CANADA Law and Practice Contributed by: John Pirie, Matthew Latella, David Gadsden and Christina Doria, Baker McKenzie
Freezing and Asset Disclosure Orders In Canada, there are a number of remedies to assist in securing assets before judgment. Among them are Mareva injunctions (which can include an asset disclo - sure component) and CPLs, as well as asset or “spe - cific fund” preservation orders issued under provincial rules of civil procedure. Mareva injunction in Canada This extraordinary form of pre-judgment “freeze order” is available in Canada and, in the right circumstances, can be granted with asset disclosure terms having worldwide effect. Dubbed “one of the law’s two nucle - ar weapons”, it was confirmed as part of the com - mon law of Canada in a 1985 decision of the Supreme Court of Canada. However, the Supreme Court did not establish a rigid test for the remedy, but rather established broad parameters without imposing a rig - id prescription. The court summarised the “gist of the Mareva action” as the right to freeze exigible assets – regardless of where the defendant resides – where a cause of action between the plaintiff and defend - ant has been determined that is justiciable before the courts of that jurisdiction and where there is a genuine risk of the disappearance of assets, either inside or outside the jurisdiction. As more Mareva orders have been sought in varied scenarios, the requirements for a Mareva injunction have been relaxed somewhat. Multiple Ontario Supe - rior Court decisions have held that the risk of dissi - pation can be inferred in cases where the inference arises from the circumstances of the alleged fraud, taking into account all of the surrounding circum - stances, such as evidence suggestive of the defend - ant’s fraudulent activity or a pattern of prior fraudulent conduct. The inference is also available if a strong prima facie case is established for other causes of action. However, a recent decision served as a reminder of how fact-specific consideration of this factor can be. The Ontario Superior Court declined to grant a Mareva injunction in a case featuring a strong prima facie case in conversion, dishonest conduct and evidence of past dissipation of corporate assets. The court relied on otherwise extant legal restrictions on the respond - ent’s assets, and his willingness to consent to an order
that his counsel hold a sizeable portion of the funds the applicant sought to freeze to conclude the evi - dence of a risk of future dissipation was inadequate to justify the extraordinary relief. Nonetheless, shortly thereafter, the same judge granted an order appoint - ing an inspector under the Ontario Business Corpo - rations Act to investigate and report on the business and financial affairs of the corporations at issue in the proceedings. The Supreme Court seemed to favour the “strong pri - ma facie case” requirement adopted by the Ontario Court of Appeal a few years earlier, while also noting that the Ontario approach was “somewhat narrower” than the “good arguable case” standard of UK case law. The “balance of convenience” must favour the issuance of the order. This branch of the analysis involves a detailed consideration of the competing interests at play – principally, the plaintiff’s interest in avoiding a worthless judgment and the defendant’s interest in not having assets detained prior to judg - ment. In British Columbia, the courts have adopted a flexible approach, employing a two-step test for the issuance of a Mareva injunction. The test requires an applicant to: • establish the threshold issue of a strong prima facie or good arguable case; and • consider all the relevant factors in balancing the interests of the parties, including – without limita - tion – the existence of eligible assets and a real risk of disposal or disposition of those assets. Courts have the flexibility to carry out justice between the parties in any given case and “the judge must not… become a prisoner of a formula”. The British Columbia Court of Appeal has also recognised that almost every Mareva injunction is likely to inconven - ience the other party in some way, and this court has emphasised that “the overarching consideration in each case is the balance of justice and convenience”. Mareva injunctions are often sought on an ex parte basis. As with any ex parte relief, it is crucial that full, frank and fair disclosure of all material facts be made, particularly those that tend to support the position
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