A freezing injunction is a court order that can restrain a person or business from disposing of, or dealing with, their assets. It can be made against someone personally or against a third party who may be holding assets on their behalf.
- When should an application be made?
An application is generally made before proceedings are issued if you fear the other person will dispose of their assets before a judgment can be enforced.
The injunction can be used for any known assets up to the value of the claim. Alternatively, where you have a claim calling for the delivery of a particular asset it can be used for the assets which are the subject matter of the proceedings.
- When will a Court grant an order?
The Court has significant discretion when determining whether or not to impose a freezing injunction and will only do so where it is just and reasonable. Before a freezing injunction is granted, the Court must be satisfied that:
- The English courts have jurisdiction;
- The applicant has a cause of action which may give rise to a judgment that can be enforced against the respondent’s assets;
- The applicant has made full disclosure of all material facts relevant to the granting of the injunction;
- The applicant is able to demonstrate that it has a good, arguable case;
- Sufficient assets exist to meet the applicant’s claim; and
- There is a real risk of the respondent disposing of the assets.
- What are the risks for the applicant?
A freezing injunction is a powerful tool to ensure that assets are available over which to make a claim but the Courts have developed safeguards for respondents to ensure that injunctions are not misused. For example, when making its decision, the Court applies the “balance of convenience” test, where it looks at all of the relevant factors surrounding the case and compares the likely detriment caused by the injunction with the benefit gained by the applicant. The applicant must also provide an undertaking to the Court to compensate the respondent if it is later shown that the injunction should not have been granted. If the potential harm to the respondent cannot be rectified through an order for damages, it is unlikely that the Court will grant the order.
A freezing injunction can be an extremely effective tool if you are suspicious that a potential defendant may be disposing of assets so as to put those assets beyond your reach. If you are successful, the injunction will preserve the assets for enforcement purposes. This can serve to bring financial pressure on a defendant to make an offer of settlement or, alternatively, to offer you security against a judgment. However, given the safeguards imposed by the Court, you must be confident of your position before applying for a freezing injunction.