If you suffer a civil wrong, you will probably consider the question: ‘Can I get my money back?’. A large part of the answer may be found in a so-called freezing order, also known as a Mareva order or Mareva injunction. It is named after the second reported case in which it was made available: Mareva Compania Naviwa SA v International Bulkcam’ws SA [I975] 2 Lloyd’s Reports 509. In Queensland, Mareva Orders are dealt with in Chapter 8 Part 2 Division 2 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), which is complemented by Practice Direction Number 1 of 2007.
PURPOSE OF THE MAREVA ORDER
The purpose of Mareva order is to restrain a defendant from dealing with the whole or a part of his or her assets until the final judgment on the matter is made by the Court (rule 260A(2) of the UCPR). A Mareva injunction, once granted, does not provide the applicant with any proprietary rights in the assets subjected to the order, nor does it give an applicant preference over other creditors of the respondent. It simply ‘freezes’ assets in the hands of either the defendant to the main legal action or a third party (Rule 260C of the UCPR), such as a bank, which might not be a party to the primary proceeding (Cardile v LED Builders Pty Ltd (1999) 198 CLR 380). A Mareva order can be served on a person outside Australian (rule 260F). In addition, the court may make ancillary orders, including an order for disclosure of the respondent’s assets (rule 260B of the UCPR) .
NATURE AND VALUE OF THE ASSETS THAT CAN BE ‘FROZEN’
For the purposes of Mareva orders, respondent’s assets include all his or her assets which the respondent can deal with or dispose of, regardless of whether they are in the respondent’s name and whether they are owned solely by the respondent or co-owned. Respondent’s assets can include property (if the property has been sold, then the proceeds of the sale), any money in the account of the respondent, etc. The amount of assets that can be ‘frozen’ by the court should not exceed the approximate maximum value of the applicant’s claim, including costs and interest and should exclude dealings by the respondent with his or her assets for legitimate purposes (paying for ordinary living expenses, for reasonable legal advice, etc.). According to the Practice Direction, a Mareva order should reserve liberty for the respondent to apply on short notice to have the order discharged or varied.
WHAT NEEDS TO BE DEMONSTRATED BY THE APPLICANT IN ORDER TO OBTAIN A MAREVA ORDER?
Given that Mareva orders substantially restrict a respondent’s proprietary rights, Courts do not grant them lightly. According to rule 260D(2)-(3) of the UCPR, to obtain a Mareva order against a respondent an applicant must establish that:
- There is a serious matter to be tried
- if the order is not made, the applicant would be subject to a risk that a judgment in his or her favour would not be satisfied because the respondent might be outside of the jurisdiction or the respondent’s assets might be removed from Australia, disposed of or diminished in value.
AN APPLICANT SEEKING A FREEZING ORDER SHOULD KEEP THE FOLLOWING IN MIND:
- An applicant should act reasonably and immediately. Any delay in approaching the Court to obtain Mareva Order weakens the applicant’s case and diminishes a chance to get an order. Therefore, once you are aware of a potential ‘white collar crime’ where Mareva order may be appropriate, you should proceed to investigate the matter immediately, and should involve your lawyers at the earliest possible chance.
- An applicant should be ready to go to Court urgently. You should be seen as avoiding any delay.
- An applicant should ‘keep it quiet’. Do not inform the respondent that you are attempting to obtain a Mareva order against him or her. Otherwise, the perpetrator may have a chance to remove his assets from the court’s jurisdiction. Note that the Court hearing for the freezing order will be ex-parte (the alleged perpetrator is not informed of the hearing and does not participate in it).
- An applicant needs to identify any other persons or companies that may control the respondent’s assets. This will usually be banks where the respondent holds accounts. An applicant should put these third parties on notice of the freezing order as soon as it is granted with the assistance of the applicant’s lawyer. Note that overseas financial institutions are likely to be outside of the jurisdiction of Australian Courts.
- If a freezing order is made, the Court will schedule a further hearing where the respondent will have an opportunity to object the order. Therefore, an applicant should be ready for a busy period of defending the grant of the order after it is initially granted.
Mareva orders are sometimes regarded as the nuclear weapon of civil litigation; not often used or cheap, but devastating.