Freezing Injunctions: Varying and Discharging an Injunction
What is a freezing injunction?
A freezing injunction, also known as a Mareva injunction, is a legal order issued by a court in the United Kingdom (UK) that prevents a party from disposing of or dealing with their assets in a way that would hinder the enforcement of a potential judgment.
These injunctions are typically used in civil cases, particularly in matters of commercial disputes, fraud, and other situations where there is a risk that a defendant may move or dissipate their assets to avoid paying a judgment.
Here are some key points about freezing injunctions in the UK:
- Purpose: The primary purpose of a freezing injunction is to preserve a defendant’s assets until a judgment can be obtained and enforced. This helps ensure that the claimant will be able to recover the money or assets awarded to them by the court.
- Criteria for Granting: The party seeking a freezing injunction must satisfy the court that they have a good arguable claim, there is a real risk that the defendant will dissipate their assets, and that it is just and convenient to grant the injunction.
- Good Arguable Case: This means that the claimant must demonstrate that they have a reasonable chance of succeeding on the merits of their case. They don’t have to prove their case at this stage, but they must show that there is a valid legal claim.
- Risk of Dissipation: The claimant must convince the court that there is a genuine risk that the defendant will try to hide or dispose of their assets in order to avoid paying a potential judgment.
- Worldwide Effect: A freezing injunction granted by a UK court can apply not only to assets within the UK, but also to assets located worldwide. This is known as a “worldwide freezing order.”
- Duty of Full and Frank Disclosure: The applicant for a freezing injunction has a duty to make full and frank disclosure of all material facts to the court, including any facts that might be detrimental to their case. Failing to do so can lead to serious consequences, including the discharge of the injunction.
- Notification of Third Parties: In many cases, a freezing injunction will require the defendant to notify third parties (such as banks or financial institutions) that their assets are subject to the injunction. This is to prevent the defendant from secretly moving or disposing of their assets.
- Variation and Discharge: The defendant can apply to the court to have the freezing injunction varied or discharged. They may do so if they believe there has been a material change in circumstances.
- Costs and Damages: If a freezing injunction is wrongly obtained, and the defendant suffers loss as a result, the claimant may be required to compensate the defendant for damages. The court may require the party seeking the injunction to provide a cross undertaking in damages if it is later determined that the injunction should not have been granted.
- Legal Advice: Seeking legal advice is crucial when a party contests or applies for a freezing injunction, as the process can be complex and the consequences significant.
What happens when a freezing injunction is granted?
When a freezing order is granted, several important steps and consequences follow:
- Notification to Defendant: The defendant is formally notified of the freezing order. This notification informs them that their assets are now subject to the court’s restrictions.
- Notification to Third Parties: The order may also require the defendant to notify third parties, such as banks or financial institutions, where they hold assets or bank accounts. This is to ensure that those parties are aware of the freezing order and take appropriate steps to comply with it.
- Asset Freeze: The defendant is prohibited from disposing of, dealing with, or moving their assets in any way that would undermine the enforcement of a potential judgment. This includes selling, transferring, or dissipating assets. if a party subject to a freezing order attempts to dispose of or deal with their assets in a way that violates the terms of the order, they could be held in contempt of court.
- Disclosure and Investigation: The defendant may be required to provide a disclosure of their assets. This is to help identify and document the assets that are subject to the freezing order.
- Preservation of Evidence: The defendant may be required to preserve any relevant documents or evidence that could be pertinent to the case.
- Compliance Monitoring: The claimant or their legal representatives may monitor the defendant’s compliance with the freezing order. They may request information or conduct investigations to ensure the order is being adhered to.
- Variation or Discharge: The defendant has the option to apply to the court to have the freezing order varied (e.g., to allow for reasonable living expenses) or discharged (e.g., if they can demonstrate that the order was wrongly obtained or that circumstances have changed).
- Consequences of Non-Compliance: Failure to comply with a freezing order can have serious consequences. The court may hold the defendant in contempt, which can lead to fines, imprisonment, or other penalties.
- Legal Costs and Damages: If a freezing order is wrongly obtained, and the defendant suffers financial loss as a result, the court may order the claimant to compensate the defendant for damages and legal costs.
- Continuation of Legal Proceedings: The underlying legal case continues to progress. The freezing order is a protective measure to ensure that the defendant’s assets are available to satisfy any potential judgment in favour of the claimant.
What types of assets can the court place under a freeze?
The high court has the authority to freeze all assets belonging to the respondent. This encompasses assets registered in the respondent’s name, as well as those held under a third party’s name, such as a spouse or business partner. This can encompass bank accounts, shares, and vehicles.
When determining which assets to freeze, the court typically takes the following factors into account:
- The monetary value of the asset.
- The likelihood of the respondent attempting to dissipate the asset if it is not frozen.
- The practicality of freezing the asset.
- The effect of freezing the asset on the respondent’s ability to cover their day-to-day expenses.
In specific instances, the court may instruct the respondent to furnish security equivalent to the value of the frozen assets. This entails the respondent providing funds or alternative assets as a pledge to guarantee their compliance with the injunction.
While freezing injunctions serve as a robust safeguard for assets, they are not devoid of potential drawbacks. If a freezing injunction is granted without sufficient justification, it can result in significant costs and reputational harm for the respondent. Therefore, it is imperative to seek legal assistance from a specialised freezing injunction solicitor prior to pursuing such an injunction.
Freezing Injunctions: Varying and Discharging
Varying and discharging freezing injunctions are legal processes that allow the parties involved to request changes to or the removal of a freezing order. Here’s a closer look at each:
- Varying a Freezing Injunction:
- Definition: Varying a freezing injunction involves requesting the court to modify or change the terms of the order. This can include adjustments to the scope of the assets covered, the value of assets, or the conditions under which assets can be accessed or used.
- Grounds for Variation:
- Changes in circumstances: If there are significant changes in the circumstances of the case or the parties involved, the Court may agree to vary the terms.
- New information: If new evidence or information comes to light that was not available when the freezing order was originally granted, this may be a basis for variation.
- To allow for reasonable living expenses: The court may consider varying the order to allow the defendant access to funds for necessary living expenses.
- Application Process:
- The party applying for the order to vary the freezing injunction (usually the defendant) would need to make an application to the court.
- This application would need to be supported by relevant evidence and legal arguments explaining why the variation is necessary.
- Court’s Discretion: The decision to vary a freezing injunction is ultimately at the discretion of the court. The court will consider the merits of the application and weigh the interests of all parties involved.
- Discharging a Freezing Injunction:
- Definition: Discharging a freezing injunction involves requesting the court to revoke or lift the order entirely. If successful, this would mean that the defendant is no longer subject to the freezing restrictions.
- Grounds for Discharge:
- If the claimant fails to demonstrate a good arguable case.
- If there is a significant change in circumstances that warrants the discharge of the order.
- If the freezing order was improperly obtained.
- Application Process:
- The party seeking to have the freezing order discharged (usually the defendant) would need to make an application to the court.
- This application would need to be supported by evidence and legal arguments explaining why the order should be lifted.
- Court’s Discretion: As with variations, the decision to discharge a freezing injunction is at the discretion of the court. The court will carefully consider the arguments presented by both parties.
- Consequences of Discharge: If a freezing injunction is discharged, the defendant would no longer be subject to the freezing restrictions, and they would regain control over their assets.
It’s important to note that both varying and discharging freezing injunctions are complex legal processes that require careful consideration and often involve legal representation. Parties seeking to pursue these actions should seek advice from qualified legal professionals.
How can Expert Commercial Law assist with freezing injunctions: varying and discharging?
Our panel of freezing injunction solicitors can assist parties with freezing injunctions – varying and discharging injunctions.
We can also help claimants taking legal action against a defendant that might be at risk of dissipating assets.
Our panel firms provide guidance throughout the process and can help protect their client’s rights and interests. They can also help evaluate the strength of the case and advise on the best course of action. If you need help with a freezing injunction order, then please get in touch with us today.
Please note we are not a firm of solicitors; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a freezing injunction query or a commercial law case, we will pass your case on to a panel firm in return for a fee from our panel firms. We will never charge you for passing your case to a panel firm.
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Please note, we are not a firm of solicitors; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a commercial law case, we will pass your case onto a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm.