Francesco Corallo & Ors v Giuseppe Pinelli & Ors

A freezing order protects against unjustified dissipation of assets, not against the risk that a defendant may be unable to satisfy a judgment. The applicant must show a good arguable case, a real risk that a judgment will go unsatisfied because of unjustified dissipation, and, where relevant, that the order is just and convenient in the amount sought.

The risk must be established objectively by solid evidence. A good arguable case involving dishonesty, negligence or breach of trust does not itself establish a risk of dissipation. The evidence must connect the alleged conduct with a real risk that the defendant will deal improperly with his or her own assets. An intrusive order must also be justified by evidence supporting its full value.

The claimants applied for a worldwide freezing order against the first defendant in the sum of £3.6 million, together with injunctions concerning the second and third defendants and companies connected with them. The application arose from alleged breaches of duty, breach of trust, negligent misstatement and accounting claims concerning client funds and a loan transaction.

The first defendant disputed the merits, risk of dissipation, and justice and convenience of the proposed relief. The other defendants offered undertakings in terms broadly corresponding to the injunctions sought. The central issues were whether the claimants had a good arguable case, whether there was a real risk of unjustified dissipation, and whether the proposed relief was justified.

1. Good arguable case. The claimants’ case that the first defendant owed contractual, common-law or fiduciary duties was more than barely capable of serious argument. The claims arising from the loan transaction therefore met the good arguable case threshold. Some pleaded claims could, in principle, justify recovery of the full loan principal and interest, although the court made no final findings on the merits.
2. Risk of dissipation. The applicable question was whether there was an objectively established real risk that a judgment would go unsatisfied by reason of unjustified dissipation. The risk had to be supported by solid evidence. Alleged misuse of client money, disputed commission, incomplete asset disclosure, conduct concerning the loan security, and the insolvency of related companies did not, individually or collectively, establish the necessary connection with dissipation of the first defendant’s own assets.
3. The first defendant’s prompt repayment of identified personal expenditure, compliance with earlier undertakings, transfer of substantial client balances, voluntary disclosure of further assets, and retention of assets during the relevant period weighed against a real risk. Allegations of dishonesty or conduct akin to dishonesty were insufficient without evidence showing that assets were likely to be dissipated.
4. Justice and convenience. Even if a risk had been established, the evidence did not justify freezing assets in the full sum sought. The claimants had not adequately explained substantial alleged payments or demonstrated the likely inadequacy of the primary loan security. A freezing order could not properly be used as security for repayment of the loan.
5. The application for a freezing order and ancillary relief against the first defendant was dismissed. The undertakings offered by the first defendant, TOL and Lemido were accepted in lieu of the injunctions sought against them.