Take-home points
1. Under the Foreign Judgment Act 1991 (Cth), the judgments of certain foreign courts may be registered in state supreme courts and enforced.
2. The state supreme courts also have inherit jurisdiction to grant freezing orders in respect of prospective foreign judgments not yet delivered, to prevent assets within the jurisdiction from being dissipated which would frustrate any foreign judgment properly registered in Australia.
3. The making of freezing orders must be within the inherit jurisdiction of the state supreme courts as regulated by any relevant rules of procedure and practice.
4. The process may be useful for litigants who find enforcing judgments abroad, such as against foreign State-owned entities, who hold assets in Australia.
The High Court has confirmed that the Supreme Court of each state in Australia has the inherit power to order a freezing order where it relates to a prospective judgment of a foreign court.
Under the Foreign Judgment Act 1991 (Cth) a regime exists for parties to register and enforcement judgments made by certain foreign courts. Judgments include both final and interlocutory orders made by a court in a civil proceeding. Whether or not judgment may be registered in State Supreme Courts (and enforcement action taken) will depend on from which Court the judgment is issued, and whether or not it is a “money judgment” or “non-money judgment”. For more details please see our article Registering and Enforcing Foreign Judgments in Australia.
Freezing orders, also known as “Mareva injunctions/orders” or “asset preservation order” is an order the Court may make restraining a party from dealing with certain specified assets (such as disposing of it, or otherwise removing or hiding it). The ordinary purpose of a freezing order is to preserve a party’s asset until a judgment to prevent that party from dealing with property in such a way that may frustrating or inhibiting the Court’s process to satisfy a judgment, or otherwise be an abuse of process of the Court. For more details, please see our article Freezing orders – preserving the value of your judgment.
In PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015] HCA 36, the High Court confirmed that a Supreme Court has the inherent power within its authority to adjudicate (including making a freezing order) in relation to a prospective judgment of a foreign court which would be registrable under the Foreign Judgments Act 1991 (Cth).
Relevant facts
PT Bayan involved the following facts:
1. PT Bayan, the appellant, and BCBC, the respondents, owned all the shares in a company incorporated in Indonesia. The appellant also owned shares in a company incorporated in Australia.
2. Through the Indonesian company, the parties operated a business pursuant to a joint venture agreement governed by the law of Singapore. The respondent commenced proceedings against the appellant in the High Court of Singapore for (among other things) breach of the joint venture agreement. At the time of the High Court’s judgment, a final decision from the High Court of Singapore remained pending.
3. After commencing the proceeding in the High Court of Singapore, the respondent applied to the Supreme Court of Western Australia for a freezing order against the appellant in respect of the shares in the Australian company, which was granted by Justice Pritchard. The order prevented the appellants from transferring any of its shares in the Australian company to a related entity, further encumbering those shares, or from in any way disposing of, dealing with, or otherwise diminishing the value of those shares without first giving notice to the respondent.
4. The appellant applied to the High Court to have the freezing order discharged, which was remitted back the Supreme Court of Western Australia for consideration. Justice Le Miere dismissed the remitted proceedings, discharged the freezing order against the Australian company and continued the freezing order against the appellants.
5. Justice Le Miere decided that the respondents had an arguable case in the proceedings in the High Court of Singapore and that gave rise to a sufficient prospect that the High Court of Singapore would give a money judgment in favour of the respondents for at least US$138 million. Justice Le Miere noted that the rest of the appellant’s assets were located in Singapore and that the law of Singapore precluded execution of a money judgment of the High Court of Singapore, there was a real and sensible risk that the judgment of the High Court of Singapore would remain unsatisfied.
6. The appellant appealed the decision by Justice Le Miere to the Court of Appeal, which was subsequently unanimously dismissed. The appellant then appealed that decision to the High Court.
The High Court’s decision
While the appellant accepted that the findings by Justice Le Miere fulfilled the criteria under the Western Australian Supreme Court Rules for the making of a freezing order, it argued that the freezing order was outside the inherit jurisdiction of the Court because it was not explicitly authorised by the Supreme Court Act of Western Australia nor the Foreign Judgments Act.
The High Court unanimously dismissed the appellant’s appeal and held that it was well established in Australia that a court may make a freezing order to protect prospective enforcement process. A freezing order may also be made in advance of judgment. The making of a freezing order in relation to an anticipated judgment of a foreign court is within the inherit power of a state supreme court as it is to “protect a process of registration and enforcement in the Supreme Court which is in prospect of being invoked.” The criteria listed in any court rules then appropriately tailor the exercise of that inherit power.
The majority opinion also noted that an application for a freezing order in relation to a prospective judgment of a foreign court registrable under the Foreign Judgements Act is a matter which may be vested in state supreme courts to exercise in their Federal jurisdiction. This would, under section 39 of the Judiciary Act 1903 (Cth) invest the state court with federal jurisdiction to the exclusion of state jurisdiction under section 109 of the Constitution.
Commentary
As Australia continues its economic engagement with the rest of the world and continues to grow as a hub of trade and commerce, international corporations will hold more substantial assets in Australia including shares, licences, and real property.
Corporations based abroad and involved in foreign jurisdictions where enforcement of judgments may prove difficult, (for example, due to complex asset-holding structures, enforcement against State own entities or recognition of foreign judgments) can look to Australia to see if there are assets available to satisfy favourable judgments.
Parties litigating in overseas jurisdictions can be assured that they are will be able to rely on freezing orders from Australian courts to prevent defendants from disposing of assets before a foreign judgment is delivered, provided the procedural rules of that particular state supreme court are complied with. The judgment provides further support in promoting Australia’s competitiveness on the world stage.