What is a Mareva Order?

A Mareva order (Mareva Order), also known as an asset freezing order or asset protection order, is a special type of interlocutory injunction which restrains a defendant from dealing with the whole or part of their assets pending the outcome of legal proceedings.  In preventing a defendant from disposing of their assets in a way which may deprive the plaintiff of an effective remedy, Mareva Orders are a tool to prevent an abuse of court processes and protect the proper administration of justice.  In Queensland, Mareva Orders are dealt with in Chapter 8 Part 2 Division 2 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR).

What is the purpose of a Mareva Order?

Rule 260A(1) of the UCPR states that:

“The court may make an order (a freezing order) for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.”

Mareva Orders may restrain a respondent from “removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets”: rule 260A(2) of the UCPR.  The Court may also make any ancillary orders it considers appropriate, including an order to obtain information about a defendant’s assets or to deliver up certain assets: rule 260B of the UCPR.

What needs to be satisfied for the Court to grant a Mareva Order?

Requirements under the UCPR

Pursuant to rule 260D(2)-(3) of the UCPR, to obtain a Mareva Order an applicant must establish that:

• there is a good arguable case (in the case of interlocutory Mareva Orders);
• there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:
  • the respondent might abscond from the jurisdiction; or
  • the assets of the respondent might be removed from Australia or disposed of, dealt with or diminished in value.

Requirements under the common law

Under the common law there were five (5) requirements to be satisfied for obtaining a Mareva Order, as applied by Kingham DCJ in the case of Pankhurst v Damata [2008] QSC 28:

• the applicant must have a judgment enforceable within the jurisdiction or an existing cause of action which is justiciable within the jurisdiction;
• in the case of interlocutory Mareva Orders, the applicant must have a good arguable case;
• the respondent must have assets either within the jurisdiction or outside the jurisdiction;
• there must be a real risk or danger that the respondent will remove assets from the court’s jurisdiction, or dispose of them or otherwise deal with them in such a way as to render them unavailable to satisfy any judgment that might be made in favour of the applicant; and
• if the order is not made, the applicant would be subject to a risk that a judgment in its favour would not be satisfied (the applicant does not have to prove that it was the intention of the respondent to deprive the applicant of satisfaction of its judgment provided that is the probable effect).

Guidance provided by the Supreme Court of Queensland

The Supreme Court of Queensland Practice Direction Number 1 of 2007 (Practice Direction) provides further guidance, stating that the application for a Mareva Order should be accompanied by an undertaking as to damages by the applicant, and an affidavit containing:

• information about the judgment which has been obtained, or, if no judgment has been obtained, the following information about the cause of action:
  • the basis of the claim for substantive relief;
  • the amount of the claim; and
  • if the application is made without notice to the respondent (ex parte), the applicant’s knowledge of any possible defence;
• the nature and value of the respondent’s assets, so far as they are known to the applicant, within and outside Australia;
• the matters referred to in rule 260D of the UCPR; and
• the identity of any person, other than the respondent, who, the applicant believes, may be affected by the order, and how that person may be affected by it.

Can Mareva Orders be granted against a third party?

Rule 260C of the UCPR expressly provides that a Mareva Order may be granted against a non-party, and rule 128 further provides that the order may be served on a person outside Australia.  Pursuant to rule 260D(4) to obtain a Mareva Order against a third party an applicant must generally establish that:

• there is a good arguable case;
• there is a danger that the judgment will be wholly or partly unsatisfied because the third party:
  • holds or is using, or has exercised or is exercising, a power of disposition over assets subject to the order; or
  • is in possession of, or in a position of control or influence concerning, assets subject to the order.

What are the limits of a Mareva Order?

A Mareva Order, once granted, does not give a plaintiff any proprietary rights in the assets subject to the order, nor does it give an applicant preference over other creditors of the respondent. According to the Practice Direction, a Mareva Order should also reserve liberty for the respondent to apply on short notice to have the order discharged or varied.

The Practice Direction makes it clear that the value of the assets covered by the order should not exceed the likely maximum amount of the applicant’s claim, including interest and costs, and should exclude dealings by the respondent with its assets for legitimate purposes, such as the payment of ordinary living expenses, payment of reasonable legal expenses, dealings in the ordinary and proper course of the respondent’s business, and dealings in the discharge of bona fide obligations incurred under a contract entered into before the order was made.

Additional powers under the Corporations Act

The Corporations Act 2001 (Cth) (Corps Act) provides an additional mechanism for preventing a defendant from dealing with certain property.  Pursuant to s 1323 of the Corps Act, where an investigation is being carried out under the Australian Securities and Investments Commission Act 2001 (Cth) or the Corps Act, or a prosecution or civil proceeding has begun under the Corps Act, the Court may make an order, if it considers it necessary or desirable to do so for the purpose of protecting the interests of the plaintiff, prohibiting the defendant or another person from paying out, transferring, moving out of the jurisdiction, or otherwise parting with possession of certain money, financial products or other property.

Takeaways

The Mareva Order is a drastic remedy which is not be granted lightly, however, it is also a useful tool for a plaintiff who fears a defendant will deal with their assets in a way to frustrate the judgement.  As such, legal advice should be sought to ensure that the application for a Mareva Order gives the applicant the best chance of preserving assets to satisfy any judgement.

Links and further references

Supreme and District Courts of Queensland

Supreme Court of Queensland Practice Direction Number 1 of 2007 – Freezing Orders

District Court of Queensland Practice Direction Number 1 of 2007 – Freezing Orders

Federal Court of Australia

Federal Court of Australia – Freezing Orders Practice Note (GPN-FRZG)

Legislation

Corporations Act 2001 (Cth)

Uniform Civil Procedure Rules 1999 (Qld)

Cases

Applied Electro Systems Pty Ltd v Neal [2017] QDC 211

Creswick v Creswick [2012] QSC 174

Millennium Federation Pty Ltd v Bigjig Pty Ltd [2000] 1 Qd R 275

Modern Office Concepts v Stewart [2008] QDC 216

Pankhurst v Damata [2008] QSC 28

Zabusky v Van Leeuwen [2011] QSC 270

Further information about mareva orders

If you need assistance with a litigious matter or a Mareva Order, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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