28th September 2017
A freezing order is an injunction which restrains a defendant or potential defendant from disposing of or dissipating assets. A freezing order is typically obtained by a claimant or potential claimant, such as a bank or other financial institution, who wishes to ensure that a [potential] defendant’s assets remain available pending the enforcement of a court judgment. Various different types of assets can be frozen, including bank accounts, shares, investments, land, property and so on.
A freezing injunction is an equitable remedy which is granted at the courts’ discretion. That means that the usual equitable bars can apply as hurdles for an applicant to overcome, including:
Freezing orders are endorsed with a penal notice, so that if a respondent fails to comply, it will be in contempt of court and can face a fine, imprisonment or seizure of assets.
Freezing orders, by their very nature, have a severe restrictive impact. They are therefore not issued by the courts lightly and there are additional requirements with which an applicant must comply. To obtain a freezing order:
The requirement for a cause of action means that the applicant must explain to the court its substantive claim, and the facts and evidence upon which it relies, at the time of the freezing order application. The applicant must also demonstrate that its case is good and arguable, which is a relatively high threshold. Case law  has suggested that, whilst a freezing order applicant is not required to show a better than 50% chance of success, it does have to establish that its case is more than barely capable of serious argument. That is a higher standard than the mere ‘serious question to be tried’ test that is required for other, less draconian, injunctions.
In the common circumstances where proceedings are contemplated but have not yet been formulated when a potential claimant gets wind or suspects that a defendant might be about to dispose of its assets, a freezing injunction application – and therefore a substantive claim – has to be made urgently and within a very tight timescale. The freezer must be obtained before the assets disappear or it will be worthless.
As a recent Court of Appeal case has confirmed, one of the key components of a successful freezing order application is being able to demonstrate to the court that there are assets in existence. Only once an applicant has managed that, can it begin to go on to convince the court that such assets are at risk of dissipation. (The questions of the existence and whereabouts of assets can come to the fore, in particular, in worldwide applications.)
The case of Ras Al Khaimah Investment Authority & Ors v Bestfort Development LLP & Ors , considered the proper test, on an application for a worldwide freezing injunction, for showing that the respondent had assets that could be caught. The Court of Appeal held that it was not enough for an applicant to assert that the respondent was apparently wealthy and must have assets somewhere; rather the applicant must “satisfy” the court of the existence of assets. Demonstrating mere likelihood would not suffice but, whilst an applicant cannot necessarily be expected to know of the existence of another’s assets, it must be able to show a good arguable case or grounds for belief in their existence.
As to the risk of dissipation, an applicant needs to adduce solid evidence that, without a freezing injunction, the [potential] defendant will place assets out of reach of enforcement. Mere unsupported statements or expressions of concern will carry little, if any, weight. In preparing its evidence an applicant should consider:
Applicants must also:
The obligation to give full and frank disclosure is onerous and strict. Invariably, freezing injunctions are sought on a ‘without notice’ basis. (Giving notice of a freezing order application is tantamount to tipping off, and could therefore give the untrustworthy respondent the time they need to place assets out of reach, thereby rendering the order useless.) With the respondent being absent and therefore unable to make representations at the initial freezing order hearing, the applicant and its legal advisors are under a duty to ensure that all material facts are brought to the court’s attention.
It is not for the applicant to decide what information the court might need. The applicant must disclose all facts and information, consideration of which would enable the court to properly exercise its discretion. That includes any facts which may adversely affect the applicant’s own case; the length of time any dispute has been ongoing (the longer a dispute has been ongoing, the less likely is the risk of dissipation of assets); and any relevant facts which might not necessarily have been within the applicant’s or its advisors’ actual knowledge, but which they could have discovered had they made reasonable enquiries.
Finally, to ensure the effectiveness of a freezing order, applicants should consider whether also to seek certain other orders in support. For example, a disclosure order is generally essential, as it requires a respondent to disclose its assets. In particularly high risk cases, search and seizure orders; third party disclosure orders; orders requiring cross-examination of a respondent about his or her assets; orders against third parties holding assets which, in truth, belong to the respondent; and/or orders requiring delivery-up of a respondent’s passport, may be made.
Applicants must also consider where any assets within their sights are located. A freezing order may only be enforced in another jurisdiction with the English court’s permission. It is not enforceable outside the jurisdiction, and is not binding on third parties overseas, until it has been recognised, registered or enforced in the local court. In many cases applicants may, therefore, wish to apply for a worldwide freezing order.
Where an applicant’s claim is not just monetary but concerns equitable rights over assets themselves, the court may grant a proprietary injunction (that is, an order as to ownership of assets) alongside, or instead of, a freezing order.
Freezing order applicants should note the following:
 Ninemia v Trav Schiffahrtsgesellschaft mbH  1 All ER, CA
  EWCA Civ 1014