When Freezing Orders Fall
Arbitration, Procedure and the Limits of Interim Relief
The decision in Bharucha v Patel & Anor is a sharp reminder that freezing injunctions do not operate in isolation. Interim relief is inseparable from jurisdiction, procedure, and the forum in which the substantive dispute will ultimately be resolved. For litigants seeking asset preservation, and for defendants facing without-notice injunctions, this judgment clarifies where the limits now sit.
The case concerns the interaction between freezing orders granted by the High Court and a defendant’s contractual right to arbitrate. The court’s reasoning demonstrates how procedural choices made early in a dispute can decisively determine whether interim protection survives.
The Background and Procedural Context
The dispute arose following the collapse of a dental partnership. The claimant alleged misappropriation of partnership assets and sought urgent interim relief. Without notice, the court granted domestic freezing orders and asset preservation injunctions against the defendants, together with a prohibitory injunction restricting dissipation of assets.
Shortly afterwards, the defendants applied for a stay of the proceedings under the Arbitration Act 1996, relying on an arbitration clause in the partnership agreement. They argued that the court proceedings should be halted in favour of arbitration and that, once stayed, the interim relief granted by the court could no longer stand.
The court was therefore required to determine whether the defendants were entitled to a mandatory stay, and if so, what the consequences were for the freezing orders already in place.
Arbitration Act 1996: The Right to a Stay
The starting point of the court’s analysis was section 9 of the Arbitration Act 1996. Where legal proceedings are brought in respect of matters subject to a valid arbitration agreement, the court must grant a stay unless the right has been lost.
The critical issue was whether the defendants had taken a “step in the proceedings to answer the substantive claim”, which would have barred them from invoking the arbitration clause. The claimant argued that the defendants’ engagement with the litigation process amounted to such a step.
The court rejected that submission. It reaffirmed that not every procedural act constitutes a waiver of arbitration rights. The test is whether the defendant has objectively demonstrated an election to have the dispute resolved by the court rather than by arbitration. Procedural participation that is defensive or protective, rather than responsive to the merits, will not usually cross that threshold.
On the facts, the defendants had preserved their arbitration rights. The stay was therefore mandatory.
The Consequence of the Stay for Freezing Orders
Once the proceedings were stayed in favour of arbitration, the court turned to the fate of the freezing orders. The conclusion was decisive.
Freezing injunctions are ancillary remedies. They exist to support the effective determination of a substantive claim before the court. Where that claim is no longer being pursued in court, because it must instead be resolved by arbitration, the jurisdictional foundation for the injunction falls away.
The court therefore discharged the freezing orders and asset preservation injunctions in full. Importantly, it made clear that such relief would not be re-granted in the stayed proceedings. The claimant was left to pursue any interim protection through the arbitral process or by other appropriate means consistent with the arbitration framework.
What This Means in Practice for Applicants
For parties seeking freezing injunctions, this judgment signifies the need for early procedural clarity. Where an arbitration clause governs the dispute, interim relief must be sought with that reality squarely in mind. A freezing order obtained from the court may be short-lived if the defendant promptly and properly invokes the right to arbitrate.
The decision also highlights the importance of timing. A claimant who moves swiftly for interim relief without addressing the arbitration position risks obtaining an order that cannot survive scrutiny once jurisdiction is challenged.
What This Means for Defendants
For defendants, the case illustrates the continued strength of arbitration clauses when properly preserved. Promptly asserting the right to a stay, and avoiding steps that could be characterised as engaging with the substance of the claim, remains critical.
The judgment confirms that courts will not lightly infer a waiver of arbitration rights. Where those rights are maintained, they can be decisive not only in determining forum, but also in dismantling interim measures imposed at an early stage.
Freezing Orders Remain Powerful, But Not Absolute
The broader lesson from Bharucha v Patel is that freezing orders, while formidable, are not autonomous tools. They depend on jurisdiction, procedural alignment, and the correct forum. Arbitration clauses are not a technical footnote; they are often determinative.
For practitioners and commercial parties alike, the case reinforces a fundamental principle: interim relief is only as strong as the procedural foundation beneath it. Where that foundation shifts, the relief will fall with it.
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This article has been authored by Abdullah Suker, Managing Director of Lyon Croft Law.
