Legal disputes often instigate concerns about a party attempting to dissipate or dispose of their assets before the resolution of the case. Such scenarios can obstruct an aggrieved party in their pursuit of damage recovery or judgment enforcement.

An essential legal recourse, known as a ‘Mareva Injunction’—termed ‘asset preservation order’ or ‘freezing order’ in different jurisdictions – serves as a preventive mechanism to avert these situations. This term draws its origins from the benchmark case of Mareva Compania Naviera SA v. International Bulk Carriers SA[1], or “The Mareva”. This injunction serves as a restraining order on the defendant who has assets within the court’s jurisdiction from dissipating or disposing of those assets prior to the plaintiff securing any judgment.

To secure a Mareva injunction, the plaintiff must satisfy specific criteria. The recent case of All Kurma Sdn Bhd v Teoh Heng Tatt & Ors[2] offers valuable insights into these prerequisites.

Firstly, the plaintiff must put forth a ‘good arguable case’ against the defendants, meaning their case should exhibit substantial credibility and seriousness, without necessarily implying a probability of success exceeding fifty percent.

Second, the plaintiff must show that the defendant has assets within the jurisdiction. In this case, the second element is not disputed.

The third element involves establishing a genuine risk that the defendant may dispose of their assets to undermine the plaintiff’s claim. Here, the plaintiff is required to provide credible evidence of this risk. They must showcase a tangible likelihood that the defendants could dissipate their assets, jeopardizing the plaintiff’s judgment.

The plaintiff also needs to convince the court that the deliberate dissipation was intended to evade a possible judgment. The court should not infer a genuine risk of dissipation merely from the plaintiff’s allegations of the defendant’s dishonesty. There needs to be evidence with a ‘real and material bearing’ on the risk of dissipation.

It was further elaborated that:-

“Further, beyond demonstrating that there was a real risk of asset dissipation, the plaintiff must demonstrate to the court that the premeditated dissipation was done intentionally to avoid a possible judgment. The court should not presume that there was a real risk of dissipation purely from the plaintiff’s assertions that the defendants were dishonest. There must be evidence that had a ‘real and material bearing’ on the risk of dissipation and evidence that could justify an inference of a real risk of dissipation.”

In the All Kurma case, the court determined that the plaintiff had failed to meet these conditions, leading to the setting aside of the ex parte Mareva injunction.

Curbing Fraud: Freeze the Fraudsters and their Conspirators

A Mareva injunction in Malaysia could order the defendant to disclose all assets they own, whether they are located inside or outside of Malaysia. In certain scenarios, it may also necessitate third parties to disclose any of the defendant’s assets they are holding on their behalf.

Essentially, Mareva injunctions are judicial orders that impede a defendant from managing, relocating, or disposing of his or her assets. Consequently, any attempt to transfer or remove the defendant’s assets would constitute a violation of the court’s order. This applies notably to the defendant’s assets and bank accounts, which will consequently be frozen. If a third party, after being served with the order, assists the defendant in transferring or relocating assets, the freezing order will apply to them as well.

[1] [1980] 1 All ER 213

[2] [2023] 7 MLJ 303

About the author

Lum Man Chan
Partner
Dispute Resolution, Liquidation & Restructuring, Regulatory & Corporate Compliance, Employment Law
Halim Hong & Quek
[email protected]