Articles

Internationally Challenging: High Court of Australia Grants Freezing Order to a Foreign Party in Support of a Foreign Judgment

Coal

  • PT Bayan Resources TBK (“Bayan”), a company incorporated in Indonesia, owned shares in Kangaroo Resources Limited (“KRL”), a company incorporated in Australia. BCBC Singapore Pte Ltd (“BCBC”) is a company incorporated in Singapore.  BCBC and Bayan were joint owners of an Indonesian coal joint venture company. The joint venture agreement was governed by the laws of Singapore.
  • BCBC commenced proceedings against Bayan in the High Court of Singapore claiming, amongst other things, alleged breaches of coal supply agreements to the joint venture in the region of US$138 million.
  • BCBC undertook extensive research into Bayan and other than a few specific assets in Indonesia, the only asset of any significance was Bayan’s ownership of 57% of an Australian coal company, which was worth in the region of AU$55-AU$259 million.
  • Registering and enforcing foreign money judgments in Indonesia are fraught with difficulties. Further, the law of Indonesia specifically precludes registration of a money judgment in the High Court of Singapore.  Quite simply, any Singaporean money judgment would not be able to be registered and enforced against Bayan’s assets in Indonesia.
  • BCBC therefore looked to the Australian shares. After the Singaporean proceedings had commenced, but before judgment had been obtained, BCBC applied (ex parte) to the Supreme Court of Western Australia for a freezing order under Order 52A of the Rules of the Supreme Court 1971 (WA) (“the Rules”) in respect of the shares owned by Bayan.  They did this in order to prevent the shares from being sold before any judgment.
  • Order 52A of the Rules provides for the ability of the Supreme Court to make a freezing order, with or without notice, for the purpose of preventing the frustration of the Supreme Court’s process by seeking to meet a potential danger that a judgment or prospective judgment of the Supreme Court will be wholly or partly unsatisfied.
  • BCBC had to establish that there was “a real risk” that if the Australian shares were not frozen, any judgment would go unsatisfied as a result of Bayan removing the shares from Australia or selling them.
  • Bayan was in the process of refinancing some US$700-$900 million of debt using its assets, including the Australian shares, as collateral.
  • It is important to note that there were no other proceedings on foot in Western Australia and that there was no prospect of any before judgment in the Singaporean proceedings.
  • Order 52A Rule 5 sets out the criteria by which the Court may make a freezing order. In brief, freezing orders may be granted where the claimant is able to show that it has a good prospect of success.  In this case, BCBC did have a good, arguable case in the Singapore proceedings
  • Freezing orders against Bayan were granted by the Supreme Court and upheld on appeal to the High Court of Australia. Bayan had appealed to the High Court arguing that the freezing orders should be discharged because Order 52A of the Rules was beyond the inherent jurisdiction of the Supreme Court as it was a non-money judgment.  Bayan argued that such an order was not authorised by the Foreign Judgments Act 1991 (Cth) (“the Foreign Judgments Act)” and was invalid.  Part 2 of the Foreign Judgments Act establishes a regime in the registration and enforcement of judgments of foreign Courts.
  • Bayan’s argument was that because there was no substantive proceedings commenced in Western Australia and no judgment had, in fact, yet been obtained in the Singaporean proceedings, the Court did not have the power to grant such a freezing order as this would go beyond both the Court’s statutory and inherent jurisdiction. Bayan contended that the Supreme Court of Western Australia lacked the power to make a freezing order until the High Court of Singapore delivered judgment in BCBC’s favour, for only then will the right to enforce the judgment arise under the Foreign Judgments Act.
  • The High Court rejected Bayan’s arguments, stating that Bayan’s arguments were unsustainable for two fundamental reasons: it took too broad a view of the scope of the Foreign Judgment Act and it took too narrow a view of the powers granted to the Supreme Court. The Court concluded that it had the power to regulate and safeguard the processes for the registration and enforcement of foreign judgments and that its power extended to granting a freezing order in respect of a prospective judgment of the foreign Court which would, if made, be registerable under the Foreign Judgments Act and enforceable by the Court.
  • The Court considered its inherent power to make such orders to be appropriate, “to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction1 and that this was not limited to cases where substantive proceedings in the Supreme Court had been commenced or were imminent. The Court went on to state,

The power to make a freezing order in relation to an anticipated judgment of a foreign Court, which when made would be registerable by order of the Supreme Court under the Foreign Judgments Act, is within the inherent power of the Supreme Court.  That is because the making of the order is to protect a process of registration and enforcement in the Supreme Court, which is in prospect of being invoked.”2

  • Finally, the High Court also made the point of stipulating that, as a consequence of the Foreign Judgments Act, the Federal Court could hear the applications.

CommentsHigh Court

  • In conclusion, this decision confirms that the Supreme Court of Western Australia (and most probably all other Australian state and territory Supreme Courts) has the power to grant a freezing order in respect of a prospective foreign judgment that would be registerable under the Foreign Judgments Act.
  • This is obviously very important for parties who are engaged in international litigations and other forms of international dispute resolutions. The Foreign Judgments Act provides the local registration of judgments of the superior Courts and this judgment has shown the Court’s willingness to assist foreign litigants with prospective rights against assets located in Australia.
  • This decision is, therefore, very good news for parties seeking security against Australian assets, both in terms of foreign Court litigations and also international arbitrations.

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1 At para 43.

2 At para 50.