Freezing Orders in Hong Kong Fraud Cases

When fraud is discovered, the priority is stopping the money from moving. In Hong Kong, the primary civil tool for this is a freezing order, formally known as a Mareva injunction — a court order that prevents the defendant from removing, dissipating, or dealing with assets up to a specified value. This article explains how freezing orders work, what the court requires, and how they compare to other mechanisms for preserving assets in fraud cases.

What Is a Mareva Injunction?

A Mareva injunction is an interlocutory (pre-trial) injunction that restrains a defendant from disposing of or dealing with assets pending the resolution of a case. The name comes from the English case Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd’s Rep 509.

The legal basis is section 21L of the High Court Ordinance (Cap. 4), which gives the Court of First Instance power to grant an injunction “in all cases in which it appears to the Court to be just or convenient to do so.” Section 21L(3) specifically addresses the court’s power to restrain a party from removing assets from the jurisdiction.

A Mareva injunction does not give the applicant any proprietary claim over the frozen assets. It prevents the defendant from putting assets beyond the reach of a future judgment. Breach is contempt of court, punishable by imprisonment or fines.

Requirements for Obtaining a Freezing Order

Hong Kong courts treat Mareva injunctions as “draconian” remedies and will only grant them where the applicant satisfies strict requirements. The court applies the test set out in Practice Direction 11.2, which also prescribes the standard form of order.

1. Good arguable case

The applicant must show a “good arguable case” on the merits — a threshold higher than the “serious issue to be tried” standard used for ordinary interlocutory injunctions. The case must be more than barely capable of serious argument. In fraud cases involving clear evidence of deceit or unjust enrichment, this requirement is usually met.

2. Real risk of dissipation

The applicant must demonstrate a real risk that the defendant will dissipate assets — meaning the defendant will move, hide, or dispose of assets so that a future judgment would go unsatisfied. This is the most contested requirement.

Key principles the court applies:

• The risk must be established by solid evidence, not mere inference or generalised assertion.
• Evidence of dishonest or fraudulent conduct forming the basis of the claim can point powerfully towards an inference of dissipation risk.
• The fact that the defendant may use assets in the ordinary course of business or daily living does not constitute dissipation.
• The court will take a holistic view of all circumstantial evidence when assessing risk.

3. Assets within (or outside) the jurisdiction

The applicant must show that the defendant has identifiable assets within Hong Kong, or — for worldwide orders — that assets within Hong Kong are insufficient to satisfy the claim and that the defendant holds assets abroad.

4. Balance of convenience

The court will consider whether the balance of convenience favours granting the injunction, weighing the potential harm to the applicant if the order is refused against the potential harm to the defendant if it is granted.

The Ex Parte Process

Freezing orders are almost always sought on an ex parte (without notice) basis — the defendant is not informed in advance, because giving notice would allow them to move assets before the order is made.

The procedure is governed by Practice Direction 11.1. In urgent fraud cases, a solicitor can apply to a duty judge and obtain the order within one to two days. The applicant files a writ of summons (or undertakes to file one immediately) together with an affidavit setting out the evidence.

After the order is granted, the defendant is served and may challenge it at a return date hearing, typically listed within 7 to 14 days.

Full and Frank Disclosure

Because the defendant is not present at the ex parte hearing, the law imposes a strict duty of full and frank disclosure on the applicant. This means:

• The applicant must put all material facts before the court, including facts that are unfavourable to their case.
• The applicant must draw to the court’s attention all arguments that the defendant would reasonably be expected to make.
• The duty extends to facts the applicant ought to have known with reasonable diligence — not merely facts actually known.

The consequences of failing in this duty are severe. The court will normally discharge the freezing order, even if the order was otherwise justified — though it retains discretion and may consider whether the non-disclosure was innocent.

Undertaking as to Damages

The applicant must give an undertaking as to damages — a promise to compensate the defendant (and affected third parties, such as banks) for any loss suffered if the freezing order is later discharged.

The court may require the applicant to fortify this undertaking by providing security — a payment into court or bank guarantee. This is particularly likely where there is doubt about the applicant’s ability to pay. A Mareva application therefore involves real financial commitment.

Ancillary Asset Disclosure Order

A freezing order is typically accompanied by an ancillary disclosure order requiring the defendant to disclose all assets above a specified value by sworn affidavit — including bank accounts, real property, shares, vehicles, and any recent transfers or disposals.

If the court considers the disclosure unsatisfactory, it may order a further and better affidavit and, ultimately, cross-examination of the defendant before a judge. Non-compliance is itself contempt of court.

This ancillary order is critical in fraud cases, where victims often do not know the full extent of the defendant’s assets. It converts a defensive measure into an information-gathering tool.

Worldwide vs Domestic Freezing Orders

A domestic Mareva injunction covers assets within Hong Kong only. A worldwide Mareva injunction extends to the defendant’s assets anywhere in the world.

To obtain a worldwide order, the applicant must show that assets within Hong Kong are insufficient to satisfy the claim. Worldwide orders are subject to additional safeguards, including the Babanaft proviso — a provision that the order does not affect third parties outside Hong Kong unless and until it is recognised or enforced by the courts of the relevant foreign jurisdiction.

Worldwide orders are common in fraud cases because fraudsters frequently move funds across borders. However, enforcing such orders abroad requires separate proceedings in each jurisdiction.

Proprietary Injunction vs Mareva Injunction

A proprietary injunction and a Mareva injunction serve different purposes. A Mareva freezes the defendant’s own assets up to a specified value to preserve them for judgment enforcement. A proprietary injunction preserves specific assets that the applicant claims belong to them — for example, fraud proceeds traceable into a particular bank account.

The threshold for a proprietary injunction is lower: the applicant need only show a serious issue to be tried regarding their proprietary claim, with no need to prove risk of dissipation. This makes proprietary injunctions easier to obtain where the victim can trace their money directly.

In fraud cases, both remedies are frequently sought together — a proprietary injunction over the traced funds and a Mareva over the defendant’s other assets as additional security.

Freezing Order vs Police No Consent Letter

Fraud victims in Hong Kong may encounter two distinct freezing mechanisms. A No Consent Letter (NCL) is an administrative measure issued by the Joint Financial Intelligence Unit (JFIU) under section 25A of the Organised and Serious Crimes Ordinance (Cap. 455). The bank freezes the account voluntarily to avoid money laundering liability — not because it is legally compelled.

For many cases, the initial freeze comes from an NCL. However, because an NCL can be revoked, victims with higher-value claims should consider obtaining a Mareva injunction for stronger protection. See our guide on what to do if you have been scammed for the full recovery process.

Costs and Practical Considerations

Applying for a Mareva injunction involves significant costs: preparing affidavit evidence, drafting the order, and attending both the ex parte and return date hearings requires substantial solicitor and (often) barrister time. On top of legal fees, the applicant faces financial exposure from the undertaking as to damages, potential fortification requirements, and third-party compliance costs.

A Mareva injunction is therefore most appropriate where the amount at stake justifies the expense. For lower-value claims, the police NCL freeze combined with civil recovery proceedings may be a more proportionate approach.

Frequently Asked Questions

How quickly can a freezing order be obtained?

In urgent fraud cases, a solicitor can typically obtain an ex parte Mareva injunction within one to two working days of being instructed, provided the evidence is ready.

Can a freezing order cover cryptocurrency?

Yes. Hong Kong courts have recognised cryptocurrency as property and have granted both Mareva injunctions and proprietary injunctions over crypto assets held on exchanges.

Does the freezing order mean I get my money back?

No. A freezing order only preserves assets — it does not transfer them to the applicant. To recover funds, the applicant must obtain judgment and then enforce it through mechanisms such as garnishee orders or charging orders.

Can the defendant challenge the order?

Yes. At the return date hearing, the defendant may argue the requirements are not met, that the applicant failed to make full and frank disclosure, or that the balance of convenience does not favour continuing the order.