In the course of my work as a matrimonial finance specialist, I am often asked to advise on issues concerning the dissipation of assets by one of the parties to a divorce. A client will sometimes inform me that her husband has threatened to move their assets offshore the moment he receives a divorce petition, or that perhaps he has already done so without informing her. In another scenario, a client will be concerned that the other party is in the process of gifting assets to children from a previous relationship or new partners or is purchasing assets in someone else’s name.
In the case of threats to dissipate assets or move them offshore, I invariably consider whether a freezing order is appropriate to safeguard my client’s interest in the matrimonial finances and to preserve her financial claims.
A freezing order (sometime called a freezing injunction) is an interim order made by a court that prohibits a party from disposing of or dealing with certain of his or her assets. The court’s jurisdiction to grant a freezing order is derived from section 37 of the Senior Courts Act 1981 before proceedings have been issued or from section 37(2)(a) of the Matrimonial Causes Act 1973 once financial proceedings are underway.
A freezing order can preserve a wide range of assets, such as business assets, liquid cash in a bank account, property, stocks and shares, family heirlooms or vehicles. Assets can either be in the UK or abroad and the injunction will also bind any other third parties that may hold the subject assets jointly with the respondent spouse.
Freezing injunctions are very effective but relatively rare, mostly because they are so heavy-handed in their nature. They prevent the dissipation or hiding of assets, but can also have the unwanted effect of stifling the other party’s business or negatively affecting a third party, such a business partner.
Freezing orders are only made if the court consider it is ‘just and convenient’ to do so – in other words, a judge hearing the application must be persuaded that it is ‘fair’ to make one.
Advising my clients of this is rather difficult, as the standard of ‘fairness’ is a difficult one to quantify. What one judge considers to be ‘fair’ can be completely different from another’s interpretation of the circumstances.
Because of their heavy-handedness, the court will wish to ensure that the applicant spouse meets a rigorous set of requirements and safeguards before a freezing order is made with respect to the other party’s assets.
To stand a chance of success in securing a freezing order, the applicant must:
- Show an unjustified dealing with assets (including threats) which indicates that there is a solid risk of dissipation of assets;
- Clearly set out his or her evidence in an affidavit. The applicant must inform the court of all the reasons he or she believes the risk to be real and imminent, rather than an idle threat;
- Understand that an application without notice can be made, but that this will fail unless there is powerful evidence that giving notice will allow the respondent to take action defeating the purpose of the injunction or that there is literally no time to give notice before an asset is dissipated. An application on short notice (rather than no notice at all) stands a much better chance of success;
- Disclose everything. The applicant has a high duty of candour when making or pursuing the application. If it is discovered at a later time that he or she was untruthful in any way, the freezing order will be discharged and the other party will have a claim for costs and damages;
If you think you may need to apply for a freezing order or are served with one, you must act quickly. I would invite you to contact a member of our experienced team as soon as possible.