Freezing Orders within English divorce proceedings
This article explains how freezing orders can be used within divorce proceedings to protect assets and prevent a husband or wife transferring or moving assets to secure an unfair advantage over the other party.
Why Obtain a Freezing Order?
The financial discussions that take place as part of a divorce can be a calm process of transparent information-gathering followed by constructive discussions.
However, when emotions are raw, when fear and anger take over, or when the stakes are very high, there can be a temptation for the parties’ involved to attempt to engage in underhand behaviour with a view to securing a perceived advantage.
In cases involving multiple jurisdictions, there is a heightened risk that an individual could move cash and liquid assets to a country where English orders cannot easily be enforced – in what is often a clumsy attempt to render any eventual English court order ineffective (or at least make it difficult and expensive to enforce).
Typically (but certainly not always) it is the husband who has primary control of the family’s finances and therefore it is usually the behaviour of the husbands which is under scrutiny.
If a wife suspects that there is a risk that her husband is about to move assets out of the reach of the English court, she may need to urgently consider applying for a freezing order (also called a freezing injunction).
What is a Freezing Order?
A freezing injunction is an interim order which is designed to prevent a person disposing of or dealing with assets until the conclusion of a divorce or financial dispute. In theory any assets can be frozen, but typically such applications will relate to bank accounts, shares, property and land. A freezing injunction can be obtained over assets within the jurisdiction of England and Wales (a domestic freezing order) or worldwide (a worldwide freezing order).
A freezing injunction will take effect personally against the party subject to it and should be served on the holders of the relevant assets (i.e. banks, administrators of the assets). A breach of a freezing order amounts to contempt of court.
How To Obtain a Freezing Order
A freezing injunction application requires careful thought, planning and preparation. Compliance with procedural requirements is fundamental. The costs are high, and there are financial risks to the applicant in terms of costs and damages if the application is handled incorrectly or if the freezing order causes loss to the respondent.
First of all, there should be an early assessment of whether any immediate action should be taken at all. For example, if the wife suspects that the husband is about to move liquid funds of £100,000 out of England to an unfriendly jurisdiction, but together they jointly own a mortgage-free London property with equity in excess of £3m it is unlikely to be a sensible use of time and funds to take any immediate action. The English court has the power to notionally “add-back” funds that have been dissipated, in which case, where there are sufficient secure assets from which the wife can be “reimbursed” immediate action is unlikely to be necessary.
If, however, the majority of the assets are in the husband’s sole name and therefore under his sole control, the wife’s position may be vulnerable.
UL v BK  EWHC 1735 (Fam) provides guidance on the principles to be applied on an application for a freezing order:
- The applicant must show clear evidence of unjustified dealing with assets giving rise to the conclusion that there is a solid risk of dissipation of the assets to the applicant’s prejudice.
- The applicant must demonstrate that other available options to preserve specific tangible assets would not be sufficient to protect the applicant’s claims.
- The evidence must set out clear facts and sources of information. Unsupported expressions of fear have little weight.
- The application can be made without giving notice to the respondent, but only in cases of exceptional urgency.
If the applicant has an accurate understanding of the overall extent of the family’s assets she should seek to freeze no more than 50% of the total assets, unless there is a good reason to argue that she might eventually receive a greater proportion. For example, in higher value cases capitalised maintenance can be 6 or 7 figure sum that must be paid in addition to the initial division of capital.
As part of the application, the applicant must undertake to pay any damages sustained by the respondent as a result of the freezing order (and which the court considers the applicant should pay). The court can also order the applicant to pay damages to a third party who suffers a loss as a consequence of the order. The target and scope of a freezing injunction must therefore be considered carefully.
Do I need to tell my spouse about the freezing order?
If the application for a freezing order was made without notice to the respondent, any order will be granted only until the return date when there will be a full, with notice hearing. At that time, the respondent will have an opportunity to challenge or at least vary provisions of the initial order.
The respondent may challenge the allegations of dissipation, offer security for any future award, or counter and seek a fair variation of the terms of the freezing order. Because the purpose of a freezing order is only to prevent a respondent from evading the court process by making unjustifiable disposals of his assets, it does not prevent a respondent from spending money in ways which he can show are legitimate. Provision must be made for the respondent to have access to funds to cover ordinary business dealings and ordinary living expenses, and for legal advise and representation.
Whether or not to apply for a freezing injunction depends entirely on the specific circumstances of the case, the location of the parties and their assets, the previous course of dealings and the evidence available. On one hand, it is important for the applicant to act quickly. Unnecessary delays in applying for a freezing injunction will make it more difficult to convince the court that the injunction is necessary. Delay also increases the risk that the assets in question will already have been dissipated by the time any injunction is granted. On the other hand, a poorly thought out application can backfire on the applicant in terms of costs orders and damages.
It is essential that the risks of either course of action are assessed at the outset of every case. If you require advice on obtaining a freezing order, setting aside or overturning a freezing order, please contact [email protected]
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