We will all be involved in a dispute at some point in our lives. We may even reach a point where we want to take someone to court in order to reach an outcome that we desire. Have you wondered what happens if the other person is not able to pay up if we win against them? If we reasonably believe that the other person is going to sell their property in an attempt to avoid paying if they lose, asset freezing orders (also known as asset preservation orders or Mareva orders) are one way to make sure your opponent has enough resources to meet a judgment against them, however, there are lots of misconceptions about when and how you can get one. This article tries to make it plain and simple, and to hopefully bust some of the following myths:

Myth #1:  Their purpose is to seek security for a pending Judgment 

Too often, applications for a freezing order are made with the sole intention of seeking security for a judgment which a plaintiff hopes to gain in the future. There are certain requirements you must meet before the court will make a freezing order.

Myth #2:  They’re easily lodged with few requirements

It is an extreme order which will not be granted lightly. There are a variety of requirements that must be satisfied before the court will allow the order.

Firstly, there is a minimum standard to which the case must be argued. The case must be a ‘good arguable case’, that is, you must be able to convince the court that you have a serious issue to be tried by the court.

Next, the plaintiff must prove that there is a real danger that the other person may dispose of his or her assets in order to avoid paying if you win. You will be required to provide significant evidence to support this claim.

Any judge hearing such an application will ask: ‘is there an imminent transaction and have you given notice to the other side?’

Finally, the court will also consider the nature of the defendant’s assets – for example, the greater the liquidity the greater risk of dissipation, the financial standing of the defendant including their credit history.

Myth #3:  You can freeze all assets held by the respondent

When applying for a freezing order, the plaintiff cannot simply request a blanket freezing order over all of the known assets a defendant possesses. The value of the assets covered by the freezing order cannot exceed the likely maximum amount of the reasonable claim by the plaintiff.

The order must also exclude assets for dealings by the respondent for legitimate purposes. For example, payments for ordinary living and business expenses and dealings in the discharge of contractual obligations that were incurred before the freezing order was made.

Seeking legal advice

It is imperative that you are accurately informed of the obligations and requirements of a freezing order before lodging an order with the court.  If you would like further information regarding freezing orders or general litigation advice, please do not hesitate to contact one of our experienced litigation solicitors on 9963 9800 or via email at law@etheringtons.com.au.