The English courts have various powers to enforce a judgment. They can order the seizure and sale of property; they can put a charge on an asset; they can order that money owed by third parties to a judgment debtor be paid over to a judgment creditor. They can also order that assets be frozen until other enforcement action can be taken.
While the courts will, as a matter of policy, assist in the enforcement of judgments, questions can arise about the relationship between these various powers and how they should be used. In particular, the circumstances in which a freezing order might be issued can be unclear. Why should a defendant’s assets be frozen, just because they do not pay up straightaway? Why should assets be reserved for one creditor under a judgment, when there may be other creditors who also expect to receive their money?
These questions have recently been addressed by the Court of Appeal in Les Ambassadeurs Club Limited v Songbu Yu [2021] EWCA Civ 1310.
The facts
Mr Songbu Yu was one of the wealthiest people in China. In 2014 the net worth of Mr Yu and his family was US$ 1.3 billion. In that year Mr Yu became a member of Les Ambassadeurs Club in Mayfair, London, which advertises itself as a “members only gambling club for the premium player”. Members can play roulette, baccarat, blackjack and other games at any time: the Club is open 24 hours a day.
Over a period of five days in 2018, Mr Yu purchased chips at the Club worth £19 million. He then lost it all. He also subsequently did not honour the cheques that he had used to buy the chips with. After a negotiation, the Club agreed to accept £16.54 million instead of the full £19 million, and agreed that Mr Yu could pay this in instalments. However, Mr Yu did not pay the first instalment when it became due, so the Club started legal proceedings.
After that Mr Yu made a series of payments which reduced the debt to £6.5 million; then he stopped paying and stopped communicating with the Club. The Club therefore continued with the legal action, and in November 2020 it obtained a summary judgment for the sum outstanding, which by that time, with interest, totalled over £10 million.
The Club applied for a worldwide freezing order against Mr Yu’s assets. However, the judge was not convinced that a freezing order was appropriate and refused to grant one. The Club appealed that decision to the Court of Appeal.
The appeal
The Club argued that the judge had misapplied the law on freezing injunctions and, on the facts here, had made a mistake in refusing to grant the judgment.
The four requirements for a freezing order are that (1) the applicant has a good arguable case on the merits, (2) there is a real risk of dissipation of the defendant’s assets, (3) the defendant’s assets are within the geographical scope of the proposed injunction, and (4) in all the circumstances it is just and convenient to grant the order sought.
Since judgment had already been granted, the first requirement was satisfied; and since it was a worldwide freezing order that was sought, the third requirement was also satisfied. It might also be just and convenient to grant the order in these circumstances. The main issue here was whether there was a real risk of dissipation of the assets.
The Court of Appeal first addressed the question of what “real risk” meant. After reviewing the authorities, the Court concluded that this referred to a risk that was more than “fanciful” but, on the other hand, less than “on the balance of probabilities”. There needed to be solid evidence of the likelihood of dissipation, although precisely what that entailed depended on the particular situation. The Court of Appeal concluded that the judge had applied the right test in this case.
The Court of Appeal also agreed with the judge that the test had not been met here. While Mr Yu could move his assets in order to put them out of the reach of creditors, for example by moving them to China, there was no evidence that Mr Yu had actually taken such steps in the past, and he had not taken the opportunity to move his assets (in particular, his cash in bank accounts in England) during the four months between the service of the order for summary judgment and the application for a freezing order. Also, while Mr Yu’s lack of contact with the Club and his failure to participate in the legal proceedings might indicate a risk of dissipation, these could also suggest he did not want to pay until he was made to pay, through the process of enforcement.
Overall, the Court of Appeal thought that the judge was entitled to conclude, based on a review of all the circumstances, that the evidence relied on was not strong enough to establish that there was a real risk of dissipation of assets. As a result the appeal was dismissed.
Comment
This case is a good illustration of what it takes to obtain a post-judgment freezing order.
The defendant’s fault could not be clearer: an order for summary judgment had been obtained. Also, the claimant did not have to show that there was a risk on the balance of probabilities that the defendant would dissipate his asset, only that there was a real risk of his doing so.
The fact that the defendant could easily have moved his assets out of the reach of creditors was not enough to show that there was such a risk. There had to be evidence that indicated the defendant might actually move his assets. In the absence of such evidence, the courts concluded that it was not appropriate to grant a freezing order; and the claimant would instead have to pursue enforcement through the other methods that are available.
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