Author Rob Adam

Issue Spring 09

Pub IoD

The current economic climate means that credit control and the chasing of unpaid debts represents an ever greater issue for all businesses.

Worse still are situations where debtors seek to transfer their assets either to another person or company or abroad in the hope of avoiding losing those assets when a judgment is obtained.

In such circumstances it is possible to make an application to the High Court for what is called a freezing injunction (previously known as a Mareva injunction). The basis upon which such application is made is that the claimant has a good arguable claim against the debtor and can also establish that there is a real risk that the debtor will dissipate or conceal his assets so as to defeat any judgments.

If these hurdles can be overcome, and the court is satisfied that the balance of convenience lies in favour of granting an injunction, then the court can make a freezing injunction. It is crucial to provide evidence of a real risk of assets being dissipated. Without such evidence the court will not make an order.

This is a draconian order that prevents the debtor from dealing with or selling assets pending the outcome of the trial. The order can specify particular assets, such as a property or bank account, or may cover all of the debtor’s assets, whatever they may be, and will normally require the debtor to Inevitably, there will be debtors who refuse to pay, or simply ignore, your demands for payment, requiring the issuing of court proceedings. produce an affidavit within a few days of the granting of the order setting out to the court what assets the debtor holds.

The beauty of the freezing injunction is that it is made without notice, which means that no warning is given to the debtor about the application.

The court will expect you to provide an undertaking to pay damages to the debtor if the court decides at the end of the case that the freezing injunction ought not to have been granted and while this can be an expensive application, it remains a formidable weapon within any litigator’s armoury. It has the element of surprise; it puts immediate pressure on any debtor to pay or negotiate sensibly and provides you with an early significant tactical advantage in the proceedings.

The freezing injunction is a remedy we expect to use more for clients in what may be difficult trading conditions ahead of us

Rob Adam

Partner & Head of Dispute Resolution

Tel: 01284 762331

Email: rob.adam@ashtonkcj.co.uk

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