Freezing orders and the Foreign Judgments Act

Freezing orders (also known as Mareva orders or Mareva injunctions) are oft-used tools available to a plaintiff to preserve the assets of a defendant, where there is a danger of the defendant absconding or of the assets being removed from the jurisdiction or otherwise diminished. Such dangers put in peril the ability of a plaintiff to recover any favourable judgment against that defendant.

The Foreign Judgments Act (‘FJA’) establishes a regime for the registration and enforcement in Australia of judgments of foreign courts. For the purposes of the FJA, ‘judgment’ includes a final or interlocutory order given or made by a court in civil proceedings.(1)

Facts and procedural history

BCBC Singapore Pte Ltd (‘BCBC’) commenced proceedings against PT Bayan Resources TBK (‘Bayan’), a company incorporated in Indonesia, in the High Court of Singapore in relation to a dispute arising from a joint venture agreement. That proceeding is ongoing.

The majority of Bayan’s assets are located in Indonesia. As Indonesian law precludes enforcement of foreign judgments, there was a real risk that any judgment of the High Court of Singapore which was adverse to Bayan would remain unsatisfied. Fortunately for BCBC, Bayan owned a significant shareholding in Kangaroo Resources Limited (KRL), a company incorporated in Australia.

BCBC applied to the Supreme Court of WA for freezing orders against Bayan and KRL in respect of Bayan’s shares in KRL. The Supreme Court made a freezing order against Bayan.

The Court of Appeal of WA unanimously dismissed an appeal by Bayan. Bayan appealed to the High Court.

Decision

The High Court unanimously dismissed Bayan’s appeal (French CJ, Kiefel, Bell, Gageler and Gordon JJ delivering the primary judgment).

The primary judgment rejected Bayan’s arguments that the making of such a freezing order was (a) beyond the inherent jurisdiction of the Supreme Court and was not authorised by the Supreme Court Act or FJA; and (b) inconsistent with the scheme of the FJA.

The primary judgment noted that it is well established in Australia that the inherent power of the Supreme Court of a State ‘includes the power to make such orders as the Court may determine to be appropriate “to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction”.(2) A freezing order is a paradigm example of the exercise of this power.

The primary judgment held that the process which a freezing order is designed to protect is ‘a prospective enforcement process’.(3) It is enough that some future legal process may be available to a plaintiff to require a third party to contribute to the funds of the defendant to satisfy any judgment obtained by the plaintiff against that defendant.(4)

The Supreme Court’s inherent power to make such freezing order in respect of a prospective foreign judgment is entirely consistent with the Foreign Judgments Act.

What does this mean?

It confirms that in Australia prospective foreign judgment creditors seeking judgment against debtors who have assets in Australia can successfully obtain a freezing order over a debtor’s Australian assets.  However, the creditor will still need to satisfy the standard criteria.(5)