In commercial litigation, a Plaintiff may unilaterally apply for a Mareva Injunction Order, without giving the Defendant prior notice, so as to restrain the defendant from improperly disposing of or dissipating his/ her assets.
As the Defendant is not notified before the application, the Defendant’s bank account will be frozen when the Mareva Injunction Order is granted by the Court and upon the sealed Court Order being served on (delivered to) the relevant banks. Therefore, in civil proceedings, the Mareva Injunction Order is a powerful weapon.
In appropriate cases, the Plaintiff can also apply for a Disclosure Order at the same time. The Disclosure Order requires the banks to provide to the Plaintiff the information related to the Defendant’s account, such as bank statements and account-opening documents. As a result, the Plaintiff can better understand and ascertain the assets of the Defendant, and find out whether parts or all of the assets have been transferred, so as to consider whether there would be further legal actions against other parties.
Therefore, in commercial litigation, the Mareva Injunction Order can be extremely useful.
However, as the Mareva Injunction Order might create substantial impact to the Defendant’s cash flow, it must be used with great caution.
The threshold for the Court to grant the Mareva Injunction Order is quite high. Among other factors, the Court would consider:
- Whether there is a good arguable case on the substantive claim against the defendant
- The Defendant has assets within Hong Kong
- The balance of convenience is in favour of granting this injunction order; and
- There is a real risk of dissipation of assets by the Defendant before the Court can make the final judgment at the upcoming trial.
It is noteworthy that, in an application for the Mareva Injunction Order, the Plaintiff must make full and frank disclosure. As the Court grants the Order, the Plaintiff also has to provide an undertaking as to damages. In particular, if the Plaintiff fails to demonstrate the propriety of the Order at a later stage, the Plaintiff is liable for the loss suffered by the Defendant as a result of the Order.
Therefore, to avoid unnecessary risk, the Plaintiff must consider carefully before applying for the Mareva Injunction Order, for example:
- Is there is a good arguable case;
- The amount and value of assets involved in the dispute;
- All other relevant factors.
Our lawyers are experienced in applying for Mareva Injunction Order and Disclosure Order. The claim amounts involved range from millions to hundreds of millions of dollars, and most of the cases involve complex commercial fraud or cyberfraud (internet fraud).
If you or your company are facing the following situation, you may wish to contact our lawyers for advice and consider if it is necessary to apply for a Mareva Injunction Order:
- You have fallen victim to Cyberfraud / Internet Fraud / Email Fraud / Telephone Fraud
- Suppliers refused to deliver goods, and evidence of fraud, such as falsification of documents has been uncovered
- Customers refused to render payment, and evidence of fraud, such as falsification of documents has been uncovered
- Shareholders, Directors or Senior Employees have transferred a large sum of money without proper authority and without reason, and you are suspecting embezzlement
- You suspect that you may have fallen victim to fraud but are unsure
If you have encountered any of the above scenarios, you could contact our lawyers for advice. We would analyse the case and provide legal advice for each client according to his/ her needs and budget. If necessary and subject to actual circumstances, we can will apply for a Mareva Injunction Order on behalf of you on an urgent basis.