Introduction
Debt is a common phenomenon in commercial transactions. Disputes arising from debt are just as common and frequent. While these disputes are sometimes easily resolved by the parties, other times they prove complicated or impossible so that a court action becomes warranted. The creditor is thus forced to approach the court to recover the debt from a reluctant or uncompromising debtor. But many creditor often realises that the judicial process is riddled with hurdles that he must surmount in order to realise his claim. In that wise, the filing of an action in court is just the smallest of the task. One major worry that besets creditors is the risk of not realising the fruit of the judgment where a Debtor, on catching whiff of his adversary’s suit, dissipates his assets in order to frustrate the action of his adversary—the Creditor. It is for this reason that a Creditor must be strategically proactive in his litigation approach. Mareva injunction come in handy as an effective litigation tool for preventing a cunning debtor from unjustly getting one up against a creditor.
Meaning and Purpose of Mareva Injunction
Mareva injunction is a kind of interim or interlocutory order of court that serves as a preservatory order to prevent the dissipation of assets pending the determination of the rights of the parties in a suit. What is meant by “interim” and “interlocutory” is that the order is temporary or provisional. Often referred to as a “freezing order,” a mareva injunction essentially prevents the dissipation of assets (by whatever means) from the jurisdiction of the court while a suit is pending. It serves the objective of ensuring that whatever orders the court eventually makes is not rendered ineffective by virtue of one of the parties pre-empting the court and dissipating its assets. In the context of debt recovery matters, the debtor would often dispose of his assets or move them out of jurisdiction, effectively foisting a fait accompli on the court and leaving the eventual judgment-creditor to reap a pyrrhic victory at the end of the day. Thus, a mareva injunction is a useful litigation tool to forestall such cunning and underhand tactics.
Origin of Mareva Injunction
Mareva injunction was first developed and applied by the High Courts in England and was firmly established in the case of Mareva Compania Naviera. A.V. International Bulkcarriers,[i] the case from which the order got its striking name. In expounding the nature of mareva injunction, the Court stated that:
“If it appears that the debt is due and owing and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment, the court has jurisdiction in a proper case to grant an interlocutory judgment so as to prevent him disposing of those assets. It seems to me that this is a proper case for exercise of this jurisdiction.”
In Bahman (Prince Abdul) Bin Turki Al Sudairy v Abu Taha,[ii] the English Court further expounded mareva injunction thus:
“A Mareva injunction can be granted against a man even though he is based in this country if the circumstances are such that there is a danger of his absconding or a danger of the assets being removed out of jurisdiction or disposed within jurisdiction or otherwise dealt with so that there is a danger that the plaintiff if he gets judgment will not be able to get it satisfied”
Judicial Application of Mareva Injunction in Nigeria
Mareva injunction has been adopted and applied in a plethora of cases by Nigerian courts. The case of Kotoye v. CBN[iii] where the Court applied a freezing (preservatory) order on funds pending the determination of the case is one of the earliest applications of freezing orders. In Sotuminu v. Ocean Steamship (Nig) Ltd,[iv] the SC further acknowledged the powers of the Courts to grant mareva injunction and went ahead to lay down the conditions for the grant of mareva order of injunction. Mareva injunction continues to be granted by the court in appropriate circumstances and upon fulfilment of the conditions for the grant of the order, the purpose of which is to preserve the assets of the party claimed against so that the victorious party can reap the fruit of his judgment.
Nigerian courts apply the underlying equitable principle for the grant of mareva injunction. Thus, in Trade Bank Plc v Barilux (Nig.) Ltd,[v] a case that involved a dispute between a Nigerian company and a Nigerian bank, the Court of Appeal held that the use of mareva injunction was not restricted to obtaining preservatory orders against foreign defendants whether or not based/domiciled within jurisdiction but also covered a defendant based within jurisdiction.
Which Courts Have Powers to Grant Mareva Injunction
A Mareva injunction can be granted by the superior courts of record in Nigeria—that is, the Federal High Court, the National Industrial Court, the High Court of the Federal Capital Territory and the High Courts of States. The Court of Appeal and the Supreme Court also have powers to grant mareva injunction. Mareva injunctions are however not only available to superior court of records in a civil context. The enabling law of magistrate courts can donate such powers to the Magistrates. For example, Sections 28 and 33 of the Magistrate Court Law of Lagos State 2009 and Order 9 of the Magistrate Court (Civil Procedure) Rules 2009 both donate to the Magistrate Court power to grant interim and preservatory injunctions. Thus, a magistrate court may be empowered to grant mareva injunctions.
What Kind of Assets Can Mareva Injunction Be Made Against?
While mareva injunction is often made on moveable properties that can be easily transferred out of jurisdiction or dissipated, nothing suggests that a mareva order cannot be made in respect of immoveable property. This is because a debtor, having learned of a suit against him, may quickly divest himself of ownership of an immoveable property so that there would be no asset to satisfy the judgment debt. Mareva injunction can thus be made in respect of a wide variety of assets including immoveable property like land and moveable properties like goods, vehicles, monies in banks accounts etc.
Mareva Orders and Third Parties
Mareva orders affect third parties in possession of properties or assets to which a mareva order applies. These third parties do not necessarily need to be served with the court processes. Once they are notified of the order, it becomes mandatory for the third party to strictly comply or face contempt proceedings and other civil liability.
Procedure for Obtaining Mareva Injunction in Court
A mareva injunction being an order of court made pending the determination of a case, it therefore supposes the existence of a suit which the court has been invited to adjudicate upon. Thus, the first step towards obtaining a mareva injunction in debt recovery matters is to file a suit for the recovery of the debt and file alongside an application for an order of mareva injunction to preserve the assets of the debtor pending the hearing and determination of the suit.
Strategies for Obtaining Effective Mareva injunction
Below are strategies for effectively utilising mareva injunction in debt recovery matters:
- Filing both ex-parte application and motion on notice for order of mareva injunction. The objective of mareva injunction is to catch the Debtor unaware so that he does not dispose of his assets upon getting whiff of the suit. This is why an interim ex-parte application is brought before the court to freeze the assets of the debtor. An ex-parte application is without notice to the debtor who is usually the defendant in the suit. However, a motion on notice must be filed to put the debtor on notice in respect of the order. An ex-parte order of mareva injunction is typically made to last until the date set for hearing of the Motion on Notice. The Debtor may however apply to the court before that date to vacate the ex-parte order.
Upon the hearing of the motion on notice for the grant of an order for mareva injunction, the court may make the interim ex-parte order an interlocutory one so that it lasts until the determination of the substantive suit. That way, the debtor is estopped by the order from interfering with his assets that have been affected by the mareva injunction.
- Filing of affidavit of urgency with the application for mareva injunction. In commercial matters, time is usually of the essence. Unrealised debt is a potential loss at worst and a phantom asset at best. Thus, business savviness demands quick recovery of debts that are due and unpaid. However, administrative bottlenecks at the court registry can occasion delays. Thus, an affidavit of urgency is a useful tool to quickly have a matter assigned to a judge so that the application for mareva injunction can be quickly heard.
Conditions for Grant of Mareva Injunction
A mareva injunction is not granted simply upon asking. Like every other equitable remedy of court, there are guiding principles for the grant of mareva injunction. The Supreme Court in the Sotiminu case laid out the conditions that an applicant must satisfy before a mareva order is issued. The Applicant must show the following:
- The existence of a strong case against the defendant
- The existence of a justiciable cause of action against the defendant.
- The existence of a real and imminent risk of the defendant removing his assets from jurisdiction and thereby rendering nugatory any judgment which the plaintiff may obtain against him.
- Make a full disclosure of all material facts relevant to the application.
- Give full particulars of the assets within the jurisdiction against which the order is sought.
- The balance of convenience must be on the side of the applicant.
- Prepared and able to give an undertaking as to damages in the event that the order ought not have been made in the first place.
The Court further stated that these conditions are conjunctive rather than disjunctive. This means that all the listed pre-conditions must be fulfilled by the applicant before the order of mareva injunction will be granted. In the above Sotiminu case, the Court refused to grant the order because the applicant failed to satisfy 4 of the 7 conditions.
Territorial limitations of Freezing Orders
The usual cases upon which a court is beseeched to grant mareva injunction or freezing order is where there is apprehension that the defendant will dispose of his assets within jurisdiction. What about those situations where the assets are outside jurisdiction?
It is apposite to state at this point that for the purpose of enforcement of judgments or orders of court, Nigeria is a single jurisdiction. Thus, a judgment by the High Court of Lagos state, for example, can be enforced in other states of the federation. The implication is that a mareva order granted by the Lagos State High Court in respect of property in Kano state would effectively preserve that property and bind third parties in possession of that property.
Where, however, the said property is in a foreign jurisdiction e.g., the United Kingdom, the powers of a Nigerian Court is limited territorially. Although Nigerian Courts have the power to make Worldwide Freezing Orders (WFO), the court is beset with the problem of enforcement. While there is a system of enforcement of foreign judgments in most countries, similar provisions may not be available for interim orders. However, certain countries like the UK would be willing to enforce a WFO interim order. Nevertheless, WFOs are sparingly granted by the courts. Although, in EFCC vs. Akingbola[vi], a case of financial crime, the Federal High Court granted a WFO on assets in Lagos, Accra in the Republic of Ghana, England, and Dubai in the United Arab Emirate, it however remains doubtful how the court would respond to an application for WFO in a civil context.
Timeline for Obtaining Mareva Orders
The timeline for Obtaining a Mareva Injunction can be fast as possible. It can be obtained immediately a case is filed through ex-parte and before the defendant debtor is served with the court processes. The motion on notice will make the order interlocutory on failure of the debtor to satisfy the court that the order is unwarranted in the circumstances.
Conclusion
In conclusion, the goal of undertaking any legal process is to achieve the desired results. In debt recovery matters using the litigation process, the goal of the creditor is not only to be pronounced victorious but also to be able to enforce the judgment and actually recover the debt. The ability of the debtor to frustrate this end result by dissipating his assets poses a threat to the creditor achieving his aim. This therefore warrants the creditor to be circumspect and two steps ahead of his adversary. By employing mareva injunction, the creditor ensures that the debtor is unable to deal with his assets while the case subsists, thus giving the creditor an assurance of satisfaction of the judgment sum in the event that he gets a favourable judgment in the case.
[i] (1975) 2 Lloyd’s Report 509 per Lord Denning, MR at 510
[ii] (1980) 3 AER 409
[iii] (1989) 1 NWLR (Pt.98) P.419 at P.450, 465
[iv] (1992) 5 NWLR (PT.239) 1 @ 25
[v] [2000] 13 NWLR (pt.685) 483 C.A
[vi] https://allafrica.com/stories/201001041610.html
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