Freezing injunctions

What are freezing injunctions?

In certain circumstances, a claimant, who has a very strong case against a defendant, may feel that there is a serious risk that the defendant will dispose of his or her assets before the case proceeds to trial, thereby preventing the claimant, if successful at the trial, from being able to execute judgment, as there may no longer be any assets available which would realise the value of the judgment.

The freezing injunction is a form of interim injunction designed to guard against this, and has the effect of restraining defendants from disposing of, or dissipating, their assets so as to frustrate any judgment which the claimant may obtain against them. Freezing injunctions are also known as ‘Mareva’ injunction, stemming from the decision of the Court of Appeal in Mareva Compania Naviera SA v International Bulk Carriers SA [1980] 1 ALL ER 213. Traditionally it has been said that a freezing injunction can only be granted if the claim is justiciable in England and Wales.

Principles

There are four requirements:

  1. A cause of action justiciable in England and Wales

  2. A good arguable case

  3. The defendant having assets within the jurisdiction;

  4. A real risk that the defendant may dispose of or dissipate those assets before judgment can be enforced.

Good arguable case

The claimant’s affidavit must disclose a good arguable case as regards the merits of the substantive claim against the defendant.

It is usually the case that the claimant has to show that the defendant has some assets within the jurisdiction. If the defendant holds a bank account jointly with someone who is not a party to the action, that account may none the less be frozen by a Mareva. Land can also be the subject of a freezing injunction.

A freezing injunction will not normally extend to assets outside the jurisdiction. However, in an exceptional case, the court may make an order affecting assets both here and abroad. Such an order will be rare.

Risk of disposal

In order to obtain a freezing injunction, the claimant must show that there is a risk that the defendant will remove assets from the jurisdiction, or dispose of them, or dissipate of them or hide them. A freezing injunction may be granted whether the defendant is or is not resident within the jurisdiction.

Discretion

The court has a power to grant freezing injunctions where it is ‘just and convenient.’ In deciding whether or not to grant a freezing injunction, a factor the court will consider is the value of the defendant’s assets from the claimant’s point of view, namely their resale value in the light of the amount which the claimant is claiming in the action. In other words, would these assets in fact assist the claimant in a material way to satisfy any judgment that may be obtained?

Procedure

Applications for freezing injunctions are made without notice to the defendant. The application is heard by a judge, and may be made at any stage in the proceedings, even before a claim form has been issued, or after judgment in aid of execution. The applicant will need to issue an application notice setting out the nature of the order sought. The application needs to be supported by evidence, and this is one of the rare occasions where the evidence must be in the form of affidavits.

Purpose of the order

There are two points:

  1. The object of a freezing injunction is not to give the claimant priority over the defendant’s other creditors
  2. The effect of the freezing injunction should not be such as to place undue pressure on the defendant to settle the claim on terms unduly favourable to the claimant.