Otherwise known as a Mareva injunction or asset-preserving order, a freezing order is a court order that prevents a person or company from disposing of, dealing with, or reducing their assets while legal proceedings are on foot, or before you can enforce a judgment already obtained. Courts often grant freezing orders ex parte, without the other party being notified first. However, it is an extraordinary interim remedy and only available in the District Court or Supreme Court.
If you are concerned a debtor or opponent is moving assets to defeat a judgment, our urgent injunction and freezing order lawyers act on short notice to preserve assets and protect your position. Contact us immediately on (02) 9233 7737. Delay reduces the value of the order.
What is a freezing order?
A freezing order is a court order that restricts how a person or company can deal with their assets. Depending on the terms of the order, it may prohibit the respondent from:
- Withdrawing funds from bank accounts (above a specified threshold for living or business expenses)
- Selling, mortgaging, or otherwise dealing with real property
- Transferring shares, business interests, or other investments
- Removing assets from New South Wales or Australia
- Causing a company they control to deal with corporate assets
The order does not transfer ownership of the assets to you. It simply locks them in place so that they remain available if and when you obtain judgment and seek to enforce it.
Freezing orders can be made over Australian assets only, or in cases where there is reason to believe assets are held or about to be moved offshore over worldwide assets.
However, it should be noted that a freezing order is not used to provide security to you, but only to prevent the frustration or inhibition of the Court’s process.
When is a freezing order available?
A freezing order is not available in every debt dispute. You must establish two things to the court’s satisfaction.
- A good arguable case
You must demonstrate that you have a genuine, arguable legal claim against the respondent or that you have a judgment given in your favour. In the former case, it requires less than the standard to prove a case at trial, but more than being “barely capable of serious argument”.
Your underlying claim might be a breach of contract, an unpaid debt, a guarantee, a judgment already obtained, a statutory claim, or a claim in equity. In most commercial debt recovery situations, this element is met if you have good documentation: a signed contract, invoices, records of non-payment, and correspondence.
- Danger of judgment being unsatisfied
This is the core element of a freezing order.
You need to establish that there is a real risk that the respondent will, unless restrained, dispose of, deal with, or remove their assets in a way that will frustrate your ability to enforce a judgment wholly or partially.
Courts do not grant freezing orders based on mere suspicion, general concern about the debtor’s financial position, or the fact that a defendant might spend their own money in the ordinary course of life and business. The risk must be real, and could be inferred, but there must be substantial evidence to support it.
Examples of evidence that support a finding of real risk of dissipation include:
- Asset transfers to related parties: a director transferring company property to their spouse or a related entity at a time when legal proceedings are threatened
- Conduct suggesting evasion: the respondent has changed their behaviour, become difficult to contact, or has started moving funds after learning of your claim
- History of similar conduct: evidence that the respondent has previously hidden assets or frustrated creditors in other disputes
- The nature of the defendant’s assets: liquid assets (cash, shares) are more easily dissipated than fixed assets (land); a respondent whose only asset is an easily sold investment portfolio presents a higher dissipation risk than one with registered land
- Offshore connections: a respondent with access to foreign bank accounts or overseas entities presents a clear risk of moving assets beyond the reach of Australian courts
- Unusual corporate transactions: intercompany transfers, dividend payments to controllers, or asset stripping at the time a claim arises are strong indicators of dissipation risk
- Impending insolvency combined with asset movement: a company that appears insolvent but whose controller is extracting value raises serious concerns
It is important to distinguish a freezing order from a Security for Costs application in that the respondent’s general impecuniosity is not itself sufficient, in that it is not evidence of dissipation risk. The risk must be of deliberate evasion, not mere inability to pay.
The undertaking as to damages
Before any freezing order is granted, the court requires the applicant to give an undertaking as to damages.
This is a formal promise that if the order is ultimately found to have been wrongly granted, i.e. because you fail in your underlying claim, or because the court finds there was no genuine dissipation risk, you will compensate the respondent for any loss caused by the order during its operation.
The practical consequences of an undertaking should be taken seriously. A business that is prevented from dealing with its bank accounts and property for three months may suffer substantial losses. If you lose the underlying case, you will be liable for those losses.
This is why freezing orders should not be sought lightly. They are powerful tools against genuine dissipation risk. Where the risk is uncertain, or the underlying claim is weak, the financial exposure from the undertaking may outweigh the commercial benefit of the order.
Worldwide freezing orders
In cases where a respondent has assets overseas or is connected to offshore entities, a court can make a worldwide freezing order.
Worldwide freezing orders are significant orders that courts grant only where there is genuine risk of assets being moved offshore. The practical enforcement of a worldwide order depends on whether the respondent has assets in countries that will recognise and enforce Australian court orders. The order does not automatically freeze overseas bank accounts but creates personal obligations backed by the threat of contempt.
If the respondent has connections to countries with enforcement treaties with Australia, or significant assets in common law jurisdictions that recognise Mareva injunctions, a worldwide order may be practically effective.
Freezing orders after judgment
A freezing order is not only available during proceedings. Courts can grant freezing orders after judgment is obtained to protect the enforcement process.
Where you have a judgment but the debtor has not yet paid, and you have reason to believe they are about to move assets, an application can be made immediately. A judgment creditor has a stronger position in many respects than a pre-judgment applicant. The arguable case is established by the judgment itself, so the focus of the application is primarily on demonstrating the dissipation risk.
For the full range of judgment enforcement options available in NSW, see our article on enforcing a judgment in NSW.
Freezing orders and statutory demands
In commercial debt recovery, freezing orders and statutory demands are sometimes used in combination.
A statutory demand under section 459E of the Corporations Act 2001 (Cth) gives a debtor company 21 days to pay or have the debt set aside. Non-compliance creates a presumption of insolvency, enabling winding up proceedings. Where a company debtor is dissipating assets and a statutory demand is also in play, coordinating these remedies requires careful strategy.
For specific guidance on statutory demands, including when to serve one and how to respond to one, see our statutory demand lawyers page.
The difference between a freezing order and a caveat
A caveat is a notice lodged on a property title that prevents certain dealings with the property until the caveat is resolved. It is a tool specific to real property.
A freezing order is a court order that can cover all of a respondent’s assets, not just property. It can include bank accounts, shares, business assets, and other personal property.
If your concern is limited to a specific piece of real property the respondent owns, a caveat may be sufficient and is faster and cheaper to put in place. In practice, both tools are sometimes used together, such as a caveat on a known property plus a freezing order over the balance of assets.
What happens if the freezing order is breached?
Breach of a freezing order is contempt of court. The consequences are serious: the court can impose substantial fines or imprisonment. Where a company respondent breaches an order, its directors and officers can be held personally liable for the contempt.
If you become aware that a respondent has dealt with assets in breach of a freezing order, contact us immediately. Contempt proceedings must be commenced promptly and handled with procedural care.
Contact our commercial litigation lawyers now
If you have reason to believe a debtor is moving assets, time is the critical variable. Every hour of delay is a potential opportunity for the respondent to move funds beyond the reach of the court. Call (02) 9233 7737.
Please provide a description of what assets you believe exist, what the respondent has done or is about to do, and any documents that support your underlying claim. We will assess the strength of an application quickly and advise on whether an ex parte application is appropriate.
For the full range of urgent court relief available in commercial disputes, see our injunctions and urgent court relief page.
