Magomedov v TPG Group: Important clarification of the “good arguable case” test in freezing injunctions

In this article, 4 New Square’s Saaman Pourghadiri considers the recent case of Magomedov v TPG Group [2023] EWHC 3134, in which the High Court provided important clarification on the test for obtaining a freezing order. 4 New Square’s Daniel Saoul KC acted for the Claimants.

Two recent High Court decisions have suggested that the “good arguable case” test for the grant of a freezing order had changed and was to be aligned with the test used in the context of jurisdictional challenges. In Magomedov v TPG [2023] EWHC 3134, Butcher J held that those decisions were wrong and that the classic statement of the test in The Niedersachsen [2983] 2 Lloyd’s Rep 600 remained good law.

That is to say, in the context of a freezing order a “good arguable case” is one that is “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 applicant need not go further and establish that it has “the better of the argument” or satisfy the threefold test in Brownlie v Four Seasons [2017] UKSC 80.

Daniel Saoul KC acted for the Claimants in Magomedov v TPG Group.

Justin Fenwick KC, Tim Chelmick, and Mark Cullen acted for one of the Defendants in a related application where injunctive relief was refused. A copy of the judgment can be viewed here.

Freezing Orders – the Requirements

The legal principles applicable to freezing orders are well known. In summary, to obtain a freezing order the following must be shown:

1. 1. The Claimant has a good arguable case on the merits;
   2. There is a real risk that judgment will go unsatisfied by reason of an unjustified dissipation of assets; and
   3. Whether it is just in all the circumstances of the case to impose it.

Good Arguable Case in Freezing Orders and Jurisdiction Challenges Compared

The Niedersachsen [2983] 2 Lloyd’s Rep 600 held that in the context of freezing orders a good arguable case was one “which is 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 formulation “good arguable case” is also used when the Court is considering whether it has jurisdiction to hear a claim. Amongst the matters a Claimant must establish is that there is a “good arguable case” that a Claim falls within one of the jurisdictional gateways set out in CPR PD6B 3(1). A Claimant must also show that there is a serious issue to be tried on the merits of the claim and that England is the appropriate forum for the dispute.

The “good arguable case” threshold in Jurisdiction cases was considered and refined by the Supreme Court in Brownlie v Four Seasons [2017] UKSC 80 and the Court of Appeal in Kaefer Aislamientos v AMS Drilling [2019] EWCA Civ 10. The Court of Appeal explained that “good arguable case” in the context of jurisdictional gateways meant that the Claimant had to show it had “the better of the argument” and:

“(i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that 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; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.”

In both Harrington v Mehta [20222] EWHC 2960 (Ch) and Chowgule v Shirke [2023] EWHC 2815 (Comm), the Court imported the test in Jurisdiction cases to Freezing Order cases.

Butcher J’s Analysis in Magomedov

The issue confronting Butcher J in Magomedov v TPG Group was whether to: (a) follow Harrington and Chowgule and import the “good arguable case” test from Jurisdiction cases to Freezing Order cases; or (b) hold that those authorities were wrong and apply the classic Niedersachsen test to Freezing Orders.

Butcher J rejected importing the test from Jurisdictional Challenges.

Butcher J noted that in jurisdictional challenges the “good arguable case” test applied to whether one of the Jurisdictional Gateways had been met. It was not directed at the merits of the case. By contrast in an application for a freezing order the test is directed at the merits. This had significance for three principal reasons:

1. 1. First, in a jurisdictional challenge once the Court has accepted a gateway applies, the issue would not be revisited at trial. That justified a higher degree of certainty in jurisdiction challenges in relation to that issue. By contrast in the case of a freezing order, the merits of the underlying claim would be revisited at trial.
   2. The nature of cases in which freezing orders were sought were typically claims of fraud, dishonesty and the like. In such cases the claimant would typically struggle to meet a higher threshold at the interlocutory stage. Imposing a higher burden could deny the victims of fraud the interim protection freezing orders are supposed to provide.
   3. Imposing a higher burden would generate the sorts of “mini-trials” the authorities deprecated at the interlocutory stage.

Conclusions

The clarification of the law provided by Butcher J is welcome and the reasoning given by Butcher J accords with the well-established approach in freezing order cases, and meets important policy concerns. It also recognises the distinction between the freezing order context and the question the Court is considering when looking at jurisdictional gateways. It is now the most recent Judgment on this point, and will hopefully avoid confusion in the application of the “good arguable case” test in freezing orders going forward.

A copy of the Judgment can be found here.