Checkmate – freezing injunctions
Checkmate – your essential guide to commercial disputes
This series of articles provides a valuable point of orientation to help readers navigate uncertainty with greater confidence.
Read our Checkmate seriesFormal dispute resolution processes have a reputation (perhaps deservedly) for being lengthy and time consuming. This is especially true of litigation before courts and, to some extent, arbitration. If you are a claimant seeking to recover a sum of money, you may be faced with a wait of several years. That delay can be compensated for with interest. But what is a claimant to do when faced with a defendant who may take advantage of the delay to secrete assets away from the reach of the courts so that any victory is Pyrrhic?
The answer, very often, lies in the interim freezing order, which is an interim remedy available in English courts to support not only English litigation, but foreign litigation and even arbitration.
This article forms part of our Checkmate Series – your essential guide to commercial disputes, a collection of practical insights designed to help businesses navigate common dispute scenarios with clarity and confidence. Explore the full guide here.
What is a freezing injunction?
Modern interim freezing orders took their original name of Mareva injunctions from a Court of Appeal case in 1975 (Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd’s Rep. 509), although a similar order was first granted earlier that year. They were renamed as part of the civil procedure rules reform in 1999, which sought to simplify court procedure, including by replacing arcane legal names with plain English where possible.
They are an order against a person (the respondent) freezing some or all of that person’s assets. Disobeying the order is a contempt of court, and a freezing order will carry a stern warning (the “penal notice”) on the front of it warning of the consequences of disobedience. The order will remain in place until it is varied. The advantage is that the applicant for the freezing order knows that assets will be preserved to be recovered if the applicant is successful in its dispute with the respondent.
How do you get a freezing injunction
It is common to apply for a freezing injunction without notice to the respondent (since otherwise the respondent might take steps to put their assets beyond reach upon hearing of the application).
The applications are often made on an urgent basis. They need to be supported by evidence, usually in the form of an affidavit (a witness statement sworn in front of an independent solicitor).
To grant a freezing order, the respondent must usually establish the following:
- the English court has jurisdiction
- the applicant has a cause of action
- the applicant has a good arguable case on the merits in relation to their cause of action
- there must be a risk that assets of the respondent will be dissipated
The applicant will also usually be required to provide undertakings to the court to pay for damage caused to the applicant.
It is important to note that, because the applications are usually made without notice (and the respondent does not have the change to put their case), there is a duty of full and frank disclosure to the court. This means that the applicant must tell the court of all facts relevant to the application, whether they are helpful to their application or not.
What should I do if I receive a freezing injunction?
If you should find yourself the object of a freezing injunction, you should seek legal advice immediately. You will need to prepare for a hearing (the “return date”) at which you will have the opportunity to put your case as to why the injunction should not have been granted. But you will also need to start complying with the injunction immediately. This means that you cannot deal with your assets. It is also common for you to have to disclose details of your assets to the court and to the applicant. Careful compliance is essential, and best done with legal advice.
This insight is one of a series of Checkmate articles exploring the core themes that underpin modern commercial disputes, from post-acquisition claims to shareholder conflicts and directors’ duties.
To access the full guide and build a broader understanding of the risks and strategic considerations across these areas, visit here.
