On 3 March 2016, the High Court in BCS Corporate Acceptances Ltd and others v Terry and another considered an application to continue a freezing injunction against two respondents. It held that obtaining security over assets was not the purpose of such an order, and there was no basis to grant a freezing injunction against a second respondent who was not party to the proceedings.
In 2013, the applicants had obtained default judgment against Mr Terry, and damages were assessed in May 2015 in the sum of £2.26 million, together with a payment on account of costs of £50,000. Although there was no judgment against Ms Drewett (Mr Terry’s wife), and no proceedings were contemplated against her, a freezing injunction was obtained against both Mr Terry and Ms Drewett, which the applicants now sought to continue. Among the arguments put forward by the respondents, it was submitted that there was no proper basis for continuing the injunction against Ms Drewett given there were no proceedings against her.
May J held that while freezing injunction against Mr Terry was to continue, the injunction against Ms Drewett had been wrongly obtained and was to be discharged ab initio.
The judge commented that the applicants had mistakenly “targeted particular assets in a proprietary way“. As Ms Drewett was simply a third party affected by the proceedings against her husband, it had been wrong to seek to freeze her assets and require her to disclose them in order to “police” the order. The most that could have been done was to identify in the injunction against Mr Terry particular assets which belonged to him, although they were apparently held by Ms Drewett. There was no risk of dissipation by Ms Drewett in respect of the assets she held, and no fresh injunction would be made against her.
The judge commented that “a freezing order is not proprietary relief and obtaining security is not its purpose“, even if that is ultimately the effect the order may have.
This case serves as a reminder that the essential purpose of a freezing injunction is to prevent a respondent from dissipating their assets and frustrating the enforcement of a judgment against them. They operate in personam against the respondent and do not grant security over assets. In applying for a freezing injunction, an applicant must demonstrate that there is real risk of the respondent’s assets being dissipated.