A freezing injunction is an interim court order that restrains a party from dealing with or disposing of assets. The reason they are used are to protect assets until a court judgment can be either obtained or enforced and they are sought in situations where there is a risk a party may dissipate assets to frustrate any judgment the other side may obtain.
A freezing injunction can freeze all assets located in the UK as well as abroad, including:
If the application succeeds and an order is made by the court, its effect is to freeze all assets mentioned in the order. The order covers third parties who are legally obliged to comply with the order and will be in contempt of court if they breach the freezing order. Therefore, it is important that any order made is quickly served on the relevant person as well as all related third parties, such as banks or other financial institutions, that are holding assets for that person.
It should be stressed that since a freezing injunction is regarded as a very draconian measure that prohibits a person from using assets that are legally theirs, and so is only temporary. All injunctions, including freezing injunctions, are discretionary remedies. This means they are made at the discretion of the court and no one has a legal right to a freezing injunction. The courts set a high standard for granting such a remedy to a party and they will only be issued if the court decides it is just and reasonable to do so.
For a freezing order to be granted the main issue is whether it is just and fair. The injustice to the respondent cannot outweigh the gain that the applicant will obtain. The conduct of the applicant is taken into account. The applicant also has to satisfy the following conditions:
There must be a legal or equitable right that gives a substantive cause of action
The English court must have jurisdiction
The applicant must have a good arguable case
The assets must exist
There must be a real risk that the assets may be removed, dissipated, hidden or disposed of
The applicant must give an undertaking in damages to cover any losses the respondent suffers because of the freezing injunction, if it is deemed later on that the applicant never should have been entitled to such a remedy in the first place.
If there is a real risk of a party disposing of the assets or removing them outside the court’s jurisdiction, it is crucial for the freezing order application to be made quickly. An application for a freezing injunction is often made without notice, meaning the other party is not present and does not even know about the hearing. The reason for this is where there is a fear that the assets will be disposed of before the freezing order takes effect.
As freezing injunctions are such a draconian remedy and the first hearing often takes place without the respondent being present so lack the ability to defend the application, the applicant must provide sworn evidence in the form of an affidavit to the court as part of the application. The applicant has to explain why the application is urgent and the exact risks in relation to the assets.
The applicant must also give full and fair disclosure and represent all aspects of the case fairly to the court, as they are the only party providing evidence at the first stage of the proceedings. This means that the applicant must openly disclose those arguments that would be unfavourable to their own case. The applicant may face significant cost consequences if the court later finds out that the applicant’s representations were not fully truthful and balanced.
If the court grants a freezing injunction, the applicant must then serve the following on the respondent:
All the evidence provided
The court order
Note of the hearing
This must be served personally on the relevant person to ensure that it is actually received and enforced. The applicant must also serve the order on relevant third parties, such as banks who are holding assets on behalf of the respondent.
This initial injunction will be granted on a temporary basis that only lasts until the return date where the respondent will also be present. At this second hearing it will be argued whether the injunction should remain or be set aside or varied.
If the respondent breaches a valid freezing injunction then they can be held in contempt of court, with the possibility of imprisonment, a fine or the assets being seized.
Since these orders are made without notie, they will only be granted for a short period, typically seven days.
The information on this website is intended as a guide and does not constitute legal advice. Vardags do not accept liability for any errors in the information on this website, nor any losses stemming from reliance upon the statements made herein. All articles and pages aim to reflect the legal position at time they were published, and may have been rendered obsolete by subsequent developments in the law. Should you require specialist advice, tailored to your situation, please see how Vardags can help you.