In the recent decision of Pt Bayan Resources TBK v BCBC Singapore Pte Ltd [2014] WASCA 178, the Western Australian Court of Appeal unanimously found that the Rules of the Supreme Court 1971 (WA) (RSC) were valid insofar as they empower the Court to ‘freeze’ local assets ahead of a possible foreign judgment.

Order 52A r 5(1)(b)(ii) RSC authorizes a court to make a freezing order to restrain a party from disposing of or diminishing assets in order to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied. A freezing order may be made where the applicant has a good arguable case on a prospective cause of action that is justiciable in another court, including a court of a foreign country.  

Background

The facts of the case concerned a contractual dispute for a monetary judgement in the High Court of Singapore (HCS), whereby BCBC Singapore Pte Ltd (BCBC) had commenced proceedings against Pt Bayan Resources TBK (Bayan) alleging breach of contract.

At the time of the appeal, no judgment had been obtained in the HCS. If successful, BCBC will be able to register its judgment in Australia under the Foreign Judgments Act 1991 (Cth) (FJA) and liquidate Bayan’s Australian shares in order to satisfy the Singapore judgment debt.

Prior to commencing proceedings in the HCS, BCBC obtained a freezing order pursuant to O52A r 5(1)(b)(ii) RSC, restraining Bayan from transferring its Australian shares. On appeal, Bayan did not challenge the primary judge’s decision to grant a freezing order, rather the appeal concerned whether O52A RSC itself was valid.

First instance decision

At trial1, Le Miere J ordered the continuation of the freezing order over Bayan’s Australian assets. The primary judge held that O52A RSC was supported by the Supreme Court’s inherent jurisdiction under the Supreme Court Act 1935 (WA) (SCA) and the Supreme Court’s rule making powers conferred on it by the FJA.

Why the Court of Appeal held O52A RSC to be valid

On appeal Bayan contended that the Supreme Court did not have inherent or statutory power under O52A RSC to make a freezing order as no substantive proceedings had been or were to be commenced in the Supreme Court and no judgment had been made in the foreign proceedings. Furthermore, Bayan asserted that the existence of such power would be inconsistent with the FJA for the purposes of section 109 of the Commonwealth of Australia Constitution Act 1900 (Constitution).  

The critical issues on appeal were whether O52A RSC is beyond the statutory powers granted to the Supreme Court under the FJA or its inherent jurisdiction under the SCA.

Is O52A necessary or convenient for giving effect to the FJA?

The FJA provides a framework for the registration and enforcement in Australia of certain foreign judgments and empowers the Supreme Court of each State and Territory to make rules of court prescribing matters necessary or convenient for carrying out or giving effect to the FJA.

In essence, the court considered whether O52A is ‘necessary or convenient’ to give effect to the FJA. The court reasoned that as the FJA does not regulate the enforcement of foreign judgments or the mechanisms which the courts may adopt to prevent the abuse or frustration of their enforcement processes, in the circumstances there was ample scope for the Supreme Court to make rules in connection with the enforcement of judgments under the FJA. Importantly, the court held that the rights created by the FJA would be of no practical utility if the defendant’s Australian assets were removed from the jurisdiction or their value was to be materially diminished.

Is O52A within the Supreme Court’s inherent jurisdiction?

The SCA grants the Supreme Court inherent power necessary to effectively exercise its jurisdiction and to protect the administration of justice. The court held that O52A RSC is within the Supreme Court’s inherent jurisdiction. The objective in granting a freezing order is the prevention of abuse or frustration of its processes and the protection of the administration of justice, as freezing orders protect a judgment debt that might otherwise be wholly or partly unsatisfied.

Further, section 167(1)(a) of the SCA provides that rules of the court may be made for regulating and prescribing the procedure and practice to be followed in the Supreme Court.

Is O52A constitutionally invalid?

The court held that O52A RSC is not inconsistent with the FJA as the FJA does not prescribe the processes or requirements for enforcement of foreign judgments. Rather these matters are expressly left to the control of the registering courts. The power of the Supreme Court to make a freezing order under O52A RSC does not detract from or weaken the operation of the FJA, but supports the Supreme Court’s capacity to prevent the abuse or frustration of its processes.

Final comments

If litigating overseas, plaintiffs can rest assured that domestic assets the subject of the litigation can be the subject of a freezing order before that foreign judgment is delivered.  

It remains to be seen whether Bayan will seek special leave to have this matter heard in the High Court of Australia; at an earlier stage of the proceedings, Bayan unsuccessfully sought to be heard in the High Court. If Bayan can successfully argue that O52A RSC is inconsistent with the FJA, the Order will be held to be invalid.

However, in our opinion this is unlikely. The primary judge importantly stated that in order to exclude or curtail the inherent jurisdiction of a superior court, unambiguous statutory language is required. It is clear from the Court of Appeal’s reasoning in this decision that in enacting the FJA, Federal Parliament did not intend to displace the inherent jurisdiction of the Supreme Court. This reasoningis likely to apply in other jurisdictions.