UK: Monies Paid Into Joint Account to Discharge Freezing Injunction Do Not Create Any Security Right

Last Updated: 11 March 2003

The recent Court of Appeal decision in Flightline Limited v Edwards & another [2003] EWCA Civ 63 has considered the status of monies paid by the defendants, Swissair Schweizerische Luftverkehr-Aktiengesellshaft ("Swissair"), into a joint account for the purposes of discharging a freezing injunction over its assets. The court concluded that these monies do not create any entitlement to payment as a matter of right in the event of a successful judgment in the action.

The standard form of freezing injunction contains an express provision that it will cease to have effect if the respondent provides security (in a sum to be specified in the order), either by means of a payment into court or by some other agreed method. Although the freezing injunction obtained by Flightline contained no such express provision the Court of Appeal did not, in the event, consider this to be a relevant factor. The judgment also therefore appears to apply equally to monies paid to discharge freezing injunctions which do contain the standard wording.


Following the collapse of the Swissair Group in October 2001, Swissair repudiated its arrangements with Flightline. Flightline commenced proceedings on 16 January 2002 in which it claimed some £4.2 million. At the same time it obtained a freezing injunction to prevent Swissair from dealing with its assets in England and Wales up to a maximum of £4.2 million. Upon being given notice of the freezing injunction, Swissair indicated its intention to make an application to discharge the freezing injunction.

Flightline and Swissair then agreed that a sum in excess of £4.2 million, which Swissair was shortly to receive from a third party, should be paid into an account opened in the joint names of Flightline and Swissair’s solicitors. It was agreed that, to the extent the balance exceeded £4.2 million, it could be paid out to Swissair and that thereafter the freezing injunction should cease to have effect.

Subsequently the parties agreed on the smaller sum of £3.335 million being held in the joint bank account. The terms of this agreement were incorporated in a Consent Order of 13 March 2002. This Order was made on Swissair’s undertaking set out in a schedule to the order:

"Not to withdraw or in any way dispose of or deal with or encumber its interest in the monies in the [joint account] up to a limit of £3,325,000 million pending further order of the Court or the written consent of [the two firms of solicitors]."

On 4 April 2002, the appellants were appointed provisional liquidators of Swissair. On 28 May 2002, Flightline issued an application pursuant to Section 130(2) of the Insolvency Act 1986 for leave to continue its action against the company. Section 130(2) provides as follows: -

"When a winding up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by the leave of the Court and subject to such terms as the Court may impose".

The liquidators accepted that if Flightline had a charge over the monies in the joint account, leave to continue the action should be granted. Flightline accepted that if it did not have a charge over the monies, no leave should be given.

First Instance decision

At first instance, Mr Justice Neuberger found that the effect of the March Order was that the money was to be held in the joint account, subject only to what the court might order. Therefore, he considered the money was beyond the reach of Swissair, unless or until the court ordered otherwise. He considered the parties must have agreed that the freezing injunction was no longer necessary because Flightline now had security for its claim. Notwithstanding the absence of the standard provision in the freezing injunction in question, in circumstances where the standard form wording provided that a freezing injunction would cease to have effect if a respondent provided "security", Mr Justice Neuberger considered the natural inference was that the payment made into the joint account would be security for the claim. Mr Justice Neuberger also considered there was no intrinsic reason why a claimant, who has obtained a freezing injunction and in the process has incurred risk and expense, should not be put in a better position than other creditors, either by being paid or by having the benefit of security. The liquidators appealed.

Court of Appeal decision

The Court of Appeal allowed the appeal, relying on the Privy Council’s decision in Palmer v Carey [1926] AC 703, which held that in order for an equitable charge to be created over a specific fund, it is necessary to find not merely a restriction on disposal of the fund by the debtor but also an obligation on the debtor to pay the debt out of the fund. The Court of Appeal considered this statement of principle to apply directly to consent orders and also indirectly to other court orders. Therefore, the Court of Appeal considered the relevant question to ask was whether one could construe into the terms of the March Order a provision that if Flightline was successful in obtaining judgment, it would be entitled to payment out of such monies as a matter of right. The Court of Appeal did not consider this was the case and considered the terms of the March Order entirely consistent with the continuance of interim protection of a "freezing" nature until trial or further order.


Whilst it is trite law that a freezing injunction does not give a claimant proprietary rights over a defendant’s assets, this decision makes clear that a payment made by a defendant into court or elsewhere and paid with the specific purpose of enabling a freezing injunction to be discharged will not give a claimant security over those funds notwithstanding the reference to provision of security in the freezing injunction. Accordingly, the claimant will be in no better position than other creditors or potential creditors of the defendant. If a claimant seeks a charge over such funds then very clear wording would have to be used, and it might also be necessary to register that charge. It is difficult to see that there would be any incentive for a defendant to give such security to a claimant.

Article by Sonya Leydecker

© Herbert Smith March 2003

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.