Freezing orders explained: Preserving assets in fraud cases

When dealing with serious fraud or financial misconduct, preserving assets is often the highest priority for victims. Freezing orders – also called Mareva injunctions – are one of the most effective legal tools in Australia to stop wrongdoers from hiding or dissipating assets before a judgment can be enforced.

We've already outlined key steps for responding to fraud, including the importance of swift action to secure assets. Here, we build on that foundation by providing a detailed guide to obtaining freezing orders, covering the legal framework, procedural steps and strategic considerations to help maximise recovery.

What is a freezing order?

A freezing order is a temporary court order that prevents a respondent from moving or dealing with assets in a way that could undermine the enforcement of a current or future judgment. Its primary purpose is to preserve the status quo, ensuring assets remain available to satisfy a potential judgment.

Freezing orders apply to the respondent’s assets, whether located in or outside Australia, up to a specified sum. The operation of the order must not be frustrated by any third party who has notice of it, such as banks or other financial institutions.

Commonwealth, State and Territory court rules and practice notes outline the basis on which a party can seek freezing orders. These include a sample form of ex parte orders, which should not be significantly varied without good reason.

Legal framework and core requirements

To secure a freezing order, the applicant must demonstrate:

A judgment or a strong arguable case: The applicant must show a judgment in their favour or a strong arguable case on an underlying claim (more than a mere possibility of success).

A real risk of dissipation: There must be a genuine risk that a judgment (actual or prospective) will go unsatisfied due to asset dissipation, absconding or interference by third parties.

Just and convenient: The court must be satisfied that granting the order is fair and appropriate in the circumstances, balancing the rights of both parties.

The court will also require:

Clear evidence of dissipation risk: This must be based on actual conduct or reasonable inferences from suspicious behaviour – mere suspicion is not enough.

Proportionality: The order must be proportionate, usually limited to the value of the claim (including interest and legal costs). Applicants must provide evidence to justify the amount sought.

Allowances for reasonable expenses: The order should allow for reasonable living, legal, and business expenses.

Procedural fairness: The respondent must have the right to apply to vary or discharge the order.

Duty of disclosure

Freezing orders are often sought on an ex parte basis, meaning the respondent is not notified beforehand. This is to prevent the dissipation of assets before the order is made.

In such cases, the applicant must meet a strict duty of full and frank disclosure, including disclosing potential defences and any material facts that could affect the court’s decision.

Freezing orders against third parties

In appropriate cases, the court may extend freezing orders to third parties. This may occur where:

• the third party holds or controls assets beneficially owned by the respondent;

• the third party is complicit in or facilitates concealment of those assets; or

• there is a legal route by which those assets could be compelled back (eg., via tracing, restitution or enforcement mechanisms).

This is particularly relevant in fraud cases where perpetrators use family members, trusts or nominee companies to hide the proceeds of wrongdoing. For example, a freezing order may be extended to a family member who holds assets in their name but for the benefit of the respondent.

Worldwide reach and jurisdictional scope

Australian courts can issue worldwide freezing orders, covering assets held offshore. The High Court confirmed this in Deputy Commissioner of Taxation v Huang [2021] HCA 43, recognising that domestic courts can act to preserve foreign assets if there is a real risk of enforcement being frustrated.

While enforcing such orders overseas may require separate proceedings, they can still serve as a powerful deterrent and a tool for uncovering hidden assets.

Ancillary orders to strengthen effectiveness

To maximise the impact of a freezing order, an applicant can request additional ancillary orders, such as:

Asset disclosure orders: Requiring the respondent to disclose the nature, location, and value of their assets under oath.

Cross-examination rights: Allowing the applicant to question the respondent about their financial disclosures.

Leave to issue subpoenas: Compelling third parties, such as banks or financial institutions, to produce documents relevant to the case (eg., trace asset flows).

Control of assets: Requiring funds or property to be deposited into court or a secure account.

Travel restrictions: Preventing the respondent from leaving the jurisdiction or requiring them to surrender their passport.

Delivery of designated assets: Requiring the respondent to deliver specific assets, even if they are not directly in issue in the proceedings.

Appointment of a receiver: Placing at-risk assets under the control of a court-appointed receiver.

These ancillary orders are critical for uncovering hidden assets, preventing circumvention and supporting asset tracing efforts. For example, an asset disclosure order can reveal previously unknown bank accounts, while travel restrictions can prevent a respondent from absconding with liquid assets. In my experience, these measures also place significant pressure on respondents, often forcing them to cooperate or settle early.

Illustrative uses of freezing and ancillary orders in fraud cases

In my experience, freezing and ancillary orders are invaluable tools in fraud matters, enabling clients to secure assets and preserve enforcement prospects across a range of challenging scenarios.

Examples from matters I have worked on include:

Misappropriation of funds: Respondents diverting funds into personal investments, property acquisitions, luxury purchases or gambling. In several cases, freezing orders revealed that misappropriated funds had been used to acquire businesses and real estate, often held in the names of respondents or their relatives.

Offshore dissipation: Freezing orders have successfully prevented respondents from transferring funds overseas to frustrate enforcement. In one instance, an order intercepted transfers to foreign accounts, ensuring the funds remained within the court’s jurisdiction and available for recovery.

Third-party asset concealment: Orders have been obtained against spouses, associates, and nominee entities holding assets on behalf of wrongdoers. These orders have been instrumental in identifying concealed assets and preserving them for enforcement.

Tracing stolen funds: In a case involving misappropriated funds gambled away by the respondent, freezing and ancillary orders secured critical evidence to support claims against gambling venues for knowingly receiving stolen property.

Securing proceeds of property sales: In bribery-related proceedings, a freezing order preserved a former executive’s share of the sale proceeds from a family home, safeguarding the funds for recovery.

These examples highlight the strategic utility of freezing and ancillary orders, not only in preserving assets but also in facilitating recovery, uncovering asset trails, and supporting broader enforcement efforts.

Strategic considerations for victims of fraud

Freezing orders are more than just legal remedies – they are strategic tools in fraud response and litigation that:

• pressure respondents into early settlement, especially when significant assets are at stake;

• improve recovery prospects by locking down assets while investigations or claims are still being developed; and

• signal to regulators, boards, and stakeholders that your organisation is taking decisive action;.

Enforcement and sanctions for non-compliance

Courts have wide discretion to impose sanctions for non-compliance with freezing or ancillary orders, including a charge of contempt.

Penalties for contempt include fines, sequestration of assets, or, in serious cases, imprisonment. It is typically for the offended party to enforce contempt proceedings.

Undertaking as to damages

Applicants must provide an undertaking as to damages to compensate the respondent for any loss suffered if the freezing order is later found to have been improperly granted. Additional undertakings may also be required to minimise the order’s impact and protect the respondent’s legitimate business or personal needs.

This requirement highlights the importance of conducting a thorough internal assessment of the merits and risks before applying for a freezing order.