Securing assets in England in support of foreign family law proceedings

Litigants in foreign divorce proceedings can secure assets in England and Wales in support of those proceedings. This article sets out some of the options available, particularly at an interim stage. It is worth noting that similar relief would be available to support other types of foreign proceedings – the relief is not restricted to family law proceedings.

The circumstances of each case must be considered carefully; it is important to take early advice to ensure the assets in question are protected appropriately and expeditiously.

The English court’s jurisdiction

The power to support proceedings in another jurisdiction derives from s 25 of the Civil Jurisdiction and Judgments Act 1982 (as amended). In exercising this power, the English court does not determine the merits of the foreign proceedings; instead it assesses the appropriateness of granting relief in England.

To do so, the English court must be satisfied (in addition to the points covered above) that:

• the facts of the underlying case are such that an English court would grant the relief sought if the proceedings were in England rather than abroad;
• it is appropriate for the English court – rather than the foreign court with conduct of the proceedings – to grant the relief sought in support of the foreign proceedings.

Type of interim relief

Provided the English court is satisfied that it can award interim relief in support of the foreign proceedings, the English court can exercise its typical powers available to it in English cases. Below is a short summary of types of relief that may be granted.

Interim freezing injunction

Freezing injunctions are interim remedies meaning that a court will not have adjudicated on the parties’ substantive rights prior to the injunction being made, nor will the court conduct a mini-trial. Put simply, an interim freezing injunction is an order which prevents the person subject to the order from dealing with particular assets, up to a certain value.

The English court has a discretionary power to grant the injunction where:

1. there is an underlying cause of action;
2. there are assets over which the injunction can be granted;
3. there is a real risk of the assets being dissipated; and
4. it is just and convenient to do so.

We will consider (4) primarily below.

The English court will consider a number of factors in relation to (4) – whether it is just and convenient to grant the relief. Included among those are whether there is a serious issue to be tried and, if there is, the court must also consider the balance of convenience as to whether a freezing injunction should be granted or not (taking into account the parties’ respective positions and likely prejudice suffered by the granting of the injunction).

Serious issue to be tried

Whether the requirement for there to be a "serious issue to be tried" is satisfied will depend on the underlying facts of the foreign proceedings. The English court would be unlikely to grant relief in England if the foreign proceedings are frivolous or vexatious.

Balance of convenience

The balance of convenience test is considered in three stages:

1. Whether damages will be an adequate remedy for the person seeking the relief if they succeed at trial of the foreign proceedings. If damages would be an adequate remedy, the freezing injunction would not be granted.
2. Whether the protection for the defendant of a cross-undertaking in damages is adequate. A cross-undertaking in damages may require "fortification", meaning the person who gave the cross-undertaking would have to provide security or pay money into the English court up to the value of the fortified cross-undertaking. To determine the value of the cross-undertaking, the court will estimate the harm that the person subject to the injunction might suffer if any freezing injunction is subsequently found to have been made improperly.
3. If there is doubt as to the adequacy of damages in relation to either (1) or (2) above, the court will consider the balance of convenience more generally. It will consider the particular factual circumstances in which the injunction is sought.

Freezing injunctions are usually sought without notice to the respondent, as giving notice would defeat the object of the relief sought. At an initial hearing, attended only by the party seeking the injunction, full and frank disclosure must be given of all facts relevant to the issues to be determined. If that does not happen, the freezing injunction may not be made or may be overturned.

The person against whom the freezing injunction is made would learn of the freezing injunction (if it is granted by the court) only after that initial hearing. A second hearing would follow at which both parties will be represented. The court will then decide whether the injunction should be continued, varied or discharged.

Asset disclosure order

Another interim remedy is an order directing a party to provide information about relevant property or assets (including the location thereof) which are or may be the subject of an application for a freezing injunction. The rationale behind such an order is to obtain information about assets which may then sought to be attacked subsequently.

An asset disclosure order is commonly sought at the same time as and ancillary to a freezing injunction, the reasons for which are twofold. First, it is useful to enable the applicant to police the freezing injunction if he / she is armed with details of the assets that the respondent holds. The asset disclosure order usually requires the respondent to swear an affidavit setting out their assets within a few days of the asset disclosure order having been made. If the respondent makes false statements in the affidavit they will be in contempt of court and so subject to a fine or possible term of imprisonment.

Secondly, if an asset disclosure order application is made prior to an application for a freezing injunction, the respondent is put on notice of the freezing injunction. That makes it more difficult to demonstrate to the court that there is a real risk of dissipation of the assets (see above), so can make it more difficult to obtain the freezing injunction at all.

Proprietary injunction

A further alternative form of interim relief which the English court may grant is a proprietary order. Unlike a freezing injunction, which is aimed primarily at freezing the respondent’s assets to ensure that he / she has the means to satisfy an eventual debt to the applicant following the foreign proceedings, a proprietary injunction is aimed at preventing the respondent from disposing of assets which belong (either legally or beneficially) to the applicant. It is therefore aimed at protecting the applicant’s assets in the respondent’s hands, rather than prohibiting the disposal of the respondent’s own assets.

The basis on which a proprietary injunction will be granted by the English court is similar to the requirements for a freezing injunction. However, there are two particular differences to note. First, there is no need to show any risk of dissipation for the grant of a proprietary injunction. Second, and more obviously, the applicant will need to be able to demonstrate that the assets to be subject to the proprietary injunction belong to (or are said to belong to) the applicant (not the respondent). The ownership could be beneficial, rather than legal.

Stop notice

If the assets being secured are shares in a company, a stop notice can be useful. English company law allows a party to serve a "stop notice" on a company, putting the company on notice that the applicant claims to have an equitable interest in its shares. The effect of such a notice is that the company will not allow any sale of any affected shares until the equitable ownership interest has been resolved.

The benefit of a stop notice is that it has a similar effect to an injunction – ie the shares cannot be sold for a limited period – but at a much smaller cost, as it avoids the need to apply for a costly freezing injunction, and at a lower risk. However, a stop notice can be side-stepped much more easily than a freezing injunction (for example, because the company may choose not to adhere to it and / or because the respondent may be able to persuade the company that the equitable claim is baseless). Also, taking this step would put the respondent on notice of the issue, as the company would immediately inform the respondent of the stop notice having been issued.

Options under English family law

In addition to those options outlined above, another option would be to discontinue the foreign proceedings and issue divorce and financial proceedings in England. It is then possible to apply for an order preventing a disposition under s 37 of the Matrimonial Causes Act 1973, and freezing orders under the court’s inherent jurisdiction.

Conclusion

As is evident from the above, there are a number of options to consider, and what is key is that legal advice is sought immediately, steps are taken quickly, and evidence is available to support any application made.

If you require further information about anything covered in this briefing, please contact Jolyon Connell, Sally Mantell or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

Please note this article was originally published by Family Law Journal, see here.

© Farrer & Co LLP, February 2023