Implications of Mareva injunctions for foreign investors divesting Australian assets

The use of the Mareva injunction is currently in vogue with Australia’s Commissioner of Taxation as a measure to target foreign residents who the commissioner believes will not comply with their Australian tax obligations that result from the divestment of Australian assets, such as ASX-listed shares. The commissioner has most recently obtained a Mareva injunction in Federal Commissioner of Taxation v Regent Pacific Group (2013).

In the context of tax debt

The equitable remedy of a Mareva injunction (named after Mareva Compania Naviera SA v International Bulkcarriers SA [1975]) is incorporated into both federal and state court rules, and is referred to in the court rules as a “freezing order”. Broadly, the purpose of a Mareva injunction is to “prevent the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied”.

The commissioner will generally apply to the Federal Court for a Mareva injunction where the commissioner believes that a foreign resident may dispose of or deal with assets, which could culminate in the foreign resident not fulfilling payment of the tax liability or the enforcement of a judgment the commissioner may obtain if successful in subsequent litigation regarding the tax liability.

Michael Sheng is a partner at Ashurst in Shanghai; Craig Saunders is a partner at Ashurst in Sydney. Tim Loh, a senior associate at Ashurst in Sydney, co-authored this article