MAREVA INJUNCTION: COURT OF APPEAL MOVES TO CHECK ARBITRARY USE BY CREDITORS

Introduction

A creditor is exposed to several kinds of challenges in the attempt to recover debts. One of such challenges could be in this form – While the creditor is making moves to recover the debt, especially by court action, the debtor might, in a bid to save the debtor’s assets, secretly move the assets outside the jurisdiction of the court. Thus, when the creditor secures a favourable judgment, there will be no assets to latch on for the purpose of recovery.

In order to counter such clever moves by some debtors, the court, in the spirit of equity (fairness) invented the concept of Mareva Injunction. By this, the court makes an order restraining the debtor from moving away available assets or disposing of or dissipating the assets pending the determination of the case or pending repayment of the debt. The order may restrain a defendant, who is not within jurisdiction but who has assets within, from removing such assets from within jurisdiction or disposing of them.

The order can be extensive. For instance, a bank warehousing funds belonging to the debtor may be restrained from allowing the debtor to tamper with such funds. Generally, the injunction may be granted against any person who is in possession of the debtor’s assets.

However, just like in virtually every form of injunction, the courts are only permitted to grant Mareva Injunction if certain preconditions are met. The conditions are placed there to check potential abuse of the injunctive relief. Therefore, the courts are to be guided by these conditions. Where the creditor, as applicant, fulfills the conditions, then Mareva Injunction will be granted. Otherwise, it will be refused.

In a recent case, the Court of Appeal was called upon to decide whether the trial Court exercised its discretion judicially and judiciously when it granted the Mareva Injunction in the case. This was in the case of Haladu v. Access Bank Plc. [2021] 13 NWLR (Pt. 1794) 434.

Haladu v. Access Bank Plc

In the case, the creditor, Access Bank Plc (Respondent), applied for a Mareva Injunction against the alleged debtor, Andrew Haladu (Appellant) restraining his bankers from allowing him access to funds standing to his credit. The Bank was aiming to recover the sum of over N6 Billion allegedly owed by one H. A. R. Petroleum Services Ltd and which was allegedly guaranteed by Mr. Haladu. Mr. Haladu denied any indebtedness.

The trial Court granted the interlocutory Mareva Injunction on 31 May 2017 pending the hearing and determination of the substantive suit. The trial Court, in restraining the banks as prayed by Access Bank, directed that where it is found that the Appellant does not maintain an account with any of the banks named in the action, Access Bank shall bear the costs (if any) of bringing such banks to the court. 

The Appellant challenged the Order contending that the Bank did not fulfill some of the preconditions for the grant of the Order to wit – That the Bank failed to give an undertaking as to damages. By this undertaking, the Bank, as applicant, was supposed to undertake to pay damages to the debtor in the event that it turns out the order was not supposed to be made in the first place. The Bank was also said to have misled the court when it stated, without proof, that the debtor was making positive moves to move his assets outside the jurisdiction of the Court.

Court of Appeal decides

The Court of Appeal took time to consider the surrounding circumstances and the arguments. In arriving at its decision on 25 March 2021, the Court of Appeal found that the Bank failed to give an undertaking as to damages. There was no where in the supporting Affidavit where the undertaking featured. Even when the trial Court ordered that the undertaking should be made subsequent to the grant of the Order, there was no evidence that it was made.

But that’s not even the only problem. The Court of Appeal found that, as compelling as the allegations of the Bank against the Appellant was, as it pertains to the alleged transfer of Appellant’s funds outside jurisdiction, the Court found nothing to support the allegation in the face of the clear denials by the Appellant. In particular, the Bank alleged that the Appellant and his family members have strong ties abroad and will have no difficulty transferring funds. The Bank also alleged that the Appellant has been transferring his funds outside the country. As a matter of fact, the Bank told the Court that aside the disposable funds of the Appellant in the banks, it has no information regarding any other assets of the Appellant. The Appellant denied this, stating that there was nothing to show in his exhibited account statements that he was transferring funds. The Bank was unable to furnish any proof to the countrary.

Without any difficulty, the Court of Appeal held that the decision of the trial Court in making the interlocutory order of Mareva Injunction in favour of the Bank was perverse. Ojo, JCA explained (at page 465):

The finding of the trial Court that the Respondent [Access Bank Plc] established that there is a real and imminent risk of the Appellant moving his assets from its jurisdiction is perverse. The Respondent also failed to give undertaking as to damages.

Thoughts

Alleged transafsr of funds 

As worthy as the decision of the Court of Appeal appears, it is important to note that it is not often easy to have a direct evidence of movement of assets outside jurisdiction.

One of the conditions is that there must be real and imminent risk that the defendant “will” move the assets or dissipate same.

In this case, the Bank tried to lead evidence of imminent danger that the Appellant might move his funds. But the bulk of it was on speculations that seemed persuasive. For instance, it was alleged that the Appellant, his wife and children are directors and shareholders of a company in the United Kingdom and that they are frequent visitors and residents of the UK and other countries in Europe. It was not particularly clear whether the Appellant disputed this.

But the Appellant vehemently disputed the Bank’s allegation that he was transferring funds out of jurisdiction. The Bank alleged that its discoveries concerning the Respondent were the product of discreet investigations.

It remains a disturbing finding that the direct claim by the Bank that the Appellant was transferring funds was not positively proved. That appears to be a bare claim in the face of the Appellant’s denial which the Bank had no further response to. 

Undertaking as to damages

Regarding the undertaking as to damages, the issue of failure to make the undertaking might be salvaged. Interestingly, the Bank had made an undertaking as to damages pursuant to interim order of Marva Injunction earlier made on 24 August 2016. The Order which was the subject of this appeal was the interlocutory Order of Mareva Injunction made on 31 May 2017. The trial Court ordered for a fresh undertaking to be made within 72 hours. But the Bank failed. 

The Court of Appeal reasoned that since the interim Order of 24 August 2016 lapsed after 7 days on 31 August 2016, consequently, the Bank’s undertaking as to damages also lapsed. This means that the Bank was bound to make a fresh undertaking as to damages in line with the interlocutory Order made on 31 May 2017 which it failed to make. 

It may not be totally out of place if in making the interlocutory Order of 31 May 2017, the trial Court directs that the Bank’s earlier undertaking as to damages subsists. 

Furthermore, the Court of Appeal can hold that for the purpose of the injunction, that earlier undertaking remains valid. Alternatively, the Court of Appeal can make fresh Order that a another undertaking should be filed.

Besides, it goes without saying, really. Where there is a wrong, there is a remedy. If it appears that the Order ought not to have been made, the Bank, as an applicant and a beneficiary of the Order is bound to pay compensation to the debtor, whether or not the Bank signs any undertaking expressly. This can be reasonably implied. 

Give or take, it is difficult to fault the Court of Appeal on its ultimate decision to set aside the Order.

For the purpose of clarity, the following are the preconditions to be fulfilled if you must command the equitable jurisdiction of the court to grant you a Mareva Injunction. The applicant must show that:

1. The applicant has a cause of action against the defendant which is justiciable.

2. There is a real and imminent risk of the defendant removing his assets from jurisdiction and thereby rendering nugatory any judgment which the plaintiff may obtain.

3. The applicant has made a full disclosure of all material facts relevant to the application.

4. The applicant has given full particulars of the assets within jurisdiction.

5. The balance of convenience is on the side of the applicant in that, as against the respondent, the applicant has more to lose or suffer by way of irreparable damage if the order is not granted.

6. The applicant is prepared to give an undertaking as to damages.

Failure to satisfy any of the above preconditions means the order ought not to be granted.

Conclusion

Access Bank Plc was unable to hold strong in fulfilling all these preconditions and the Appellant appeared to have had his way. It will be difficult to fault the decision of the Court of Appeal on any  further appeal to the apex Court.



Stephen Azubuike
Author: Stephen Azubuike
Stephen is a lawyer with expertise in Commercial Dispute Resolution and Technology Law practice. He is a Partner at Infusion Lawyers. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts on behalf of financial institutions, other corporate bodies and multinationals. He has worked with a number of startup tech companies. He tweets @siazubuike.
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