Freezing Order – An In-Depth Guide

In the complex realm of asset freezing, making the right choices and taking swift action is crucial.

By securing the services of a strong, proactive legal representative and employing a smart and effective strategy from the outset, you significantly enhance your prospects of achieving the desired outcome when faced with a freezing order.

To obtain a freezing order, the applicant must demonstrate that there is an underlying cause of action, such as fraud, and a real risk that the defendant will dissipate the assets.

It is crucial to present a strong and persuasive case supported by skilled legal representation.

Seeking legal advice from experts in the field is essential for both parties involved in bringing or defending a freezing order

What is a Freezing Order?

Freezing orders play a crucial role in safeguarding assets and preventing defendants (also known as respondents) from depleting their value or making them untraceable before a judgment is reached on their ownership.

Under Section 37 of the Senior Courts Act 1981, the High Court has the authority to grant interim freezing injunctions if it is deemed “just and convenient” to do so. The court can issue an injunction whenever it is deemed “right and just” in the given circumstances.

Freezing orders can encompass various types of assets, including bank accounts, public and private shares, tangible properties like vehicles and land, as well as intangible assets such as business goodwill and intellectual property rights.

Once a freezing injunction is served to the respondent, it becomes effective immediately. Non-compliance with the order can result in contempt of court proceedings. Hence, seeking legal advice is imperative for both those seeking and defending against freezing orders at every stage of the process.

To successfully obtain a freezing order, it is necessary to demonstrate an underlying cause of action, such as fraud, and establish a genuine risk of asset dissipation. The application must also present a good and arguable claim against the defendant. Given the complexities involved, assembling a successful application necessitates the assistance of highly skilled legal professionals specialized in this field.

Considering that high net worth individuals often transfer their wealth across borders, courts can impose worldwide freezing orders to ensure assets are preserved.

Every aspect of a freezing order demands a clear, convincing, and logical presentation of the case. Failure to do so provides the defendant with ample opportunity to argue for variations or even discharge of the freezing order

Applying for a Freezing Order

An application for a freezing order necessitates meticulous preparation and strict adherence to the duty of full and frank disclosure. Failing to do so could provide the respondent with grounds to challenge the order after its issuance.

The applicant must demonstrate the following:

1. Good Arguable Case: The applicant must present a strong and viable case that supports the need for a freezing order. This entails providing compelling evidence and legal arguments to substantiate the underlying cause of action.
2. Risk of Dissipation: It is crucial to establish a real and credible risk that the respondent will dissipate or diminish the assets in question. This can involve demonstrating past behavior, suspicious transactions, or other relevant factors that indicate the potential for asset disposal.
3. Jurisdiction and Availability of Assets: The applicant must ensure that the assets subject to the freezing order fall within the jurisdiction of the court. Additionally, it is important to establish the existence and location of the assets to ensure their effective preservation.
4. Just and Right to Grant the Order: The applicant must convince the court that granting the freezing order is both just and appropriate in the circumstances. This may involve highlighting the urgency, potential harm, or irreparable loss that could result if the order is not issued.

The applicant should also take into account potential objections raised by the defense and effectively address them in the application. It is essential to demonstrate that enforcing a judgment without a freezing order would pose significant challenges.

To emphasize the potential risk of dissipation in the absence of a freezing order, the following factors can be highlighted:

1. Defendant’s Conduct: The applicant can draw attention to any discreditable actions or evasive behavior exhibited by the defendant. Such behavior may indicate a higher likelihood of asset dissipation.
2. Type and Holding of Assets: Emphasizing that movable or liquid assets are more susceptible to dissipation can strengthen the case for a freezing order. Additionally, if assets are held in complex corporate structures, it can be argued that they may be easily moved or concealed.
3. Financial Position and Business Practices: The applicant can underscore the defendant’s financial stability, the nature of their business, and any questionable accounting practices. This can help establish the risk of dissipation based on the defendant’s financial circumstances.
4. Cross-Border Connections: If the defendant has connections or assets abroad, or has previously transferred assets to another jurisdiction, it can be presented as a potential risk for dissipation. This highlights the need for a freezing order with global reach.

Without Notice Applications

When seeking a freezing order, the application is typically made on an ex-parte basis, also known as a without notice application. This means that the application is presented to the court without notifying the defendant.

While it is generally preferred to give parties an opportunity to make representations before an order is issued, an ex-parte application may be granted if notifying the defendant would likely cause injustice to the applicant, and if the court determines that the risk of loss outweighs the risk of injustice if the order is not made. The applicant must demonstrate that providing notice would undermine the purpose of the application or prejudice its effectiveness.

An ex-parte application requires the applicant to act swiftly, with utmost secrecy, and attention to detail. It must be supported by compelling evidence that justifies proceeding without notifying the defendant.

The application must contain the following:

1. Reasons for Without Notice: The application should clearly explain why it is being made without notifying the defendant, highlighting the potential risks or harm that could occur if notice were given.
2. Request for Private Hearing: It is essential to request that the hearing be conducted in private to maintain the confidentiality and sensitivity of the matter.
3. Circumstances and Background Facts: The application should provide a comprehensive overview of the circumstances surrounding the case, presenting all relevant background facts that support the need for a freezing order.
4. Arguments for Granting the Freezing Injunction: The application must present strong arguments and legal grounds that justify the necessity of a freezing order to protect the applicant’s interests.
5. Cross Undertaking in Damages: The applicant must undertake to pay any damages the respondent may suffer if the court later determines that the freezing order should not have been granted.
6. Full and Frank Disclosure: The applicant has a duty to provide full and frank disclosure of all relevant facts, including any that may be adverse to their case. This ensures fairness and transparency in the application process

After the Application

Upon the court granting the freezing order, the applicant is required to give an undertaking to promptly issue and serve the claim form to the respondent. This ensures that the respondent is provided with the necessary legal documentation related to the case as soon as reasonably practicable.

Additionally, the freezing order will specify a return date for a subsequent hearing. During this hearing, the defendant has the opportunity to attend and present their version of events, offering their perspective on the matter at hand. The purpose of this hearing is to determine whether the freezing order should be continued, discharged, or varied based on the arguments and evidence presented by both parties.

According to the guidelines outlined in the Chancery Guide, which provides comprehensive legal guidance for cases brought to the Chancery Division of the High Court of Justice, an injunction granted without notice typically has a limited duration. Therefore, at the return date hearing, the burden lies with the applicant to justify why the freezing order should be extended or maintained.

By adhering to these processes and obligations, the applicant ensures transparency, fairness, and the opportunity for both parties to present their positions before the court, contributing to a just and balanced decision-making process.

World Wide Freezing Orders

An application for a worldwide freezing order possesses a reach that extends beyond the borders of the country in which it is initially granted. This provides an additional layer of protection and control over assets located in different jurisdictions. However, despite its global nature, the court considers similar factors when evaluating such an application, including:

1. Location and Nature of Assets: The court examines the specific location and nature of the assets involved. This assessment helps determine the extent of control required to effectively preserve and protect these assets.
2. Disruption Caused by Freezing the Assets: The potential disruption caused by freezing the assets is carefully evaluated. This includes weighing the impact on ongoing business operations or any other relevant considerations, ensuring a balanced approach to asset preservation.
3. Effect on Other Litigation and Third Parties: The court considers the broader implications of the freezing order, including any effects it may have on concurrent legal proceedings or third-party interests. This assessment seeks to strike a fair balance between asset protection and potential collateral consequences.

Whether the freezing order is sought for a single jurisdiction or multiple jurisdictions, meticulous attention to detail is paramount in the application process. Given the complexities involved in dealing with assets spread across different countries, seeking expert legal advice becomes crucial.

By considering these factors and applying a comprehensive and well-structured approach to the application, the applicant enhances the prospects of obtaining a worldwide freezing order that effectively safeguards assets on a global scale.

Defending Freezing Orders

When seeking a freezing order, the applicant has a duty to provide a full and honest disclosure to the court, especially since the application is typically made without the defendant’s presence. However, in cases where the injunction is granted without notice to the other party, the applicant must also specify a return date. This return date allows the defendant to participate in the proceedings and present their arguments before the court.

Usually scheduled a couple of weeks after the order is granted, the return date allows for a reasonable period for the defendant to assess their position, seek legal counsel, and prepare their challenges against the order. This time frame is particularly crucial in complex cases, ensuring that the defendant has an adequate opportunity to gather evidence and present their case effectively.

In such circumstances, it is essential for the defendant to act promptly if they intend to challenge the order or seek amendments, such as adjusting the allocated amount for living expenses. Moreover, it is crucial for the defendant to avoid actions or statements that could be misconstrued as consenting to the continuation of the injunction or prejudicing their ability to challenge it.

By acting swiftly and maintaining a cautious stance, the defendant can effectively navigate the process, protect their rights, and present their arguments to challenge the continuation of the injunction in a timely manner

Grounds for having a Freezing Order Discharged

The subject of the order holds the right to apply for its discharge on various grounds, ensuring a fair and balanced legal process. Some of the grounds on which the order can be challenged include:

1. Non-Arguability: The subject may argue that the underlying allegation lacks merit or is not legally sustainable. They can challenge the evidence or legal basis presented in support of the order.
2. Failure to Establish Risk of Dissipation: The subject can contest the applicant’s claim that there is a genuine risk of dissipation of assets. They may provide evidence to demonstrate that the risk is unfounded or exaggerated.
3. Injustice in Continuing the Injunction: The subject has the opportunity to present arguments showing that it would be unjust to continue the freezing order. This could involve demonstrating that they would suffer significant harm or loss as a result of the order’s continuation.
4. Non-Disclosure or Misrepresentation: If the applicant has failed to disclose all relevant facts to the court or has misrepresented the situation when applying for the freezing order, the subject can challenge the order on these grounds.
5. Lack of Jurisdiction: The subject can argue that the court lacks the necessary jurisdiction to issue the freezing order. They may question whether the court has the authority to make decisions regarding the assets in question.

Alternatively, during the return date hearing, the subject can also seek to vary the terms of the freezing order. They may argue that the original terms are overly restrictive or disproportionate and request modifications that better balance the interests of both parties.

By presenting compelling arguments based on these grounds, the subject of the order can challenge its validity and seek its discharge or variation. This ensures that the legal process remains fair and respects the rights and interests of all parties involved.

Exploring strategies to Contest an Order

Whether aiming to modify the terms of a freezing order or seeking its discharge, defendants must swiftly and accurately identify the potential losses they are likely to suffer as a result. To effectively challenge the order, defendants must present compelling evidence that convinces the court of the likelihood and impact of such losses.

While it is the applicant’s responsibility to build a persuasive case when seeking a freezing order, the defendant can leverage the applicant’s arguments and approach to challenge the order. When the applicant applies for a freezing injunction without notifying the defendant, they have a duty to make a full and transparent disclosure to the court to ensure fairness, as the defendant is not present to present their own case. The applicant must disclose all relevant matters, including any adverse factors that may affect the application. Failure to fulfill this duty provides grounds for the court to set aside the order due to the applicant’s non-compliance.

Moreover, the applicant is obligated to follow the correct legal procedures and utilize appropriate forms for written arguments and hearing notes. Failure to disclose any legal issues or principles may also be viewed as a breach of the duty to provide full and transparent disclosure, potentially leading to the order being set aside.

A freezing injunction significantly intrudes upon the defendant’s personal or business affairs. Therefore, the court is mindful of ensuring that the injunction is not used oppressively or as a mere security measure for a claim. The court carefully considers strong arguments presented by the defendant that challenge the credibility of the applicant’s arguments or evidence. This offers substantial opportunities for contesting what the applicant may consider to be a strong and arguable case.

Factors such as the time taken by the applicant to seek the freezing injunction can be utilized by the defendant. If the applicant has been slow in pursuing the injunction, it can be argued that there is no real risk of asset dissipation. Similarly, the defendant can emphasize their reputable business history and longevity to challenge the applicant’s claim of a dissipation risk.

While the specific facts and circumstances surrounding each application will vary significantly, each case presents the potential for the subject of the injunction to challenge the imposed restrictions. By effectively leveraging these opportunities, defendants can contest the freezing order and address the limitations imposed upon them.

Frequently asked questions

What is a freezing order in UK law?

A freezing order in UK law is an interim measure granted by a court to prevent a person from being able to dispose of or deal with their assets before a judgment has been enforced.

What are the effects of a freezing order?

The effects of a freezing order is to merely prevents the Respondent from dealing with those assets (eg selling, transferring ownership or charging them) until the underlying legal claim is settled or resolved at a full trial.

Conclusion

In the realm of freezing orders, navigating the legal landscape requires strategic action and comprehensive representation. As highlighted throughout, it is crucial to understand the dynamics involved, identify grounds for challenge, and seek expert advice to protect your interests.

Whether you are looking to contest an order, vary its terms, or ensure full compliance with disclosure obligations, skilled legal guidance is essential. If you find yourself served with a freezing order, take proactive steps to safeguard your rights and minimize the impact on your personal or business affairs.

Contact us today via our online enquiry form, and let our experienced team provide the robust representation you need to navigate this complex legal process effectively. Don’t hesitate – act now to secure your best possible outcome.