Assets In Western Australia Frozen Ahead Of Anticipated Foreign Judgment

The High Court of Australia (High Court) has unanimously held that the Supreme Court of Western Australia (WA Supreme Court) has the inherent power to make a freezing order over assets in Western Australia that are subject to an anticipated judgment of a foreign court which, when delivered, would be registrable under the Foreign Judgments Act 1991 (Cth) (Foreign Judgments Act).

Background

PT Bayan Resources TBK (Bayan), an Indonesian entity, entered into a joint venture agreement with BCBC Singapore Pte Ltd (BCBC), a Singaporean entity. BCBC commenced proceedings against Bayan in the High Court of Singapore earlier this year. Bayan owns shares in Kangaroo Resources Limited (KRL), an ASX-listed company based in Perth. BCBC made an ex parte application to the WA Supreme Court seeking freezing orders against KRL and Bayan in respect of Bayan's shareholdings in KRL.

The WA Supreme Court granted BCBC's application. KRL and Bayan challenged the decision. The Court of Appeal dismissed the freezing order against KRL, but upheld the order against Bayan. Bayan subsequently appealed to the High Court.

HCA Decision

Bayan argued that the making of a freezing order against an anticipated judgment of a foreign court is beyond the inherent powers of the WA Supreme Court. The High Court rejected this argument and held that the Foreign Judgments Act's comprehensive scheme does not limit the inherent powers of any superior court.

The High Court also held that the Foreign Judgments Act vests superior courts with federal jurisdiction that encompasses the totality of issues that arise for determination in the curial processes which flow, directly or indirectly, from the making of an application to enforce a foreign judgment under the Foreign Judgments Act, including the making of freezing orders.

Significantly, the High Court affirmed that the WA Supreme Court's status as a superior court in Western Australia implies that it has a broad inherent jurisdiction to administer law and make orders (including freezing orders). The High Court also referred to its previous decisions which establish that the inherent power of superior courts includes the power to make orders, such as freezing orders, to prevent the abuse or frustration of its processes in relation to matters coming within its jurisdiction.

Conclusion

This decision has clarified that the WA Supreme Court can make freezing orders on assets within its jurisdiction, in respect to anticipated judgements of foreign courts that would be registrable under the Foreign Judgments Act. The decision should be welcomed by the business community in the Asia-Pacific Region as it provides protection against the dissipation of assets when doing business in the region.

The criteria on which the WA Supreme Court will consider freezing order applications in respect to anticipated foreign judgments include where:

1. the applicant has a good arguable case on an accrued/prospective cause of action that is capable of being heard in a court outside Australia;
2. there is a sufficient prospect that the foreign court will give judgment in favour of the applicant;
3. there is a sufficient prospect that the judgment will be registered in or enforced by the WA Supreme Court; and
4. the WA Supreme Court is satisfied that there is a danger the prospective judgment will be wholly or partly unsatisfied because assets may be removed from Australia, disposed of, or diminished in value.

Importantly, Australian companies doing business abroad should understand that their assets in Australia may be at risk of being subject to a freezing order in circumstances where disputes are referred to foreign courts (prior to any judgment being delivered in the foreign court).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.