Freezing Orders: When They Apply And What To Do Next

BCL's Senior Associate, Ewelina James, has written a guide explaining what a freezing order is, when it can be used, and what both applicants and respondents need to do.

What is a freezing order?

A freezing order, also known as a freeze order or asset freezing order, is a legal order that prevents a person or entity from disposing of, transferring, or otherwise dealing with certain assets or property.

This type of order is typically obtained by claimants in situations where there is a risk that assets might be hidden, dissipated, or moved before a judgment is made in a case.

Freezing orders are typically temporary and made without the respondent being notified in advance, particularly if there is a risk that alerting them might lead to the dissipation of assets. Freezing orders last until a return date hearing where the respondent will have the opportunity to contest the freezing order and explain its position. A return date hearing typically takes place within 7 to 14 days. If the court grants a permanent injunction, the order can last until the conclusion of the proceedings.

What is its purpose?

It is an essential measure to protect assets so that they are available to satisfy a judgment in a claim.

Freezing orders usually apply to assets such as money, property, bank accounts, or investments. If the applicant believes that the respondent has assets outside the UK, the applicant can ask the court for a Worldwide Freezing Order to freeze assets wherever they are located. 

Applying for a Freezing Order

When to apply

It is very important for the applicant to act quickly when bringing an application for a freezing order. An application for a freezing order is most often made prior to court proceedings being issued. However, a freezing order can also be sought during the course of proceedings or even after judgment is given, to prevent the disposal of assets before the judgment is enforced.

Requirements

The court has a wide discretion to grant a freezing order and will do so only when it considers that it is just and convenient.

To successfully obtain a freezing order, the applicant must:

• demonstrate that it has a strong claim, which means it must be able to demonstrate there is a “serious issue to be tried”
• have grounds to believe that the respondent has sufficient assets over which it has control 
• show that there is a real risk that the respondent will dissipate (hide, transfer, or dispose of) its assets before a judgment is made, which would make it difficult or impossible to enforce the judgment. Mere suspicion, fear, and speculation based on past behaviour are unlikely to be sufficient to establish a real risk on their own.
• Provide an undertaking to the court to pay any damages to the other party if it is later shown that the order should not have been made. This means that if the freezing order was wrongly obtained (e.g., if the claim is unsuccessful), the applicant might have to pay damages to the respondent for any losses caused by the order.

Filing an application

An application is filed either on notice or without notice. An on notice application means the respondent is informed of the application before the hearing. The respondent has the opportunity to respond and present its case to the court.

A without notice application, also known as an ex parte application, is an application made on an urgent basis without the respondent being present at or aware of the hearing of such application. When making a without notice application, the applicant is required to disclose all relevant facts, whether or not those facts are favourable to its case. This ensures that the court has all the information it needs to make a fair decision. Any incorrect information or omission which is subsequently discovered must be corrected, even subsequent to the granting of a freezing order. 

Receiving a Freezing Order

It is important to take immediate and careful action. A freezing order is a serious court order, and it contains a penal notice. This means that if the respondent breaches the freezing order, it can be held in contempt of court with penalties including imprisonment and fines.

Further, being subject to a freezing order can have significant reputational and financial consequences. The existence of the freezing order, even if later discharged, is a serious red flag to third parties and may result in business relationships and trade coming to a halt.

The following are key steps that the respondent should take immediately upon receipt of the freezing order:

Read the order carefully

• The respondent should make sure it fully understands the terms of the freezing order. The order will specify what assets are frozen, where they are, and what actions you are prohibited from taking. For example, it may prevent the respondent from selling, transferring, or otherwise dealing with specific assets. 
• The respondent should check if the order applies worldwide or is limited to specific assets in the UK. It may apply to certain bank accounts, properties, or other assets. The freezing order will usually allow the respondent to spend a limited sum on ordinary living expenses or reasonable legal fees.

Seek legal advice

• A solicitor who specialises in freezing orders or commercial litigation will be able to help the respondent to understand its legal position, options, and any possible defences. A solicitor can help the respondent assess whether there is a way to challenge the freezing order, negotiate with the applicant, or modify the order. For example, a solicitor can explore challenging the order on the basis that the applicant has failed to provide sufficient evidence or a risk of asset dissipation; that the order unfairly restricts legitimate business activities or personal expenses; or that the applicant has failed to disclose crucial information when applying for the order. Alternatively, if the order is too restrictive or is causing significant hardship, a solicitor may seek a modification of the terms, for example allowing the respondent to access certain funds/more funds for living expenses or legal fees.

Comply with the order

• The order normally requires the respondent to disclose the value, location and details of all of its assets exceeding a minimum value. This can include details of specific trusts and trust assets. The respondent must provide full details as required by the order, and provision of such information usually takes the form of an affidavit.
• The respondent must not attempt to transfer, sell, or dispose of any assets that are covered by the order. Breaching a freezing order is considered contempt of court and can result in severe penalties, including fines and imprisonment.

Whether you are applying for a freezing order or responding to it, we provide strategic legal guidance that protects your business interests. Please contact us for more information.