An asset-freezing or Mareva injunction is a powerful litigation weapon where it is suspected that a wrongdoer has misappropriated assets and may be putting them beyond the plaintiff 's reach. The High Court recently reviewed the criteria applied in deciding whether to grant such an injunction.
The Supreme Court in the 1990s1 endorsed an approach requiring the plaintiff to meet five criteria for a Mareva injunction. The plaintiff must:
a) make full and frank disclosure of all material matters in his knowledge;
b) give particulars of his claims, showing the grounds and amount of his claims and fairly setting out points made against his claims by the defendant;
c) give grounds for believing that the defendant has assets susceptible to freezing by an Irish court: the existence of an Irish bank account is normally sufficient;
d) give grounds for believing that there is a risk of the assets being removed or dissipated, and
e) give an undertaking in damages, in case his claims fail.
Additionally, the Supreme Court required a combination of two circumstances: (i) that the plaintiff has an arguable case that his claims will succeed, and (ii) that the
anticipated disposal of the defendant's assets is to prevent the plaintiff from recovering damages and not merely for the purpose of carrying on a business or discharging debts.
In Bonice Property Corp and others v Oakes, the plaintiffs owned two castles in Cork and had engaged the defendant to manage the restoration and maintenance of both. The defendant was responsible for paying tradesmen, labourers and contractors engaged on the restoration. She kept notebooks recording those payments. The plaintiffs made transfers into her bank account in line with payment summaries she provided and intermittently reconciled those payments with records of work done.
An employee of the plaintiffs formed a belief that discrepancies existed between what was recorded in the defendant's notebooks and what the workers concerned told him they had actually received. The plaintiffs made further inquiries, and alleged that the defendant had acted fraudulently by obtaining reimbursement over a significant period for sums which were not due to workers whose work was claimed for. The defendant denied these allegations.
In assessing criteria b to e set out above, the court was satisfied that the plaintiffs had adequately particularised the grounds and the amount of the claim and fairly identified potential defences. The presence of freezable assets, including an Irish bank account, was not in issue. As regards risk of dissipation, the court noted authority that "...direct evidence of an intention to evade will rarely be available at the interlocutory stage" so that where there is a good arguable case that the defendant has acted fraudulently or dishonestly, further specific evidence on risk of dissipation is unnecessary for the court to be accept that there is sufficient risk to justify granting Mareva relief. The court identified four evidentiary factors from which it could infer that, if not restrained, there was a risk of dissipation of the defendant's assets to defeat the plaintiffs' claims. The plaintiffs also gave an adequate undertaking in damages.
The defendant raised issues about whether the plaintiffs had satisfied the duty to make full and frank disclosure in applying for the interim order. Principal among the criticisms was the plaintiffs' failure to exhibit copies of the notebooks. The court rejected this criticism as essentially aimed at analysis of the notebooks' contents, which would ultimately have to be undertaken at trial by reference to other admissible evidence of the payments actually received by the workers. Though not alleging bad faith non-disclosure, the defendant submitted that there was material nondisclosure sufficient to warrant refusal of the injunction. The court held that the test on non-disclosure should have regard to the fact that in urgent interim applications there will inevitably be "haste in the preparation of affidavits and exhibits", and that it should assess in deciding on whether to discharge an interim order or to grant or refuse interlocutory relief whether the process has "been abused to the extent of obtaining an order under false pretence". There was no such abuse in this case.
Finally, the defendant argued that the plaintiffs had not shown a good arguable case on the evidence, emphasising that there was no direct (affidavit) evidence from any of the workers affected. The plaintiffs had relied on indirect evidence, including hearsay, which is permissible in Ireland in interlocutory applications. This argument failed as the defendant had herself adduced little or no evidence to support her denial of the claims: the court concluded that "...it is clear that indirect evidence, where admissible, may be, and frequently is, perfectly sufficient to make out a claim, especially in the absence of any significant countervailing evidence". Accordingly, the plaintiffs were entitled to an interlocutory Mareva injunction.
The Mareva injunction is a powerful litigation tool, but it is draconian and is not granted lightly. A plaintiff cannot expect to succeed in a Mareva application based only on suspicion, however well-founded. Before a Mareva can be granted, the plaintiff must clearly particularise its own claim, and show that it has a good arguable case. Work needs to be done to establish and sufficiently identify assets the defendant has in Ireland or susceptible to an Irish court order, and to clearly identify grounds for believing there is a risk they will be dissipated (of which indicators of dishonesty by the defendant will be powerful evidence). Finally, the plaintiff should lay all of his cards on the table by making full and frank disclosure of all relevant matters, even if they are unhelpful; the consequences of having an application refused or an interim Mareva injunction set aside for non-disclosure are likely to be catastrophic to the plaintiff 's claim, so tactical non-disclosure is not a risk worth taking. Before moving, the plaintiff must rapidly assemble sufficient cogent evidence, which may include hearsay, then lay it out fairly in court.