I have been served with a Freezing Order. What do I do?

This short guide is intended to assist individuals who have been served with a freezing order (also known as a 'Mareva injunction' or ‘freezing injunction’).  It is not intended as a substitute for legal advice and if you have been served with a freezing order you should seek specialist legal advice without delay.

Why the order was obtained and what it means

If you have been served with a freezing order without advance notice, it means that the claimant(s) has lodged evidence with the court and appeared before a judge (normally a High Court judge) and satisfied him/her, for the time being, that there is (1) a good and arguable claim against you, (2) that you have assets, and (3) that those assets need to be safeguarded to prevent you from moving, hiding or otherwise dissipating them with a view to frustrating a prospective judgment against you.

What the order does not mean is that you have been found liable for anything, that the court has made any findings in fact or in law against you, or that your assets no longer belong to you. In the meantime, though, there are likely to be significant and immediate consequences to your day-to-day life. Indeed, by the time you are served with the order, your banks will also have been (or will very soon be) served with the order and thus, prohibited in law from allowing you access to your accounts outside the terms of the order.  This is because it is a contempt of court for third parties to assist an individual in breaching a freezing order.

Moreover, although a freezing order should normally entitle you to minimum spending limits for ordinary living and legal expenses, it is often the case that you will not, practically speaking, be able to enforce those rights and access those limits until you have met certain requirements of the order concerning disclosure of your assets etc (see below). In the meantime, your scheduled direct debits and standing orders are unlikely to be processed, automatic transfers between accounts may not take place, etc.

How to respond in the short term

You should immediately instruct solicitors to advise you on your obligations under the freezing order.  Time is very much of the essence.  If the freezing order was taken out without notice to you, sometimes known as on an 'ex parte' basis, (which is normally the case to avoid ‘tipping you off’ and disposing of assets), a further hearing should have been scheduled (known as the “return date”). On the return date, which is often within a week of the original order, the court must consider whether to continue the order and if so, whether any terms should be varied. Although technically it is for the claimant to show that the grounds for the original order are made out, practically speaking it is for you to show why the order should be discharged or varied.  It is your first opportunity to put evidence before the court and explain why this is the case.

Unless (a) you can produce evidence that you have fixed assets that exceed the the value of the freezing order, or (b) you can show that the freezing order was clearly taken out against the wrong person or there was some other obvious mistake, then there is often merit in initially consenting to the continuation of the order for a short period of time, with sufficient provision for living expenses and legal fees.  This is by no means an admission of liability and, if dealt with correctly by your lawyers, should not prejudice either the case against you or your right to seek to have the order/discharged or varied at a later date.   This is particularly so where the priority is to seek access to funds to meet day-to-day living expenses and where more time and funds are needed to mount a proper legal challenge.

The immediate steps that usually need to be taken to comply with the order

You will normally be required, within days of being served with the freezing order, to swear and serve an affidavit disclosing all of your assets with a value above, say, £1,000, including details of your bank accounts, pensions and shares, as well as the value of your home, your vehicle(s), any art or jewellery, etc. and the equity you hold in each item.  Your solicitors will help you prepare the affidavit.  It is important that you are honest in your affidavit as if you are found to have been untruthful this may give rise to contempt of court proceedings (which could result in your fine or imprisonment) and/or damage your credibility/prospects of success in defending the substantive claim/applying for the order to be set aside.

A freezing order may also require you to disclose to the other side details concerning both your income and your monthly expenditures for you to be able to access funds for legitimate ordinary living expenses. Once disclosed to the claimant, your solicitors will usually then need to ensure that the other side provides the requisite information and authorisation to the bank(s) for them to be able to release, on a restricted basis, the relevant accounts.

Whilst these are the most common disclosure features of a freezing injunction, the court has a wide discretion in respect of the orders it can make.  For example, a worldwide freezing order might require a defendant to repatriate funds.  If you are served with a freezing order, you should immediately seek independent legal advice to ensure prompt and appropriate steps are taken to comply with the order and to protect your overall interests in the proceedings.

After you have met these and any other immediate requirements of the order, you can focus your attention on applying to vary or discharge the order and/or on defending the substantive claim (either in court or by way of out of court settlement).

Consequences of not complying with a freezing order

For as long as the freezing order is in place, you must comply with it.

At the top of the freezing order, there will no doubt be a “Penal Notice” warning you that if you do not comply with it, you could be found in contempt of court. The penalty may be a fine, seizure of assets or up to two years’ imprisonment.  A breach could also hinder efforts to apply for a variation or discharge of the freezing order or harm your defence to the substantive claim.

The court takes breaches of freezing orders very seriously. It is, therefore, critical that you fully understand the terms of a freezing order against you and that you comply with them. Failure to do so may have dire consequences.

Can I apply to discharge or set aside a freezing order?

Your solicitors should be able to advise you on whether there are grounds to apply to discharge or vary the terms of a freezing order.  Typically, this will be the case where the test set out above is not met (or ceases to be met), the value of the claim changes or the claimant failed to disclose material facts to the Court at the without notice hearing.  An application to vary or discharge a freezing order should initially be canvassed with the claimant's solicitors to see if there is a scope for agreeing matters by consent (i.e. without a hearing).   If the court finds consent has unreasonably held, this may result in the claimant being ordered to pay your legal costs of the application.

What if a freezing order causes me to suffer long-term financial loss?

A claimant who seeks a freezing order is normally required to provide a “cross-undertaking” (promise) to the court that if it subsequently transpires the injunction was improperly obtained that they will compensate the respondent and any third party that suffers loss as a result of the freezing injunction.  If the Claimant failed to pay such damages they themselves would be in contempt of court.

If you have concerns about a claimant’s ability to pay such damages, you can request that they ‘fortify’ the undertaking by making a payment into court.

Because of the potential draconian consequences of a freezing injunction to both claimants and defendants they are often referred to as a weapon of last resort or a ‘nuclear option’; where a claimant is very confident about their case and prepared to commit significant financial resources to it and provide an undertaking in damages.

Where there are good grounds for questioning the propriety of a freezing order, placing a claimant on notice of a claim for damages (identifying the likely losses) is often a good way of putting pressure on them to consider varying or discharging the order.

My bank accounts are frozen, but I have not been served with a freezing order

If a freezing order has been made against you, it is likely that you will find out about it within days of it being made.  Indeed, your bank may confirm this to you.  If this does not happen this may be because your bank account has been frozen for a different reason.  It is possible for a bank account to be frozen in circumstances where a court has not made any order.  The most common reason for this is that the bank has made a suspicious activity report to the National Crime Agency and has placed an embargo on your account (see our blog here).

There are also other types of court orders that may place restrictions on funds or assets, such as restraint orders, account freezing orders, property freezing orders and charging orders.  Whilst some have similarities with freezing orders, the procedure is different.  Again, it is normally prudent to instruct solicitors as soon as you become aware of them.

If you have been the subject of a freezing order, contact our specialist solicitors by telephoning us on 020 7183 8950 or emailing law@brettwilson.co.uk.