…international commercial arbitration – freezing orders in anticipation of enforcement of arbitral award – where enforcement sought in this court and in foreign courts
In Viterra BV v Shandong Ruyi Technology Group Co Ltd [2022] FCA 215 (11 March 2022), the court considered whether Australian assets can be frozen in aid of enforcement processes of a foreign court, and in what circumstances a wholly owned subsidiary of the judgment debtor may be restrained from disposing of, dealing with or otherwise diminishing the value of its assets.
The applicant (Viterra) is a Dutch-based company that had succeeded in an arbitration against the first respondent, Ruyi, in a dispute arising from a contract for the sale of cotton. Viterra had received from Ruyi no money towards satisfying the award of approximately $18.7 million (AUD).
Viterra commenced recognition and enforcement proceedings in China and in Singapore. It anticipated judgment in Singapore, following which it intended to execute the judgment against Ruyi’s shares in its wholly owned subsidiary, CSST Singapore. CSST Singapore’s assets included 80% of the shares in two Australian incorporated entities, the third and fourth respondents. Viterra submitted that once it obtained the shares in CSST Singapore, it would realise that company’s assets and obtain payment.
Viterra had been granted ex parte interlocutory freezing orders against CSST Singapore preventing it from dealing with, dissipating or diminishing the value of its assets without notice to Viterra. CSST Singapore sought discharge of the freezing orders, arguing that the case did not come within the meaning of r7.35(5)(b) of the Federal Court Rules 2011 (Cth) (the rules), which allows the court to make freezing orders against a third party.
CSST Singapore submitted that the rule does not apply because there is no process in the court under which CSST Singapore may be obliged to disgorge assets or contribute towards satisfying any judgment against Viterra.
The court summarised the applicable cases in Australia, of which Stewart J noted there are remarkably few dealing with freezing orders against third parties that are the wholly-owned subsidiary of the debtor, as well as relevant foreign judgments.
The court held that the freezing orders should be discharged, finding that Viterra was outside the ambit of r7.32 and r7.35(5)(b) of the rules. Those rules refer respectively to the protection of the court’s powers and the availability of a ‘process’ in the court. It was held (at [109]) that those are both references to the Federal Court of Australia, as opposed to “another court” whether inside or outside Australia.
As the freezing order was not sought in aid of a judgment of the Federal Court, the court should not make such an order. The position was to be distinguished from cases in which a foreign judgment was to be recognised and form the basis of a judgment in Australia.
Further, the proposed process of obtaining shares in CSST Singapore and realising its assets was not a process of enforcing or executing judgment of either the Federal Court or the High Court of Singapore. It was a process available to Viterra as a shareholder, not a process that Stewart J considered should be protected by the power to make freezing orders.
Shanta Martin is a barrister at the Victorian Bar, ph 03 9225 7222 or email shanta.martin@vicbar.com.au. The full version of these judgments can be found at www.austlii.edu.au. Numbers in square brackets refer to a paragraph number in the judgment.
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