EQUITY & TRUST I

LAWS 3330

MAREVA INJUNCTION
 DEFINITION
• Mareva injunction generally results from a successful
application to freeze the assets of the defendant prior to trial.
• Has its origin in English law and it is worthy to note that the
position in England before 1975 was that courts would not grant
an injunction to restrain a defendant from disposing of his assets
and it had never been the practice of the English courts to seize
assets of a defendant before judgment, or to restrain their
disposal.
• Lister and Co. v. Stubbs [1890] 45 Ch.D. 1, 13: “you cannot get
an injunction to restrain a man who is alleged to be a debtor
from parting with his property”. No injunction will be granted
before trial and the only exception is in the case of fraud”.
• This old traditional view was later removed with the
introduction of a new way to prevent a defendant from disposing
his assets prior to trial or judgment.
 ORIGIN OF MAREVA INJUNCTION
•Mareva v. International Bulkcarriers [1975] 2 Lloyd’s Rep
509: A shipowner let the ship named, ‘Mareva’, to a foreign
charterer who defaulted on a payment. The shipowner found
out that the charterers had money in an English bank and
sought an injunction freezing the account.
•It was held that an order would be granted to stop the
charterers from moving the money abroad before the case
was heard.
•Normally, the application will be ex parte, which means that
one party applies without giving notice to the other side for if
the other party did have notice, they could move the assets.
•In the Due Process of Law (1980), Lord Denning described
the Mareva injunction as “The greatest piece of judicial law
reform in my time”.
 GUIDELINES FOR MAREVA INJUNCTION

• Plaintiff must have a good arguable case;

• Plaintiff should give grounds for believing that the
defendant has assets in the jurisdiction;
• Plaintiff should give grounds for believing that there is a
risk of their removal before the claim is satisfied, and a
danger of default if the assets were removed (The mere fact
that the defendant is abroad is not sufficient);
• Plaintiff must undertake in damages, giving security in
suitable cases, in case he is unsuccessful in the action.
(serve as a safeguard to the defendant).
 CONT.
• Nippon Yusen Kaisha v. Karageorgis [1975] 3 All ER 282:
Per Lord Denning “We are told that an injunction of this
kind has never been done before. It has never been the
practice of the English courts to seize assets of a defendant
in advance of judgment, or to restrain the disposal of them.
It seems to me that the time has come when we should
revise our practice. There is no reason why the High Court
or this Court should not make an order such as is asked for
here”.
• His main reason for allowing the applications was strong
prima facie proof that the hire was owing and unpaid.
• If such injunction was not granted, monies might be
removed out of jurisdiction and the ship owners would have
the greatest difficulty in recovering anything.
 GENERAL PRINCIPLES
• Function: To prevent removal of assets.
• Its purpose is to ensure that, if the plaintiff succeeds in the action,
there will be property of the defendant available.
• To prevent any defendant from disposing its assets prior or during
trial so as to leave the plaintiff with nothing remaining to satisfy a
judgment which might be obtained against the defendant.
• It is interlocutory, ancillary to a substantive pecuniary claim for debt
or damages, it is designed to prevent the judgment against a foreign
defendant for a sum of money.
• Usually made ex parte (speed is of the essence)
• Unlimited to its subject matter and nature of proceedings.
• Third party (bank) who has been given notice on Mareva Injunction
must comply with it and freeze the account of the defendant as failure
to comply amounts to contempt of court.
• On the other hand, plaintiff is under obligation to indemnify the third
party against expenses and liabilities incurred as a result of
compliance.
 SCOPE OF MAREVA INJUNCTION
• Ashtiani v. Kashi [1987] Q.B. 888: Where a Mareva injunction
is granted before judgment, the injunction should be limited to
assets within the jurisdiction of the court.
• However, this restrictive approach was reversed by the English
Court of Appeal in Republic of Haiti v. Duvalier [1990]
Q.B.202; Derby & Co v. Weldon No. 1 [1990] Ch. 48: where it
issued such “protective” orders for assets located abroad in a
series of decisions.
• The scope of a Mareva injunction was later expanded (the
presumption that a Mareva injunction should only be confined to
foreign based defendant) to include non-foreign based defendant
or local defendant.
• Another major development was the availability of a Mareva
injunction to be used to freeze the disposal of assets located
outside the jurisdiction.
• Section 25 of the English Civil Jurisdiction and Judgments Act
1982 as extended in 1997, which gives the English Court power
to grant free-standing interim relief in aid of foreign proceedings
anywhere in the world and also to freeze future assets.
 CONT.
• Babanaft International Co. S.A. v. Bassatne [1990] Ch. 13: Ps
obtained judgment for over $15m against Ds, who were two
brothers (Lebanese nationals), one of whom lived mainly in
Switzerland while the other lived mainly in Greece. They owned
property in the UK and carried on shipping and oil-trading
transactions worldwide. When Ds failed to satisfy the judgment,
the judge made an order to determine what assets were available
to meet the judgment debt.
• The judge ordered Ds to file an affidavit disclosing their assets
wherever situated, he granted an injunction restraining Ds from
dealing with their assets outside the jurisdiction. Ds appealed
against the injunction.
• Held: Such an injunction, if made, should be qualified by an
express proviso making it clear that the injunction was directed
to the defendant himself and did not affect the rights of third
parties or seek to control their activities.
 CONT.
• Republic of Haiti v. Duvalier and Others [1989] 1 All ER
456: Applied the Babanaft proviso in Mareva Injunctions
affecting assets worldwide.
• It should be noted that such injunction should only be
granted in exceptional and rare cases.
• Limitations: Maximum sum frozen to be specified. This
injunction should freeze a maximum amount of the
defendant’s assets so that he should be able to deal with the
remainder.
• Ordinary living expenses and other legitimate expenses to
be allowed. Defendant should be allowed to use his assets
to pay for his ordinary living expenses.
• Mareva injunction should not interfere with defendant’s
normal course of business.
 POSITION IN MALAYSIA
• Historically, the implementation of the Mareva injunction did not get
a good start in Malaysia as the initial reasoning was that the
Malaysian court had no jurisdiction to grant such relief and this
caused an obstacle to the introduction of the Mareva injunction.
• Zainal Abidin bin Haji Abdul Rahman v. Century Hotel Sdn. Bhd.
[1982] 1 MLJ 40, in the first case on the Mareva injunction in
Malaysia, the High Court held that the remedy sought by the plaintiff,
that is the Mareva injunction, was unknown to Malaysian law.
• On appeal, Raja Azlan Shah CJ overturned the decision of the High
Court and held that the Malaysian Court had jurisdiction to grant a
Mareva Injunction in appropriate circumstances and he emphasised
that this was needed in order to fulfill the needs of businessmen.
• The purpose for adopting the principles of the Mareva injunction was
due to the increase of foreign investors holding substantial
investments in Malaysia.
JURISDICTIONAL BASIS OF MAREVA INJUNCTION
IN MALAYSIA
• The statutory provisions relevant to the issue of Mareva
injunction have been examined by the courts in a series of
cases. They are:
 (i) Section 50 of the Specific Relief Act 1950:
Preventive relief is granted at the discretion of the court
by injunction, temporary or perpetual.
 (ii) Paragraph 6 of the Schedule to the Courts of
Judicature Act 1964; and
 (iii) Order 29 and Order 92, Rule 4 of the Rules of High
Court 1980.
 PRINCIPLES GOVERNING MAREVA
INJUNCTIONS
• Pacific Centre Sdn Bhd v. United Engineers (Malaysia) Bhd [1984]
2 MLJ 143: the court followed the guidelines propounded by Lord
Denning in Third Chandris Shipping Corporation and Ors v.
Unimarine SA [1979] 2 All ER 972 as follows:
1. The plaintiff should make full and frank disclosure of all matters in
his knowledge which are material for the judge to know.
2. The plaintiff should give particulars of his claim against the
defendant by stating the ground of his claim and the amount thereof,
and fairly stating the points made against it by the defendant.
3. The plaintiff should give some grounds for believing that the
defendant has assets in the jurisdiction.
4. 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.
5. The plaintiff must give an undertaking in damages, which in a
suitable case, should be supported by a bond or security.
 CONT.
• Bank Bumiputra Malaysia Berhad & Ors v. Lorraine Osman
& Ors [1985] 2 MLJ 236: Ps brought an action against D who
happened to be a director of the first plaintiff company and
chairman of the Board of Directors of the second plaintiff
company (a wholly subsidiary of the first plaintiff) whereby Ps
alleged that D received the sum of RM27,652,835 without the
knowledge and approval of Ps and in breach of his fiduciary
duty as director and chairman.
• As Ps considered it as secret profits, an ex parte application for
Mareva injunction was made to restrain D from transferring his
assets out of jurisdiction. D was also required to make disclosure
as to the value, nature and whereabouts of his money, with
reference to 32 other banks and 102 other companies.
• Held: An order for Mareva injunction was granted to freeze
assets of defendant not only located in Malaysia but also in
Hong Kong and England.
 CONT.
• Aspatra Sdn Bhd & 21 Ors v Bank Bumiputra Malaysia Bhd &
Anor (BBMB) [1988] 1 MLJ 97: Aspatra Sdn Bhd and others
were among the companies affected by the Mareva proceedings
brought by BBMB against Lorraine Osman. In this case, they
were allowed to be joined as interveners. They applied for this
order to be set aside. Among the issues discussed was whether the
High Court judge was correct in lifting the corporate veil of the
interveners and in holding the opinion that the assets of the
interveners were assets of Lorrain.
• Held: It could generally lift the corporate veil in order to do
justice particularly where an element of fraud is involved.
• In this case there was an element of fraud in the receipt of secret
profits and this was sufficient for the court to lift the corporate
veil for the purpose of determining whether the assets were really
owned by the company or by Lorrain.
 EXTENSION OF MAREVA INJUNCTION IN
DEFAMATION ACTION
• Dato’ Kam Woon Wah v Mohd Jalil bin Sarip [1998] 2 MLJ
201: P applied for a Mareva injunction in a libel action. D wrote
a letter to a Judicial Commissioner explaining various arbitrary
and unlawful acts taken by P in an attempt to dispose a piece of
property. P took offence to the contents of the letter and sued D
for defamation. The writ for this application was accompanied
by a summons in chambers seeking a Mareva injunction to
restrain D from removing any of his assets from the jurisdiction
of the court. D contended in his defence that the Mareva
injunction was not applicable to a defamation suit.
• Held: To invoke Mareva Injunction for defamation, the standard
of proof is higher than the ordinary application. The applicant
had to show that D’s statement was untrue and that any defence
D raised would fail.
 WRIT OF ‘NE EXEAT REGNO’
• A writ issued to restrain a person from leaving the kingdom.
• Although it was formerly used for political purposes, later it
resorted into equity when the defendant is about to leave.
• In relation to Mareva Injunction, the issuance of the writ is for the
arrest of defendant pending provision of security for the debt.
• Section 6 of the Debtors Act 1869 (Power under certain
circumstances to arrest defendant about to quit England): “…
[T]he defendant would have been liable to arrest,… the plaintiff
has good cause of action against the defendant to the amount of
fifty pounds or upwards, and that there is probable cause for
believing that the defendant is about to quit England unless he be
apprehended,… judge may in the prescribed manner order such
defendant to be arrested and imprisoned for a period not
exceeding six months, unless and until he has sooner given the
prescribed security, not exceeding the amount claimed in the
action,…”.
 CONT.
• Al Nahkel for Contracting and Trading Ltd v. Lowe [1986] Q.B.
235: D had allegedly stolen £14,000 from P in Saudi Arabia. He flew
to London carrying large sums in cash, intending to fly to Manila the
next day. P sought a Mareva injunction (which prevents a defendant
from disposing of or otherwise dealing with his assets) and a writ of
“ne exeat regno” unless D gave security for £14,000. The writ was
granted in support of the Mareva injunction to prevent D from leaving
with the money in order to frustrate Ps claim.
• Allied Arab Bank v. Hajjar [1988] 1 WLR 497: The writ had been
granted requiring a security of £36 million (a sum which D, a
Jordanian, had guaranteed). D could not raise the security and spent
“one of the most distressing and humiliating nights of his life” in jail.
He was released from custody on entering into a bond for £250,000
and surrendering his passport. On appeal, the writ was set aside.
• Therefore, the appropriate remedy is to seek for an injunction to
restrain D from leaving the jurisdiction, not imprison.
 POSITION IN MALAYSIA

• Section 6 (1) of the Debtors Act 1957 (Arrest of judgment

debtor): “Where a judgment for the payment of money
remains wholly or in part unsatisfied, whether a writ of
execution has been issued or not, the court may order the
debtor to be arrested and brought before the court forthwith
for examination in accordance with subsection 4(1), if it
appears to the court that there is probable reason for
believing, having regard to his conduct, or the state of his
affairs, or otherwise, that he is likely to leave the State with a
view of avoiding payment of such money or of avoiding
examination in respect of his affairs”.
THANK YOU