RELEVANT LEGAL PRINCIPLES
46 The Court is empowered to make freezing orders by r 7.32 of the Federal Court Rules, which provides as follows :
7.32 Freezing order
(1) The Court may make an order (a freezing order), with or without notice to a respondent, 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.
Note: Without notice is defined in the Dictionary.
47 Orders ancillary to freezing orders are the subject of r 7.33, which provides :
7.33 Ancillary order
(1) The Court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the Court considers appropriate.
(2) Without limiting the generality of subrule (1), an ancillary order may be made for either or both of the following purposes:
(a) eliciting information relating to assets relevant to the freezing order or prospective freezing order;
(b) determining whether the freezing order should be made.
48 Rule 7.34 extends the powers of the Court in rules 7.32 and 7.33 to persons who are not otherwise parties to the substantive proceedings, namely third parties. For completeness I note that r 7.34 provides :
7.34 Order may be against person not a party to proceeding
The Court may make a freezing order or an ancillary order against a person even if the person is not a party in a proceeding in which substantive relief is sought against the respondent.
49 Rule 7.35 anticipates freezing orders against a judgment debtor, or prospective judgment debtor, or a third party. In particular r 7.35 (1)(b) states that :
(1) This rule applies if:
(a) …
(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in:
(i) the Court; or
(ii) ...
50 Further factors guiding the exercise of the Court's discretion are set out in r 7.35 (4)-(6) as follows :
(4) The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:
(a) the judgment debtor, prospective judgment debtor or another person absconds;
(b) the assets of the judgment debtor, prospective judgment debtor or another person are:
(i) removed from Australia or from a place inside or outside Australia; or
(ii) disposed of, dealt with or diminished in value.
(5) The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that:
(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:
(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
(6) Nothing in this rule affects the power of the Court to make a freezing order or ancillary order if the Court considers it is in the interests of justice to do so.
51 Having regard to these rules I note the following.
52 First, Freezing Orders Practice Note (GPN-FRZG) issued by the Chief Justice on 25 October 2016 applies to any proceeding involving an application in this Court for a freezing order, and to that extent supplements the provisions of the Federal Court Rules relating to the making of such orders.
53 Second, the DCT seeks interim orders ex parte. I note however that r 7.32 (1) empowers the Court to make a freezing order with or without notice to a respondent.
54 In relation to the making of orders ex parte, I note the following observation of Gageler J in Aristocrat Technologies Australia Pty Ltd v Allam [2016] HCA 3 :
15. It is an elementary principle of our ordinarily adversarial system of justice that full and fair disclosure must be made by any person who seeks an order from a court ex parte, with the result that failure to make such disclosure is ordinarily sufficient to warrant discharge of such order as might be made. The principle is not confined to particular types of interlocutory orders. Its rationale lies in the importance to the administration of justice of the courts and the public being able to have confidence that an order will not be made in the absence of a person whose rights are immediately to be affected by that order unless the court making the order has first been informed by the applicant of all facts known to the applicant which that absent person could be expected to have sought to place before the court had the application for the order been contested.
(footnotes omitted)
55 (See also Rumsley v Vegas Enterprises Pty Ltd [2016] FCAFC 84 at [20].
56 Third, as the Practice Note states at 2.6, a freezing order should be viewed as an extraordinary interim remedy because it can restrict the right to deal with assets even before judgment, and is commonly granted without notice. In this respect I further note the following observation of Gaudron, McHugh, Gummow and Callinan JJ in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 403-404:
We agree with the tenor of what was said with particular respect to Mareva relief before judgment by the Court of Appeal of New South Wales (Mason P, Sheller JA, Sheppard A-JA) in Frigo v Culhaci:
"[A Mareva order] is a drastic remedy which should not be granted lightly....
A [Mareva order] is an interlocutory order which, if granted, imposes a severe restriction upon a defendant's right to deal with his or her assets. It is granted at the suit of a plaintiff whose status as a creditor is in dispute and who need not be a secured creditor. Its purpose is to preserve the status quo, not to change it in favour of the plaintiff. The function of the order is not to 'provide a plaintiff with security in advance for a judgment that he hopes to obtain and that he fears might not be satisfied; nor is it to improve the position of the plaintiff in the event of the defendant's insolvency' ... Many authorities attest to the care with which courts are required to scrutinise applications for [Mareva orders]…"
(footnotes omitted, emphasis added)
57 In view of the extreme seriousness of a freezing order it is also appropriate for the Court to take into account the balance of convenience of making an order in these terms : Deputy Commissioner of Taxation v Shi [2018] FCA 1915 at [20].
58 Fourth, the Court must be satisfied that a freezing order is necessary to prevent the frustration or inhibition of the Court's process by seeking to meet a danger that a - in this case - prospective judgment of the Court will be wholly or partly unsatisfied. In respect of prospective judgment debtors, the Court must be satisfied that there is a danger of a prospective judgment being wholly or partly unsatisfied because the debtor (or another person) might abscond, or relevant assets will be removed, disposed of, dealt with or diminished in value (r 7.35 (4)).
59 Fifth, r 7.32 (2) contemplates orders restraining a respondent in respect of assets located in or outside Australia.
60 Sixth, the purposes for which ancillary orders may be made are limited by r 7.33 (2), namely for eliciting information relating to assets relating to the freezing order or determining whether the freezing order should be made.
61 Seventh, plainly either freezing orders or ancillary orders may be made against a person even if not a party to the substantive application. However the circumstances in which the Court may make such orders against third parties are subject to r 7.35 (5). Rule 7.35 (5)(a) requires that there must be a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:
the third party holds or is using, or has exercised or is exercising, a power of disposition over relevant assets; or
the third party is in possession of, or in a position of control or influence concerning, relevant assets.
62 Alternatively, r 7.35 (5)(b) enlivens the Court's power to make freezing or ancillary orders against third parties where, having regard to all the circumstances, a process is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, wherein the third party may be obliged to disgorge assets or contribute towards satisfying the judgment or prospective judgment.
63 Eighth, an applicant for a freezing order bears the onus of satisfying the Court that the order should be made, and in satisfying the Court as to the amount which is to be the subject of the order : Zhen v Mo [2008] VSC 300 at [24].
64 Ninth, an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order : Zhen at [25].
65 Finally, and critically, an applicant for a freezing order must demonstrate that it has a good arguable case on an accrued or prospective cause of action that is justiciable in the Court.