Asset control - securing claimants' interests

District Judge Christopher Tromans examines how to preserve the defendant's assets for the benefit of the claimant

It is mid-afternoon on a Friday when the claimant client calls.

He is in a state of high agitation because he has heard rumours that the defendant is about to dispose of his assets.

He would like to protect his position before the weekend.

What can be done in the short term?

Prior to judgment, a claim relating to land can be registered as a pending action but this is of limited effect in terms of security.

After judgment, a writ or order enforcing a judgment can be registered as a writ or order affecting land, which in practical terms will impede attempts by the defendant to sell or mortgage the land.

Prior to judgment, the following options are likely to be more effective.

Specific assets in issue

This can include cases in which the subject matter of the case is land or other property or an identifiable fund such as a specific bank or building society account.

Rule 25.1(c) of the Civil Procedure Rules 1998 (CPR) empowers the court to make an order for the detention, custody or preservation of relevant property.

That is defined by CPR rule 25.2 as property (including land) which is the subject of a claim or in respect of which a question arises in a claim.

If the property is perishable, the order can provide for its sale.

An order can also authorise a person to enter any land or building, in the possession of a party to the proceedings, to carry out the order made (CPR rule 25.1(d)).

The remedy replaces the powers formerly exercisable under order 29, rule 2 of the Rules to the Supreme Court and order 13, rule 7 of the County Court Rules.

No specific assets in issue

What is required here is a freezing order under CPR rule 25.1(f), which is the present day equivalent of a Mareva injunction.

A party can be restrained from removing assets from the jurisdiction and from dealing with assets, whether or not the assets are in the jurisdiction.

The application must be made by application notice and must be supported by affidavit evidence.

With few exceptions, the application must be made to a High Court judge and so it is important to follow the procedural requirements contained in the CPR practice direction 25A.

A draft order should be prepared in the form set out in the annex to the practice direction rather than in the forms in the PD [1996] 1 WLR 1552.

In particular, the application and the order should particularise the assets and specify a maximum value of the assets to be affected.

The undertakings provided for by paragraph 5.1 of PD 25A must be given and the applicant's counsel or solicitor advocate must, if the application is made without notice, provide any party affected with a full note of the hearing.

While the order will remain effective until the specified return date, any party who has been notified of the order can apply for its variation or discharge at any time.

Assets need to be identified

In this case, the order which may be required is a search order under CPR rule 25.1(1)(h), formerly known as an Anton Piller Order.

This requires a party to admit another party to premises under section 7 of the Civil Procedure Act 1997 to search for, inspect, copy and deliver to the applicant's solicitors documents and items listed in the order.

These can include financial documents and securities.

Again, the application must normally be made to a High Court judge and there is a draft order in the annex to PD 25A.

The procedure is complex.

If it all seems too daunting, there is an alternative which may achieve a similar result.

Rule 25.1(1)(g) of the CPR provides for an order requiring a party to provide information about the location of assets which may be the subject of an application for a freezing order.

This application does not have to be made to a High Court judge.

After judgment

CPR part 73 deals with stop orders and stop notices.

The High Court may make a stop order in relation to funds in court on the application of a chargee or a judgment creditor of anyone entitled to an interest in the funds.

There is a similar power to make a stop order in relation to securities not in court but this is only exercisable on the application by a party claiming to have a beneficial interest in the securities.

If an order is made, any other person claiming to have a beneficial interest in the funds or securities can apply for variation or discharge.

CPR rules 73.17 and 73.18 empower a court officer to issue a stop notice which will restrict, for a period of 14 days, the transfer of specified securities.

Notwithstanding the uncertainty about whether pre-CPR authorities are relevant in interpreting the CPR, the American Cyanamid principle of whether more harm will be done by granting or refusing interim relief should still be applied.

What is clear is that the overriding objective will be applied and proportionality will be an important consideration.

Over-ambitious applications for freezing orders or search orders are unlikely to be successful.

Paragraph 4.3 of PD 25A provides that, wherever possible, the application notice, evidence and draft order should be filed with the court at least two hours prior to the hearing.

Furthermore, the applicant must give informal notice of the application to the respondent except in cases where there is a need for secrecy.

Urgent applications

Paragraph 4.5 of PD 25A deals with telephone applications in the High Court.

On weekdays between 10am and 5pm, a telephone call should be made by counsel or by the applicant's solicitor to the Royal Courts of Justice, tel: 020 7936 6000 to speak to a High Court judge of the appropriate division.

The judge will normally require the draft order to be sent by fax and the papers and orders for sealing should be lodged by no later than the next working day.

Out of hours, the same number should be called in order to contact the clerk to the appropriate duty judge.

Out of London, the Urgent Court Business Officer of the circuit should be contacted.

Human rights issues

As yet, there is no definitive authority on the inter-relation of these interim remedies and a defendant's rights under article 8 of the European Convention on Human Rights.

It has been held in Strasbourg that a broadly drawn search order with no supervising solicitor present at the search conflicts with article 8 (Neimietz v Germany [1993] 16 EHRR 97) and an application for interim relief made without notice does not infringe a defendant's rights under article 6(1) (Aktiebolag v Sweden (1992) 12 October, unreported).

In practice, and pending further authority, one of the main factors the court is likely to take into account is whether the applicant can show that it is necessary to interfere with the defendant's article 8 rights in order to protect the rights of others, ie the applicant (Chappell v UK [1990] 12 EHRR 1).

District Judge Tromans sits at Plymouth Combined Court Centre