Nigeria: Use Of Mareva Injunction For Debt Recovery In Nigeria

Article by Okorie Kalu1

INTRODUCTION

The feeling of control, sense of security and certainty is something that everyone covets and pursues when entering into commercial arrangements. This is also true when things go sour, where a person (standing usually in the position of a creditor) needs to test the efficacy of the remedial options available to him under the law arising from breach of the agreed commercial terms. In taking a decision to initiate a claim in court, an investor or creditor would be looking for counsel and representation from solicitors that can articulate, develop and implement effective debt recovery strategies using legal techniques and procedures developed to achieve asset preservation, retention and realization. Putting it simply, he would be looking for results. When this result is in the form of a favourable judgment, beyond that outcome, the risk of being unable to enforce same is an absolute nightmare for all plaintiffs/judgment creditors, for it is only a pyrrhic victory for a judgment creditor who has or no longer has access to assets which may be attached and realized.

The above reality is exacerbated by various gaps and frailties of the Nigerian system in terms of access to credit information about a borrower2, weak collateral registry system3, delays and compromises that may a times be witnessed in our judicial system even in the face of clearly enforceable claims and creditors rights, leading to loss or dispersion of assets over the period of the litigation.

A major response by the courts to the above risks/threats is the Mareva injunction4 provided certain circumstances are met. This interlocutory judicial order -which has been described by many commentators as a creditor's legal "nuclear weapon"5- has recently found a place of pride in the heart of Nigerian debt recovery outside its traditional sphere of maritime litigation where it was developed so much so that it is often used more in abuse than in protection of assets where there is real risk of dissipation. This article will briefly describe the nature of a Mareva injunction, its scope and limitations by reference the nature of defendants, third party rights and extent of seizure on assets. It will then consider the application of the doctrine in recent cases where the defendant is well situated within jurisdiction and there is no risk of loss or dispersion of assets outside the jurisdiction of the court and in the context of constitutional rights to property. Finally, we will attempt to make sense of the recent trend and make suggestions for protection of constitutional rights to property.

The Mareva Injunction: Definition and Origin

The Mareva injunction is an ad personam6 order but it is also arguably an in personam7 order. In its entirety it is a discretionary, interlocutory injunction awarded without the defendant being heard, either before or at the trial.8

It is further a preservatory specie of an injunctive order that is one 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 nugatory9. Further, unlike an interim order –also obtained ex parte even without commencing a suit- it operates until the substantive determination of the civil rights and obligations of the parties with regard to the subject properties. An interim order seeking to preserve the status quo only operates until a named date or until further order of the court or until an application on notice can be heard10.

The foundations of the Mareva Injunction can be traced back to the English Courts in 1975 where in two landmark maritime cases, to wit Nippon Yusen Kaisha v. Karageorgis11 and Mareva Compania Naviera S.A. v. Int'l Bulkcarriers S.A12, the English courts departed from its self inflicted rule of practice pre - 197513 not to seize assets of a defendant in advance of judgment.

Initially the English courts took the view that there was no reason to grant interlocutory preservative orders in the nature of a Mareva against a British defaulter who would attempt to dissipate his assets as he would face retribution in the form of bankruptcy or winding up procedure. But not only was that approach arguably economically unsound14 but it was oblivious of the immunity of a foreign defendant, the subject of another Sovereign, from local jurisdiction of an English court once his funds or assets are removed outside the local jurisdiction, which issue was particularly prevalent then in maritime commercial disputes.

Accordingly, by 1975, the English courts took the view that it was in the interest of justice to issue preservatory orders that would prevent foreign defendants from removing assets outside the reach of the English courts thereby thwarting the benefit of the judgment obtained against such defendants15.

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Footnotes

1 Partner, PUNUKA Attorneys & Solicitors. My profound appreciation to Chief Anthony I. Idigbe, SAN, Senior Partner, PUNUKA Attorneys & Solicitors for his valuable comments and contributions to this paper. I also thank Miss Solape Owoyemi (intern) for her research assistance. The views expressed in this paper are personal.

2 Although post 2009 financial crisis, the Central Bank of Nigeria has revived use of its Credit Risk Management Systems Bureau, usually all that a plaintiff can do before instituting proceedings is to ascertain, informally and most times speculatively, whether his defendant is worth suing. This is not by any means guarantee that the defendant will remain judgment-worthy until the moment of execution arrives.

3 This is virtually non-existent for goods and chattels and to a much lesser extent now for choses in action like shares. This makes it relatively very easy to surreptitiously dispose of such unregistered charged assets.

4 Copper David, "The Effect of Mareva Injunctions" Civil Justice Quarterly 1998 35

5 Fabano Carlos, "Maximizing Plaintiff Protection in the World Of Asset Freezing and Bypassing the Due Process Requirement : The Mareva Injunction" (2002) 9 ILSA J. Int'l & Comp. L. 131 at p.

6 An 'ad personam order' is an order to do or not to do something in another jurisdiction. See also Gemot Biehler, ''Procedures in International Law'' ( Springer Publishers 2008) p.98

7 An in personam order is made against and binds only a particular person whilst an order in rem binds the whole world. As we shall see, whilst it is made against a Defendant, the Mareva Order is generally meant to also be binding on third parties whose degree of liability is determined by reference to their degree of actual or inputed knowledge of the order of the court. As such it has been argued that it can be categorized as an in rem order.

8 Catherine Colston, "Principles of Intellectual Property Law " (Cavendish Publishing Limited, 1999) p.422 see also Sotiminu V. Ocean Steamship (Nig) Ltd (1992) 5 NWLR (PT.239) 1 at 25

9 Akingbola V. Chairman, EFCC [2012] 9 NWLR (Part 1306) 475 at 500 Paras E – G

10 Bank Boston N.A. U.S.A. v. Adegoroye [2000] 2 NWLR (pt.644) 215 C.A; Saraki v Kotoye (1992) 9 NWLR (Pt. 264) 156

11 [1975] 2 Lloyds Rep. 187

12 [1975] 2 Lloyds Rep. 509

13 Prior to 1975, section 45 of the UK Supreme Court of Judicature (Consolidation) Act 1925 in pari materia with Section 37(1) of the UK Supreme Court Act 1981 vested in the High Court the power to grant injunction or mandamus in all deserving cases

14 What would be the sense of bankruptcy or liquidation proceedings or such other collective proceedings for the Plaintiff when the assets have been disposed off within and without jurisdiction? Without prejudice to the avoidance powers of a liquidator for the benefit of all creditors whose claims are proved, the plaintiff together with a legion of other aggrieved creditors would be left with an empty shell and an empty judgment.

15 See Goff J. in the Angel Bell [1980] 1 Lloyds Rep. 632 at 635; Third Chandris Shipping Corp. v. Unimarine SA [1979] Q.B. 645 at pp. 668-669; Gee, supra, n. 10; Powles, "Mareva Round-Up" [1982] J.B.L. 383 at p. 489; I. S. Goldrein and K. H. P. Wilkinson, Commercial Litigation: Pre-Emptive Remedies (2nd ed., 1991), p. 129; S. W. Hoyle; The Mareva Injunction and Related Orders (2nd ed., 1989); D. M. McAllister, Mareva Injunctions (2nd ed., 1987)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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