An extract from The Asset Tracing and Recovery Review, 8th Edition

Seizure and evidence

i Securing assets and proceeds

In relation to civil proceedings, there are several forms of interim relief available in Malaysia to prevent the dissipation of assets and to secure the same from those alleged to be involved in the fraud complained of.

Mareva injunction

A Mareva injunction is a court order preventing a defendant from dealing with, moving or disposing his or her assets. Essentially, it means that the defendant's assets are frozen such that any attempt to transfer or to move out his or her assets would be a breach of the court's order and would be subjected to contempt of court proceedings. The freezing order would also be binding on a third party insofar as the third party is served with the order and subsequently assists the defendant in transferring or moving his or her assets. A breach of the order by the third party would also open up the third party to a contempt of court proceeding. In practice, therefore, Mareva injunctions are routinely served on banks, which would result in banks taking immediate steps to freeze the accounts that a defendant may have with them.

In Malaysia, a Mareva injunction would also require the defendant to make disclosure of all assets owned, whether within or outside of Malaysia, and may also, in certain circumstances, require third parties to disclose information relating to the defendant's assets held by them.

Because of the far-reaching consequences of a Mareva injunction, the plaintiff must satisfy the following requirements before the court would grant such order:

  1. the plaintiff must have a good arguable case;
  2. the defendant must have assets within the jurisdiction;
  3. there is evidence of a real risk of dissipation or removal of the defendant's assets before judgment; and
  4. the balance of convenience leans in favour of the plaintiff and the granting of a Mareva injunction.

It is to be noted that the Malaysian courts have accepted that the risk of dissipation of assets is always there where it can be shown that a defendant had acted in want of good faith, maintains foreign accounts and there has been evidence of movement of funds into foreign accounts.

A Mareva injunction application may be made ex parte but will only be valid for 21 days from the date the order was granted and an inter partes hearing of the application must be scheduled within 14 days from the granting of the ex parte order. Where the application is made ex parte, the plaintiff has an obligation to make full and frank disclosure of all relevant material facts, including those that are not in the plaintiff's favour. A failure to do so may result in the order being discharged and set aside. A plaintiff seeking a Mareva injunction must also give an undertaking to pay to the defendant any damages that the defendant may suffer as a result of the order if it later transpires that the order ought not to have been granted.

Proprietary injunction

A plaintiff may also seek to preserve a specific or particular asset of the defendant in which the plaintiff is claiming a proprietary interest. To apply for and obtain a proprietary injunction, a plaintiff will have to satisfy the relevant test in the case of American Cynamid v. Ethicon Limited as adopted by the Malaysian courts in the case of Keet Gerald Francis Noel John v. Mohd Noor bin Abdullah, which requires the plaintiff to establish the following:

  1. there is a bona fide serious issue to be tried;
  2. the balance of convenience leans in favour of granting the injunction; and
  3. that damages would not be an adequate remedy.

It is not uncommon for a proprietary injunction to be granted to preserve the assets of a victim of a fraudulent scam that had fallen into the hands of a third party, and such an injunction would be granted even though the assets sought to be preserved are monetary in nature.

ii Obtaining evidenceAnton Piller order

Where a plaintiff is concerned that a defendant may hide or destroy evidence that is relevant to the plaintiff's claim, the plaintiff may seek an injunction requiring the defendant to permit the plaintiff to enter into the defendant's premises to enable an inspection, seizure and removal of documents relating to the plaintiff's claim. This type of injunction is more commonly known as an Anton Piller order.

To obtain an Anton Piller order, the plaintiff must establish that:

  1. there is an extremely strong prima facie case;
  2. the damage, potential or actual, must be very serious for the plaintiff; and
  3. there must be clear evidence that the defendant has in its possession incriminating documents, and that there is a real possibility that the defendant may destroy such material before any inter partes applications can be made.

As with the Mareva injunction, the application is to be made with a full and frank disclosure, and an undertaking as to damages must be given. The granting of an Anton Piller order ex parte is subject to a subsequent application to set aside the order and claim for damages that may be filed by the defendant.

Bankers Trust order

In Malaysia, a plaintiff may also apply for a disclosure order against a third-party bank for information pertaining to a defendant's bank account known as a Bankers Trust order, named after the English case that established the jurisdiction and power of a court to make such a disclosure order. This disclosure would also be a permitted disclosure pursuant to Section 134 of and Schedule 11 to the Financial Services Act 2013 and Order 24 Rule 7A of the Rules of Court 2012. This disclosure order is most commonly applied by the plaintiff in aid of the plaintiff's tracing exercise to discover the whereabouts of monies claimed by the plaintiff as forming part of its claim against the defendant.

Norwich Pharmacal order

Before commencing an action in court, a proposed plaintiff may apply for what is commonly called a Norwich Pharmacal order from the court to obtain documents from a third party with the aim of identifying the wrongdoer if the plaintiff was uncertain as to the parties that may be involved in the wrongdoing committed against the plaintiff.

Strict conditions must be satisfied to ensure that such disclosure application do not become a fishing expedition. In Infoline Sdn Bhd v. Benjamin Lim Kheng Hoe, the Court of Appeal had elaborated and held that:

[T]he respondent must show that the discovery is necessarily required even before an action is initiated as it is precisely to enable the respondent to decide whether he can even commence action against the appellant in particular, to start with. And if the information revealed from that discovery can determine or assist in reaching an answer to that predicament, then the order ought to be made.'

The procedures and documents that are required for such application have now been embodied into the Rules of Court 2012 and are as set out in Order 24 Rule 7A of the Rules of Court 2012. To obtain such an order, the proposed plaintiff must satisfy the requirement under Order 24 Rule 7A(3) of the Rules of Court 2012, and must essentially state the following in the proposed plaintiff's affidavit in support of the application:

  1. the documents sought for discovery;
  2. sufficient and material facts to show that the defendant is in possession, power or custody of the documents concerned, or is likely to have the documents;
  3. sufficient facts to show the likelihood of the defendant being a party named in the subsequent legal action; and
  4. the relevance of the documents sought for discovery.

Order 24 Rule 7A (9) of the Rules of Court 2012 further provides that where the order is made by the court, the person against whom the order was made shall be entitled to his or costs of the application and of complying with any order made on an indemnity basis unless the court orders otherwise.