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How Do Creditors Use Mareva Injunctions to Freeze Debtor Assets?

Posted by M. Margaret Gonsalves-Sabola | Aug 31, 2018 | 0 Comments

A debtor in The Bahamas who tries to move assets to avoid paying creditors may find himself restrained by a Mareva injunction from doing so. Debtors' first instinct when confronted by a creditor demanding payment may be to dispose of or hide all valuable assets so there is nothing left for the creditor to take. Creditors can stop debtors from getting rid of assets by requesting a Mareva injunction, also sometimes called a freezing order, from the court.

The Supreme Court may issue a Mareva injunction when it appears just and convenient to prevent the debtor from disposing of assets. (Supreme Court Act 1996, Section 21(1); Mareva Compania Naviera SA v. International Bulkcarriers SA [1975] 2 Lloyd's Rep 509; see Private Trust Corp v. Grupo Torras SA [1997–98] 1 OFLR 443.) Whether to grant a request for a freezing order is at the court's discretion.

Generally creditors must show the court that the creditor has at least one claim against the debtor that could be heard in court and that the creditor's claim is credible (he has a possibility of winning the claim). The creditor also must show that the debtor has assets in The Bahamas and that there is a significant risk that the debtor will dispose of the assets before the creditor can get and enforce a court judgment. (Meespierson (Bahamas) Limited v. Grupo Torras SA [1999] 2 ITELR 29; Ninemia Maritime Corporation v. Trave Schiffahrtgesellschaft mbH & Co[1983] 2 Lloyd's Rep 600.)

The creditor could show the real risk by providing evidence that the debtor has sold or transferred assets already, evidence that the debtor has made inquiries about selling assets, or evidence that shows a strong likelihood the debtor plans to do so in the future (such as showing that he disposed of assets to avoid a judgment in the past).

Sometimes, a creditor learns that a debtor does not have sufficient assets located in The Bahamas to satisfy a debt. In that case, Bahamian law permits the creditor to obtain a worldwide Mareva injunction – meaning the court prohibits the debtor from disposing of assets located anywhere in the world. (Walsh & Others v. Deloitte & Touche Inc [2002] 4 LRC 454 (UKPC).)

If you are a creditor who learns that your debtor is moving assets, you need urgent legal advice to help you obtain a Mareva injunction. If you are a debtor, you need legal advice to settle your debts quickly and efficiently so that your assets do not become subject to a freezing order and unavailable to you.

To find out more about seeking an injunction in court, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.

About the Author

M. Margaret Gonsalves-Sabola

M. Margaret Gonsalves-Sabola is a civil and commercial litigation attorney and an accredited civil and commercial mediator. Margaret has over 21 years' experience in legal practice in the United Kingdom, Jamaica and The Bahamas.


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