Jersey
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes, freezing orders are available in Jersey and their effect is that the respondent is prohibited from dealing with the assets referred to in the freezing order (either within the jurisdiction or worldwide) until a specified time (or further order of the Court).
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. The Court typically also requires the respondent to provide disclosure in an affidavit of the nature, value and location of their assets.
3. Briefly what is the relevant legal test?
(i) The applicant has a good arguable case in the underlying substantive claim or prospective claim;
(ii) the respondent has assets, which may be within Jersey or (in the case of a worldwide freezing order) outside Jersey (although the Court will generally exercise greater caution in granting relief in respect of assets overseas unless there is clear connection with Jersey);
(iii) there is a real risk of unjustified dissipation of assets; and
(iv) it is just and convenient to grant the freezing order.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The application can be determined on the papers (that is, without a hearing), though the applicant’s lawyers may attend the judge in chambers to assist further if required. An application can be made on, or without, notice to the respondent. The applicant must file the following documents with the Court: the pleadings with a draft form of the order sought; the evidence upon which the applicant relies (in affidavit form together with exhibits); and a skeleton argument.
If an application is made without notice to the respondent then the applicant has a duty of full and frank disclosure and if there is any ex parte hearing (a hearing without notice) then the applicant’s lawyer must prepare a full note, to be shared with the respondent upon request, and there will be a return hearing at which the respondent can challenge the order (assuming it is made).
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes, the applicant has to provide a cross-undertaking in damages to the respondent. In certain circumstances, the Court may order that the applicant provide security to reinforce the cross-undertaking.
6. Can it be sought against third parties?
Yes, a third party to the underlying proceedings or prospective proceedings may be made a party to a freezing order where there is good reason to suppose that its assets are in fact the assets of the defendant in the underlying litigation, or will be available to the defendant to meet a judgment or arbitral award. For example, banks and financial institutions are commonly joined as a “party cited” (i.e. an innocent third party). Any third party joined as a party cited which has notice of the freezing order will be bound by its terms.
Anyone who is on notice of the order and assists or permits the defendant to breach it risks being held in contempt of Court. The exception to this is third parties who are outside Jersey. A worldwide freezing order will generally only affect third parties outside Jersey if it has been declared enforceable by their local Court.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets provided they are not perishable, whether within the jurisdiction (a domestic freezing order) or outside (a worldwide freezing order).
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to commencing the claim (although the Court will expect the applicant to issue its claim promptly afterwards) or following judgment to assist with enforcement.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. The order will generally provide that the respondent may deal with their assets:
(i) above a specified value;
(ii) in the ordinary and proper course of business;
(iii) up to a particular limit per week for ordinary living expenses; or
(iv) for legal expenses.
12. What happens after a freezing (or equivalent) order is granted?
The applicant will typically notify third parties (such as banks) of the freezing order when they might hold the respondent’s assets. Assuming the original order was obtained without notice (as it often will have been), there will be a return hearing, at which the respondent may challenge the order.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Usually, the Court decides who will pay the costs of the application at the final determination of the underlying litigation.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) A third party is not prevented from exercising any rights of set-off arising prior to its notification of the freezing order.
(ii) A third party does not need to enquire as to the application of any money withdrawn by the respondent if the withdrawal is permitted by the freezing order.
(iii) A freezing order only affects third parties outside of the jurisdiction in certain circumstances.
(iv) As regards assets outside of the jurisdiction, a freezing order does not prevent a third party from complying with (a) what it reasonably believes to be its obligations under the law of the country where the assets are located or the law of any contract between itself and the respondent or (b) any orders of the Courts of the country where the assets are located.
(v) Applicants undertake to pay the reasonable costs of any third party which have been incurred as a result of the order, and to compensate them for any loss caused by it.
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent who breaches a freezing order may be held in contempt of Court and may be imprisoned, fined or have their assets seized. A third party may only be in contempt of Court where they knowingly help or permit the respondent to breach the terms of the order.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
No, but anyone who knows of the order and assists or permits the defendant to breach it will risk being held in contempt of Court.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, in principle, although subject to the laws of the relevant jurisdiction.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
It is not possible to have a foreign freezing order recognized or enforced in Jersey. However, the Royal Court will readily make freezing orders which mirror those obtained in other jurisdictions, provided that it is satisfied that to do so is a proper exercise of its powers.
Contact
Niall MacDonald Partner Appleby Global St Helier, Jersey nmacdonald@applebyglobal.com www.applebyglobal.com
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