Worldwide freezing orders (WFOs) are a powerful, some might say draconian, tool and will only be issued if there is a real risk of an alleged wrongdoer dissipating assets. The question of what constitutes such a risk came under analysis in a guideline Court of Appeal decision.
Two companies and their administrators obtained pre-trial WFOs against five people who were alleged to have misappropriated large sums belonging to the companies. Prior to those orders being made, the Serious Fraud Office (SFO) had been granted criminal restraint orders (CROs) in respect of the individuals’ assets.
In challenging the WFOs, two of them argued that, given the prior existence of the CROs, it could not be shown that there was a real risk that they would dissipate their assets. The CROs and the WFOs were said to be identical in effect and the duo argued that the imposition of the WFOs had achieved nothing, save to expose them to a heavier burden of compliance and greater legal costs.
In dismissing the appeals, however, the Court found on the facts of the case that the CROs were not a complete or adequate substitute for WFOs. The CROs were targeted at ensuring the preservation of assets that might be used to satisfy a criminal confiscation order, whereas the WFOs were designed to protect the companies’ private interests.
The SFO was under no obligation to notify the companies in the event that the CROs were lifted and the companies had a more than fanciful concern that the SFO might permit the duo to deal with their assets in such a way as to undermine the companies’ position. There was also the possibility that assets to which the companies proved to be entitled might fall outside the ambit of the CROs.
The companies’ administrators might well have information and expert opinion concerning the existence or value of the duo’s assets that was not available to the SFO and had justifiable concerns about the possible shortcomings of the CROs in guarding against the risk of dissipation.