Chowgule & Company Private Ltd & Anor v Pratap Shirke & Ors

For a freezing injunction in a fraud claim, the claimant must establish a good arguable case, a real risk of unjustified dissipation supported by solid evidence, and that relief is appropriate. The good arguable case inquiry is three-limbed: a plausible evidential basis; reliable resolution of disputed issues where possible; and, where that is impossible, sufficient plausibility on the available material. Where the court can compare the parties’ cases, the claimant must have the better argument. Unexplained transactions, offshore structures and enforcement difficulties do not by themselves establish fraud or dissipation. A possible conspiracy must be supported by evidence and displace plausible innocent explanations. The application failed because the alleged fraud was not established on the material available.

The claimants alleged that the defendants had conspired to defraud them of approximately US$128 million through investments, loans and related transactions involving shipping companies. They sought a freezing injunction against the first defendant and ancillary disclosure orders against the first and fourth defendants.

The application was heard on notice after earlier directions and undertakings. The central issues were whether the claimants had a good arguable case of fraud, whether there was a real risk of unjustified dissipation of assets, and whether the court should exercise its discretion to grant relief. The judgment did not determine the merits of the underlying claims or the separate stay application.

1. Disposition. The application for a freezing order and ancillary disclosure was dismissed. The undertakings previously given by the first defendant were discharged.
2. Good arguable case. The court accepted that freezing relief requires a good arguable case on the merits, a real risk of dissipation and an appropriate case for the exercise of discretion. The three-limbed good arguable case approach in Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV, [2019] EWCA Civ 10, was adopted. The claimant must provide a plausible evidential basis, the court should resolve disputed issues where it can reliably do so, and sufficient plausibility may suffice where reliable assessment is impossible. Given the serious and penal consequences of freezing relief, the judge expressed doubt whether it should be granted in a fraud claim unless the claimant had the better argument. Here, the court could compare the evidence and concluded that the defendants’ case was considerably more plausible.
3. Fraud and inference. Allegations of fraud and conspiracy had to be decided on evidence. The fact that transactions were complex or presently unexplained did not justify inferring fraud where innocent explanations remained plausible. The reasoning approved in Magomedov v TPG Group Holdings (SBS) LP, [2023] EWHC 2655 (Comm), was applied. The evidence instead supported an explanation based on a distressed and cyclical shipping investment, continuing financing requirements and the management of an eventual exit.
4. Risk of dissipation. The court treated the risk issue as unnecessary after rejecting the good arguable case, but stated that it would in any event have failed. The principles summarised in Lakatamia Shipping Co. Ltd v Morimoto Su, [2019] EWCA Civ 2203, required solid evidence of an objectively real risk of unjustified dissipation. Offshore structures, remoteness or illiquidity of assets, and difficulty of enforcement were insufficient without evidence of a threatened change in normal asset handling. The rule in Laemthong International Lines Co. Ltd v ARTIS, [2004] EWHC 2226 (Comm), was likewise applied.
5. Other matters. The judgment left liability, limitation, quantum, reflective loss and related issues open because the evidence was incomplete. It also observed, without deciding the issue, that the duty of full and frank disclosure as presently articulated applies to without-notice hearings.