What Evidence Is Required In Order To Secure A Mareva Injunction?

• Published date: 19 October 2022
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Trials & Appeals & Compensation
• Law Firm: Gan Partnership
• Author: Lee Xin Div and Tasha Lim Yi Chien

Introduction

Pending the determination of a dispute, a party may worry that the opposing party will dissipate the relevant assets in dispute before the conclusion of the legal action. What options are available to ensure these relevant assets are preserved?

One recourse is to seek an order to effectively freeze the assets of the party pending the outcome of legal action. Such an order is commonly known as a "Mareva injunction".

Given the severity of such an injunction, it should come as no surprise that certain thresholds must be met in order to qualify for it. In Malaysia the three qualifying elements are:

• a good arguable case (element one);
• that the assets are within the jurisdiction (element two) and
• a real risk of dissipation of assets before the judgment (element three).

In a recent decision,⁽¹⁾the Federal Court dismissed an appeal which had overruled a High Court's decision to grant a Mareva injunction between the parties.⁽²⁾The appeal before the Federal Court was whether the Court of Appeal had erred in disturbing the High Court's findings regarding element three.⁽³⁾

Background

First, what is a "real risk of dissipation"? Certainly, it cannot be disputed that the burden to show this risk is upon the applicant seeking a Mareva injunction. The real question is what is the standard of proof?

Haddon-Cave LJ in the UK Court of Appeal caseLakatamia Shipping Company Ltd v Morimoto⁽⁴⁾held that the standard of proof to show risk of dissipation is the "good arguable case" standard. The Malaysia High Court applied theLakatamiadecision in caseSRC International Sdn Bhd v Dato' Sri Mohd Najib Hj Abd Razak⁽⁵⁾where Mohd Arief Emran Arifin JC held that the defendant's failure to rebut serious allegations of dishonestly and provide reasonable explanations indicated that there were "sufficient reasons to believe" that there was a "real risk of dissipation".

The High Court inHoma Engineering (M) Sdn Bhd v Chew Kok Choon⁽⁶⁾described the test for element three as "whether a sensible commercial man could infer a danger that payment would not forthcoming if assets are dissipated".

Decision

In this case, the Federal Court did not disturb the Court of Appeal's reliance on the UK Court of Appeal case ofNinemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Nidersachsen,⁽⁷⁾which said there are only two ways to satisfy element three - namely, that there is:

• direct evidence of the real risk of dissipation; or
• dishonesty, lack of probity or misconduct that...