What is a freezing order?

In Queensland, Rule 260A of the Uniform Civil Procedure Rules 1999 (Qld) deals with the provision of freezing orders, which are also known as Mareva Injunctions, or Asset Preservation Orders.  These are court issued orders that prevent a party from disposing of, dealing with, or diminishing the value of assets,[1] either within or outside of Australia during legal proceedings.

Mareva Injunction

The term “Mareva Injunction” originates from an early case in which an injunction was granted to safeguard the plaintiff from the risk that any judgment or award could be undermined by the defendant dispersing or removing assets, consequently making them unavailable for enforcement.

In other words, freezing orders can (amongst other things) prevent the defendant from:

• withdrawing funds from a financial institution;
• transferring funds to a third party;
• transferring or selling shares;
• transferring or selling real property (real estate);
• transferring or selling motor vehicles; and
• selling or disposing of personal possessions.

This ensures fairness in legal proceedings and prevents actions from parties that could render judicial outcomes ineffective.

When can a freezing order be made?

To succeed in obtaining a freezing order, the onus is on the applicant to establish the following:

• they have a good arguable case;[2]
• there is a risk that the judgment debtor, prospective judgment debtor, or another person (third party) may abscond[3], or
• the assets of the judgment debtor, prospective judgment debtor, or another person (third party) may be removed from Australia, or from any location outside Australia;[4] and be disposed of, dealt with, or diminished in value.[5]

Ultimately, there must be a genuine risk that the other party may flee or fail to preserve their assets, which would prevent any judgment from being satisfied.

Requirements under common law

There are five primary requirements that must be met for a freezing order application to succeed:

1. The applicant must have a judgment that can be enforced within the jurisdiction or an active cause of action within the jurisdiction.
2. For interlocutory Mareva orders, the applicant must present a good arguable case;
3. The respondent must have assets, either within or outside the jurisdiction;
4. There must be a real risk that the respondent will remove assets from the court’s jurisdiction, which could make any potential orders unenforceable;
5. If the Mareva order application fails, the applicant risks being unable to satisfy a judgment in their favour.[6]

Interim or Interlocutory Injunction?

The purpose of granting a freezing order is to address the matter urgently and prevent the dissipation of assets before a judgment is made in the proceedings. An interim injunction can be applied for ex parte, meaning without notice to the respondent, and remains in effect for a short period. In contrast, an interlocutory injunction is applied for prior to trial and remains in force until the conclusion of the case.

Can I defend against a freezing order?

The court reserves the right for respondents to apply to vary or discharge freezing orders. Such applications are typically treated as urgent.

The respondent may also prevent the freezing order by providing security, such as paying a sum to the court, depositing funds into a joint bank account held by both parties’ solicitors, or offering a bank guarantee. The value of the security should be sufficient to cover the anticipated judgment, including costs and interest related to the claim.

A freezing order will also cease to have effect once the respondent provides the agreed security or payment. However, this security does not give the applicant priority over the respondent’s other creditors in the event of insolvency. If the order is discharged, the respondent must promptly file and serve notice with the court.

Ancillary Orders

The Court may issue ancillary orders alongside freezing orders, with the most common being an order for the disclosure of assets.[7]

Conclusion

When dealing with urgent and complex Court applications, proper experience is essential.

Whether you are concerned a party may transfer their assets to avoid paying a judgment or an application for freezing orders, or Mareva orders, has been brought against you, we can assist.

[1] Uniform Civil Procedure Rules 1999 (Qld) (‘UCPR’) reg 260A.

[2] UCPR (n 1) 260D (2).

[3] Ibid reg 260D (3)(a).

[4] Ibid reg 260D (3)(b)(i).

[5] Ibid reg 260D (3)(b)(ii).

[6] Pankhurst v Damata [2008] QSC 28.

[7] Ibid 8.

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.