Sometimes referred to as a “Mareva” injunction, a freezing order prevents another party from dealing with, or disposing of, an asset until a financial settlement has been reached in their divorce. Put simply, it stops the asset being sold, hidden, or placed out of arm’s reach. This article discusses freezing orders and explains the circumstances when you may need to apply for one.
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What assets can be frozen by a freezing order?
Essentially, any kind of asset can be the subject of a freezing order, and it doesn’t necessarily have to be situated in the UK. Overseas assets can be frozen, too. The types of asset commonly frozen include:
Less tangible assets, such as insurance premiums, goodwill, IP rights, and cryptocurrency, can also be frozen in certain circumstances. Assets may be owned jointly or in one party’s name only. Additionally, assets held or controlled by third parties for the benefit of the party subject to the freezing order can be frozen.
How can assets be concealed?
The following circumstances are all common examples of concealing or reducing assets:
- Moving savings/funds from one account to another or a third party account, such as a new partner
- Reducing savings by going on a spending spree
- Moving assets out of the UK, such as putting them in offshore tax havens
- Selling/remortgaging a property thereby considerably lowering the equity
- Moving savings into a trust
What are the legal requirements for a freezing order?
Applications for freezing order are typically held in the high court, and tend to be made without notice to the other party. This is to avoid putting the person in control of the asset in question on notice of a pending application, and potentially giving them time to dispose of the asset or put it out of reach.
Under s37 of the Matrimonial Causes Act 1973, the court will only grant a freezing order where:
- The person making the application has a sufficient cause of action and any failure to make a freezing order will create an injustice
- The applicant has a good and arguable case, although it is not necessary to establish it will definitely succeed
- There are sufficient assets to meet the claim
- There is a very real risk that the assets will be disposed of or dissipated before the court’s judgment
- The applicant has made full and frank financial disclosure to the court
Such an application is not without consequences. The applicant must provide the court with an undertaking promising they will financially compensate the other party if the court finds there was no reason to grant a freezing order. This is to prevent malicious applications.
How do I get a freezing order?
If you suspect your partner may try to dispose of assets, you must act quickly if you believe they are at risk. You will need to give your solicitor as much information as you can including the location of the assets, their value, why you believe they are at risk, and any evidence you have to confirm your side of things, such as witnesses, emails, or text messages.
A freezing order is generally applied for without notice to your ex-partner, and they will not be heard at the initial hearing. So, if an order is granted, it will only be for a temporary period until your ex-partner has the opportunity to come to court and set out their position. The court will then balance the evidence from both sides before deciding whether a freezing order should be granted. The court has a wide discretion regarding freezing applications, and may take into account both parties conduct.
Advantages and disadvantages of freezing orders
- A freezing order will preserve the assets that are at risk of being lost. Prevention is a better and more reliable method of protecting assets, rather than trying to recover them after they have gone.
- An application for a freezing order can bring financial disputes to a head and encourage early settlement without needing a formal hearing. This will save you costs in the longer term.
- If you inappropriately apply for a freezing order, it could prove to be a costly mistake because you will end up paying your ex-partner damages.
- An application can place a burden on you to provide full documented details of your finances and assets to the court. If the application includes overseas assets, you will have the extra step of registering the court order with the foreign jurisdiction because it will not apply automatically.
What directions can the court make in a freezing order application?
As stated above, the court has a wide discretion. Common orders include:
- Cross-examination of your ex-partner about the location, nature, and value of the assets in question
- Demanding passport to prove identity
- Appointing a Receiver over your ex-partner’s business
- Immediate delivery of the asset or payment into court
- Authorise your ex-partner’s bank to disclose information regarding their account
- Search order
- Disclosure of the identity of your ex-partner’s funders
- Prevent any party holding assets or documents on behalf of your ex-partner from dealing or disposing of them
Can a freezing order be challenged?
You must challenge freezing orders in a timely manner as hearing dates are set quickly, leaving little time to prepare a case. Each case is different; however, you will need to present robust evidence that there is no risk or basis of you disposing or dissipating assets.
If a freezing order has already been granted, you may apply to have the case set aside or varied if the terms are causing you hardship, or are onerous. In the meantime, you must comply with the terms of the freezing order, otherwise you could be held in contempt of court and open yourself up to a fine seizure of your assets, or even imprisonment.
This is a complex area of law, and applying for an injunction is not a step that should be taken lightly. It is important to seek legal advice early as delay could cause your application to fail.
The information on this website is to be considered a guide and is therefore not legal advice. You use this information with the understanding that Wiselaw does not accept liability for any direct or indirect losses as a result of anyone relying on or acting upon the information on this website. Whilst we endeavour to provide accurate information, Wiselaw does not accept liability for any errors or omissions on this website.