#3658 - Freezing Injunctions - Civil Procedure

ESSAY PLAN 12 – freezing injunctions

What is it?

Specialised form of interlocutory injunction

Applied ex parte (without notice).

Where the C expects to recover judgment against the D for a sum of money and it is feared that the D may dispose of assets so that the judgment cannot be satisfied, a freezing injunction may be made to prevent the D from removing assets from the jurisdiction or otherwise dissipating them.

In personam order

Lord Denning (1980) – “the greatest piece of judicial law reform in my time”

First granted by CoA in Nippon Yusen.

Followed by Mareva.

Legitimacy of freezing injunction confirmed by HoL in Siskina.

The Pythia – Lord Mustill: freezing injunctions very population i.e. 20 per month.

Ketchum – can be applied pre or post judgment e.g. where pending an appeal.

Senior Courts Act 1982, s37 – High Court: where just convenient to do so.

Civil Procedure Rules 25

Siskina – Lord Diplock: there must already be a cause of action.

Fourie v Le Roux – the modern view is that in order to avoid injustice the court may occasionally allow a freezing injunction before the action has technically arisen in law if the C has a clearly formulated case for substantive relief.

McGrath (2012) – freezing order is a “sophisticated order where the interests of both parties are carefully balanced and protected by specific provisions, all of which are kept under constant review”. Contrast with proposed European Account Preservation Order could not be greater.

In personam

The freezing injunction is an in personam order restraining the D from dealing with his assets in a particular way, on pain of being guilty of a contempt of court (Uzan (no 2)). On the face of it only affects that one person.

Gray – Morritt J: “it is not the purpose to give the creditor who obtains it security over any particular asset of the D or a priority over other creditors of the D”.

Cretanor Maritime – the relief does not give the applicant any proprietary interest in the D’s assets.

Galaxia – freezing order set aside where unreasonable impact upon the freedom of action of innocent third parties.

Mareva – Roskill LJ: judges sometimes used language of proprietary claim just as this judge did refer to the C’s claim of a “lien”.

Seaward – injunction against third party promoter to not act to undermine injunction.

Z v A – Eveleigh LJ: third parties (e.g. banks) who have notice of a freezing injunction will be guilty of contempt of court if they knowingly assist the D in disposing of assets in breach of the order.

Searose - Non parties are entitled to an indemnity from the applicant for expenses incurred in carrying out the injunction.

Customs and Excise Commissioners v Barclays Bank – A bank which makes payment out in breach of a freezing injunction may be held in contempt but will not be subject to a claim in negligence by the C should there subsequently be insufficient assets remaining in the account to satisfy the judgment. Lord Binghamd: no duty is owed by a litigating party to its opponent and so it would be stange and anomalous if the bank were liable to the C. Bank will nopt be able to compensate the applicant on the basis of negligence.

Hadkinson – assets held by the D upon trust for a third party will not be caught by a general reference in a freezing injunction to the D’s assets.

Solodchenko – the current standard form of freezing injunction in commercial court is broad enough to catch assets held on trust. The presumption is that the order does catch all assets in D’s name but then can come forward to demonstrate that acts belong to someone else. Patten LJ: cautioned against over-zealous use of the Commercial Court’s wider form of wording in situations where there was no clear reason to suspect that the respondent was acting oter than as a good faith nominee or trustee for others.

Chabra – Mummery J: courts prepared to grant freezing injunctions directly against third party transferees of the D’s assets even when the 3^rd party is not involved in the substantive proceedings. Assets held by third parties for and on behalf of the D. Necessary to establish a good arguable case that the assets held by the third party were beneficially owned by the D.

Yukos – this can extend to a case where 3^rd party companies were used as vehicles for payments to the D but without actually holding the payments for the D beneficially. The companies received payments only for the purposes of paying them to the D and had no other role. McGarth (2012) is favourable of this extension of the Chabra jurisdiction.

Procedural safeguards

Tamaruya (2010 - The claimant seeking freezing injunction normally proceeds ex parte, without giving the defendant the initial opportunity to present his case. The defendant, taken by surprise, might find himself unable to secure funding to keep the business running, or might suffer irreparable damage to his reputation. The procedure could be used oppressively by creditors to put undue pressure on debtors. Freezing orders could also implicate those who are not parties to the litigation.

American Cyanamid – C must satisfy that (i) there is a serious issue to be tried and (ii) that the balance of convenience favours the grant of the injunction.

Z v A – it must be likely that the C will recover judgment against the D for a freezing injunction.

Ralston (2010) thinks the ‘good arguable case on the merits’ threshold is “not a particularly effective safeguard” – this is more lax than the Anton Piller order which requires “an extremely strong primary facie case”.

The Niedersachsen – there must be a real risk both that the D will deal with his assets to put them beyond C’s reason and so any judgment in C’s favour will remain unsatisfied. No need to demonstrate a subjective intention to avoid meeting a judgment.

The Pythia – the C is under a duty to make full and frank disclosure to the court of all material matters. If this is not done the freezing injunction can be set aside (The P – the C and D had been in touch about possibility of freezing injunction – takes away the element of surprise!). BUT not every single lack of disclosure will be material (Sidhu No 1 – Walker LJ: “full and frank”).

Third Chandris – the C must give the D an undertaking in damages if his case fails at the full hearing (can be banked up with bank guarantee) cf applications by state agencies (Hoffmann La Roche).

Manterfield – CoA upheld decision to make freezing order without requiring the C to give a cross undertaking as to damages. First case that the dispensation has been extended to the arm of a foreign government. Ralston (2010) thinks this is a wrong dispense of a “fundamental safeguard that ought to have been retained for this draconian interim remedy”

Zuckerman strongly criticised the decision of Hoffmann La Roche – requiring a cross undertaking is a matter of elementary justice and procedural equality, irrespective of the identity of the applicant. Yet, Ralston (2010) thinks the extension of the case is still unwarranted.

Meagher – the cross undertaking’s importance described as “immense”. It represents the only possibility of remedy for the D in the event that she sustains loss by reason of the freezing order but is vindicated.

Re First Express – Hoffmann J: the court must be satisfied that any damage which the respondent may suffer through having to comply with the order is compensatable under the cross-undertaking or that the risk of uncompensatable loss is clearly outweighed by the risk of injustice to the applicant if the order is not made.

Lloyds Bowmaker – if obtains freezing injunction, the C is under an obligation to proceed as quickly as possible with the action.

C must return to court for the inter partes review – court will then decide in the presence of the respondent whether to continue the injunction. The respondent has the right to ask the court to vary or discharge the injunction (PC)

Camdex International (no. 2) – if all of D’s assets are covered by the order, allowance will be made for the D to meet daily living expenses or contractual obligations if they’re a corporate body as in this case.

Phillips LJ: the purpose of freezing injunction is to prevent dissipation of assets available for execution of a judgment, and not to pressurise the D into paying a judgment debt

Aldous LJ: nor is it to obtain priority over other creditors if the D is insolvent

DSS v Butler – freezing injunction will not be granted where statute already provides comprehensive powers of enforcement.

Issues

Grupo Mexicano – in America: Justice Scalia (majority) states that it is a historic principle that pre-judgment the D has no interest at all in D’s property and fears that it would generate abusive applications. Issues: prevents from using own money, pre-judgment and usually pre-commencement, only need to show arguable case and no notification to the respondent. England has taken the minority opinion, per Justice Ginsberg, who agrees with anxieties but states they can be overcome by procedural protections. = majority: federal courts have no power to grant an interlocutory injunction to restrain a D from disposing of its assets pending the determination of the action.

Justice Ginsburg: “the remedy at law is worthless absent the provisional relief in equity’s arsenal. Moreover, increasingly sophisticated foreign-haven judgment proofing strategies, coupled with technology that permits the near instantenous transfer of assets abroad”.

Saggers – injunctions routinely and quickly issued by single judge and can even be granted over the telephone.

JSC BTA Bank – a disclosure...