A freezing order, or Mareva injunction, is a mechanism that can be imposed by a court to freeze another party’s assets. A party may apply for a freezing order prior to the commencement of, during, or after court proceedings have concluded.
By freezing a party’s assets, it is intended that the risk a judgment will be wholly or partly unpaid will be minimised. This risk may be diminished as a freezing order prevents a party from removing, disposing of and dealing with or diminishing the value of their assets. Freezing orders are typically made ‘ex parte’, or without notice to the defendant, with the hope of preventing a party from depleting or removing their assets from the relevant jurisdiction after the main legal claim is started. An application for a freezing order is one of the few occasions in law where the element of surprise is accepted. A freezing order may also assist a successful party to enforce a judgment against the assets of the unsuccessful party.
Freezing orders are typically made ‘ex parte’, or without notice to the defendant, with the hope of preventing a party from depleting or removing their assets from the relevant jurisdiction after the main legal claim is started.
Ultimately, the court has a discretion about whether to grant a freezing order. As a freezing order substantially restricts a party’s personal proprietary rights, they are not granted lightly. The court must be satisfied the applicant has a good arguable case and that there is a real risk the other party will remove or diminish the value of their assets, potentially frustrating any judgment made against them. The applicant may also be required to provide an undertaking as to damages to compensate the party the subject of the order, should the applicant’s claim ultimately fail. The value of assets frozen should not exceed the maximum amount of the applicant’s claim, inclusive of costs. An application may also be made to a court to vary or remove an order, should the matter have settled outside of court or the value of the claim has changed. A freezing order may also cease if, subject to a court order, the frozen party deposits a specified sum of money with the court.
As freezing orders can be made against third parties, assets frequently subject to freezing orders include bank accounts. A freezing order is also an effective method of protecting intellectual property. For example, the court can freeze property such as client lists. It should be noted, however, that a freezing order will not cover assets or dealings with assets for legitimate purposes, such as payment of ordinary living or businesses expenses. A freezing order is a powerful tool that, if used correctly, can ensure a party’s assets are protected and rights upheld. Should a party subject to a freezing order violate the order, they may be found in contempt of court and punished appropriately. The implications of such an order should not be underestimated.