A Freezing Order is an interim Order which freezes a person or company’s assets. This can be the entirety of the assets or up to a limit specified by the Court.
The purpose of a Freezing Orderis to stop a person (or company) from disposing of or dealing with their assets other than in the ordinary course of business. The idea behind a Freezing Orderis typically to preserve a Respondent’s assets and prevent a Respondent to a monetary claim from frustrating the claim by putting his assets beyond the reach of the Applicant.It has the effect of freezing some or all of an individuals’ assets, essentially preserving them until judgement is obtained in the underlying proceedings and is capable of enforcement.
Freezing Ordersare not lightly granted by the Courts. The reason is due to the extraordinary nature of the remedy which a Freezing Orderoffers an Applicant. They interfere with the prima facie right of a person to deal with his assets as they wish and as such, the Court will look very carefully at any application for such an Order.
Which Courts can Grant Freezing Order?
The Court’s jurisdiction to grant a Freezing Orderis derived from Section 37 of the Senior Courts Act 1981 (SCA 1981). The relevant rules are contained in the Civil Procedure Rules 1998 (as amended), Part 25 and Practice Direction 25A.
A Freezing Ordercan either be granted by a Judge in the High Court or a Circuit Judge in the County Court. The latter is a new development and has only been in place since April 2014.
There are exceptions to this rule, whereby a Freezing Order may be granted by a Master or District Judge in the High Court or a District Judge in the County Court, but only if the Freezing Order is:
In a formatalready agreed by the parties.
In connection with or ancillary to a Charging Order.
In connection with or ancillary to an Order appointing a Receiver by way of equitable execution; or
In proceedings pursuant to CPR 66.7 relating to an Order restraining persons from receiving sums due from the Crown.
However, the most common route is to seek a Freezing Order before a Judge in the High Court and there is always a High Court Judge available at short notice to hear emergency applications of this nature. Often, when considering a Freezing Order, the legal advisor to the Applicant will contact the Court shortly before attending Court to make the application and in so doing will provide a brief time estimate of how long he believes the application will take. Ideally it will also lodge papers in advance to enable the Judge to pre read in to at least some of the papers.
Commonly, a Claimant will seek a Freezing Orderbefore proceedings have been issuedin order to prevent a Respondent from disposing of his assets in order to defeat any eventual judgement. However, Freezing Orders can be sought at any time in proceedings and even after judgement has been obtained in the substantive proceedings.
Freezing Orders can also be granted in proprietary claims, i.e. where the Applicant is making a claim against a particular asset. The Court will apply different principles on the granting of a Freezing Order over property and these are covered in our other booklets in this series.
It is important however to understand that Freezing Orders do not provide security overor priority for payment from a Respondent’s assets. Nor does it provide security against a possible future judgement or a judgement already obtained. They are simply there to prevent a Respondent from dissipating his assets with the intention or effect of frustrating enforcement of a prospective judgement. They do not therefore give a Claimant priority over the Respondent‘s other creditors generally or in the event of a Respondent‘sinsolvency (as in such circumstances the Claimant will have equal rights to other unsecured creditors). Accordingly, a Freezing Order is not the appropriate tool where it appears that the Respondent‘sis already indebted to other creditors with potentially larger claims.
However, a bonafide buyer of an asset subject to a Freezing Order for value, without notice of the Freezing Order, will gain good title to it. However this can be a contentious matter in itself and the buyer will have to provide evidence it was not connected with the Respondentand had no knowledge of the existence of the Freezing Order.
ii) To assist Foreign Proceedings
Courts in England & Wales may grant Freezing Orders in order to aid foreign proceedings, pursuant to Section 25 of the Civil Jurisdiction and Judgements Act 1982 (CJJA 1982).
iii) To assist Arbitration Proceedings
The Court’s power in this country to grant Freezing Orders in the support of arbitration proceedings anywhere in the world derives from Section 44 of the Arbitration Act 1996.This power extends to granting Freezing Orders to aid enforcement of arbitration awards (as opposed to any pre-award).