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Freezing Injunctions

December 31, 2011

Freezing Injunctions:

What is a Freezing Injunction?

A Freezing Injunction is granted when a applicant is able to show a good arguable claim to be entitled to a recovery of money from a respondent and he can show the court that there is a real risk the respondent will remove assets outside the jurisdiction or there is a risk that he may deal with them so they may become unavailable or untraceable. The court may grant an injunction to stop the respondent from moving them from the jurisdiction of the court.

When will an application for a Freezing Injunction be made?

Such an application is normally made prior to proceedings being issued. However there are circumstances when it can be applied for after proceedings have been issued or after judgment has been entered, if there is a risk that the respondent will dispose of property.

How is the application made?

The application is normally made without notice ie the application and the hearing are not notified to the respondent.

If proceedings have not been issued then the application is made with evidence in support and a draft order. At the hearing the appicant will undertake to the court to issue a Claim Form immediately. If possible it should be served with the order for the injunction.

What do I have to show to obtain my Freezing Injunction?

You have to show a good arguable case on the merits, that there is a real risk that the respondent will dispose of assets and the respondent has assets to meet the value of the claim.

The applicant must provide an undertaking to the court to pay damages to the defendant if it is shown at a later stage that the injunction should not have been granted.

The court will have to be satisfied the application has been made promptly and there had been no delay, the court will also make its decision on the balance of convenience test.

The court will look at all the factors the detriment caused to the respondent and the value to the applicant.

What Order is made?

The court makes a Freezing Injunction Order and will list a date when both parties will return before the court.

It will name the parties who are subject to the injunction. It will order that the applicant does not remove from the jurisdiction any assets (the value detailed by the court) and dispose of, deal with or administer the value of his assets in or outside the jurisdiction to that value.

The injunction will apply to property or all jointly owned property.

The injunction normally requires the applicant to disclose the value and location details of all his assets exceeding the minimum value.

Service of the injunction:

The injunction must be served promptly and personally on the applicant which will have attached the Penal Notice which will detail the penalty for breaching the injunction.

The respondent will then be served with the application, any supporting evidence in support of the application, the order, proceedings and any note made of the without notice hearing.

Third parties such as banks could be served first with the injunction before the respondent so as to freeze the bank account.

What are the penalties for breaching the injunction?

If there is a breach in the injunction then the respondent will be liable for contempt of court, punishable by a fine and imprisonment.

It is vital that the technical aspects of the application for the injunction are complied with otherwise the injunction risks being set aside.

There is a duty of frank disclosure. The applicant must put before the court if the respondent is not there all the information. Unless the order is served personally on the respondent then it is not possible to apply for the respondents committal if in breach. It is important when trying to persuade the court when trying to grant an injunction that all evidence is put before the court. There is often a difficulty persuading the judge that such an order should be made. What sort of such factors should be presented to the court to show that there is a risk of assets being dissipated would be:

The defendant’s credit history. If there has been a previous history of defaulting on debt or dissipating assets perhaps through a link with another country where the defendant might move.

How easy it would be to remove those assets, if there is evidence of the defendant’s dishonesty may well assist the judgment of Thane Investments Limited v Tomlinson [2011] EWCA, the court said there needed to be

“solid evidence … of the likelihood of dissipation.” The court said that dishonesty on the part of the intended defendant was insufficient. The court will have to look at and scrutinise with great care whether what is alleged as the dishonesty of the defendant and the injunction sort justifies the inference that, that person has the assets which he is likely to dissipate.

It is very important to have strong evidence of that point and link it to the risk of dissipation of assets.