Worldwide and Domestic Freezing Orders

Helen Hill, a member of our Property Litigation team, tells us more about this subject.

What is a freezing order?

A freezing order is an interim injunction that stops a party from disposing of or dealing with their assets.

Its usual purpose is to preserve the assets where another party has a legal claim against them. The freezing order will usually freeze the assets until the judgment has been obtained and can be enforced.

A freezing order can be made in respect of assets both within England and Wales or situated outside the jurisdiction or worldwide.

Freezing orders can be an incredibly aggressive tool and can be a useful strategy for achieving an early resolution to genuine disputes. However, they are by their very nature draconian, as they can deprive a potential defendant of the asset(s) for a significant amount of time.

It is therefore important that you get full and proper legal advice before considering whether to issue an application for a freezing order, because the Court will not grant such order unless you make the right court application and produce comprehensive evidence.

Do I need a freezing order?

Assessing the risk of “dissipation” (the risk of the defendant disposing of or hiding their assets) is the first step for any party who is considering making an application for a freezing order.

If you think that a potential defendant will dispose of, or try to hide assets, in order to avoid a judgment, or even dispose of assets as part of their everyday business, which would stop you from enforcing any judgment you obtained from the Court, you may want to consider obtaining a freezing order.

What does the Court require?

In any application for a freezing order, the Court requires full and frank disclosure of all material relating to the claim and the application, even if that material is not in your favour.

You will also need to be able to show the Court that there is a real risk of a potential defendant “dissipating” (disposing of or hiding) their assets, meaning that you would be unable to enforce a judgment if you obtained one.

Further, the Court will require you to have either issued the claim or to give an undertaking that you will issue the claim within a short period of time after the freezing order is granted.

You will also be required to give an “undertaking in damages”, should you be unsuccessful in the claim. An undertaking in damages requires the claimant to pay any damages that the defendant (or any other party notified of the order) sustains by reason of the freezing order, if it subsequently transpires that the order ought not to have been granted. You will need to consider beforehand on what basis you would be prepared to give an undertaking to those parties.

How do I make an application for a freezing order?

If you are considering making an application for a freezing order you will need to obtain legal advice. Freezing orders can be really effective, and can lead to an early settlement of a claim, but the legal costs of obtaining such order can be significant so a cost/benefit analysis needs to be carried out.

The facts of every case will be relevant, but will also be different, so your solicitor will be able to give you the advice you need in order to decide whether to proceed.

If the threat of dissipation of the assets is imminent, it might be necessary to obtain a freezing injunction. In this case, you will need to act quickly. It may be possible to make an application without notice to the defendant. Again, this can be a useful tool but whether the application should be made with or without notice will depend on the facts of each case.

 

Our team

Richard Wadkin

Partner

Dispute Resolution

Direct Line +44 (0)113 297 7728

Michael Watson

Partner

Property Litigation

Direct Line +44 (0)113 297 1850