A freezing order (also known as a “Mareva injunction”) is a powerful legal tool used in family law to prevent a party from dissipating or hiding assets during a legal dispute. These orders are primarily sought to ensure that any financial settlement decided by the court can be effectively enforced.
Freezing orders are most commonly associated with high-value divorce cases or disputes where there is a genuine concern that one party may seek to hide, transfer, or otherwise dispose of assets in an attempt to evade their financial responsibilities.
In this article, we will explore the legal framework of freezing orders, including the conditions under which they may be granted, when they might apply, potential risks, and how the other side can challenge or oppose them.
What is a freezing order?
Freezing orders are a form of injunctive relief and are granted on an emergency basis. It is a court order that prevents an individual from removing, selling, or dealing with their assets, whether they are in the UK or abroad. The assets that can be frozen include bank accounts, property, shares, and other valuable items. The purpose is to ensure that the assets remain available to satisfy any financial award made by the court in a divorce.
Freezing orders can apply to both “domestic” assets (those within the UK) and “worldwide” assets (those located internationally). It is seen as a drastic and intrusive remedy, so the court generally only grants them when it is absolutely necessary.
Examples of situations where a freezing order may be appropriate include:
- If one party in a divorce case is attempting to sell or transfer valuable property, such as a house, business shares, or other high-value assets, intending to hide or transferring the proceeds out of reach.
- If there is evidence that a party is transferring large sums of money to offshore bank accounts, particularly in jurisdictions with lax regulatory oversight.
- Where a party is attempting to transfer assets to friends or family members in an attempt to conceal their true wealth.
- In cases involving international divorces or where the respondent holds significant assets abroad, there is a risk that assets could be moved to foreign jurisdictions where enforcement of UK court orders might be difficult.
What are the requirements for obtaining a freezing order?
To secure a freezing order, an applicant must meet several legal requirements. These are designed to prevent the misuse of freezing orders and ensure that they are granted only in cases where there is a genuine risk of asset dissipation. The criteria that must be met are:
- The applicant must demonstrate that they have a “good arguable case” in the underlying legal dispute. In the context of family law, this involves showing that the applicant has a legitimate financial claim against the respondent, such as a claim for financial provision or property distribution in divorce proceedings. It also requires the applicant to provide credible evidence of their claim. Mere suspicion or belief that assets might be dissipated is not enough. Evidence could include unusual financial transactions, transferring assets to overseas accounts, or the sale of valuable property at below-market value.
- The applicant must evidence that there is a real risk of the respondent dissipating, hiding, or disposing of their assets. The risk must be more than speculative and there must be concrete reasons to believe the respondent is taking steps (or may take steps) to prevent the applicant from accessing those assets.
What assets can be frozen?
The assets the applicant seeks to freeze must be clearly identified and traceable. The freezing order can only cover assets that are either in the UK or, with a worldwide freezing order, identifiable in foreign jurisdictions. It is important that the applicant presents details of these assets in their application.
The court will also consider the balance of convenience when deciding whether to grant a freezing order. This means weighing the potential harm or prejudice to the respondent if the order is granted against the harm to the applicant if the order is not granted. The court will need to be satisfied that the inconvenience caused to the respondent by freezing their assets is justified in the context of the applicant’s claim.
Are there any risks or consequences of a freezing order?
While freezing orders provide significant protection to the applicant, they also carry risks and potential drawbacks. Freezing orders can be expensive to obtain, as they often involve complex legal arguments and evidence. If the applicant is unsuccessful or the order is deemed unjustified, they may be liable for the respondent’s legal costs.
As part of the application, the applicant must provide an undertaking to the court to compensate the respondent for any losses suffered because of the freezing order if it is later overturned or found to have been wrongly granted.
A freezing order can severely restrict the respondent’s financial freedom, affecting their ability to meet living expenses, run a business, or manage their financial affairs. The court may allow reasonable expenses, but this can still be burdensome.
What is the likelihood of obtaining a freezing order?
Given the strict legal requirements and the serious consequences of freezing a respondent’s assets, they are not granted lightly. The courts apply a rigorous standard when assessing applications, particularly regarding the evidence of a risk of dissipation. An applicant will need firm evidence to support their claim that assets are at risk.
In high-net-worth divorce cases where there is substantial evidence of asset dissipation, freezing orders are more likely to be granted. However, in more typical family law disputes involving smaller sums or less clear evidence of dissipation, the chances of obtaining a freezing order are significantly lower.
Can I argue against a freezing order being made?
The respondent may challenge or oppose a freezing order. They may argue that there is no real risk of them dissipating or hiding assets and provide evidence that their financial affairs are being conducted in a legitimate and transparent manner.
The respondent could argue that the freezing order is too broad and covers assets that are not relevant to the dispute or that they need access to assets to meet living expenses or business obligations. In addition, they may say that the freezing order causes disproportionate harm to them compared to the potential harm to the applicant. It is also possible to have a freezing order varied or discharged altogether if the respondent can demonstrate that the conditions for granting it were not met.
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