Asset freezing orders provide relief against a defendant’s defeating the claimant’s quest for an enforceable judgment through the dissipation of assets. Dissipation does not involve any use or disposal of assets which has the effect of leaving the defendant unable to meet any judgment the claimant may obtain. But to date the received wisdom has been that the defendant need not intend to defeat the claimant’s attempt to obtain an enforceable judgment. This article suggests that it may be time for the courts to give a heavier weighting to any evidence suggesting that this is the defendant’s intention.
If a claimant in civil litigation has a well-grounded fear that the defendant will dispose of its assets to an extent likely to make the enforcement of any judgment the claimant subsequently obtains unenforceable, the claimant may seek an asset freezing order against the defendant.1
The effect of this order is to prevent the defendant from disposing of assets up to the maximum value of the claimant’s claim.2
The order does not provide the claimant with any security for the claim, so the “freeze” over dispositions of assets works for the benefit of all the defendant’s creditors. The order is usually sought without notice to the defendant, due to the concern that notice would bring about the very thing the order is designed to prevent, the disposal of assets.3
A without notice order will be granted until a “return day”, when both parties can be heard as to whether the order should be continued, subject to such terms as the court considers appropriate. Among those terms will be provisions allowing the defendant to spend reasonable sums on such matters as living expenses, and legal expenses in this or other litigation in which the defendant is embroiled, and to make dispositions in the ordinary course of business.4
As the asset freezing order is not intended to confer any security on the claimant, it should not disable the defendant from carrying on its business in the usual way. That would be a clear injustice, both to the defendant and also to those third parties to whom the defendant may justifiably make payment.