Key Takeaways:
- A freezing order (also called a Mareva injunction) is an emergency court order that prevents a defendant from moving, hiding or spending assets pending the outcome of litigation.
- To obtain a freezing order, the claimant must show a good arguable case on the merits, a real risk that the defendant will dissipate assets and that it is just and convenient to grant the order.
- Applications are often made without notice to the defendant. The court will hear from the claimant and decide whether to grant the order on an interim basis.
- Once granted, breach of a freezing order is contempt of court and can result in imprisonment or an unlimited fine.
In fraud and serious civil disputes, one of the most pressing concerns is that by the time a court delivers a judgment, the defendant has moved the money. A freezing order addresses this by preventing a defendant from dealing with their assets while litigation is ongoing, protecting the value of any eventual judgment before it is even given.
This article explains how freezing orders work in civil fraud cases, what the court requires before granting one and what happens after an order is made. Our dispute resolution solicitors at Osbourne Pinner offer a free 30-minute consultation and can advise on whether a freezing order is appropriate in your case.
What Is a Freezing Order?
A freezing order is an injunction made under section 37 of the Senior Courts Act 1981. It prevents a defendant from disposing of, dealing with or diminishing the value of their assets up to a specified value while proceedings are ongoing. The order can apply to assets within England and Wales or, in more complex cases, worldwide.
Freezing orders are also known as Mareva injunctions, after the 1975 Court of Appeal decision in Mareva Compania Naviera SA v International Bulkcarriers SA that established the jurisdiction. They are one of the most powerful tools available in civil litigation because they act quickly, before the defendant has time to react.
When Are Freezing Orders Used in Fraud Cases?
Freezing orders are particularly common in civil fraud claims: cases where assets have been misappropriated, where there are allegations of dishonest dealing or breach of fiduciary duty, or where a defendant is suspected of actively trying to put assets beyond the reach of creditors. They are also used in commercial disputes where there is reason to believe the defendant will not satisfy a judgment voluntarily.
The order does not transfer ownership of assets to the claimant. It simply freezes them in place until the court can determine the dispute on its merits. If the claimant wins, the frozen assets provide a fund from which the judgment can be satisfied. If the claimant loses, the defendant is released from the order and may claim damages if the freeze caused them loss.
What the Court Requires Before Granting a Freezing Order
The test for a freezing order has three parts, each of which the applicant must satisfy on the evidence.
A Good Arguable Case
The claimant must show they have a good arguable case on the underlying claim. Not proof that they will win, but enough substance to show the claim is more than speculative. In fraud cases, this usually means demonstrating the core facts of the fraud with evidence: documents, transaction records, correspondence or witness statements.
A Real Risk of Asset Dissipation
The claimant must also show there is a real risk the defendant will move, hide or spend the assets if not restrained. The court looks at evidence such as recent unexplained asset transfers, a history of dishonesty, connections to offshore accounts, or conduct after the claimant raised concerns. A mere suspicion is not enough. There needs to be objective evidence pointing to a genuine risk.
Just and Convenient
Finally, the court considers whether it is just and convenient to grant the order, weighing the potential harm to the claimant if no order is made against the impact on the defendant of having their assets frozen. The claimant must give a cross-undertaking in damages, meaning they agree to compensate the defendant for any loss caused by the order if the claimant ultimately loses the case.
How to Apply for a Freezing Order
Freezing order applications are almost always made without notice to the defendant. If the defendant were told in advance, the purpose of the order would be undermined: they could move assets before the freeze takes effect. The application is made to the High Court, which can grant an interim order at a without-notice hearing based on the applicant’s evidence alone.
Because the application is made without the other side present, the duty of full and frank disclosure is particularly strict. The applicant must volunteer all material facts, including anything that might go against their case, or risk the order being set aside. The court takes a serious view of non-disclosure.
Once an interim order is granted, a return date is fixed, usually within a week or two, at which the defendant can appear and argue that the order should be discharged or varied. At that hearing, the court revisits the decision with both sides present.
See also: Civil Fraud and Asset Recovery
What Happens Once a Freezing Order Is Made?
After a freezing order is granted, it must be served on the defendant and on any third parties who hold relevant assets, such as banks. Third parties who are aware of the order and take steps that assist a breach of it can themselves be in contempt of court.
The order will usually contain a provision allowing the defendant to spend a reasonable amount on living expenses and legal costs, to prevent it from being used oppressively. The defendant must also disclose details of all their assets worldwide so the claimant knows what is within the scope of the freeze.
Breach of a freezing order is contempt of court. The consequences can include imprisonment, an unlimited fine or, where a third party assists the breach, separate proceedings against that party.
Speak to a Dispute Resolution Solicitor about Freezing Orders
Freezing order applications move fast and the evidential requirements are demanding. An order obtained on inadequate evidence, or without proper disclosure, risks being set aside at the return date. That wastes costs and alerts the defendant. Getting the application right from the outset matters enormously.
At Osbourne Pinner, our dispute resolution solicitors advise on freezing order applications and other emergency civil remedies in fraud and commercial disputes. We can assess whether the threshold is met in your case, prepare the without-notice application and represent you at the return date hearing.
Please note that this article is for informational purposes only and does not constitute legal advice. We always recommend speaking to a qualified solicitor for advice tailored to your specific circumstances.
We offer a free 30-minute consultation to discuss your situation. You can speak with us via video call or visit our offices in Harrow, Canary Wharf, Piccadilly Circus or Manchester. To arrange your consultation, call 0203 983 5080, email [email protected] or complete the form below.
