In brief
A victory in court is hollow if a defendant has hidden or dissipated assets and is unable to pay the judgment debt. A useful tool in a plaintiff’s arsenal is a freezing order – an order by the court that a defendant cannot deal with specific assets up to the amount claimed by you.
What you need to know
- When you bring proceedings against a defendant you need to consider the commercial reality of the situation as well as the legal merits of your case.
- Although they are not granted lightly, freezing orders are an effective method of ensuring that a defendant has sufficient assets to satisfy any judgment amount ordered against it.
- There is usually a carve-out to allow the defendant reasonable living expenses and the ability to pay legal fees.
- A freezing order prevents a defendant from moving assets and funds overseas or transferring them to different entities. The purpose is to ensure that any judgment you receive can be satisfied by the defendant.
What are the criteria for obtaining a freezing order?
Whilst every case turns on its own facts, the court considers the following:
1. That there is an arguable case against the defendant
You will need to provide the court with sufficient evidence for the court to determine that there is a good arguable claim against the defendant. The evidence is provided by way of an affidavit, which outlines the evidence in your case and exhibits the relevant documents.
2. That there exists a real risk of the defendant concealing or disposing of or removing from the court’s jurisdiction its assets, in order to avoid satisfying an adverse judgment against it.
The onus of proving the risk rests with the plaintiff. The risk must be real, not merely a suspicion. Furthermore, you will need to provide evidence to the court that there is a real risk of disposition or removal of assets from the jurisdiction.
Can a defendant dispute freezing orders?
Yes. The orders are usually made ex parte, without notice to or in the presence of the defendant. As the defendant is not present in court, the plaintiff has a duty to provide the court with all the relevant information – whether it helps or harms the case.
If satisfied that there are grounds to warrant a freezing order, the court will usually make an interim order thereby freezing the defendant’s assets until a further hearing date. At the further hearing date the defendant can present evidence and arguments as to why an ongoing freezing order should not be made.
Take home points
Freezing orders are a drastic remedy and the Court does not grant them lightly. Where there is evidence that the defendant may be trying to hide or remove assets from the jurisdiction, a freezing order becomes an effective tool in a plaintiff’s arsenal.
As part of assessing a claim against a defendant, a plaintiff should not just assess the legal risks of litigation, but also consider any behavior that indicates that the defendant is hiding assets in order to avoid satisfying a judgment made against it.
As a plaintiff, a freezing order is always an option worth considering when filing proceedings if you are concerned (and have evidence) that the defendant is likely to dissipate their assets to avoid enforcement of any order you may obtain.
If a freezing order is made against you, you should immediately seek legal advice as to whether there are grounds to overturn the order.
For further information about this, contact Catherine Ballantyne, Special Counsel at catherine.ballantyne@madgwicks.com.au.
