[Dr] No risk of dissipation – Les Ambassadeurs Club Ltd v Yu

The test for “a real risk of dissipation” has been clarified by the Court of Appeal in an important and high-profile judgment Les Ambassadeurs Club Ltd v Songbo Yu [2021] EWCA Civ 1310.

Between 27 April and 1 May 2018 Mr Yu, a Chinese high-net-worth businessman, used cheques to purchase £19 million worth of chips at the Les Ambassadeurs Club casino in Mayfair (‘the Club’). The casino featured in the James Bond film ‘Dr No’, hence the above toe-curling and totally irrelevant pun.

None of the cheques were honoured. A settlement agreement was made in November 2018 but soon breached, and the casino issued the proceedings in the High Court in December 2018. Some but not all of the sum owing was paid, but Mr Yu then stopped engaging with the Club’s lawyers or the proceedings. Summary judgment was granted on 19 November 2020. Four months later the Club applied for a post-judgment worldwide freezing order, which was refused at first instance on the basis that the court was not satisfied there was a real risk of dissipation.

While the Court of Appeal was therefore considering “a real risk of dissipation” in a civil context, the test is also of course applied in applications for restraint under section 41 of the Proceeds of Crime Act 2002. Where there is no real risk of dissipation, a restraint order will not be necessary and should not be granted (Re AJ and DJ (9 December 1992, unreported, and Re B (Restraint Order) [2008] EWCA Crim 1374.

The Club sought to overturn the first instance decision on the basis that too high a threshold had been applied, and that “a real risk” meant more than merely fanciful, a low test. Indeed that was the test suggested in the restraint context by Glidewell LJ in Re AJ and DJ.

The Court of Appeal disagreed and upheld the first instance decision. A risk that is more than merely fanciful will be necessary but not necessarily sufficient. The gloss of “more than merely fanciful” is not necessary to the “real risk” test:

“The focus should be on whether, on the facts and circumstances of the particular case, the evidence adduced before the court objectively demonstrates a risk of unjustified dissipation which is sufficient in all the circumstances to make it just and convenient to grant a freezing injunction. Plainly a risk which is theoretical, fanciful or insignificant will not meet that threshold; but the judge should be addressing the question whether he or she is satisfied that the alleged risk is real, and that does not require any comparative exercise to be carried out, or the attaching of some other label to a risk which falls short of the threshold.”[1]

Approving of Gulf International Bank BSC v Aldwood [2020] 1 All ER (Comm) 334, Andrews LJ found that “solid evidence” of a real risk of dissipation will be necessary.

Encouraging for those resisting restraint? [Dr] Yes. Andrews LJ also offered further helpful guidance:

• Evidence that someone is disinclined to pay their debts unless required through enforcement is not enough.
• Neither was it sufficient that Mr Yu had the wherewithal to move his assets out of reach of creditors. One hopes that this point can counter the tired prosecution submission that a defendant has assets, business interests, or a life elsewhere, and has the resources to remove their assets from the jurisdiction. That is not sufficient to demonstrate a real risk of dissipation.
• There was no evidence Mr Yu had ever taken steps to put his assets out of reach of creditors. In this respect the Court of Appeal’s judgment is notably similar to that in Re B (Restraint Order), where it was emphasised that where no dissipation had occurred over a long period, the prosecution should be prepared to explain why a restraint order was necessary.

The court will of course much more readily find a real risk of dissipation where the defendant faces criminal proceedings for charges of dishonesty. Les Ambassadeurs Club Ltd v Yu does not change that, but it is essential reading for both civil and criminal fraud pracitioners, and may shift the balance slightly in favour of those resisting restraint or freezing orders.

[1] At §36