Malaysia
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. In Malaysia, a freezing order (known as a Mareva injunction) prohibits a respondent from removing from the jurisdiction or disposing of or dealing with assets that will or may be necessary to meet an applicant’s pending suit or claim.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
Yes. An order for discovery of information and documents and interrogatories for a respondent and/or a third party to disclose the nature, value and whereabouts of its/their assets in Malaysia may be given as part of a freezing order.
3. Briefly what is the relevant legal test?
(a) The applicant has a good arguable case;
(b) the respondent has assets within the jurisdiction; and
(c) there is a real risk of the assets being removed or dissipated before judgment is satisfied.
It is notable, for completeness, that the Court has ruled that the test of balance of convenience (which generally involves an assessment of the balance of convenience between the harm that the freezing order could cause to the respondent against the harm that will be suffered by the applicant if the freezing order is not granted) is not a relevant factor to be considered in the context of a freezing order (Lee Kai Wuen & Anor v Lee Yee Wuen [2022] 7 CLJ 505).
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
An application for a freezing order may be made by way of a notice of application which is supported by an affidavit by the applicant. Such application is usually made ex parte, i.e. without notice to the respondent. The affidavit must be made in compliance with the relevant procedural rules and contain full and frank disclosure and fair presentation of all relevant materials, including unfavorable facts which may lead the Court not to grant the freezing order. A hearing will then be fixed to hear the application, at which the Court will decide whether or not to grant the freezing order.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
As a general rule, the applicant is required to provide to the Court an undertaking in damages in support of the freezing order being granted. The usual form of undertaking is that the applicant will pay any damages suffered by the respondent (as determined by the Court) if the Court subsequently finds that the freezing order ought not to have been granted.
6. Can it be sought against third parties?
Yes. A freezing order may be granted against third parties in support of and incidental to the applicant’s claims against the respondent. This is particularly so where there is a good reason to believe that the assets held by the third party are in fact the assets of the respondent in the underlying claim (whether or not via a nominee or trust arrangement) or will be available for the satisfaction of a judgment obtained against the respondent. Upon being served with and having knowledge of the freezing order, third parties such as financial institutions are required to act consistently with freezing orders so as not to breach the freezing order.
7. What assets are covered by a freezing (or equivalent) order?
Freezing orders may cover both tangible assets (such as money and goods) and intangible assets (such as licenses, trademarks and copyrights) and the assets may be within the jurisdiction (in a case of a domestic freezing order) or outside the jurisdiction (in a case of a worldwide freezing order).
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
An application for the grant of a freezing order may be made by any party at any stage of the proceedings, including prior to issuance of a suit or claim, before or after trial, or after the grant of judgment.
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
Yes. A freezing order may typically provide for exclusion of dealings with the respondent’s assets for the following purposes:
(i) payment of reasonable and ordinary living expenses;
(ii) payment of ordinary debts as they fall due; and
(iii) payment of reasonable legal expenses/costs in defending the claim/suit.
12. What happens after a freezing (or equivalent) order is granted?
Where a freezing order is granted, the applicant may proceed to notify the same to the respondent and any other relevant parties holding or in control of the relevant assets captured under the freezing order.
13. Who pays the costs of the application for a freezing (or equivalent) order?
Although there is no fixed rule in Malaysia as to who should pay the costs of application for a freezing order and when such costs are to be determined, it is likely on balance that such costs will be awarded to the successful party in the suit upon conclusion of the suit. This is however subject to the prayers on costs sought in the freezing order application and the facts and circumstances of the case, as the Court deems fit.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
A freezing order does not affect a third party’s right of set-off against the respondent for liabilities incurred prior to the date of the freezing order. A freezing order may also be granted on the terms, amongst others, that the applicant shall inform all third parties that have been notified and affected as a result of the freezing order of their right to apply to the Court to vary or discharge the freezing order or for directions.
The following principles on the freezing order vis-à-vis third parties are likely to be applicable:
(i) a third party does not need to enquire as to the application of any money withdrawn by the respondent if the withdrawal appears to be permitted by the freezing order;
(ii) the applicant who seeks a freezing order should also give an undertaking to a third party to pay any expenses reasonably incurred by them; and
(iii) a freezing order should generally not cover any assets other than cash or assets whose value is easily ascertainable such as shares, title deeds or other articles in a safe deposit held by third party, unless the terms of the freezing order are specifically drafted so as to include them and an upper limit should be inserted so that the third party can know exactly the limit covered by the freezing order.
15. What are the consequences of breach of a freezing (or equivalent) order?
Failure to comply with a freezing order may lead to proceedings for contempt of Court, which is punishable with both fines and imprisonment. This applies not only to the respondent, but also such third parties who although not named in the freezing order, have notice or knowledge of the freezing order and have aided or abetted the respondent in committing a breach of the freezing order or acted in such a way that contravenes or frustrates the freezing order.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
There is no established law in Malaysia stipulating that a third party notified of (but not a party to) a freezing order owes a duty of care to the applicant. Current case law suggests that no such duty exists (Wong Chong Kiew v Lee Hock Seng & Anor [2020] MLJU 482).
17. Can a freezing (or equivalent) order be enforced abroad?
Yes, subject to the laws of the relevant jurisdiction. The enforcement of a freezing order abroad does not require a Malaysian Court’s prior permission.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
A freezing order obtained in a foreign jurisdiction falling under the purview of the Malaysian Reciprocal Enforcement of Judgments Act 1958 (referred to below as “REJA”) can be registered under the REJA to be recognized and enforced in Malaysia. Otherwise, a fresh suit may have to be filed in Malaysian Courts to enforce the foreign judgment.
Contacts
Adrian Koh Managing Partner Mah-Kamariyah & Philip Koh Petaling Jaya, Malaysia adrian.koh@mkp.com.my www.mkp.com.my Hao Yi Poo Associate Mah-Kamariyah & Philip Koh Petaling Jaya, Malaysia haoyi@mkp.com.my www.mkp.com.my
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