Aggressive Legal Tactics: A platform for justice or a battleground for legal warfare?
The litigation landscape has always been marked by calculated strategy, but recent years have seen the rise of increasingly aggressive legal tactics that are reshaping the way disputes are fought in courts. Tactics such as freezing orders, security for costs orders, and insolvency orders have been raising critical questions about access to justice, fairness, and the overall health of the legal system. While these tools are designed to serve legitimate purposes, they are often weaponised in ways that can cripple businesses, obstruct the legal process, and force settlements long before a case can be heard on its merits.
Freezing Orders: Financial paralysis and access to justice
Freezing orders prevent a defendant from accessing or disposing of assets throughout the duration of the case. While they intend to safeguard assets from being hidden or dissipated, they can have the unintended consequence of paralysing a business and damaging an individual’s reputation long before any judgment is made. Individuals and companies facing a freezing order may find themselves unable to pay for reputable legal counsel, meet contractual obligations, pay for staff, or service their loans – essentially halting their entire business model. In corporate litigation, where the stakes are high and disputes can take years to resolve, freezing orders effectively punish a company before it has been proven guilty.
For example, in the case of Fundo Soberano de Angola v dos Santos, the Angolan sovereign wealth fund, Fundo Soberano de Angola (FSDEA), obtained a World Freezing Order (WFO) against Jean-Claude Bastos de Morais, alleging that he had conspired to misappropriate the fund’s assets. The WFO was granted, restraining Bastos from disposing of or dealing with his assets up to the value of USD $3 billion. In a judgment given at the adjourned return date hearing, the WFO was discharged on the basis that the applicants had committed no less than eight separate breaches of their duty in full and frank disclosure. All charges against Mr Bastos were eventually dropped and Mr Bastos’ criminal record remains clean to this day.
Security for Costs Orders: A barrier to justice for plaintiffs
Another powerful tactic used in high-stakes litigation is security for costs orders. It usually requires plaintiffs to deposit a substantial amount of money, or provide a bond or guarantee, to cover the defendant’s legal costs in the event that the plaintiff loses the case. There are specific conditions that the court sets out as part of granting such an order, the most important is where there is evidence to believe that the plaintiff, if unsuccessful, will not be able to pay the defendant’s legal costs. While designed to protect defendants from trivial claims, security for costs orders can also be used as a strategic tool to block financially weaker plaintiffs from pursuing legitimate cases.
The Excalibur Ventures v. Texas Keystone case serves as a striking example. Excalibur, a small exploration company, brought a claim against Texas Keystone over oil rights. Texas Keystone successfully obtained a security for costs order against Excalibur, arguing that the plaintiff’s claim lacked merit and that it would be unable to cover the defendant’s legal costs if the claim failed. Excalibur was a shell company with no assets, so a number of professional funders provided £31.75 million for Excalibur to pursue its claim in return for a working interest or a substantial financial return. The case was eventually dismissed, with Excalibur losing the oil rights dispute, but not before being financially drained by the enormous security order and its payments.
Insolvency Orders: Liquidation as a litigation strategy
One of the most drastic tactics in corporate litigation remains the use of insolvency orders to force a company into bankruptcy, even when it has the potential to repay its debts if given sufficient time. In such cases, creditors seek an insolvency order as a strategic move to liquidate the company quickly, allowing them to strip its assets rather than waiting for repayment through a more gradual restructuring process. This tactic can destroy businesses that are still viable and capable of recovery, yet are pushed into liquidation purely for the financial benefit of impatient creditors. This tactic results in the elimination of jobs and reduction of the overall value of a business that creditors might have recovered through a more measured process.
A stark example of forced liquidation was seen in the collapse of British Homes Stores (BHS). It was forced into liquidation after billionaire Sir Philip Green sold the company for just £1. The new owners failed to raise capital to reverse losses and pushed for liquidation. Many argued that with proper restructuring and time, BHS could have found a viable path to pay off its debts without going under. However, the forced insolvency allowed creditors to strip valuable assets, leaving employees and pensioners at a loss. The collapse resulted in the loss of 11,500 jobs and a pension deficit of £571 million.
A call for judicial restraint and balance
As corporate litigation becomes more aggressive, the strategic use of legal tools, like freezing orders, security for costs orders, and insolvency orders, raises critical questions about fairness and access to justice. While these tactics intend to protect the integrity of the legal process, they are often manipulated by well-resourced parties to gain a tactical advantage in the case. This can leave smaller businesses, individuals, and even legitimate claimants at a severe disadvantage.
As such, legal courts must exercise greater caution in granting aggressive orders and ensure that they are not being misused as mechanisms to burden financially weaker parties. A more balanced approach, one that allows the legal process to proceed on its merits while protecting both parties involved, should be sustained. Only then, we can ensure that the court remains a platform for justice, rather than a battleground for legal warfare.
