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Freezing orders (Mareva Injunction)

Updated: Oct 29, 2019

According to the practice note prepared by the Honourable Justice P Biscoe of the Land and Environment Court of New South Wales and updated by his Honour Judge M Dicker SC of the District Court of New South Wales: “the court is empowered to make a freezing order, with or without notice to the respondent, to prevent the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied: r 25.11. This jurisdiction is concerned with money claims, as distinct from proprietary claims where the principles governing interlocutory injunctions are different. If the court has no jurisdiction to give a relevant money judgment, it has no power to make a freezing order under this rule: Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249 at [45]–[46] “.

Freezing orders are interlocutory orders and they are often sought ex parte without notice to the respondent. They are therefore not to be granted lightly and is an exceptional remedy. Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102 at [57].

To compare with the Interlocutory injunction, the applicant must satisfy the court that there is a prima facie case; the plaintiff is likely to suffer injury for which damages will not be an adequate remedy and the balance of convenience favours the granting of an injunction. – ABC v O’Neill (2006)227CLR57.

A good arguable case is “one which is more than barely capable of serious argument, and yet not necessarily one which the judge believes would have a better than 50 per cent chance of success”: Ninemia Maritime Corp v Trave GmbH & Co KG (“The Niedersachsen”) [1984] 1 All ER 398 at 404 per Mustill J. It is a less stringent test than requiring proof on the balance of probabilities: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 325 per Gleeson CJ; Frigo v Culhaci [1998] NSWCA 88.

To seek a Mareva Injunction, (1) the applicant must satisfy the court that it has a good arguable case referring to the above threshold; (2) there is a danger that the judgment might be futile due to the judgment debtor dealing with or disposing of assets in discharging obligations; (3) the applicant must provide an undertaking as to damages because in its absence if the proceedings fail, the respondent will be left without remedy. The legal practitioner must disclose all material facts on an ex parte application for the court to exercise its discretionary power. The duration of an ex parte order is usually very short.

The value of the assets seeking to be restrained should not exceed the total likely claim plus costs and interests excluding living, legal and business expenses. In addition, a freezing order does not operate as a form of the security for a plaintiff's judgment, but only to prevent the frustration of the frustration of that judgment by dissipation of assets. Clout (as trustee in bankruptcy of the Estate of Dexter) v Anscor Pty Ltd [2001] FCA 174 at [19].

Orders ancillary to a freezing order include the following:

1. a disclosure of assets order (the most common form, as the respondent should disclose the location, nature and details of its assets)

2. an order for the cross-examination of a respondent about his or her assets disclosure

3. an order requiring the delivery of specified assets

4. an order that a respondent direct its bank to disclose information to the applicant

5. an order that a respondent restore or pay money to a designated account or into court

6. an order restraining the respondent from leaving the jurisdiction for a period

7. an order appointing a receiver to the respondent’s assets

8. an order for the transfer of assets from one foreign jurisdiction to another

9. a Norwich order (Norwich Pharmacal Co v Commissioners of Customs and Excise [1974] AC 133),

10. a search order. – NSW Civil Trials Bench Book.

If a freezing order is made against or served on a third party, the third party is bound by the order. UCPR 25.13 provides that the court may make a freezing order or an ancillary order against a respondent even if the respondent is not a party to a proceeding. Failure to comply with freezing orders will be guilty of contempt of court, for which it may be penalised by committal, sequestration or fine. ---- NSW Civil Trial Bench Book.

The efficacy of freezing orders is dependent upon compliance by third parties and may be tested through processes such as subpoenas. ---NSW Civil Trials Bench Book.

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