstrates that their prospects are above 50%", they will feel obliged to adduce at that stage as much evidence on the issue as they can muster. In cases such as the present where an issue being considered is one on which expert evidence will be required (here, a question of foreign law), parties might be justified in arguing that the court should hear oral evidence from the rival experts and decide the point – in effect, as a preliminary issue. That would be at odds with the principle that such applications should not become mini-trials, and would have the overall effect of lengthening hearings of this kind.

A good arguable case as to what?

It is worth noting that, in freezing order applications, the requirement for a good arguable "case" has commonly been treated as referring to a cause of action.  However, the majority of the Privy Council has recently concluded that there is no reason in principle to link the grant of a freezing order to an existing cause of action (in its obiter “ground-breaking exposition of the law of injunctions” in Broad Idea International Ltd v Convoy Collateral Ltd [2021] UKPC 24, discussed here).

The Privy Council majority restated the test for freezing injunctions to make clear that the good arguable case does not necessarily mean a good arguable case to establish all elements of a crystallised cause of action against the respondent but, rather, a good arguable case "for being granted a judgment or order" which the freezing order would support (if the other criteria are met).

While the Privy Council's judgment is not technically binding on the English courts as a precedent, it may be influential on a court called upon in the future to undertake a "first principles" review of the good arguable case test in the context of freezing orders.