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Mostyn J gives guidance on freezing and search orders in financial remedy cases

Judgment provides examples, principles, safeguards and a warning on ex parte applications

In UL v BK (Freezing Orders: Safeguards: Standard Examples) [2013] EWHC 1735 (Fam), Mr Justice Mostyn has taken the opportunity to provide guidance on the use, necessary safeguards and form of freezing and search orders in financial remedy cases. The President authorised Mostyn J to promulgate for general use the examples appended to the judgment. The President also approved the guidance (in para 51) set out below.

The judgment also re-states principles established in Tchenguiz & Ors v Imerman concerning the illegal acquisition by one party (in this case the wife) of documents belonging to the other party.

The case concerned an application by a wife for the continuation of an ex parte freezing order granted by the High Court in February 2013. A second order was made which provided that certain documents which belonged to the husband should be handed over to the wife's solicitors and retained in sealed files until further order.

Mostyn J is critical of the practice of applying ex parte for freezing and search orders without justification. He says:

"[F]reezing and search orders are almost invariably made ex parte and, as such, are a violation of the elementary rule of natural justice audi alteram partem....

"The unilateral step taken at the beginning of case echoes down its history. Often the respondent is enraged by the step taken against him and looks to take counter-offensive measures. Every single subsequent step is coloured by that fateful first step. Costs tend to mount exponentially. And even after the lawyers close their files and render their final bills the personal relations of the spouses will likely remain forever soured. A nuclear winter often ensues."

Mostyn J sets out the rules applicable to urgent applications for such orders:

"The requirement of exceptional urgency is expressly stipulated in para 5.1 of FPR 2010 PD 18A. This provides that an application may be made without notice only where there is exceptional urgency; or where the overriding objective is best furthered by doing so; or by consent of all parties; or with the permission of the court; or where paragraph 4.9 applies; or where a court order, rule or practice direction permits. Para 4.9 deals with the situation where a date for a hearing has been fixed, and a party who wishes to make an application at that hearing but does not have sufficient time to file an application notice."

There are appended to the judgment standard examples of freezing and search orders. Mostyn J, with the authority of the President, states:

"The example for the freezing order should be used whether the application is made under s37 of the 1981 Act to a High Court Judge or to a District Judge under s37 of the Matrimonial Causes Act 1973. It will be seen that each example order requires that the reason for giving no, or short, notice is expressly stated on its face. If this, or any other standard term, is not proposed to be included in an order then the departure or omission must be drawn to the judge's attention and must be clearly justified."

In para 51 of the judgment Mostyn J summarises the relevant principles and safeguards:

"i) The court has a general power to preserve specific tangible assets in specie where they are the subject matter of the claim.  Such an order does not necessarily require application of all the freezing order principles and safeguards, although it is open to the court to impose them.

ii) For a freezing order in a sum of money which is capable of embracing all of the respondent's assets up to the specified figure it is essential that all the principles and safeguards are scrupulously applied.

iii) Whether the application is made under the 1981 Act or the 1973 Act the applicant must show, by reference to clear evidence, an unjustified dealing with assets (which would include threats) by the respondent giving rise to the conclusion that there is a solid risk of dissipation of assets to the applicant's prejudice. Such an unjustified dealing will normally give rise to the inference that it is done with the intention to defeat the applicant's claim (and such an intention is presumed in the case of an application under the 1973 Act).

iv) The evidence in support of the application must depose to clear facts. The sources of information and belief must be clearly set out.

v) Where the application for a freezing order is made ex parte the applicant has to show that the matter is one of exceptional urgency. Short informal notice must be given to the respondent unless it is essential that he is not made aware of the application. No notice at all would only be justified where there is powerful evidence that the giving of any notice would likely lead the respondent to take steps to defeat the purpose of the injunction, or where there is literally no time to give any notice before the order is required to prevent the threatened wrongful act. Cases where no notice at all can be justified are very rare indeed. The order of the court should record on its face the reason why it was satisfied that no or short notice was given.

vi) Where no notice, or short informal notice, is given the applicant is fixed with a high duty of candour. Breach of that duty will likely lead to a discharge of the order. The applicable principles on the re-grant of the order after discharge are set out in Arena Corporation v Schroeder at para 213.

vii) Where no notice, or short informal notice, is given the safeguards assume critical importance. The safeguards are set out in the standard examples for freezing and search orders. If an applicant seeks to dis-apply any safeguard the court must be made unambiguously aware of this and the departure must be clearly justified. The giving of an undertaking in damages, whether to the respondent or to an affected third party, is an almost invariable requirement; release of this must be clearly justified."

In para 56 of the the judgment Mostyn J re-states principles established in  Tchenguiz & Ors v Imerman concerning the illegal acquisition by one party (in this case the wife) of documents belonging to the other party.

Philip Marshall QC and Peter Newman  of 1 King's Bench Walk (instructed by Jones Nickolds) represented the wife. Deborah Bangay QC of 1 Hare Court and Dakis Hagen of Serle Court (instructed by HowardKennedyFsi LLP) represented the husband.