HomeFWJ TakeawayFraud and freezing ordersDefending a freezing orderApplications to discharge a freezing order – 8 important considerations

It is possible for a defendant to challenge a freezing injunction – either get it dismissed or have the terms varied. Our experts have been helping individuals, companies and financiers with these complex applications since 2002. Let us help you too.

The grounds on which such an application can be made are as follows:

1. The court had no jurisdiction to make the order

For a freezing order to be granted in England & Wales, the court must have jurisdiction to hear the substantive claims between the parties. It must be remembered that a freezing order cannot simply sit alone in isolation. Rather, it is there to support the main set of proceedings between the parties which are to be litigated out in the ordinary way – for example a claim in fraud. These claims are known as the substantive claims and it is these which the court must have jurisdiction to hear.

The only exception to this is if it is a freezing order made in support of foreign proceedings. To understand more about foreign proceedings, please refer to other web pages.

2. The applicant’s substantive claim is not a good arguable case

There is no onus on the applicant at the time of seeking a freezing injunction to establish that the substantive claim is “bound to succeed” or has more than a 50% chance of success at trial. However the court will consider the merits of the substantive claim at the time of the application for a freezing order is made (or where the applicant is seeking to continue it) and a case which is shown to be simply no more than arguable is insufficient to support either the granting or continuation of a freezing injunction.

The court will review for example any defences which may be available to the respondent including for example, the defence of set-off when deciding whether the applicant has a good arguable case.

3. There is no risk of dissipation of the respondent’s assets

To grant a freezing order without notice to a respondent, the court must be persuaded that there is a real risk that any judgment may not be satisfied because the respondent may seek to remove assets beyond the reach of the applicant. The court applies an objective test in this matter and considers the effect of the respondents actions, not his intentions.

  • if a respondent can provide evidence of his strong financial status, business history, links with the jurisdiction or indeed links to countries in which the judgment would be enforceable and supports this with evidence of the ability to pay any ultimate award of damages, then it is likely that the court will discharge the freezing order on the basis that there is no real risk that the respondent will remove his assets from the jurisdiction;
  • for example, if the respondent’s main asset is a property in England and there is no evidence that the property is up for sale and the respondent has always lived in England, has family connections in England and close links to the that country, then the court will take this carefully into account when determining whether there is a real risk of dissipation of a respondent’s assets.

4. Inordinate delay by the applicant

Speed is of the essence for an applicant when seeking a freezing order from the court.

A freezing order is what is known as an “equitable remedy”, and any applicant must act reasonably and without any undue delay in pursuing its claim. Any unreasonable delay also counts against an applicant when seeking or continuing a freezing injunction or freezing order. If a respondent can show that a delay has occurred and that delay is not explicable by the applicant, then this can provide a ground for the discharge of a freezing order.

5. Failure by the applicant to comply with its duty of full and frank disclosure

Where a freezing injunction has been granted without notice (ie without giving notice to the respondent of the application), the applicant must ensure that all material and relevant matters are brought to the attention of the court at the time the freezing injunction is applied for (even if such matters go against the application).

  • this is very important due to the fact that with all without notice applications a respondent does not know that the court hearing is happening and does not have the ability to comment on anything which the applicant tells the court about in the course of the application. Without notice applications are by their very nature, one sided applications;
  • therefore, it is incumbent upon the applicant to make sure that every material and relevant fact is made known to the court when a without notice freezing order is applied for, even if those facts are not particularly helpful to the applicant. Matters to be disclosed can be matters of either law or fact and should include any relevant issues even if adverse to the applicant.

Examples of such matters include any defences to the claim that may be available to respondent together with any potential claims by a respondent of privilege against self-incrimination.

In circumstances where the non-disclosure is serious in nature, courts has been known to discharge a freezing order. In less serious cases, courts have set-aside the original order and re-imposed the order on specific terms – but often with an order that the applicant pays the respondent’s costs on what is known as an indemnity basis – something which can be very expensive for the applicant indeed.

6. Demonstrating that the freezing order is oppressive

Freezing orders should not be used oppressively. For example, a common term within a freezing order is that the respondent should be able to meet his ordinary living expenses as well as his reasonable legal costs or business expenses. Freezing orders that fail to include these terms can be seen as oppressive and as such, are open to challenge by a respondent.

Additionally, a freezing injunction should not prohibit a respondent from dealing with or disposing of any assets in the ordinary and proper course of business. A freezing order should not be used to cause a respondent excessive difficulties in undertaking its business and should not for example cause the business to cease trading. In those circumstances, an application can be made to court to have the freezing order discharged.

7. The applicant has not complied with its undertakings, or alternatively, damages would not be an adequate remedy

When, applying for a freezing order, an applicant is normally required to give what is called an “undertaking in damages” to compensate a respondent if it is later shown that the applicant was not entitled to the injunctive relief sought. The undertaking itself is given to the court and not the respondent. Even where there is no express undertaking, there is always an implied undertaking.

However, a respondent may be able to seek discharge of the freezing order on two grounds:

  • the applicant has not complied with his undertakings or is shown to have insufficient means to meet any undertaking in damages; and/or
  • the respondent can show that damages would not be an adequate remedy for losses that he will sustain.

Where there are doubts about the applicant’s ability to pay any undertakings in damages, a respondent can make an application to court that the applicant be ordered to pay actual money into court as security in the event that it is later shown that the applicant was actually not entitled to the injunctive relief.

The quantum / value of any such payment will take into account the value of the underlying claim, the respondent’s potential defence and the potential costs that it will incur. A respondent can seek to vary any such order if it considers that costs, in excess of those provided for, may be incurred by it in relation to responding to the underlying claim. Of course, such a request would have to be justified by reference to specific evidence and any decision to seek further payments will be entirely at the discretion of the court.

8. Other considerations

If a respondent wishes to set-aside a freezing order which has been obtained without notice, the right route is that he must apply to the judge and not, for example, attempt to appeal to the court of Appeal without having first been to the court in the first instance.

The application must be made promptly if at all possible.

Even if you do not agree with the evidence in support of, or the existence of, a freezing order, despite any protests of innocence you may have it is vital that the correct procedure is adopted. Please remember that any breach of a freezing order, no matter the reliability of the grounds it was obtained on, is contempt of court and could lead to committal to prison.

Francis Wilks & Jones is one of the county’s leading firm of freezing injunction solicitors. We are experts in what we do including dealing with applications to discharge freezing injunctions.  

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