Baby, It’s Cold Outside
With a chill in the air now that Winter has arrived, at Paradigm Family Law we thought it might be worth taking a look at the area of Freezing Orders or Freezing Injunctions.
What are Freezing Orders?
A freezing order is designed to prevent a party from disposing or otherwise dealing with assets in an attempt to prevent those assets being the subject of the matrimonial claim. As such, they are often obtained without notice being given to the asset holder who might only then learn of the injunction once it has already been granted.
However, they are not to be taken lightly, and the chances of a successful application are dependent upon meeting a set of strict guidelines and protective principles. The penalties for both the applicant and the recipient are significant and range from costs penalties to imprisonment for contempt.
What can be frozen?
A wide range of assets are capable of being frozen. They can be UK, or in other jurisdictions and worldwide. The principle targets are often bank accounts and/or property but can include valuable paintings, jewellery, stocks and shares and vehicles.
The injunction can bind not only the party to the proceedings, but also whether jointly held or on trust by a third party, and can bind that third party.
It is vital to serve the relevant third party with the Freezing Order as they are only bound once notified. This is particularly effective with Banks, who once served, owe a duty to the court to comply with the order and won’t allow the account holder to breach it.
How much is frozen?
The order will usually extend to the value of the claim plus any interest and or costs applicable. In the matrimonial court, that can therefore be a significant sum. It is often specific to assets of a certain known value such as a bank account balance(s) or a particular item. But, it can cover all assets – especially when the value of the claim is unknown when the application for the freezing order is made.
How do I get one?
The case of UL v BK (Freezing Orders: Safeguards: Standard Examples)  EWHC 1735 (Fam) is the principle authority to turn to, and in particular the judgment of Mostyn J who considered the law and practice for freezing orders.
Principles and Safeguards
Mostyn J summarised the principles and safeguards in cases where freezing injunctions are considered as follows:
i) The court has a general power to preserve specific tangible assets in specie where they are the subject matter of the claim.
ii) For a freezing order in a sum of money which is capable of embracing all of the respondent’s assets up to the specified figure it is essential that all the principles and safeguards are scrupulously applied.
iii) Whether the application is made under the Senior Courts Act 1981 or the Matrimonial Act 1973 the applicant must show, by reference to clear evidence, an unjustified dealing with assets (which would include threats) by the respondent giving rise to the conclusion that there is a solid risk of dissipation of assets to the applicant’s prejudice. Such an unjustified dealing will normally give rise to the inference that it is done with the intention to defeat the applicant’s claim (and such an intention is presumed in the case of an application under the 1973 Act).
iv) The evidence in support of the application must depose to clear facts. The sources of information and belief must be clearly set out.
v) Where the application for a freezing order is made ex parte the applicant has to show that the matter is one of exceptional urgency. Short informal notice must be given to the respondent unless it is essential that he is not made aware of the application. 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. The order of the court should record on its face the reason why it was satisfied that no or short notice was given.
vi) Where no notice, or short informal notice, is given the applicant is fixed with a high duty of candour. Breach of that duty will likely lead to a discharge of the order. The applicable principles on the re-grant of the order after discharge are set out in Arena Corporation v Schroeder at para 213.
vii) Where no notice, or short informal notice, is given the safeguards assume critical importance. The safeguards are set out in the standard examples for freezing and search orders. If an applicant seeks to dis-apply any safeguard the court must be made unambiguously aware of this and the departure must be clearly justified. The giving of an undertaking in damages, whether to the respondent or to an affected third party, is an almost invariable requirement; release of this must be clearly justified.
Mostyn J also provides standard examples of Freezing Orders as appendices to the judgment.
What happens if the freezing order is breached?
There are no grey areas with a freezing order. If on the receiving end, you must comply with it to the letter. The freezing order will contain a penal notice which means that any breach could be held to be in contempt of court. The penalty can be a fine, asset seizure or imprisonment.
Are there any ways to avoid one?
Assuming the claim is legitimate in the first instance, and therefore the assets concerned are likely to be the subject of the matrimonial proceedings there are a number of things that can be done to minimise the chances of an application for a freezing injunction. If one has already been made, these double as good reasons for seeking the immediate discharge of the freezing order:
1. Be up front with the other party as to the nature and extent of your assets.
2. Provide full frank and clear disclosure at the earliest opportunity.
3. Provide an undertaking not to dispose or dissipate the assets in dispute.
4. Perhaps consider depositing a sum of money as security to be held to joint order by the solicitors or with an agreed third party e.g. a Bank.
If you are served with a freezing order or think you might need to apply for one to preserve the assets on divorce, you must act quickly. Seek immediate advice from our specialist team at Paradigm Family Law with the experience and expertise to deal with freezing injunctions. Don’t freeze, and certainly don’t try to cover your tracks – act now.
For more details on this or any other family law matter, please do not hesitate to contact James or Frank. Paradigm Family Law offers a free initial consultation and our fixed fee solutions cover financial proceedings from start to finish. You can call us on 0845 6020422 or email us to [email protected]. You can also follow us on twitter and LinkedIn and Facebook for the latest news and views on family law.