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It’s getting cold – Time for a freezing order!

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In MST news on 22 April 2009, we published a short article on urgent restraining orders which are aimed at stopping a threatened potentially unlawful act. These orders are called interlocutory injunctions.

One unique type of interlocutory injunction is a “freezing order” an order that freezes the other party’s assets pending a trial.

Often the purpose of Court proceedings is to obtain an order for the other party to pay you money. Imagine if, during the course of the court case, you were to discover that the other party was taking steps to move, dispose of or fully encumber their assets so that they would be out of your reach after you won your case.

A “freezing order” may be obtained where you can show the Court that there are reasonable grounds to believe that the other party is taking steps to place their assets out of the reach of creditors and so abuse the Court process and you have a good arguable case against the other party.

In urgent cases, a freezing order can be obtained within 24 hours without notice to the other party. In these circumstances the injunction usually only lasts for a few days, so that the other party can be served with documents and come back to Court to put up any opposition.

Freezing orders may be limited to assets in Australia or may extend to assets anywhere in the world. Hence they can be far reaching. But a freezing order will operate to preserve the assets of the other party to the extent that the likely maximum of your claim, interest and costs are covered. A Court would not permit the total freezing of a billionaire’s assets in the face of a $250,000 claim. In addition, the other party would still be able to deal with assets to pay living expenses, legal expenses and reasonable business expenses.

The other party will ordinarily be required to file a detailed affidavit setting out their assets, liabilities, income and commitments.

Freezing orders can also be made after a judgment has been obtained in your favour. MST was recently successful in obtaining such an order to secure an award made in favour of one of our clients when a husband attempted to transfer real estate into his wife’s name for no sum of money. The freezing order was made against both the husband and the wife, even though the wife was not party to the original action against the husband.

Like other interlocutory injunctions freezing orders will not be granted unless the applicant gives an undertaking to the court to compensate the other party for any loss the other party sustains whilst the freezing order is in place, if at trial (which could be months or years later) the other party is successful.

Despite this, the obtaining of a freezing order usually places the applicant in a very strong negotiating position thereafter and a large majority of cases resolve on terms favourable to the applicant after such an order has been made.

The MST Commercial Litigation team has extensive experience in applying for and opposing applications for freezing orders. We will discuss strategy with you to ensure that the best litigation tactics are applied having regard to your commercial interests.

In subsequent editions of MST news, we will publish an article dealing with orders that permit searches of another party’s premises and seizure of key supporting evidence – yet another aggressive litigation tactic aimed at producing the result you need.

Author: Kaye Griffiths