The recent English Court of Appeal decision in Ras Al Khaimah Investment Authority v Bestfort Development LLP and others  EWCA Civ 1014 clarifies the test for the existence of assets on an application for a worldwide freezing order (“WFO”). The main question of law raised by the appeal was whether an applicant for a WFO has to show that (1) it is likely that a defendant has assets that will be caught by the order or (2) a good arguable case that a defendant has such assets or (3) grounds for believing that a defendant has, or is likely to have, such assets or (4) merely that the defendant is wealthy and must therefore have assets somewhere.
The Current Test
The current test is taken from the Pertamina  QB 644 and the Ninemia  1 WLR 1412 cases, which requires an applicant for a WFO to show that they have (a) a good arguable case that they have a good claim and (b) a good arguable case that there is a risk that a defendant will dissipate their assets. However, until now, the test for showing whether a defendant in fact has assets that will be caught by the order has been somewhat less certain.
Following this case, it appears the current test is that an applicant must “satisfy” the court that a good arguable case exists, or that there are grounds for belief, as to the existence of assets (although Longmore LJ preferred “grounds for belief”).
The applicants (Ras Al Khaimah government entities) appealed against the first instance decision of the Honourable Mrs Justice Rose DBE in which she refused to grant WFOs against 14 limited liability partnerships (LLPs) all registered in England and Wales. The applicants were responsible for investing the sovereign wealth of Ras Al Khaimah in projects in Georgia. When the government entities suspected one of their directors, a Mr Gela Mikadze (a Georgian national, lawyer and businessman), of breaching his fiduciary duties, they brought proceedings against him in Georgia and the UAE. They applied to the English court under section 25 of the Civil Jurisdiction and Judgments Act 1982, seeking an interim WFO in respect of the assets of the 14 LLPs, who were controlled by Mr Mikadze.
First Instance Decision – Mrs Justice Rose DBE
At first instance, the judge held that the applicants had a good arguable claim against Mr Mikadze and a good arguable case that if the LLPs had assets, they were Mr Mikadze’s assets and he was likely to dissipate them. However, she went on to hold that the LLPs did not have assets that could be caught by a WFO, after finding that none of the LLPs were “likely to have” assets somewhere in the world. She further held that the risk of dissipation was countered by the fact that the LLPs had complied with previous costs orders, and by the applicants’ two to three-year delay in applying for relief.
The applicants appealed.
The Court of Appeal’s Findings
The Court of Appeal allowed the appeal in part, holding as follows:
However, the Court of Appeal ordered that a freezing injunction in the normal form should be issued against the LLPs who appeared to have assets in respect of their assets anywhere in the world save to the extent that such assets existed in Georgia (paras 60-61). The Court of Appeal also granted the government entities permission to request an Order appointing a Receiver over the same entities.
This is the third court decision, in three separate jurisdictions, against Mr Mikadze, following his high-profile criminal convictions for fraud in both Georgia and the UAE.