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High Court rejects enforcement prospects limitation on worldwide freezing orders

The High Court, by majority (Gageler, Keane, Gordon and Gleeson JJ, Edelman J dissenting), has held that the power of the Federal Court to make a worldwide freezing order is not constrained by a precondition to the effect that an applicant must prove a realistic possibility of enforcement of the judgment debt against assets in any foreign jurisdiction to which the proposed freezing order relates.

The decision is particularly significant because the rule considered by the High Court – r 7.32 of the Federal Court Rules 2011 (Cth) – appears in substantially identical terms in the rules of all State and Territory Supreme Courts throughout Australia.

The High Court emphasised that r 7.32 does not include an express precondition to the effect suggested. Provisions granting powers to a court are not to be read down by making implications or imposing limitations which are not found in the express words: at [23].

The Court observed that there is no reason to imply an unexpressed limitation on the scope of the power in r 7.32, where r 7.32 is, in substance, a restatement of the powers under s 23 of the Federal Court of Australia Act 1976 (Cth) and the Federal Court’s implied power, and there is no similar limitation upon those powers: at [24].

The suggested efficacy requirement was held to be inconsistent with the in personam nature of a freezing order. It is the court’s authority to make orders against a person who is subject to the court’s jurisdiction that is relevant to the court’s power to make a freezing order, not the location of the person’s assets: at [25].

The majority said that the suggested precondition was inconsistent with the evident purpose of r 7.32. A requirement to prove a realistic possibility of enforcement in any relevant foreign jurisdiction “would render the power largely impotent to protect the Court’s process from frustration by defendants who are able to secrete their assets or move them almost instantaneously across international borders”: at [26].

Further, to focus upon the possible availability of enforcement processes in foreign jurisdictions would be to ignore other ways that a judgment may eventually be satisfied, such as following the appointment of a receiver. Nor is there any reason “to ignore the possibility that a defendant, who is demonstrated to have created the relevant danger, may be induced by the inconvenience of a freezing order, falling short of oppression, to comply with the Court’s process”: at [27].

The Court added that the suggested limitation was “effectively inconsistent with the power to make a worldwide freezing order, similar to a power recognised in numerous foreign jurisdictions, because it necessitates identification of the defendant’s foreign assets as well as a potential means of enforcement in a relevant foreign jurisdiction”: at [28].

Nonetheless, the High Court cautioned that a worldwide freezing order, like any freezing order, should not be granted lightly. The likely utility of such an order “is undoubtedly relevant to the exercise of the court’s discretion to grant the order”. Indeed, the discretionary nature of the power was itself identified as a reason why the Federal Court would not strive to read into the purposive requirement in r 7.32 an additional requirement about the prospects of enforcement: at [30].

Luke Livingston SC appeared (led by Stephen Donaghue QC, the Solicitor-General of the Commonwealth, and Stephen Lloyd SC) for the successful appellant. A copy of the Court’s reasons may be found here: Deputy Commissioner of Taxation v Huang [2021] HCA 43.

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