Recently, we were successful in obtaining an urgent freezing order in the Supreme Court of Queensland in a corporate dispute.
Our client had evidence that the defendant in its proceeding was disposing of his assets in order to frustrate any recovery of a potential judgment by our client.
What is a freezing order?
A freezing order is an order restraining a person or corporation from removing any assets located in or outside Australia or from disposing of, dealing with or diminishing the value of those assets.
The purpose of the order is to minimise the risk that judgment might be unsatisfied at the conclusion of the matter.
An application for a freezing order is made without notice and heard ex parte (meaning in the absence of the respondent). The order will be usually made with a short timeframe until the return date where the respondent can be heard on the order. The onus is on the applicant to satisfy the Court that the order should continue.
Freezing orders are not granted lightly, which is reflected in the strict criteria which must be proven in order to successfully obtain the order.
Minimum requirements
Rule 260D of the Uniform Civil Procedure Rules 1999 sets out the requirements that must be satisfied before a freezing order is granted, namely:
1. There is a good arguable case (in the substantive action); and
2. There is a danger that the judgment will be wholly or partly unsatisfied because:
a. The respondent might abscond; or
b. The assets might be removed, disposed of, dealt with or diminished in value.
Proving the risk of dissipation of assets is easier if there is evidence of fraud and may in some cases be sufficient to give rise to an inference that assets may be diminished or disposed of.
An application for a freezing order must be supported with sworn evidence as to:
1. the judgment obtained or the cause of action including:
a. The basis of the claim for substantive relief;
b. The amount of the claim; and
c. The applicant’s knowledge of any possible defence;
2. the nature and value of the respondent’s assets so far as they are known to the applicant;
3. the matters referred to in rule 260D of the Rules; and
4. the identity of any person, who may be affected by the order and how they may be affected.
Other orders
The Court may make orders requiring the Respondent to swear to the details of their assets and liabilities.
Our case
In our client’s circumstances, as a result of the quick action by both our client and our firm to gather the evidence demonstrating the disposal of assets and file the urgent application, the freezing order was granted to give our client peace of mind that any potential judgment is not just an expensive piece of paper.
Our client had evidence to show that the other party had recently sold his principal place of residence and closed down his business. The Court agreed that this gave rise to an inference that he was disposing of his assets and made the order freezing his assets and the proceeds of the sale.
The application was filed and heard within 8 days of finding out that the property had been sold and business closed.