A Bank's Guide To Freezing Orders

In this article we take a detailed look at freezing orders. Of most concern to lenders will be the obligations that fall on them - as bankers to the respondent which is the subject of the freezing order - when dealing with the respondent's assets, for example in relation to drawings under a loan facility and permitting payments out of a frozen account.

What is it?

A freezing order (or freezing injunction) is an injunction granted by the High Court to restrain one or more parties from disposing of, dealing with, or diminishing the value of, any of their assets, typically up to a certain monetary limit1. A freezing order may be made in respect of assets within England and Wales (known as a Domestic Freezing Order), or in respect of assets worldwide (known as a Worldwide Freezing Order ("WFO").

A freezing order does not provide any security over the assets frozen, nor does it give the applicant priority over the respondent's other creditors if the respondent becomes insolvent.

Requirements for Grant

Upon receiving an application for a freezing order, the court will exercise its discretion to grant a freezing order only where it considers it just and convenient to do so. The following conditions have to be established for a freezing order to be granted:

1. the applicant must have a cause of action, justiciable in England and Wales;

2. the applicant must have a good arguable case on the merits; and

3. there must be a real risk of the respondent's assets being dissipated.

   Application for a Freezing order

   Applications for freezing orders are made pursuant to Rule 25 of the Civil Procedure Rules of England and Wales, and are generally made to a High Court judge with supporting evidence contained in an affidavit. There is a standard form of order, which provides the starting point for any order sought. An application for a freezing order may be made with or without notice to respondents, but is more commonly made without notice and, if necessary, before a claim is issued.

   Banks and Freezing orders

   A freezing order may be notified to a third party (such as a bank who holds funds on behalf of a respondent) to prevent any attempt by the respondent to deal with an asset. Once notified of a freezing order, a bank is also required to comply with it or otherwise it will risk being penalised and/or in contempt of court.

   If any bank has either 1) been given notice of a freezing order, or 2) been made a party to a freezing order itself, it should carry out...