The Ultimate Guide to Freezing orders
The Ultimate Guide to Freezing orders
When millions of pounds worth of assets is at stake, it is no wonder divorcing high-net-worth (HNW)) couples often end up disputing who is entitled to what when it comes to the financial settlement. And although most cases can be resolved outside of court through alternative dispute resolution procedures such as round-table negotiation and mediation, if one party suspects the other of deliberately hiding assets to avoid them becoming part of the settlement, litigation is often an inevitable outcome. One way the suspicious party can ensure their spouse is not able to disperse or dispose of property and assets before a financial settlement order is made is to apply for a freezing order.
What is a freezing order?
A freezing order is an injunction made by the Court that restrains a party from disposing of, dealing with, or dissipating named assets. Its primary purpose is to preserve the status quo of assets to prevent them from being moved, concealed, or depleted during financial remedy proceedings. This ensures that both parties have a fair and equal opportunity to access and divide marital assets.
Formally known as a Mareva Order, freezing orders have been described as the ‘nuclear weapon’ of family law due to their ability to punish someone in anticipation of them taking action to prevent a fair financial settlement. Furthermore, freezing orders can negatively impact innocent third parties, such as business partners and suppliers. Therefore, they are not granted lightly.
What can be covered by a Freezing Order?
Freezing orders can be applied to assets of every kind, including:
• property and land
• stocks and shares
• cars
• art
• bank accounts
• antiques
• business assets
How is an application for a freezing order made?
Freezing orders are an ‘equitable remedy,’ and the Court will only grant such remedies if:
• The Applicant is completely honest about their circumstances and knowledge of the matter. This is known as the ‘clean hands’ principle; and
• The application for the order is made as soon as practicably possible.
Three facts must be established before the Court will grant a freezing order:
1. The case has robust merits, meaning there is evidence of an intention to dissipate assets, in a deliberate or reckless way. Assets dispersed of due to a random event unconnected with the divorce financial settlement is not enough.
2. Evidence shows the Respondent has unjustifiably dealt with or managed the assets in question. Merely holding assets in an offshore trust will not, by itself, amount to unjustified conduct, and
3. There is a real risk of injustice if the application is refused.
Freezing order applications can be made without notifying the other party. This is known as an ex parte application and is used when evidence can show a real risk of the assets being dispersed or disposed of if notice of the application is provided in advance.
In UL v BK (Freezing Orders: Safeguards: Standard Examples) [2013] EWHC 1735 (Fam) Mr Justice Mostyn provided the following safeguards and principles the Court must observe when deciding whether to grant a freezing order application.
a) Assets can be preserved in their original state.
b) The rules and safeguarding around issuing a freezing order must be strictly applied.
c) It is for the Applicant to provide substantial evidence that their partner may dispose of assets in order to deny the Applicant of a fair financial settlement.
d) In ex parte applications, Justice Mostyn stated; “No notice at all would only be justified where there is powerful evidence that the giving of any notice would likely lead the respondent to take steps to defeat the purpose of the injunction, or where there is literally no time to give any notice before the order is required to prevent the threatened wrongful act. Cases where no notice at all can be justified are very rare indeed.”
e) Any dishonesty of the part of the Applicant in an ex parte application will result in the order being refused.
The recent judgment in J v H [2022] EWFC 133, 2022 WL 16839713 confirmed that UL v BK is the determinative case regarding freezing order safeguards and principles. It also made clear that when drafting a freezing order, the Court had to ensure that reasonable provisions are made to cover the Respondent’s costs of living and that neither the Respondent nor any third parties’ ability to make economic decisions and take action is completely obliterated by the order.
How long can a freezing order be granted for?
If the freezing order was granted ex parte it will only remain in place until the date of the full hearing (set by the Court) when the Respondent will have a chance to defend the granting of the order.
Should the order remain in place following the full hearing, it will usually be ordered to continue "until judgment or further order".
How can a Family Law Solicitor assist with freezing order applications?
A Family Law Solicitor experienced in HNW family law cases can provide the following assistance in freezing order application matters:
• Advise you on whether a freezing order is the best way of ensuring the assets are not dispersed or disposed of. Being made subject to a freezing order may affect the Respondent’s ability to obtain credit, which may not be in the Applicant’s long-term interests. There are other alternatives that can protect assets, for example a notification order which forces the Respondent to notify the Applicant of any dealings with the assets.
• If a freezing order is the best solution, an experienced Solicitor will ensure the application and supporting evidence is correctly prepared and presented. Due to the draconian nature of freezing orders, the Courts are unsympathetic to poorly prepared applications as well as Solicitors who fail to follow the correct procedure and will not hesitate to deny such an application and even impose adverse costs orders as a penalty.
• Solicitors experienced in HNW divorce often collaborate with an in-house team of forensic accountants who can trace assets held in shell/offshore companies and complex trusts.
Summing up
Applying for a freezing order is a major step and you will require the advice and representation of a Family Law Solicitor who is experienced in HNW divorce to ensure your best interests are protected.
