7. What can the plaintiff do if the defendant is likely to dispose of his assets improperly before the case proceeds to trial?
In such case, the plaintiff may consider applying for a Mareva injunction.
A Mareva injunction is a form of interlocutory injunction which is a court order made before trial to keep matters in their original state until the trial can be heard. It has the effect of restraining the defendant from disposing of, or dissipating, his assets before the court delivers the judgment at trial.
In a very exceptional case, the court may even grant a world-wide Mareva injunction that affects the defendant's assets abroad.
Breach of a Mareva injunction by the defendant may lead to imprisonment.
The initial application for a Mareva injunction is usually made ex parte (i.e. without giving notice to the defendant). This is because knowledge by the defendant that the application is processing may well defeat the original purpose which the plaintiff is trying to achieve. The application procedure to be followed has been prescribed in Practice Direction 11.1 (Ex Parte, Interim and Interlocutory Applications for Injunctions) and must be carefully studied. It is important to note that:
- the plaintiff, as the applicant for an ex parte Mareva injunction, must ensure that he makes full and frank disclosure of all the important matters within his knowledge; and
- if the Mareva injunction is granted, the plaintiff will normally be required to give some undertakings, one of which being an undertaking in damages/compensation (i.e. a promise to pay the defendant compensation for any loss incurred as a result of the injunction if the plaintiff later fails to prove that he is entitled to such an injunction order). Sometimes the plaintiff may also have to pay reasonable costs to any third parties (e.g. banks) who have to check whether they hold any assets related to the case. Therefore, it is not rational for the plaintiff to make such an application if the amount or value of the assets under dispute is small .
The court will grant a Mareva injunction if the plaintiff can show that:
- there is a good arguable case on a 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 or secretion of assets by the defendant before the court can make the final judgment at the coming trial.
(Note: The requirements for the grant of a Mareva injunction have been effectively summarized in Practice Direction 11.2 (Mareva Injunctions and Anton Piller Orders). The Practice Direction also provides the standard form for use on an application for a Mareva injunction. It is therefore vital to pay close attention to the Practice Direction and legal advice must be sought if you have further queries.)
A Mareva injunction granted ex parte will subsequently be heard at an inter-partes hearing (i.e. a hearing involving all parties, after notice has been given to the defendant) on a "return date". At the hearing, the defendant may apply to have the injunction set aside (for example, on the ground that the injunction was obtained as a result of important non-disclosure of information by the plaintiff). If the Mareva injunction is granted, the defendant could still withdraw a certain sum of money for daily living expenses and for carrying on his existing business (if any).