Case law: Court clarifies when proposed transfer of assets outside the UK justifies a freezing injunction
A litigant should consider applying for a freezing injunction in relation to any assets to be transferred outside the UK by the other side, other than in the ordinary course of living or business, a recent case highlights.
One of the parties to a legal dispute in the UK courts (the other being his brother) lived in Thailand. The other brother asked the court for a freezing injunction over non-UK assets - shares in a Jersey company – owned by the first brother.
A freezing injunction stops a litigant from disposing of or dealing with assets before the dispute ends. Otherwise that party could, if it loses, claim it has no assets to satisfy a judgment against it.
A requirement for an application for a freezing injunction to succeed is that there must be 'a real risk of dissipation of the relevant assets, such that there is a real risk of a judgment in the claimant's favour going unsatisfied if the injunction is not granted'. The second brother claimed an injunction was necessary to stop the first brother from inappropriately dissipating his assets.
The first brother made no secret of the fact he intended to sell the shares and transfer the proceeds to Thailand. However, he argued that this did not affect his ability to pay any compensation and costs awarded against him if he lost, as he would be able to get access to other assets. The injunction should not therefore be awarded.
The High Court said that a freezing injunction would not be appropriate if the transfer was part of the first brother's 'ordinary course of business or living'. However, if it was not, "then an intended transfer to an overseas jurisdiction may provide sufficient basis for an injunction once the court considers its effect on whether the judgment will be met. The hurdle does not appear overly onerous".
Here, there was no evidence the transfer was part of the first brother's ordinary course of business or living. The court also took into account that, in separate legal proceedings about other issues arising from the same dispute, the first brother had tried to put assets beyond the reach of the second brother. This meant there was a real risk that the proceeds of the share sale would be inappropriately dissipated. The court was not convinced that any judgment against him would be satisfied without them. It did not believe that the first brother would be able to get access to other assets as he claimed he would, and there was no evidence of any other steps taken by him to ensure he could satisfy any judgment against him. It therefore awarded the freezing injunction.
Although the first brother had complied with all court orders made in these proceedings, this was not enough of a guarantee that he would not try to dissipate his assets in these proceedings, given his behaviour in other proceedings.
A litigant should consider applying for a freezing injunction in relation to any assets that are to be transferred outside the UK by the other side, other than in the ordinary course of living or business
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