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Matthew Latella

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Fraud exception to letter of credit autonomy principle requires “impropriety, dishonesty or deceit”. Court of Appeal overturns ruling that had denied commercial landlord of bankrupt tenant full amount of credit.

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On October 28, 2020, the Ontario Court of Appeal overturned a respected Commercial Court judge’s decision on a motion affecting a range of important legal issues, including the fraud exception to the autonomy principle regarding letters of credit. In 7636156 Canada Inc. (Re), 2020 ONCA 681, Ontario’s highest court clarified the law regarding a landlord’s right to call on a letter of credit (“LC”) when its tenant becomes bankrupt. The Court of Appeal confirmed that, under the autonomy principle, a bank’s obligation under an LC is independent of a tenant’s obligations under the lease, and clarified the fraud exception that allows a bank to refuse to pay on an LC. The case also holds implications for Canadian bankruptcy law.

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Mareva injunctions: They’re not just for pre-judgment anymore

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The Mareva injunction is a powerful tool for levelling the playing field when dealing with those who, left to their own devices, would dissipate their assets, with a view to frustrating the claims of their creditors.  While the commencement of litigation is the traditional juncture to seek such extraordinary relief, based in part on the idea that a defendant might then take steps to dissipate assets, it is not the only stage of the process at which such an order is available. If a Mareva was either not granted, or not sought, at the front end of the process, but then a money judgment is obtained, some defendants might then take steps to remove, conceal or consume assets, while an appeal is pending, thereby exploiting the automatic stay of execution imposed.

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British Columbia Court of Appeal upholds Mareva injunction in aid of international arbitral proceedings, overturning lower court

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In a decision sure to please the international arbitration bar and those who pursue asset recovery in fraud matters alike, our team was recently successful before the highest court in British Columbia. The BC Court of Appeal reinforced the importance of Canada’s international obligations to recognize and enforce arbitral awards and to treat foreign litigants as favourably as British Columbians at all stages of proceedings, including the pursuit of extraordinary relief such as Mareva injunctions. Madam Justice Garson, writing for a unanimous Court that included Madam Justice Levine and Madam Justice Neilson, overturned a decision of Madam Justice Ross, which had declared a Mareva injunction to have been wrongly granted, in part, based on the “limited association” of the parties to British Columbia. In reaffirming the flexible approach to Mareva injunctions taken by British Columbia Courts, the panel explicitly rejected the conclusion of Justice Ross that the appellant had failed to meet the full, frank and fair disclosure obligations of a party seeking an injunction on ex parte basis.

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Senior Executive Impersonation – widespread fraud targeting multinationals

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In recent months, Baker & McKenzie has represented a number of clients around the world, including in Canada, who have fallen victim to similar but unrelated scams targeting multinational companies with subsidiaries around the globe. The fact patterns are so strikingly similar that we have issued a Global Alert to minimise the risk of other clients falling prey to this fraud. The Alert features contacts in a variety of the jurisdictions in which we have offices and can be found here.

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“Winners” and “losers” in alleged Ponzi schemes: Court approves bankruptcy trustee’s settlement with parties who did not lose money

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When a Ponzi scheme collapses, as with musical chairs, there will be some investors with a place to sit, while others are bereft of such comfort. Unlike musical chairs, the first time the music stops for most Ponzi schemes, the majority of the participants are on the losing end.  A recent British Columbia decision in the Bankruptcy of Rashida Abdulrasul Samji explored what happens when some of the fortunate few “winners” in an alleged Ponzi scheme negotiate a resolution with a bankruptcy trustee responsible for making decisions in the best interests of all the creditors of the bankrupt entity at the centre of the alleged scheme. 

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