As a matrimonial finance specialist, clients sometimes ask me whether we should be applying to court for a freezing order, or injunction, against family cash or assets under the control of the other spouse, whether in this jurisdiction or elsewhere. In such cases, threats have invariably been made that family assets will be liquidated, and the money moved to an unknown destination, in response to divorce proceedings being issued.
Usually the assets in question are located in England & Wales, and threats have been made to move them off-shore, raising the possibility of an application for a domestic freezing order. In an increasingly global economy however, I am finding that clients’ assets are often already located in another jurisdiction, and the concern is that any onward movement will make them virtually untraceable. In such cases, a worldwide freezing order may be appropriate.
Whilst freezing orders can be extremely effective, they are not always necessary. More often than not, the threat will turn out to be idle, or just badly-thought out and so easily dealt with by a robust letter, and an undertaking by the spouse – i.e. a legal promise to do (or not to do) something. If a more formal approach is required, lawyers can ask the family court to use its general power to preserve specific family assets. This is usually the more appropriate and cost-effective approach, because such applications are not subject to the same rigorous safeguards as freezing orders.
Sometimes however, swift and decisive action must be taken, to avoid a client’s financial claims on divorce being defeated before proceedings have even begun. This is particularly important in cases where overseas bank accounts, companies or trust vehicles are already known to exist, often for tax purposes (and usually somewhere warm and exotic).
So what exactly is a freezing order?
Put simply, a freezing order is an interim injunction that restrains a party from disposing of (or otherwise dealing with) his or her assets. The court’s jurisdiction to grant a freezing order is derived from section 37 of the Senior Courts Act 1981, but the legal principles behind freezing orders mean that they are only made if the court consider it is ‘just and convenient’ to do so – in other words, it boils down to whether a particular judge, on any given day, can be persuaded that it is ‘fair’ to make one.
Inevitably, this makes advising clients on their chances of succeeding with an application for a freezing order difficult, but ticking the following boxes is crucial:
- The applicant must have the right to make the application: the asset in question will usually form part of the ‘matrimonial pot’ available for distribution between the parties, meaning the applicant is technically entitled to make a claim against it.
- There must be a ‘real risk’ that the asset in question will be dissipated: it will be up to the applicant to evidence this, for example by explaining to the court that a threat has been received that the asset is at risk of being removed or disposed of.
- The other party must be given some notice: even if this is only ‘short and informal’ – unless the situation is exceptionally urgent, or there is a clear and obvious risk that ‘tipping off’ the other party will be fatal to the application.
- The applicant must be ‘candid’: in other words, truthful and straightforward in the details provided to the court in the application. The goes back to the roots of the court’s power to make freezing orders, based as they are based on the somewhat nebulous principle of ‘fairness’. If the applicant is deemed to have been dishonest or misleading, the application will be dismissed (and costs penalties will invariably follow).
An experienced family practitioner will instinctively know whether a particular situation which seems to require some form of swift and decisive action, also meets the high bar attached to applications for freezing orders. In the vast majority of cases, freezing orders are not required in order to safeguard family assets. But it’s good to know they exist, just in case.