FREEZING ORDER – A PRACTICAL GUIDE PART 2

When are Freezing Orders not possible?

There are some circumstances where Freezing Orders are not available. These are as follows:-

1. In proceedings against the Crown.
2. In proceedings against a Foreign State, unless it has provided written consent.
3. By a Defendant until after he has filed an Acknowledgement of Service or a Defence.
4. To help enforce a penal law of a Foreign State.

What Assets may be frozen?

A Freezing Order may only attach to assets against which a judgement could potentially be enforced.

Over the years, a wide range of assets have been caught by the terms of Freezing Orders and the terms of the Order will always be strictly interpreted. In principle, all types of assets can be frozen including, for example, bank accounts, shares, motor vehicles and land. Excluded assets include those which are perishable (food being an example). However, intangible assets such as goodwill are covered.

It is necessary to show that the Respondent has either a legal or beneficial interest in the asset in question. Assets can be jointly owned or held by a third party for the benefit of a Respondent. If shares are frozen, the Court order should also ensure that the Company is restricted from dealing with the shares (possibly reducing the value of those shares).

It is not always possible at the time of applying for a Freezing Order to know whether a Respondent owns a particular asset or not. Where there is doubt the terms of the Order should include them and, if necessary, they should be amended at a later date.

Can Freezing Orders attach to assets in foreign jurisdictions?

The English Courts have the ability to grant Freezing Orders to cover assets of a Respondent held abroad. Whilst a cautious approach is taken by the Courts in such circumstances, the Court will exercise its jurisdiction pursuant to Section 25 of the CJJA 1982 where appropriate. These types of Orders are commonly referred to as Worldwide Freezing Orders.

What value of assets will be caught by the Freezing Order?

There are three main types of Freezing Order:-

1. A maximum sum order. The Court places a monetary limit on the Freezing Order. This is the most common type of Order.
2. A General Order that extends to all of the Respondent’s assets. An unlimited Order of this nature is only justifiable in exceptional circumstances. These include where the extent of the Respondents assets is unknown, the fraud claim is a complex one and the total value of it cannot yet be determined.
3. An Order that attaches to specific assets. These orders are normally sought in relation to large, high value assets, such as ships or property that is worth as much as, or more than the claim. 
4. An Order that attaches to specific assets. These orders are normally sought in relation to large, high value assets, such as ships or property that is worth as much as, or more than the claim.

What about a Respondent’s Business, Legal Expenses and living expenses?

It is a rule that Freezing Orders must not be used in an oppressive manner.

For example, they cannot be used to make life so difficult for someone that they have to stop trading. A company served with a Freezing Order has the right to continue trading and make payments in the ordinary course of business – e.g. to employees and suppliers.

Equally, a Respondent is entitled to payment of reasonable legal expenses in order to obtain advice with regard to the meaning of the Order.

In addition, a Respondent is allowed a weekly sum of money for living expenses. This is normally set at £500 a week, although, Respondents often seek to vary the terms of the Freezing Order to increase this amount.

Can Orders be made against non-parties?

Freezing Orders can be made against third parties against whom the Claimant has no claims, but who appear to hold assets on behalf of a Respondent. The Court’s authority stems from the case of TSB Private Bank International SA against Chabra [1992] 2 All ER 245. These Orders are referred to as the “Chabra Jurisdiction”. The Courts will take a variety of factors in to account when considering such orders, including whether the third party Respondent has a connection with the jurisdiction and the relevant assets there as well.

In addition, Freezing Orders will often be served on third parties to prevent them from dealing with any transactions that may contravene the Order. For example, solicitors are often notified where a property asset (that could be transferred to another entity by them) is subject to a Freezing Order. The Freezing Order will have a Penal Notice attached to it warning any recipient that if they act in assisting the contravention of the Order then they could be criminally liable.

How long does a Freezing Order last?

Most Freezing Orders are only granted for a period of time until the Return Date(usually the second hearing) when all parties including the Respondent can attend Court. This is because most Freezing Orders are obtained “without notice” to a Respondent. The Return Date is ordinarily 7 days after the granting of the Freezing Order. To learn more about Return Dates and Without Notice Applications, please refer to our other Blogs in this series.

At the Return Date hearing, the Freezing Order may be subject to challenge and discharge, and hence fall away. Alternatively it can be varied by agreement or by Court Order. Or it can simply remain in place whilst the parties litigate the substantive claim or come to an earlier settlement.