CHERN & CO. Secures Worldwide Mareva Injunction for Hong Kong-Based Client

CHERN & CO. was recently appointed to represent a Hong Kong-based investment and project management consulting firm (“our Client”) in applying for a Mareva Injunction before the High Court of Shah Alam. This action is pending the outcome of arbitration at the Hong Kong International Arbitration Centre (“HKIAC”).

Brief Facts

In June 2021, our Client entered into a Sales and Purchase Agreement (“SPA”) with the Defendant to procure medical gloves for a contract sum of USD 21,500,000.00. Our Client paid a deposit of USD 430,000.00, but it became evident that the Defendant had no intention of fulfilling their obligations.

Prior to the SPA, the Defendant had assured our Client that 10,000,000 boxes of medical gloves were available for sale. They also provided a Letter of Guarantee, attesting that the goods were ready and stored in a bonded warehouse. However, the Defendant failed to meet several conditions of the SPA, including the provision of the Letter of Guarantee and relevant SGS Inspection Reports. They also demanded additional deposits not included in the SPA.

Due to these breaches, our Client issued a Notice of Arbitration under the SPA, referring the dispute to HKIAC. The Defendant attempted to obstruct the arbitral process.

Mareva Injunction Application

Given the risk of asset dissipation by the Defendant, our Client applied for a Mareva Injunction. An ex parte order for the Mareva Injunction was granted to preserve the status quo pending arbitration.

High Court’s Verdict

Following oral submissions from our legal team and the Defendant’s counsel, the High Court upheld the Mareva Injunction to safeguard our Client’s interests. The Court also ordered that arbitration proceedings commence within 14 days of the Order.

The Defendant’s application for Security for Costs was dismissed, with the Court agreeing that our Client’s status as a foreign entity should not be the sole factor in awarding security for costs. Additionally, the Court mandated the Defendant to disclose all assets in Malaysia or abroad within 7 days, affirmed on oath, and prohibited any reduction of assets amounting to USD 430,000.00.

Conclusion

This case underscores the importance of taking legal action to protect assets and ensure compliance with contractual obligations. For more information or assistance with similar issues, please contact us.

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