What are Mareva Injuctions?
A Mareva injunction is a court order which temporarily restrains the party being sued (defendant) from disposing of his/ her assets until the determination of the case between the suing party (plaintiff) and the defendant. The courts noted that the sole purpose or justification for the Mareva order is to prevent the plaintiffs being cheated out of the proceeds of their action, should it be successful, by the defendant either transferring his assets abroad or dissipating his assets within the jurisdiction.
Brief History
This type of injunction originated out of an English Court of Appeal case called Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213. This case revolved around a shipping dispute whereby the defendant was a foreign party having monies in an English bank. Being a foreign defendant and the monies being capable of being transferred out of jurisdiction, there was grave concern the defendant would remove the monies leaving the plaintiff with no practical recourse should the plaintiff win its case. The English Court of Appeal granted an injunction to prevent the monies being dissipated, hence the name ‘Mareva Injunction’.
Conditions to be satisfied for the Court to grant a Mareva Injunction?
The conditions the Court will want an applicant to satisfy are as follows:
- The applicant has a good arguable case
- There are assets within the Court’s jurisdiction
- There is risk of dissipation of assets
The first two conditions are normally the easiest to fulfil. A good arguable case merely means you have a reasonably good case on the facts against the defendant. It does not necessarily mean that you are able to win your case. For assets within jurisdiction, most defendants are within Malaysia and therefore, one assumes they would have some assets within Malaysia.
The difficulty arises in proving a risk of dissipation. To show a risk of dissipation, you would either need some evidence that the defendant is about to move or hide the defendant’s assets or in the situation of fraud, the fraud itself shows propensity for dishonesty and the inference that the ill-gotten gains will be hidden or dissipated.
What are the appropriate circumstances for one to apply for a Mareva Injunction?
In Malaysia, a Mareva Injunction is applied for under two distinct circumstances.
- Classic Mareva situation
Where the defendant is foreign and the assets are capable of being transferred out of jurisdiction easily without the plaintiff’s knowledge. Such assets are usually cash in banks or shares which are easily sold and proceeds transferred away.
- Fraud, a breach of trust or untrustworthy
- Where the defendants is seen to be dishonest
- Corporate Fraud or Embezzlement
The Process
Generally, the process is swift. This is because in practice, a plaintiff must act quickly and quietly so that he or she can freeze the defendant’s assets before the defendant finds out about the forthcoming injunction and dissipates his or her assets.
It is a battle of wits and a race against time.
In fact, in very urgent matters, one may only have to file the writ or originating summons within 2 days from a Mareva order.
Note: Written Law: – Order 29 rule 1(3) of the Rules of Court 2012
How to apply for a Mareva Injunction?
- Apply by way of a Notice of Application supported by an Affidavit
Affidavit in support must contain:
- the facts giving rise to the claim;
- the facts giving rise to the application for this injunction;
- the facts relied on to justify the application ex-parte, including details of any notice given to the other party or, if notice has not been given, the reason for not giving notice;
- any answer by the defendant (or which he is likely to assert) to the claim or application;
- any facts which may lead the Court not to grant the application ex-parte or at all;
- any similar application made to another Judge, and the order made on that application; and
- the precise relief sought.
Take Note :
- It would be prudent to file a certificate of urgency as well so that the Court can schedule the hearing quickly and before the defendant has the chance to dissipate his or her assets.
- It would also be prudent to commence this on an ex-parte basis so that the defendant would not take steps to rid his or her assets in the meantime.
- After filing the Notice of Application and Affidavit in Court, the Court will hear the matter and may grant the Mareva injunction.’
- If the Mareva injunction is obtained ex-parte, the plaintiff must serve the order within 7 days from its date and the Court will fix a date to hear the matter inter-partes within 14 days.
Conclusion
Mareva injunctions force a defendant to live on a stipend whilst his or her assets are frozen before he or she is found liable for the plaintiff’s claim. In effect, Mareva injunctions are recognized as draconian orders.
As a corollary, when a plaintiff seeks a Mareva injunction against the defendant, he or she must comply with the provisions and requirements, or else the Court will not entertain such an application.
