The Mareva Injunction in a nutshell

In a disturbingly common trend whereby plaintiffs are granted with a “hollow judgment”, where they are granted the relief they seek by the court, but only to find themselves with no assets to attach, the Mareva injunction provides a helping hand.

The Mareva injunction stems from the English legal system in terms of a 1795 judgment by Lord Denning, which was received into South African law as a result of the British colonisation of the Cape Colony, which coincidentally also commenced in 1795. The relevance of the Mareva principle is that of injunctive relief, whereby property of a debtor may be attached if the defendant threatens to do away with his or her assets. The Mareva injunction is also referred to as an anti-dissipation order.

Injunctive relief, in its most simplistic definition, is an emergency application to court to prevent one’s legal rights from being infringed, freeze assets or to preserve property or evidence. It is generally launched on an urgent basis. This article explores the current legal position of the Mareva injunction within the South African legal system.

A mechanism which is similarly classed under injunctive relief is an Anton Piller order. However, an Anton Piller order prevents a defendant from destroying evidence or documents, whereas the Mareva injunction is aimed at preventing a debtor from disposing or dissipating assets that would frustrate a potential judgment. Both are extraordinary remedies.

A starting point is to elaborate on the concept of an interdict which, in short, is to prohibit a person from doing something. The purpose therefore is to freeze the position until the court decides where the right lies, at which point the interim interdict ceases to operate.[1]

In the case of an interdict, a court acts on balance of convenience, which can be judged by whether there is a greater possible prejudice to a respondent than to the applicant seeking the order. This is as is set out in Webster v Mitchell 1948 (1) SA 1186 (W), where the test is also laid out:

• A prima facie right even if it subject to some doubt;
• A reasonable apprehension of irreparable and imminent harm to the right if an interim interdict is not granted;
• The balance of convenience must favour the granting of an interdict; and lastly
• The applicant must have no other remedy.[2]

In the case of Nippon Yusen Kaisha v Karageorgise and Another [1975] 3 All ER 282, the Mareva principle was birthed. The plaintiff, being a ship owner, sought an injunction against the defendant, a charterer, for failing to pay back a large sum of money that was owed to the ship owner. The basis for the injunction was that the ship owner wanted to secure the assets or funds of the charterer. The Court of Appeal, subsequent to a refusal in the court a quo, Lord Denning MR held that:

            “We are told that an injunction of this kind has never been done before.  It has

            Never been the practice of the English Court to seize assets of a defendant in

            advance of judgement, or to restrain the disposal of them. The time has come

            when we should revise our practice. There is no reason why the High Court or

            this court should not make an order such as is asked here. [3]

 Shortly thereafter, in Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyds Rep 509, from which the principle ultimately received its name, Lord Denning held that “if it appears that a 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 disposing of those assets.[4]

I pause to mention that the Mareva injunction and the Anton Piller order rules are seen as the nuclear weapons of commercial litigation and can be beneficial or even crucial if properly followed through. As a tactic, with appropriate preparation, the Mareva injunction can be beneficial to a plaintiff as to prevent a debtor intentionally concealing assets to frustrate the recovery of funds following a judgment.

The intention of a debtor is an imperative factor to establish when launching the Mareva injunction. It has been to be shown, by an applicant, that the debtor does indeed intend on disposing of his/her property in a manner that will defeat any right to levy execution. However, fear in itself is insufficient to prove intention.

In considering whether to launch the Mareva injunction, litigators should consider various factors such as having a proper clear case, which is good in law, and meeting the requirements of an interdict in order to protect assets in pending litigation. The assets which may be frozen can be tangible or intangible and include: bank accounts, motor vehicles, jewellery and other valuables. The Mareva injunction is a proactive remedy and should be considered where a suspicion of unscrupulous opponents arises.

The Mareva injunction is an instrumental tool for litigants to protect the best interests of their client. In the growing age of business transactions, more and more debtors will seek to transfer property and assets as to avoid being executed upon, and, in this instance, the Mareva injunction as a weapon may be called upon to ensure that the status quo is preserved between parties in litigation, pending final determination of the merits of a matter. In this way, a “hollow judgment” can be entirely avoided.

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice.