A Freezing Order (sometimes referred to as a Freezing Injunction) is an interim injunction granted by the Court restraining a party (the Respondent) from disposing or dealing with assets. Within divorce or dissolution proceedings, it is most commonly utilised by the Applicant to prevent the Respondent from frustrating the financial proceedings and attempting to hide and/or dissipate assets which the Applicant has a valid matrimonial claim upon.
They can prove invaluable in protecting a claim upon assets following the breakdown of a marriage or civil partnership. Not only must the Respondent comply with the terms of the Freezing Order, third parties must not breach its terms, or help or permit the Respondent to do so. A Freezing Order can be sought against assets within the jurisdiction (England and Wales) or more rarely abroad (by way of a Worldwide Freezing Order or WFO).
How can assets be concealed
Regularly encountered examples include:
- dissipating savings such as going on a spending spree.
- moving savings to another account or third party such as a new partner’s account.
- moving assets out of the jurisdiction (England & Wales) such as offshore tax havens.
- selling or re-mortgaging a property which in many cases will lower the equity within the marriage / civil partnership considerably.
- moving savings into a trust.
What assets can be frozen
Assets that can be frozen include bank accounts, investments, private and public shares, property, land, and motor vehicles. Even less tangible assets such as goodwill, insurance premiums, IP rights, and cryptocurrency can be frozen in certain circumstances.
How do I obtain a Freezing Order
The legislation sets out that the Applicant must satisfy the Court that the Respondent is about to make a disposition of an asset with the intention of defeating the Applicant’s claim for financial relief in the divorce / dissolution. This means that there is concern that should the Respondent successfully dissipate or conceal the asset, there will be insufficient other assets upon which the Applicant can make a matrimonial claim.
The Applicant must have a good arguable case; there must be clear evidence of unjustified dealing with assets by the Respondent, and there must be a real risk of injustice if relief is refused. Real evidence must be provided; suspicions and feelings will not be entertained by the Court. The Respondent’s conduct will be of the utmost importance.
A thorough and well-prepared application is ordinarily submitted to the Family Court. If the application seeks to freeze assets over £15m, or over £7.5m and of particular complexity, the application should be submitted to the High Court instead.
For example, in a high-profile case involving Russian billionaire Farkhad Akhmedov and his ex-wife Tatiana Akhmedova, a superyacht valued at over £300m was impounded in Dubai when the High Court granted a Freezing Order in favour of the Applicant ex-wife.
Consideration must be given whether to make the application on an ex parte (without notice to the Respondent) basis or short notice to the Respondent basis. There is clear case law suggesting that ex parte applications must address a matter of exceptional urgency and should be justified very rarely. The Applicant must show that giving notice to the Respondent of the application would defeat or prejudice the purpose of the application. If not, at least short notice must be provided to the Respondent.
Where no notice or short notice is provided to the Respondent, the Applicant must provide the Court with a very high level of disclosure of all material facts, including any defence which the Respondent may seek to put forward. Such a duty is quite unusual in other applications before a Family Court.
The Applicant must also provide an undertaking (a promise on oath) to the Court to pay any damages sustained by the Respondent which the Court considers the Applicant should pay. Again, such undertakings are rare in other applications before a Family Court.
What if the Respondent ignores the Freezing Order
The Respondent would be in breach of the Freezing Order and in contempt of court; he/she would be at risk of having his/her assets seized, and receiving a fine, a community order, or even a custodial sentence. The same applies to third parties who willingly breach its terms or help or permit the Respondent to do so.
What are the risks in seeking a Freezing Order
Caution must be exercised when seeking a Freezing Order. It is high-risk litigation meaning, if unsuccessful, an Applicant could well end up in a less favourable financial position. Freezing Orders are draconian in nature, and not frivolously imposed by the Court. Careful consideration should be given as to whether there is another method of securing the desired outcome. For example, an Avoidance of Disposition Order application may be more appropriate if the asset has already been sold or transferred for less than its monetary value. A badly prepared and ill-thought-out application could result in an adverse order for costs. Should the correct legal procedure not be followed by the Applicant, the Respondent could later seek a Freezing Order be set aside by the Court.
On a practical level, Freezing Orders are known to be a nuclear option in litigation as they inevitably raise tensions. Parties can often become entrenched in their positions afterwards.
If the assets are abroad and the Applicant is considering an application for a Worldwide Freezing Order, consideration will need to be given to the enforceability and recognition of an English Freezing Order in the foreign jurisdiction. In other words, will the overseas jurisdiction cooperate with the terms of the English Order. As a result of the UK leaving the European Union, this area has recently grown even more complex.
Whether you are seeking, or been made subject to, a Freezing Order, you will require specialist legal advice. We, at Rayden Solicitors, are regularly instructed in such applications and can provide the specialist expertise required.