In a recent Court of Appeal (COA) case of Lee Kai Wuen & Anor v Lee Yee Wuen [2022] 7 CLJ 505, the COA had clarified several principles relating to Mareva injunction.
The COA dealt with, amongst others, the following issues relating to Mareva injunction:
- How is a good arguable case established?
- When can the risk of dissipation of assets be presumed?
- Is ‘balance of convenience’ the fourth criteria for a grant of a Mareva injunction?
Facts
Lee Yee Wuen, the Respondent, brought an originating summons against her brother, the first Appellant (Lee Kai Wuen), her mother, the second Appellant and Kien Yiap Trading Sdn Bhd (Company), the third Appellant, in respect of the affairs of the Company.
This was an appeal by the Appellants against the grant of an interlocutory Mareva injunction by the High Court on 15.8.2020.
The material parts of the Mareva injunction granted were:
- That the Appellants be prohibited from removing from Malaysia any of their assets which are in Malaysia up to a value of RM3,412,829.41 (Mareva sum).
- The prohibition extends to real properties, credit balance or monies held at any financial institutions including bank accounts.
Findings of the Court
- Good arguable case
To establish a good arguable case, it was not necessary that the Applicant’s case have a better than 50% chance of success, although it has to be more than barely capable of serious argument
The High Court judge concluded that the Respondent had established the requirement of a good arguable case because:
- The High Court judge doubted the contention that the arrangement for monies due to the Company were paid into Joint Accounts to meet the financial obligations of the Company due to the demise of the deceased, who previously owned 51% shares in the Company. If such were the case, the arrangement should have been temporary, not continued until December 2018; and
- The Company’s monthly commitments were RM115,790.75, this amount was in stark contrast to the amount of monies diverted into the Joint Accounts.
The COA agreed with the High Court because based on the facts of the case, there were serious doubts that all monies due to the company that were paid into the Joint Accounts were used for the benefit of the company.
- Risk of Dissipation of Assets
The High Court took the view that if there is misappropriation, dishonesty or lack of probity, the risk of dissipation of assets can be presumed. The High Court held that since the High Court had earlier found a good and arguable case for misappropriation and the first Appellant had breached his director’s duty, the High Court considered these acts in presuming a real risk of dissipation.
However, the COA disagreed with the High Court and clarified that:
- The risk of dissipation must be inferred from the circumstances of the case (Pharmmalaysia Bhd v. Dinesh Kumar Jashbhai Nagjibha Patel & Ors [2004] 7 CLJ 465 at 550) – rather than presumed.
- There must either be direct evidence of a real risk of dissipation of assets or circumstances in evidence that warrants an inference of such a risk (Ninemia Maritime Corporation v. Trave Schiffahrtsgesellschaft m.b.H. & Co KG; The Nidersachsen [1984] 1 All ER 398).
- The ingredient is not merely the risk of dissipation, but a ‘real risk’ where it cannot be based merely on arguable allegations.
- Although the High Court’s reasoning suggests that the risk was inferred from ‘acts’ referred to, the COA viewed that to infer a real risk of dissipation merely because a good arguable case has been made out is a step too far. This tantamounts to conflating two separate ingredients into one.
There was no evidence that the Appellants had misappropriated the monies transferred into the joint accounts for their own benefit. No evidence or particulars was provided concerning how much was misappropriated by the appellants. Therefore, the High Court judge had erred in presuming or inferring that there was a real risk of dissipation.
- Balance of Convenience
The COA held that balance of convenience is NOT a criterion that needs to be considered when considering the grant of a Mareva injunction.
In cases where the balance of convenience vis-à-vis the grant of a Mareva injunction was considered, there is an error in conflating the requirements for the grant of non Mareva type interlocutory injunctions with Mareva injunctions.
Balance of convenience does not need to be considered because seeking to defeat a judgement of the court by disposing assets out of jurisdiction cannot be countenanced by any inconvenience.
Finally, the COA allowed the appeal because the High Court had erred in law when it held that there was a real risk of dissipation of assets.
If you have any queries or questions, you may address them to: Wong Sheng Wei ([email protected])