FREEZING ORDERS IMPORTANT PRE APPLICATION CONSIDERATIONS PART 1
In this series of posts, the person or company seeking the Freezing Order is referred to as the Applicant and the person or company subject to the Order is referred to as the Respondent.
A Freezing Order is a remedy that the court may order in support of a claim brought by an Applicant. For the court to grant a Freezing Order it will need to be satisfied that (i) the Applicant has a substantive good arguable claim against the Respondent; (ii) that there is a solid risk that unless a Freezing Order is granted the Respondent may not have assets available to pay any judgement that the Applicant may obtain and (iii) it is just and convenient to grant the Order.
The effect of a Freezing Order is not to give the Applicant any security over the assets that are frozen. It merely prevents the Respondent from dealing with those assets (eg disposing of them or charging them) pending trial.
Before applying for a Freezing Order, any Applicant must be aware of the nature of the Order they are seeking from the Court and the obligation it is under when making such an application.
Whilst some of these considerations relate to legal aspects, any Applicant must always bear in mind the practical considerations of applying for a Freezing Order before deciding to commence that course of action. Often, when faced with a possible fraud or other serious wrongdoing, Applicants are very keen to head off to Court and seek a Freezing Order against a Respondent but in so doing they must be aware that this is only the first part of what can be a very lengthy, time consuming and expensive process.
Proper consideration of this prior to making such an application,together with consideration of other potential remedies, is essential before embarking on what could be a very lengthy set of legal proceedings.
Freezing Orders are a powerful weapon in the right hands.Careful thought and due consideration should be taken prior to taking any steps to obtain such anOrder. Whilst difficult to do in what are often very serious circumstances an Applicant might find it self in, it is always worth taking some time to step back and consider all the options before reaching a decision.
The practical considerations which all Applicants should take into account include the following:-
The time, expense and commitment involved
Freezing Orders are one of the most serious types of Order which a Court can grant.As a result the Court does not grant them lightly and as set out above, a Freezing Orderis only the first step in what can be a lengthy litigation process.
Freezing Orders are time consuming. Often, they require significant investment of management time and involvement of senior individuals before an application can be issued. Applicants will be deeply involved with their legal advisors in the preparation of the evidence required to obtain a Freezing Order. This can often involve working over some days and nights (and sometimes weeks) in order to produce the Affidavit evidence required in support of the Freezing Order.
If the Applicant is a company, senior personnel will be required to access company documentation and help prepare the evidence to substantiate allegations made, commonly involving analysis of money flows and other financial information to help evidence the wrong doing by the Respondent. This may require the assistance of the Finance Team of a company, the bookkeeper or the company accountant. This will obviously have an impact on the day to day running of the business at a time when it has already suffered from the Respondent’s wrongdoing.
In circumstances where the court grants a without notice Freezing Order, the Applicant will normally be required to go back to court 7 to 14 dayslater for what is known as the Return Date. Often that hearing is fairly brief. If the Respondent wishes to challenge the continuation of the Freezing Order, the court will usually set a timetable for the service of evidence and relist the hearing. In the meantime the injunction will continue.
The standard terms of a Freezing Order are that it will not prevent the Respondent from making payments in the ordinary course of business or spending money on legal advice and representation. Additionally, if the Respondent is an individual, it will state that the order wiIl not restrict the Respondent from spending a specified amount per week or month on ordinary living expenses. The principle is that the Respondent ought not to be restricted from making his or her usual payments in accordance with their standard of living. Usually at the without notice hearing the Applicant will estimate what the Respondent’s expenditure may be and will seek a restriction that the Respondent does not spend more.
Typically in the days between the granting of the Freezing Order and the Return Date, the Respondent may take issue with the practical effect of the Order on payments in the ordinary course of business and (where the Respondent is an individual) on the amount of permitted living expenses. Practically the Return Date hearing will often be concerned with resolving such matters, if disputed.