BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 3)
[2013] WASC 239
•26 JUNE 2013
BCBC SINGAPORE PTE LTD -v- PT BAYAN RESOURCES TBK [No 3] [2013] WASC 239
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 239 | |
| Case No: | CIV:1562/2012 | 15 FEBRUARY 2013 | |
| Coram: | LE MIERE J | 26/06/13 | |
| 49 | Judgment Part: | 1 of 1 | |
| Result: | Application for declaration that the Supreme Court does not have jurisdiction or power to make freezing orders dismissed Application for freezing orders against PT Bayan Resources TBK granted Application for freezing orders against Kangaroo Resources Ltd dismissed | ||
| B | |||
| PDF Version |
| Parties: | BCBC SINGAPORE PTE LTD PT BAYAN RESOURCES TBK KANGAROO RESOURCES LTD P T BAYAN RESOURCES TBK |
Catchwords: | Jurisdiction to make freezing orders Whether Rules of the Supreme Court 1971 (WA) O 52A r 5(1)(b)(ii) is to the extent that it authorises the Supreme Court to make freezing orders in aid of proceedings on a cause of action being tried in a foreign court within the inherent jurisdiction of the Supreme Court Whether O 52A r 5(1)(b)(ii) is authorised by s 167(1) of the Supreme Court Rules 1935 (WA) Whether O 52A r 5(1)(b)(ii) is within the power conferred on the court by s 16(1)(d)(i) of the Supreme Court Rules 1935 (WA) Whether O 52A r 5(1)(b)(ii) is inconsistent with s 17 of the Foreign Judgments Act 1991 (Cth) Whether O 52A r 5(1)(b)(ii) is inconsistent with ch III of the Australian Constitution Relationship between requirement for good arguable case and sufficient prospect that another court will give judgment and that that judgment will be registered or enforced by the court Danger that prospective judgment will be unsatisfied |
Legislation: | Australia Act 1986 (Cth), s 2(1) Commonwealth of Australia Constitution Act (Cth), s 32, s 109 Foreign Judgments Act 1991 (Cth), s 6, s 17 Judiciary Act 1903 (Cth), s 78B Rules of the Supreme Court 1971 (WA), O 52A r 5(1)(b)(ii) Supreme Court Act 1935 (WA), s 16(1)(d)(i), s 167(1)(a) Supreme Court Act 1970 (NSW), s 23 |
Case References: | Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249 Australian Boot Trade Employees Federation v Whybrow & Co [1910] HCA 53; (1910) 11 CLR 311 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199 Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 BCBC Singapore Pte Ltd v BT Bayan Resources TPK [2012] WASC 170 Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583 Carbines v Powell (1925) 36 CLR 88 Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 Celtic Resources Holdings Plc v Arduina Holding BV [2006] WASC 68; (2006) 32 WAR 276 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334 Davis v Turning Properties Pty Ltd [2005] NSWSC 742; (2005) 222 ALR 676 Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014 Dickson v The Queen [2010] HCA 30; (2010) 241 CLR 491 Gill v Walton (1991) 25 NSWLR 190 Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 Jemena Asset Management (3) Pty Ltd v Coinvest Ltd [2011] HCA 33; (2011) 244 CLR 508 Mercedes Benz AG v Leiduck [1996] AC 284 Momcilovic v The Queen [2011] HCA 34; (2011) 245 CLR 1 Morton v Union Steamship Company of New Zealand Ltd (1951) 83 CLR 402 Ninemia Maritime Corp v Trave Shiffahrtsgesellschaft GmbH & Co KG (the Niedersachsen) [1984] 1 All ER 398 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1 Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 Severstal Export GmbH v Bhushan Steel Ltd [2013] NSWCA 102 Shanahan v Scott (1957) 96 CLR 245 Siskina v Distos Compania Naviera SA [1979] AC 210 State of South Australia v Totani [2010] HCA 39; (2010) 242 CLR 1 The Official Receiver of the State of Israel in his capacity as Liquidator North America Bank Ltd (in liquidation) v Raveh [2001] WASC 72; (2001) 24 WAR 53 Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645 Union Steamship Co of Australia Pty Ltd v King [1988] HCA 55; (1988) 166 CLR 1 Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
PT BAYAN RESOURCES TBK
First Defendant
KANGAROO RESOURCES LTD
Second Defendant
- First Plaintiff
KANGAROO RESOURCES LTD
Second Plaintiff
AND
BCBC SINGAPORE PTE LTD
Defendant
(Page 2)
Catchwords:
Jurisdiction to make freezing orders - Whether Rules of the Supreme Court 1971 (WA) O 52A r 5(1)(b)(ii) is to the extent that it authorises the Supreme Court to make freezing orders in aid of proceedings on a cause of action being tried in a foreign court within the inherent jurisdiction of the Supreme Court
Whether O 52A r 5(1)(b)(ii) is authorised by s 167(1) of the Supreme Court Rules 1935 (WA)
Whether O 52A r 5(1)(b)(ii) is within the power conferred on the court by s 16(1)(d)(i) of the Supreme Court Rules 1935 (WA)
Whether O 52A r 5(1)(b)(ii) is inconsistent with s 17 of the Foreign Judgments Act 1991 (Cth)
Whether O 52A r 5(1)(b)(ii) is inconsistent with ch III of the Australian Constitution
Relationship between requirement for good arguable case and sufficient prospect that another court will give judgment and that that judgment will be registered or enforced by the court - Danger that prospective judgment will be unsatisfied
Legislation:
Australia Act 1986 (Cth), s 2(1)
Commonwealth of Australia Constitution Act (Cth), s 32, s 109
Foreign Judgments Act 1991 (Cth), s 6, s 17
Judiciary Act 1903 (Cth), s 78B
Rules of the Supreme Court 1971 (WA), O 52A r 5(1)(b)(ii)
Supreme Court Act 1935 (WA), s 16(1)(d)(i), s 167(1)(a)
Supreme Court Act 1970 (NSW), s 23
Result:
Application for declaration that the Supreme Court does not have jurisdiction or power to make freezing orders dismissed
Application for freezing orders against PT Bayan Resources TBK granted
Application for freezing orders against Kangaroo Resources Ltd dismissed
(Page 3)
Category: B
Representation:
CIV 1562 of 2012
Counsel:
Plaintiff : Dr A S Bell SC & Mr D Roche
First Defendant : Mr B W Walker QC & Mr P Kulevski
Second Defendant : Mr B W Walker QC & Mr P Kulevski
Intervenor
(Attorney General of WA) : Ms F B Seaward & Mr A N Sharpe
Solicitors:
Plaintiff : Freehills
First Defendant : Clayton Utz
Second Defendant : Clayton Utz
Intervenor
(Attorney General of WA) : State Solicitor for Western Australia
CIV 2139 of 2012
Counsel:
First Plaintiff : Mr B W Walker QC & Mr P Kulevski
Second Plaintiff : Mr B W Walker QC & Mr P Kulevski
Defendant : Dr A S Bell SC & Mr D Roche
Intervenor
(Attorney General of WA) : Ms F B Seaward & Mr A N Sharpe
Solicitors:
First Plaintiff : Clayton Utz
Second Plaintiff : Clayton Utz
Defendant : Freehills
Intervenor
(Attorney General of WA) : State Solicitor for Western Australia
Case(s) referred to in judgment(s):
Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249
Australian Boot Trade Employees Federation v Whybrow & Co [1910] HCA 53; (1910) 11 CLR 311
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256
BCBC Singapore Pte Ltd v BT Bayan Resources TPK [2012] WASC 170
Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583
Carbines v Powell (1925) 36 CLR 88
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Celtic Resources Holdings Plc v Arduina Holding BV [2006] WASC 68; (2006) 32 WAR 276
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334
Davis v Turning Properties Pty Ltd [2005] NSWSC 742; (2005) 222 ALR 676
Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014
Dickson v The Queen [2010] HCA 30; (2010) 241 CLR 491
Gill v Walton (1991) 25 NSWLR 190
Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49
Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612
Jemena Asset Management (3) Pty Ltd v Coinvest Ltd [2011] HCA 33; (2011) 244 CLR 508
Mercedes Benz AG v Leiduck [1996] AC 284
Momcilovic v The Queen [2011] HCA 34; (2011) 245 CLR 1
Morton v Union Steamship Company of New Zealand Ltd (1951) 83 CLR 402
Ninemia Maritime Corp v Trave Shiffahrtsgesellschaft GmbH & Co KG (the Niedersachsen) [1984] 1 All ER 398
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264
Severstal Export GmbH v Bhushan Steel Ltd [2013] NSWCA 102
Shanahan v Scott (1957) 96 CLR 245
Siskina v Distos Compania Naviera SA [1979] AC 210
State of South Australia v Totani [2010] HCA 39; (2010) 242 CLR 1
(Page 5)
The Official Receiver of the State of Israel in his capacity as Liquidator North America Bank Ltd (in liquidation) v Raveh [2001] WASC 72; (2001) 24 WAR 53
Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645
Union Steamship Co of Australia Pty Ltd v King [1988] HCA 55; (1988) 166 CLR 1
Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378
(Page 6)
1 LE MIERE J: In April 2012 BCBC Singapore Pte Ltd (BCBCS) applied to this court for freezing orders against PT Bayan Resources TBK (Bayan) and Kangaroo Resources Ltd (Kangaroo Resources) in respect of a parcel of shares held by Bayan in Kangaroo Resources (CIV 1562 of 2012). BCBCS' application was brought pursuant to O 52A of the Rules of the Supreme Court 1971 (WA) (RSC), or in the exercise of the court's inherent jurisdiction. Following the hearing of BCBCS' ex parte application on 5 April 2012, Pritchard J made interim freezing orders against Bayan and Kangaroo Resources (the Freezing Orders), see BCBC Singapore Pte Ltd v BT Bayan Resources TPK [2012] WASC 170. The Freezing Orders restrain Bayan from transferring any of its shares in Kangaroo Resources (the Shares) to a related entity, from further encumbering the Shares and from disposing of or dealing with the Shares without first giving seven clear business days' notice in writing to BCBCS. The Freezing Orders restrain Kangaroo Resources from registering the transfer of any of the Shares to a related entity of Bayan and require Kangaroo Resources to give seven clear business days' notice to BCBCS before registering the transfer of any of the Shares or disposing of assets of Kangaroo Resources with a value in excess of $5 million other than in the ordinary course of business.
2 On 17 May 2012 Bayan and Kangaroo Resources commenced proceedings in the High Court in which they challenged the jurisdiction or power of this court to make the Freezing Orders. On 26 June 2012 Gummow ACJ ordered that the proceedings be remitted to this court. Those proceedings are now CIV 2139 of 2012. I subsequently ordered that BCBCS' application for a continuation of the Freezing Orders (CIV 1562 of 2012) should be heard together with the action brought by Bayan and Kangaroo Resources challenging the jurisdiction or power of this court to make the Freezing Orders.
Overview of issues
3 BCBCS contends that O 52A r 5(1)(b)(ii), to the extent that it authorises this court to make freezing orders for the purpose of preventing the frustration of a prospective judgment in this court resulting from the registration of a judgment on a cause of action being tried in Singapore, is within the inherent jurisdiction of the court and is accordingly within the rule making authority of s 167(1)(a) of the Supreme Court Act 1935 (WA) (Supreme Court Act). Secondly, BCBCS contends alternatively, that O 52A r 5(1)(b)(ii), to the extent that it authorises the court to make the freezing orders here under consideration, is within the power conferred on the court by s 16(1)(d)(i) of the Supreme Court Act. Thirdly, BCBCS
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- contends that O 52A r 5(1)(b)(ii) is authorised by the rule making power in s 17 of the Foreign Judgments Act 1991 (Cth) (Foreign Judgments Act).
4 Bayan says that O 52A r 5(1)(b)(ii), to the extent that it authorises the court to make freezing orders to prevent the frustration of a prospective judgment in this court resulting from the registration of a judgment obtained in the Singapore proceedings, is beyond power because it is not authorised by the inherent power of the court, s 167(1)(a) of the Supreme Court Act or s 17 of the Foreign Judgments Act. Secondly, Bayan submits that if s 167(1)(a) of the Supreme Court Act purports to authorise the making of O 52A r 5(1)(b)(ii) to have an operation that would permit the grant of the Freezing Orders where no foreign judgment has been obtained, then O 52A r 5(1)(b)(ii) would be inoperative as it would be inconsistent with the Foreign Judgments Act for the purposes of s 109 of the Commonwealth Constitution. Thirdly, Bayan says that even if the purported operation of O 52A falls within the grant of rule-making power contained in s 17 of the Foreign Judgments Act, whether or not it additionally falls within s 167(1)(a) of the Supreme Court Act, then O 52A r 5(1)(b)(ii) is invalid as it would attempt to confer upon this court, by the relevant legislature, a function incompatible with the role of the court as a repository of Federal jurisdiction for the purposes of ch III of the Constitution.
5 If the court does have the power to make the Freezing Orders and has the power to order their continuation, then the court may order their continuation if BCBCS has a good arguable case on a cause of action that is justiciable in the High Court of Singapore, there is a sufficient prospect that the High Court of Singapore will give judgment in favour of BCBCS and there is a sufficient prospect that the judgment will be registered in this court. BCBCS submits that it has a strong case and it is likely that the High Court of Singapore will give judgment in its favour and BCBCS will register that judgment in this court pursuant to the provisions of the Foreign Judgments Act. Bayan has not put on any evidence concerning the merits of BCBCS' action against Bayan in the High Court of Singapore.
6 If BCBCS has a good arguable case on a cause of action justiciable in the High Court of Singapore and there is a sufficient prospect that that court will give judgment in favour of BCBCS and that judgment will be registered in this court, then this court may make a freezing order against Bayan if the court is satisfied that there is a danger that the judgment will be wholly or partly unsatisfied because the assets of Bayan are removed
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- from Australia or disposed of, dealt with or diminished in value. BCBCS has put forward evidence in support of those matters. Bayan has not put on any evidence in relation to those matters.
7 The Freezing Orders were made after the court was given undertakings by BCBCS to submit to such order as the court may consider to be just for the payment of compensation to any person affected by the operation of the order and to pay the sum of $2 million as security for that undertaking. BCBCS maintains that undertaking. Bayan submits that if the court orders that the Freezing Orders be continued, then the $2 million security posted in support of BCBCS' undertaking is inadequate and the Freezing Orders should only be continued if BCBCS gives security in an amount of at least $26.8 million.
8 Finally, Kangaroo Resources says that even if O 52A r 5(1)(b)(ii) is within power and the court has power to make freezing orders for the purpose of preventing the frustration of a prospective judgment in this court resulting from the registration of a judgment on BCBCS' cause of action being tried in Singapore, it is beyond the power of the court to order the continuation of the Freezing Orders insofar as they restrain Kangaroo Resources dealing with the Shares or the assets of Kangaroo Resources.
The background facts
9 BCBCS is a company incorporated in Singapore. It is a wholly owned subsidiary of an Australian company, Binderless Coal Briquetting Co Pty Ltd (BCBC), which is in turn a wholly owned subsidiary of another Australian company, White Energy Co Ltd. BCBCS owns 51% of the shares in an Indonesian joint venture company, PT Kaltim Supacoal (KSC). The remaining 49% of the shares in the joint venture company are owned by Bayan. Bayan is an Indonesian company. It is the parent company of the Bayan group of companies.
10 The rights and obligations of the shareholders in KSC are governed by a joint venture deed dated 7 June 2006 (the JV Deed). Initially the parties to the JV Deed were BCBC and Bayan International Pty Ltd (Bayan International). By a deed of novation Bayan acquired the shares in KSC previously held by Bayan International and BCBCS acquired the shares in KSC previously held by BCBC. The JV Deed is governed by the law of Singapore.
11 The parties to the JV Deed fell into dispute in November and December 2011. BCBCS alleges that, in breach of the JV Deed, Bayan
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- instructed its associated companies to stop supplying coal to KSC and refused to provide funding to KSC. On 13 December 2011 Bayan issued a default notice alleging that BCBCS had breached its obligations under the JV Deed. BCBCS denies the validity of, or assertions in, that notice.
12 On 27 December 2011 BCBCS commenced proceedings against Bayan and Bayan International in the High Court of Singapore. BCBCS claims, amongst other things, damages against Bayan for breaches of the JV Deed. A statement of claim in those proceedings was filed on 31 January 2012 and a defence and counterclaim were filed on 22 February 2012.
13 On 21 February 2012 Bayan issued a notice to BCBCS immediately terminating, or purporting to terminate, the JV Deed. BCBCS treated the purported termination as a wrongful repudiation of Bayan's obligations under the JV Deed, accepted the repudiation and terminated the JV Deed. On 23 March 2012 BCBCS filed an amended statement of claim in the Singaporean proceedings and the relief claimed under that amended statement of claim is damages for breach of contract.
14 No judgment has been obtained in the Singaporean proceedings. No proceedings, apart from the claim for freezing orders, have been, or will be, commenced in Western Australia unless BCBCS obtains a judgment in the High Court of Singapore, when it will register and enforce the judgment in this court pursuant to the Foreign Judgments Act.
Intervention of Attorney General
15 Bayan gave notice that the proceeding commenced in the High Court involves a matter arising under the Constitution or involving its interpretation within the meaning of s 78B of the Judiciary Act 1903 (Cth). The Attorney General for Western Australia (Attorney General) intervened in these proceedings pursuant to s 78A of the Judiciary Act. The Attorney General submits that the Notice of a Constitutional Matter and the submissions of the parties raise the following issues:
(a) Whether RSC O52A r5(1)(b)(ii) is, to the extent that it authorises this Court to make freezing orders in aid of proceedings on a cause of action being tried in Singapore:
(i) within the inherent jurisdiction of the Supreme Court;
(ii) ultra vires section 167(1)(a) of the Supreme Court Act; and
(iii) ultra vires section 17 of the Foreign Judgments Act.
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- (b) Whether O52A r5(1)(b)(ii) is inconsistent with the Foreign Judgments Act for the purposes of section 109 of the Commonwealth Constitution.
(c) Whether O52A r5(1)(b)(ii) contravenes Chapter III of the Constitution by conferring a function upon the Supreme Court of Western Australia which is incompatible with the role of this Court as a repository of federal jurisdiction.
16 The Attorney General submits that this court has inherent jurisdiction to make freezing orders for the purpose of preventing the frustration of a prospective judgment in this court resulting from the registration of a judgment on a cause of action being tried in a foreign court, and hence O 52A r 5(1)(b)(ii) is authorised by the rule-making power under s 167(1)(a) of the Supreme Court Act. In addition, the Attorney General submits that O 52A r 5(1)(b)(ii) is authorised by the rule making power in s 17 of the Foreign Judgments Act.
17 The Attorney General did not make any submissions on whether, in the exercise of the court's discretion, the Freezing Orders ought to be continued or on the adequacy of the security paid by BCBCS in support of its undertaking as to damages.
Order 52A Freezing Orders
18 The Supreme Courts and the Federal Court of Australia have adopted uniform or harmonised rules dealing with freezing orders. The harmonised rules were made following the recommendations of the Chief Justices' Rules Harmonisation Committee.
19 Order 52A r 5 deals with freezing orders against a judgment debtor, prospective judgment debtor or third party. Order 52A r 5(1)(b) and r 5(3) together have the effect that r 5 applies if an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in another court and there is a sufficient prospect that the other court will give judgment in favour of the applicant and there is a sufficient prospect that the judgment will be registered in, or enforced by, the Court.
20 Rule 5(4) provides that the court may make a freezing order against a judgment debtor or prospective judgment debtor if the court is satisfied that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:
(a) the judgment debtor, prospective judgment debtor or another person absconds; or
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- (b) the assets of the judgment debtor, prospective judgment debtor or another person are -
(i) removed from Australia or from a place inside or outside Australia; or
(ii) disposed of, dealt with or diminished in value.
(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because -
(i) the third party holds or is using, or has exercised or is exercising, a power of dispossession over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
22 Order 52A r 6 provides that nothing in O 52A diminishes the inherent, implied or statutory jurisdiction of the Court to make a freezing order.
23 Bayan says that O 52A r 5(1)(b)(ii), to the extent that it purports to authorise the Court to grant a freezing order in aid of proceedings on a cause of action being tried in a court outside Australia in which a judgment has not been given that is capable of registration or enforcement by the Court, is beyond the jurisdiction or power of the Court.
24 A freezing order is also referred to as an asset preservation order and was formerly known as a Mareva injunction or Mareva order. In these reasons I will refer to a freezing order, Mareva order, Mareva injunction or asset preservation order depending upon the context.
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Inherent jurisdiction
25 This court has power to make a freezing order. The source of the power is the inherent jurisdiction of the court to prevent abuse or frustration of its processes. In Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 Wilson and Dawson JJ held that the power:
… exists not to create additional rights but to enable a court to protect its process from abuse in relation to the enforcement of its orders. It is neither a species of anticipatory execution nor does it give a form of security for any judgment which may ultimately be awarded (619).
- Deane J (with whom Mason CJ, Wilson & Dawson JJ agreed) said that the power to grant a Mareva injunction should:
… now be accepted as an established part of the armoury of a court of law and equity to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction (623).
One limitation on the powers of the Federal Court to grant interlocutory injunctions is that those powers must be exercised for the purpose for which they are conferred. In a later passage of the judgment of Deane J in Jackson v Stirling Industries Ltd, his Honour said a power to prevent the abuse or frustration of a court's process should be accepted 'as an established part of the armoury of a court of law and equity' and that 'the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that court by s 23 of the Federal Court of Australia Act'. But his Honour observed, orders must be framed 'so as to come within the limits set by the purpose which [the order] can properly be intended to serve'. The Mareva injunction is the paradigm example of an order to prevent the frustration of a court's process … The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceeding against who final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked [35]. (footnotes omitted)
27 In Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380, LED Builders Pty Ltd (LED) commenced proceedings against Eagle Homes Pty Ltd (Eagle Homes) for the infringement of LED's copyright in certain building plans. The shares in Eagle Homes were held by Mr and Mrs Cardile. Before judgment, Eagle Homes declared and paid substantial dividends to the Cardiles. The Cardiles formed a new company, Ultra Modern Pty Ltd, which began a housing construction
(Page 13)
- business using new plans and Eagle Homes' business name was transferred to Ultra Modern. Judgment was given for LED. LED elected for an account of profits and applied for Mareva orders against Mr and Mrs Cardile and Ultra Modern pending the taking of the account. Neither Mr and Mrs Cardile nor Ultra Modern were parties to the original proceedings. The Cardiles appealed to the High Court against orders restraining them from disposing of or dealing with any of their assets until further order.
28 In their joint judgment Gaudron, McHugh, Gummow and Callinan JJ said that a Mareva order is an exercise of the court's power to protect the integrity of its processes. Their Honours said:
The integrity of those processes extends to preserving the efficacy of the execution which would lie against the actual or prospective judgment debtor [25].
- After referring to certain forms of equitable relief their Honours said:
In these various ways, the courts developed doctrines and remedies, outside the injunction as understood in courts of equity, to protect the integrity of its processes once set in motion. The Mareva order for the preservation of assets should be seen as a further development [40].
Their Honours then discussed the doctrinal basis of the Mareva order. At [41] their Honours referred to Patrick Stevedores and set out the passage from the joint judgment to which I have referred. At [42] their Honours said that that passage in Patrick Stevedores should be accepted as a correct statement of principle with two qualifications. The first is:
… in that passage, the attention of the Court was directed to orders against parties to the proceedings and against whom final relief was sought. In that situation, the focus is the frustration of the court's process. If relief is available against non-parties, the focus must be the administration of justice.
The second qualification is that 'to avoid confusion as to its doctrinal basis, it is preferable that references to "Mareva orders" be substituted for "injunctions".'
29 In Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199, the High Court held that where an interlocutory injunction is sought, it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which final relief is sought. However, the High Court said that a Mareva order is not an interlocutory injunction: Gleeson CJ [12], Gaudron J [60],
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- Gummow and Hayne JJ [94]. Accordingly, where a freezing order is sought it is not necessary to identify the legal or equitable rights which are to be determined at a trial and in respect of which final relief is sought from the court.
30 In Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 Gleeson CJ, Gummow, Hayne and Crennan JJ said that in Cardile, in dealing with the doctrinal foundation of asset preservation orders, Gaudron, McHugh, Gummow and Callinan JJ had referred to the power of the court to protect the integrity of its processes once set in motion and that the integrity of those processes extends to preserving the efficacy of the execution which would lie against the actual or prospective judgment debtor and that the protection of the administration of justice which this involves may, in a proper case, extend to asset preservation orders against third parties to the principal litigation [9].
31 Senior counsel for Bayan, Mr Walker SC, submits that I am bound by the decision of the High Court in Cardile to find that this court does not have jurisdiction to make a freezing order to assist an applicant who is conducting proceedings in a foreign jurisdiction where the applicant intends to register and enforce in Australia a foreign judgment. Mr Walker submitted that it emerges from [40] of the joint judgment that the purpose for which a freezing order can properly be intended to serve is to protect the integrity of the court's processes 'once set in motion'. That is a reference to the processes of the court granting the injunction or Mareva order. Mr Walker says that the statements in [41] and [42] of the joint judgment are binding statements of the limits of a freezing order. The court may make such orders against parties to the proceedings and against whom final relief is sought as are needed to ensure the effective exercise of the jurisdiction invoked. There is a qualification or extension to that statement of principle in relation to orders against third parties, that is parties such as Mr and Mrs Cardile or Ultra Modern, who are not parties to the action. In relation to such parties their Honours said:
What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word 'may', be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: (i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including 'claims and expectancies', of the judgment debtor or potential judgment debtor; or (ii) some process, ultimately enforceable by
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- the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.
It is that principle which we would apply to this case. Its application is a matter of law, although discretionary elements are involved [57] - [58].
32 The ratio decidendi of Cardile is binding on this court. The ratio is the principle or statement of law on which the decision is based to the extent to which it is essential to the decision. The ratio decidendi may be expressed in wide or narrow terms. What is the ratio decidendi of Cardile can be answered only by examining their Honours reasoning. It does not appear from the joint judgment in Cardile that it is intended to be an exposition of the whole law on Mareva orders, but rather to govern the making of a Mareva order against a third party such as Ultra Modern. As I have said, at [25] of the joint judgment their Honours said that a Mareva order is an exercise of the court's power to protect the integrity of its processes once set in motion and that the integrity of those processes extends to preserving the efficacy of the execution which would lie against the actual or prospective judgment debtor. Their Honours then said:
The protection of the administration of justice which this involves may, in a proper case, extend to asset preservation orders against third parties to the principal litigation. This appeal concerns the identification of such cases [25].
- Thus, the appeal was concerned with identifying proper cases where the protection of the administration of justice may extend to asset preservation orders against third parties to the principal litigation. In [57] of their joint judgment their Honours set out the principle to guide the courts in determining whether to grant Mareva relief in cases where the activities of third parties are the object sought to be restrained.
33 Nevertheless, this court should follow any statement of principle clearly expressed by a majority of the High Court. In the joint judgment in Patrick Stevedores their Honours said that a power to prevent the abuse or frustration of a court's process should be accepted as an established part of the armoury of a court of law and equity, and that the Mareva injunction is the paradigm example of an order to prevent the frustration of the court's process. In the joint judgment in Cardile their Honours said that the passage in Patrick Stevedores, which includes the statements to
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- which I have referred, should be accepted as a correct statement of principle subject to two matters. The first is that in Patrick Stevedores the attention of the court was directed to orders against parties to the proceedings and against whom final relief was sought. Their Honours said that in that situation the focus is the frustration of the court's process. The only other situation which their Honours averted to was that of third parties such as the Cardiles or Ultra Modern. Their Honours did not consider the situation of an applicant who is a party to proceedings in a foreign jurisdiction who intends to register any judgment obtained in the court in which a freezing order is sought. The joint judgment in Cardile does not expound a principle that a freezing order may only be made for the purpose of preventing frustration of the process of the court invoked by a party who claims to have legal or equitable rights which are to be determined at a trial and in respect of which final relief is sought from the court in which the freezing order is sought. The joint judgment is not inconsistent with the court having power to make a freezing order to prevent frustration of the court's process which the applicant intends to invoke after obtaining a judgment in the foreign proceedings by registering the judgment in the Australian court.
34 The following relevant legal principles in relation to freezing orders may be drawn from the High Court decisions to which I have referred. First, the doctrinal basis of the freezing order is to prevent the abuse or frustration of the court's processes and protect the proper administration of justice in relation to the enforcement of the judgment of the court. Secondly, a freezing order may be made against an actual or prospective judgment debtor. The purpose of a freezing order is to preserve the efficacy of the execution which would lie against an actual or prospective judgment debtor. Thirdly, a freezing order is not an interlocutory injunction. Freezing orders have a different basis in principle and doctrine to injunctions in aid of legal rights in pending litigation. Fourthly, a freezing order may be made against a third party, that is a person who is not a party to an actual or prospective action in the court.
35 Having regard to those principles, I conclude that this court does have jurisdiction or power to make a freezing order for the purpose of preventing the frustration of a prospective judgment in this court resulting from the registration of a judgment on a cause of action being tried in a foreign jurisdiction.
36 In Cardile the High Court held that Australian superior courts have inherent jurisdiction to make freezing orders to prevent the frustration of
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- their processes. In the second edition of 'Freezing and Search Orders: Mareva and Anton Pillar Orders' Justice Biscoe says:
Those processes include the enforcement of a foreign judgment, when obtained, in the Australian court. In the meantime a freezing order may be made to prevent the frustration of that process [5.82].
38 Freezing orders where a party is sued abroad and has assets in Australia have been considered by single judges in a number of cases since Cardile. In The Official Receiver of the State of Israel in his capacity as Liquidator North America Bank Ltd (in liquidation) v Raveh [2001] WASC 72; (2001) 24 WAR 53 the plaintiff commenced proceedings in the District Court of Israel and obtained a worldwide Mareva type order against the property of the defendant pending determination of the proceedings. The plaintiff proposed to have any judgment obtained in the District Court of Israel registered as a foreign judgment and enforced in this court. The plaintiff sought a Mareva injunction in respect of any of the proceeds to be obtained by the defendant from the settlement of proceedings which had been commenced in this court, relying, in support of the injunction, upon the proceedings in Israel and the foreshadowed registration of the judgment in Western Australia. Murray J dismissed the application. Murray J noted the references in Patrick Stevedores and Cardile to the potential frustration of the court process. His Honour limited the concepts of abuse and frustration to parties to proceedings before the court and against whom final relief was sought. Murray J referred to the interlocutory nature of
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- Mareva orders and concluded that an abuse of court process must arise from a cause of action pursued to final orders within the court:
As I understand the applicable principles for the grant of a Mareva order, it is right to focus upon the making of an order in appropriate circumstances in aid of a party who is seeking final relief, the order being of an interlocutory character to operate against a party who would so behave as to seek to frustrate, or in a way calculated to have the tendency to frustrate, the final process of the court and the enforcement of its orders [18].
After referring to the decisions of the House of Lords in Siskina v Distos Compania Naviera SA [1979] AC 210 and Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 and the Privy Council in Mercedes Benz AG v Leiduck [1996] AC 284 Murray J concluded that:
A Mareva order, as I have said, in my opinion rests upon the foundation of principle that it is not to enforce foreign process, but to operate upon a defendant who seeks to evade or acts in a way calculated to defeat the enforcement in this court of a substantive right pursued by the plaintiff in this court [27].
Murray J considered that a Mareva order was still in the nature of an interlocutory remedy designed to assist parties pursuing a matter before the court. However, as noted earlier in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd, Gummow and Hayne JJ noted that following Patrick Stevedores and Cardile the basis of a Mareva order is to prevent frustration of a court process and that accordingly a Mareva order is not a preliminary injunction within the traditional principles of equity jurisdiction. Murray J did not have the benefit of these observations when he delivered his judgment in March 2001 because Lenah Game Meats was decided later that year in November 2001. Following the comments of Gummow and Hayne JJ in Lenah Game Meats the earlier decisions in Patrick Stevedores and Cardile should be seen as a rejection of the interlocutory injunction approach. Accordingly no cause of action within the jurisdiction should be required because a Mareva order is not an interlocutory injunction. This is the approach taken in Davis by Campbell J.
40 In Davis v Turning Properties Pty Ltd [2005] NSWSC 742; (2005) 222 ALR 676 the plaintiff had commenced proceedings in the Bahamas against Mr Turner and companies associated with him. The plaintiff obtained a worldwide Mareva order from the Bahamas court. The order
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- extended to associated companies of the defendants and to an Australian company, Turning Properties Pty Ltd. The plaintiff obtained a Mareva order in the Supreme Court of New South Wales against Turning Properties. The application for the continuation of that order came before Campbell J. Campbell J observed that in their joint judgment in Cardile, Gaudron, McHugh, Gummow and Callinan JJ held that a Mareva order should not be regarded as a species of injunction and that their Honours:
reiterated the decision that the Court had already come to, that the basis for the jurisdiction to issue Mareva orders was the Court's power to act in the administration of justice, a power such as that conferred by section 23 of the Supreme Court Act 1970 [NSW] [22].
Campbell J said at [35] that the administration of justice in New South Wales is not confined to the orderly disposition of litigation which is begun, tried and ends in New South Wales, but includes the enforcement in New South Wales of rights established elsewhere. Campbell J noted that the ordinary course of administration of justice has long included a court making certain of its remedies available in aid of proceedings in another court. Campbell J referred to and accepted as correct a statement by Justice Biscoe in the first edition of 'Mareva and Anton Pillar Orders' (2005) that there is an inherent jurisdiction to make an order in aid of the enforcement of a foreign judgment in Australia, whether or not that judgment has been obtained [36].
41 Transnational freezing orders were considered by Hasluck J in Celtic Resources Holdings Plc v Arduina Holding BV [2006] WASC 68; (2006) 32 WAR 276. The applicant, an Irish company, and the respondent, a Dutch company, were parties to an agreement which provided for disputes to be settled by arbitration. A dispute concerning the agreement was arbitrated in London. The arbitrator made an award providing for the first respondent to pay the applicant the sum of £916,338.28. Pursuant to the Arbitration Act 1996 (UK), a judgment was entered in the United Kingdom High Court that the first respondent pay to the applicant the sum of £916,338.28. The Civil Procedure Rules (UK) in effect provided that the first respondent could apply to set aside the judgment within 14 days of being served with it and that the judgment could not be enforced until after the end of this 14 day period or any application to set it aside had been disposed of. The applicant applied to this court for registration of the UK judgment pursuant to the Foreign Judgments Act and for a Mareva order. At the time of these applications the judgment based upon the arbitration award had not been served on the first respondent. Hasluck J dismissed both applications. His Honour held
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- that the judgment was not enforceable in the UK and therefore it could not be registered in the Supreme Court due to the provisions of the Foreign Judgments Act, which prohibited registration of a judgment if at the date of the application the judgment could not be enforced in the country of the original court. Hasluck J did not dismiss the application for a Mareva order on the ground that the court did not have power to make the order, but rather that in the circumstances of that case an order should not be made. Hasluck J referred to many authorities concerning Mareva orders including Cardile, Lenah Game Meats, Raveh and Davis. Hasluck J said:
The High Court of Australia appears to have refined the Mareva order in recent years in three ways: first, it has held that such an order is not an injunction and that the power to grant it may be impeded by forcing it into the injunction mould; second, superior courts have inherent jurisdiction to make freezing orders to prevent the frustration of their process. The view is open, and should be embraced, that those processes include the enforcement of a foreign judgment when obtained in the Australian court and that in the meantime a freezing order may be made to prevent the frustration of that process, see Cardile's case (supra); Australian Broadcasting Corp v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 243 [51].
Hasluck J concluded that after his review of the decided cases:
I am prepared to accept that in certain circumstances Australian superior courts have an inherent jurisdiction to grant Mareva relief in relation to assets in Australia where a foreign judgment has been or is to be obtained [56].
His Honour declined to make the Mareva order because the provisions of the Foreign Judgments Act and the Civil Procedure Rules (UK) had the effect that Celtic Resource Holdings Plc was at that time prevented from enforcing the judgment it had obtained in the UK. His Honour considered that in those circumstances 'it would circumvent and be inconsistent with the prescribed procedure in the country of origin if a Mareva order was made of the kind proposed which indirectly had the effect of enforcing the judgment in question'.
42 In Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583 Sackar J made a freezing order, on the application of Bhushan, an Indian company, restraining the defendant, Severstal, a Swiss company, from disposing of assets in Australia. Bhushan had commenced proceedings in India and intended, if and when it obtained a judgment in India, to register and enforce the judgment in Australia. Sackar J made a freezing order in favour of Bhushan. His Honour assumed without
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- discussion that the court had jurisdiction or power to make the orders sought. The New South Wales Court of Appeal dismissed an appeal by Severstal in Severstal Export GmbH v Bhushan Steel Ltd [2013] NSWCA 102. Bathurst CJ, with whom Beazley P and Barrett JA agreed, held that where r 25.14(1)(a)(ii) or r 25.14(1)(b)(ii) of the Uniform Civil Procedures Rules 2005 (NSW) (UCPR), the equivalent of RSC O 52A r 5(1)(a)(ii) and O 52A r 5(1)(b)(ii), applies, the judgment or prospective judgment referred to in UCPR r 25.14(4) [RSC O 52A r 5(4)] is the judgment of the foreign court. Bathurst CJ then said:
It does not seem to me that r 25.11 [RSC O 52A r 2] requires that a contrary conclusion be reached. It is true that the rule makes it clear that the power to make a freezing order is to prevent the frustration or inhibition of the court's processes. However, the construction which I consider preferable will not defeat that purpose. If the conditions of jurisdiction contained in r 25.14(2) and r 25.14(3) [RSC O 52A r 5(2) and r 3] are made out and there is a danger that a foreign judgment or prospective foreign judgment will not be enforced because of the matters referred to in r 25.14(4)(a) or (b) [RSC O 52A r 5(4)(a) or (b)], then the Court can protect its registration and enforcement process by making a freezing order. On the other hand, if there is no risk to the enforcement of the foreign judgment or prospective judgment, there is no need for the Court to make any order to protect its process [53].
No challenge was made on appeal to the validity of the UCPR pursuant to which the freezing order was made.
43 As a judge of this court I should follow a decision of another judge of this court unless there is a good reason for not following it. In this case there are conflicting decisions of single judges of this court. In Raveh Murray J held that the court may not grant a Mareva order to protect the enforcement of a prospective judgment in this court resulting from a prospective foreign judgment. In Celtic Hasluck J held that this court has an inherent jurisdiction to grant Mareva relief in relation to assets in Australia where a foreign judgment has been or is to be obtained. The jurisdiction accepted to exist by Hasluck J is consistent with the decision of Campbell J in Davis and for the reasons I have stated earlier is consistent with the principles referred to by the High Court in Cardile and emphasised in Lenah Game Meats and Batistatos.
44 For the reasons I have stated, I find that this court has an inherent jurisdiction to make a freezing order against a prospective judgment debtor where there is a sufficient prospect that a foreign court will give judgment in favour of the applicant and the judgment will be registered in or enforced by this court.
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Supreme Court Act s 16
45 BCBCS submits that s 16 of the Supreme Court Act also gives the court power to make the Freezing Orders. Section 16(1)(d)(i) provides that the Supreme Court shall be a court of equity, with power and authority within Western Australia
to administer justice, and to do, exercise, and perform all acts, matters and things necessary for the due execution of such equitable jurisdiction as, at the commencement of the Supreme Court Ordinance 1861, the Lord Chancellor of England could or lawfully might have done within the realm of England in the exercise of [his jurisdiction].
46 In Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 the New South Wales Court of Appeal held that the Supreme Court of New South Wales had jurisdiction to grant a Mareva injunction restraining a debtor from removing assets from the reach of a creditor thus rendering any future judgment fruitless. The court held that the jurisdiction derives from the court's inherent power or from s 23 of the Supreme Court Act 1970 (NSW):
We have come to the conclusion that jurisdiction does exist and that it derives from the Supreme Court Act, s 23, or from the Court's inherent power. The basis of jurisdiction is founded on the risk that the defendant will so deal with his assets that he will stultify and render ineffective any judgment given by the Court in the plaintiff's action, and thus impair the jurisdiction of the Court and render it impotent properly and effectively to administer justice in New South Wales. As has appeared, the jurisdiction to grant the injunction is not to be exercised simply to preclude a debtor from dealing with his assets, and in particular to prevent him from using them to pay his debts in the ordinary course of business. It is directed to dispositions which do not fall within this category and which are intended to frustrate, or have the necessary effect of frustrating, the plaintiff in his attempt to seek through the court a remedy for the obligation to which he claims the defendant is subject.
Assuming that the jurisdiction is exercised with due caution, it seems to us that it is necessary for the administration of justice in this State that the court should have power to prevent a defendant who would otherwise have assets to satisfy a judgment from setting the court and its procedures at naught by making sure that its judgment will be a mere brutum fulmen. The whole sense and purpose of the inherent powers, as well as the powers which s 23 confers, are to ensure the effective administration of justice. The analysis of the 'Mareva' injunction which has occurred during the years of its growth show that it is designed to prevent conduct inimical to the administration of justice. The reported decisions show that a 'Mareva' injunction will be granted where necessary to ensure that justice is effectively administered … (276A - D).
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- Section 23 of the Supreme Court Act 1970 (NSW) provides:
The Court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales.
In relation to any difference between s 23 and the inherent jurisdiction the court said:
It may be that there is some difference between this provision and the inherent jurisdiction of the court but we doubt it, and if there is, it would seem to be irrelevant for present purposes. The court exercises from time to time a great many powers which are not the subject of any explicit statutory provision or rule, the exercise being based generally on the court's inherent powers. As it seems to us, those powers are recognized and exercised because they are necessary for the administration of justice in New South Wales. On this view s 23 confirms the existence of the Court's inherent powers but does not increase them. However the inherent jurisdiction could not exceed what is necessary for the administration of justice, and the jurisdiction conferred by the section would not be less than the inherent jurisdiction (270B).
The judicial interpretation of s 23 of the Supreme Court Act 1970 (NSW) equally applies to s 16(1)(d)(i) of the Supreme Court Act 1935 (WA) (341E).
48 The power conferred on this court by s 16(1)(d)(i) of the Supreme Court Act is relevantly coextensive with that conferred on the Supreme
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- Court of New South Wales by s 23 of the Supreme Court Act 1970 (NSW). However, the question remains whether the jurisdiction granted by s 16(1)(d)(i) is wide enough to encompass a transnational freezing order of the sort here in issue. Whether or not s 16(1)(d)(i) of the Supreme Court Act confers on this court power to make such a freezing order depends upon whether this court has an inherent jurisdiction or power to make the orders because s 16(1)(d)(i) does not confer on the court a power wider than its inherent power to make freezing orders. I have found that this court has an inherent jurisdiction to make a freezing order of the sort here being considered. The power conferred on the court by s 16(1)(d)(i) is for present purposes coextensive with that inherent power. In that sense, s 16(1)(d)(i) of the Supreme Court Act is a further source of the power of the court to make a freezing order of the sort here being considered.
Order 52A r 5(1)(b)(ii) is authorised by Supreme Court Act s 167(1)(a)
49 Section 167(1)(a) of the Supreme Court Act provides that rules of court may be made for the following purposes:
(a) for regulating and prescribing the procedure … and the practice to be followed in the Supreme Court in all causes and matters whatsoever in or with respect to which the court has for the time being jurisdiction … and any matters incidental to or relating to any such procedure or practice …
50 I have held that the Court has inherent jurisdiction to make a freezing order against a prospective judgment debtor where there is a sufficient prospect that a foreign court will give judgment in favour of the applicant and the judgment will be registered in or enforced by this court. Therefore, O 52A r 5(1)(b)(ii) is authorised by the rulemaking power in s 167(1)(a) of the Supreme Court Act.
51 The legislature of the State of Western Australia has plenary power to make laws for the 'peace, order and good Government of [the State]', including laws that have extra territorial operation, provided there is sufficient nexus between the State and the extra territorial circumstances on which the law operates: Constitution Act 1899 (WA) s 2; Australia Act 1986 (Cth) s 2(1). The test of the validity of an exercise of the power is the existence of a relevant connection between the circumstances on which the particular legislation operates and the State. The test should be liberally applied so that even a remote and general connection will suffice: Union Steamship Co of Australia Pty Ltd v King [1988] HCA 55; (1988) 166 CLR 1. A sufficient nexus exists here in that O 52A r 5(3)(b)
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- requires that there be a sufficient prospect that the judgment will be registered in or enforced by the Court.
Order 52A r 5(1)(b)(ii) is authorised by the Foreign Judgments Act
52 Section 17 of the Foreign Judgments Act provides:
(1) The power of an authority to make rules regulating the practice and procedure of a superior court extends to making any rules, not inconsistent with this Act or with any regulations made under this Act, prescribing all matters necessary or convenient to be prescribed for carrying out or giving effect to this Act, including the following:
…
(2) This section does not affect any power to make rules under any other law.
53 BCBCS and the Attorney General submit that by providing for the making of freezing orders in relation to foreign judgments to be registered in the Court, O 52A prescribes matters necessary or convenient for giving effect to the Foreign Judgments Act.
54 The Foreign Judgments Act provides for the enforcement of foreign superior court civil judgments for payment of money by registration in State and Territory Supreme Courts. The basis of the scheme is reciprocity. The Act applies with respect to judgments of courts of a particular country, by regulation, where the Governor General is satisfied that substantial reciprocity of treatment will be given to the enforcement in that country of corresponding Australian judgments. The Foreign Judgments Act applies to judgments of the High Court of Singapore. Section 6 of the Act deals with applications for, and the effect of, registration of foreign judgments. A judgment creditor under a judgment may apply to the appropriate court to have the judgment registered in the court. All money judgments registrable under the Act may be registered in State and Territory Supreme Courts. On registration a registered judgment has, for the purpose of enforcement, the same force and effect and the registering court has the same control over the enforcement of a registered judgment 'as if the judgment had been originally given in the court in which it is registered and entered on the date of registration'. Section 7 deals with setting aside a registered judgment. Section 8 provides that enforcement of a registered judgment may be stayed pending the final determination of an appeal in the stated circumstances.
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55 BCBCS and the Attorney General submit that O 52A r 5(1)(b)(ii), to the extent that it authorises the Court to make freezing orders in aid of proceedings on a cause of action being tried in Singapore, is 'necessary or convenient' for the carrying out or giving effect to the Foreign Judgments Act and therefore is authorised by the rule making power in s 17 of the Foreign Judgments Act.
56 In Shanahan v Scott (1957) 96 CLR 245 the High Court concluded that a power to make regulations necessary or convenient for carrying out the objects of an Act:
… does not enable the authority by regulations to extend the scope or general operation of the enactment but is strictly ancillary. It will authorise the provision of subsidiary means of carrying into effect what is enacted in the statute itself and will cover what is incidental to the execution of its specific provisions. But such a power will not support attempts to widen the purposes of the Act, to add new and different means of carrying them out or to depart from or vary the plan which the legislature has adopted to attain its ends (250).
- The High Court held that the regulation in question, which prohibited the cold storage of eggs, extended to eggs that were not part of a marketing scheme provided for under the Act. The regulation was:
… much more than an elaboration, a filling in or a fulfilment of the plan or purpose which the main provisions of the Act have laid down or, if the expressions be preferred, have 'outlined' or 'sketched'. It means that an attempt has been made to add to the general plan or conception of the legislation and to extend it into a further field of regulation, namely that of the use, handling or disposition of eggs independently of the board's marketing of the eggs vested in or otherwise acquired by the board (254).
It is not open to the grantee of the power actually bestowed to add to its efficacy, as it is called, by some further means outside the limits of the power conferred, for the purpose of more effectively coping with the evils intended to be met … The authority must be taken as it is created, taken to the full, but not exceeded. In other words, in the absence of express statement to the contrary, you may complement, but you may not supplement, a granted power (92).
58 In 'Delegated Legislation in Australia', (4th ed) Pearce and Argument say at [14.7] that
[t]he scope of a necessary or convenient empowering clause will vary according to the content of the Act in which it is included. The more
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- detailed the Act, the more limited the power to make regulations; the more general the Act, the more it is apparent that the legislature has deliberately left it to the executive to spell out the details in regulations.
- This distinction is made in Morton v Union Steamship Company of New Zealand Ltd (1951) 83 CLR 402, 410.
59 Section 6(3) of the Foreign Judgments Act provides that if the stated conditions are satisfied the Supreme Court is to order the judgment to be registered. Section 6(7) provides that subject to matters not presently relevant:
(a) a registered judgment has, for the purposes of enforcement, the same force and effect; and
(b) proceedings may be taken on a registered judgment; and
(c) the amount for which a judgment is registered carries interest; and
(d) the registering court has the same control over the enforcement of a registered judgment;
as if the judgment had been originally given in the court in which it is registered and entered on the date of registration.
- Enforcement is defined in s 3(1) to mean:
(a) where there is not an amount of money payable under the judgment, enforcement by:
(i) attachment; or
(ii) committal; or
(iii) fine; or
(iv) sequestration; or
(b) where there is an amount of money payable under the judgment, enforcement by execution.
The Foreign Judgments Act does not otherwise make provision for the enforcement of a registered judgment.
60 A freezing order is an established part of the armoury of a court to prevent the abuse or frustration of its process. The integrity of those processes extends to preserving the efficacy of the execution which would lie against a prospective judgment debtor. A rule providing for the court to make a freezing order in respect of a prospective foreign judgment
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- registered in the court complements rather than supplements the power granted to the court to register and enforce a foreign judgment. Order 52A r 5(1)(b) and r 5(3) are necessary or convenient for carrying out or giving effect to the Foreign Judgments Act. Accordingly, O 52A r 5(1)(b)(ii) is authorised by the rulemaking power in s 17 of the Foreign Judgments Act.
Order 52A r 5(1)(b)(ii) is not inconsistent with Foreign Judgments Act
61 Bayan says that if O 52A r 5(1)(b)(ii) is not authorised by s 17 of the Foreign Judgments Act but is authorised by the Supreme Court Act, then it is inoperative because it is inconsistent with the Foreign Judgments Act and by reason of s 109 of the Constitution is invalid to the extent of the inconsistency. I have found that O 52A r 5(1)(b)(ii) is authorised by s 17 of the Foreign Judgments Act. It necessarily follows that it is not inconsistent with the Foreign Judgments Act. If, contrary to my finding, O 52A r 5(1)(b)(ii) is not authorised by s 17 of the Foreign Judgments Act, then I find that it is not inconsistent with the Foreign Judgments Act. I will briefly set out my reasons for that finding.
62 In Dickson v The Queen [2010] HCA 30; (2010) 241 CLR 491 in their joint reasons the whole court said:
The statement of principle respecting s 109 of the Constitution which had been made by Dixon J in Victoria v Commonwealth was taken up in the joint reasons of the whole court in Telstra Corporation Ltd v Worthing as follows (at [28]):
'In Victoria v Commonwealth, Dixon J stated two propositions which are presently material. The first was: "When a State law, if valid, would alter, impair or detract from the operation of a law of the Commonwealth Parliament, then to that extent it is invalid." The second, which followed immediately in the same passage, was: "Moreover, if it appears from the terms, the nature or the subject matter of a Federal enactment that it was intended as a complete statement of the law governing a particular matter or set of rights and duties, then for a State law to regulate or apply to the same matter or relation is regarded as a detraction from the full operation of the Commonwealth law and so as inconsistent." The second proposition may apply in a given case where the first does not, yet, contrary to the approach taken in the Court of Appeal, if the first proposition applies, then s 109 of the Constitution operates even if, and without the occasion to consider whether, the second proposition applies.'
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- The first proposition is often associated with the description 'direct inconsistency', and the second with the expressions 'covering the field' and 'indirect inconsistency' …[13] - [14].
63 In Jemena Asset Management (3) Pty Ltd v Coinvest Ltd [2011] HCA 33; (2011) 244 CLR 508 the court in a joint judgment said:
The crucial notions of 'altering', 'impairing' or 'detracting from' the operation of a law of the Commonwealth had in common the idea that the State law undermined the Commonwealth law. Any 'alteration' or 'impairment' of, or 'detraction' from, a Commonwealth law must be significant and not trivial (509).
64 In Momcilovic v The Queen [2011] HCA 34; (2011) 245 CLR 1 Gummow J discussed the different classes of inconsistency which are embraced by s 109 of the Constitution by reference to the submissions of counsel in Australian Boot Trade Employees Federation v Whybrow & Co [1910] HCA 53; (1910) 11 CLR 311. Gummow J identified three classes:
'(1) Where two conflicting duties are imposed by the two legislatures; (2) Where there is something in the nature of a right or privilege conferred by the paramount legislature, and the other legislature seeks to impose some additional restrictions on the exercise of that right or privilege; and (3) Where the Court forms the view from the language of the paramount legislature that they intended their law to be the only law upon the particular point' [240].
- Gummow J treated classes (1) and (2) as examples of direct inconsistency. In Dickson, the High Court also treated circumstances coming within class (2) as an example of direct inconsistency [22].
65 As I understand it, Bayan relies upon indirect inconsistency. Bayan says that the Foreign Judgments Act creates a complete statutory scheme in providing a statutory right to have a judgment registered and enforced. I do not accept that submission for a number of reasons.
66 First, the Foreign Judgments Act is not an exclusive and exhaustive code with respect to the enforcement of foreign judgments. The Foreign Judgments Act provides for the registration and enforcement of only those judgments to which pt 2 of the Act applies. Secondly, the Commonwealth Parliament does not appear to have intended that the Foreign Judgments Act shall be a complete statement of the law governing the enforcement of judgments to which pt 2 applies. The Foreign Judgments Act provides that, amongst other things, proceedings may be taken on a registered
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- judgment and the registering court has the same control over the enforcement of a registered judgment as if the judgment had been originally given in the court in which it is registered and entered: s 6(7). Thirdly, the ability of the court to make a freezing order does not impair, negate or detract from the operation of the Foreign Judgments Act. It supports the ability of the court to prevent the frustration of the court's processes in the same way that it does in relation to the operation of the court's processes in any other matter.
67 I find that RSC O 52A r 5(1)(b)(ii) is not inconsistent with the Foreign Judgments Act.
Order 52A r 5(1)(b)(ii) does not confer on the court a function incompatible with the role of a ch III court
68 Bayan says that if the purported operation of O 52A r 5(1)(b)(ii) falls within the grant of the rule making power contained in s 17 of the Foreign Judgments Act, then it is invalid as it would attempt to confer upon the court, by the relevant legislature, a function incompatible with the role of the court as a repository of federal jurisdiction for the purposes of ch III of the Constitution.
69 Counsel for Bayan submits that the principle prevents a legislature from requiring a court capable of exercising federal jurisdiction to depart to a significant degree from the methods and standards which have historically characterised the exercise of judicial power: State of South Australia v Totani [2010] HCA 39; (2010) 242 CLR 1 [131] (Gummow J) [42] (Crennan & Bell JJ). Mr Walker submits that O 52A r 5(1)(b)(ii) is an attempt to confer a power on a court unrelated to any substantive process before the court and by reason only of the existence of a potential right under the federal legislation which may arise at some future time. Mr Walker submits that it is antithetical to the judicial process to make predictions about how matters may turn out in foreign proceedings without the Australian court actually being empowered, or called upon, to make the decision for itself applying foreign law. The process of the court, invited by this rule Mr Walker submits, does not involve the relevant ascertainment of the facts as they are and as they bear on the right or liability in issue and the identification of the applicable law, followed by an application of that law to those facts. Rather, it involves the application of an extraordinary remedy on an hypothesis unrelated to the protection of the courts own processes which may have been properly engaged.
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70 I accept the written submissions of the Attorney General that O 52A does not confer upon the court a function which is incompatible with its role under ch III of the Constitution as a repository of Federal jurisdiction. The Constitutional question raised is a question about the extent of the authority conferred by s 167(1)(a) of the Supreme Court Act and s 17 of the Foreign Judgments Act. The rule making power conferred by each of those provisions is to be construed as requiring the discretionary power which each confers to be exercised in accordance with the applicable law, including the Constitution. It is an implicit requirement of both s 167(1)(a) of the Supreme Court Act and s 17 of the Foreign Judgments Act that the rule making power not be exercised in a manner which would be inconsistent with the limitations on legislative power derived from ch III of the Constitution. The question is whether, having regard to the constraints imposed by reference to ch III of the Constitution, the rules are ultra vires s 167(1)(a) of the Supreme Court Act and s 17 of the Foreign Judgments Act for the reason that the power conferred by the rules is incompatible with the court's role under ch III of the Constitution as a repository of federal jurisdiction.
71 The Attorney General submits, and I accept, that the argument raised by the defendants must be rejected if this court holds, as I have, that it has the inherent jurisdiction to make a freezing order in the circumstances addressed by O 52A r 5(1)(b)(ii) of the RSC. The exercise by the court of its inherent jurisdiction to protect the administration of justice could not be said to alter the character of the court such that it would cease to meet the constitutional descriptions of a 'court of the state'.
72 The Attorney General submits, and I accept, that in any event the discretion exercised pursuant to O 52A r 5(1)(b)(ii) shares most of the attributes of ordinary judicial decision making. The court may only make a freezing order if it is satisfied that the conditions prescribed in the rule for making an order are met. If the court is so satisfied it is not required to make a freezing order. The court retains a discretion whether to make a freezing order. Determining whether it is satisfied that the conditions for making a freezing order are met and, if so, whether to exercise the discretion to make a freezing order does not require the court to depart from the usual processes, methods and standards of the court.
Court has power to make Freezing Orders
73 For the reasons stated, O 52A r 5(1)(b)(ii) is a valid exercise of the court's rule making power under s 167(1)(a) of the Supreme Court Act and s 17 of the Foreign Judgments Act. The court has jurisdiction, or
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- power, to make a freezing order and to continue the Freezing Orders against Bayan if the following conditions are satisfied:
1. BCBCS has a good arguable case on an accrued cause of action that is justiciable in the High Court of Singapore (O 52A r 5(1)(b)(ii));
2. there is a sufficient prospect that the High Court of Singapore will give judgment in favour of BCBCS (O 52A r 5(3)(a));
3. there is a sufficient prospect that the judgment will be registered in or enforced by this court (O 52A r 5(3)(b)); and
4. the Court is satisfied that there is a danger that a prospective judgment in the High Court of Singapore will be wholly or partly unsatisfied because the assets of Bayan are removed from Australia or disposed of, dealt with, or diminished in value (O 52A r 5(4)(b)).
Good arguable case
74 BCBCS' action in the High Court of Singapore is for damages for breach of contract and other relief. The action was commenced on 27 December 2011. BCBCS has filed an amended statement of claim. Bayan has filed a defence and counterclaim. There is no suggestion that BCBCS' claim is not justiciable in the High Court of Singapore. BCBCS submitted, Bayan did not dispute, and I accept, that the High Court of Singapore will apply the common law in dealing with the respective claims of the parties.
75 BCBCS must establish that it has a good arguable case. In Ninemia Maritime Corp v Trave Shiffahrtsgesellschaft GmbH & Co KG (the Niedersachsen) [1984] 1 All ER 398, 404 Mustill J considered that a good arguable case, in the context of a Mareva order, is one 'which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success'. I do not think there is any difference between that test and the requirement that the applicant for a Mareva order show 'a reasonably arguable case on legal as well as factual matters' expounded by Gaudron, McHugh, Gummow and Callinan JJ in Cardile at [68].
76 BCBCS alleges Bayan breached its contractual obligations by:
1. refusing to provide funding to KSC;
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- 2. refusing to procure the supply of coal to KSC and instructing its subsidiaries to cease supplying coal to KSC;
3. purporting to issue a default notice to BCBCS in circumstances where it had no basis for doing so; and
4. terminating the contract without justification.
77 The first breach alleged by BCBCS is that Bayan refused to provide funding to KSC. There is evidence that on several occasions Bayan said that it would not put any further money into KSC. By refusing to continue providing funding to KSC, Bayan appears to have breached cl 8.2 of the JV Deed and, arguably, an implied term in the JV Deed that both parties are obliged to provide funding to the extent that it is reasonably required to achieve the objectives of the JV Deed.
78 The second breach alleged by BCBCS is that Bayan refused to procure the supply of coal to KSC. There is evidence that Bayan instructed its subsidiaries, PT Bara Tabang (Bara) and PT Fajar Sakti Prima (Fajar) to cease the supply of coal to the JV company. In an email of 9 November 2011 from Russell Neil, the chief development officer and a director of Bayan, to Wong Chong Keong, Bayan's mine manager for the Bara and Fajar mines, Mr Neil instructed Bara and Fajar to stop supplying coal to KSC until further notice.
79 In [73] of its defence and counterclaim (amendment number 2) Bayan admits that it requested that Bara and Fajar put a hold on the supply of coal to KSC until further notice, but says it subsequently informed White Energy and or BCBCS that Bara and Fajar could continue the supply of coal to KSC at the price based on the HBA index as stipulated under the Indonesian legislation as agreed under the Coal Supply Agreements dated 1 October 2010. In instructing Bara and Fajar to cease supply of coal, Bayan arguably breached several obligations under the Joint Venture Deed.
80 The third manner in which BCBCS alleges Bayan breached its contractual obligations is by purporting to issue a default notice to BCBCS in circumstances where it had no basis for doing so. Bayan issued the notice on 13 December 2011. The default notice alleged three breaches of the JV Deed by BCBCS. The first is that BCBCS caused KSC to incur approximately $7 million in expenditure over the budget for the nine months to 30 September 2011 without prior notice to, and without the consent of, Bayan, in breach of clauses of the JV Deed. BCBCS says, and there is evidence to support its contention, that BCBCS
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- was not required to obtain Bayan's consent but in any event Bayan consented to, or had knowledge of, these expenditures. The second alleged breach is that White Energy Company, being in management and control of BCBCS, made public announcements referring to negotiations and/or confidential matters in relation to the JV Deed without Bayan's consent or knowledge in breach of clauses of the JV Deed. In response BCBCS says that announcements by White Energy Company, which is not a party to the JV Deed, cannot constitute a breach of the JV Deed, and further that White Energy Company, as an ASX listed company, was under a duty to disclose material matters in relation to BCBCS, its wholly owned subsidiary. The third alleged breach is that BCBCS had continually failed in its obligations under the JV Deed by continually incurring mounting unjustified expenses and debts without the production of any commercially and technically viable Upgraded Coal Briquettes, the end products produced by KSC could not be sold as a stand alone product into any market and Bayan had not received any consideration nor had Bayan received any benefit under the JV Deed. In response BCBCS says that Bayan has failed to identify any contractual provision to support such a claim. In its defence and counterclaim Bayan does not assert that BCBCS breached any term of the JV Deed but pleads 'no contractual provision is required to terminate the JV Deed based on total failure of consideration'.
81 BCBCS says that the default notice was not validly issued for several reasons. First, none of the alleged breaches actually constituted breaches. BCBCS has made out at least a reasonably arguable case on the law and facts relating to the alleged breaches. Secondly, BCBCS says that, in circumstances where Bayan was in breach of its own contractual obligations, in particular its obligations to provide funding and procure the supply of coal for the plant, Bayan was not entitled to issue a default notice. Thirdly, BCBCS says that even if the matters referred to in the default notice did constitute a breach, they were not material breaches which entitled Bayan to issue a default notice. Fourthly, BCBCS says that even if the matters complained of constituted material breaches and Bayan was otherwise entitled to issue a default notice, the notice did not comply with the requirements under cl 13 of the JV Deed for a default notice, including by requiring remedies that were self-evidently impossible to undertake. For example, the notice required BCBCS to remedy its default within 30 days by producing one million metric tonnes per annum of Upgraded Coal Briquettes in circumstances where Bayan had refused to provide further funding and had stopped the supply of coal. BCBCS says that in light of these matters, there was no basis for Bayan to issue the
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- default notice and consequently the notice was issued in breach of Bayan's obligations under the JV Deed.
82 The fourth basis of BCBCS' claim is Bayan's conduct in purporting to terminate the JV Deed. Bayan wrote to BCBCS on 21 February 2012 purporting to terminate the JV Deed. BCBCS alleges that Bayan had no basis in fact or law for the issue of the termination notice in that:
1. the default notice was invalid for the reasons referred to;
2. contrary to the default notice, BCBCS was not in breach of its obligations under the JV Deed; and
3. the claim of total failure of consideration is not true, and, in any event, does not, by itself, provide a basis for termination.
83 In its written outline of submissions BCBCS refers to Singaporean authority to the effect that under Singaporean law, like Australian law, failure of consideration is a restitutionary principle which allows for the recovery of payments in circumstances where there has been a total failure of consideration. For those reasons, BCBCS contends that Bayan's termination constituted a wrongful repudiation of the JV Deed.
84 In this application Bayan has not put on any evidence or advanced any argument that BCBCS does not have a good arguable case in the Singapore proceedings. Nevertheless, BCBCS has, properly, outlined the defence and counterclaim of Bayan in the High Court of Singapore. Bayan does not deny that the JV Deed contained obligations in relation to funding and procuring the supply of coal. Bayan pleads that it was discharged from its obligations on two grounds. First, the consideration for the JV Deed and the Funding MOU had wholly failed. Secondly, BCBCS had itself breached the express and/or implied terms of the JV Deed and Funding MOU. I have already referred to BCBCS' response to Bayan's claim that consideration for the JV Deed and the Funding MOU had wholly failed. In addition, BCBCS says that there was not a total failure of consideration. There is evidence that at the time immediately prior to Bayan's refusal to provide funding to KSC, capital modification works were 98% complete. Before those capital modification works were undertaken, KSC was able to run the plant at 25% overall capacity and the pre-briquetting moisture content of the coal had been reduced to the targeted 6% to 7%. BCBCS has put forward evidence that if KSC's operations had been able to continue, and if KSC had received adequate funding to complete the remaining capital modifications, and to commission and operate the plant until the end of 2011, KSC would have
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- been producing Upgraded Coal Briquettes by early December 2011 and would have been in a position to fund its own operations from the sale of the Upgraded Coal Briquettes by around mid-2012.
85 In relation to Bayan's second argument, that it was discharged from its contractual obligations because BCBCS had itself breached the express and implied terms of the JV Deed and the subsequent Funding MOU, Bayan relies on four alleged breaches:
1. BCBCS incurred expenditure without obtaining the consent of Bayan, in contravention of clauses of the JV Deed;
2. BCBCS breached its good faith and related obligations under the JV Deed by KSC failing to produce Upgraded Coal Briquettes;
3. BCBCS breached an implied term in the JV Deed and/or Funding MOU that BCBCS would procure that KSC produced one million metric tonnes per annum of Upgraded Coal Briquettes; and
4. BCBCS had breached an implied term of the JV Deed and/or Funding MOU that the costs of the KSC project would be in the region of $US40 million.
86 I have already referred to BCBCS' answer to the first alleged breach. In relation to the second alleged breach BCBCS contends, and for the purposes of this application I accept, a failure by KSC to produce Upgraded Coal Briquettes would not constitute a breach by BCBCS of its good faith obligations. In relation to the third and fourth alleged breaches, BCBCS rejects the existence of any such implied terms which it says are inconsistent with the express terms of the JV Deed and neither obvious, nor necessary, for business efficacy. BCBCS' argument on that point is at least strongly arguable on the material presently before the court.
87 Bayan has filed a counterclaim. BCBCS submits that with the exceptions of three additional claims, the counterclaim largely covers the same ground as the defence and the default notice. The first additional claim is that BCBCS breached the JV Deed by failing to respond to the default notice in the manner prescribed by the JV Deed. This claim depends upon the assertion that the default notice was valid. The remaining two additional claims relate to representations allegedly made by BCBCS during the negotiations leading up to the JV Deed. BCBCS submits that these claims are doomed for several reasons, including that many of the representations predate BCBCS' existence and thus could not have been made by BCBCS, and others postdate the JV Deed and thus
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- could not have induced anyone to enter the JV Deed. Further, cl 20.10 of the JV Deed expressly states that the JV Deed comprises the entire agreement of the parties and superseded any prior representations. In any event, BCBCS says that the evidence contained in Mr Maras' affidavit establishes that Bayan understood the risk involved in the project, including the risks of delay and increased costs.
88 It is not possible or appropriate for the court to undertake a detailed evaluation of the prospects of BCBCS succeeding in its claims against Bayan in the High Court of Singapore. It is not necessary that the court should come to the conclusion that it is more probable than not that BCBCS will succeed. I find that BCBCS has made out a good arguable case in the sense that it is reasonably arguable, it is more than barely capable of serious argument.
89 In addition to establishing that it has a good arguable case against Bayan for breach of contract, BCBCS must also establish a good arguable case that it is entitled to substantial damages to justify the Freezing Orders. BCBCS claims damages for repudiatory breach of contract and alternatively for breaches of contract. BCBCS claims damages based on the alternative bases of loss of profits, loss of chance and wasted expenditure. BCBCS contends that, but for Bayan's breaches of contract, KSC would have begun to produce and sell Upgraded Coal Briquettes and BCBCS claims for loss of profits based on the profits that it would have made as a 51% shareholder in KSC from the sale of Upgraded Coal Briquettes. In its amended statement of claim in the Singapore proceedings BCBCS has particularised its loss of profits based on the production capacity of the Upgraded Coal Briquettes the plant would have achieved. The estimated loss of profits ranges from $63 million from a production capacity of one million tonnes per annum to $749 million for 15 million tonnes per annum. Further, BCBCS claims damages for wasted expenditure. BCBCS submits that Singapore law recognises a plaintiff's right to claim reliance losses and cites Halsburys Laws of Singapore [80.545] in support of that proposition. There is nothing to contradict that proposition, which I accept.
90 The wasted expenditure which BCBCS seeks to recover in the Singapore proceedings amounts to at least $US138 million made up as follows:
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91 There is evidence that BCBCS is not likely to be able to recover this expenditure. Bayan is the only feasible supplier of coal to the coal processing plant which is located in a remote and inaccessible part of Indonesia. Bayan has refused to supply coal to KSC. In any event, an Indonesian court has declared KSC bankrupt and appointed curators to KSC.
92 Wasted expenditure is not recoverable if it would not have been recouped had the contract been performed. However, once the plaintiff proves that the expenditure was reasonably incurred, the onus shifts to the party in breach to show that it would not have been recouped. There is no evidence from which I may infer that BCBCS' expenditure would not have been recouped if Bayan had not breached the JV Deed. The material before me establishes a good arguable case that BCBCS will recover damages of at least $US138 million.
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Sufficient prospect Singapore Court will give judgment in favour of BCBCS
93 In Bhushan Steel Ltd v Severstal Sackar J said of the requirement in UCPR 25.14(3)(a) [RSC O 52A r 5(3)(a)] that there is a sufficient prospect that the other court will give judgment in favour of the applicant:
It is submitted by Bhushan that 25.14(3)(a) does not relate to the strength or quality of the case in the proceedings but rather to the prospect of an actual judgment materialising. UCPR 25.14 can be invoked when a cause of action has not accrued, indeed the cause of action might only be prospective. It can also be called in aid whether the proceedings that are prospective are to occur domestically or internationally. Here of course proceedings have been commenced, are part heard, some evidence has been taken and the matter is ongoing. There is no reason to doubt that the Delhi Court will not indeed deliver judgment at some point which will (subject to appeal) bind the parties. The process has been regularly commenced and is proceeding in a manner this court can clearly identify with. The adversarial system is engaged and there are rights of appeal [133].
94 Order 52A r 5(3)(a) does not require me to decide that the High Court of Singapore will give judgment in favour of BCBCS or even that the probability of it doing so is more than 50%. The requirement is only that there are sufficient prospects that the High Court of Singapore will do so, so as to warrant making the order. On the materials before the court I find that there are sufficient prospects that the High Court of Singapore will do so and that it will enter a money judgment in favour of BCBCS for $US138 million or more.
Sufficient prospects of enforcement of the judgment
95 It is also necessary for BCBCS to satisfy the court that there are sufficient prospects that any judgment obtained in the High Court of Singapore will be registered in or enforced by the Court: O 52A r 5(3)(b). The High Court of Singapore is a court in respect of which pt 2 of the Foreign Judgments Act applies. BCBCS has stated its intention to register in this court any judgment obtained by it in the High Court of Singapore and to enforce the judgment against the assets of Bhushan in Australia. I find there is a sufficient prospect that the judgment will be registered in or enforced by the Court.
Danger that prospective judgment will be unsatisfied
96 In Cardile, Gaudron, McHugh, Gummow and Callinan JJ made a number of points about the granting of a freezing order. Their Honours said:
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- … the granting of a Mareva order is bound to have a significant impact on the property of the person against whom it is made. In a practical sense it operates as a very tight 'negative pledge' species of security over property, to which the contempt sanction is attached. It requires a high degree of caution on the part of a court invited to make an order of that kind. An order lightly or wrongly granted may have a capacity to impair or restrict commerce just as much as one appropriately granted may facilitate and ensure its due conduct.
…
Another reason … for care in exercising the power to grant a Mareva order is that there may be difficulties associated with the quantification and recovery of damages pursuant to the undertaking [as to damages] if it should turn out that the order should not have been granted [50] - [52].
97 The interests of justice may support the granting of a freezing order to prevent the dissipation of assets pending the hearing of an action even though the risk of dissipation is less probable than not: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 325 (Gleeson CJ); Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49, 54; Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014. The facts that assets within the jurisdiction are moveable, or that the proceeds from their realisation may be removed from the jurisdiction, and that the defendant is incorporated outside the jurisdiction, are not enough to warrant an inferential finding of danger of dissipation: Hua Wang Bank [12] (Kenny J). There must be facts from which a prudent, sensible, commercial person can properly infer a danger of default if assets are removed from the jurisdiction: Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645, 671 (Lawton LJ). Hua Wang Bank [12] (Kenny J).
98 Bayan is incorporated in Indonesia. BCBCS and its solicitors have undertaken an investigation of the assets of Bayan. That investigation includes a search and analysis of publicly available financial statements, reports and information concerning Bayan.
BCBCS' solicitors undertook searches of the following resources in respect of Bayan:
1. the Bayan website;
2. the One Source database, which appears to be an online service providing to its subscribers business information concerning businesses including Bayan;
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- 3. Bayan's announcements register and other information available in English on the Indonesian stock exchange; and
4. general searches via Google.
99 The company profile on Bayan's website states that the Bayan group is engaged in open cut mining of various coal quality from mines located primarily in East and South Kalimantan. A prospectus issued by Bayan in or around July 2008 for the purpose of its initial public offering includes a number of statements in a section titled 'Risk Factors'. Those statements include the following:
[Bayan has] been reliant in part on the financial support of [their] founding and controlling shareholder … [T]here can be no assurance that the loss of access to shareholder financing will not result in a material adverse effect on [Bayan's] business, financial condition, results of operations and prospects.
- The controlling shareholder is Dato Low Tuck Kwong. The prospectus also stated:
Our founding shareholders, whose interest in our business may be different from yours, exercise significant influence over the Company.
The prospectus also contains the following statement:
You may have difficulty enforcing judgments against us or our management.
We are an Indonesian company, and all of our commissioners, directors and executive officers and certain of the experts named in this offering memorandum, are residents of Indonesia. As a result, you should note that it may be difficult or impossible to serve legal process on us, our management or experts, and to force us to appear in a non-Indonesian court. It may also be difficult or impossible to enforce a judgment of a non-Indonesian court against any of these parties.
101 There is expert evidence before the court that, subject to exceptions not relevant, a Singapore money judgment could not be enforced in Indonesia. Article 436 of the Indonesian Civil Procedure Regulations provides that, subject to exceptions not relevant, judgments granted by foreign courts cannot be executed in Indonesia.
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102 The matters to which I have referred are sufficient to give rise to a real and sensible risk that a judgment obtained from the High Court of Singapore would remain unsatisfied. In short, apart from the Shares, Bayan's only known assets are in Indonesia and the law of Indonesia precludes execution of a Singapore money judgment in Indonesia. Although it is unnecessary to go further, BCBCS points to other matters which give rise to a real risk that a judgment in its favour from the High Court of Singapore may go unsatisfied. Those matters include:
1. Bayan's attempts to escape the bargain that it struck with BCBCS when it considered that it was in its interests to do so;
2. Bayan's repudiation of the joint venture arrangements;
3. Bayan's attempts to avoid contributing to creditors' demands for repayment of debts owed to them including stating:
Bayan wishes to wind up the company so we will not put any further money into KSC. Our preference is for the creditors of KSC to file to reclaim their money from KSC under Indonesian insolvency laws.
4. Persons associated with Bayan, in particular Mr Dato Low Tuck Kwong, have previously tried to avoid the legal effect of a judgment in another legal proceeding and Mr Dato Low Tuck Kwong may exercise a level of control over Bayan that would enable him to procure Bayan to avoid the effect of a judgment of the Singapore High Court.
Each of those matters is relevant, is supported by evidence and provides additional reasons why there is a real risk that a judgment of the High Court of Singapore would not be satisfied.
Undertaking as to damages
103 BCBCS has given the usual undertaking as to damages and has offered security for that undertaking in the sum of $2 million. Bayan submits that the $2 million security is inadequate and the Freezing Orders should only be continued if BCBCS gives security in an amount of at least $26.8 million.
104 In Cardile, Gaudron, McHugh, Gummow and Callinan JJ said that another reason for care in exercising the power to grant a Mareva order is that there may be difficulties associated with the quantification and recovery of damages pursuant to the undertaking if it should turn out that the order should not have been granted. Their Honours referred to the
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- discussion of the quantification and recovery of damages pursuant to the undertaking by Aickin J in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249. Aickin J said, in relation to the assessment of damages pursuant to an undertaking as to damages in support of an interlocutory injunction:
However the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case. No doubt the view as expressed in the two decisions of the Court of Appeal does not constitute a rigid rule and circumstances may sometimes require a different approach. However it will in my opinion be seldom that it will be just or equitable that the unsuccessful plaintiff should bear the burden of damages which were not foreseeable from circumstances known to him at the time (266 - 267).
106 BCBCS says that the appropriate amount of security should be assessed having regard to the nature of the restraints imposed by the Freezing Orders. The Freezing Orders effectively:
1. prevent Bayan from transferring the Shares to any related entity of Bayan;
2. prevent Bayan from encumbering the Shares; and
3. prevent Bayan from disposing of the Shares to any third party and dealing with the Shares in any way or otherwise diminishing their value without first providing seven days' notice to BCBCS and its solicitors in accordance with the terms of the order.
The Freezing Orders provide that Bayan may relieve itself from the obligations imposed on it by the order by payment of $US128 million either into court or into a joint solicitors' trust account, or to agree some other form of replacement security with BCBCS. Accordingly, Bayan
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- submits that so long as the Freezing Orders remain in place it is exposed to:
(1) any risks associated with not being able to transfer the Shares to any related entity of Bayan;
(2) any risks associated with not being able to encumber the Shares;
(3) any risks associated with not being able to sell the Shares; and
(4) in the alternative to (1) to (3), any risks associated with being required to raise $US128 million and deposit it with the Court until the substantive proceeding is determined.
107 Bayan relied upon the evidence of Marten Touw, a financier who has held various senior management roles within the finance industry. In order to understand Mr Touw's opinion concerning the appropriate amount of security, it is helpful to begin with the submissions by counsel for BCBCS to Pritchard J concerning the appropriate amount of security. Counsel informed Pritchard J that shares in Kangaroo Resources are a very illiquid stock. There were 3.4 billion shares on issue. Between June 2011 and April 2012 the most shares traded on a single day was 1.2% of the shares on issue. Bayan held 1.925 billion shares, being 56% of the total shares on issue. Counsel for BCBCS, Dr Bell SC, submitted that an appropriate calculation of the amount of security was an amount equal to Potential Price Change multiplied by Tradeable Volume, where Potential Price Change is defined as the potential movement in the price of the Shares over time and Tradeable Volume is defined as the amount of the Shares that could be traded in one day on the ASX. Dr Bell said that in the previous nine months the highest number of shares which had been traded in a day was 1.2% of the shares on issue and hence that should be taken to be the most shares that could be traded in any one day, the Tradeable Volume. Dr Bell hypothesised a Potential Price Change of 4 cents, being about 25% of the current share price. Applying that formula gave an amount of approximately $1.6 million on 5 April 2012.
108 Mr Touw considered that that methodology for calculating the amount of security did not effectively protect Bayan for damages. In his report of 17 October 2012 Mr Touw referred to a common calculation for historical price volatility. Mr Touw arrived at a volatility figure of approximately 11.13% compared with Dr Bell's figure of 25%. Mr Touw said that the Tradeable Volume input to Dr Bell's formula should be replaced with a new term, Saleable Volume, which Mr Touw defined as the number of shares that Bayan could pro-actively sell. Mr Touw opined
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- that the only rational way Bayan would sell its Shares is in broker solicited very large chunks but more likely in their entirety. On that basis the 'only credible volume assumption is all 1.925 million shares'. Applying the formula: security amount equals Potential Price Change multiplied by Saleable Volume as at 5 April 2012, Mr Touw calculated the appropriate amount for notice periods of seven days, 30 days and 60 days to be approximately $26.8 million, $47.5 million and $67.1 million respectively. Mr Touw opined:
• a security amount in the range of $26.8 million to $67.1 million would have been appropriate as at 5 April 2012;
• the Freezing Order has the effect of creating buyer uncertainty and the notice period term would cause Bayan to have to pre-signal to the market any intent to sell. Both would have a price depressing effect on the KRL share price and by extension the value of Bayan's KRL shareholding;
• I would not take the risk onto a bank balance sheet but if forced to give a price it would have been at least $50 million.
110 Mr Touw approached the appropriate amount of security on an alternative basis as follows. The Freezing Orders provided that Bayan may relieve itself of the obligations imposed on it by the order by payment of $US128 million into court or a joint solicitors' trust account. If Bayan were to lodge cash of $US128 million then it would have to borrow the money. Even if it did not have to borrow the money, the $US128 million has an opportunity cost in the other purposes monies could be put to. Using the assumption that Bayan would have to borrow the money for up to two years and that the interest rate would be 5.75%, the borrowing costs could be calculated in an amount of $15,143,200.
111 Dr Bell challenged Mr Touw's methodology and the assumptions that he made in arriving at his calculations. In particular, Dr Bell challenged Mr Touw's assumption that Bayan would be able to sell its shares in their entirety or in broker-solicited very large chunks. However, in his closing submissions Dr Bell submitted that it was sufficient to refer to Mr Touw's alternative method for calculating the amount of security. In
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- cross-examination Dr Bell asked Mr Touw to replace the $US128 million cash deposit with a notional sale based on the current market price of the Shares, which was approximately $52 million. Mr Touw accepted that the notion of paying into court is a proxy for assessing an appropriate amount of security. Mr Touw further agreed that if the Shares were sold at the current price and the amount was paid into court, and if he used the same interest rate as in his previous calculations but used a one year rather than a two year period, he would get a figure of approximately $2.99 million as the relevant cost of borrowing or opportunity cost. Mr Touw further accepted that in making that calculation he had not taken into account the interest that would have been earned on the money paid into court. There is evidence that the Public Trustee pays 5% interest on monies paid into the Public Trustee Common Account. Mr Touw accepted that the interest earned on the money deposited should be set off against the opportunity cost of depositing the money.
112 In his affidavit affirmed 16 November 2012 Mr Marjoribanks produces a table which sets out the anticipated opportunity cost to Bayan should it pay the sum of $US128 million into court. The table also identifies the difference in the cost of funds if the funds are held in court for 12 months or two years, and identifies the actual cost of funds taking into account the difference between the rate at which Bayan stated it will be able to borrow such funds, and the interest which is able to be accrued on those funds once they have been paid into the Public Trustee Common Account. The table shows the net cost of funds to Bayan, that is the difference between Bayan's funding cost and the interest earned from the Public Trustee on a deposit of $A123,400,000 ($US128,000,000) for periods of 12 months and two years. The table shows that the net cost of funds to Bayan is $1,190,000 for the 12 month term and $2,494,700 for a two year term. All other matters being equal, the net cost of depositing $52 million would be approximately $501,000 for a 12 month term and $1,051,000 for a two year term.
113 There are many uncertainties for assessing the damages that might be caused to Bayan if it is subsequently found that the freezing order should not have been made. Those uncertainties include the future share price, the volatility of the share price, the volume of shares which Bayan might wish to, or be able to, sell, the period for which the restraint will apply, the term of any deposit of funds if Bayan should elect to deposit funds to release itself from the restraints and other factors. The likely amount of damages, and hence the appropriate amount of security, cannot be calculated arithmetically.
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114 The amount of security must be related to the terms of the order. I have referred to Dr Bell's cross-examination of Mr Touw about the opportunity cost of Bayan paying into court an amount equal to the market value of the Shares. The Freezing Orders do not provide for Bayan to be released from the restraints by paying into court an amount equal to the market value of the Shares. The Freezing Orders provide that the order will cease to have effect if Bayan pays the sum of $US128 million into court. That order should be varied to provide that the freezing order will cease to have effect if Bayan pays into court an amount equal to the market value of the Shares. On 6 February shares in Kangaroo Resources were trading at approximately 2.7 cents. The value of the Shares on the basis that each share might be sold for 2.7 cents was approximately $52 million. The opportunity cost to Bayan of paying $52 million into court based on Mr Touw's methodology and assumptions, but allowing for the deposited amount to add interest at 5% for a one year period or two year period, is substantially less than $2 million.
115 Taking all matters into account, the sum of $2 million is adequate security on the basis that Bayan may be released from the freezing order if it pays $52 million into court. The Freezing Orders should be varied to provide that Bayan may be released from the freezing order if it pays $52 million into court. It is not appropriate that Bayan should have to pay into court an amount in excess of the market value of the Shares in order to be released from the freezing order.
Order against Kangaroo Resources
116 RSC O 52A r 5(5) provides that the court may make a freezing order against a person other than a judgment debtor or prospective judgment debtor (the third party) if the court is satisfied:
(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because -
(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor;
or
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- (b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
117 None of the circumstances set out in r 5(a) or (b) apply to Kangaroo Resources. So far as r 5(5)(a)(ii) is concerned, Kangaroo Resources is not in a position of control or influence concerning the Shares. Kangaroo Resources registers any transfer of shares but that does not amount to control of the Shares in any relevant sense. The activities of Kangaroo Resources affect the value of the Shares but that does not amount to influence concerning the Shares in any relevant sense.
118 Order 52A r 6 provides that O 52A does not diminish the inherent, implied or statutory jurisdiction of the Court to make a freezing order. Accordingly it is necessary to consider whether the court has inherent jurisdiction to make a freezing order against Kangaroo Resources apart from O 52A.
119 The jurisdiction to make a freezing order against a third party was considered by the High Court in Cardile. As I have said, the High Court was concerned with identifying proper cases where the protection of the administration of justice may extend to asset preservation orders against third parties to the principal litigation. In par 57 of their joint judgment their Honours set out the principle to guide the courts in determining whether to grant Mareva relief in cases where the activities of third parties are the object sought to be restrained. Their Honours said that a Mareva order may be appropriate, assuming the existence of other relevant criteria and discretionary factors in circumstances in which:
(1) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including 'claims and expectancies', of the judgment debtor or potential judgment debtor; or
(2) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor [57].
- Those circumstances do not apply in this case. The joint judgment did not say expressly that the circumstances set out in [57] of Cardile are the only circumstances in which a freezing order may be made against a third party. It is possible that the classes or categories of case in which a freezing order may be made against a third party are not closed. However, it does not appear from the joint judgment that it is sufficient that the prospective judgment debtor holds shares, including a controlling interest, in the third party. Bayan's controlling interest in Kangaroo Resources enables it to control or exercise influence over the disposition by Kangaroo Resources of its assets, but does not give to Kangaroo Resources any control or power of disposition over the assets of Bayan.
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120 This is not a case in which the Court may make a freezing order against a third party. The third party, Kangaroo Resources, has no relevant control over the assets of the prospective judgment debtor, Bayan. The Freezing Orders against Kangaroo Resources should not be continued.
Conclusion
121 The court has jurisdiction to make the Freezing Orders. RSC O 52A r 5(1)(b)(ii), to the extent that it authorises the court to make freezing orders in aid of proceedings on a cause of action being tried in Singapore, is within the inherent jurisdiction of the court, and is authorised by the rule making power in s 167(1)(a) of the Supreme Court Act and s 17 of the Foreign Judgments Act. Bayan's claims for relief in CIV 2139 of 2012 must be dismissed.
122 On the basis that BCBCS maintains its undertaking and security for that undertaking in the sum of $2 million, the Freezing Orders should be continued until further order with par 12(a)(i) of the order being varied to provide that the order will cease to have effect if Bayan pays the sum of $52 million into court. The freezing orders against Kangaroo Resources should not be continued.
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