The Court held in UL v. BK  EWHC 1735 that the test for a freezing order involves establishing proof of an intention to dissipate assets in such a way as to frustrate a judgment or order. Applications must be supported by solid evidence of a real risk of dissipation. Affidavits asserting belief in, or the fear of, likely default have no probative value unless the sources and grounds of that belief are set out. This requirement is vitally important where the affidavit or statement is being used to support a freezing application, and especially so where the application is made ex parte.
The judge was greatly concerned about the widespread abuse of the principles governing without notice applications and held that an application may be made without notice only where there is exceptional urgency. Except in cases where it is essential that the respondent must not be aware of the application, the applicant should take steps to notify the respondent informally of an application.
All without notice applications place a high duty of candour or a duty of full and frank disclosure on the applicant who must not only state his or her own case, but also the possible demerits. An applicant should also be truthful about the sources of evidence.
The judge explained that on account of the severity and potential unfairness of a freezing order, applicants must respect important safeguards. In order to guard against the approach in the instant case being followed in the future, the court outlined the following safeguards:
- an order will not be made unless the applicant produces evidence which shows that he has a very strong case;
- the evidence must be served on the respondent with the order;
- the order must include a cross-undertaking in damages;
- the order must include an express right to the respondent to apply to discharge on short notice;
- the order must include a return date so that the issue can be brought back for review inter partes as soon as possible; and
- there must be an explicit provision allowing the respondent access to sufficient of his funds to pay his reasonable legal expenses.
All these safeguards are intended to offer some protection to the respondent.
Finally the court reiterated important principles about obtaining and using documents belonging to the other party to support an application for a without notice freezing order and held that it was unlawful for one party to breach the other’s privacy by “furtively copying documents whether they exist in hard copy or electronically”.
Click here for a copy of the judgment.