Freezing Orders And Third Parties -Duties Explained Part 1
In these posts, the person or company seeking the Freezing Order is referred to as the Applicant and the person or company subject to the Freezing Order is referred to as the Respondent.
Once a Freezing Order has been granted, it is common for an Applicant to arrange for service of it on the relevant third parties. The most common of these are solicitors, banks and/or other financial institutions in which the Respondent has or is suspected tohave an account.
If it is clear as part of the preparatory work undertaken by the Applicant that theRespondent’s banking and account details are known, then the Applicant can also include in the Freezing Order draft letters which the Respondent is required to sign and return to the Applicant authorising the Applicant to make enquiries of the bank without further permission from the Respondent. This procedure can also be extended to other third party institutions if relevant.
As Banks are often the main recipient of Freezing Orders it is often the case that they have their own internal in-house legal teams who manage the receipt and enforcement of these types of orders.
Often, legal advisers to an Applicant will have the contact details for the relevant branch or department of the Bank and the Freezing Order will be served upon the relevant team direct. In the absence of the relevant contact information, the Freezing Ordershould be served at the registered office of the Bank (generally available on Companies House and / or at the relevant Registry within the jurisdiction of the main office) together with the local branch of the Bank where the account is held – in the latter circumstance the covering letter should make it clear what the Order is and specifically refer to the obligations on the Bank. Often the Manager of that particular branch will then refer the matter to their in-house legal team. For the avoidance of doubt, service upon the registered office must always be done in addition to the above steps.
Most banks have internal systems to deal with the receipt of a Freezing Order and ensure compliance with it. They should ensure that every relevant part of the Bank involved with making payments is notified of the terms of the Freezing Order and that the relevant restrictions are put in place in relation to the particular account(s) in question.
Banks will be aware that if a third party knowingly assists in the disposal of assets subject to a Freezing Order, that party may be subject to proceedings for Contempt of Court. This can result in either a fine, seizure of assets and / or imprisonment.
d.Payments out of accounts subject to a Freezing Order
The service of Freezing Orders can put the Bank in a difficult position. For example, if the Respondent is a company, then pursuant to the terms of the standard FreezingOrder the company is entitled to pay normal reasonable business expenses. The same applies in respect of an individual Respondent’s ordinary living expenses which a Respondent is entitled to in accordance with the terms of the standard Freezing Order. Therefore, a Bank holding frozen funds has no obligation to enquire as to the purpose of a withdrawal by a Respondent provided that it appears to be permitted by the Order. So long as the payments appear to be for the purpose of meeting either reasonable legal, living or business expenses, then those payments can be made, subject to any other restrictions imposed by the Order / the Bank.
e.Blocking the account
In practice, Banks often adopt the approach of simply putting a block on the entire account(s). This can cause obvious difficulties for a Respondent and therefore the Applicant or its legal advisers when serving the Freezing Order on a Bank must make it clear that the Respondent is entitled to payments relating to ordinary living, business or legal expenses and that the account should not simply be blocked. However, it will be down to the individual Bank as to how it wishes to deal with and / or police the terms of the Order.
Sometimes, the Bank will simply wait for a further Order from the Court stating that certain funds can be released. This is often the case where the Bank is simply unaware as to whether the amounts being requested to be paid are reasonable or not and it is well worth considering amending the terms of any proposed Freezing Order with a view to avoiding such future difficulties.