Because of the firm’s experience as a commercial litigation firm for business organisations, we have a knack for advising corporate clients to pre-empt problems and disputes.
Mareva Injunction
Mareva Injunction is a Court order which effectively freezes assets of a defendant from being dissipated pending the outcome or completion of a legal action before the Courts. This injunction is particularly effective over liquid assets such as money held in banks or financial institutions. A bank or financial institution being made aware of a Mareva Injunction is duty-bound to freeze or suspend the use of the defendant’s bank account.
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’.
In Malaysia, a Mareva Injunction is applied for under two distinct circumstances. The first circumstance is the 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.
The second circumstance is when it involves a fraud, a breach of trust or when a defendant proves to be wholly untrustworthy. In such a circumstance, the defendant is seen to be dishonest. One of the first cases in which a Mareva Injunction was obtained in Malaysia is that of Bank Bumiputra Malaysia Bhd & Anor v Lorrain Osman & Ors [1985] 2 MLJ 236.
This injunction is particularly useful in corporate fraud or when an employee or director embezzles money. If you are affected by corporate fraud or embezzlement, kindly contact Mr Gideon Tan (gideon@gtrz.com.my), Mr Alfred Lai (alfredlai@gtrz.com.my) and/or Ms Irene Wong (irene@gtrz.com.my).
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.