South Africa
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. A Court will grant a freezing order, locally known as an anti-dissipation interdict, where there is evidence that the opposing party is concealing, dissipating, secreting away or diminishing the value of the assets with the intention of defeating a claim to be instituted or already instituted against them. Where a Court order is granted, it prevents the opposing party from dealing with the assets referred to in the freezing order for so long as the interim order remains in effect or until made final. An anti-dissipation interdict is not a claim in itself but is a means to ensure that the party is able to enforce a potential judgment against the counterparty. Thus, preserving the integrity of the judicial process by preventing a judgment from being rendered nugatory.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. The party seeking the order may ask the Court to order that:
(i) the opposing party disclose under oath all of their assets, including the nature, value, and location thereof; and/or
(ii) the opposing party disclose under oath any assets that they acquire from the date of the order up until the date of the final judgment in the action; and/or
(iii) a receiver to be appointed and to take possession and/or delivery of the assets.
3. Briefly what is the relevant legal test?
A person seeking to obtain an anti-dissipation interdict must first satisfy the requirements for an interdict, namely:
(i) that they have a prima facie right;
(ii) there is a well-grounded fear of irreparable harm should the interdict not be granted;
(iii) there is no satisfactory alternative remedy; and
(iv) the balance of convenience must favor the granting of the relief.
In addition, the person seeking to obtain an anti-dissipation interdict must satisfy the requirements specific for an anti-dissipation interdict, namely, the person against whom the order is being sought:
(i) has no bona fide defense against an apparently valid claim by another (the applicant);
(ii) must have assets within the jurisdiction of the Court; and
(iii) must have the intention of defeating the claim, or to render it hollow, by disposing of the assets in any way (i.e. concealing, dissipating, or secreting funds or diminishing the value of the assets).
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
A party can institute the application on notice to the other party, alternatively without notice. In the circumstances where it is brought without notice, there is a higher duty on the applicant to place all the relevant facts (even those which are against them) before the Court. Any person against whom an order is granted without notice, may anticipate the return day upon delivery of not less than 24 hours’ notice. These applications are generally brought on an urgent basis.
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?
There is no requirement for the party seeking the order to provide any form of security or to commit to compensation if their claim is ultimately unsuccessful. However, the Court may make an order to such an effect.
6. Can it be sought against third parties?
Yes, the purpose of such an order is to freeze or preserve an asset in issue between the parties, even though the assets are in possession of a third party. Should a third party have a direct and substantial interest in the asset sought to be preserved, then notice must be given to such third party of the application. For example, where a bank has a mortgage bond over immovable property then notice must be given to the bank as an interested party.
7. What assets are covered by a freezing (or equivalent) order?
Any corporeal and incorporeal assets, including both moveable and immovable assets, provided they a within the jurisdiction of the South African Court. Asset which are not located within the jurisdiction of South Africa will not be covered by an anti-dissipation interdict.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes, provided the assets sought to be preserved are in the jurisdiction of the South African Courts.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
In principle, yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, including prior to the commencement of a claim. In these circumstances, the Court will order that the claim must be instituted within a certain period, failing which, the anti-dissipation interdict will be discharged.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
South African Courts have referenced the practice notes of the Courts of England and Wales which set out various safeguards that one should consider when seeking an anti-dissipation order. By way of example, a Court may freeze the money in a party’s bank account subject to the party being able to utilize a certain amount of money each month for living expenses.
12. What happens after a freezing (or equivalent) order is granted?
Where an order is granted on notice and depending on the content of the order, the order will need to be served by way of sheriff on all the relevant parties, and all the necessary steps must be taken to give effect to the order. For example, if it relates to preserving immovable property, the order will need to be registered in the relevant deed’s office.
In the instance where the order was obtained without notice, the order will need to be served by way of sheriff on all the relevant parties, and all necessary steps must be taken to give effect to the order. Any person against whom an order is granted without notice, may anticipate the return day upon delivery of not less than 24 hours’ notice to either set aside or vary the order.
13. Who pays the costs of the application for a freezing (or equivalent) order?
It is in the Court’s discretion, but the general rule is that costs follow the successful party. A Court may, however, decide to reserve costs for determination in the claim either pending or to be instituted.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
The test in obtaining such an order is high and the South African Courts do not easily grant such applications. Should the order impact a party that was not given notice of the application, they may anticipate the return day upon delivery of not less than 24 hours’ notice to either set aside or vary the order and in the event that a third party has suffered damages as a result of the anti-dissipation interdict, they may bring an action to recover those damages.
15. What are the consequences of breach of a freezing (or equivalent) order?
Any party who knows of a Court order and who disregards a Court order may be held in contempt of Court.
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)?
Yes.
17. Can a freezing (or equivalent) order be enforced abroad?
In principle, our Courts will not make an order to preserve assets that are situated in a foreign jurisdiction as it cannot give effect to such an order.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
Whilst South African Courts may recognize foreign judgments it does not mean that those foreign judgments are automatically enforceable. The Court must make a foreign judgment an order of Court in South Africa before the judgment can be executed upon.
Contacts
Helen Westman Partner Eversheds Sutherland Johannesburg, South Africa helenwestman@eversheds-sutherland.co.za www.eversheds-sutherland.com Peter van Niekerk Senior Partner – Head of Litigation Eversheds Sutherland Johannesburg, South Africa petervanniekerk@eversheds-sutherland.co.za www.eversheds-sutherland.com Hemali Govind Senior Associate Eversheds Sutherland Johannesburg, South Africa hemaligovind@eversheds-sutherland.co.za www.eversheds-sutherland.com
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