CASE SCENARIO
Mrs Adeyemi advanced a loan of 200 million Naira to Mr Patrick, a Togolese residing in Nigeria. The loan was secured by Mr Patrick’s landed property located in Lagos. Mr Patrick failed to repay the loan, Miss Atinuke sued in the Lagos high court. During the pendency of the suit, Mr Patrick put up the land for sale on OLX. If Mr Patrick is allowed to sell the land, there would be no way to enforce the judgement that Miss Atinuke may eventually get. What can Miss Atinuke do in order to prevent Mr Patrick from selling the land until a judgement is delivered in the pending suit?
INTRODUCTION
One big event that has characterized the 21st century is the advent and the development of technology which has impacted nearly all facets of life. As a matter of fact, court processes has had its own fair share of these developments. In some jurisdictions, it has become a possibility to transfer title to properties online. This has in recent times, made the enforcement of court judgements against the assets of judgement debtors a cumbersome process.
In the light of the foregoing, litigants are left with empty judgements with no means to enforce them and this definitely has a deleterious effect on litigants causing them to lose faith in the justice system. In response to the obvious injustice occasioned by the unfortunate reality pointed out above, the Mareva injunction was introduced to grant solace to litigants.
WHAT ARE INJUNCTIONS
Injunctions generally were defined by Karibi-Whyte JSC, in Babatunde Adenuga & 5 Ors v. K. Odunewe & Ors (2001) 2NWLR (Pt 696) 184 at 195 as: “… an equitable order restraining the person to whom it is directed from doing the things specified in the order or requiring in exceptional situations the performance of a specified act”.
MEANING OF MAREVA INJUNCTION
Mareva injunction A.K.A Freezing order is a form of injunctive order that prevents the dissipating or dealing with the properties (pending the determination of a dispute) that could render the judgment of a court or the resolution of that dispute nugatory. It operates until the substantive determination of the civil rights and obligations of the parties with regard to the subject properties. In order words, the doctrine of Mareva injunction operates to stop a defendant against whom a plaintiff has a good arguable claim from disposing of or dissipating his assets pending the determination of the case or pending payment to the plaintiff.
THE LEGAL POSITION ON FREEZING ORDERS BEFORE 1975
Originally, a plaintiff could not obtain any interim injunctive relief intended to prevent a defendant from dissipating the assets or taking his assets outside the jurisdiction in the face of imminent lawsuit or judgement. Cotton L.J puts the position in the case of LISTER AND CO V STUBBS (1970) 45 Ch.D 1 at P.14 thus: “If we were to order the defendant to give security asked for, it would be introducing an entirely new and wrong principle – which we ought not to do, even though we might think that, having regard to the circumstances of the case, it would be highly just to make the order”.
This position of the law clearly worked a hardship upon plaintiffs; and, in turn, assisted the recalcitrant defendant to evade possible or anticipated execution of judgment against his assets.
POST 1975
The foregoing was the position until 1975 when the doctrine of Mareva injunction was developed by the High Court of Justice in England in two successive cases of NIPPON YUSEN KAISHA VS. KARANGEORGIS (1975) 1 W. L. R 1093 and MAREVA COMPAGNIA NAVIERA S.A. v. INTERNATIONAL BULKCARRIERS S.A (1980) 1 AII ER 213, from which the doctrine acquired its name.
THE MAREVA CASE
In the case of MAREVA COMPANIA NAVIERA S.A. V. INT’L BULK CARRIERS S.A. (SUPRA) under a voyage charter, a vessel was loaded with a cargo of fertilizer consigned to India. The Indian High Commission, in accordance with the obligations under the voyage charter, paid 90% of the freight but paid it to a bank in London to the credit of the charterers. Out of that, the charterers paid to the first two instalments by credit transferred to the ship-owners. The third was due on 12 June 1975, but the charterers failed to pay it. The ship-owners treated the charterers’ conduct as a repudiation of the charter. They issued a writ on 20 June. They claimed the unpaid hire, which comes to $US30,800, and damages for the repudiation. Meanwhile, they believe that there is a grave danger that the money in the bank in London will disappear. So they have applied for an injunction to restrain the disposal of those moneys which are now in the bank.
THE ORDER
The court granted the ad personam order requested making use of the jurisdiction given to it by the 1925 Act: ‘A mandamus or an injunction may be granted or a receiver appointed by an interlocutory order of the court in all cases in which it shall appear to the court to be just or convenient.’ The court stated that the order could be made even though it dealt with assets in which the plaintiff claimed no direct right.
INSTANCES WHEN MAREVA INJUNCTION WOULD BE GRANTED
Where the defendant against whom the injunction is sought is a foreigner. It is not unusual that foreigners owe debts to Nigerians or Nigerian banks and then go ahead to sell the debt securities or move them out of Nigeria in order to avoid their obligations under the loan agreement. In such cases, an order of Mareva Injunction can be granted to prevent a foreigner from selling or moving such properties out of the country.
Where there are Indications that the defendant has commenced the sale of the Res, an order of Mareva Injunction can be granted in order to stop the sale and freeze the asset pending the determination of the pending suit or dispute.
Mareva Injunction may also be granted against a fraudulent party who has committed fraud with the Res, so as to freeze the property and preclude him from further commission of such fraud.
APPLICATION OF MAREVA INJUNCTION IN NIGERIA
Generally, in Nigeria, the root of the court’s statutory, equitable and inherent jurisdiction would be traced back to the Constitution. The court’s power to grant mandamus, injunction or appoint a receiver is usually donated by statute establishing the relevant court pursuant to the 1999 Constitution as amended and amplified by the relevant court rules. However, in terms of case law in Nigeria, recognition of Mareva injunction may be first traced to the Supreme Court case of SOTIMINU V. OCEAN STEAMSHIP (NIG) LTD (1992) 5 NWLR (PT.239) 1, where the Supreme Court acknowledged as a preventive measure, the power of the court to grant anticipatory and preservative ex parte injunction to a Plaintiff with a good prima facie case against a “mischievous” Defendant planning to remove assets outside the jurisdiction of the court before judgment.
CONDITION FOR THE GRANT OF MAREVA INJUNCTION
In DUROJAIYE v. CONTINENTAL FEEDERS (NIG) LIMITED (2001) 14 WRN 141, the court made it clear that by the very nature of the injunctive relief, an Applicant must show that he has a cause of action against the Defendant which is justifiable, that there is a real and imminent risk of the Defendant removing his asset from jurisdiction and thereby rendering nugatory, any judgment which the Plaintiff may obtain, that the Applicant has made a full disclosure of all material facts relevant to the application, that he has given full particulars of the assets within the jurisdiction, that the balance of convenience is on the side of the Applicant, and that he is prepared to give an undertaking as to damages for failure to satisfy the Court in any of the above.
Furthermore, in SOTUMINU v. OCEAN STEAMSHIP (NIG) LTD (supra), the Supreme Court listed the conditions for the grant of Mareva Injunction (per Nnaemeka-Agu, JSC). By these rules, before a Mareva Injunction could be granted the applicant must show:
- That he has a cause of action against the defendant which is justiciable in England.
- That 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.
- That the applicant has made full disclosure of all material facts relevant to the application.
- That he has given full particulars of the assets within the jurisdiction.
- That the balance of convenience is on the side of the applicant.
- That he is prepared to give an undertaking as to damages.
REASON BEHIND GRANTING THE ORDER
It is pertinent to restate the reasoning behind the Courts granting the order of Mareva injunction. As stated by Lord Denning, in the MAREVA COMPANIA NAVIERIA S.A. case: “If it appears that the debt is due and owing and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment, the Court has jurisdiction in a proper case to grant an interlocutory injunction so as to prevent him disposing of those assets.”
Paramount in the above dictum is the danger of the debtor disposing of his assets in order to defeat the judgment. This is the second precondition in the SOTUMINU Case (supra), “that 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.
LEGAL EFFECT OF MAREVA INJUNCTION
A Mareva order takes effect as soon as it is made and served. It does not operate as an attachment to the asset. It merely restrains the owner of the asset from dealing with the assets in a specified manner. Buckley, L. J., in CRETANOR MARITIME CO. LTD. VS. IRISH MARINE MANAGEMENT LTD (1978) W.L.R. 966 AT 974, made this point very clearly when he stated as follows:
“…..It is, I think, manifest that a Mareva injunction cannot operate as an attachment. Attachment’ must, I apprehend, mean a seizure of assets under some writ or like command or order of a competent authority, normally with a view to their being realized to meet established claim or held as a pledge or security for the discharge of some claim either already established or yet to be established. An attachment must fasten on particular assets…… A Mareva injunction, however, even if it relates to a particular asset…… is relief in personam…… All that the injunction achieves is in truth to prohibit the owner from doing certain things in relation to the asset…..”
EFFECT OF MAREVA INJUNCTION ON THIRD PARTIES
A third party that has been given notice of the injunction, if he knowingly assists in a breach of the order, will be guilty of contempt of court, irrespective of the defendant’s knowledge of the injunction. A bank must, therefore, dishonour any cheque or refuse any transfer of money once it has received notice of the injunction.
If a bank is under an obligation to another party to make payments on behalf of the defendant, for instance under a bank guarantee, the bank may violate the injunction and debit the defendant’s account irrespective of notice. The bank must, however, as far as possible, consider withdrawal of such facilities from the defendant.
The plaintiff must indemnify any reasonable expense incurred by a third party in complying with the injunction, and is required to give the court an undertaking to this effect. These costs can, however, be recovered from the defendant at trial, if the plaintiff is successful.
It is the duty of the plaintiff to give the third party such information as is needed to allow it to comply with the injunction. If the plaintiff does not have sufficient information and is unable to identify the assets of the defendant, he may request the third party to conduct a search. The cost for this, however, is to be borne by the plaintiff.
CONCLUSION
The Nigerian landscape shows that the English procedure for grant of Mareva injunction has been fully adopted and in some areas expanded by statute and case law. Mareva over the years has simply become a tool of predilection in debt recovery in Nigeria and seems to have grown from being exceptionally granted to being liberally granted by the court at the instance of counsel/recovery agent in proceedings in court. It also nowadays, serves as a critical means for a creditor to trace assets and gauge the magnitude and nature of assets available as well as the level of indebtedness to other creditors and the risk of the defendant not having substantial assets to satisfy the judgment. However, despite its numerous appeals as a debt recovery instrument, it is also often abused by creditors and sought to be converted from a preservatory order to one that would help a creditor change his status as a creditor in terms of priority of interest.
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