Santina v Rare Art: in the soup – worldwide freezing injunction over a £14,000 costs order?
6 min read
The English Court's jurisdiction to grant freezing injunctions has been the subject of considerable judicial attention in recent years. In Convoy Collateral v Broad Idea,1 the Privy Council "laid to rest" the House of Lords' decision in The Siskina,2 concluding that where the Court has personal jurisdiction over a party, it has the power to grant a freezing injunction (or other interim relief) against that party to assist enforcement. Or in other words, that jurisdiction existed irrespective of the existence of an underlying claim for substantive relief.
In Santina Limited v Rare Art (London) Ltd [2023] EWHC 807 (Ch), the High Court addressed the question of whether an order for security for costs and/or a £14,000 costs order (both unsatisfied) provided sufficient jurisdiction to grant a freezing injunction in favour of the Defendant to the proceedings. In this case, however, neither party sought to rely on the court's broader jurisdiction under Convoy Collateral, with the Defendant/Applicant instead successfully arguing that the security for costs order was sufficient to found jurisdiction for a worldwide freezing injunction. In upholding and continuing the injunction, the judge, Marcus Smith J, nonetheless rejected the more limited jurisdiction prescribed by The Siskina. However, the fact that the Claimant/Respondent still sought to rely on it (albeit unsuccessfully) suggests that The Siskina may not have been as decisively dealt with as the Privy Council in Convoy Collateral appears to have intended.
Santina v Rare Art also demonstrates the High Court's willingness to use the tools at its disposal to prevent parties from frustrating court orders through the dissipation of assets, even in respect of relatively modest sums – £200,0003 in this case. It should serve as a warning to both recalcitrant claimants and defendants subject to adverse costs orders.
Factual and Procedural Background
Santina Limited ("Santina"), acting through its agent, purchased a pair of silver-gilt soup tureens from Rare Art (London) Limited (trading as Koopman Rare Art) ("Rare Art") for £181,500. Santina alleged that the sale was induced by a number of false representations by Rare Art and commenced proceedings against it on 16 July 2021.
Following an application by Rare Art, on 13 October 2022 the court ordered Santina to (i) give security for Rare Art's costs in the amount of £130,000 and (ii) pay Rare Art's £14,000 costs in respect of the application (the "Costs Order"). Santina failed to comply with the Costs Order and instead sought permission to appeal against it. As a consequence, Rare Art applied to have Santina's claim struck out. Rare Art's strike out claim was stayed pending a decision on the permission to appeal.
Application for the freezing injunction
In the interim, Rare Art applied for a worldwide freezing injunction without notice on 14 March 2022. The injunction was granted by Edwin Johnson J. It prohibited Santina from:
1. removing from England and Wales, disposing or dealing with or diminishing the value of its assets up to £200,000 in the jurisdiction; or
2. disposing, dealing with, or diminishing the value of any of its assets up to the value of £200,000 whether in the jurisdiction or otherwise.
These prohibitions also expressly extended to the silver-gilt soup tureens themselves.
The Return Date
At the return date hearing, Marcus Smith J heard (i) the appeal against the Costs Order; and (ii) Santina's application to set aside the freezing injunction. Permission to appeal was rejected principally on the basis that the Costs Order was a matter of discretion for the judge of first instance.
In respect of (ii), Santina argued that the freezing injunction should be set aside on two grounds:
1. Material non-disclosure; and
2. Lack of jurisdiction to make a freezing injunction.
Marcus Smith J rejected all of Santina's arguments on material non-disclosure.
On the issue of jurisdiction, neither party contested that the court had unlimited discretion under s. 37 of the Senior Courts Act 1981 (the "Act") to grant injunctive relief where it appeared to be just and equitable to do so. Rather, Santina, argued that the freezing injunction was so far outside the discretion to grant such relief, that the discretion should not have been exercised.
Marcus Smith J considered the "jurisdiction" of the freezing injunction from this perspective, and ultimately rejected Santina's arguments:
1. The rationale of a freezing injunction was to prevent a party from taking steps outside of its usual business activities with a view to deliberately dissipating or transferring its assets in order to make them unavailable to meet any court judgment.
2. In order to obtain a freezing injunction under s. 37 of the Act, an applicant must satisfy the "just and convenient" test:
(a) The applicant has a good arguable case on the merits against the respondent;
(b) There is a real risk the judgment will go unsatisfied by reason of the unjustified disposal by the defendant of its assets, unless the defendant is restrained by court order from disposing of them; and
(c) It is just and appropriate, as a matter of discretion, to grant the injunction.
3. Per The Siskina, a freezing order would not have been granted unless the applicant had an accrued right of action (to the standard of a good arguable case). In those circumstances, Rare Art would therefore have had to have been a claimant or counterclaimant to be entitled to an injunction.
4. Subsequent authorities have, however, moved away from the narrow view in The Siskina. In Jet West Ltd v Haddican,4 the Court of Appeal held that the court had jurisdiction to prevent parties from frustrating court orders by moving assets out of the jurisdiction, including in respect of costs orders.
5. In the present case, Santina had failed to comply with the Costs Order. But for Santina's appeal which stayed the proceedings, Rare Art would already have struck out Santina's claim and been awarded its costs. The test was therefore whether the unsatisfied security for costs order was the essential equivalent of a cause of action which may be converted into a money judgment in due course. Marcus Smith J held that (i) this test was satisfied; (ii) Edwin Johnson J was right to grant the freezing injunction at the without notice hearing; and (iii) the freezing injunction should be substantially continued.
6. Marcus Smith J did not consider the £14,000 costs order alone to be sufficient to properly found the jurisdiction of the freezing injunction given its small amount. However, his comments indicate that the court would be prepared to grant a freezing injunction in respect of an assessed costs order for a more substantial sum.
1 Broad Idea International Ltd v Convoy Collateral Ltd (British Virgin Islands) [2021] UKPC 24.
2 Siskina v Distos Compania Naiera SA (The Siskina) [1979] AC 210.
3 Based on the £130,000 unsatisfied security for costs order and the costs the Defendant would have recovered if awarded the costs of the proceedings.
4 Jet West Ltd v. Haddican [1992] 1 WLR 487 per Lord Donaldson MR at [489].
White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
© 2023 White & Case LLP
