Australia
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. They are also known as Mareva Orders or Asset Protection Orders. The respondent is prohibited from dealing with, disposing or diminishing the value of the assets specified in the order until a further order of the Court, or until a specified time (such as, a further hearing, judgment or payment). The procedure varies as between specific Australian jurisdictions (i.e. particular State or Territory Courts and Federal Court of Australia) and accordingly, this guide contains a high-level summary of the position in Australia.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. An ancillary order, requiring the respondent to provide discovery or disclosure of its assets, whether inside or outside the jurisdiction is commonly made.
3. Briefly what is the relevant legal test?
The applicant must typically satisfy the following:
(i) a sufficiently strong prima facie claim on its prospective claim (based on the ‘good arguable case’ test) or otherwise, a judgment;
(ii) the prospective claim must be a money claim as distinct from a proprietary claim;
(iii) the respondent has assets inside or outside of the jurisdiction;
(iv) an award of damages will be inadequate or any prospective judgment will be wholly or partially unsatisfied (for example, there is a risk that assets might be disposed of);
(v) the interests of justice favor making the order, so the balance of convenience, the consequences of granting the order to the applicant outweigh the consequences to the respondent.
There are also certain discretionary factors which are considered by the Court.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court, which includes an affidavit setting out the reasons for the application and the basis on which the legal test is satisfied. An application can be made on or without notice to the respondent and before service of the originating process. Where it is made without notice, the applicant has a duty of full and frank disclosure to the Court and there will be a later return hearing at which the respondent can challenge any order which was made without notice.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
Yes. The applicant must provide a cross-undertaking as to damages at the time the application is made, which means the applicant will automatically submit to any order that the Court considers appropriate, including to make payment (in the nature of compensation) to any party affected by the order. In some instances, the Court may require the applicant to provide security, such as payment into Court.
6. Can it be sought against third parties?
Yes. The Court may make an order against third parties where the third party has control over assets which might be used to satisfy a judgment and where the Court is satisfied that there is likely to be relief ultimately available to the applicant, in which the third party may be required to deliver up the assets to the applicant. The Court may also make an order against prospective respondents where a cause of action has not yet accrued but the applicant must satisfy the Court that it has a good and arguable case in respect of that prospective cause of action. Any party which has notice of the order is prohibited from knowingly assisting in any breach of the order.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets, whether inside the jurisdiction (a domestic order) or outside (a worldwide order). Typically, the value of the assets should not exceed the maximum amount of the applicant’s likely claim.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes. Most Australian Courts have an inherent jurisdiction to make an order, with respect to domestic assets, in aid of the enforcement of a foreign judgment, whether or not the foreign judgment has yet been obtained. However, the Court will need to be satisfied that:
(i) the judgment of the foreign Court can be registered in or enforced by an Australian Court;
(ii) the foreign Court will grant a judgment and the judgment will be registered or enforced by an Australian Court.
The Foreign Judgments Act 1991 (Cth) (Act) provides a set of rules for the recognition of foreign judgments by an Australian Court.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage, but if before commencing the substantive claim, the Court will expect the applicant to issue its claim promptly and a failure to do so may be a discretionary factor which the Court will consider when deciding whether or not to make the order.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. The order will typically provide that the respondent is permitted to deal with their assets:
(i) above a specified value;
(ii) in the ordinary and proper course of business and/or for ordinary domestic expenses; and
(iii) for legal expenses or other professional services.
12. What happens after a freezing (or equivalent) order is granted?
The applicant serves the order on the respondent (if it was made without notice) and will typically notify relevant third parties of the order (such as the respondent’s banking institution(s)). If the order was made without notice, the Court will list a return hearing at which time the respondent may challenge the order which may then be discharged, extended for a further period of time or replaced with an undertaking which has the effect of preserving the status of the assets until the trial of the underlying claim.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Either the applicant or the respondent will be ordered to bear the costs of a freezing order but that is typically decided following final determination of the underlying claim at trial.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
Orders against third parties are typically only ordered in limited circumstances (referred to at 6 above) and the applicant must provide a cross-undertaking as to damages (in the nature of a payment of compensation) to any third party affected by the order (referred to at 5 above).
15. What are the consequences of breach of a freezing (or equivalent) order?
A respondent (or other party to the order) that breaches the order maybe held to be in civil contempt of Court and liable to imprisonment, sequestration of its property or other punishment. Any third party, which has notice of the order, may also be liable to the same.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
No.
17. Can a freezing (or equivalent) order be enforced abroad?
Yes.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
No, not in circumstances where there is no connection with Australia apart from assets being within the jurisdiction, i.e. where the parties are foreign and where the order has been obtained from a foreign Court and the judgment has not, or has no prosects, of being registered in or enforced by an Australian Court.
Contacts
Scott Castledine Partner Thomson Geer Sydney, Australia scastledine@tglaw.com.au tglaw.com.au Davina Lee Associate Thomson Geer Sydney, Australia dxlee@tglaw.com.au tglaw.com.au
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