Think back to when someone owed you money. You’d be concerned if they can convert to cash or liquidate assets before the court sorts things out. That’s where a freezing order, sometimes referred to as a Mareva injunction, comes into play.
It would restrict access to assets like bank accounts, shares, and even property until a court decision can be implemented. It’s a common practice for courts to apply this whenever there’s a looming risk, as it enables freezing claims worth millions.
1. Risk of Asset Dissipation Before Judgment
You provide notice, and someone tries to shift funds or liquidate property to move them out of the jurisdiction. That’s a surefire way to lose the opportunity to recover something.
A freezing order essentially prevents that. There are many instances of people attempting to move funds immediately after a claim, only for those attempts to fail. Because of the order, though it might be feasible, those attempts could not be actualised, so those funds remained where they should have been.
2. Disputed Ownership of Assets
During disputes, be it a breakup, contract disputes, or even a fraud claim, one party might secretly dispose of assets, leading to the other party incurring unjust losses. A freezing order preserves the status quo. No transfers, no clandestine sales can take place. Just the other day, I advised someone whose business partner was trying to transfer shares just before the hearing for the case. The order prevented any such movement, and everything remained at a standstill.
3. Enforcing a Court Judgment
Imagine winning a case in court only for the other party to withdraw or cancel their payment method to avoid paying you. What benefit comes from winning a court case if the funds can’t be accessed? A freezing order prevents withdrawal until payment is settled. I recall a case where a defendant tried to remove £50,000 due to losing a court case, my ability to impose freezing orders was a lifesaver.
4. Preventing Concealed or Fraudulent Transfers
Many people attempt to conceal money that creditors would use against them, funds truly marked for a person can be masked with the use of stubborn friends, offshore accounts, or shell companies, basically, business firms with the sole intent to evade taxes.
With such accounts and their use, the freezing order would not be effective. There was a case I had where a person transferring money to accomplices, the order was able to activate mid-transfer.
5. Securing Assets During Fund Tracing
Tracing funds involves going through a lot of unnecessary processes, and that costs a lot of time. A freezing order secures money that is still available to utilise, while funds that are misplaced or temporarily lost, using or attempting to misplace funds using the freezing order, can protect funds until the order is forced to hit. If business funds or investments go missing, the order freezes the funds.
What Courts Require to Grant a Freezing Order
Judges do not appear to give these away lightly. They seek a reasonable case, a clear risk of damage, and equity. Full disclosure, no concealing or exaggerating, is needed. To prevent a potential flight risk, the court may issue the orders on an ex parte basis, that is, without informing the opposing party in advance.. If the applicant is found to have misrepresented or overstated loss and risk, there are severe costs and punitive measures that the court can take against them or undo the order entirely.
What Types of Assets Can Be Frozen
It isn’t only bank accounts that get restricted, share holdings, properties, investments, cryptocurrencies, vehicles, and art pieces may also face restrictions if they fall under the respondent’s control. In cross-border disputes, some courts issue global orders that restrict country-wide access to the assets. This can also extend to properties that, although held under another individual’s name, are controlled by one singular person.
What Happens After the Freezing Order is Issued
Upon service of the order, the targeted individual is required to submit a detailed sworn asset declaration under oath. It is done in a matter of days, typically within a few days. In instances of incorrect granting, courts can seek orders of compensation, legal fees, or even penal sanctions. This serves to ensure that the system is not abused by the controlled applicants. Instead, this constitutes a safeguard.
Why Freezing Orders Are Increasing
We observed a trend, an increase in the use of such orders. In the report, HMRC increased the use of account freezing orders by more than 170% from 2021/22 and 2023/24. This is a direct sign of the importance of suspending access to funds.
Why This Matters to You
Finally, in the situation where an argument can be made to suggest that a person might attempt to rapidly conceal or relocate assets before or post court orders, freezing orders enable you to secure control of those assets.
This provides time to carry out the necessary groundwork that would include a search, discussions, or legal assertions. Such actions are made rationally, and not in retaliation, and are based on the desire to ensure the safety of one’s assets.
Conclusion
A freezing order is a focused tool, both legal and just. It prevents erasure of what’s rightfully yours and keeps your claim actionable. In a case where funds or resources you can claim are at risk or have the potential to vanish, your claim is dealt with ethically. It’s a lifesaver.