Freezing Injunctions Notes

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...

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