If you think a fraud has been committed and want to make sure the fraudster does not remove the stolen monies from your reach, or if you are making a court claim and are concerned assets will be removed to prevent you getting them when you win your case, a freezing injunction might be the answer.
A freezing injunction is an order that prevents someone from disposing of or dealing with assets. The purpose of the injunction is to preserve those assets until a final judgment can be obtained to be enforced against those assets. An order can be sought before proceedings have been issued, or after trial. All types of assets can be frozen, including bank accounts, shares, vehicles and land, whether owned by a company or a person and whether they are solely or jointly owned. Freezing injunctions can be made over assets in England and Wales (domestic freezing orders) or elsewhere in the world (worldwide freezing orders.)
Often there is urgency to obtain a freezing injunction and often the application needs to be made before the person with the assets is aware and able to spirit them away. That is why freezing injunctions are often obtained at a hearing of which the respondent is unaware, although you need to show why the injunction is being requested in those circumstances and show that there is a risk that the asset will be dissipated. Injunctions can be obtained very fast, even within a day or two of our being instructed.
The subject matter of every freezing injunction is unique but freezing injunctions always contain the same broad obligations for the respondent:
- Unless or until the injunction is discharged or otherwise ceases to have effect, the respondent must comply with the terms of the order. There will be a penal notice on the front page of the injunction, stating that if the respondent disobeys the order, it could be held to be in contempt of court, resulting in imprisonment, a fine or the seizure of assets. This also applies to any other person who knows of the order and does anything that helps or permits the respondent to breach the terms of the order (such as partners, agents, employees, directors and even shareholders). (See what happened in the case of Templeton v Motorcare.)
- The injunction will likely state that an individual respondent who is ordered not to do something must not do it himself or in any other way. He must not do it through others acting on his behalf or on his instructions or with his encouragement.
- A respondent company must take all possible steps to prevent a breach. A company is deemed to have notice of an order from the time it is received. The injunction will likely state that if a company is ordered not to do something, it must not do it itself or by its directors, officers, partners, employees or agents or in any other way. Therefore, on receipt of a freezing injunction, a respondent company should immediately inform the relevant people in that company about the order.
Maximum sum order
As freezing injunctions can be oppressive, the court is usually reluctant to order blanket restrictions which are disproportionate to the issues at stake and the amounts involved in the litigation. Commonly, a “maximum sum order” is made, which is intended to ensure that the level of frozen assets is commensurate with the value of the claim to be made. The respondent may dispose of or deal with surplus assets, provided the total unencumbered value of assets remaining in England and Wales exceeds the maximum sum under the order. However, care should be taken to ensure assets caught by the order are not dealt with: it might be wise to take legal advice. Disobeying the order is contempt of court and can lead to imprisonment and fines.
Where a freezing injunction is granted, a respondent will have a number of options. Initial considerations for any respondent are as follows:
- Whether the respondent is unsure of any aspect of the scope or extent of the order and, if so, whether guidance or clarification is required from the court.
- Whether more time is needed to prepare evidence for the court hearing where the freezing injunction can be challenged. This is usually within a few days or a week at most of the applicant’s without notice hearing which the respondent was not invited to attend, and if more time is needed, an application to adjourn the return hearing to a later date may be required.
- Whether there are any grounds on which to have the order discharged or varied, and this is an option if the freezing injunction has been wrongly granted based on partial or inaccurate information given to the court by the applicant at the without notice hearing.
The key consideration is that a freezing injunction must not be delayed if you think there is a risk that assets may be dispersed which would frustrate enforcement of your claim. Alternatively, if you are the respondent, a freezing injunction must not be ignored for any period of time whatsoever once you have received service of an order. Legal advice in both circumstances should be sought immediately.