In Fourie v Le Roux and others (January 2007), the House of Lords considered the question of whether it was proper for the Court to make an asset freezing order at a time when the claimant had not decided what proceedings he was going to bring against the defendant.
An application for a freezing injunction was made by the liquidator of two South African companies. The liquidator had come to the view that two of the respondents had fraudulently stripped one of the companies of its assets and removed those assets or their proceeds to England. An order was granted against the respondents on 9 July 2004 which froze their assets in England and Wales up to £3.4 million each and an application to set aside the order was issued later that month. The main ground on which the freezing order was challenged was that "there was no jurisdiction to make the order" because, at the time the order was made, there had been no subsisting proceedings to which the order could be ancillary and no undertaking to commence any such proceedings had been offered by the liquidator.
On the hearing of the application to discharge the freezing order, the judge noted that no proceedings for substantive relief had yet been formulated. He held that the court had no jurisdiction to make the freezing order in circumstances where the applicant had no intention of issuing proceedings immediately or almost immediately. The freezing order was discharged, costs were ordered to be paid by the liquidator on an indemnity basis and an order was made for the immediate enforcement of the cross-undertaking in damages which had been given by the liquidator. (Later the same day, a further freezing order was made for the lower sum of £1 million for each respondent on the liquidator's undertaking to issue and serve particulars of claim within 7 days).
The Court of Appeal dismissed the liquidator's appeal against the earlier orders on the basis that the jurisdiction to make a freezing order had not been "activated" either by the issue of substantive proceedings or an undertaking to issue such proceedings. The liquidator appealed to the House of Lords.
The House of Lords took the view that the English Court did have jurisdiction in the strict sense over the respondents as both were in England at the time the original freezing order was made. The House of Lords' focus was on whether it was proper, in the circumstances as they stood at the time the freezing order was made, for the judge to have made the order. This question involved the examination of the restrictions and limitations which have been placed by both case law and rules of court on the circumstances in which a freezing order can properly be granted.
In the circumstances as they stood at the time the first freezing order was made, the protection for the defendants that ought to have been associated with the grant of a without notice freezing order was absent. That protection ought to have included directions about the commencement of proceedings for substantive relief but there were none – at the time, the liquidator had not brought or formulated such proceedings. The appeal challenging the discharge of the first freezing order was accordingly dismissed. Although the House of Lords did not interfere with the indemnity costs order, it considered that a decision as to what, if anything, should be paid to the respondents for loss caused to them by the first freezing order should not be taken until the result of the litigation was known.
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