Frequently Asked Questions - Fraud: For Defendants

Fraud - For Defendants FAQs

 

1) I have just been served with a freezing injunction; can I apply to discharge it?

2) How can I pay my living expenses and legal fees if my assets are frozen?

3) The order says I need to provide a list of my assets immediately and confirm this within 24 hours.  Do I really have to respond this quickly?

4) Do I have to comply with the Order if I have a good defence or grounds to discharge it?

5) What will happen if I breach the injunction?

6) Do I have to respond to the injunction if I am not in the jurisdiction?

7) What do my assets include?

8) Will I breach the injunction by making a legitimate payment to a creditor?

9) Why won’t my bank let me withdraw my permitted weekly spending limit?

 

 

1) I have just been served with a freezing injunction; can I apply to discharge it?

A freezing injunction (also known as a freezing order) will usually contain a provision expressly allowing the Defendant to apply to discharge the order. This application should be made at the return date (normally 7-14 days after the “without notice” hearing date when the injunction was granted), and if more time is required an adjournment of the return date hearing should be sought. If you agree at the return date hearing that the order should continue, then it can only be discharged if there is a material change in circumstances.

The grounds for discharging a freezing injunction are that the Claimant does not meet the criteria for having obtained it, or they have not complied with their duty of full and frank disclosure and failed to tell the Court some material fact at the without notice hearing, which would have lead the judge to decline to make the order.

There are tactical considerations involved in considering whether to apply to discharge. These include whether the Court is likely to simply make a new order; whether you want to be forced to set out your case at a very early stage and under time pressure; whether your resources are best deployed in making such an application; the likely impact of the order on how you are viewed by the Court; and whether the injunction is seriously hampering your ability to carry on business or conduct the litigation.

See our related blog, How can I challenge a freezing order over my assets?

2) How can I pay my living expenses and legal fees if my assets are frozen?

The order should provide that there is an exception to allow you to spend a reasonable sum on legal fees, and a fixed weekly limit on your ordinary living expenses. This is subject to the proviso that you must first tell the Claimant’s solicitors where the money is to come from. Practically this means you will first have to comply with the disclosure obligations in the freezing order requiring you to disclose your assets.

It is possible to apply to vary the terms of the injunction if the weekly spending limit is insufficient for your needs. This is a very common application made by a defendant who has been served with a freezing injunction. It must be supported by evidence to show what your requirements are. This would include bank statements showing direct debits, bills and invoices. The injunction is not intended to prevent you from living your normal life, but instead to prevent unusual dissipation of your assets. 

3) The order says I need to provide a list of my assets immediately and confirm this within 24 hours.  Do I really have to respond this quickly?

Yes. You will be in breach of the injunction if you do not. You are permitted to take legal advice before complying, and often an extension of time will be sought by your lawyers, particularly if the task is one which will take some time.  Absent an extension of time being agreed or ordered by the Court if you fail to comply you risk being in breach of the injunction. Any application or request for an extension of time should be supported by evidence to demonstrate why it will take longer than allowed for in the order.

If you comply late without having obtained an extension of time it is prudent to seek one retrospectively either from the other side by consent or from the Court.  This is likely to be granted if it appears that you have fully complied and if you have a good reason for any delay.

4) Do I have to comply with the Order if I have a good defence or grounds to discharge it?

Yes. It is necessary to comply with the disclosure obligations even if you issue an application to discharge the Order. Until the Court hears that application and discharges the injunction you must comply with its terms or you will be in breach.

The time periods for compliance with the disclosure obligations are usually very short. Practically speaking it is very difficult to prepare and issue a discharge application before these time periods expire, so it is almost always better to properly comply with the disclosure obligations and then focus on any application to discharge. This application is likely to be viewed more favourably by the Court if you are not in breach of the injunction.

5) What will happen if I breach the injunction?

If you do not comply with the injunction either by failing to do things you are required to do by a certain time, or doing things you are prohibited from doing, you will be in breach and this is a contempt of Court. The Court takes a very dim view of parties failing to comply with its orders, and it has teeth and will use them.

If you are in breach the Claimant is likely to make an application for your committal to prison for contempt, and the Court has the ability to make such an order, with a maximum prison sentence of 24 months. The Court has demonstrated an appetite to make committal orders up to the maximum sentence in serious cases.

The Claimant could also seek an order for your cross examination on your asset disclosure, an order that you hand over your passport to the Claimant’s solicitors and/or an order debarring you from defending the proceedings if you are in breach of your obligations under the Order.

6) Do I have to respond to the injunction if I am not in the jurisdiction?

This will depend whether you are out of the jurisdiction for a short time or whether you are resident out of the jurisdiction. If you are only way for a short time you must respond.

If you are resident out of the jurisdiction this may depend on whether you were properly served with the injunction and/or if the civil proceedings accompanying the injunction were properly brought in England and Wales. You may be able to dispute the jurisdiction of the English Court, however, because the time periods for complying with a freezing injunction are so short you may need to comply with the disclosure obligations and then seek to challenge jurisdiction.

Whilst the English Court cannot compel you to come to the jurisdiction to face a committal hearing, there will be a significant risk that you would be arrested if you ever came to England and Wales in the future. Failing to comply with the injunction will also harm your prospects of applying for its discharge, and possibly also your ability to successfully defend the claim. If you have assets within England and Wales these will be at risk if a judgment is obtained and enforcement proceedings brought whether or not you come into England and Wales.

7) What do my assets include?

The definition of assets obviously includes those which are in your name, whether sole name or joint names. This includes monies in the bank, real property, vehicles, jewellery.

It also includes assets not in your name which you have the power to dispose of or deal with as if they are your own. This would include the proceeds of loan agreements, but not the right to borrow under a facility and a trust of which you are the beneficiary. When complying with the disclosure obligations it is necessary to ensure you disclose all your assets which are properly discloseable, and often detailed legal advice is necessary to determine this.

8) Will I breach the injunction by making a legitimate payment to a creditor?

Yes, unless you have varied the order to permit such a payment to be made.  Any payment without the sanction of the Court or the consent of the Claimant that is either outside of the weekly spending limit for your living expenses or is a business debt, would be a breach. There is a provision in the order for third parties affected by the order to apply to the Court for its variation or discharge of parts of the order which affect that person. This permits a genuine creditor to apply to the Court for permission for the payment to be made. 

9) Why won’t my bank let me withdraw my permitted weekly spending limit?

When the Claimant obtains the freezing injunction it will be served on your bank(s) and the bank(s) will freeze your accounts entirely. This is because the bank might be liable to the Claimant for any loss if it permits a breach of the injunction by allowing you to use your monies once it has notice of the injunction. The most effective way of ensuring compliance with the injunction is to prevent any withdrawals at all. This is despite there being protections for banks built in to the order to the effect that if the payment appears to be permitted by the order the bank does not have to make any further enquiry.

Usually before making any payments the bank will require the Claimant’s solicitors to confirm in writing that a particular payment is permitted. The Claimant’s solicitors will be reluctant to do this if they believe that you have not properly complied with the disclosure obligations; the Claimant will assert that until all of your assets have been disclosed they cannot police the adherence to the terms relating to the exceptions to the order permitting legal expenses and living expenses to be paid.

Once the procedures have been put in place for the payments out of your account pursuant to agreement with the Claimant’s solicitors the process is normally easier and the banks are more comfortable in allowing payments to be made.

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