Freezing orders are an important tool for litigants who are in danger of having assets destroyed which are subject to potential court orders. Keep reading this Legal Kitz blog to find out more about what a freezing order is, who and what it can impact, and what happens if you are subject to one.
What is a freezing order?
A freezing order, also known as a “Mareva order” or an “asset preservation order”, is an injunction which the Supreme Court may grant to restrain a party from selling or moving assets while the relevant litigation is still in process. These orders are granted where there is a danger that a party may frustrate potential orders, by disposing of or moving assets outside Australia. Freezing orders are granted infrequently due to the considerable interference on a party’s property rights, and are mostly applied in situations of international fraud.
The right for a court to make a freezing order is held in the Uniform Civil Procedure Rules 1999 (Qld), rule 260A:
(1) The court may make an order (a “freezing order”) for the purpose of preventing 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.
(2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.
Who can I apply to make a freezing order against?
An application for a freezing order can be made against any individual or company who is defendant to a claim where the court order may be wholly or partly unsatisfied. A freezing order may also be made against a third party to the relevant claim, where that party controls the assets of the defendant in any way, or may have to contribute to any potential judgement in the relevant litigation.
It is important to make a freezing order application as soon as possible. The Supreme Court of Queensland case BluePoint Property Pty Ltd v Zuri Properties Pty Ltd [2020] QSC 219 was a dispute between the rights of two parties in relation to development of a parcel of land, which included an application for an injunction, and an attempt to obtain a caveat. The plaintiff delayed in applying for a freezing order to preserve the assets of the defendant, but the assets had already been dealt with. It is crucial to make freezing order applications in a timely manner and without notice to the respondent.
What assets can a freezing order cover?
A freezing order can only apply to the value of the relevant claim, plus costs and interest. The order can apply to:
Property (houses, buildings, and land);
Motor vehicles;
Bank accounts;
Term deposits;
Share portfolios;
Personal valuables; and
Any other assets the court sees appropriate.
Mareva orders are not limited to assets located or held in Australia.
What is required for the courts to make a Mareva order under the UCPR?
In order to obtain a freezing order under rule 260A, the applicant must show:
that they have a “good arguable case”;
a real risk that there will be an unjustifiable disposal of assets which can affect future court proceedings; and
that the order takes into account the impact on all parties involved.
Applications for a freezing order will be heard without notice to the respondent. The court will hear the application first, and if the application for the freezing order has been successful, will allow the respondent to argue against the freezing order on the next return date.
What is required for the courts to make a Mareva order under common law?
The case Pankhurst v Damata (2008) QSC 28 applied the five requirements which must be satisfied to succeed on an application for a freezing order:
The applicant must have judgement enforceable within the jurisdiction or an existing cause of action within the jurisdiction;
In case of interlocutory Mareva orders, the applicant must have a good arguable case;
The respondent must have assets (within or outside the jurisdiction);
There must be a real danger or risk that the respondent will remove assets within the court’s jurisdiction (rendering any potential orders wholly or partly unsatisfied); and
If the application for a Mareva order is not successful, the applicant is at risk that the judgement in their favour may not be satisfied.
What happens if I am under a freezing order?
When under a Mareva order, a respondent will have access to withdraw a set amount per week to pay for reasonable living expenses, such as groceries and repayments. If this is insufficient, the respondent can often negotiate or apply to the court to increase the amount.
A respondent will also usually need to provide an affidavit of assets, which is a document that sets out all assets held by that person. The applicant will then be able to notify all relevant organisations to ensure the freezing order is applied. This is particularly relevant where it is unknown if a respondent has other assets, such as a share portfolio or a betting account. Falsifying affidavits can result in severe penalties, up to and including imprisonment.
When freezing orders are granted, the applicant is not given any proprietary rights after the assets of the respondent.
How can I defend against a freezing order?
To avoid asset preservation orders, a respondent can apply to the court to vary or discharge an order if the imposition is too significant. The Supreme Court will review the application on short notice, in accordance with Practice Direction 1 of 2007. It may also be varied by consent between the applicant and the respondent.
Alternatively, the respondent can provide security to avoid a freezing order, such as:
paying a sum to the court,
paying a sum into a joint bank account between the parties’ solicitors; or
providing a bank guarantee.
The value should be enough to cover the likely judgement of the relevant claim, costs and interest.
How long does a freezing order last?
Freezing orders will usually be continued until the relevant legal dispute has been finalised by the court, or if a settlement has been reached. Unless the respondent can convince the court that the orders should not be continued, the freezing orders will remain in place. This may remain for many years, until a resolution has been reached.
Freezing orders are useful where there is a danger for debtors to spend, remove, or destroy assets which may prevent a prospective judgement from being satisfied. It is important to remember that freezing orders are carefully considered and infrequently granted, but are a strong tool for litigants where there is a high risk.
Legal advice
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