A party to arbitration or court proceedings in Australia can obtain a freezing order in advance of obtaining a domestic court judgment or arbitration award, in prescribed circumstances. In PT Bayan Resources TBK v BCBC Singapore Pte Ltd 1 the High Court of Australia has confirmed that Australian courts have the same power to grant freezing orders prior to a judgment or award being obtained in respect of proceedings commenced outside of Australia, provided that judgment or award would be enforceable in Australia.
In summary, the Foreign Judgments Act 1991 (the FJA) allows registration and enforcement in Australia of judgments obtained in certain countries, including Singapore, the United Kingdom, and France, which have reciprocal arrangements in place for the enforcement of Australian court judgments.
The facts and arguments
BCBC Singapore Pte Ltd (BCBC) commenced proceedings against PT Bayan Resources TBK (Bayan) in the High Court of Singapore for damages for breach of a joint venture agreement. The parties, the shareholder agreement and the dispute had no connection with Australia. However, Bayan owned shares in a West Australian company (Ausco) and, under the FJA, any judgment BCBC obtained against Bayan in the Singaporean High Court proceeding would be enforceable against Bayan’s Australian assets.
BCBC applied to the Supreme Court of Western Australia for a freezing order over Bayan’s shares in Ausco. The freezing order was granted.
Banyan appealed to the High Court and, for the purposes of the appeal, conceded that BCBC met the prescribed requirements for the grant of a freezing order in that:
- BCBC had “a good arguable case”.
- BCBC had “sufficient prospect” of obtaining a judgment in its favour.
- BCBC could enforce the judgment in Western Australia.
- There was ‘a danger that [any] judgment will be wholly or partly unsatisfied’ because Bayan might dispose of its Australian assets at any time.
However, Banyan argued that the WA Supreme Court did not have the power under either Commonwealth or State legislation (the FJA or the Supreme Court Act 1935), to make a freezing order in respect of a foreign judgment before the foreign judgment was obtained.
The High Court unanimously rejected Banyan’s argument and confirmed that:
- Each State’s Supreme Court has the power to make a freezing order in the exercise of its inherent jurisdiction to make such orders as that Court may determine to be appropriate “to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction”and that the Supreme Court’s power was not limited to cases where substantive proceedings in that Supreme Court had been commenced or were imminent.
- The Supreme Court’s power arose equally to protect “a prospective enforcement process” under the FJA before a judgment was obtained.
- The purpose of a freezing order is to protect a prospective enforcement process and that it was irrelevant that a freezing order is requested in anticipation of a foreign judgment coming into existence.
- Where a party is exposed to the risk that their opponent may dissipate their assets, there is no reason to distinguish between arbitral proceedings and proceedings instituted in court, specifically approving an earlier decision that a freezing order is available to support domestic arbitrations.
- Federal jurisdiction arises under the FJA, which means that a prospective award in an international arbitration would be accorded the same status as a domestic arbitration or foreign judgment.
A freezing order is now a very powerful asset for any claimant in foreign proceedings where a genuine danger exists that an opponent’s Australian assets will be disposed of in advance of a judgment or award being obtained. However, freezing orders are not easily obtained, the prescribed circumstances must be demonstrated:
- An ex parte application requires full and frank disclosure of all relevant facts.
- An undertaking in respect of damages will almost always be required.
As such a freezing order is not available as a means by which to obtain security for a claim where no real danger of dissipation can be established.