IRISH EQUITY LAW
IRISH EQUITY LAW
The Mareva injunction is a very powerful remedy which if improperly invoked will bring about an injustice, something that it was designed to prevent’
- Definition of Mareva Injunction:
A Mareva Injunction is defined “as an injunction which freezes a defendant’s assets, preventing their dissipation, and ensuring that they shall be available to the plaintiff, in the event that the plaintiff succeeds in the trial of action.”
In the case of Bank Mellat v Nikpour, the judge described Mareva injunction as “one of the law’s two nuclear weapons”. In O’Mahoney v Horgan O’Flaherty J stated that “It needs to be emphasised that the Mareva injunction is a very powerful remedy which if improperly invoked will bring about an injustice, something that it was designed to prevent.”
- Historical Background vis-vis case law analysis
Prior to the Nippon’s case, it was feasible for an organization against which action was bought to remove all of its assets to any other country. The defendants indulged in delaying tactics by either disposing off the assets or transferring it to a third party or transferring it to another country. This position was substantially altered and a reform was bought about in the Nippon’s case.
- Nippon’s Case:
Facts: In this case, two Greek men hired a ship from a Japanese owner as charter parties. Further, they did not pay the charges. Furthermore, they closed their offices and disappeared. However, they had funds in a London Bank account. In this regard, the Japanese owners anticipated that Greek man would transfer the funds outside the country; probably in a Swiss Bank account where it would not be feasible for them to bring action. The Solicitors for the Japanese parties issued a writ for service outside the jurisdiction and before the write could be served applied to the courts in England for injunction so as to prevent the defendants from transferring their funds outside England. The injunction was refused by Mr. Justice Donaldson on account of the fact that an injunction of this nature was never issued prior in England. The injunction was however granted by the appeal court by Lord Denning.
Decision: Lord Denning, inter alia, held that “there is a strong prima facie case that the hire is owning and unpaid. If an injunction is not granted, these moneys may be removed from the jurisdiction and the ship owners will have the greatest difficulty in recovering them.” It was further held that, “On notice being given, the banks will not part with the money. If the defendants wish to change this order, they can, of course, apply to discharge it, if they have grounds for doing so.”
- Mareva Compania: This case can be considered as one of the most important case on this subject. On the basis of the facts and circumstances of this case, it was held by Lord Denning that the “the principle applies to a creditor who has a right to be paid the debt owing to him even before he has established his right by getting judgment for it. 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 proper case to grant interlocutory injunction so as to prevent him from disposing off his assets.
- Operation of the Mavera injunction
It has been rightly pointed out that “the courts would be forthcoming to grant freezing order so as to ensure recovery of money. This has consequentially led to an increase in the grant of Mareva injunctions' in the Irish courts off lately. The Mareva injunction functions and operates by effectively freezing the defendants assets in such circumstances where the plaintiff apprehends that the defendants may dissipate the asset so as to defeat plaintiff’s claim.
However, there are exceptions to the rule set out by Mareva Injunction. These exceptions have evolved with a view to protect the third parties who may have had an adverse affect on account of such freezing orders. For instance, in this regard in case of Cretanor Maritime Co. Ltd, it was held that “a non-party who is affected by the term of the freezing injunction can apply for a variation without intervening provided they have clear interest.
In Third Chandris Shipping Corporation v Unimarine SA  QB 645 at 671–672 it was held that “there must be facts from which “a prudent, sensible commercial man, can properly infer a danger of default”.
The following five guideline were laid down in this Chandris case,
- the plaintiff should make full and frank disclosure of all matter in his knowledge which it is material for a judge to know;
- the plaintiff should give the particulars of his case against the defendant, stating the ground of his claim and the amount, and fairly stating the points made by it against the defendant.”
- The plaintiff must give some grounds for believing that the defendant has asset within the jurisdiction. The existence of a bank account is normally sufficient.”
- The plaintiff must give some grounds for believing that there is a risk of the assets being dissipated.
- The plaintiff must give an undertaking in damages in case he must fail.
In the case of O’Mahoney, it appeared that the Supreme Court was in favour of good arguable case test. In the foregoing case, it was held by the Supreme Court that the plaintiff has to prove that there is indeed a real risk of the defendant dissipating off the assets and that the plaintiff has a good and arguable case entitling a grant of injunction in his favour.
It can be observed that during the initial stage of development of law on this subject, the justification for the grant of the Mareva injunction was exceptionally strong, case of the plaintiff. However, as the time progressed, the conditions for the grant of such injunctions have been made less stringent and as set out in the O’Mahoney case, the plaintiff should pass the “good arguable case test” There are other determining factors which are taken into consideration prior to the grant of this injunction, one of them being “a substantial question to be tried” as pointed out in the Countyglen plc v Carway case. The moot question for the judiciary takes into consideration is that no innocent third party is affected by the courts undue action. In light of the foregoing, the judiciary has set out guiding principles through series of judicial pronouncements. The doctrine of “full and fair” disclosure is one of such guideline. In Bambrick v Cobley, it was held that “the court retains a discretion to refuse to discharge the order where there has been a failure to disclose all material facts”. Further Lord Denning has also, in a series of pronouncements, pressed for the necessity of making true, accurate and fair disclosure concerning all the particulars supporting and substantiating the stand that the defendant has assets within the jurisdiction and is not attempting to dissipate them.
The application for the Mareva injunction is made on ex parte basis. In light of the foregoing, the defendant is not made aware prior to the decision being taken. This is to ensure that the defendant does not dissipate any asset. Nevertheless, this cripples the other party’s right to make appropriate representation.
There are judicial pronouncements which are vclearly against the prerequisites for granting a Mareva Injunction. The Fleming case is a moot example on this point.
In an article by Philip Burk, the facts of the case are aptly summarized as follows: “The Fleming case arose out of an agreement between a trade union and the defendants concerning redundancies in the work force. On being informed of the defendants’ intention to close their Limerick plant, and being unhappy with the redundancy package negotiated by their union, the plaintiffs (a number of individuals working in the plant) served strike notice on the defendants and applied for a Mareva injunction to restrain the defendants from reducing their assets below £84,000. In refusing the relief sought, the trial judge stated that the conduct of the plaintiffs had played an important role. They had operated a number of sit-ins at the Dublin premises of Ranks, which had caused a large amount of stock on the premises to rot.
Held: Philip Burk further states that “McWilliam J, while refusing to grant a Mareva injunction on the facts, nonetheless accepted that the types of cases in which Mareva injunctions may be granted are not confined to those against defendants resident outside the jurisdiction”.
Further, in the case of “Tracey v Bowen, while ascertaining risk, the court shall take the entire factual matrix into consideration. In such instances, the courts will more often than not do away with the necessity of specifically showing the risk of dissipation of assets where the court apprehends that there is a risk of dishonesty or fraud.
Mavera Injunction with statute
Council Regulation (EC) 44/2001: In order to address the challenges faced while granting Mareva Injunction vis-à-vis foreign jurisdiction, the above regulation was promulgated. The main purpose of this Regulation “to unify the rules of conflict of jurisdiction in civil and commercial matters and to simplify the formalities with a view to rapid and simple recognition and enforcement of judgments from Member States bound by this Regulation.
Further, Section 13(1) of the Jurisdiction of Courts and Enforcement of Judgments Act 1998 aids in the recognition and enforcement of Mareva injunctions granted in recognized states of the 1968 Convention. This section, inter alia, provides that provides that the courts of this jurisdiction have the power to grant provisional, including protective measures where proceedings have been commenced or are about to be commenced in another member state, even where the plaintiff has no independent cause of action within the jurisdiction.
International Mareva Injunction:
There are many judicial pronouncements which indicates exercise of extra territorial jurisdiction while granting Mareva injunction. The case of Republic of Haiti v Duvalier  QB 202 is a case in point which shows the exercise of extra territorial jurisdiction whilst granting Mareva injunction. However, the courts would certainly take into consideration the implications such orders may have on innocent third parties. The courts would also take into consideration the prejudice that would be caused to the defendant by considering the question of balance of convenience.
- It appears that the jurisprudence behind Mareva injunction has evolved over a period of time on account of strong commercial consideration vis-a-vis a need to protect a claimant/creditor from defaulting defendant/debtor.
- However, in an attempt to protect third parties, adequate exceptions are being carved out through various judicial pronouncements;
- The courts globally passes order have extra territorial reach/
- There are hosts of statutory developments vis-a-vis Mareva injunction for the purpose of bringing about effective enforcement.
- Robert Clark, Maire Ni Shuilleabhain, Brenda Ní Shúilleabháin “Intellectual Property Law in Ireland” (Chapter 4-Page 425-429)
-  FSR 87 at 92
- O’Mahoney v Horgan  1 ILRM 161
- Nippon Yusen Kaisha v. Karageorgis  1 WLR 1093
- Nippon Yusen Kaisha v. Karageorgis  1 WLR 1093
- Mareva Compania Naviera SA v. International Bulkcarriers SA  2 Lloyd’s Rep. 509
- Cretanor Maritime Co. Ltd v Irish Marine Management Ltd  1 WLR 966. Case 4 Dowley v O’ Brien  IEHC 566
- Barrister and Course Director of the Bar Professional Training Course the City Law School Stuart Sime, Stuart Sime. “Practical Approach to Civil Procedure”
- Tracy v Bowen  2 IR 528
- Council Regulation (EC) 44/2001
- Countyglen plc v Carway  1 ILRM 481
- Bambrick V Cobley  ILRM 81
- Equity And The Law Of Trust In The Republic Of Ireland, Ronan Keane, Bloomsbury
- Professional, Second Edition, Chapter 15.
- Fleming and Others v Ranks (Ireland) Ltd (1983), Retrieved from http://www.citycolleges.ie/wp/wp-content/uploads/CITY-COLLEGES-FE1-NIGHT-BEFORE-NOTES-March-2012.pdf