Freezing orders - a good strategic move in the Plaintiff's arsenal
When you bring proceedings against a Defendant you need to consider the commercial reality of the situation as well as the legal merits of your case. A victory in Court is hollow if the Defendant has hidden or dissipated assets and cannot pay the judgment debt.
One extremely useful tool in a Plaintiff's arsenal is a freezing order. Although they are not granted lightly, when they are granted it is a very effective method of ensuring that the Defendant has sufficient assets to satisfy any judgment amount ordered against it.
What is a freezing order?
It is an order by the Court that the Defendant cannot deal with specific assets up to the amount claimed by you. It prevents the Defendant from moving assets and funds overseas or transferring them to different entities. The purpose is to ensure that any judgment you receive can be satisfied by the Defendant.
There is usually a carve out to allow the Defendant reasonable living expenses and the ability to pay legal fees.
What are the criteria for obtaining freezing order?
Every case turns on its own facts however the Court looks specifically at the following:
- That there is an arguable case against the defendant. You will need to provide the Court with sufficient evidence for the Court to determine this. The evidence is provided by way of an affidavit which outlines the evidence in your case and exhibits the relevant documents.
- That there exists a real risk of the Defendant concealing or disposing of or removing from the Court’s jurisdiction its assets, in order to avoid satisfying an adverse judgment against it. The onus of proving the risk rests with the Plaintiff. The risk must be real - that is more than a suspicion. You will need to provide evidence to the Court that there is a real risk of disposition or removal of assets from the jurisdiction.
Can the defendant dispute the orders?
Yes. The orders are usually made without notice to or in the presence of the Defendant. As the Defendant is not present in Court, the Plaintiff has a duty to provide the Court with all the relevant information - whether it helps or harms its case.
If satisfied that there are grounds to warrant a freezing order, the Court will usually make an interim order freezing the Defendant's assets until a hearing date where the defendant can present evidence and arguments as to why ongoing freezing orders should not be made.
Take home points
Freezing orders are a drastic remedy and the Court does not grant them lightly. Where there is evidence that defendant may be trying to hide or remove assets from the jurisdiction, it is a very effective weapon for a Plaintiff.
As part of assessing a claim against a Defendant, a Plaintiff should not just assess the legal risks of litigation, but also consider any behaviour that indicates that the Defendant has assets or is hiding assets in order to avoid satisfying a judgment made against it.
If a freezing order is made against you, you should immediately seek legal advice as to whether there are grounds to overturn the orders.
If you would like to discuss freezing orders in relation to your own situation, please contact Partner Catherine Ballantyne.