Freezing orders: When are payments made in the “ordinary course of business”?

On 14 October 2015, the Court of Appeal overturned a decision that two payments had been made in breach of a freezing order.

The order prohibited the respondent to the freezing injunction application from dealing with or disposing of any of its assets other than in the ordinary and proper course of business.

The Court held that the judge at first instance had taken too narrow a view in construing this exception and that, in light of the specific facts of the case, the freezing order had not been breached.

Comment:

This judgment serves as a reminder that the underlying purpose of a freezing order is not to give the claimant security for his claim, but to prevent the dissipation or concealment of assets that would otherwise be available to satisfy a judgment.

It also confirms the English courts’ strict approach to the scope of freezing orders. Where the facts suggest the defendant has made repayments in good faith to discharge a pre-existing liability, a court is unlikely to find that the freezing order has been breached.

At the same time, the lower court decision shows that the penalties for breach of a freezing order can be severe, including custodial sentences for those involved, where appropriate.

For further details of the case and our commentary, please click the link below.