Fraud Litigation:
Freezing Orders
In dealing with fraud cases, PCB Litigation is frequently instructed to obtain or seek to discharge freezing orders, both in England and overseas. Below is a brief summary of the key factors to be considered when applying in England for a World Wide Freezing Order, though much of the summary is applicable to seeking freezing orders in other countries.
When will a Court grant a freezing order?
What does the Applicant need to consider when deciding to apply for a Freezing Order?
What does the Applicant need to do when applying for a Freezing Order?
What does the Applicant need to do once the Freezing Order is obtained?
Please contact us for more detailed, case-specific advice.
When will a Court grant a freezing order?
The Court has to be satisfied that:
- the Applicant for a freezing order has a good arguable case; and
- there is a real risk that judgment will go unsatisfied by reason of the disposal by the Respondent of his assets, unless he is restrained by Court Order from disposing of them.
- before proceedings are commenced;
- without notice to the Respondent;
- in support of proceedings commenced or to be commenced in a foreign country, where the Respondent is in England or has assets in England against which Court Orders can be enforced.
The Court can also grant freezing orders:
What does the Applicant need to consider when deciding to apply for a Freezing Order?
It is important to consider the following matters when deciding to apply for a Freezing Order:
- Whether there is sufficient evidence to show a good arguable case and a risk of dissipation of the Respondent's assets.
- There is a requirement when seeking Freezing Orders without notice to the Respondent that there is full and frank disclosure. The evidence and legal submissions will have to draw the Court's attention to matters that are adverse to the Applicant's case as well as those matters that go to establishing that there is a good arguable case and a risk of dissipation by the Respondent of his assets. The Applicant will need to consider whether this need to draw the Court's attention to matters adverse to his case may cause long term damage to his case.
- Whether the Applicant knows where assets of the Claimant are located. If not, whether they can be speedily located through investigation, by means of Tracing Orders or through other available methods. Whether delay whilst carrying out investigations will lead to assets being dissipated.
- Whether the usual requirements in the Freezing Order that the Respondent discloses his assets need to be modified to include reference to specific assets that the Applicant knows the Respondent once had.
- Whether it may be advisable to seek an Order ancillary to the Freezing Order that the Respondent be restrained from leaving the country pending full disclosure of his assets and that the Respondent delivers up his passport(s) in the meantime.
- Whether it may be advisable to seek any other Orders to be executed when serving the Freezing Order, such as a Search Order to search the Respondent's premises and seize evidence.
- Whether the application should be made on notice to the Respondent. Sometimes, it can be said that the Respondent would not have had an opportunity to dissipate a particular asset if a short period of notice were given.
- Whilst in many cases the Freezing Order results in the Respondent seeking to quickly reach a settlement to extricate himself from the situation, the Respondent may instead react by making an application to discharge the Freezing Order. The Applicant therefore needs to be prepared for the possible costs of defending a discharge application in addition to the costs of obtaining the Freezing Order.
- The extent to which the Respondent (or a third party) may suffer damages as a consequence of the Freezing Order, for which the Applicant might ultimately be liable.
- The extent to which identifiable assets in other countries can be quickly frozen.
What does the Applicant need to do when applying for a Freezing Order?
In order to obtain Freezing Order relief, the Applicant will need:
- to act quickly: delay can be a reason for the Court to refuse to grant Freezing Order relief;
- to provide full and frank disclosure to the Court;
- to prepare a draft Freezing Order, adapting the standard form to the particular needs of the case, e.g. to ensure that appropriate steps can be taken in other countries to ensure the Freezing Order is effective in those other countries: variations from the standard order will need to be drawn to the attention of the Court;
- to provide an undertaking to pay any damages that the Respondent may suffer as a result of the Freezing Order if the Court later decides it would be right for the Respondent to be compensated, which may need to be fortified by was of a payment into Court or to the Applicant's solicitors to hold as security;
- to provide an undertaking to the Court to compensate any third parties who incur costs in complying with the Freezing Order or who suffer damages as a result of the Freezing Order, should the Court decide they should be compensated;
- to provide an undertaking to the Court to serve the Freezing Order as soon as practicable.
- to provide an undertaking to the Court to commence proceedings within a short period of time.
What does the Applicant need to do once the Freezing Order is obtained?
After the Applicant has obtained the Freezing Order, it is important to ensure that all undertakings are complied with and all other steps are taken to ensure that the Freezing Order is fully effective:
- Orders may need to be speedily obtained in other countries to freeze assets identified overseas.
- The Freezing Order will need to be served on third parties (e.g. banks) to ensure that assets they control are frozen.
- The Freezing Order will need to be served on the Respondent as soon as practicable. Normally, the Respondent will be required to disclose his assets to the person serving the Freezing Order, to be confirmed afterward by affidavit. Sometimes, the Respondent will also be required to deliver up his passport(s) to the person serving the Freezing Order.
- The above steps will need to be coordinated to ensure they are carried out simultaneously, if possible.
- The disclosure of the Respondent's assets will need to be analysed with a view to determining whether it is complete and accurate. If it is not, then consideration will need to be given to applying for the Respondent's cross-examination on that disclosure.
- The Applicant will also need to be prepared to deal with any application the Respondent may make to vary or discharge the Freezing Order.
Disclaimer
The information given above is provided as a service to its readers and does not constitute legal advice. Whilst attempts are made to provide quality information, no claims, promises or guarantees are made about the accuracy, completeness or adequacy of the information contained herein. As legal advice must be tailored to the specific circumstances of each case, and laws are constantly changing, nothing herein should be used as a substitute for the advice of a specialist in the area.
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