New Zealand
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes, both domestic and international. The respondent is prohibited from removing assets located in or outside New Zealand or disposing, dealing with or diminishing the value of those assets (subject to any exceptions specified in the orders). The orders may be made until a specified time (for example, a further hearing, judgment or payment) or further order of the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. The Court may make any of the following orders: orders for the purposes of eliciting information relating to assets (i.e. discovery orders, including interrogation of the respondent); appointing a receiver of the assets that are the subject of the freezing order; search orders; orders requiring assets to be delivered up; and orders restraining individuals from leaving New Zealand.
3. Briefly what is the relevant legal test?
(i) The applicant must have a good arguable case in the underlying substantive claim or prospective claim;
(ii) the respondent has assets to which the orders can apply. Assets need not be specifically identified, but should be described with sufficient particularity to enable the person to whom notice is given to identify the assets frozen;
(iii) there is a real risk that the respondent will dissipate or dispose of the assets. Mere speculation is not sufficient.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court setting out the legal and factual basis for the alleged claim, details of the orders sought, along with an affidavit setting out the evidence in support. An application can be made with or without notice to the respondent.
For a without notice application, in addition to filing the application and affidavit, the applicant must also file a memorandum of counsel setting out submissions on why the relevant test is met. The applicant has a duty of full and frank disclosure. A short hearing of the without notice application may take place, but generally the Court will determine the application on the papers.
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 an undertaking in damages unless there are special circumstances (for example, if the respondent’s actions had put the applicant in a parlous financial position that prevents it from giving such an undertaking).
6. Can it be sought against third parties?
Yes. Freezing orders ought to be obtained against a third party in order to bind it and require it to perform certain actions (for example, where the third party holds or has control over the defendant’s assets). If substantive, permanent relief is sought against a third party, then it should be joined to the underlying proceeding as a defendant, and not just as a respondent to the freezing orders application.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets, whether within the jurisdiction (a domestic freezing order) or outside (a worldwide freezing order). Perishable assets are not usually covered by freezing orders.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
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, including prior to commencing the claim (although the Court will expect the applicant to issue its claim promptly thereafter) or following judgment to assist with enforcement.
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. If the likely maximum amount of the applicant’s claim is known, the value of the assets covered by the freezing order must not exceed the claim value plus interest and costs. The order will generally provide that the respondent may deal with their assets:
(i) for the purpose of paying ordinary living expenses;
(ii) paying legal expenses relating to the freezing order; or
(iii) disposing of assets in the ordinary course of the respondent’s business, including business expenses incurred in good faith.
12. What happens after a freezing (or equivalent) order is granted?
The applicant will typically give notice of the freezing order to third parties (such as banks) who might hold the respondent’s assets.
If the freezing order was obtained without notice, the applicant will serve the order and the application documents on the respondent. The respondent can apply to the Court to discharge or vary the orders. Any such application will be treated as urgent. Such application must proceed as a de novo hearing.
If freezing orders are made, the applicant has an obligation to take all reasonable steps it can to bring the proceedings to a substantive hearing quickly.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Costs typically only arise where there has been an opposition to the application for a freezing order, and typically the unsuccessful party (whether applicant or respondent) will be ordered to make a contribution to the successful party’s costs. Costs will typically be assessed and ordered to be paid shortly after the relevant application has been determined, but in some cases costs may not be assessed until an overall cost assessment is made as part of the final judgment in the underlying proceedings.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
A Court may order an applicant to indemnify an innocent third party for costs reasonably incurred in complying with a freezing order. Further, innocent third parties who are detrimentally affected by a freezing order have standing to apply to have the order varied or discharged as appropriate i.e. if the freezing order interferes too greatly with the third party’s freedom of trade and action generally. A third party successful with such an application will be entitled to all reasonable costs. There are no specific protections for third parties seeking to exercise a right of set-off.
In respect of assets located outside New Zealand, a third party may comply with:
(i) what it reasonably believes to be its obligations, contractual or otherwise, under the laws of the country in which those assets are situated; and
(ii) any orders of the Courts of that country, provided notice is given.
15. What are the consequences of breach of a freezing (or equivalent) order?
Any respondent who has notice of a freezing order and disobeys it may be held in contempt of Court. The Court will have a discretion but consequences can include fines, seizure of assets and imprisonment. Such consequences tend to be reserved for particularly egregious and repeated conduct.
A third party who has notice of a freezing order may also be held in contempt of Court where they knowingly help or permit the respondent to breach the terms of the order, or act inconsistently with the order.
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, if declared enforceable by a Court in the relevant country, in which case it affects a person only to the extent that it has been declared enforceable, with some limited exceptions.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
In general, no. A fresh application in New Zealand will be required. The New Zealand Court will make its own assessment but will have regard to the relevant overseas order and any judgment in relation to it.
Contacts
Janko Marcetic Senior Associate Chapman Tripp Auckland, New Zealand janko.marcetic@chapmantripp.com www.chapmantripp.com Michael Arthur Partner Chapman Tripp Auckland, New Zealand michael.arthur@chapmantripp.com www.chapmantripp.com Nathan Whittle Solicitor Chapman Tripp Auckland, New Zealand nathan.whittle@chapmantripp.com www.chapmantripp.com
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