A freezing injunction is an temporary order placed against a respondent’s assets which when granted, will stop the respondent from being able to freely dispose of their assets. However, the injunction does not place any liability on the parties involved. Often such injunctions are entered into as there are other pending proceedings to which the assets are related.

The assets affected by the freezing injunction can be dependent on these pending proceedings. Any type of asset can be included within the order such as bank accounts, shares, land, and art. Whilst domestic freezing orders only apply to assets in England and Wales, the Court can issue an international order which will restrain the respondent’s worldwide assets. Click here to read a previous article on domestic and worldwide freezing injunctions. It is also possible that the injunction may only affect assets up to a maximum sum such as the pending claim’s value. Alternatively, it may apply to all of the respondent’s assets or only to specific assets.

How is a Freezing Injunction granted?

Freezing injunctions can be applied for by applicants without providing advance notice to the respondent. This is known as applying on an ‘ex parte’ basis. This application process usually involves sending an application to the High Court where a judge will decide if the applicant has satisfied the required criteria to grant an injunction.
The Applicant must satisfy the judge that:

1. A good and arguable case has been made against the respondent.
2. The respondent has property within the jurisdiction of the Court.
3. There is a risk that these assets may be dissipated or moved by the respondent.
4. It is just and convenient in all circumstances to grant the injunction.

For a more in-depth explanation of what is required to obtain a freezing injunction, click here to read a previous article.

What happens once the Freezing Injunction is granted?

Once the Court grants the injunction, the respondent will be served notice of it as soon as possible. Additionally, any third party who holds assets on the respondent’s behalf will also be served notice of the injunction. An example of this may be the respondent’s bank to ensure that a bank account is frozen, and the respondent is unable to access its contents. These third parties must follow the order as assisting any breach will find them in contempt of court.

Once served, it is important that the respondent receives independent legal advice to ensure they accurately understand the terms of the injunction, which assets it applies to, and any obligations it imposes on the respondent. The order must be complied with, even if it is thought that it has been improperly granted.

A freezing injunction may request immediate action from the respondent. This can involve the respondent swearing an affidavit which would provide the applicant with the details of assets held by the respondent. The specific assets that require such disclosure will be dependent on the subject of the pending proceedings. The Court has a wide discretion regarding the scope of such obligations so it is crucial to understand them.

It is vital that this information is provided accurately and honestly as failure to do so is contempt of court which may result in fines or seizure of assets. Additionally, freezing injunctions will usually have Penal Notices attached, meaning non-compliance may also result in up to two years imprisonment.

Defending a Freezing Injunction

The injunction will include notice of a Return Date hearing. This will usually be held a week after the injunction has been granted and served. The Return Date is an opportunity for the Court to review the injunction and the applicant to state why it should continue. Importantly, it enables the respondent to be present at the proceedings and share their own submissions. The respondent can ask the court at this hearing to discharge the injunction, or its terms be varied.

At the Return Date hearing, it is possible for the Respondent to make the following applications to the Court which should be made promptly:

1. Variation
It is possible for the defendant to ask to vary the terms of the injunction. This may be necessary where the terms are too wide, apply to too many assets, or they have been oppressive. The injunction may be oppressive if the amount it allocates the respondent for living expenses is not enough.

An application to vary the injunction can be done through consent if its terms permit. However, it is important to note that if the respondent does vary the injunction by consent, it may mean they are prevented from relying on the grounds for it to be discharged later.

If the injunction does not include variation of terms by consent, it is possible to apply to the Court instead. The Court will then consider the overall fairness of the case as well as considering the respondent’s conduct so far in the proceedings and the impact the injunction is having on the respondent. This may involve assessing the loss that the respondent has suffered so far due to the injunction being in place.

2. Discharge/Dismissal
To discharge the injunction, the Respondent must apply promptly to the Court. There are multiple grounds available to do so including:

• There has been an unreasonable delay by the applicant. As the injunction is restrictive on the respondent, the applicant is under a duty to reflect the urgent nature of the injunction and they should press ahead with the relevant proceedings to limit the impact on the respondent. If they fail to do so, the injunction may be discharged.
• The applicant failed to comply with its duty of full and frank disclosure. Due to the initial hearing being without notice, the Court considers the duty of full and frank disclosure strictly. This means that the applicant must have provided all relevant information to the Court, even if it negatively affects their case. If the applicant has not done so, it is possible to challenge the freezing injunction and ask for it to be set aside.
• The applicant has failed to comply with their undertakings. When applicants ask for the injunction, they provide an undertaking to the Court that they will pay any damages suffered by the respondent and third parties if it has been improperly granted.
• The injunction itself is oppressive. If the injunction is causing the respondent to suffer an unjust amount of loss, this may be a reason for the court to consider discharge.

Additionally, the court will also consider the overall fairness of the case, balancing the applicant’s need to protect the assets with the restriction the order is placing on the respondent.

3. Continuation
It is also possible, in light of the Return Date hearing, that the freezing injunction will continue indefinitely until the main proceedings have been concluded and a judgement determined. Following this judgement, the freezing injunction will be lifted, however other orders may be imposed on the respondent in its place depending on the Court’s decision.

How we can help?

If you would like to discuss bringing or defending an application for a freezing injunction, please contact Partner Adam Haffenden from the Disputes Resolution team on 0203 440 8139 or email adam.haffenden@tvedwards.com.

Disclaimer: The information on the TV Edwards website is for general information only and reflects the position at the date of publication.