What is a freezing injunction?

A freezing injunction, previously known as a Mareva injunction, is utilised in both commercial and civil litigation. It is used to prevent a party from disposing of assets or relocating them outside of England and Wales until a court has decided on a claim.

This interim remedy can be ordered by the court against a potential defendant either before a case begins or at any stage during litigation. This type of injunction is invoked when a claimant demonstrates that a defendant is likely to dissipate assets before the trial.

In commercial litigation, claimants may have strong prospects of success and a potential for substantial damages. However, the effectiveness of such claims can be jeopardised if the defendant lacks the financial capacity to meet the awarded damages, legal costs, and interest.

Thorough investigations into the defendant’s asset holdings and ability to pay must be conducted at the outset of litigation to ensure a claimant’s resources are not futilely expended.

Even if investigations reveal sufficient assets, there remains the risk of a defendant disposing of assets to thwart the claimant.

This is where a freezing injunction becomes crucial, providing assurance to the claimant that, as long as the frozen assets cover the damages, legal costs, and interest claimed, the litigation process will not result in an empty judgment.

How to obtain a freezing injunction

To obtain a freezing order, a claimant must make an application for a freezing order to the High Court or County Court. Typically, these injunctions are granted on a “without notice” basis, meaning the other party is not present during the hearing and remains unaware of the application.

As the defendants are uninformed about the hearing, the claimant has a duty of full and frank disclosure, necessitating the revelation of all relevant information to the court, even if it may be unfavourable to the application.

The Court has discretion in granting interim injunctive relief and requires the claimant to demonstrate a good arguable case and a risk of dissipation. Written evidence, often in the form of affidavits, must support these assertions. Additionally, the claimant usually agrees to compensate the defendant if the court later determines that the freezing injunction was unjustified.

A freezing injunction solicitor can be of great use for those wishing to apply for a freezing injunction against another party.

Which assets can be frozen?

A freezing injunction covers assets for which a judgment can be attached, including land, funds in bank accounts, shares, bonds, or vehicles. It may be unlimited, freezing all of the defendant’s assets, or limited to the total value of the claim (referred to as a “maximum sum order”) or a specific asset.

Domestic freezing injunctions apply only to assets within England and Wales, while worldwide freezing injunctions can extend to assets outside of these jurisdictions, albeit with certain limitations.

What happens if a party breaches a freezing injunction?

If a party breaches a freezing injunction, it can have serious legal consequences. Breaching a freezing injunction is considered contempt of court, and the consequences can include:

• Contempt Proceedings: The party that breaches the freezing injunction may be subject to contempt of court proceedings. Contempt of court is a serious offense and can result in penalties, including fines or imprisonment.
• Seizure of assets: The court may order the seizure of the assets that were subject to the freezing injunction. This is done to ensure that the party complies with the court order and to prevent any further attempts to dissipate assets.
• Enforcement of Judgment: If the breach of the freezing injunction results in a judgment against the party, the court may enforce the judgment by various means, such as seizing additional assets, garnishing wages, or other enforcement methods.
• Legal costs: The party that breaches the freezing injunction may be ordered to pay the legal costs incurred by the other party in enforcing the injunction and pursuing contempt proceedings.
• Additional remedies: In addition to the above consequences, the court has the discretion to impose other remedies it deems appropriate in the circumstances of the case.

What to do if a freezing injunction has been made against you

For defendants subject to a freezing injunction obtained through a “without notice” hearing, the court documents and the attached Penal Notice can be surprising.

It’s crucial for defendants to understand their right to a fair hearing and the possibility of having the freezing injunction lifted at the next court hearing.

This involves filing affidavit evidence in reply that contradicts the claimant’s arguments regarding the strength of the case and the risk of asset dissipation.

Seeking legal advice can help to ensure the best possible route is taken when dealing with a freezing injunction. 

What is a cross undertaking in damages?

A cross-undertaking in damages is a legal concept that often accompanies the granting of a freezing injunction. It is a promise given by the party seeking the injunction to compensate the party against whom the injunction is granted for any losses or damages that the latter may suffer if it is later determined that the injunction should not have been granted.

How can ARC Costs’ network of freezing injunction solicitors assist?

ARC can introduce you to an experienced freezing injunction solicitor who is equipped to take legal action in your best interests. Our network of specialist commercial dispute resolution lawyers is extremely knowledgeable and will provide you with the most appropriate legal advice.

In addition to introducing you to our network of freezing injunction solicitors, we can also assist in the recovery and negotiation of legal costs in commercial cases, whether you are the paying or receiving party.

ARC Costs are highly experienced in advising and assisting with costs issues and disputes in all areas of law. As Costs Draftsman and Costs Lawyers, we can assist you with your commercial litigation costs issues.

To find out more about how we can provide you with assistance, please get in touch with us at 012014 397302 or email one of our expert team at info@arccosts.co.uk. Alternatively, please use our free chat facility to speak to an expert directly.