The Court of Appeal has unanimously restored a worldwide freezing injunction against a defendant’s mother, in a useful reminder of the evidence necessary to show a risk of assets being disseminated.
Lakatamia Shipping Co Ltd (Lakatamia) appealed against the discharge of a worldwide freezing injunction made against Toshiko Morimoto (Madam Su).
A dispute arose in relation to a freight-forwarding agreement, which Lakatamia had entered into with Mr Su, Madam Su’s son. Subsequently, Mr Su breached the agreement causing Lakatamia substantial loss. Judgment was granted against Mr Su which, to date, has not been paid. Mr Su owes Lakatamia approximately US$57m (the Judgment Debt).
Lakatamia applied for, and was granted, a WFO against Mr Su, which prohibited him from dealing with his assets anywhere in the world, up to a value of US$48,842,440.24 (the First WFO). However, in breach of this order, Mr Su allegedly dissipated assets of around EUR 27m, which he obtained after the sale of two villas in Monaco (the Assets).
During cross-examination as part of committal proceedings, Mr Su gave evidence that Madam Su, (i) received the Assets via her lawyers; (ii) she was aware, at the time, of the First WFO; and (iii) she performed a “treasury” function for the Su family. Lakatamia applied for a further WFO, against Madam Su in support of a claim of unlawful means conspiracy, by combining with other Defendants to assist Mr Su to dissipate the Assets, and the violation of Lakatamia’s rights under the Judgment Debt.
On the return date hearing, Sir Michael Burton found that, even though there was a good arguable case against Madam Su, a real risk of dissipation had not been “established by solid evidence”. He discharged the WFO against Madam Su.
Lakatamia filed an expedited appeal. Lakatamia claimed that the Judge erred in finding no real risk of dissipation: (i) when he had held there was a good arguable case that Madam Su was involved in the dissipation of the assets in breach of the First WFO; and (ii) he failed to consider relevant evidence in relation to Madam Su’s ability to move large amounts of money between accounts and jurisdictions, Madam Su’s significant liquid assets and evidence of Madam Su’s use of a nominee director and shareholder.
In relation to (i) the Court of Appeal held that there “was clear scope for an inference of dissipation in the present case” on the basis that both of Lakatamia’s claims against Madam Su related directly on the question of dissipation itself; i.e. the claims relate to Madam Su assisting in the act of dissipation of her son’s funds. The Court of Appeal held that “common sense would suggest that there was a strong inference that there was a risk that she would do exactly the same in relation to her own assets in order to frustrate the enforcement of any judgment against her”.
In relation to (ii) the Court of Appeal considered that the Judge had failed to give sufficient weight to this evidence.
Consequently, the appeal was allowed and the WFO restored. The judgment is significant for two reasons; firstly it demonstrates that the nature of the cause of action brought against the respondent can itself demonstrate a risk of dissipation of assets; and secondly confirms that a real risk of dissipation does not need to be established on the balance of probabilities – a “real” risk is shown by demonstrating that the respondent “may” unjustifiably dissipate assets.