In a recent decision in the ongoing US$18.3bn Magomodev litigation, the High Court (Butcher J) has given an important judgment regarding the threshold of a “good arguable case” for the purposes of a notification injunction.
In his judgment, the Judge considered and disagreed with the recent decisions of Edwin Johnson J in Harrington v Mehta [2022] EWHC 2960 (Ch) and Dias J in Chowgule v Shirke [2023] EWHC 2815 (Comm). In both these cases, the Judges had applied the three-limbed test of “good arguable case” derived from Brownlie v Four Seasons Holdings Inc [2017] UKSC 80 [2018] 1 WLR 192 and discussed in Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV [2019] EWCA Civ 10 [2019] 1 WLR 3514 to an application for a freezing injunction, and concluded that in order to obtain a freezing injunction, the claimant was required to prove that it had a relatively better case than the respondent on the merits.
The Judge held that in his view, “[a]fter careful deliberation, but without real doubt, I consider that Harrington v Mehta and Chowgule v Shirke are wrong insofar as they apply the three-limb test derived from Brownlie in the context of applications for freezing orders.” He held that the test for freezing orders remains that as set out in The Niedersachsen [1983] 2 Lloyd's Rep 600, i.e. that the claimant must show a case 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 judgment also demonstrates the importance of tailoring injunctions so that they are no more onerous than necessary, including by providing for sensible financial thresholds and other exceptions. In this regard, following extensive further argument, the Judge decided to grant a limited notification injunction requiring notification only of certain “transformational” events insofar as they related to the respondent’s assets held in Russia and required the claimants to provide US$5mn of fortification.
James MacDonald KC and Ben Lewy acted for the respondent, Transneft, instructed by Enyo Law.
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