It is everyone’s concern: you are owed a large sum of money, and the person or company who owes you the money (the debtor) seems to be putting their money offshore or hiding it away. Maybe they are selling their house. What if they transfer their money with a mouse-click and disappear? How will you be paid then?
This is a worrying scenario for any creditor.
But – if you move fast - all is not lost. One of the law’s most powerful weapons is the freezing injunction: the court is able to “freeze” an individual or corporate debtor’s assets, so that they cannot readily be dealt with or disposed of. The freezing order preserves the assets so that the creditor has the chance to take court proceedings and obtain judgment, and so that the debtor’s assets remain available as a target for enforcement of a judgment.
We at Lewis Nedas have many years’ experience of obtaining injunctions, including freezing orders, for our clients (and also in acting for clients who are on the receiving end of such orders – to be considered in a subsequent article).
The freezing order – requirements when making an application
The first requirement is that, whilst the claimant applying for such an order cannot (of course) guarantee that they will succeed in their claim, they must be able to explain on what basis they expect to recover judgment. Court proceedings must be prepared by a barrister (referred to as “Counsel” who will present the application to the Court) and the claimant must promise to pursue the proceedings. The claimant must show that they have a “good arguable case” in relation to the dispute.
Second, the claimant must provide some evidence that the defendant has assets in England and Wales. This may be land and property, a bank account, shares, or assets. The need is to show the court that there is something on which the freezing order can bite.
Third, the claimant needs to satisfy the Court that there is a real risk that the defendant (or people acting as the defendant’s agent, or on the defendant’s instructions) may hide or dispose of their assets so that it becomes much harder for the claimant, having obtained judgment, to actually get paid. (The Court may give a judgment ordering the debtor to pay the creditor say £1 million, but if the debtor does not pay, the creditor must “enforce” against the debtor’s assets. This means getting a court order allowing the creditor to take and sell the debtor’s assets to realise money to pay the creditor’s judgment debt and costs.) There needs to be evidence of facts from which the Court can infer that the defendant is likely to move assets or improperly dispose of them: unsupported assertions, or mere expressions of fear, will not persuade the Court.
Fourth, the court must be satisfied that it is just and convenient in all the circumstances of the case to grant the freezing order.
Fifth, the claimant must solemnly promise (“undertake to the Court”) that if the freezing order turns out to have been wrongly obtained or to cause loss which the Court considers should be compensated, then the claimant will pay such sums. Normally, the claimant must tell the Court what assets are available to underlie the undertaking.
Sixth, the claimant must be open with the Court about the weaknesses in their case, or if there are reasons which might make the Court less likely to make the order. This is the so-called duty of full and frank disclosure.
Obtaining the freezing order usually involves a few days of intense work by solicitors and Counsel, and culminates in a hearing presented by Counsel before a senior level (High Court) Judge. The Judge normally needs to be persuaded that the facts of the individual case justify the making of a freezing order.
If an Order is made
On the first hearing of an application for an injunction, the judgment will normally make an Order which lasts for one week. The Order must then be communicated to the Defendant, and also to those such as banks, who are known to hold the Defendant’s assets. During this period, the Defendant is normally required to disclose the nature and location of their assets.
A further hearing is then held, at which the claimant asks for the injunction to be continued, and the Defendant may (but does not always) oppose the continuation.
The case then is required to proceed through the normal litigation processes until either a settlement is achieved, or the Judge decides the case.
William Shakespeare’s character’s comment “The first thing we do, let's kill all the lawyers” is often thought of as an ironic expression of the ordinary person's frustration with legal complexities and the cost of going to court.
We are not going to pretend that obtaining an injunction is cheap. It is only worthwhile when there is a lot of money at stake.
Why are we saying this? It is because we do not want to waste your time or ours.
We will always provide you with estimates of the likely legal costs going forward. Like filling a car with petrol before going on a trip, our business model works on the basis that each stage is pre-funded: we hold the funds in our client account on your behalf until they are needed. In this way, our clients can keep track of their ongoing expenditure.
Is a freezing order appropriate in every case?
No. Most cases are, in fact, not suitable for a freezing order. It is only where the strict requirements are satisfied that an application will succeed. Where the creditor has a justified concern that there is a real risk that the debtor is planning to dispose of, or hide assets, then it is worth investigating this form of injunction.
Why Lewis Nedas?
At Lewis Nedas Law, you can rely on us to do a proper job at reasonable cost. We have the experience, but we do not have City of London overheads or steep hourly rates. Above all, we want to understand your commercial objectives, and will do our best to achieve them. We work closely with exceptional Counsel as appropriate.
We do not rack up legal costs willy-nilly. We are aware that legal costs are a burden, and we are keen to keep our charges to as low a level as can reasonably achieved. We will guide you as to the most effective ways of enabling us to give you the best service we can, whilst also keeping our fees down.
You can rely on Lewis Nedas to tell you if your case has problems which make it desirable to negotiate a settlement with your opponents.
This article is intended to be no more than a general guide, and does not comprise legal advice. You are strongly advised to take legal advice before making or resisting any application to the Court.