Court discharges freezing order due to material non-disclosure going to the risk of dissipation

• United Kingdom

• Financial services disputes and investigations
• Litigation and dispute management - Freezing Orders

16-06-2020

Les Ambassadeurs Club Limited v Sheikh Salah Hamdan Albluewi [2020] EWHC 1313 (QB)

Facts of the case

• This decision relates to the continuation/discharge of a worldwide freezing order (the “WFO”) against the Defendant (“Sheikh Albluewi”) in favour of the Claimant (“Les Ambassadeurs”)
• Les Ambassadeurs applied for the continuation of the WFO on the basis that it was necessary to prevent Sheikh Albleuwi from dissipating his assets and thereby frustrating Les Ambassadeurs’ ability to enforce a judgment that it is seeking against him in respect of alleged gambling debts.
• Sheikh Albluewi applied for the discharge of the WFO on the basis that (a) there was no real risk of dissipation of assets, (b) it was not just and convenient to have a WFO, and (c) Les Ambassadeurs breached their duty to make full and frank disclosure on the without notice application.

The decision

• Freedman J dismissed Les Ambassadeurs’ application and discharged the WFO, on the following grounds:-
  
  
  • No real risk of dissipation of assets: Les Ambassadeurs’ argument was predicated on Sheikh Albleuwi having “gone to ground” in Saudi Arabia in the middle of his default and a concern that he would seek to remove all of his assets to Saudi Arabia where they would not be amenable to enforcement.
  • However, Freedman J found that Sheikh Albleuwi’s return to Saudi Arabia in the middle of his default coincided with his annual return to that country. As regards the asset position, Freedman J found that Sheikh Albleuwi had substantial personal and business connections with London which were contrary to a conclusion that he would remove all his assets to Saudi Arabia, and that he owned assets in sums more than sufficient to discharge the instant debts in jurisdictions that would be amenable to enforcement. He also found that Sheikh Albleuwi’s playing and payment history with Les Ambassadeurs was such that, whilst he had previously dishonoured cheques/credit terms, ultimately he had made payment and there was not a real risk that he would do any different in this instance.
  • Material non-disclosure: Les Ambassadeurs had failed to give a fair presentation to the Court as to real risk of dissipation of assets. Freedman J identified two “highly significant” breaches of this duty which were particularly material as they were factors which led the Court to conclude that there was a real risk of dissipation when it made the WFO. These non-disclosures were not made in bad faith but did justify the discharge of the WFO.
  • Given the above, Freedman J found that it was not necessary for him to make a finding on the basis of justice and convenience.

Analysis and practical advice

• Just as dishonesty does not necessarily prove a real risk of dissipation, so the more difficult it will be for an applicant to rely, without more, on a lack of commercial probity falling short of dishonesty to establish such a risk, particularly where that applicant has shown a preparedness to do business with a respondent he knows not to be of good standing.
• Although not deliberate, the non-disclosures in this case went to the heart of the issue of whether there was a real risk of dissipation. This is an area where the Court will exercise particular caution because the case law states that such a risk is not to be inferred lightly. It is, therefore, important that as far as reasonably possible all relevant factors are put before the Court by the applicant.
• As an applicant, it is important to remember that compliance with the duty of full and frank disclosure extends to:
  
  
  
  • All material facts and not just those known to the applicant, but also those which he would have known about if he had made enquiries (the proper extent of which will turn on the nature of the case, the probable effect of the order and the degree of urgency and time available);
  • Drawing the Court’s attention to matters which might be in the evidence supporting the application but which are not immediately obvious, for example (as in this case) information contained in exhibits to affidavits but not referenced directly in the covering affidavit or in submissions to the Court; and
  • Informing the Court about any departures from the standard form of order.

• Breaches of the duty of full and frank disclosure will inevitably inform the Court’s decision on costs, including whether indemnity costs are appropriate.