A Mareva injunction allows a claimant to freeze a defendant's assets pending litigation. The injunction regularly contains provisos for the defendant to be able to meet certain types of regular expenditure and meet legal costs. The defendant in United Mizrahi Bank was being sued for breach of trust: he was an employee of the bank who had allegedly arranged for customers to pay money to entities controlled by him. The bank obtained a Mareva injunction pending the hearing of its claim for the return of the moneys obtained through this breach of trust. The claim was proprietary in nature. The bank could "trace" its ownership of the funds into the hands of the defendant and his associates.
The defendant sought declarations from the English High Court that by using some of the frozen assets to fund his legal expenses in defending the action, he would not be in breach of the Mareva injunction, and that if the claim against him was upheld, the expenditure of money on legal services would not be regarded as a further breach of trust. In relation to the first point, Rattee J held that the Mareva injunction contained a specific proviso for legal expenses, and therefore the use of assets for this purpose could not be a breach of the injunction. In relation to the second point, Michael Burton QC was unable to provide reassurance. Although the defendant would not be in breach of the Mareva injunction by using the disputed assets to fund his defence, it was possible that the assets would be found to be the property of the bank. If they passed into new hands - in casu those of the defendant's solicitors - there was a risk that those solicitors might also be made subject to a claim for their return.European Review of Private Law