Chapter 25 - Mareva Injunction

Question 1

MAREVA INJUNCTION

Overview

Answer 1

1) General rule
2) Exceptions
3) Mareva injunction in Malaysia
4) Procedures to apply for Mareva injunction
5) Requirements to apply for Mareva injunction
6) Test to grant Mareva injunction
7) Issues on Mareva injunction
8) Setting-aside Mareva injunction

Question 2

MAREVA INJUNCTION

General rule

Answer 2

Lister v Stubbs:

• the court will not grant an injunction to restrain D from parting with his assets so that they may be preserved in case P’s claim succeeds.
  P, like other creditors of D, must obtain his judgment and then enforce it.
• He cannot prevent D from disposing of his assets pendente lite merely because he fears that by the time he obtains judgment in his favour, D will have no assets against which the judgment can be enforced.

Question 3

MAREVA INJUNCTION

Exceptions

Answer 3

1) The “nuclear” exception - Nippon Yusen Kaisha v Karageorgis (CA):

• The granting of an order to seize D’s assets in advance of a judgment is warranted by S.45 of the Supreme Court of Judicature (Consolidation) Act 1925;
• OTF, there is a strong prima facie case that the hire is owing and unpaid.
• If an injunction is not granted, these moneys may be removed out of the jurisdiction and the shipowners will have the greatest difficulty in recovering anything.

2) The “Mareva” exception - Mareva Compania Naviera SA v International Bulkcarriers SA (CA):

• Lord Denning MR reiterated that the court had the jurisdiction to grant such an injunction.
• Since then, Mareva is accepted as an exception to the general rule.

Question 4

MAREVA INJUNCTION IN MALAYSIA

Overview

Answer 4

1) definition & scope

2) jurisdiction to grant

Question 5

MAREVA INJUNCTION IN MALAYSIA

Definition & scope

Answer 5

S&F International Limited v Transcon Engineering Sdn Bhd:

• a species of interlocutory injunction which restrains a defendant by himself or by his agents or servants or otherwise from removing from the jurisdiction or disposing of or dealing with those of his assets that will or may be necessary to meet a plaintiff’s pending claim.

Question 6

MAREVA INJUNCTION IN MALAYSIA

Jurisdiction to grant

Answer 6

1) Zainal Abidin v Century Hotel Sdn Bhd:
- By virtue of Paragraph 6 of the Schedule to the Courts of Judicature Act 1964, FC held that courts have jurisdiction to grant a Mareva injunction in appropriate circumstances.
2) S&F International Limited v Transcon Engineering Sdn Bhd:
- The exercise of discretion to order in respect of moneys due to the appellant is known as a Mareva injunction.

Question 7

PROCEDURES TO APPLY FOR MAREVA INJUNCTION

Overview

Answer 7

1) Mode & contents of NoA
2) Certificate of urgency
3) Affidavit
4) Order & service

Question 8

PROCEDURES TO APPLY FOR MAREVA INJUNCTION

Requirements, mode & contents of NoA

Answer 8

1) Mode: Notice of application.

2) Contents of Notice of Application:
provisions for the defendant’s living expenses and legal fees.

Question 9

PROCEDURES TO APPLY FOR MAREVA INJUNCTION

Certificate of urgency

Answer 9

• it is 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.

Question 10

PROCEDURES TO APPLY FOR MAREVA INJUNCTION

Affidavit

Answer 10

1) the facts giving rise to the claim;
2) the facts giving rise to the application for this injunction;
3) 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;
4) any answer by the defendant (or which he is likely to assert) to the claim or application;
5) any facts which may lead the Court not to grant the application ex-parte or at all;
6) any similar application made to another Judge, and the order made on that application; and
7) the precise relief sought.

Question 11

PROCEDURES TO APPLY FOR MAREVA INJUNCTION

Order & service

Answer 11

1) Injunction order:
- Form 53.
2) Service:
- 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.

Question 12

REQUIREMENTS TO APPLY FOR MAREVA INJUNCTION

Overview

Answer 12

1) General requirements in application
2) Asset within jurisdiction
3) Full & frank disclosure
4) Monetary limit
5) Undertaking as to damages

Question 13

REQUIREMENTS TO APPLY FOR MAREVA INJUNCTION

General requirements in application

Answer 13

Third Chandris Shipping Corporation & Ors v Unimarine S.A:

1) FULL & FRANK DISCLOSURE:
- The plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge to know.
2) PARTICULARS OF CLAIM:
- The plaintiff should give particulars of his claim against the defendant and fairly stating the points made against it by the defendant.
3) GROUNDS FOR BELIEVING EXISTENCE OF D’S ASSETS:

• The plaintiff should give some grounds for believing that the defendants have assets here.
• i.e. knowledge on the existence of a bank account in England is enough, whether it is in overdraft or not.

4) GROUNDS FOR BELIEVING REAL RISK OF D REMOVING ASSETS:

• The plaintiff should give some grounds for believing that there is a risk of the assets being removed before the judgment or award is satisfied.
  The mere fact that the defendant is abroad is not by itself sufficient.

5) UNDERTAKING FOR DAMAGES:

• The plaintiffs must give an undertaking in damages, in case they fail in their claim or the injunction turns out to be unjustified.
• In a suitable case this should be supported by a bond or security and the injunction only granted on it being given, or undertaken to be given.

Question 14

REQUIREMENTS TO APPLY FOR MAREVA INJUNCTION

Asset within jurisdiction

Answer 14

Ang Chee Huat v Engelbach Thomas Joseph:

• The defendant’s assets are within the jurisdiction.

Question 15

REQUIREMENTS TO APPLY FOR MAREVA INJUNCTION

Full & frank disclosure

Answer 15

Creative Furnishing Sdn Bhd v Wong Koi:

• There is full and frank disclosure of material facts.
• Every material representation must not be misleading, and there must not be any suppression of material facts.
• Failure to do so at the crucial time of making the ex-parte application would invariably be fatal.

Question 16

REQUIREMENTS TO APPLY FOR MAREVA INJUNCTION

Monetary limit

Answer 16

Motor Sports International Ltd v Delcont (M) Sdn Bhd:

• There is a monetary limit on the sums sought to be frozen.
• Note that Mareva injunctions ought not to freeze more than is necessary.

Question 17

REQUIREMENTS TO APPLY FOR MAREVA INJUNCTION

Undertaking of damages

Answer 17

Tsoi Ping Kwan v Loh Lai Ngoh:

• The Plaintiff must undertakes to pay damages.

Question 18

TEST TO GRANT MAREVA INJUNCTION

Overview

Answer 18

1) Good arguable case

2) Risk of dissipation of asset

Question 19

TEST TO GRANT MAREVA INJUNCTION

Good arguable case

Answer 19

Ninemia Maritime Corp. v Trave Schiffahrtsgesellschaft MBF & Co KG:

• he has a good arguable case;
• i.e. more than being barely capable of serious argument.
  not necessarily believing that >50% chance of success.
  Ref. Creative Furnishing Sdn Bhd v Wong Koi:
• a “fair chance” for the plaintiff to obtain judgment against the defendant.

Question 20

TEST TO GRANT MAREVA INJUNCTION

Risk of dissipation of asset

Answer 20

Ninemia Maritime Corp. v Trave Schiffahrtsgesellschaft MBF & Co KG:

• there is a risk that assets will be dissipated;
• risk must be real, i.e. refusal of an injunction would involve a real risk that a judgment or award in his favour would remain unsatisfied because of the defendant’s removal of assets from the jurisdiction or dissipation of assets within the jurisdiction.
• he must demonstrate this by solid evidence;
• mere proof that D is incorporated abroad will not suffice.

Example:

• D’s previous actions show his probity is not to be relied upon or that the corporate structure of D infers that it is not to be relied upon.

Ref. S & F International Limited v Trans-Con Engineering Sdn Bhd:

• There is a real risk that the defendant will or might dispose of his assets.
  This risk can be assessed through the defendant’s previous actions which indicate his integrity is not to be trusted.

Question 21

ISSUES ON MAREVA INJUNCTION

Effect of Mareva on P

Answer 21

xx

Question 22

ISSUES ON MAREVA INJUNCTION

Mareva against local D

Answer 22

1) Whether available for local D - Barclay Johnson v Yuill:
- Although the essence of the jurisdiction to grant Mareva injunction involves the risk of the assets being removed from the jurisdiction which will be greater for foreign-based defendants, there is no reason why Mareva should not be available against a local D.
2) Application - Chartered Bank v Daklouche:

• a Mareva injunction was granted against an English-based defendant.
• The law should be that there is jurisdiction to grant a Mareva injunction even though the defendant may be served here.
• If he makes a fleeting visit, or if there is a danger that he may abscond, or that the assets or moneys may disappear and be taken out of the reach of the creditors, a Mareva injunction can be granted.
• Here is this £70,000 lying in a bank in England, which can be removed at the stroke of a pen from England outside the reach of the creditors.

*Followed in: Zainal Abidin v Century Hotel Sdn Bhd

Question 23

ISSUES ON MAREVA INJUNCTION

Effect of Mareva against 3rd party - general

Answer 23

1) PCW (Underwriting Agencies) Ltd v Dixon:

• P has NO priority over those assets; or
• D is NOT prevented from paying his debts as they fell due; or
• P is not able to exert pressure on him to settle an action.

2) Galaxia Maritime v Mineralimportexport; The Eleftherois:

• A plaintiff seeking for Mareva cannot possibly be entitled to obtain the advantage of such an order for himself at the expense of the business rights of an innocent third party, merely by proffering him an indemnity in whatever form.
• i.e. the Mareva injunction should not interfere with the business of 3rd parties.

Question 24

ISSUES ON MAREVA INJUNCTION

Effect of Mareva on D’s debt

Answer 24

Iraqi Ministry of Defence v Arcepey Shipping Co SA; The Angel Bell:

• A Mareva injunction is not a form of pre-trial attachment but a relief in personam which prohibits certain acts in relation to the assets in question.
• D is not prevented from paying his debts to the other creditors as they fall due even where it is alleged that the debt is due pursuant to an illegal and void moneylending transaction.

Question 25

ISSUES ON MAREVA INJUNCTION Effect of Mareva on P

Answer 25

Campbell Mussells & Ors v Thompson: - English CA held that a Mareva injunction was never intended to put P in the position of a secured creditor.

Question 26

ISSUES ON MAREVA INJUNCTION Post-judgment Mareva

Answer 26

1) Polly Peck Order - Polly Peck International Plc v Nadir: - the order sought was that D earmark funds that will become available to it to satisfy the Plaintiff's judgment. 2) Post-judgment Mareva - Fawziah Holdings Sdn Bhd v Metramac Corporation: - The Court of Appeal refused to grant Polly Peck Order but instead granted an injunction restraining D from dissipating up to RM100 million; - This is an order which Gopal Sri Ram JCA described as a “post judgment Mareva injunction”.

Question 27

SETTING-ASIDE MAREVA INJUNCTION Overview

Answer 27

1) Procedures | 2) Grounds to set aside

Question 28

SETTING-ASIDE MAREVA INJUNCTION Procedures

Answer 28

Mode: Affidavit: Grounds:

Question 29

SETTING-ASIDE MAREVA INJUNCTION Grounds to set aside

Answer 29

Motor Sports International Ltd & Ors v Delcont (M) Sdn Bhd: - NON-COMPLIANCE: Non-compliance with O.29, r.2A; i.e. no full & frank disclosure. - NO MONEY LIMIT: The ex parte order did not place a monetary limit on the sums frozen in the bank accounts. - IMPOSITION OF ADDITIONAL CONDITIONS: It is a ground to set aside the Mareva if the effect of the Judge's additional condition or order was to accord D priority over other creditors and to place it in the position of a secured creditor, which was contrary to the purpose of the Mareva jurisdiction.