HomeFWJ TakeawayFraud and freezing ordersDefending a freezing orderFreezing orders and third parties – duties explained

If you are not a named party in the Freezing Order but still served with a copy, it is vital to take early legal advice. Avoiding mistakes is crucial.

Once a Freezing Order has been granted, it is common for an Applicant to arrange for service of it on the relevant third parties. The most common of these are

  • solicitors,
  • banks and
  • other financial institutions in which the Respondent has or is suspected to have an account.

If it is clear as part of the preparatory work undertaken by the Applicant that the Respondent’s banking and account details are known, then the Applicant can also include in the Freezing Order draft letters which the Respondent is required to sign and return to the Applicant authorising the Applicant to make enquiries of the bank without further permission from the Respondent. This procedure can also be extended to other third party institutions if relevant.

Liability of third parties served with a freezing order

Any third party served with a freezing order owes a duty of care to the court to comply with the terms of the Order and not to permit the Respondent to breach the Order.

However, case law relating to this area has made it clear that third parties do not owe any duty of care to the Applicant directly

What a third party should do when served with a freezing order?

A third party served with a notice should do the following:

  • Carefully look at the terms of the Order;
  • Check whether a Penal notice exists and read the contents.
  • Identify any relevant assets which may be in its possession, custody or control and/or any ongoing transactions involving the Respondent which it may also be involved in;
  • Take reasonable steps to ensure that the terms of the Freezing Order are not breached or are not about to be breached.

Banks and their position when served with a Freezing Order

In-house legal teams

As Banks are often the main recipient of Freezing Orders it is often the case that they have their own internal in-house legal teams who manage the receipt and enforcement of these types of orders.

Often, legal advisers to an Applicant will have the contact details for the relevant branch or department of the bank and the Freezing Order will be served upon the relevant team direct. In the absence of the relevant contact information, the Freezing Order should be served

  • at the registered office of the bank (generally available on Companies House and / or at the relevant Registry within the jurisdiction of the main office)
  • together with the local branch of the Bank where the account is held – in the latter circumstance the covering letter should make it clear what the Order is and specifically refer to the obligations on the Bank.

Often the Manager of that particular branch will then refer the matter to their in-house legal team. For the avoidance of doubt, service upon the registered office must always be done in addition to the above steps.

Internal systems

Most banks have internal systems to deal with the receipt of a Freezing Order and ensure compliance with it. They should ensure that every relevant part of the Bank involved with making payments is notified of the terms of the Freezing Order and that the relevant restrictions are put in place in relation to the particular account(s) in question.

Knowing assistance

Banks will be aware that if a third party knowingly assists in the disposal of assets subject to a Freezing Order, that party may be subject to proceedings for contempt of court. This can result in either a fine, seizure of assets and / or imprisonment.

Payments out of accounts subject to a Freezing Order

The service of Freezing Orders can put the Bank in a difficult position. For example, if the Respondent is a company, then pursuant to the terms of the standard Freezing Order the company is entitled to pay normal reasonable business expenses.

The same applies in respect of an individual Respondent’s ordinary living expenses which a Respondent is entitled to in accordance with the terms of the standard Freezing Order.

Therefore, a Bank holding frozen funds has no obligation to enquire as to the purpose of a withdrawal by a Respondent provided that it appears to be permitted by the Order. So long as the payments appear to be for the purpose of meeting either reasonable legal, living or business expenses, then those payments can be made, subject to any other restrictions imposed by the Order / the Bank.

Blocking the account

In practice, Banks often adopt the approach of simply putting a block on the entire account(s). This can cause obvious difficulties for a Respondent and therefore the Applicant or its legal advisers when serving the Freezing Order on a Bank must make it clear that the Respondent is entitled to payments relating to ordinary living, business or legal expenses and that the account should not simply be blocked. However, it will be down to the individual Bank as to how it wishes to deal with and / or police the terms of the Order.

Sometimes, the Bank will simply wait for a further Order from the Court stating that certain funds can be released. This is often the case where the Bank is simply unaware as to whether the amounts being requested to be paid are reasonable or not and it is well worth considering amending the terms of any proposed Freezing Order with a view to avoiding such future difficulties.

If you have been notified or served with a Freezing Order and need urgent assistance – contact out team today. We can provide the fast effective and expert advice you need.

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