An Australian overview to Asset Tracing

Lander & Rogers recently contributed to the TerraLex Guide to Tracing Assets Around the World 2018. As individuals and companies continue to move assets away from countries in which they are subject to dispute, it is important that parties are able to trace assets across jurisdictions. This Guide draws together contributions from tracing experts across a number of countries.

Tracing is the process by which the original owner of property can identify assets physically retained or registered in the name of another party, because of some kind of misappropriation or misuse of property. Australian courts provide a number of remedies to recover money or personal property that is wrongly in the hands of a third party. These include money had and received, a declaration of constructive trust, a declaration of equitable lien, an account of profits and damages.

These remedies will often be supported by freezing orders (previously known as Mareva injunctions) or search orders (previously known as Anton Piller orders) to ensure misappropriated property is not lost or dissipated pending determination of the ownership dispute in the courts. Both types of interim orders can be obtained quickly (sometimes, within a day) if a court is satisfied it is appropriate.

Is any information about assets publicly available?

There are multiple sources of information about a person's or company's assets, available for members of the public to access for a fee including:

• land title searches – ownership of land is required to be registered under various state title regimes. Various information brokers can provide searches of these registers.
• Australian Securities & Investments Commission – all public companies and other disclosing entities (but not private companies) are required to prepare and lodge annual financial reports, which may include some details of the entity's assets.
• Personal Property Securities Register – information may also be available on the PPSR, which is the national register for all security interests attached to personal property.

What steps can be taken to obtain information to identify asset holders (whether third party or wrongdoer/adverse party) or the assets?

As against third parties

Although discovery is generally limited between parties to proceedings, third parties may be subject to discovery obligations where the identity of the wrongdoer is unknown: Norwich Pharmacal Co v Customs and Excise Cmrs [1974] AC 133. Typically, this will involve the identity of trustees or the nature and location of trust property.

An alternative method for obtaining information about a third party's assets is through a search order against the wrongdoer. This may provide an applicant with enough information to use against disclosed third parties.

As against the wrongdoer

The most useful action against a wrongdoer is to obtain a search order. This permits an applicant to enter premises to inspect, remove or make copies of documents. Documents include electronic files, and an applicant may seize or make copies of a respondent's computers or hard‑drives to obtain information. Furthermore, a search order can also compel the wrongdoer to disclose the persons with whom they have had dealings. This may assist in tracing a particular asset to a third party. A person who breaches the terms of a search order, or impedes its due execution, is guilty of contempt of court.

In addition, freezing orders may also include ancillary orders requiring a respondent to disclose the nature, value and location of assets.

Can steps be taken to protect/preserve assets on an interim basis?

Yes. Freezing orders can be obtained on an interim basis to prevent the loss or dissipation of misappropriated funds pending the outcome of a final hearing. Freezing orders made on an ex-parte basis (given the urgency of the application and the need to obtain an order before assets are dissipated) are generally only made for a very short duration, no more than a few days. The application is then brought back before the court, in the presence of the respondent, for the court to determine whether or not to extend the interim freezing orders, after hearing from the respondent.

What are the requirements for obtaining a freezing injunction (if available)?

To obtain a freezing order, the applicant must show:

• there is an arguable case against the wrongdoer;
• there is a real risk the wrongdoer or third party is about to leave the jurisdiction or dissipate the asset/s;
• the balance of convenience between the injustice an applicant may suffer with the potential prejudice to the alleged wrongdoer or party subject to the order, favours the granting of the order; and
• where an order is sought against a third party, the applicant will also need to show the third party holds, is using, or is otherwise in possession of the asset.

As a condition of the making of a freezing order, the Court will normally require appropriate undertakings to be given by the applicant to the Court, including an undertaking as to damages.

What assets can be frozen and do they have to be within the jurisdiction?

The types of assets to which freezing orders may apply are broad. It includes all forms of real and personal property, including choses in action. A freezing order can be framed by reference to specific assets or a maximum sum. However, the value of the assets covered by a freezing order should not exceed the likely maximum amount of the applicant’s claim, including interest and costs. Freezing orders usually do not extend to dealings with assets for living expenses, reasonable legal expenses, business expenses and existing contractual obligations.

Further, an Australian court may grant freezing orders against assets located outside Australia (a transitional freezing order), provided the court is satisfied there is a case to be answered within its jurisdiction. An order of this nature is typically requested where the respondent has no or limited assets within Australia.

What about a search order?

To assist in locating the misappropriated property or funds and to establish the need for other interim or final orders, an applicant may seek an Anton Piller or search order. This allows an applicant to enter the respondent’s premises to inspect, remove or make copies of documents, and to force disclosure of the persons with whom the respondent has had dealings.

To obtain a search order, an applicant needs to demonstrate:

• a strong prima facie case;
• the damage suffered by the applicant is serious;
• there is clear evidence of possession by the respondent of incriminating documents or things; and
• there is a real possibility the respondent might, if he or she became aware of the application, destroy the material.

Can a freezing injunction or search order be obtained in support of proceedings outside of the jurisdiction?

Australian authorities indicate it is permissible for a court to freeze assets owned by a party in Australia pending judgment to be delivered by a foreign court. It has been held by the High Court that this is within the inherent power of an Australian court under the Foreign Judgments Act 1991 (Cth): see TBK v BCBC Singapore Pte Ltd (2015) 89 ALJR 975.

A search order cannot be made by an Australian court in relation to proceedings outside of its jurisdiction. But, if an Australian court has jurisdiction over a respondent, it can make a search order that extends to foreign premises.

Can a freezing injunction obtained from a foreign court be enforced against assets in the jurisdiction?

Not directly. Australia is not a party to any reciprocal recognition regime dealing with freezing orders, such as the Brussels Convention. As such, an applicant needs to separately rely on an Australian court's inherent jurisdiction to grant a freezing order in respect of a pending foreign judgment that can be registered under the Foreign Judgments Act. Further, in the event a foreign judgment is obtained and registered in Australia, the court also has the power to grant a freezing order, if appropriate.