Deputy Commissioner of Taxation v Huang [2021] HCATrans 162 (13 October 2021)

Last Updated: 15 October 2021

[2021] HCATrans 162

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S26 of 2021

B e t w e e n -

DEPUTY COMMISSIONER OF TAXATION

Appellant

and

CHANGRAN HUANG

Respondent

GAGELER J
KEANE J
GORDON J
EDELMAN J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO SYDNEY, BRISBANE AND MELBOURNE

ON WEDNESDAY, 13 OCTOBER 2021, AT 10.06 AM

Copyright in the High Court of Australia
GAGELER J: In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR S.P. DONAGHUE, QC, Solicitor‑General of the Commonwealth of Australia, appears with MR S.B. LLOYD, SC and MR L.T. LIVINGSTON, SC for the appellant. (instructed by Craddock Murray Neumann Lawyers)

MR B.W. WALKER, SC appears with MR G.E.S. NG and MR Y.H. LI for the respondent. (instructed by Unsworth Legal)

GAGELER J: Mr Solicitor.

MR DONAGHUE: Thank you, your Honour. Your Honours, the questions in this appeal, which is reflected in the sole ground of appeal which your Honours will see at page 131 of the core appeal book, is whether the power of the Federal Court to make worldwide freezing orders is subject to a jurisdictional precondition that there be:

proof of a realistic possibility of enforcement of a judgment debt against assets of the respondent in each foreign jurisdiction to which the proposed [freezing] order relates.

That question arises against an uncontroversial factual background that your Honours will see summarised by the Full Court at the commencement of its judgment on page 53 of the core appeal book from paragraph 3 and following. The essence of the background is as follows. The respondent to the appeal and his wife were tax residents in Australia from 1 February 2013. The respondent left Australia for the People’s Republic of China on 4 December 2018 and his wife followed on 11 September 2019, some nine months later.

Also on 11 September 2019, following an audit by the Australian Tax Office into the respondent’s income tax affairs, the Deputy Commissioner issued notices of amended assessment for the financial years 2013 to 2015, along with a notice of assessment of shortfall penalty. Together those tax notices assessed the respondent as liable to a total amount of almost $A141 million.

Five days after those notices of assessment were issued, the Deputy Commissioner filed an originating application in the Federal Court seeking judgment against the respondent for the amounts stated in the tax assessment notices and interest.

On the same day that the originating application was filed - 16 September 2019 - Justice Katzmann made ex parte freezing orders against the respondent in respect of both his Australian and foreign assets. Your Honours will see Justice Katzmann’s judgment in the appellant’s book of further materials commencing at – well, her Honour’s reasons commence at page 67 of that book.

But if your Honours could turn to page 76 of that book you will see from paragraph 49 and following that Justice Katzmann identified seven reasons why she was satisfied that there was a danger that the prospective judgment would be wholly or partly unsatisfied and she sets them out from paragraphs 50 through to 57, so the size of the tax liability at $140 million is considerable, the audit indicated “an intention to avoid paying tax by grossly understating income”. Mr Huang was a Chinese national, currently overseas, who has taken steps towards severing his ties with Australia. His assets “do not seem to be enough to satisfy the tax liability”, a problem that would be exacerbated if assets were moved offshore. Fifth, and importantly, he is:

likely to be a person of substantial wealth having regard to the transfers of monies into and out of Australia between January 2016 and August 2019 and the number of foreign companies which he apparently controls. He has significant business interests in the PRC, including Hong Kong, and the structures and operations to allow him to easily move assets between jurisdictions.

At 55:

These circumstances demonstrate [the respondent] has both a motive and the means to dissipate his Australian assets.

At 56 he:

has already taken steps to divest himself of his interest in Australian companies and trusts. Although he transferred money overseas before he was aware that he was under investigation by the ATO, since the audit began the amount of money transferred offshore increased dramatically.

Seventh, and finally:

the issue of the tax assessment notices increases the likelihood of dissipation.

None of those findings were challenged subsequently at any point.

Justice Katzmann made orders on the same day, that your Honours will see on page 54 of the same book of materials, which included in orders 4 and 5 orders for the service of the proceedings and a set of identified documents upon the respondents in the People’s Republic of China and also in order 5 for substituted service and the respondent subsequently submitted to the jurisdiction of the court in a document you will see at page 85 of the same book of materials, indicating the solicitor who was acting for him and providing an address for service.

In our submission, once the respondent was validly served with those documents he obviously enough became subject to the jurisdiction of the Federal Court, notwithstanding the fact that he is located in the People’s Republic of China, and that, for reasons I will develop, is a point of some significance given the in personam character of freezing orders.

Subsequent to the making of those orders and the orders for service and substituted service and the submission to jurisdiction there was an inter partes hearing before Justice Jagot, at the conclusion of which the worldwide freezing order against the respondent was continued substantially in the same form in which the order had been made by Justice Katzmann.

Your Honours can see the relevant provisions of that order extracted in the Full Court’s judgment on page 54 of the core appeal book in paragraph 6, and you will see there order 6(c)and 8(b) which are the orders in issue in the appeal, order 6(c) providing or applying to assets outside Australia identified in (i) and (ii), and then there was an ancillary disclosure order in 8(b).

After the inter partes hearing confirming the worldwide freezing order, on 19 December 2019 following an application by the Deputy Commissioner for final judgment and the respondent acknowledging that he had no.....and that a tax debt was due and payable, Justice Jagot entered judgment in favour of the Deputy Commissioner in the amount of some $140.6 million, which your Honours will see at paragraph 8.

So it is against that factual background of an ex parte order, then an inter partes freezing order, service, submission to jurisdiction and judgment being entered that the question arises in this appeal concerning whether or not there is a precondition to the making of a worldwide freezing order of the kind that the Full Court held to exist.

GLEESON J: Mr Donaghue, I have a question about the application of rule 7.35(1). Is the application of that rule determined at the time of Justice Katzmann’s order or Justice Jagot’s order which is said to be a continuation of the freezing order, or does the fact that judgment was subsequently entered have some relevance in determining whether rule 7.35 applies?

MR DONAGHUE: Your Honour, my submission would be that rule 7.35 does not apply and was not relied upon at any point, and I will develop this shortly. But the rule that Justice Jagot relied upon was rule 7.32 in making the freezing order that is in issue and, for reasons that I will develop, our friend’s focus on 7.35 is, with great respect, misguided because it is an attack upon a rule that was not relied upon by the court to make the orders and does not have any relevance other than contextual relevance to the validity of the order.

GLEESON J: Will you explain in doing that why it is that the rule does not apply simply by virtue of the satisfaction of the terms of 7.35(1)?

MR DONAGHUE: Yes, your Honour, I will. I undertake to your Honour I will come to that, but if I could defer it.....time. Your Honours, I propose to structure our submissions, the Commissioner’s submissions, as follows: first, by addressing the proper construction of rule 7.32 and in the course of that I will address the role of 7.35; second, by coming to the reasoning of the Full Court; third, by addressing a number of the relevant authorities, including some United Kingdom authorities that quite closely – or the most directly relevant to the issues that arise on the appeal.

After I have dealt with those matters then Mr Lloyd will address the Court on the practical implications of the Full Court’s interpretations of these provisions which, we submit, tell against the correctness of their Honours’ judgment and the implications of the Full Court’s reasoning in relation to possible equitable relief in aid of enforcement.

So if I could start with the construction of the relevant rules. As your Honours know, the jurisprudence in this Court makes it plain that the source of the Federal Court’s power to make freezing orders is section 23 of the Federal Court of Australia Act and also the power is implied within the status of the Federal Court as the superior court of record but, nonetheless, those powers are concerned and regulated by the provisions that one sees in Division 7.4 of the Federal Court Rules and it is those rules that were the focus of the argument in the courts below and of the appeal.

If your Honours could turn to rule 7.32, which you will find in volume 1 of the joint book of authorities behind tab 3. This is a rule within its terms is focusing on the court, the Federal Court. So:

The [Federal] Court may make an order (a freezing order), with or without notice . . . for the purpose of preventing the frustration or inhibition of the Court’s process –

the Federal Court’s process:

by seeking to meet a danger that a judgment or prospective judgment of the [Federal] Court will be wholly or partly unsatisfied.

Rule (2) makes plain that the assets to which that freezing order relates might be either in or outside of Australia, lest there be any doubt about that. So there is not any textual limitation on the operation of the freezing order in relation to offshore assets or in terms any reference to the enforceability of the order in the place where those offshore assets might be located.

We make three points about that rule textually. First, the point I just foreshadowed, that in its terms one does not see any requirement to prove the possibility of enforcement of the order in any jurisdiction to which the asset relates. So if there is a restriction of that kind it must be implied. That brings into play, in our submission, the well‑established principles governing the implications of limits on the powers of a court, and I will come to develop that in a little more detail shortly.

But, in our submission, it is not surprising that one does not see a limitation referring to enforceability against the assets in each place where the order might apply having regard to the very well‑established in personam character of freezing orders. These are orders binding on the person who is subject to the jurisdiction of the court, and if the person is subject to the jurisdiction of the court then obligations can properly be imposed upon that person in relation to all of their assets, no matter where those assets might be located.

So once one has regard to that characteristic feature of a freezing order we submit it is entirely unsurprising that the order does not focus on the place where the person’s assets might happen to be at any given time. That would be at odds with the whole foundation of the freezing order jurisdiction.

The second point we would make, your Honours, is that it is plain that there is a purposive limitation in 7.32(1). The order must be made:

for the purpose of preventing the frustration or inhibition of the Court’s process –

But the rule explains, in our submission, how an order pursues or must pursue that process. It does not leave it at large. The order must seek to meet the danger that the judgment will be unsatisfied. In our submission, it is plain enough textually from those words that an order can seek to meet the danger without the court needing to be satisfied that it will actually meet the danger, that it will achieve the purpose of removing or eliminating the danger.

It is enough at the point of power to make the order that the order is being pursued for that purpose and as a matter of ordinary language there is no necessity for satisfaction that the purpose will be achieved in order for the purpose to be pursued.

So, if one takes an example far removed from the present, one could say, for example, that an athlete is training for the purpose of achieving Olympic glory without needing to assess how likely the athlete was to succeed at a pending Olympic Games. Their purpose would be undisputed irrespective of their prospects.

So, in our submission, as long as the purpose of the order is to seek to meet the danger that the order will be unsatisfied, which we submit means unpaid, then it will meet the purpose of restriction that one sees in 7.32.

The final textual point we make is that the reference one sees there in rule 7.32(1) is to the court’s process, not to the court’s enforcement process. Enforcement processes are obviously included within the concept of the court’s process but, in our submission, the word “enforcement” should not be implied into that paragraph to narrow the focus of the provisions because, in our submission, the entry of judgment itself, having binding force between parties which have been properly served and brought within the jurisdiction of the Court is itself something that can require protection from a freezing order and if, for example, the respondent or prospective respondent is engaged on a process of a spending spree or a gambling spree that is going to dissipate assets so that there will not be sufficient assets left to meet the judgment, even if that is occurring in a place where the judgment could readily be enforced, then the dissipation of the assets will frustrate the process – will frustrate the judgment of the court, quite independently of any question of the implementation of enforcement processes or otherwise.

So that is the order that we submit was the focus of – the source of power that Justice Jagot identified and the source of power in issue in the Federal Court. But our friends in writing and in their oral outline do not focus on that rule at all. It receives that most passing reference in their submissions. They invite your Honours to focus on rule 7.35.

Now, before I come to the construction of that rule, can I just make good the proposition that that rule was not the rule upon which the Federal Court focused. If you start with Justice Jagot’s judgment in the core appeal book on page 7, you will see under the heading “Assets in Hong Kong and China”:

I deal first with the scope of the freezing orders . . . within and outside of Australia.

The respondent’s case depends on the purpose for which a freezing order can be made –

and her Honour sets out rule 7.32. Then, if you go on a few pages to pages 11 and 12 of the book, paragraph 29 – her Honour again refers there on the fourth line to 7.32 – and paragraph 30, which is at the conclusion of her Honour’s analysis, 7.32(1). So, all about 7.32, not about 7.35.

Unsurprisingly in those circumstances, the notice of appeal – which is sufficiently quoted by the Full Federal Court.....on page 55 of the book, in paragraph 9 also refers to 7.32, and does so in terms that explicitly identify the issue on the appeal as one of power, not of the satisfaction of a discretionary condition. So, I am referring in particular to 1b:

The primary judge erred by failing to find that:

...

a freezing order ‑ ‑ ‑

GLEESON J: Mr Donaghue, you have not gone back to Justice Katzman’s judgment – and this concerns this question that I asked earlier about whether Justice Jagot’s order is a continuation of Justice Katzmann’s judgment. That notes that the Deputy Commissioner relied on 7.35.

MR DONAGHUE: Your Honour, at the time of Justice Katzmann’s judgment the Deputy Commissioner relied and – having regard to the passage that your Honour is referring to, I checked this – the Commissioner’s submissions relied on both 7.32 and 7.35 before Justice Katzmann, but by the time the matter came before Justice Jagot it was an inter partes hearing. While her Honour’s order is substantially in the same terms as Justice Katzmann’s, it was not a continuation of the order – her Honour made a new freezing order following the inter partes hearing.

The focus, as we understand it – and as is suggested by her Honour’s judgment is that then – the focus at that time was exclusively on 7.32. That is why we submit the notice of appeal alleges an error, not in relation to 7.35, but there was an error in being satisfied by 7.32 – and that the order was therefore beyond the power.

That what was put in play in the Full Federal Court and, with the exception of a short diversion in the Full Court’s reasoning at paragraphs 35 to 38 where the Full Court deals with a note that the Deputy Commissioner put on shortly before the hearing raising a new argument which our friend says requires a notice of contention and which the – but the Full Court effectively dealt with it on its merit and rejected - the Full Court starts with 7.32 and, having rejected that, the discursion into 7.35 – its dispositive reasoning, which I will come to quite shortly. Likewise, the focus is on 7.32.

So, in our submission, it is perhaps a little surprising that our friends have focused as heavily as they have on the alleged requirements of 7.35. If that is not just a passing reference, your Honours will have seen our friends in writing – and I think we have given your Honours the various references in our oral outline to this – but there are many, many passages in our friend’s submissions focusing on 7.35.

It is said at one point to be containing the causation requirement that is fatal to our case and our friend’s oral outline at paragraphs 3, 4 and 7 for the hearing today also focuses on 7.35. But, interestingly, there they make express what has previously only been implied, which is that there is in effect an Anthony Hordern contention being advanced that your Honours should treat rule 7.35 as limiting the power otherwise apparently conferred by 7.32 and, indeed, the oral outline suggests that our friend’s case will be that 7.32 is entirely subject to 7.35 so that really one needs to meet the requirements of 7.35 regardless.

That submission we contend should not be accepted for the following reasons. First, if your Honours go to the end of 7.35, 7.35(6), one sees a provision that appears intended to negate an Anthony Hordern argument:

Nothing in this rule affects the power of the Court to make a freezing order or ancillary order –

So that is not a promising start for the idea that 7.35 abstracts. Second, if it does – if 7.35 really does limit 7.32 then it is very difficult to understand what work our friends would leave 7.32 to do. It would seem to be entirely consumed. But in fact, in our submission, the true explanation for 7.35 is that it extends in particular respects the freezing order power in order to overcome particular limits that have been identified on the freezing order jurisdiction in the United Kingdom, in particular in the case of the Siskina [1979] AC 210.

There were two particular limits that had been held to exist on the freezing order jurisdiction in the Siskina. One was that the court could not make a freezing order before a cause of action had accrued, and the second was that freezing orders could only be made in respect of matters in which the English courts would have jurisdiction to determine the underlying dispute, so a Mareva or freezing order could not be made in aid of foreign proceedings. Both of those limits emerged from the Siskina.

If your Honours then turn to the text of 7.35 you can see how the rule deals with those problems, because while 7.32 is just about the court, the Federal Court, 7.35 is not. It deals with four combinations of circumstance. Judgment has been given, and then there are two sub‑combinations, one by the Federal Court or one by another court, a foreign court, so evidently there the foreign court possibility is an extension of what one sees in 7.32. In the second pair of circumstances where judgment has not yet been given, there is a good arguable case, not just on an accrued cause of action, but also on a prospective cause of action, and that is the other Siskina limitation, again by either the Federal Court or a foreign court.

Your Honours will then see that in relation to the foreign – the two combinations dealt with in (a)(ii) and (b)(ii), which are dealing with courts other than the Federal Court, there are additional limitations picked up by reference to sub‑rule (2) and sub‑rule (3). When one is dealing with a court other than the Federal Court, the rules require there to be:

a sufficient prospect that the judgment will be registered in or enforced by the Court.

So you have in 7.35, unlike in 7.32, an express reference to enforcement suggesting, in our submission, that in this division of the rules, when it is intended to limit the power by reference to considerations of enforceability, that is stated expressly. So that is important contextually in terms of whether enforcement should be implied into 7.32. But for present purposes the critical point is that, in our submission, it is plain that 7.35 is extending the jurisdiction in a way that overcomes the jurisdictional limitation that I just identified and, once that is recognised, it cannot be said that these two rules concern the same power.

If they do not concern the same power, that being the phrase this Court used in Nystrom to explain the Anthony Hordern rule, there is no basis to hold that one rule abstracts from the other. So one has not only the express textual provision in 7.35(6) that tends to deny that argument, but one also has the fact that the powers are just different. If 7.35 is satisfied, then that is enough; you can get a freezing order. But if 7.35 is not satisfied, then if you are dealing with conduct that might frustrate or inhibit the processes of the Federal Court itself, the general rule in 7.32 remains available and should be applied in accordance with its terms.

That is, in our submission, what happened in this case. That is where the focus was before Justice Jagot and in the Federal Court and all of our friend’s submissions that focus upon the causal requirement in 7.35(4) which identifies particular reasons why there must be a danger that the judgment will be wholly or partly unsatisfied, those causal particular reasons why, having no textual equivalent in 7.32, just have nothing to do with the appeal. All of our friend’s arguments about causation fail if the Anthony Hordern argument fails.

GAGELER J: Mr Solicitor, does rule 7.36 play any part in the present case?

MR DONAGHUE: Your Honour, I think not. That is another Anthony Hordern negating‑type provision but it appears to be intended to – well, actually, your Honour, I should qualify that answer. As I said in opening, the power comes from rule 23 of the Federal Court of Australia Act and from the character of the Federal Court as a superior court of record.

Rule 7.36 suggests that while Division 7.4 regulates that power in particular ways, it does not abstract from it, so that it could be said that even if the Full Court implied a jurisdictional precondition on 7.32, it would still be possible for the Federal Court to say, well, I cannot make a worldwide freezing order under 7.32 but I can make it ignoring Division 7.4 entirely and just relying directly on section 23 of the Federal Court Act.

But no one I think has said that before in the Federal Court, so as I understand what happened in the Federal Court, it was not suggested that the order could be supported on some basis other than the provisions of 7.4 of the rules. So I think the more correct answer to your Honour’s question is that this appeal involving, as we see it, the correct construction of 7.32 and whether that rule is subject to a jurisdictional prerequisite of the kind proposed by the Full Court, that is the question that your Honours should answer. There might be a separate question if we lose the appeal as to whether there is another avenue available.

GAGELER J: It might be just a quibble with the word “jurisdictional”. Perhaps it is not so much jurisdictional as a matter of potential irregularity.

MR DONAGHUE: I accept that there is force in that, your Honour. Perhaps it is jurisdictional in the sense that the power identified in 7.32 may or may not be engaged but not in the broader sense of whether the Federal Court has power to do the thing in question.

Your Honours, that is what I was proposing to say about 7.35. So, your Honour Justice Gleeson, if I have not answered your Honour’s question I should have another go in that respect because those were the submissions I undertook to make.

GLEESON J: It does, though, look when you read the whole of Division 7.4 as though rule 7.34 and rule 7.35 attempt to cover the field of the persons against whom a freezing order might make, and with the possibility that there might be something more that is addressed by 7.36 and that seems to me at least to be one indicator that 7.34 and 7.35 are intended to supplement 7.32.

MR DONAGHUE: They are intended to supplement, in my submission, your Honour, yes, but not intended to limit. So, in my submission, all of these rules – and your Honours can see this from the notes under the heading to 7.4 – were the product of a harmonisation process conducted by the Council of Chief Justices’ Rules Harmonisation Committee. So, they came together as a package, and they need to be read coherently, in our submission.

In our submission, the way it works is that the basic power is found in 7.32, but then the Committee was dealing with the fact that there is a body of law in this area that had identified various kinds of limits that might have cut down that power. Orders against third parties is one of them – and that is what is dealt with in 7.34. .....cause of action have not yet accrued is another one.....freezing orders supporting foreign judgments rather than judgments of the court in question is another one.

So, what the Rules Committee was doing, in my submission, was dealing with problems that have identified in various – different ways in those later rules, but not in a way that abstracts from the power that is found in 7.32.

Now, your Honours, can I take you to the judgment of the Full Court. Your Honours have already seen in paragraph 9 the notice of appeal which was – this is on page 55 – expressing the error as a failure to find that:

a freezing order in respect of the [foreign] assets . . . would not serve the purpose of preventing or inhibiting the frustration of the Court’s process within the meaning of rule 7.32(1) of the Federal Court Rules 2011, and is therefore beyond power.

That was how it was put. In responding to that at paragraph 15 in the Full Court’s reasons, where they are dealing – summarising the primary judge, you see again the terms of 7.32 quoted. Their Honours then largely paraphrase – or summarise her Honour’s reasons through to about paragraph 30, and at paragraph 30, the Full Court notes that:

the primary judge then identified possibilities of enforcement sufficient to enable the conclusion to be reached that the purpose of r 7.32(1) –

had been satisfied, again.....on that rule, and then their Honours move in to their own analysis. The dispositive reasoning in this case is contained in only a few passages of the – so there is a diversion caused by the supplementary note that the Commissioner filed, which one sees being dealt with at 35 – there their Honours say:

It is convenient to note –

there was:

a supplementary note –

It raised a new argument that their Honours – in that context that their Honours quote 7.35(4) and then at 38, their Honours say it suggests:

a reversal of the onus of proof –

and there is reference to the fact that it was raised late – that there should have been a notice of contention, in paragraph 39. But then it is dismissed on the basis that, at paragraph 40, the note does not reflect what the judge actually did. Having dealt with all of that – the supplementary note side issue – at paragraph 41, their Honours come back to the main point. There, they are dealing again – as the first sentence makes clear – with 7.32:

The purpose of a freezing order as identified in r 7.32 is the prevention of the frustration or inhibition –

The quote from Jackson v Stirling Industries. Then, in our submission, one sees that the critical paragraphs – and these are the paragraphs we mentioned in the notice of appeal, 42, 43 and 47, which is really the sum total of the reasoning that is under appeal. So, starting with 42:

If assets are beyond the reach of the Court’s enforcement processes –

So, we are talking about 7.32 that refers to the court’s processes, not its enforcement processes, but the word “enforcement” has appeared:

then a freezing order with respect to those assets is not for the purpose –

Now, your Honours might recall from the text, the purpose is identified in that rule is to seek to meet the danger but that is now how the court identified – instead they use:

because there is no longer a realistic possibility –

et cetera. That language is the language of 7.35(4). So, what their Honours have done is taken the legal test that governs 7.35(4) and applied it as if it is the 7.32 process and added in an enforcement that is not there – even though it is there in some of the rules in 7.35. They have just asked the wrong question, in our submission. Rather than asking, “Did this order seek to meet the danger of frustration or inhibition of the court’s process?”, they have asked the question about whether the particular way of getting an order under 7.35 has been made good. Then, if your Honour’s move on to 43, and this is where the concept of a jurisdictional precondition comes in:

there must be a realistic possibility that any judgment obtained by the plaintiff can be enforced against assets of the defendant in the place to which the proposed order relates.

There must be a prospect of enforcement. Their Honours characterised the fact finding of Justice Jagot as a “not impossible” test, which they find is wrong, and then in the third sentence:

A test of realistic possibility is consistent with the approach taken by the courts in determining what must be shown in terms of the risk of the removal of assets -

That again seems to be a 7.35 reference, all of which has been framed by reference to the matter of enforcement, or a closely allied concept:

Although the word “danger” in the rule –

and it is not clear which rule their Honours are referring to there:

does not mean that the risk of removal or dissipation must be more probable than not . . . it does mean that there must be a realistic possibility (as we have put it) or a danger sufficiently substantial to warrant the grant of an injunction -

and if there be any doubt that that test – that their Honours were not reaching an evidentiary conclusion here – that this was a matter of legal construction – in our submission, the first sentence of 43 “there must be” the description of that as a test, and then when one comes to 47, their Honours saying:

We consider that a realistic possibility of enforcement in a foreign State is necessary.

That is again referred to as a test a couple of lines further down. Then at the end of 48, rejecting the submission that this is a House v The King discretionary situation, their Honours say:

the error of the primary judge – the formulation and application of an incorrect legal test – is an error within the principles -

So, in our submission, this is not just finding that on the facts the requirement for 7.32 had not been met. This is a construction of the rules that implies within it a necessary requirement that if you have not proved a realistic possibility of enforcement, you do not get the order and you cannot get the order.

EDELMAN J: Mr Solicitor, is that the extent of your submission? In other words, if you are not correct that 7.32(6), as it were, alongside rules such as 7.34 and 7.35, rather than 7.34 and 7.35 deconstructing parts of 7.32, then do you have any alternative submission as to the operation of 7.35, or is the entirety of your case based on a construction of 7.32?

MR DONAGHUE: Your Honour, I think the answer is that we have not put a case that says that the danger here was that the judgment would be wholly or partly unsatisfied because the assets were going to be removed from Australia, because in many cases they had already been removed, which is why Mr Walker focuses on that causal requirement or the dissipation. Someone from my team who was in the case will tell me if I am wrong, but I think that we focused this case only on the basis of satisfaction of the 7.32 requirement, and if your Honours find that we had to meet 7.35 in order to get the order, then I think it would follow that we fail.

GAGELER J: Mr Solicitor, while you are interrupted, may I ask you a question about the first sentence of paragraph 43 of the Full Court’s reasons.

MR DONAGHUE: Of course, your Honour.

GAGELER J: What is meant by “the place to which the proposed order relates”? I do not really see the order here as relating to a particular place. Did their Honours have in mind the need to make findings about where particular assets are located?

MR DONAGHUE: It seems that their Honours did. It seems that their Honours had in mind that you needed to – in order to demonstrate a realistic possibility that enforcement against assets in the place would not be available, it seems to us logically to follow, to know where those assets are and then what the enforcement processes against those assets might be.

That reading we think is supported if your Honour jumps on in the reasons to paragraph 63 because the Commissioner submitted in the alternative, in effect, that if we lost that all that should happen was that the order should be confined to remove Hong Kong and the People’s Republic of China from the order, because that was the place where there was some evidence that enforcement was not possible. But the Full Court rejected that argument and said:

the parties accepted that the order requiring –

Sorry, that moved on to disclosure there, but the way that the Full Court ultimately dealt with it was to remove the entirety of the offshore part of the freezing order on the basis that there was not evidence that there were assets in other places or that it was enforceable in those places. So their Honours do seem to have contemplated that problem.

One point that Mr Lloyd is going to develop is that that does seem to create problems from the perspective of the ancillary order that the court is then discussing in paragraph 64 just following where I took your Honour, because as your Honours would be aware, one of the critical practical features of a freezing order and the ancillary asset disclosure order is to find out where the assets actually are by reason of the ancillary asset disclosure order so as to then make it possible, having located the assets, to try to take steps under the local law of the place where the assets might be.

But if you cannot make a freezing order in respect of places where you cannot prove that assets are already located, and then the capacity to make the ancillary disclosure order stands or falls with the places to which the freezing order can apply, then it follows that you also cannot require the person to tell you where their assets are unless you can already prove that there are assets there are able to be enforced against, and that is a very significant.....upon the jurisdiction.

GORDON J: Mr Solicitor, before you leave 7.35, can I just ask two questions as a result of your position that you say you cannot satisfy 7.35. As I understood your submission, sub‑rule (4) of 7.35 contains no additional requirements other than 7.32. Is that right?

MR DONAGHUE: No, it is not, your Honour. Can I first say that since I said that I have been reminded that Justice Katzmann was satisfied that 7.35(4) was ‑ ‑ ‑

GORDON J: That is why I am asking. I am asking you – she made findings of fact about matters that, as I understand it, would satisfy 7.35(4).

MR DONAGHUE: Yes, and I think, having been reminded of that fact, I should withdraw the answer that I gave earlier because ‑ ‑ ‑

GORDON J: Well, it is not just the answer, it is a question of principle. The question is, is it not, that if you look at 7.32(1) it has both purpose and the way in which that purpose is met, by meeting:

a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.

MR DONAGHUE: Yes.

GORDON J: And that you then, in effect, meet that by making an order restraining someone:

from removing any assets located in or outside Australia or from disposing ‑ ‑ ‑

MR DONAGHUE: The difference, your Honour, is that whilst 7.32 says you have to make the order to seek to meet a danger of frustration or inhibition, 7.35(4) identifies particular ways in which that danger might arise. So 7.35 ‑ ‑ ‑

GORDON J: I agree with you, but at the moment they are a subset, for your present purposes. So it is not inconsistent to the extent of the subset.

MR DONAGHUE: Indeed. It is a subset, it is a way of proving the relevant danger, but Mr Walker’s argument would have it that it is the only ‑ ‑ ‑

GORDON J: I am not asking about Mr Walker’s argument, I am asking about your argument, because at the moment, I understood in response to Justice Edelman, you were saying it was one or nothing.

MR DONAGHUE: No.

GORDON J: Is there not an argument open to you under 7.35 which would meet Mr Walker’s argument?

MR DONAGHUE: There is, on the basis that Justice Katzmann – if, on the basis of Justice Katzmann’s findings that the causation requirement, the words following the “because” are satisfied, then that would be, because that is one way in which a judgment, not the only, but one way in which a judgment could, an order could seek to meet the danger identified in 7.32, then I accept what your Honour puts to me.

GORDON J: Is it not the position that at the time Justice Jagot made the inter partes orders, Mr Huang, in effect, was a prospective judgment creditor?

MR DONAGHUE: Yes.

GORDON J: Thank you.

MR DONAGHUE: I should just – I have created confusion by reason of my earlier answer, but I should just make plain, if I may, that we submit that 7.35(4) in some respects extends what could be done under 7.32 in relation to the prospective cause of action, the unaccrued cause of action, and in relation to the processes of a foreign court. Those are things that are not within 7.32, and the rule extends the capacity to make freezing orders in that respect. In other respects, it does not extend, but it identifies a subset of the ways in which the order might have the identified effect, and that is the exchange I just had with Justice Gordon. In our submission, the way that those ‑ ‑ ‑

EDELMAN J: Mr Solicitor, just so I understand how you say it extends rule 7.32, is that because your submission is, or perhaps you are going to come to the Siskina applying in Australia with that relevant limitation upon 7.32?

MR DONAGHUE: Well, in my submission, yes, in effect. I was not intending to say anything further about it, but in my submission the historical explanation for the approach that the Harmonisation Committee took – and this is addressed in some articles written by Justice Biscoe, which we have not given to the Court, but I could if that would assist your Honour, who, at the time, assisted the Harmonisation Committee in the formulation of this division. But the explanation given for the rule that is now 7.35, was that it was designed to address jurisdictional limitations arising from the Siskina, of the kind that I have identified.

EDELMAN J: Thank you.

MR DONAGHUE: So, perhaps as against the possibility that the Siskina would have been held to limit 7.32, the position is put beyond doubt by 7.35, just removing those requirements. There is also a third requirement from the Siskina, which is dealt with in 7.37, which is the capacity to serve outside Australia where the only connection with Australia is that the assets are here. So, two of them are addressed in 7.35 and the third one is addressed in 7.37.

EDELMAN J: Does the practical effect of that mean though that if the Siskina is not good law ‑ and there may be very real questions about that – that actually some parts of 7.35 are effectively redundant because 7.32 would subsume them?

MR DONAGHUE: Well, if it turns out to be the case that the prevention or frustration or inhibition of the court’s process ‑ for example, the Federal Court’s process ‑ would extend to orders that are made for the purpose of preventing the frustration of a judgment to be given in London, for example, then perhaps what your Honour puts to me is right, but I think it is because of the possibility that protecting steps that will inhibit the process of a foreign court would not have fallen within 7.32 that one has the 7.35 example.

But I accept the possibility that perhaps it could be said if the historical explanation for 7.35 is as I have articulated it, that if the law to which it was responding is wrong, then you did not need the rule. But as that was not clear and one can understand why in this area – and this is a point that was a motivator for the Harmonisation Committee and the associated ‑ not just these harmonised rules but the associated practice notes – because these orders are often sought ex parte and very urgently it is a jurisdiction where people do not often have a long time to think about the complexities of these things and to ask people seeking freezing orders to work out whether the Siskina is good law or not and to argue in an ex parte hearing about whether it is good law or not is a difficult burden to impose upon it. It is better to just make it clear that you can make an order in this situation and that seems to have been what drove the process.

Your Honours, in our submission, if one reads 42, 43 and 47 as setting a necessary legal requirement – and, in our submission, that is the plain meaning of the words that the Full Court has used – then they have imposed a limit upon what has long been emphasised as a broad and flexible jurisdiction arising under section 23 of the Federal Court Act and regulated by the particular rules. But in particular they have imposed requirements to focus on enforcement alone and enforcement in each place where assets might be located of a kind that, in our submission, very substantially narrows the otherwise broad terms of 7.32.

To imply a limit of that kind runs directly into the line of jurisprudence usually associated with Shin Kobe Maru v Empire Shipping which I will not take your Honours to because you are well familiar with it, but that it is just inappropriate to read a provision conferring power on a court by making implications or imposing limitations that are not found in the words. We have given your Honours the reference to that in our oral outline. The Court applied that principle quite recently in the immigration case decided last year: Minister for Home Affairs v DMA18 at paragraph 27 where it was referred to as an “established principle”.

The Full Court here just made no attempt to explain why it was appropriate to limit the power of the apparent breadth of 7.32 in the way that it did, or how it could be said to be clearly or unmistakably the case that a limit of that kind was to be implied.

Your Honours, that takes me, if I may, then to the part of my submissions where I was going to take your Honours to some of the authorities. I propose to start very briefly with two well‑known decisions in this Court.

EDELMAN J: Sorry, Mr Solicitor, just before you move on, why could it not be said that if you are correct that the premise of the expansion in 7.35 was perceived limitations upon a general provision such as 7.32, then the assumption that was being made was that 7.32 might be limited in areas such as in relation to prospective judgment debtors. Why would that then not leave that assumption being given effect to as, effectively, an implication, so that 7.35 could operate on its own terms? It is similar to an Anthony Hordern‑type argument, but it is an argument that is based upon, as I understand your submission to be, to be the premise of 7.35 expanding 7.32.

MR DONAGHUE: Your Honour, in my submission, the particular – the Siskina‑type limits, the two limits that I have identified, neither of them were directly applicable on the facts of this case, because here we were dealing with a situation where the Federal Court had jurisdiction in relation to an Australian tax debt, and it was exercising that jurisdiction and made the freezing order as an interlocutory inter partes order, the relevant freezing order in that context. So it did not need – we were not concerned with a cause of action that had not yet accrued, a prospective cause of action, and we were not concerned with protecting the processes of the foreign court.

In my submission, the fact that that rule and 7.32 in particular respect are not engaged by the facts of this case, does not provide a basis to read it as exhausting the universe of circumstances in which an order under 7.32 might be appropriate. To read it in that way seems to us to leave 7.32 with nothing to do. It has been completely consumed by 7.35, whereas if you understand the relationship between the rules and the way that I have endeavoured to articulate it, both rules have a sensible purpose.

GAGELER J: Mr Solicitor, perhaps part of the argument relies on the definition in rule 7.31 of “freezing order”, which:

has the meaning given by rule 7.32.

In light of that definition, if you then go to rule 7.35(6), what you see is that nothing in rule 7.35:

affects the power of the Court to make a freezing order –

within the meaning of 7.32:

if the Court considers it is in the interests of justice to do so.

MR DONAGHUE: Your Honour, I respectfully embrace that, and that, in my submission, makes the argument that subsection (6) is an answer to the Anthony Hordern argument very difficult to resist, once it is read with that definition. So I entirely adopt what your Honour says.

In relation to the authorities, the two High Court authorities, Jackson v Sterling and Cardile, I go to really to establish what I think are not controversial propositions, so I will not detain your Honours at any length on those judgments. In Jackson v Sterling [1987] HCA 23; (1987) 162 CLR 612, which is in volume 3, tab 7 of the joint book of authorities, the leading judgment was given by Justice Deane, with whom Chief Justice Mason, Justices Wilson and Dawson and Justice Brennan all agreed.

This is obviously a foundational case on the freezing jurisdiction in Australia. I go to it really to make three points. First, at the top of page 623 in Justice Deane’s judgment his Honour, about three or four lines down refers to the relevant power, including power:

restraining a local company from disposing of or dealing with assets which were outside the jurisdiction at least where they had been within the jurisdiction –

and your Honours will see the citation to Ballabil, which is another case I am going to come to in a moment. So his Honour just generally refers to the capacity for a freezing order to apply to extraterritorial assets without any detailed qualifications as to where those assets might be or needing to know where those assets might be or needing to know anything about the enforcement processes that might be available there. Further down on the same page, in terms now reflected in rule 7.32, right in the middle of the page it says:

That general power should, however, 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 –

So no specific reference to enforcement processes; just a general reference to the processes of the court. It is in the balance of that page that one sees the power being grounded in both section 23 of the Federal Court Act and right at the bottom of the page as an incident of the character of the court “as a superior court of law and equity”.

Finally, if your Honours turn forward two pages to 625, again at about point 4 or point 5 of the page, four or five lines into the middle paragraph, Justice Deane refers to freezing orders as – or referring to a possible ground of attack on such orders on the basis that:

they go beyond a mere order for the preservation of assets pending judgment or execution –

So that, in our submission, supports the general idea that the processes of the court include processes with respect to the giving of judgments, not just in relation to execution or enforcement that might follow. Now, obviously none of that is directed specifically to the issues that arise here, but in terms of the foundational principle they are consistent with the way that we put the case.

If your Honours could then turn briefly to Cardile v LED [1999] HCA 18; (1999) 198 CLR 380, which is in volume 3, tab 6, the previous tab in the joint book, here in a joint judgment of four members of the Court - Justices Gaudron, McHugh, Gummow and Callinan – I am just going to make two points from this case. In paragraph 41 of the judgment where there is a discussion of the doctrinal basis of Mareva orders, the Court refers to its recent statement in principle in Patrick Stevedores which is then set out at some length in the passage that follows, including a reference back to Justice Deane’s judgment in Jackson v Sterling in a passage that I have just taken your Honours to. In the sentence leading up to footnote (93) at about point 7 on the page the Mareva order is described as:

the paradigm example of an order to prevent the frustration of a court’s process –

Again not directly limited to – or limited to enforcement processes. The same might be said of paragraph 42.

If your Honours could then go to paragraph 50 there is a discussion again of the doctrinal basis for the orders and, as your Honours know, there was some controversy about that. At one point, Justice Denning, when the Master of the Rolls gave a judgment indicating that, in effect, the Mareva order was an order in rem, that was disapproved in subsequent UK cases, including Mercedes Benz v Leiduck. In paragraph 50 the Court makes plain the Australian position in respect of the foundation of such orders and makes the point, having discussed the – I am looking about seven or eight lines down in paragraph 50:

There are significant differences between an order protective of the court’s process . . . against a party . . . including the efficacy of execution-

So not apparently limited to execution but including execution and orders against third parties and it was the third party limits which were in issue in Cardile, and that is the focus, as we understand it, of 7.34 of the rules that your Honour Justice Gleeson mentioned to me earlier. Then the Court says:

It operates in personam and not as an attachment -

citing Mercedes Benz. So, in Australia, it is clear from Cardile that the freezing order does not operate as an attachment to property, it has no effect on the proprietary interests in the assets to which the order relates. The order operates in personam upon a person who is subject to the jurisdiction of the court. For reasons I will develop perhaps after the adjournment, noting the time, we submit that that points strongly against a limitation of the kind that the Full Court identified.

GAGELER J: Noting the time, Mr Solicitor, we will take the morning adjournment at this stage.

MR DONAGHUE: If the Court pleases.

AT 11.14 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.21 AM:

GAGELER J: Yes, Mr Solicitor.

MR DONAGHUE: Thank you, your Honours. Can I take the Court next, very briefly, to an early case in this line of authority, Ballabil Holdings v Hospital Products Ltd (1985) 1 NSWLR 155. It is in volume 4, tab 10. This case is a couple of years before Jackson v Sterling, and it is the case that Justice Deane mentioned in the first of the passages that I took your Honours to when referring to orders in relation to overseas assets.

The main issue in Ballabil was whether the Supreme Court had power to grant a freezing order in relation to assets which were outside the jurisdiction, in this case where the assets had previously been within the jurisdiction. The court unanimously held that there was such power. Chief Justice Street and Justice of Appeal Glass both did so without engaging in any discussion of where the assets in question were located, let alone whether it would be possible to enforce against them in that particular place. Justice of Appeal Priestley, in his judgment at page 165 F, did, albeit very briefly, deal expressly with that question, and his Honour said:

It follows to my mind that when exercising that jurisdiction against a company incorporated within the jurisdiction, the location of the company’s assets can have no bearing on the extent of the court’s jurisdiction, although it may, as already indicated, affect the court’s discretionary exercise of those powers.

So that was the position from a very early stage in Australia in relation to freezing orders for offshore assets. The most directly relevant case, as we see it, is an English decision, Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65, and if your Honours could go to that next. It is also in volume 4, this time tab 13. Derby v Weldon involved:

an action for damages for breach of contract, negligence, breach of fiduciary duty –

and various other causes of action. The third defendant in that case was a company called Milco, which was a Panamanian company, and the position was that the court was told that Milco had no assets in the UK. At one time in the recent past it had had very substantial assets, and that it now had no assets anywhere, and that is recorded in the judgment on pages 97 and 81F. On those facts, the court at first instance declined to make a freezing order against Milco on the basis that it was said there was no evidence that either a Mareva order or any eventual judgment could be enforced against Milco in Panama, even if it had assets.

So the order was refused on a non‑enforceability basis, or on the basis, rather, that the evidence did not show that the judgment would be enforceable. That decision was overturned by the Court of Appeal for England and Wales in the judgment that I am now taking your Honours to. There were three judgments, although there were substantial levels of agreement between the various members of the court with one another.

If your Honours could start with Lord Donaldson’s judgment at page 81, his Honour makes the point, to which I will return in submissions after I have dealt with these cases, at paragraph B on the page, that:

Courts assume, rightly, that those who are subject to its jurisdiction will obey its orders –

citing In re Liddell’s Settlement Trusts. Then, later on in that page at paragraph F, dealing with Milco – I am sorry, I should, before I do that, just make the point that at the end of paragraph B through to E it is pointed out that a possible sanction, in the context of a grant of a Mareva injunction is that:

in the event of disobedience, the court could bar the defendant’s right to defend -

against a prospective judgment debtor, and that is a point I will come back to as well. But dealing with the particular point I am seeking to make now, and addressing the position of Milco incorporated in Panama, the Vice‑Chancellor had said, at first instance, that:

“there is no evidence before me that either a Mareva order or any eventual judgment can be enforced . . . even if it has any assets.” This involves two considerations–lack of assets and Panamanian enforcement.

Then, dealing with the second of those matters, enforcement, at H on the same page:

So far as enforcement is concerned, I have already indicated that the ordinary sanction of being debarred from defending should suffice, but in any event I think that it is a mistake to spend time considering –

enforcement –

against Panamanian companies in Panama. Whilst that is not perhaps the last forum to be considered in the context of such enforcement, it is certainly not the first. If in due time the plaintiffs are concerned to enforce a judgment against Milco, they will be resorting to the jurisdiction where its assets, if any, happen to be.

It is true that in that passage his Lordship is dealing particularly with the fact that there is no particular reason to think that the Panamanian company will have assets in Panama, because often Panamanian companies do not – they are often based elsewhere. But the more general point that we submit emerges from that is that, not only is it not known whether enforceability would ultimately be possible in Panama, but it is also clearly inconsistent with that reasoning to suggest that you need to know where the assets, the subject of the freezing order are, and whether it is possible to enforce against those assets. Those are questions that arise later, not at the point of the making of a worldwide freezing order.

Further down, on page 82, his Lordship also makes the point that I will develop shortly. Dealing with the effect of freezing orders on third parties – and this is a consideration I will be developing in the context of a submission that it is too narrow a lens to focus just upon enforceability in the particular place where the assets happen to be located – because this part of the judgment identifies a well-known effect of Mareva orders upon third parties who have notice of the order, so, from paragraph F, of course, the:

orders only bind those to whom they are addressed. However, it is a serious contempt of court, punishable as such, for anyone to interfere with or impede the administration of justice. This occurs if someone, knowing of the terms of the court order, assists in the breach of that order by the person to whom it is addressed . . . juridical persons, notably banks, operate across frontiers. A foreign bank may have a branch within the jurisdiction and so be subject to the English courts. An English bank may have branches abroad and be asked by a defendant to take action at such a branch which will constitute a breach by the defendant of the court’s order. Is action by the foreign bank to be regarded as contempt –

et cetera. That was then dealt with, as his Lordship explains, by the introduction of a proviso, called the Babanaft proviso, which limits the terms of the freezing order in the way there described, and which I will come to in a moment. There is an equivalent limit in the order that Justice Jagot made here. The point is that, quite independently of the position – no, sorry, your Honours, I should not jump ahead. I just wanted to note that paragraph in the judgment and I will make my submission about it shortly.

Could I take your Honours then to the next judgment, that of Lord Justice Neill with whom Lord Justice Butler‑Sloss agreed, at page 92 of the report, where there are some citations of authorities broadly to the effect that one:

ought not to limit or restrict [the general] discretion by laying down rules within which alone the discretion is to be exercised –

That is the sort of fettering point, contrary to the approach that the Federal Court took in this case. On page 93 at paragraph F it said – there is a number 6 in the left‑hand column:

It seems to me that the time has come to state unequivocally that in an appropriate case the court has power to grant an interlocutory injunction even on a worldwide basis against any person who is properly before the court, so as to prevent that person by the transfer of his property frustrating a future judgment of the court.

So that is emphasising the in personam character of the order finding the person in respect of all their assets anywhere and plainly not limited by reference to questions of enforcement. On the top of the next page, 94, at paragraph A:

no reason in principle to reject the existence of the jurisdiction to grant a Mareva injunction in these cases or why fetters should be placed –

upon it. At 95D, over the page, dealing specifically with the enforceability question:

It was argued on behalf of C.M.I. that one of the strongest reasons against the grant of worldwide Mareva injunctions was the difficulty of enforcement.

His Lordship directly adopts Lord Donaldson’s reasoning on that point, to which I have already taken your Honours. Finally, in the judgment of Lord Justice Butler‑Sloss at page 97, and again about E on the page dealing with the position of Milco, the Panamanian company. The Vice‑Chancellor’s reasoning for refusing to grant the freezing order is set out at G and then it said:

I, for my part, would prefer to turn the proposition round. Although Milco is registered in Panama there is no evidence of assets held in Panama. On the contrary, the assets at one time held by Milco were likely to have been held elsewhere. If there are assets there [it] is at present no evidence that the order would be unenforceable and the granting of an order for a receiver may greatly assist in understanding the position of Milco . . . To make or refuse to make the order against Milco is a matter of discretion, not of jurisdiction.

So, in our submission, all three members of the court in Derby v Weldon (Nos 3 & 4) held that there was power to make a freezing order, a worldwide freezing order, notwithstanding the fact that there was no evidence as to whether there were assets or where those assets were located, overturning a judgment to the contrary that requires there to be evidence of enforceability.

GAGELER J: Mr Solicitor, I note that Lord Justice Neill at page 92, letter G, made the point that has become even more prominent since 1990 that:

The transfer of funds from one jurisdiction to another grows ever more speedy and the methods of transfer more sophisticated.

If you are looking at an amount standing to a credit balance in a bank account, in the blink of an eye that can be in three or four jurisdictions.

MR DONAGHUE: Precisely, your Honour. To hold that on an urgent ex parte application, the tax office or someone else needs to anticipate all of the places the money could be moved and to lead evidence of enforceability in all of them is an impossible task, and that is part of the submission Mr Lloyd is going to develop. But we entirely embrace that.

The Derby v Weldon reasoning was endorsed by a differently constituted Court of Appeal a few years later in another Derby v Weldon Case, Derby v Weldon (No 6), and this is the last case I want to take your Honours to, and there is really only one key passage which is at 1149. Sorry, Derby v Weldon (No 6) [1990] 1 WLR 1139 is in volume 4, tab 14. There, Lord Justice Dillon, with whom the other members of the court relevantly agreed, said, at paragraph E, on the page:

The jurisdiction of the court to grant a Mareva injunction against a person depends not on territorial jurisdiction of the English court over assets within its jurisdiction, but on the unlimited jurisdiction of the English court in personam against any person, whether an individual or a corporation, who is, under English procedure, properly made a party to proceedings pending before the English court.

Then there is a quote from Derby v Weldon (Nos 3 & 4) upon which we rely. That, we submit, is an accurate statement of the position. There are two basic points that I seek to make arising out of those authorities, before passing over to Mr Lloyd. The first is that that point made there by Lord Justice Dillon and in a number of the other authorities to which I have taken your Honours, that the power to make a freezing order is an in personam order deriving from the fact that the court has authority over a person properly made a party to its proceedings, is clearly part of Australian law, reflected in Cardile, and points against the proposition that there is some limit on the power to make the order derived by reference to considerations of enforceability against assets in any particular place.

Once the respondent was validly served, pursuant to the orders I took your Honours to, that Justice Katzmann made, and which was put beyond any doubt by his submission to jurisdiction, Justice Jagot had jurisdiction to make freezing orders on him that were binding in personam on his global assets, notwithstanding his location. It does not matter where he was, he was validly the subject of the jurisdiction from the court.

The point was well put in a judgment that your Honours do not have, which was approved in Mercedes Benz at page 300, where it was said that the point of an order operating in personam is “to prohibit the owner from doing certain things in relation to the asset”. That prohibition arises from the court order irrespective of where the asset is. The court does not need to know where the assets are in order for such an order properly to be made.

If one tests the point by a counterfactual and leaves all the facts the same as they are in this case, in terms of the respondent having moved very considerable assets, tens of millions of dollars offshore, to Hong Kong, and the PRC, and changes only this fact that the applicant stays in Australia – sorry, that the respondent stays in Australia, any question of the enforceability against assets located in Honk Kong and China would be exactly the same - unchanged. But the proposition that the Federal Court would not have power to make a freezing order in respect of the respondent and his global assets when he is here, in Australia, and obviously subject to the contempt powers of the Federal Court, in my submission, cannot be right.

In that situation it would be - the potential efficacy of the order would be much clearer because in the event that the respondent was here, and there was evidence that he was dealing with his assets in Hong Kong or China by moving them to other places or dissipating them or dealing with them in any other way contrary to the order, it would be obvious that he would be exposed to very real and concrete contempt sanctions for acting in that way.

But as a matter of principle, once it is recognised that he was validly served, properly the subject of the Federal Court’s jurisdiction, the practicality at the present time of enforcing contempt sanctions against him, as a matter of principle, should make no difference to the question of whether there was power to make the freezing order in the terms that it was made. So that is the first point from the authorities.

The second point is that the court’s process should not properly be understood as being limited to its enforcement processes, because there are a variety of ways in which a validly made freezing order might seek to reduce the risk – seek to address the danger, rather, to use the language of 7.32, seek to meet the danger that a judgment will not be satisfied quite independently of enforcement. I would identify three.

First, the freezing order might seek to meet that danger simply by reason of the fact that the order might be obeyed by a person who is subject to the jurisdiction of the court. It is one thing to acknowledge that at a time when no freezing order is in place, that a person in the position of the respondent might move his assets outside of Australia. He was entitled to do that. There was no legal obligation upon him that prevented him from doing that at that point. But it is quite a different thing to say that once a freezing order has been made by a person subject to the jurisdiction of the court, that it should be assumed that that order would be ignored unless that order can actually be enforced by the imposition of contempt sanctions.

GORDON J: Mr Solicitor, picking up Justice Gageler’s point, the flipside of the ability to move funds around the world very quickly, electronically, is also met by the fact that, of course, financing around the world may also be dependent upon having the freezing order lifted in order for the man or person to continue to do business.

MR DONAGHUE: Well, indeed. So, the existence of the order, even if not enforceable in Hong Kong law or the People’s Republic of China – that was one of the next points I was going to come to - might seek to meet the danger in the way that your Honour Justice Gordon identified. But before developing that point - and I noted the reference to Liddell’s Settlement in Lord Donaldson’s judgment in Derby v Weldon (Nos 3 & 4), that courts are not in the habit of considering whether or not to make an order to contemplate the possibility that the order will not be obeyed.

That observation - quite to the contrary, ordinarily, the court will not refuse to make an order out of fear that the defendant will not obey it. That is a point that has been made on a number of occasions in the authorities including by the House of Lords in a case your Honours do not have. I will give you the citation - Castanho v Brown & Root (UK) Ltd [1981] AC 557 at 574, where Lord Scarman adopted an earlier observation to that effect by Lord Justice Romer.

So, first, the order might be complied with by the respondent who is bound by it, and that does not depend on enforcement. Second, as was mentioned in Derby v Weldon, where the order is made in respect of a prospective judgment creditor, as it was here, by Justice Jagot, non‑compliance with the order can attract consequences in Australia, including the court refusing to hear the respondent further in the litigation, or preventing a respondent from continuing to defend the action. So, they are consequences that an order might have, ways that an order might seek to meet the danger that the judgment will not be satisfied, that do not depend on foreign enforcement processes, as Lord Donaldson explained in Derby v Weldon.

Third, and again this point was foreshadowed in Derby v Weldon, and quite independently of foreign enforcement processes, and I think this picks up Justice Gordon’s point, when a freezing order is made, one thing that is very commonly done is for the person who obtains the order to notify any banks where it was thought that funds might be located of the existence of the order, the purpose of that notification being to fix them with knowledge and therefore to potentially expose them to the reach of the contempt consequences if they facilitate action in breach of those orders.

In practical terms, because of the integrated nature of global finance and because it is a difficult position in which to place a global bank to have it subject to an order of an Australian – a global bank that has a presence in Australia and so is subject to the jurisdiction of Australian courts, but may also be subject to the law of the other jurisdictions in which it is operating, that tension has caused the courts to formulate various provisos on the orders that limit their effect on foreign banks.

Your Honours will see a version of that kind of order in the orders that Justice Jagot made here, if you go to page 22 of the appeal book and look at orders 16 and 17. You will see the Australian version of what in England would be called the Babanaft proviso in relation to 16 and the Baltic proviso in relation to 17.

They are both orders that limit – they are premised on the possible effects of the order on a person who has knowledge of it, the effect of the order on a third party such as a bank who has knowledge of it, and they limit the circumstances in which that contempt sanction might arise by limiting the effect of the order. So, for example, in 16(b):

any person (including a bank . . . who:

• (A) is subject to the jurisdiction of this Court, and

• (B) has been given written notice of this order, or has actual knowledge . . . and

• (C) is able to prevent or impede acts or omissions outside Australia –

So there are ways that the court chooses in the exercise of its jurisdiction to limit the effect, and 17 contains an even more considerable limitation. But our point is that as a matter of power the premise is that a worldwide freezing order might seek to meet the danger, not only through the mechanism of an enforcement proceeding in the place where assets are located, but also because of the effects that the order might have on third parties.

It is for the court then to fashion appropriate limitations upon that, as it has done in the course of orders 16 and 17. But it is not right to say, as the Full Court’s judgment would have it, that unless you can tick the particular box of showing enforceability against the assets in the place where the assets are, that that is it; the order cannot seek to address the danger that is required in order to enliven the power in 7.32.

So, in our submission, for those reasons the Full Court’s proposition that there needs to be – that it is necessary to prove a realistic possibility of enforcement against the assets of the defendant in the place where the order applies, that being what the court said at 43 and 47, is wrong for four reasons: it imposes an unwarranted limitation on the power of a superior court, implied limitation on the power of a superior court, contrary to the Shin Kobe Maru‑type principle; it is inconsistent with principle because it does not take account of the in personam character of freezing orders; it is not supported by Australian authority and is inconsistent with UK authority, in particular the Derby v Weldon Cases; and finally for the reasons that Mr Lloyd is about to develop, having regard to the points your Honours Justice Gageler and Gordon have made, it will present substantial, perhaps insuperable obstacles to the effectiveness of freezing orders. Unless the Court has any questions, those are my submissions, and I would ask your Honours to hear now from Mr Lloyd.

GAGELER J: Thank you, Mr Solicitor. Mr Lloyd.

MR LLOYD: Thank you, your Honour. The Full Court’s construction gives rise to at least three significant practical difficulties in making freezing orders with respect to foreign assets. The unreasonableness of the consequences that follow from a particular construction is a legitimate reason to doubt that construction if another is available.

The first practical difficulty we rely upon is that the applicants for freezing orders will often have only a limited understanding of the location of the respondent’s assets outside of Australia. This is because they will often have been unable to follow the flow of funds or the transfer of assets once they leave Australia.

This information problem is one reason freezing orders are accompanied by, or at least often accompanied by, ancillary orders of the kind mentioned in rule 7.33(2)(a), which is on page 10 of the book of authorities. That is, we say, the Federal Court Rules themselves recognise that applicants of freezing orders may need to elicit – I think it is the language:

eliciting information relating to assets relevant to the freezing order –

One consequence of the respondent’s argument that seeks to preclude the making of a worldwide freezing order, absent advanced proof of a real possibility of enforcement against assets, is that there would be no scope to make ancillary orders requiring the provision of information about assets in countries where such proof is not quickly available before a freezing order application can be made.

Now, one sees that in the current case – in the core appeal book on page 55 one sees the grounds of appeal that were relied upon by Mr Huang in the court below, and the second of those grounds attacks the ancillary order and the form of the order that was being attacked can be seen on page 54 in paragraph 6, order 8(b). So a consequence of the argument is – and if you need to be able to prove enforceability and if you cannot prove enforceability you cannot get a freezing order in relation to that country then you also cannot get information about the assets in that country which you might need to, on their view, prove a freezing order.

The consequential reinforcement of the information symmetry, or asymmetry rather, only serves to highlight the problem with any consideration of enforceability that precludes the making of a worldwide freezing order. An ancillary order resulting in the identification of where assets are located might disclose assets in a place where the judgment turns out to be enforceable by one means or another. It may likewise disclose assets that can be the subject of equitable execution mechanisms, to which I will return a bit later in my submissions.

We say the Full Court’s jurisdictional prerequisite approach rules that out. Now, the importance of these ancillary orders has been recognised in a number of places, but I will just give the Court one reference. It is not in a case before the Court, but the case is Crédit Suisse Fides Trust SA v Cuoghi [1998] QB 818 at the bottom of 827 over to 828. Lord Justice Millett, with whom Lord Justice Potter and Lord Bingham agreed, emphasised that:

it is the disclosure order which is the most valuable part of the relief –

and so we say that a restrictive approach to making freezing orders prevents access to information that might likewise assist in preventing the frustration of the court’s process which is, of course, the purpose of the division.

This is a reason we say not to adopt the respondent’s construction. Further, applications for freezing orders are frequently urgent, meaning applicants will often not have sufficient time to pursue investigations into the enforcement matters if the order is to be obtained before assets are dissipated.

If the applicants do not know where assets are located, or what kind of assets are held, it would follow that they will not be able to demonstrate that there is a real possibility of enforcement against assets in that place. In that way, the Full Court’s hurdle is one that cannot be cleared. It would thus defeat the purpose of freezing orders if the inevitable information imbalance between the parties were an effective barrier to making or seeking such orders. This is because assets could be dissipated or moved during the delay caused by trying to obtain the evidence to satisfy the Full Court’s test.

The second significant practical consequence is that, even if the applicant does know where assets are located, imposing a requirement to identify and prove the content of foreign law, and the existence of available mechanisms to enforce an Australian judgment in every overseas jurisdiction where assets may be located, places a heavy burden on an applicant.

The Full Court’s approach may well mean that, even if there are in fact enforcement mechanisms available, a freezing order is refused because they cannot be identified and proved at the time the order is sought, or before the assets are removed or dissipated.

Then the third significant practical consequence is that, even if the applicant were able to provide sufficient evidence of the location of the respondent’s assets, and a realistic possibility of enforcement in the relevant jurisdiction – or jurisdictions – the Full Court’s test will prevent the making of a worldwide freezing order. Instead, it would require that such an order be limited to the particular jurisdictions in relation to which the requisite test has been satisfied. That creates a potential for well‑resourced respondents to move assets surreptitiously to jurisdictions not covered by the order, further complicating enforcement efforts.

Together, these considerations point to the improbability that rule 7.32 should be read as limiting the power to making a freezing order in the manner articulated by the Full Court. The proper approach is to focus exclusively on the express requirement stated in rule 7.32, providing an order seeks “to meet a danger that a judgment” will remain “wholly or partly unsatisfied” it can be made.

These practical consequences gain additional weight when one has regard to the various types of court process that may ultimately be sought to be relied upon by a judgment creditor. In our written submissions in‑chief, at paragraphs 47 to 49, we refer to three kinds of process that could be relied upon.

Now, let me be clear. I am not here contending that the Full Court erred in failing to find, on the evidence before the Full Court, that there was a real possibility of enforcement using these processes. Our point is a different one, and it is that the nature of the processes suggests that it is improbable that proof of a realistic possibility of enforcement at the time of making an ex parte application for a freezing order is to be implied as a jurisdictional prohibition or otherwise. This is because the availability of enforcement mechanisms will only be.....later in litigation, or after judgment, or after a full examination of the judgment debtor’s affairs.

Now, just briefly mentioning three..... The first one, as we mentioned, is that steps could be taken in a court under the Bankruptcy Act. That Act envisages a sequestration order may be made against the estate of the debtor where, at the time of the act of bankruptcy, the person:

was carrying on business in Australia, either personally or by means of an agent –

It will often not be known, when a freezing order is sought, whether that kind of process could be engaged. Requiring the real possibility standard to be met at such an early stage operates to prevent freezing orders being made when they could serve to prevent the frustration of that kind of court process.

Similarly, at paragraph 48, we refer to the possibility of applying for an order akin to that in section 37A of the Conveyancing Act 1919. That provision is available if a debtor has moved assets offshore with an intent to defraud creditors. Evidence of this may not be available when an ex parte application for a freezing order is made. Again, requiring the real possibility test to be complied with operates to prevent the freezing orders being made that would facilitate reliance on that kind of remedy.

Then lastly, at paragraph 49, we turn to address what has been sometimes referred to as equitable execution. It concerns the jurisdiction of certain courts, including the Federal Court, to grant equitable relief in the aid of an enforcement of a judgment. The jurisdiction to grant equitable relief in aid of enforcement includes the power to appoint a receiver. The circumstances in which a receiver may be appointed were outlined by Justice Emmett in a case called Caird Seven Pty Ltd v Attia. It is in volume 4 of the book of authorities beginning on page 212, and the relevant passage is at page 217, paragraph 16. His Honour said:

A court of equity may, in certain circumstances, appoint a receiver in aid of a money judgment, but only where legal remedies are insufficient. Where property of a judgment debtor is not capable of being reached by a common law process, a court exercising equitable jurisdiction may intervene . . . Even in the case of a money judgment, it may be that a receiver will be appointed to legal property on the application of a judgment creditor if it can be shown that, because of special circumstances, other methods of execution would be inadequate or extremely inconvenient.

Now, in the Federal Court, the Federal Court has power to appoint receivers - that is section 57(1) of the Federal Court Act. I will not take the Court to it, but it is in volume 1, tab 4, at page 27.

Could I take the Court to a decision of Gujarat – this is in volume 4, tab 15, page 290 – where the Full Court of the Federal Court discussed that jurisdiction. The relevant passage is on page 309 in paragraph [75]:

The primary judge correctly identified the guiding principle in the appointment of receivers in aid of enforcement: what is just and convenient in all the circumstances of the case. As he said –

So that is obviously a very flexible test for what is a very flexible remedy and the core of the remedy or the ability to mould it is noted in paragraph [76], so it can be moulded to protect the judgment creditor’s, and I quote:

“legitimate entitlement to practical enforcement of its monetary judgment and order for costs”.

The court’s power to appoint a receiver may extend, at least in some circumstances, to foreign assets in jurisdictions where legal execution is unavailable. In this respect, we refer the court to the decision in Masri v Consolidated Contractors International. It is in the same volume over the page; page 311 it starts.

Briefly what that case was about, a claimant obtained a judgment in an English proceeding against a number of defendants, including two companies, one called CC (Oil and Gas), and the other is CC International. CC (Oil and Gas) and CC International were both incorporated in Lebanon. CC (Oil and Gas) was domiciled in Greece. CC (Oil and Gas) had a 10 per cent interest in an oil concession in Yemen. I will not take the Court to it, but those propositions can all be substantiated in paragraphs 3, 5, 14 and 74 of the judgment. Then paragraph 12 refers to Justice Gloster at first instance. Her Honour:

appointed a receiver in relation to CCOG’s interest in revenues from the [Yemeni oil] concession, and made a freezing order restraining CCOG from disposing of its interest in the concession and from selling oil from the concession area otherwise than in the ordinary course of business.

Then the order appointing the receiver provided that he was entitled to – this is in paragraphs 20 and 22 – due to CC (Oil and Gas) – bring actions in CC (Oil and Gas)’s name or in the receiver’s own name to collect the relevant oil revenues and in the case of foreign proceedings that entitlement to bring actions was subject to the defendant in the relevant proceedings accepting the receiver’s title to sue or the title being recognised by the foreign court.

Now, in that context, Lord Justice Lawrence Collins, with whom Lord Neuberger and Lord Justice Ward agreed, addressed this presently relevant matter at paragraph 53 on page 332 of the book:

The authorities bear out the proposition, important in this case, that the appointment does not have a proprietary effect. It has effect as an injunction restraining the judgment debtor from receiving any part of the property which it covers, if that property is not already in his possession, but it does not vest the property in the receiver . . . “It operates as an injunction restraining the defendant from getting in money which the receiver is appointed to receive.”

Then at paragraph 58:

These authorities show clearly that the order has no proprietary effect and acts in personam.

Now, we say that because the order has no proprietary effect and acts in personam, it does not depend for its efficacy upon recognition by a foreign court. Depending upon the nature of the income or asset, a receiver may succeed in recovering funds without necessarily invoking any specific curial procedure in a foreign State. The efficacy of the order may depend on the acts that the judgment debtor may be compelled to do, or restrained from doing, so as to assist the receiver.

Whether that is so, in a particular case, may depend upon the terms and conditions upon which the receiver is appointed, and the terms of any consequential relief. As the authorities to which we have taken the Court make clear, a receiver may be appointed where legal remedies are insufficient.

Now, if the reasoning of the Full Court in this case is correct, then an applicant, before seeking a freezing order, may be required to do these three things. First, you have to work out whether the assets of the – sorry, where the assets of the respondent are and whether any mechanism for legal execution of the judgment is likely to be available and, secondly, if not likely to be available, then consider whether a receivership remedy or other form of equitable relief in aid of enforcement would therefore be available, and whether it may be appropriate, and then thirdly, provide sufficient evidence that there is a realistic possibility of equitable relief in aid of enforcement.

By the time the necessary inquiries are made, a respondent will have, at least in many cases, had considerable opportunities to dissipate his or her assets. That increases the danger that a judgment debt will be unsatisfied, thus frustrating the court’s process. The increased likelihood of that outcome and these further impracticalities that arise from the Full Court’s construction of rule 7.32 provide additional reasons to reject that construction. The court’s process, spoken of in 7.32, includes not only legal forms of execution, but also equitable remedies available in aid of enforcement.

That process is frustrated or impeded if assets are dealt with in a manner that seeks to put them beyond the reach of such equitable remedies. Similarly, the danger spoken of in 7.32 includes a danger that equitable remedies in aid of enforcement of prospective judgments will be wholly or partly defeated. Such a danger may exist where a prospective equitable order in aid of enforcement might be rendered less effective in the absence of a freezing order. We say the Full Court’s restrictive and inflexible interpretation of Division 7.4 pays no regard to these prospective equitable remedies.

Now, I accept, and we note that in the respondent’s submissions they say that the question of equitable relief in aid of enforcement should not be entertained in this Court. We are not seeking to establish that there was a real possibility of such relief established on the evidence in this case. Our point is that in construing the legislation it has to be construed in light of the nature of equitable relief, and when one has regard to the nature of that relief it is strongly suggested that the Full Court’s real possibility test at the time of making an ex parte application is not the test.

Our reliance upon the nature of equitable execution processes does not ask the Court to make any new findings of fact. It is something the Court should consider just as a matter of construction and, further, it falls readily within the existing grant of special leave which is set out on page 129 of the core appeal book, and we say that there is no difficulty in
the Court having regard to it and there can be no prejudice in having regard to what is ultimately just a legal argument of construction.

May it please the Court, they are my submissions on behalf of the Commissioner.

GAGELER J: Thank you, Mr Lloyd. Mr Walker.

MR WALKER: May it please your Honours. It is our submission that the issues presented to the Court are properly framed by an understanding of the amplitude of the power stemming from section 23, the power, if it be different, implied in the status of the Court, and the prescriptions laid down in Division 7.4 of the Court’s rules. Common to all of those, as it happens, and as one would expect from the nature of things, is the concern for the interests of justice explicitly reproduced in 7.35(6), but of course intrinsically recognised by the “nothing diminishes” provisions of 7.36.

It ought to be clear from the history leading up to this hearing that the Deputy Commissioner invoked a power regulated by the rules and neither below nor properly understood here is the Deputy Commissioner taking a position that the appeal should be allowed, not because the Full Court erred in its dealing with any argument presented by the Deputy Commissioner but because there could have been but was not presented an argument below to the effect that the general “jurisdiction”, to use the word with which 7.36 is entitled, extends in a way that perceptively goes further than would be possible under the rules invoked.

In particular, of course, as we understand it, the Deputy Commissioner does not say, self‑defeatingly, with respect to the administration of justice, that such a power can extend beyond that which is appropriate in the interests of justice. That is why we start with that description of the justification and source of these powers, whether they come from implication, perhaps formally understood as inherent to the court, whether it comes from statute or from rules. They are all pulling in the same direction and guided by the same inspiration.

Your Honours, it follows that it would be going a long way to say the rules made by judges, as it happens in this particular instance under the aegis of the Council of Chief Justices’ Rules Harmonisation Committee, and in particular, against the background of both the scholarly and judicial debate about supposed limits à la the Siskina, it would be going far too far to suggest that the rules are not a particularly useful, a particularly evocative, source of understanding of what the court should appreciate as being in the interests of justice.

We go this far, that on the interpretation of the rules with respect to this power, to be seen in the Full Court below, the rules plainly do advance the interests of justice and were recognising the balance of sharply conflicting interests, which is true of all such relief. That sharply conflicting interest, including, with respect to the liberty of dealing with property lawfully is, of course, a constant accompaniment, as my learned friends have fairly drawn attention to by their selection of dicta, to the evolution of the judicial understanding in the last several decades in this country of the power itself.

Now, your Honours, in relation to that setting, namely the freedom to deal with property lawfully, the self‑evident significance of that as a concern, explicitly for the administration of justice, does not need to be laboured. But lest there by any misunderstanding by reason of the hypotheticals raised concern surreptitious and, supposedly even worse, instantaneous transfers of property, including choses in actions.....it needs to be understood that at least in this country the bringing in of capital from overseas, the derivation of profits, if fortunate, from that capital here, and then the repatriation of some or all of the investment and its returns, is really the history of this country since settlement, and that it would be a bizarre proposition that there was something a priori suspicious about a person moving assets from Australia, particularly when the person is someone who has brought assets to Australia.

When one adds the detail – factually found in this case – that our client lacks a visa to be present in Australia, then the matter becomes all the more unavailable as what I will call a pervading suspicious circumstance that ought to have informed.....Full Court below.

Now, that is not to say it may have, between the lines – in a way I am not intent on pursuing – informed first instance decisions, in this case. But it needs to be exposed in order to be enlisted for the arguments to which we are going to come concerning – to use an old-fashioned expression – the onus and burden of proof, not only of factual matters but of that persuasion to what is ultimately a discretionary order, which is in question here.

Your Honours appreciate from the way in which the Full Court dealt with such an argument below that it could be still here a difference between the parties as to whether the Full Court was entertaining – and entertaining only a House v The King argument concerning the exercise of a discretionary power, or whether there was something logically anterior to that – which is how we argued it below. Whether or not one uses the rhetorical construct of jurisdictional fact or not – or uses perhaps less‑weighted expressions such as “prerequisite” or “condition” – there is no escaping – and we do not seek to escape – that their Honours below proposed that the proper understanding of the rules which were in question before their Honours involve the application of what they call a test.

It was an application of matters which might inform both the judicial decision that the discretion was available to be exercised, what might be called the jurisdictional fact or prerequisite or condition, as well as the appropriateness of exercising it as sought or in any particular way – the true discretionary matter to which the well‑known strictures in House v The King would have applied.

House v The King does not seem to have played any real role in the argument, at least as presented in address to your Honours, and I do not wish to linger on it. It suffices to say that one cannot read either the case law, which specifically addresses what I will call the implied and, by extension, the statutory power to grant such orders, but most of all, one cannot read the rules without appreciating that in all cases, something in the nature of a foundation giving rise to the availability of the discretionary power has to be made out by the parties seeking the court to exercise such drastic power.

It need hardly be stressed, and the judicial tradition concerning these orders is plain in this regard, that an ever‑present consideration is concerning the drastic nature of the relief. It is not attachment, it is not execution in advance, it is not sequestration de bene esse. Even the receivership, to which I will come a deal later, under the heading of “Equitable execution”, is not any of those things. That is true, even when the debt is no longer prospective, but there is a judgment pursuant to which it exists, as eventually turned out to be the case here.

GAGELER J: Mr Walker, I do not want to take you out of the course of your argument at all, but just so I have a sense of where it is going, is the proposition in the last sentence of your paragraph 6 of your outline of submissions pivotal to your argument?

MR WALKER: It is not essential, but I do not wish to downplay it either. We seek to read Division 7.4 altogether, including in the context on which I opened, section 23, obviously, and the implied power, and read – I think our learned friend put it contextually and we urge that that is obviously correct – the relation of 7.32 to 7.35 has, in our submission, not achieved a proper consideration in the argument against us.

Now, may I – and this is only slightly out of order but in a way that suits me, with respect – remind the Court that the power which is given by familiar words, “The Court may make an order”, in 7.32 was obviously not a novel power. By then it was established that even without 7.32 there would be an order that could fairly have been thus described verbatim as in the rule but pursuant to the either implied power or section 23.

The understanding then that 7.32 is not what might be called a primary and constitutive provision is very important. The same words, of course, precede 7.33 “The Court may make an order”. That also was not creating something.....to exist. Rule 7.34, by the time these rules were made, that was no longer a stranger to jurisprudence. Then 7.35 orders matters in ways that start distinctly differently expressed, that is in sub‑rule (1), and those words with which sub‑rule (1) of 7.35 commence are, in our submission, an unavoidable part of reading 7.32 contextually.

If it be Anthony Hordern, so be it. If it be a contextual reading, the same consequences, we say, ought to be seen as following. The familiar, now‑familiar drafting technique of commencing a provision by describing the cases to which it applies is, in our submission, close to intractable when it comes to asking the question, does 7.35 have anything to do with a case that falls within its terms, because the terms of the rule answer that question, and render it quite unnecessary to pose. The answer is yes.

Is 7.35 inconsistent with 7.32? No, but one can enlist reasoning that could bear the badge “Anthony Hordern” in order to repel an argument that, properly understood, 7.32 is free of those matters which manifestly, in the interests of justice, are stipulated by the detailed provisions of 7.35. Now, in 7.35 itself, one then sees, after the further provisions of sub‑rules (2) and (3), describing cases to which particular sub‑rules apply, one then comes to sub‑rule (4) with the familiar language appearing to give, but probably not creating as a novelty, the power to:

make a freezing order or an ancillary order –

in certain circumstances, to which of course I am coming back. The relation, obviously, of 7.35 to all of the other rules in the division, but particularly 7.32, is affected by – fundamentally affected by – the proper understanding of sub‑rule (6) of 7.35. I have already set out what, in our submission, is the proper reading of that, namely that the interests of justice are scarcely a competing or rival set of considerations standing apart from those which have been stipulated in the previous provisions of 7.35.

There is nothing inappropriate in reading 7.35 as plainly, and, with respect, earnestly, being addressed to the striking of the balance of these strongly opposed interests in such a case, in the interests of justice. It is for those reasons that it is a moot question before this Bench, in this hearing, as to whether there is what I will call a source of power, or, perhaps more correctly, a freedom from restraint that might be seen otherwise from a proper reading of 7.32 and 7.35, which would have been, had it been raised, available to the Deputy Commissioner, when seeking initially ex parte, then inter partes, the orders that were made, because, so such a moot argument would have had it – and I am hypothesising – the interests of justice extend to permitting such orders to be made without what I will call the showings of 7.32 and 7.35, most notably in our case, obviously required.

By “the showings”, I mean that the applicant for the relief must show to the extent necessarily factually by discharging the onus appropriately, which may only be to show the existence – as we contend – of a realistic possibility of certain things – and obviously to bear the ultimate burden of persuasion.

Why I labour the point is that one thing is clear, it would be contrary to what one sees from judicial utterances about this drastic power at various times and places. It would certainly be contrary surely to a proper and purposive reading of section 23 in all its generality and it is obviously at odds with the provisions of 7.4 to see the interests of justice as served by dispensing an applicant from showing anything, except its desire to obtain an order.

Can I come back then - as we have pointed out, and I do not need to develop further than we have put it in our written submissions – properly read, the Full Court was proposing by its use of the word “test” a matter which did not gloss, let alone inflict an inappropriate implication on the terms of the rules but rather, in the circumstances of this case, recognised that the facts of such a case – and this may be a typical case, we accept – will not justify the making of such an order unless matters have been shown which, in the articulation of them in the rules, entirely unsatisfactorily reflects the way in which the juristic principle can be seen in the case law with which your Honours are very familiar.

So whether one uses the epithet “protective” or “preventive” does not much matter. These are powers to be found in the general provisions of section 23 to be implied from the nature of the superior court’s existing status and substantive jurisdiction for, self‑evidently, the purposes of protecting the processes, maybe the integrity and standing of the court – they are interrelated concepts – and in particular to protect in the instant litigation in which an application is made that which is always the functional purpose of the administration of justice – that is, to right wrongs by writing appropriate remedies according to law.

Where a money judgment, as in an assessment of tax due, is in question, then after judgment obviously the processes include those processes which might be called, in general terms, enforcements including execution of the Court’s judgment.

Now, those are matters which themselves are various, and may be staged. That does not introduce any question of principle at all. It affects the understanding of the rule, or the general statutory or implied power. For example, the enforcement of judgments in foreign jurisdictions is, pace what my learned friend, Mr Lloyd, has said, scarcely something to which the Attorney‑General’s Department, or the Australian Government Solicitors are strangers, intellectually or procedurally.

These are matters which are part and parcel of lawyering in relation to international commerce and international dealings, whether they are transactions between private entities or persons, or whether they are the purchase of a warship. One way or the other, there can be no escaping the fact that whether a judgment of an Australian court is worthwhile, is worth having, as for a very long time, dependent upon the availability of assets and the enforceability of the will of the Australian court in a place out of Australia, hence, of course, that which naturally the Commonwealth is on top of more than anyone else, the web – I do not mean tangled, the network, I perhaps should have said, of treaties and mutual legislation across oceans for the recognition and enforcement of certain kinds of judgments on certain terms.

None of that is strange or exotic, or beyond the wit of the plaintiff’s lawyers to have, probably on the shelf, everything they need in regard to it. So, we come back to that which is not moot, and that is the relief that was claimed and given at first instance under Division 7.4, and plainly as your Honours have seen, has 7.32 to the forefront, 7.35 being raised as an extra, so to speak, by our friends in the court below.

Could I start in relation to the text of the rules, given the way my learned friend the Solicitor has developed those points. Could I start by drawing to attention similarities, or even identities. 7.32, which, as our learned friend fairly says, explicitly involves a purpose, describes the purpose in terms which are very familiar from the case law, namely preventing the frustration or inhibition of the court’s process.

I note by interpolation that I will return to the oft‑repeated proposition of our friends, that it is somehow significant for today’s issues that those processes are not in 7.32 confined, whatever that means, to so‑called enforcement processes. We will come back to that point; it is a separate matter.

The order within the power regulated by 7.32(1) thus is described as one that has that purpose. The purpose is not left as generally expressed as preventing the frustration or inhibition of the court’s process. It goes on to stipulate in an area where, notoriously, there are sharply conflicting interests to be observed by saying that that purpose is to be achieved by – that preposition is important:

by seeking to meet a danger –

We entirely accept without demur our learned friend’s correct point that the successful achievement is not a test of the availability of the power to seek to achieve the outcome. Of course, that is right.

So that which the order may do for the stipulated purpose is seeking to meet a danger – and we entirely agree with our learned friend’s argument which does not seem really to differ from the way the Full Court construed this – that a danger is certainly not a risk that which is of an outcome more likely than not to occur according to the rather bold factual prediction of the court. But, rather, in a very familiar way, a danger can be held to exist, although the perceived odds of it materialising might really be quite low. Shirt’s Case is an obvious.....an understanding of that obvious aspect of giving when you wish to enjoy a future is in question.

The danger is then described in terms which you can compare, for their identity, with the corresponding phrase found in 7.35(4). It is in both provisions:

a danger that a judgment or prospective judgment will be wholly or partly unsatisfied –

That is why, one way or the other, and taking into account the various expedients that may become available from time to time, and face to face, and even place to place when you are talking about other jurisdictions, everything is concerned with what is the ultimate achievement of the administration of justice, in a case which seeks a remedy for a wrong, namely, the granting of relief which is actually enjoyed by the parties seeking, hence the expression “unsatisfied”. And of course it is true that judgments can be satisfied otherwise than by enforcement.

Most commercial litigators have the experience that enforcement is rarely necessary. It is for those reasons that the repeated insistence that the word “process” is not qualified by limiting it to procedures which inform or in terms can be seen as enforcement procedures, goes nowhere in understanding the purposive, and then, connectedly, the causative concepts that inform 7.32 and 7.35 equally. Is that a convenient time, your Honours?

GAGELER J: Yes, thank you, Mr Walker. The Court will now adjourn until 2.15 pm.

AT 12.49 LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

GAGELER J: Mr Walker.

MR WALKER: May it please your Honours. Your Honours, I have said everything I want to add to our written submissions in relation to propositions 2, 3, 4 and 5 in our outline. I am in the midst of proposition 6 and 7 in particular. I had paused for the adjournment on the similarities to the point of identity in some of the phrasing of 7.32(1) and 7.35(4). I note, though I will not make further reference to it, that 7.35(5) has some of these same similarities and the differences to which I am now turning. What we hope to persuade your Honours is that the differences are in fact, if anything, such as to dispel any notion that 7.32 is rendered otiose, nugatory, or redundant the stipulations in the provisions of 7.35 to which we have already made reference.

The first and obvious difference between the phrasing of 7.32(1) and 7.35(4) is that the former refers to “seeking to meet a danger that”, et cetera, whereas the latter refers to the court being satisfied “that there is a danger”, a phrasing that its repeated in sub‑rule (5). In our submission, that throws up at least textually the possibility of the danger in 7.32(1), including that oxymoronic possibility of a non‑existent danger.

Bearing in mind that danger is in the nature of risk or contingency of an undesirable consequence in the future then, in our submission, one would readily reject in this set of provisions designed to accommodate conflicting interests that a non‑existent danger is contemplated by 7.32(1). Of course, we concede, embrace the proposition as I noted before the adjournment, that the danger does not have to be of any particular let alone arithmetically described scale in order to satisfy the description which is preternaturally circumstantial to particular cases.

It is for those reasons that a danger is a matter which needs to be shown as thoroughly under 7.32(1) as needs to be shown under the even more obvious phrasing of:

the Court is satisfied . . . that there is a danger –

in 7.35(4). So, that is not a difference which, in our submission, indicates that reliance on 7.32 excludes, at is were, some supposedly more demanding requirements, 7.35(4) – which, for some unexplained reasons in the scheme of the rules can be dispensed with, notwithstanding that 7.35(1) describes the rules applying to cases of which ours is one.

The next matter to which I draw to attention is that the words commencing with – and following the word “because”, in 7.35(4) – as is well established in this argument, do not appear in 7.32(1). We understand from the language of the address today that your Honours are pressed with the notion that those words following the word “because” are describing a subset of means by which the court’s process may be frustrated or inhibited.

For the reasons with which I started as to the exact similarity between these rules, one has to read beyond “frustration or inhibition” to deal with the matter to be avoided if possible, giving a power to attempt to avoid it, namely that.....judgment:

will be wholly or partly unsatisfied.

It is for those reasons that one then looks at the particulars of paragraphs (a) and (b) in sub-rule (4) of rule 7.35 and notes that if that is a subset, it is a very, very large subset of the whole. We can leave “absconding” to the side for the moment, though the absconding of judgment debtors has been a concern of legal systems including our precursor systems for centuries, obviously. But if we focus on the question of assets – because the exercise of power here is with respect to assets – then one sees that the cause posited for the danger of “wholly or partially unsatisfied” judgments is described in these terms, that the assets will be:

removed from Australia –

Now, we interpolate – for all the reasons our learned friends have both put – that obviously introduces a contingency with respect to the enforcement of the judgment that would not exist if the assets were within the jurisdiction – territorially understood as a law district. But then, in (4)(b)(i), that is expanded to:

removed . . . from a place inside Australia –

I am not quite sure how that will operate differently from being:

removed from Australia –

but, in any event, being removed from a place:

outside Australia –

It may be rather clunky language, but it certainly involves the movement of assets. We accept, as some of your Honours’ questions have raised, that the assets can include intangibles – the location of intangibles is by no means an intractable challenge for.....understanding an application of these provisions.

Then we come to rule 7.35(4)(b)(ii). That subparagraph, your Honours, with the three Ds – “disposed of, dealt with or diminished in value”. I suppose one can hear hovering in the background the judicial expression “dissipation”. In our submission, it is difficult when talking about the events that may occur with respect to assets that could have an effect on the satisfaction of a judgment, it is difficult to think of matters that do not fall within one or other or maybe all three of “disposed of, dealt with or diminished in value”.

It is for those reasons, in our submission, that, properly read and bearing in mind the evident purpose of these rules and their being informed by and in turn informing the notion of the interests of justice as grounding the court’s power, one has here the notion of a composite danger or threat that arises for specified reasons but, as we would urge, would appear effectively to cover the field of those which in 7.32(1) are events comprehended by the notion of a danger of the frustration or inhibition of the court’s process being a danger that a judgment will be wholly or partially unsatisfied.

If that reading be correct, then there are no inconsistencies, let alone incoherencies of the kind that come from necessary tautology or redundancy in the reading of 7.32 and 7.35 and it is satisfying because it gives the ordinary understanding to the opening words of 7.35(1), “This rule applies”, et cetera, et cetera.

I then return to that which is common, 7.32 and 7.35. There is nothing in 7.32(1) which dispenses the applicant for the order from making out the existence of the sensible purpose of the proposed order, namely to prevent frustration or inhibition of process by seeking to meet a danger. If the applicant has to show that, then it is clear that there needs to be a connection between the circumstances said to present the risk or threat - that is, the danger – and the order said to have the purpose of preventing the frustration or inhibition of the process in that regard, that is, in the regard of ‑ ‑ ‑

KEANE J: But, Mr Walker, are you not going further and saying that 7.32 requires a showing by an applicant of a likelihood or realistic possibility that a particular preventive or protective effect will be achieved by the making of the order?

MR WALKER: Likelihood only in the sense of it being synonymous with realistic possibility, but yes, your Honour.

KEANE J: Yes. So is that not doing some violence to the language of the section which simply speaks in the purpose ‑ ‑ ‑

MR WALKER: Well, obviously I had to persuade your Honours otherwise. May I tackle that immediately. Because courts do not act in vain, and because the drastic nature of this remedy is very largely comprised of its authorisation of the deprivation of liberty to deal with property lawfully, one sees, as the substance of what an applicant must show in order to get an order, that the order will have, that is, will be for the specified purpose.

Now, in our submission, nothing can be for a specified purpose unless there is a realistic possibility of efficacy. When I say, “realistic possibility”, of course we have nothing to do with the notion that that comes anywhere near tipping the scales of more likely than not. Obviously there will be a calibration according to circumstances, including the seriousness of the position that may obtain if nothing is done.

So my first part of the answer to Justice Keane is no, no violence is done in requiring that the order applied for that the court is considering making be shown to be an order for that purpose. You do not show that an order is for a purpose by simply seeing, as it were, the averment or recital by which the applicant proceeds. There must be actual substance. There cannot be purpose without possibility of efficacy. That is the first point.

The second point is that it has to be a purpose of preventing frustration or inhibition of process by seeking, that is, through the mechanism and observance of the orders, terms, mechanism, observance of the orders, by seeking to meet a danger of the threatened unsatisfied judgment.

Now, one can only say of a proposed order, or an order the Court is contemplating making, that it will have the purpose of preventing the frustration, et cetera, by seeking to meet a danger, et cetera, if it can be shown, first, that there is a realistic possibility of that danger. That is different from what Justice Keane was asking about but is related.

Justice Keane’s question particularly directs me to the possibility that I am anti‑textually imposing something extra by reason of a realistic possibility of what I am going to call “efficacy”.....with respect, to alter Justice Keane’s question by paraphrase. For the reasons I have already put, if there is no realistic possibility of efficacy, then, in our submission, the court would not contemplate, as it were, having a punt.

Now, it is at this point that enforceability in a foreign jurisdiction is an aspect of matters where a critical distinction needs to be taken into account in a way that you will not see in the foreign case law to which your attention has been drawn, the Derby decision.

I do not need to take you back to it, but in the passages in Derby (Nos 3 & 4) - in the bundle of authorities it is pages 253 to 255, and 270 to 271, where the concern of the court is, in our submission, very plainly a concern with the enforceability of what I will call the Mareva order, that is, the restraint order, as opposed to the enforceability of the substantive, in our case, money judgment in aid of the satisfaction of which the restraint and the ancillary orders were sought and made.

One sees a similar concern with the enforceability of the restraint orders in Derby (No 6) which is the passage.....in the bundle at page 282. A similar concern can also be seen, as it happens, with the currently moot possibilities, as we would argue them to be, of seeking either to set aside transactions entered into to defeat creditors or, the special power, perhaps misnamed, but known as equitable execution, classically, if not only, through the means of a.....

But, as your Honours had your attention drawn in the Masri decision, I need to point out that there is nothing in that reasoning or outcome which speaks against the evident good sense, as a matter of principle, of the words of then Lord Justice Cozens‑Hardy that are quoted in paragraph 64 of the Masri bundle page 334, where the critical requirement to pay regard to the reception in the putative foreign jurisdiction of the judgments and orders of the English court, that is, for self‑evident reasons noted.

Now, partly that is based recently on a policy of the law against the court acting in vain, but I need to hasten to say that is not an argument that turns upon the notion that a court should make orders on the basis that they will be displayed. That is not what we are saying. There are many instances, and this country itself practices some of them, where foreign judgments will not be enforceable under a municipal system.

As your Honours will appreciate, the common law and now statutory position around the world in various jurisdictions concerning the enforcement direct or indirect, the foreign revenue laws is just one example and it is for those reasons ‑ ‑ ‑

EDELMAN J: Mr Walker, even if one assumes that there is no realistic possibility of enforcement of a freezing order in a jurisdiction to which there is a danger that assets might be removed, why would there not be, as the appellant argues, efficacy in an order that the party who would be subject to the freezing order might obey. It might only be a possibility that they might obey it.

MR WALKER: Thank you, your Honour. May I make clear, the distinction between the enforceability and foreign jurisdictions of the restraining order as opposed to the substantive judgment in aid of which the restraining order is proposed to be granted is a distinction that, in our submission, is not sufficiently taken account of in our learned friend’s argument. But we are not advancing that the unenforceability of the order made in the in personam jurisdiction which, in this case, is invoked for the reasons the rule makes clear, and is satisfied as to jurisdiction, we are not saying that the inability of an Australian court’s order to operate either of its own force, which would be absurd, or by some straightforward mechanism about which there is no evidence, we are not saying that that is the point here at all.

We are talking about the enforceability of the substantive judgment, the money judgment, in aid of which the restraint is sought. That is the enforceability about which we are concerned, for reasons I have not yet fully developed ‑ ‑ ‑

EDELMAN J: But the question remains the same. There still is a possibility, is there not, that a person subject to a freezing order will obey the order?

MR WALKER: That does not mean it is the same, your Honour. May I again seek to distinguish, for reasons which, in our submission, this Court has already made clear in what I will call the seminal authorities on this kind of jurisdiction, these orders are not to be made to put the squeeze on a defendant or a judgment debtor, prospective or actual.

Now, I put it in that way in order to encompass matters that I think Justice Gordon also raised with my learned friend before the adjournment concerning what might be understood to be the consequences for doing business internationally of there being, say, a global freezing order in effect, and I am going to come back to that.

But dealing with Justice Edelman’s question, the possibility that an order will be obeyed does not, of course, provide a reason in itself to make it, because we do not say that the possibility it will not be obeyed should be taken into account against the making of the order. The freezing order is not an order for the payment of money. It is not tantamount to satisfaction of the judgment. It is protective of processes, which will, in an appropriate place, include, ultimately, execution, but is not confined to that, by which one can say the orders of the court are being enforced so that there can be satisfaction of a judgment.

It is for those reasons, in our submission, that once one sees that the restraint does not produce satisfaction of the judgment except by illegitimate means, to which I am going to come, based, of course, on Cardile and Jackson v Sterling in particular, because there is no direct means by which the judgment is satisfied by the erection of a restraint, let alone one that covers the globe without condescending to prove anything about assets.....then, in our submission, our argument does not suffer from failing to take account of the possibility that an order will be obeyed.

You should proceed on the basis that the possibility that an order will not be obeyed should only in the most extreme of cases, which we are not, and we do not present as one, be taken into account by a first instance court considering whether to grant restraining relief. That would be, obviously, to reward contumelious behaviour. We want nothing to do with any of that kind of reasoning.

But there is a world of difference between the restraint and the satisfaction of the judgment, and one then moves, obviously, to the question as to whether or not the restraint is a means by which there can be overcome the unenforceability as a matter within the admissible law of another jurisdiction of Australian judgments.

That raises, in our submission, large and important questions, none of which have been, I think, considered in this country, as to include using the in personam jurisdiction to achieve, indirectly, the enforcement of what the law of nations does not permit as between two sovereign law districts. Nowhere can we find in the authorities the use of this restraint as a means of overcoming the unavailability of other legal systems, municipal prohibitions on enforcement.....a money judgment from Australia with respect to revenue obligations, because, as your Honours know, it is not jus cogens, but is a very widespread habit of nations including our own, and the common law, obviously, not to lend assistance by the enforcement, by whatever means are available, usually for judgments, from time to time, from foreign countries where their revenue laws would thereby be directly or indirectly ‑ ‑ ‑

GORDON J: Mr Walker, may I just raise one practical example with you which seems to me to cut across that. It is unknown on the making of an application for a freezing order and an order being made which identifies the danger that there will be a judgment partly or wholly unsatisfied because there is a risk that assets are going to be removed and therefore there is a need for an order to prevent frustration or inhibition of the court’s processes. You identify properly that it is not confined to enforcement, that the person who is the subject of the order and the potential prospective or real judgment comes along and says to the relevant party applying, “Listen, I will provide security” or “I will take steps to sell assets and pay part of the amount that is the subject of the application and therefore I seek to have assets removed from it”. Does that not all cut across this idea that I somehow have to make this inquiry about whether or not I have some efficacy in making the order?

MR WALKER: No. But I recognise that this is a matter of fundamental difference between the parties and I hope not permanently between our argument and your Honours’ judgments. Yes, that is fundamentally important. Our argument is that the insertion of a restraining order, the power to make which is explained as we have written and said it is to be explained, as a bargaining counter in the extrajudicial dealings between parties, that is so to be deprecated as simply not to form part of applicable principle.

So the order is not there to make life so irksome for somebody that they would prefer to make an agreement contrary to their views, say, about their real tax liability, yet to be determined in.....proceedings in order to be freed of that irksome restraint. If, as we submit, one cannot read these rules any more than one can read the judicial and statutory grounds for the jurisdiction as dispensing the applicant from showing anything apart perhaps from a prospective judgment or, in this case, looking at the terms of 7.35(1)(b), the existence of a good arguable case on an approved cause of action justiciable in the court and that, if I may say so, is an understatement for the statutory liability on the issue of a notice of assessment.

So the question does arise, is that all that a person has to show, or worse – or rhetorical proposition I fear, is it really, as we would submit can be understood from some of our friend’s arguments, that their case is all the stronger when they hold their hands wide, so to speak, and say, “I know nothing. I have not got any information about where any of the assets are, what the assets are, what the dealings with them are”, and it is for those reasons that – in the words of 7.35, “there is a danger”, or in the words of 7.32, that this order is one that will be for the purpose of “seeking to meet a danger”, parenthetically, “about which I cannot tell the Court whether it exists or not as a realistic possibility”, which is really to say the same thing, that is, the law should not care about the existence of something of which there is not a realistic possibility, a form of de minimis reasoning, particularly where what is in question is the power to make such.....orders.

It does mean that, yes, we do squarely meet Justice Gordon’s inquiry, by saying it cannot be part of the interests of justice so to hogtie a person – a judgment debtor – not by attachment – not by execution – without altering anything proprietary, but by saying, unless we reach an agreement out of court or by some means that the applicant for the order makes no effort to specify in a foreign territory, there can be an involuntary – that is compelled – satisfaction of the Australian judgment, all your property will remain, subject to a regime which will require almost day by day an inquiry as to whether it fits within one of the exceptions.

That, in our submission, would be a most odd way to construe the power of the superior court to prevent the frustration or inhibition of its process – not the commercial or financial ambitions or desires of a party, but the frustration or inhibition of the court’s process – by seeking to meet a danger that is expressed not in terms of there being a failure of a financial – or, in this case, fiscal or commercial endeavour or desire – but rather, a failure that a judgment – that is the most formal thing a court does by granting relief and administering justice – will not be wholly satisfied.

It is for those reasons that it is to be recalled fundamentally – if I can move – sorry, before I do move to the fundamental matter about these restraint orders, could I include what I wanted to say about causation. These are propositions 7 and 8 in our outline – I have said nearly everything I want to say.

Your Honours will gather that, in our submission, there is not by implication but by the meaning of the words that are expressly used in 7.32(1) a requirement that we have called a causation requirement. Let me explain. An order made for the purpose of preventing frustration or inhibition of process by seeking to meet a danger that a judgment will not be wholly satisfied can only be understood to be serving that purpose if one can posit what would happen in the absence of making the order, that is the danger would materialise – or may materialise – and that danger of unsatisfaction would mean that, but for the order being made, the judgment would not be satisfied.

The converse must follow logically. If the order is made, an effect is thereby created on the possibilities of satisfaction, otherwise, it is not made for the purpose of meeting the danger. It would be another species of the court acting in vain and when one is talking about interlocutory orders – modelled to an ownership, not compelling someone to pay a judgment – at least not in terms, or in substance – then, in our submission, it is difficult to avoid the obvious proposition that, if a judgment cannot be enforced in a place which, according to the factual issue joined between the parties, is a relevant place – here, the People’s Republic of China – including the semi‑autonomous territory – then, in our submission, you cannot say that that order will be for the purpose of preventing frustration, et cetera, by seeking to meet a danger, et cetera. It is for those reasons ‑ ‑ ‑

GLEESON J: Mr Walker, you might get to this, but do you give any meaning to the words “frustration or inhibition of the Court’s process” beyond a functional one?

MR WALKER: I confess, your Honours, each of those abstract nouns speaks of a detrimental effect on the intended functioning of the courts by their processes in the administration of justice. They are words which focus attention on the nature and aims – purposes, if I can use that word – of the court’s process - that is the first thing – all of which are for the administration of justice, which indicates that a debt claim is for the vindication of the creditors’ right to be paid, and “frustration and inhibition” are equally both relatively strong words to describe, as it were, the defeat of the intended aim of the system.

GLEESON J: For example, you would say that the court would not be permitted to make a freezing order in circumstances where there was a certainty that a judgment would not be satisfied because the defendant was impecunious.

MR WALKER: In the unlikely event that somebody proved in their application that a pauper was in question, so remove overseas jurisdictions from it at the moment, if one just took the plain vanilla case of a local pauper, one would hope that there would be some hesitation before a judge – and here comes the fundamentally important point about these orders – hangs the sword of Damocles of imprisonment for contempt over a person.

The danger of dealing with examples, if I may say so, is that it is tempting to add details which are entirely tendentious, so I will not continue the affecting picture of the pauper faced with a freezing order application, but suffice it to say that it can hardly be said that in the event the court is persuaded that you cannot squeeze blood from a stone, it can hardly be said that making an order would be for the purpose of preventing frustration or inhibition by seeking to meet a danger of an unsatisfied judgment.

Unless the order does something useful, by way of dealing with realistic possibilities and bearing in mind efficacy, then it will not meet those descriptions. Those are descriptions from the express words of the rule, by which I mean 7.32(1), and they are expressly, that is, their meaning is that you have to be able to posit a causal relation between making the order and meeting a danger, which does not mean eliminating the danger, it means doing something to mitigate either its possibility of materialising or the consequences if it does - either will do, or both, and second, of course, there has to be the test of that - if I do not make the order, will the moving party be worse off with respect to the prospect of the judgment being wholly or partly unsatisfied?

If the answer to that is no, because for the assets in question – and this case is only about assets out of Australia and the only facts are concerning assets in China and Hong Kong – if the facts show that there is no realistic possibility of that judgment – and that is the word in both forms of the rules – that that judgment will be enforced qua judgment, not by a commercial squeeze being put on somebody by making their life uncomfortable when they get to immigration in Washington, for example, but by reason of the process which can conclude everything up to, including and after a judgment.

That does not include making life, as it were, in advance, uncomfortable for someone, because the fundamental importance of the nature of these orders is that they carry in their wake penal consequences. They attach, if I can use that word, they attach to questions of civil debt, the possibility of suffering imprisonment by reason of breaching the terms of the order.

Now, your Honours have been told, with respect, correctly and fairly, that there have developed customs, not entirely universal, for the safeguards to be observed in the terms of these orders. You will see, for example, in the one you were particularly taken to in this case, page 22 of the book, order 16, or term 16, you will see that there is explicit concern, solicitude, for problems of what I am going to call enforceability, that is, the reception in the foreign jurisdiction of Australian compulsion, in that case, of the restraint itself.

That, in our submission, bespeaks the need to appreciate that - and in that case that term is there to spare those third parties the spectre of being in contempt of the Australian court, with whatever consequences that may have when they are next in this country. It is for those reasons, in our submission, that one goes back to the, with respect, really important statements that ought to be regarded as still underlying the proper approach to the nature of these drastic powers. Your Honours.....Jackson v Sterling ‑ ‑ ‑

GAGELER J: Mr Walker, have you finished with paragraphs 7 and 8 at this stage?

MR WALKER: Yes, your Honour.

GAGELER J: Can I just ask one question, really by way of wrap‑up. I had previously understood your argument to have as its textual peg the word “because” in rule 7.35(4). I think I now understand it to have its textual peg the reference to “purpose” in rule 7.32(1). Are there two arguments, or is it just one, or have I misunderstood it entirely?

MR WALKER: Your Honour has not misunderstood it, entirely or otherwise. It is one argument. It calls in aid both words and of course, the other words concerning danger in particular.

GAGELER J: Thank you.

EDELMAN J: So, Mr Walker, I had understood your submission to be that the cognate of the word “because” was “by”.

MR WALKER: Yes.

EDELMAN J: Does that then have the effect that, if one stopped after the word “process” at 7.32, that there would be - or would you accept that there would be no difficulty in making a freezing order in circumstances such as those in this case?

MR WALKER: No, I would not. But that is not this case. Can I explain why? You have to identify what aspect or aspects of the court’s process threaten to be frustrated or inhibited. I get the word “threatened”, of course, from the phrase:

for the purpose of preventing –

and we know by – I will start again. In the truncated version of that rule that your Honour is asking me about by way of, as it were, test of our argument, we know, even without those words, that “process” plainly includes judgment, or to put it another way, the notion of a freezing order in order to have someone file affidavits on time is really unthinkable, and yet, the court’s process can be, or most daily probably is, frustrated or inhibited by untimely co‑operation with case management directions.

So there has to be an identification of process in order to understand what it really means to frustrate or inhibit, and it must mean that there is conduct of a kind which would prevent the intended purpose of the process in question from being realised, such as to justify a freezing order. The passage I am coming to in Jackson v Sterling is of course to say otherwise than by putting the fear of imprisonment into people as a ‑ ‑ ‑

EDELMAN J: But even if one talks only of enforcement processes, could it not be said that the enforcement process would be frustrated or inhibited if, without the freezing order, the assets might otherwise be removed or might otherwise be dealt with?

MR WALKER: If one is talking about removal from Australia, then that may well be so, your Honour, although in our submission it is not the case that every defendant within the jurisdiction who has assets and is being sued in debt has therefore satisfied all that needs to be satisfied for the making of a freezing order because, as your Honours appreciate, from a passage to which I am about to come, these are not orders the character of which is to provide security in advance for a judgment, let alone, as we say, to create some hostage situation where in order to be free of a swingeing restraint something is done that you would not otherwise consent to but you wish to contest. It is not for courts, in our submission, to create a different balance of bargaining for out‑of‑court outcomes between parties.

So returning to complete what Justice Edelman has asked me, the only frustration or inhibition which in cases easily could be imagined or straightforwardly could be imagined could justify a freezing order, that is with respect to assets, is some kind of process that would have an effect on assets now either directly because their ownership is in question in the proceedings – that is very straightforward and long precedes freezing orders; or, in order, as it were, to prevent the kind of misconduct which was at the basis of the judicially developed understanding of what was called Mareva injunctions.

In other words, it is not people spending money that attracts the jurisdiction and makes available the discretion for order of Mareva injunction. It is doing it in circumstances from which something nefarious can be inferred. Otherwise, upon being sued, all of us are immediately subject to what I will call a sufficient embargo on dealings with our property accordingly. That is not the law and never has been the law and it is certainly not conveyed by these rules. So I am sorry; it is a bit nefarious.

EDELMAN J: I fully appreciate the answer. My final question is whether that means that the applicant for a freezing order bears the substantial onus of proving your counterfactual?

MR WALKER: Yes, otherwise they do not have to prove anything. Otherwise they can come to court and say, “It’s because I don’t know that there should be apprehended a danger” and hitherto no one has proposed that in the absence of something calling for answer, that the lack of co‑operation in the obtaining of an injunction against a person will justify the granting of an injunction against that person.

Your Honours, the passage, purple we hope, that I had in mind is at 121 of the bundle. It is 162 CLR at 625 in the reasons of Mr Justice Deane. I do not need to dwell in detail on them, but the nub of the policy of the law in this passage - now of course dated back to 1987 – has not fallen away as centrally informative of the interests of justice such as in turn must be centrally informative of the proper interpretation of these rules. In particular, when his Honour about halfway down that page refers to the order being:

framed so as to come within the limits set by the purpose which it can properly be intended to serve.

In our submission, that engages a concern with the relation of these restraints to the process of the court in question. Then comes, in our submission, definitional negatives of the kind which I apologise for repeating, they are really fundamental. It is “not to create security”. It is not to require the provision of security, and then a very important sentence:

Nor is it to introduce, in effect, a new vulnerability to imprisonment for debt . . . by requiring a defendant . . . to find money . . . to guarantee to a plaintiff that any judgment obtained will be satisfied.

The more your Honours heard argument today about the difficulties an applicant, including apparently a Deputy Commissioner of Taxation, would have in showing what needs to be shown on the Full Court interpretation, the more one sees that, stripped to its essentials, the argument is, “I am not satisfied that there is no” - this is the applicant saying, “I am not satisfied there is no danger. I say there is a danger. The danger should be regarded as the more threatening because unknown, and therefore I should get an order which no doubt may produce a negotiation in the future”. The last part will not be added in the application unless of course ‑ ‑ ‑

GORDON J: Mr Walker, may I ask a question about that. Are not all of those matters addressed in identifying what is the danger as identified by Justice Katzmann where she sets out the facts and matters that give rise to it?

MR WALKER: No, your Honour.

GORDON J: In other words, unless that danger is identified and proved and satisfied to the satisfaction of the judge, and it is, then your concerns are met, are they not? It meets all of the matters identified by the Court, especially by Justice Deane in the passage in Jackson.

MR WALKER: Your Honour, I think my proper answer is, no, they are not all dealt with. The applicant has to show something, and I think, with respect, I do accept the premise your Honour has raised with me, that there has to be shown a danger, and so long as that danger is shown, and I would stress, by the applicant, then one of the probanda for the availability of the power and one of the reasons for the discretionary exercise of the power is made out. That follows from the way we have argued the point.

But in our submission, there is not a danger of the relevant kind unless it amounts to a threat and frustration or inhibition of process. That cannot be supplied by somebody failing to keep themselves in funds to meet, say, a prospective judgment debt. The court’s process is not designed, for example, to restrain somebody from continuing to take entrepreneurial risks with their capital, after they have been sued.

GORDON J: I think that is understood. That is why those seven matters identified that the Solicitor‑General took us to were directed at very different facts and matters relevant to that danger. It was not that they had not kept themselves in funds. It was not as a matter of fact, just fact alone. It was not that they were being entrepreneurial. Her Honour identifies very specific matters that are said give rise to the danger of the relevant kind which gave rise to the fact that the power then could be exercised.

MR WALKER: May I stress, her Honour’s findings are – practically all of them – either explicitly or implicitly directed to Australian assets. We are concerned not with Australian assets. We have nothing to say about restraint on Australian assets. For the reasons I have already volunteered, the evident questions which arise once assets are not in Australia require a different approach, which is obviously appropriate bearing in mind the intensely circumstantial nature of this jurisdiction. But there are not findings – certainly that the Full Court accepted – to the effect that there was any repatriation, and I do mean repatriation, to China, say, with any nefarious or improper purpose. The man lacks a visa.

EDELMAN J: Mr Walker, your submission, in effect, means that no worldwide freezing order could ever be made, at least by an Australian court, does it not?

MR WALKER: It means that worldwide freezing orders should require more than a showing that the applicant does not know what is going on. I must say, in my experience, your Honours, there are very few applicants who do canter to come to court and say give me an order because I do not know what is going on. It is, give me an order because I do know X, Y and Z, and the seriously un‑excludable possibility of the consequences of that being disastrous is a reason to exercise the power, for example.

EDELMAN J: But by definition there are some jurisdictions – one could take judicial notice of the fact there are some jurisdictions where enforcement will be impossible. That would mean, would it not, that by definition a worldwide freezing order could never be made?

MR WALKER: Not by definition. It will be circumstantially because of that, your Honour. It is easy to imagine cases - at law school they used to be called rogues.....behave in such a fashion that there is any number of serious inferences that can be drawn concerning the need to exercise the in personam jurisdiction with its penal consequences for breach, with respect to a worldwide or a globally‑effective restraint. So, resort to subterfuge, for example, would be one example, would be one way in which one would begin to make out those matters.

But the notion that an applicant for such relief can say, for all I know this person operates under fraudulent pseudonyms, that can and should be seen a priori as being an inadequate basis to obtain such relief. What we are striving against is the notion that the applicant for such orders can call in aid to strengthen the case that which they have not found out, without even proving that perfectly reasonable requests for information have been sent to the counterparty with what might be called suspicious failure to do that which is reasonable by way of supplying information.

Your Honours are well familiar in other and related contexts to the evidentiary effect in certain circumstances of a failure to supply information, or failure to give an undertaking, et cetera, may have on the prospects of a properly made interlocutory restraint.

There is nothing like that in this case. I stress, we are talking about assets, about which the only location known is in China. So it is for those reasons, in our submission, that the expressions “worldwide” or “global” cannot seriously be seen as a quality that makes an order all the more obviously available, or all the more obviously salutary, that is, to extend the interfering effect of these drastic orders that could not, in principle, be a reason to make them all the more readily available. Or to put it another way, to turn on its head the question Justice Edelman has asked me, one wonders, is there any real intellectual distance between that and saying all such orders should be worldwide, always, as a matter of practice?

EDELMAN J: Well, to turn it back off its head, one might say that prior to the introduction of rules such as 7.32, there were such broad orders in existence, or certainly 7.35, and then one asks whether the rule could have had the intention of substantially narrowing orders that could be made to that effect?

MR WALKER: That is why, as your Honours will have noted, I have been trying to address the question, do my arguments entail the unavailability of worldwide orders? The answer is no, but they should not be made on the basis which defies where the onus lies, and the terms of the judicially‑pronounced principles, and the articulation of something not to be distinguished from that in the rules by the applicants saying, “I do not know what the position is anywhere in the world, so give me the whole world”.

In this case - and there is nothing sinister known with respect to dealings in foreign places – that is, out of Australia; this is a case about assets out of Australia – because one hopes that it would be understood that the negative definition that the purpose of this jurisdiction is not to create security, et cetera, certainly involves the proposition that it is not intended to be a power to require the return to Australia of assets in order that a judgment may be more conveniently enforced in Australia.

There may be cases where something like that will result, but only where there has been anterior wrongdoing of a kind probably involved in the substantive litigation itself, which might require, whether by way of trusts or otherwise, compelled return from foreign places of property, but those are different cases and they do not turn simply on the proposition that the judgment debt is more conveniently enforced by execution against assets in Australia.

Your Honours, the next passage I wanted to remind your Honours of – it is also well ploughed – is in Cardile, bundle 76, 198 CLR 403, paragraph 50. With respect, the epithet “flexible” ought not to be regarded as the universal solvent with respect to the availability of such orders, as the second sentence of paragraph 50 is truly intending to warn.

The explanation by description of the jurisdiction in question, namely, an order protective of the court’s process including the efficacy of execution, et cetera, is, in our submission, of abiding significance and requires an identification – hence our causal argument – of the nature of the danger and what it may do to the prospects of complete satisfaction of a judgment and calibration of an order would serve the purpose of preventing such frustration or inhibition of the process.

The argument against us – it is very difficult to understand what is meant by the admonition at the end of paragraph 50 that a “high degree of caution” is required. How is it a high degree of caution if, as the Court is invited to do by the Deputy Commissioner, there is a positive spurning of the need to show what assets are where, subject to what kind of dealing and to what extent they can be made available to satisfy a judgment otherwise by the hostage situation of orders, worldwide orders in particular, which so inconvenience the respondent as to have them reconsider the commercial value of their position.

That is the position put against us and we submit that it is anomalous even to consider that being done with any degree of caution, let alone a high degree of caution.

There is involved, of course, something in the nature of a reversal of onus in the sense that, though there are no concessions in our favour by our friends, we would apprehend their arguments would be different if the findings of the first instance court, say, were to the effect that the respondent has shown, beyond any doubt, the impossibility of any form of enforcement in a particular place with respect to a particular kind of asset in response to a particular form of judgment, such as a revenue debt or, that all assets are currently employed, in the ordinary course of business, in a dynamic market which will require the capacity to deploy and to redeploy resources as markets require, something which, in our submission, is viewed favourably by a court, even a foreign court, particularly with respect to international trade, and the interference with which is therefore the very kind of drastic consequence that has produced the admonitions of caution in the exercise of this jurisdiction.

Can I turn briefly to the question of instantaneous bank transfers, as I will call the matter that several of your Honours have raised. It is not only since the digital age, of course, that substantial items of property, tangible or intangible, can be instantaneously disposed of as to property in them. So the assignment of a debt or the gift of land and examples to be multiplied need take no longer than moving through the baffling websites at one’s bank.

This is not just a modern phenomenon of rapid disposal of property and, in our submission, the rapid disposal of property, like the leisurely disposal of property is, in any event, of the essence of the rights of property, including alienation – that is, the essence of an interest, a lack of interference with which is a positive value of the law in this area.

In any event, the notion that once upon a time a teller had to be enlisted in a paper process that might take a week and might involve, in former times, foreign exchange checking does not necessarily indicate anything of relevance to the exercise of this protective jurisdiction, unless of course it is supposed and it cannot be, in the absence of evidence, that those are processes to which an anxious plaintiff can become privy as they are occurring and before they are completed.

So nothing really turns on questions of principle on the notorious capacity with which breathtaking sums at credit at bank can be transferred, to use a metaphor, to become similar sums at credit of another bank in another country. In our submission, there is nothing new under the sun in terms of the speed of disposition, and there is in particular nothing that ought to affect by reference to the common laws concerned with changing circumstances or changing conditions of the approach taken to the proper caution in the exercise of this drastic jurisdiction by reason of so‑called instantaneous bank transfers.

Your Honours, as to equitable execution, another of these moot possibilities, insofar as it took the form, say, of the appointment of a receiver – as your Honours are aware, that has been of course a matter that raises as a matter of proper concern the reception in a foreign jurisdiction of the means by which that has been accomplished in terms of what would be for that other jurisdiction equally foreign orders of a local court.

Caird Seven, to which your attention has been drawn, in the bundle at page 217, in Justice Emmett’s paragraph 16 is, in our submission, to the effect that there must be something “shown” -his Honour uses that word – there must be something shown concerning the relative inefficacy of means other than the imposition of, say, a receivership with the problems that it may carry in its wake of enforceability. May it please the Court.

GAGELER J: Thank you, Mr Walker. Mr Solicitor.

MR DONAGHUE: Thank you, your Honours. A few points in reply. Mr Walker, just before lunch and just after lunch made a number of submissions about ‑ ‑ ‑

MR WALKER: I am sorry, your Honours, I can hardly hear my friend.

MR DONAGHUE: Would your Honours give me one moment.

EDELMAN J: I am having the same difficulty.

MR DONAGHUE: Your Honours, is that better?

MR WALKER: Yes, thank you very much.

EDELMAN J: Thank you.

MR DONAGHUE: Before lunch and after lunch Mr Walker made some submissions about the textual similarities between 7.32 and 7.35 and obviously there are a number of respects in which the provisions are similar. But it is important not to overlook the significant differences between those two rules including, in particular, the fact that while one sees at the centre of 7.32(1) a purposive requirement “for the purpose of preventing the frustration or inhibition of the Court’s process”, one sees no equivalent to that in 7.35.

There is no express purposive requirement and there is no reference to the frustration or inhibition of the court’s processes at all. Instead in 7.35 there is the identification of a number of particular reasons why there might be a danger – is a danger, the rule says, that the judgment will not be satisfied.

So, while we accept that there are a number of similar concepts in play, the inquiry required by the rules is not the same and, applying the rules in accordance with their language, one can satisfy 7.32 by focusing on the purpose for which the order is sought or made. Does it seek to meet the danger of the identified kind?

Your Honour Justice Keane put a question to my learned friend to the effect that there was some textual gloss or asking whether there was some textual gloss inherent in his submission, and Mr Walker answered that question by saying that it is necessary, in order to have the requisite purpose, that there be a realistic possibility of enforcement of the order.

But, in our submission, it is possible for there to be – particularly in the context of an order sought urgently, often ex parte – a capacity for the court to see the mechanism by which the order sought would seek to prevent the identified danger, that is, by freezing assets to stop them moving, to stop them being dissipated, unavailable to satisfy the judgment, even though factually, at that point in time, it is not possible to show exactly what assets where will be bitten upon by an order made in that term.

So, logically – and Mr Walker accepts it is not necessary to prove that the order will actually achieve its purpose – it is possible to prove, at the time of making the application for the order, how the order could seek to meet the danger while still needing the assistance perhaps of an ancillary order under 7.33, to give concrete detail to the particular assets that will be the subject of the order, meaning that, in our submission, it is quite possible to prove the purpose required by 7.32 without needing to take the further and additional step that the Full Court found was necessary of proving a reasonable possibility of enforcement.

Your Honours heard quite some submissions about the relevant focus being enforceability of the end judgment, not the freezing order – and we accept that that is certainly the lens that the Full Court was adopting in 42 and 43 of its judgment – but of course the respondent – notwithstanding his presence in the People’s Republic of China – was properly the subject of the jurisdiction of the Federal Court – not just with respect to the freezing order, but also with respect to the proceeding that resulted in judgment against him for just shy of $A141 million.

He was bound by that judgment as a person who was properly served with the processes of the court. Having been bound by the judgment in that way – and the court having ordered against him that that debt be paid – just as there is a reasonable expectation – or the court would expect a person bound by its order to comply with the freezing order – it would properly expect a person bound by its judgment to pay the judgment debt.

The order having been made, there is a prospect that the respondent will comply with the judgment – whether or not the judgment is enforceable against him in the People’s Republic of China – and given that prospect, there is likewise a reason to say that preserving the status quo by seeking – or that one can seek to meet a danger that that judgment will not ultimately be satisfied by freezing the assets and preserving the position until judgment is given – which is what Justice Jagot’s order did.

EDELMAN J: Mr Solicitor, assuming and accepting that the court would expect a person to pay a judgment debt, and assuming that the person does not pay the judgment debt, what is the process of the court that is frustrated or inhibited?

MR DONAGHUE: The giving of judgment itself, your Honour, is frustrated by the person not paying the judgment debt. Mr Walker, I think said - he accepted it was plain that the giving of judgment was within the processes of the court. He conceded as much as I understood his submissions.

EDELMAN J: So, in my example the judgment has already been given, the judgment debt is established, but the person decides not to pay the debt. What process is then going to be frustrated or inhibited by that decision or that action not to pay the judgment debt. I mean one can immediately see the process of enforcement may be frustrated ‑ ‑ ‑

MR DONAGHUE: Yes.

EDELMAN J: But what other process could be in play?

MR DONAGHUE: I apologise if I have misunderstood your Honour’s question. The sequence here was that the order under appeal is made before the judgment is given. So at the time that the freezing order is made there is the prospect of the future judgment being given which can be frustrated, because that is all happening before the decision to which your Honour’s – or that your Honour’s question posits could have been made.

So, at that point in time one has the process of judgment and the possibility of prospective enforcement. If your Honour’s question is putting to me could you make the freezing order after the judgment has been given, then that might be a harder argument to – it might be harder to identify a process separately from the enforcement processes. I hope I have not missed your Honour’s point, I may have.

EDELMAN J: I was concerned with circumstances after judgment had been given, but at the moment I do not really see what difference there can be between the circumstances after judgment has been given and the circumstances before judgment has been given. Judgment in either case can still be given for that amount. I am not sure I can see what other process of the court is going to be inhibited or frustrated.

MR DONAGHUE: Your Honour, the “inhibited and frustrated” words do not appear in the abstract, in 7.32. The danger of frustration or inhibition is a danger that arises from the risk that the judgment will be wholly or partly unsatisfied. So, if one is dealing with a situation in which the court has given judgment for a particular amount – in effect, as we understood the argument Mr Walker developed, it was really being said, an Australian court is required to treat the respondent as free to use the $141 million that is the subject of the judgment debt effectively as he chooses, simply because the People’s Republic of China will not enforce that judgment against him.

That proposition is, the Australian court with jurisdiction – having given judgment in relation to the $141 million – is entitled to say, you are not free to use that money as you choose, because that would frustrate the process of the court – it would mean that effect is not given to the judgment that has just been given against you. So that, while we cannot force you to pay, nevertheless, in order to prevent you from not complying with your obligation to honour the judgment debt, you are restricted in what you can do with those funds.

In that way, the freezing order facilitates the achievement of the processes of the court reflected in the order that the respondent pay just shy of $141 million to the appellant in this case. It is not holding the respondent hostage – it is not a hostage situation – it is just recognising that the processes of the court validly engaged with respect to the respondent have resulted in an order with which he is required to comply, and Australian law is not required to ignore the imposition of that obligation simply because he has moved himself to a place where enforcement mechanisms cannot be applied against him.

GAGELER J: You would say as a matter of language, I suppose, Mr Solicitor, that a judgment can be frustrated after it is given in the same way as a contract can be frustrated after it is made?

MR DONAGHUE: I would, your Honour, yes, indeed.

GLEESON J: Mr Donaghue, would you also say that a hearing conducted by the court might be a process that is frustrated, that hearing being one that eventually leads to a judgment that is not satisfied, in the sense that that hearing becomes a solemn farce if there is nothing to be gained by it?

MR DONAGHUE: Yes, your Honour. Ultimately it must be that - the order must be seeking to prevent frustration or inhibition in a particular way because of the unsatisfaction, so that it may be that one may be that one would need to view the farce aspect of that hearing as part of a wider process, the hearing leading to a judgment that ultimately means nothing because it is ignored, notwithstanding the fact that the jurisdiction of the court was properly invoked against the respondent.

GLEESON J: Surely it would not have to be a prospective frustration?

MR DONAGHUE: I agree, your Honour, and that was what I intended to convey to Justice Gageler in answer to his Honour’s question. Two other points, your Honours. First, the respondent put quite regularly that our case was that we do not need to prove anything. That, your Honours will understand, is not what we say at all. Of course the applicant for a freezing order must prove that the making of the order would seek to meet the danger of the identified kind.

Here, we did that to Justice Katzmann’s satisfaction in the findings of fact that I took your Honour’s to this morning, including matters such as at paragraph 56, that although the respondent had transferred money overseas before, once he became aware he was under investigation:

the amount of money transferred offshore increased dramatically.

At paragraph 51, it was shown that the:

results of the audit indicate an intention to avoid paying tax by grossly understating income.

I am just choosing two of the facts there. But there was evidence that led to the making of the freezing order, that went directly to the question of how this order would seek to meet the danger of the kind identified. It is no part of our case to suggest that we do not need to prove anything, or that an applicant for a freezing order does not need to prove anything.

What we submit does not need to be proved is the realistic prospect of enforcement. With respect to our friends, they tended to run together the question of the danger which does need to be proved and the question of the prospect of enforcement, which, in our submission does not.

Jackson v Sterling Industries - your Honours were taken to a passage at the bottom of page 625 in the judgment where - and our friend emphasised this sentence in particular. It was said that such an order should not be made to require a defendant:

to find money, which he may or may not have (whether or not at some point of time it may have been available to him) -

One needs to read that sentence in the context of the particular issue that was in play in Jackson v Sterling which one sees on the next page at 626. This case affirms the power to make what were then called Mareva orders, but the order that had actually been made by his Honour Justice Sheppard in the Federal Court, was an order that:

required the appellant to provide “security” by paying the amount of $3,000,000 to “any Registrar of the Court”.

That order was held not to have been validly – not to have been properly made. So, one can freeze, but one cannot say as a condition of defending the case, you must come up with $3 million and pay it to the court. That was what his Honour was criticising in the observation on which our friend relies, and it does not advance his position here.

Your Honour Justice Gordon asked a question about the findings that Justice Katzmann had made, to which Mr Walker responded by saying mostly those findings were about Australian assets. In our submission, that is true of paragraph 53, but it is obviously not true of paragraph 54 which is primarily concerned with foreign assets, and most of the other findings would apply equally to both Australian and foreign assets, so we would not accept the respondent’s characterisation of the factual findings.

Finally, your Honours, in answer to your Honour Justice Edelman’s question about whether the respondent’s submission would mean one could never have worldwide freezing orders, Mr Walker tried very hard not to say that the effect of his submissions was to prevent such submissions. But, in our respectful submission, the height of the hurdles that it was submitted would need to be cleared in order to make an order of that kind was such that in practical terms, if your Honours were to accept the submissions that have been put to you, the result would be that such orders would not be feasible.

In our submission, that would have the consequence, as your Honour pointed out, that a kind of order that had hitherto been recognised as a part of the armoury of appropriate cases would have been removed by rules that display no intention to cut back that power. In our submission, it is not a construction of the rules that your Honours should accept so as to avoid what would constitute a very significant limit upon a longstanding, now, of at least many decades, and very important power of the Federal Court.

For those reasons, your Honours, we submit that the appeal should be allowed. Unless your Honours have any questions, those are our submissions.

GAGELER J: Thank you, Mr Solicitor. The Court reserves its decision in this matter and adjourns to 9.30 am tomorrow for the pronouncement of orders, and otherwise to 9.45 am.

AT 3.47 PM THE MATTER WAS ADOURNED