Freezing injunctions – preventing the hiding of assets

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Dawn Baker - Play video

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A freezing injunction is an interim order made by a Court that prohibits a party from disposing of or dealing with the assets listed under the order.

They are relatively rare and not granted lightly because a freezing injunction in effect punishes someone in anticipation of them committing an act which may deny the other party their full divorce settlement. In simple terms they can be seen as a way of preventing the hiding of assets.

What Type of Assets Can Be Covered By A Freezing Injunction?

Normally, a freezing injunction will require the respondent to give full and frank disclosure of the type, value and location of his or her assets.

All types of assets can be frozen either in the UK or abroad including:

  • Bank accounts;
  • Cars;
  • Property;
  • Business assets;
  • Shares and bonds; and
  • Intangible assets such as goodwill cannot be frozen by the injunction.

Before you even think about applying for a freezing injunction, you need to be aware that they are:

  • Costly;
  • Require full and frank disclosure on many issues regarding your marital finances that you may prefer to keep private; and
  • If it is later found that the injunction should not have been granted you may be required to pay damages to your former spouse.

Freezing injunctions are usually applied for before proceedings are issued, however, you can seek them at anytime, including after the judgment has been obtained but not yet executed. Section 44 of the Arbitration Act 1996 gives the Court power to grant a freezing injunction in support of arbitration proceedings being held in an overseas jurisdiction.

Applications for a freezing injunction can be made without notice to the defendant. To succeed in obtaining the injunction, an applicant must provide an application form as well as evidence to support the application in the form of an affidavit.

When assessing whether there are grounds to grant a freezing injunction the Court will consider:

  • Whether the applicant has a 'good, arguable case' for applying for the order; and
  • That there is a real risk that any judgment of financial relief made in favour of the applicant will go unsatisfied.

It is just and convenient to grant the injunction. The Court has to take great care in granting a freezing injunction as innocent third parties such as business partners can be adversely affected by them.

What if your former spouse has already disposed of assets in order to defeat your claim?

An Avoidance of Dispositions Order is an order by the High Court setting aside or preventing a transaction by one party (either the husband or wife) that was/is being made with the aim of defeating his/her spouse's application for financial provision.

Avoidance of Disposition Orders are governed by Section 37 of the Matrimonial Causes Act 1973. Section 37(5) of the Act provides that the intention to defeat the other party's claim to financial relief is presumed if the disposition of the property/asset took place less than three years before the application.

If the presumption is not rebutted the transaction will be set aside unless:

  • The asset was exchanged for appropriate monetary value; and
  • The person who acquired the property/asset acted in good faith and was unaware that the respondent's goal was to deny the applicant's full financial settlement that the Court ruled they were entitled to.

In the recent case of AC v DC (No 1), Mostyn J explained succinctly what the applicant in the case had to prove in order to have her request to set aside her husband's transfer of a shareholding actioned by the Court.

In this case the wife had to show:

  • That the transfer of the shares was done with the intention of defeating the applicant's claim for financial relief (in this case intention was presumed and not successfully rebutted);
  • The transferring of the shares resulted in the defeating of the applicant's claim for financial relief; and
  • Under Section 23(2) of the Matrimonial and Family Proceedings Act 1984, the Court should exercise its discretion and set aside the share transfer.

Dividing assets after a divorce can be a minefield, adding to what is already a turbulent time for you. Forbes Solicitors not only have the complex expertise required to ensure business assets are fairly settled, but are also sympathetic and understanding, giving you the support and advice you need. If you are looking for expert legal advice to help you through your divorce, contact our friendly team on Freephone 0800 689 1058 or fill in your details in our online enquiry form and we'll get back to you.

Family/Divorce

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