Mareva orders, also known as freezing orders, may be granted when there is a risk that a defendant might move its assets out of reach of the court’s jurisdiction. Mareva orders can freeze assets owned directly or indirectly by a defendant. Oftentimes a defendant subject to a freezing order has other creditors seeking repayment. Can a creditor enforce its claim against the frozen assets? Yes, but the creditor must come to the court with clean hands and should not make loans…
In Ontario, as a general rule, partial indemnity, which ranges from approximately 40-60% of the actual costs incurred by a party, is awarded to the successful litigant. Full indemnity, which comprises 100% of the costs incurred, is granted only in exceptional and rare circumstances. An order for full indemnity is even more unusual if the action has been discontinued. However, in 781526 Ontario Inc. et al v Elliott Gerstein et al, 2023 ONSC 4313 the Ontario Superior Court of Justice found…
Background In Li et al. v. Barber et al., the Ontario Superior Court of Justice dismissed a motion by two “Freedom Convoy” organizers to release $200,000 of previously frozen funds needed to retain legal counsel to defend a class action lawsuit. Notwithstanding the nuances of this particular case, this decision is important because the court clarified that the defendants needed to meet a high evidentiary threshold to access frozen funds. The underlying facts of this case are well-known. A putative class…
In Thrive Capital Management Ltd. v. Noble 1324, 2021 ONCA 722, the Ontario Court of Appeal reversed a Superior Court’s judgment against Noble 1324 Inc. for contempt of court for the failure to disclose their assets and account for money paid in respect of real estate investments. The Superior Court ordered two alleged fraudsters to repay at least $9 million to investors as a sentence for being found in contempt of court, notwithstanding that the trial on the merits had not been heard. In allowing the appeal, the Ontario Court of Appeal offered important guidance on strategic considerations and remedies when a party is dealing with a party who refuses to comply with court orders.
In Amphenol Canada Corp v. Sundaram, 2020 ONSC 328 (“Amphenol Canada“), the Ontario Divisional Court confirmed that a prima facie showing of fraud and dissipation in the context of a Mareva injunction may have additional consequences for defendants, including presumed prejudice in terms of that defendant’s ability or inclination to satisfy future cost awards.
On November 15, 2018, the Supreme Court of Canada granted Christine DeJong Medicine Professional Corporationâs (âDeJongâ) application for leave to appeal from the decision in DBDC Spadina Ltd. v. Walton, 2018 ONCA 60. By granting leave, Canadaâs highest court will weigh in on the liability of “victims” of fraud as against one another.
The decision in SFC Litigation Trust (Trustee of) v. Chan, 2017 ONSC 1815Â represents a step toward a more flexible approach when our courts are asked to consider whether a Mareva injunction should be granted. In this case, the appellant, Mr. Chan, the former Chief Executive Officer of Sino-Forest Corporation (“SFC”), appealed an order confirming a Worldwide Mareva injunction that had been granted against him, ex parte.
SFC was a Canadian corporation and had an office in Ontario, a head office in Hong Kong, and assets predominately located in China. It carried out a sale process through the Companies’ Creditors Arrangement Act, R.S.C. 1985 c. C-36 (the “CCAA”), which ultimately failed.  SFC then applied under the CCAA for an order approving a plan of compromise and reorganization, which was subsequently sanctioned. A Litigation Trust was assigned the litigation rights of SFC.
In DBDC Spadina Ltd et al v Norma Walton et al, Justice Newbould of the Ontario Superior Court recently granted a motion for summary judgment on the basis that there was sufficient evidence to justify a finding of fraud. The decision reflects the guidance set out in the landmark Supreme Court Canada decision Hyrniak v. Mauldin, 2014 SCC 7, which recognized that the adjudicative process can be fair and just without requiring the expense and delay of a trial.
One of the most powerful pre-judgment remedies available to a plaintiff is a Mareva injunction freezing the defendant’s assets before trial. 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 in order to frustrate the claims of their creditors. Due to its extraordinary effect, the parties to such an injunction can seek to thaw the freezing order to access funds or assets. As recent case law has shown, the tests to be met differ for defendants and plaintiffs, and a number of factors ought to be considered before a request is made to thaw assets frozen under a Mareva.
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.