FREEZING ORDERS IMPORTANT PRE APPLICATION CONSIDERATIONS PART 2
Dealing with the substantive claim
The grant of a Freezing Order is only the start, not the end of the claim. A Freezing order is simply a remedy to prevent a Respondent putting his / her assets out of the reach of the Applicant. Whilst the Applicant may have the protection of a FreezingOrder in place, it is still under an obligation to pursue its substantive claim against the Respondent – commonly a monetary claim in respect of the losses it has suffered. A Freezing Order cannot be obtained in isolation without the existence of a substantive claim against the Respondent (although it may not yet have been issued).
This can be a lengthy process and ultimately end up in trial at Court and the 9 main steps in this process are set out in other posts in this series.
Cross-undertaking in damages
Applicants must pay heed to the requirement to give an undertaking in damages to the court at the outset of proceedings. This is in the event that it is later shown that the Order should not have been granted and the Respondent has suffered loss as a result.
The court may even make it a condition of the Freezing Order that the Applicant has to actually pay monies into a Court bank account which will be held there until trial or earlier order in the main proceedings. This amount could easily be in the region of £50,000 (or much higher dependant on the value of the claim) and before commencing an application the Applicant should consider whether payment of such a sum is possible and the affect it might have.
In addition, if an Applicant loses its substantive claim or the Freezing Order is discharged for any other reason, it needs to be aware that it can be held liable for a substantial claim in damages pursuant to the undertaking it has given (if this exceeds the payment into Court) and generally in the substantive proceedings.
All Applicants need to be fully advised by their solicitors with regard to a potential liability under the cross undertaking for damages.
Costs of Third Parties
Applicants must also be aware that they are responsible for the costs reasonably incurred by third parties, such as banks and other financial institutions, incomplying with the terms of the Order.
Full and Frank Disclosure
With Freezing Orders the obligations on an Applicant in terms of disclosure are very onerous indeed. Generally, Freezing Order applications are made without notice to the Respondent. The whole purpose of them is that there is a perceived risk that unless restrained by the order the Respondent will dissipate its assets. As with all applications to the court made without notice, there is a duty on the Applicant of giving full and frank disclosure.This is due to the fact that without notice applications are one sided, i.e. the Respondent is not present at the initial application.
As such, an Applicant is obliged to set out all material matters to the Court, either factual or legal, which may have a bearing on whether the Court grants the Freezing Order or not. Such disclosure relates not only to matters which are helpful to an Applicant’s claim, but importantly any facts or legal issues which are or may be detrimental to an Applicant’s claim.
For example, the Applicant is obliged to inform the Court as to whether it believes the Respondent has any likely defences to the claim or set-offs which it may apply. Equally if the Applicant has a previous conviction for dishonesty, this needs to be revealed to the court.
The point is that failure to provide full and frank disclosure to the Court may result in a Respondent challenging the Freezing Order at the return date when all the parties are back in Court. Ultimately, a lack of full and frank disclosure by the Applicant can lead to the Freezing Order being discharge and if that happens, the Applicant faces a risk of a very substantial costs order being made against it.