16 October, 2015
On 14 October 2015 the High Court of Australia handed down its unanimous decision in PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015] HCA 36, finding that the Supreme Court of Western Australia has the inherent power to make a freezing order in relation to a prospective judgment of a foreign court.
The decision affirms the power of an Australian superior court to make freezing orders in support of a prospective judgment obtained in a foreign court provided that the judgment, once obtained, would be registrable in Australia under the Foreign Judgments Act 1991 (Cth) ("the Foreign Judgments Act").
This alert will provide a brief introduction to freezing orders and the registration of foreign judgments in Australia generally, including the type of judgments that are registrable in Australia under the Foreign Judgments Act, before looking at the High Court of Australia's decision.
Background to Freezing Orders and the Registration of Foreign Judgments in Australia
A freezing order (or Mareva order) prevents a party from disposing of assets with the intention of frustrating the enforcement of a judgment. The procedural rules of the Supreme Court in each Australian state make express provision for the granting of freezing orders, including in support of foreign judgments, or prospective foreign judgments, which are enforceable in Australia. These rules regulate the Supreme Court's exercise of its inherent power to make freezing orders.
The Foreign Judgments Act creates a system of registration and enforcement in Australia of judgments obtained in certain foreign countries that have assured substantial reciprocity of treatment in relation to the enforcement in those countries of judgments given in Australian courts. These countries include the United Kingdom, Singapore, Korea, Japan, Italy, Germany, and France.
Factual Background to the High Court of Australia's Decision and Litigation History
PT Bayan Resources TBK ("Bayan"), a company incorporated in Indonesia, owned shares in Kangaroo Resources Limited ("KRL"), a company incorporated in Australia. Bayan entered into a joint venture agreement with BCBC Singapore Pte Ltd ("BCBC"), a company incorporated in Singapore. The joint venture agreement was governed by the law of Singapore. BCBC commenced proceedings against Bayan in the High Court of Singapore claiming, amongst other things, damages for breach of the joint venture agreement.
Those proceedings were pending at the time of the High Court of Australia's decision.
After commencing proceedings in the High Court of Singapore, BCBC applied to the Supreme Court of Western Australia ("Supreme Court") for freezing orders against Bayan and KRL in respect of Bayan's shares in KRL. The Supreme Court made interim freezing orders against both Bayan and KRL. The Supreme Court subsequently discharged the freezing order against KRL and ordered the continuation of the freezing order against Bayan.
Bayan appealed the Supreme Court's decision to the Court of Appeal of the Supreme Court. The Court of Appeal dismissed the appeal, and Bayan subsequently appealed to the High Court of Australia.
The High Court of Australia's Decision
On appeal to the High Court of Australia, Bayan argued that the Supreme Court lacked the power to make a freezing order. Bayan put its argument on the following grounds:
- The Foreign Judgments Act impliedly excluded any power of the Supreme Court of a State to make a freezing order in respect of a prospective foreign judgment;
- Sections 17 and 20 of the Foreign Judgments Act operated to preclude the Supreme Court from making rules regulating its own practice and procedure (including rules relating to making freezing orders);
- The Supreme Court's inherent jurisdiction to make a freezing order is always limited to circumstances in which substantive proceedings in that Court has commenced or is imminent.
In response to Bayan's first argument, the joint judges (French CJ, Kiefel, Bell, Gageler and Gordon JJ) held that the registration and enforcement regime under the Foreign Judgments Act is one that relies on the ordinary processes of the Supreme Court to enforce a foreign judgment. It would be self-defeating if the Foreign Judgments Act were to be read as impliedly excluding the Supreme Court's power to safeguard the efficacy of those enforcement processes. Further, the joint judgment stated that sections 17 and 20 of the Foreign Judgments Act did not operate to preclude the Supreme Court from making rules regulating its own practice and procedure.
The joint judgment also rejected Bayan's argument regarding the Supreme Court's inherent jurisdiction, finding instead that the power to make a freezing order in relation to a prospective judgment of a foreign court, which when made would be registrable under the Foreign Judgments Act, is within the inherent power of the Supreme Court. This is because the making of the freezing order is to protect a process of registration and enforcement in the Supreme Court which is in prospect of being invoked.
For further information, please contact:
Graham Maher, Partner, Bird & Bird
graham.maher@twobirds.com
