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Injunctions - Mareva. Buduchnist Credit Union Limited v. 2321197 Ontario Inc.
In Buduchnist Credit Union Limited v. 2321197 Ontario Inc. (Ont CA, 2023) the Court of Appeal considered the law of Mareva injunctions:[36] The motion judge’s interpretation of the Mareva Order is a question of law reviewable on a correctness standard: Onion Lake Cree Nation v. Stick, 2020 SKCA 101; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8. As explained below, I see no error in the motion judge’s interpretation of the Mareva Order, nor in his determination that BCU breached the Mareva Order.
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(i) Governing Principles
[45] Mareva injunctive orders restrain the defendant and others from improperly disposing of or dealing with their assets in order to prevent them from putting the assets beyond the court’s reach. These orders stand as an exception to the general principle that plaintiffs are not entitled to pre-judgment relief to ensure the enforcement of their claim post-judgment: Sabourin and Sun Group of Companies v. Laiken, 2013 ONCA 530, 116 O.R. (3d) 641, at para. 53, aff’d Carey v. Laiken, 2015 SCC 17, [2015] 2 S.C.R. 79. Mareva orders are not intended to place the plaintiff in the position of a secured creditor, prevent legitimate creditors from enforcing debts, or impede the defendant from meeting “legitimate debt payments accruing in the ordinary course”: Aetna Financial Services Ltd. v. Feigelman, 1985 CanLII 55 (SCC), [1985] 1 S.C.R. 2, at pp. 25-26; Halifax Plc. v. Chandler, [2001] EWCA Civ. 1750. They are granted only where there is a “genuine risk of disappearance of assets”: Aetna, at p. 25. Although not dependent on the existence of fraud, Mareva orders often restrain the defendant’s dealing with its assets before trial on the basic premise that the defendant “is a rogue bent on flouting the process of the court”: Sabourin, at para. 53.
[46] A Mareva order is a discretionary equitable remedy: Kepis & Pobe Financial Group Inc. v. Timis Corporation, 2018 BCCA 420, 429 D.L.R. (4th) 237, at para. 3. Mareva orders are granted as an exceptional remedy to maintain the integrity of the court’s process and prevent the frustration of the course of justice, objectives that transcend the parties’ interests, by preventing defendants and others from disposing of assets and flouting the court’s process: Sabourin, at paras. 50 and 53; Equustek Solutions Inc. v. Jack, 2014 BCSC 1063, at para. 132, aff’d Equustek Solutions Inc. v. Google Inc., 2015 BCCA 265, 75 B.C.L.R. (5th) 315, aff’d Google Inc. v. Equustek Solutions Inc., 2017 SCC 34, 72 B.C.L.R. (5th) 100, citing Grenzservice Speditions Ges.m.b.h v. Jans (1995), 1995 CanLII 2507 (BC SC), 15 B.C.L.R. (3d) 370 (S.C.), at para. 92; David A. Crerar, Mareva and Anton Piller Preservation Orders in Canada: A Practical Guide (Toronto: Irwin Law, 2017) at p. 35.
[47] The equitable function of Mareva orders to prevent an abuse of the court’s process and to maintain its integrity provides the context in which any request to vary should be considered. Where a party seeks a discretionary exercise of the court’s equitable jurisdiction, the court may deny relief if the party is in default of a court order or has otherwise acted inequitably: Brewster Transport Co. v. Rocky Mountain Tours & Transport Co., 1930 CanLII 36 (SCC), [1931] S.C.R. 336; White v. E.B.F. Manufacturing Ltd., 2005 NSCA 103.
[48] A well-established corollary of this principle is that a party cannot take advantage of the existence of a state of affairs produced by its own wrong: see Berlingieri v. DeSantis et al. (1980), 1980 CanLII 1823 (ON CA), 31 O.R. (2d) 1 (C.A.); Barclays Bank PLC v. Devonshire Trust, 2013 ONCA 494, 265 D.L.R. (4th) 15, at paras. 147-61, leave to appeal refused, [2013] S.C.C.A. No. 374; McCallum et al. v. Zivojinovic (1977), 1977 CanLII 1151 (ON CA), 16 O.R. (2d) 721 (C.A.), at p. 726.
[49] As the request to vary a Mareva order involves the exercise of the court’s equitable jurisdiction, applicants must come to the court “with clean hands” with respect to the transaction they base their claim upon: City of Toronto v. Polai, 1969 CanLII 339 (ON CA), [1970] 1 O.R. 483 (C.A.), aff’d 1972 CanLII 22 (SCC), [1973] S.C.R. 38; BMO Nesbitt Burns Inc. v. Wellington West Capital Inc. (2005), 2005 CanLII 30303 (ON CA), 77 O.R. (3d) 161 (C.A.), at paras. 27 and 28.
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[62] The variation of the Mareva Order stands as a precondition to the granting of BCU’s distribution motion. Any variation of a Mareva order is an exercise of the court’s equitable jurisdiction and should not, in the ordinary course, “conflict with the purpose for which the order was made in the first place”, namely, to prevent the plaintiff from being cheated out of the proceeds of their action, should it be successful: Break Fast Investments Pty Ltd v. Gravity Ventures Pty Ltd, [2013] VSC 89, at para. 43; Maple Trust, at para 51; First Majestic Silver Corp. v. Santos, 2014 BCSC 1564, at para. 18; Australian Mortgage & Finance Company v. Rome Euro Windows Pty Ltd, [2014] NSWSC 996, at para. 38. Any variation will therefore require the balancing of the parties’ competing interests: see e.g., Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, 2003 CanLII 12916 (Ont. S.C.). Having made a Mareva order, a court “should not be quick to reverse it save for good reason and the dictates of justice”: MG Corrosion Consultants Pty Ltd v. Gilmour, [2012] FCA 568, at para. 14. The overarching consideration is whether the justice of the case warrants the variance.[5] . Allen v. Kumar
In Allen v. Kumar (Div Court, 2023) the Divisional Court illustrates an example of a form of a Mareva injunction:[3] The Respondent plaintiffs, Terry Allen, Irene Allen, Christopher Robinson, Crystal Robinson, Sean Deline, Kristy Elik, Max Careau and Robin Kumar, brought an action for fraud against the Appellant. On March 19, 2019, Archibald J. found that the Respondents had a strong prima facie case and issued a Mareva injunction restraining the Appellant from dissipating assets acquired or financed with funds or property, directly or indirectly, from the Respondents (the “Mareva Order”). The Mareva Order permitted the Appellant to spend up to $5,000 per month on “ordinary living expenses” and up to $10,000 on legal services and representation, but required that the Appellant advise the Respondents’ solicitors in writing of the source of the funds and to provide them with a monthly expenditure log. . Securitas Technology Canada v. North West Construction
In Securitas Technology Canada v. North West Construction (Div Court, 2023) the Divisional Court considered the test for a Mareva injunction:[24] A Mareva Injunction is an extraordinary, pre-trial remedy, used to prevent the dissipation of assets pending trial in a civil action. Often referred to as a “freezing order,” it takes its name from the English Court of Appeal case, Mareva Compania Naviera SD v International Bulkcarriers SA [1980] 1 All ER 213 (CA). To obtain this remedy, the moving party must establish:a) it has a strong prima facie case of theft or fraud;
b) the defendant has assets in the jurisdiction;
c) there is a serious risk that the defendant will remove or dissipate its assets before judgment can be obtained;
d) the plaintiff will suffer irreparable harm if the injunction is not granted, such is it will not be able to enforce any judgment obtained because of the removal or dissipation of assets prior to trial, and;
e) the balance of convenience favours granting the injunction, in the sense that the harm suffered if the injunction is not granted will exceed the harm that will be suffered if it is.
See: 10390160 Canada Ltd et al. v. Casey et al., 2022 ONSC 628 at para. 3: Chitel et al. v. Rothbart et al., (1982) 1982 CanLII 1956 (ON CA), 39 O.R. (2d) 513. . Sakab Saudi Holding Company v. Saad Khalid S Al Jabri [for numbered case cites, see the main link]
In Sakab Saudi Holding Company v. Saad Khalid S Al Jabri (Div Court, 2023) the Divisional Court considered the application of Charter s.8 ['search and seizure'] to contempt enforcement of a civil Mareva injunction:[26] The motion judge found that the compelled production of information from Dr Saad was a lawful term of the Mareva order, in furtherance of the court’s civil jurisdiction over claims of civil fraud and related allegations. The authority to make such an order has not been contested on this appeal, and it is well established in our jurisprudence.[15]
[27] The court also has the jurisdiction to make an Anton Piller order[16] which sometimes has been described as a “civil search warrant.”[17] I address this point in more detail below but make the following initial observations about the relationship between Mareva and Anton Piller orders. It is a common feature of Mareva orders to direct production and information from a respondent. While this may be an extraordinary and intrusive order, it is less intrusive than an Anton Piller order, which authorizes a plaintiff to enter premises and seize the information and documents themselves. Other techniques that may be used in the context of cases involving Mareva and/or Anton Piller orders are orders for production from third parties such as banks and other financial institutions. In the absence of extraordinary orders such as Mareva and Anton Piller orders, parties to civil proceedings are obliged under the Rules of Civil Procedure to disclose and produce documents and to provide information during oral examinations for discovery. Compelled information is inherent to the civil litigation process. Then, of course, at a trial in the civil proceedings, compelled information may be used, and any witness who testifies may be compelled to answer questions and produce documents during the course of their testimony.
[28] These disclosure processes, in civil proceedings, are contrasted with the investigative powers of the state in criminal matters – and the protections afforded accused persons in criminal proceedings. The state may obtain warrants to search and seize materials in aid of a criminal investigation. This process is not available in civil proceedings, except to the extent that an Anton Piller order may be available and is seen in that way.[18] In a criminal case, the prosecution has substantial disclosure obligations[19] and the defence has very few obligations to disclose information and evidence to the prosecution.[20]
[29] To put the point generally, investigation of criminal matters is generally unilateral – the state has powers to obtain evidence, and they do not, generally, include compelling a person under investigation to provide information. Investigation of civil matters is generally a bilateral process of compelled disclosure – where the parties are required to provide information and documents to each other but are generally not permitted to exercise the investigative powers available to the state in investigation of criminal matters.
[30] The motion judge found that information and documents compelled from the appellants in the civil proceedings prior to commencement of the contempt motion could be used against the appellants in the contempt motion. Specifically, he concluded that such use would not violate the appellants’ right not to be compelled as a witness in the contempt motion. The motion judge reasoned as follows:a. Section 11(c) of the Charter provides: “any person charged with an offence has the right ... not to be compelled to be a witness in proceedings against that person in respect of the offence”.
b. The appellants cannot be compelled to testify in the contempt motion.[21]
c. There is some authority that evidence that could be tendered against an alleged contemnor may not be gathered in the civil proceedings after commencement of a contempt motion until that motion has been concluded. This principle does not apply to information compelled prior to commencement of the contempt motion.[22]
d. Information compelled under regulatory regimes may generally be used for enforcement proceedings in those regimes.[23]
e. Information obtained in this case prior to the contempt motion was compelled in aid of the civil fraud proceedings – the cause in respect to which the Mareva order was made. [31] The motion judge concluded that use of the Compelled Evidence did not compel the appellants to be witnesses in the contempt motion, and that this conclusion did not create a “gap” in the protection against testimonial compulsion that should be filled by s. 7 of the Charter (Decision, paras. 101 – 102):The protections afforded by a Mareva order would be seriously impaired and, in some cases, entirely undermined if, when the defendant purports to comply with the order by giving a sworn statement of assets and is examined, and the defendant discloses that assets allegedly stolen and ordered to be frozen are, in fact, being dissipated, the evidence so given is inadmissible on a subsequent motion for contempt because of the residual application of s. 7 of the Charter. The very purpose of the provisions of the Mareva order requiring the statement of assets and examination thereon is to facilitate enforcement. The defendant who is subject to the order is well aware that a failure to comply may attract severe sanctions through an order for contempt of court. I regard as significant the fact that when Dr. Saad’s affidavits were given, and when he was examined, he was not facing jeopardy through a contempt motion. When this evidence was given, Dr. Saad had not been charged with an offence, and his evidence was not given in respect of an offence. The protections against self-incrimination in s. 11(c) and s. 13 do not apply in this context.
In my view, having regard to the context in which Dr. Saad’s affidavits were given and his examinations were held, the interests of our justice system in ensuring that there is an effective civil remedy to protect against, as Myers J. put in in Pronesti, “a rogue flouting the civil process of the court”, and the fact that the evidence was given before any contempt motion was brought, there is no residual gap to be filled by s. 7 of the Charter. To give s. 7 of the Charter the effect urged by Dr. Saad would open the door to evasion by wrongdoers of their obligations under Mareva orders and introduce an obstacle to enforcement that could render ineffective or, in some cases, illusory, the protections of a Mareva order.[24] I agree with this analysis.
[32] I would draw an analogy to situations where there are parallel administrative and enforcement powers, such as the enforcement scheme in the Income Tax Act.[25] Taxpayers are required to provide information and documents in income tax returns. Tax authorities have administrative powers to compel information and documents, including, among other things, the power to audit books and records of a taxpayer. Where tax authorities pursue prosecution of an offence under the Income Tax Act, they may not use administrative enforcement powers, because they are conscriptive. Instead, they may have recourse to investigative powers associated with criminal prosecutions, such as search warrants. The taxpayer still has an obligation to file complete and accurate tax returns: these obligations are not suspended because of a nascent or actual prosecution.
[33] I note this point, not because it affects the disposition of this appeal, but to be clear that the motion judge’s decision does not open a pathway for use of compelled disclosure (whether pursuant to a Mareva order or pursuant to the Rules of Civil Procedure) for the purpose of obtaining evidence for a prosecution for contempt of court which is penal, rather than coercive, in nature. As is the case in enforcement of the Income Tax Act, compelled disclosure to ensure compliance with the Act is not inherently for the purpose of prosecution. The court has the power to restrain abuse of the civil justice process for the purpose of a penal contempt prosecution, and neither the decision below nor this decision on appeal holds otherwise.[26]
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[46] In respect to further requests for production of documents, the motion judge considered a line of authorities[33] to the effect that documents compelled prior to criminal proceedings, for other lawful purposes, are not inadmissible in subsequent criminal proceedings. The motion judge then considered R. v. Jarvis, upon which the appellants relied, in support of the proposition that when an investigation shifts from administrative to criminal in nature, administrative powers may no longer be used to compel a taxpayer to provide documents and information, in violation of their right to remain silent.[34] The motion judge then concluded as follows (the “Production Ruling”):The Court in Jarvis did not provide for an exception to the taxpayer’s Charter rights where the documents required from the taxpayer exist independently of any state compulsion.
I do not agree that Branch[35] is authority for the proposition that where documents exist independently of any state compulsion, the principle against self-incrimination under the Charter does not apply. The plaintiffs have brought a contempt of court motion seeking remedies against Dr. Saad and Mohammed. The plaintiffs having done so, the Charter rights of Dr. Saad and Mohammed are engaged. The plaintiffs cannot conscript Dr. Saad and Mohammed to assist in the prosecution of the contempt motion against them by compelling them to assemble and produce documents which the plaintiffs reserve the right to use to convict them of contempt of court.
This conclusion applies to both Dr. Saad and Mohammed. Although the documents sought from Mohammed are sought under the Mohammed Mareva Order and the contempt motion against Mohammed is brought in respect of the Saad Mareva Order, the plaintiffs reserve the right to use any documents produced by Mohammed to aid in the prosecution of the contempt motion against him. In these circumstances, the principle against self-incrimination under the Charter is engaged in respect of Mohammed and Dr. Saad.
Mohammed is not required to produce the requested documents to the plaintiffs for use on the contempt motion. I agree with the motion judge’s analysis except for one core point: an allegation of contempt does not transform proceedings from civil to criminal unless the court also finds that the contempt allegation is predominately penal rather coercive. If the contempt motion is predominantly coercive, then the nature of the proceedings has not been “transformed” to criminal.
[47] The problem with the Admissibility Ruling and the Production Ruling are their apparent inconsistency, in principle, with the motion judge’s decision respecting Issues 1 and 2. It is clear that the motion judge wrestled with this problem, and he correctly concluded that the weight of authority supported drawing a distinction between compelled evidence provided prior to an allegation of contempt and compelled evidence provided after an allegation of contempt. This context does matter, but it does not determine the issue.
[48] First, the motion judge is correct in finding that the Mareva order continues in force and the appellants’ obligations thereunder likewise continue. On the basis of the Mareva order, undertakings must be answered and information and documents provided.
[49] Second, until the respondents seek to rely on information and documents compelled from the appellants in support of the contempt motion, the court need not rule on the admissibility of that evidence.
[50] Third, if the respondents do seek to rely on information and documents compelled from the appellants and provided by them after commencement of the contempt motion, at that time the court should assess the “predominant purpose” of the contempt motion, by analogy to R. v. Jarvis.[36] If the court finds that the predominant purpose of the contempt motion is “coercive” rather than “penal” then the evidence may be compelled and will not be inadmissible because it is conscriptive.[37] If the court finds that the predominant purpose of the contempt motion is penal, then the moving party may pursue alternative approaches to obtain evidence for the contempt motion. . Sakab Saudi Holding Company v. Saad Khalid S Al Jabri [for numbered case cites, see the main link]
In Sakab Saudi Holding Company v. Saad Khalid S Al Jabri (Div Court, 2023) the Divisional Court considered complications emanating from attempts to enforce a Mareva injunction (contempt motion):[14] The Mareva order had the effect of freezing the appellants’ worldwide assets. While such an order is an extraordinary remedy, it is available in an appropriate case, and it leaves persons subject to the order in a position where they must seek authorization from the court to spend money, even to fund their basic living expenses and legal costs. The allegation in the contempt motion is that the appellants have breached the Mareva order to pay Dr Saad’s living expenses and to fund legal expenses in this and other litigation. From the outset, the respondents were clear that they were seeking to bring the appellants into compliance with the Mareva order and were not seeking imprisonment as a remedy for the alleged contempt. To quote from the respondents’ factum,[t]he Plaintiffs’ goal is simply to stop the ongoing contempt by requiring [the Appellants] to apply to the Superior Court for permission to use frozen funds to pay for living and legal expenses.[4] [15] In retrospect, the plaintiffs might wish that they had moved for remedies for “non-compliance” with the Mareva order, rather than findings of contempt. However, with respect, the principles that apply to the court’s ability to control its own process and enforce its own orders should not turn on the way in which a compliance motion is framed. The Mareva order was made after the Commercial Court found a strong prima facie case of fraud on an enormous scale. The court must and does have flexible tools and inherent jurisdiction to control its own process to see to enforcement of its orders. These tools include compelling a party to demonstrate compliance with the court’s orders. The tools used by the court in a particular case to secure compliance with its orders may impact on the remedies available for non-compliance that is discovered. This issue ought to be dealt with practically, by the parties and by the court. Here, the evident nature of the contempt motion is coercive rather than punitive and it is focused on securing compliance rather than punishing past non-compliance.
[16] The court below has discretion as to how to manage the overall case – including scoping the contempt motion and managing it so that it does not derail the main proceeding. The main claim is for fraud. The Mareva order was intended to facilitate the court’s ability to do justice to the fraud claims at the end of the case. The contempt motion was designed to obtain compliance with the Mareva order. It surely should be clear that the contempt motion should not be transformed into the main cause and impede ongoing performance of the Mareva order and the underlying proceedings. I return to this point – and its practical implications in this case – at the end of these reasons.
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[42] If the respondents had brought a motion seeking a remedy for “non-compliance” with, rather than “contempt” of, the Mareva order, perhaps some of the current difficulties – and resulting litigation delay– could have been avoided. As noted by Steele J. in McClure (at p. 3 of 6), many enforcement proceedings, including a civil contempt motion “are not penal but are coercive proceedings with respect to orders and judgments of the court to allow the court to enforce its process.” Not all non-compliance rises to the level of contempt of court, and even where it may, obtaining current and ongoing compliance is often the predominant goal.
[43] I appreciate that there are circumstances where “non-compliance” may justify a finding of contempt and a custodial sentence, because of the nature of the non-compliance and its impact on the court’s ability to do justice at the end of the case, or to the ongoing process of the litigation. Currently, in this case, the issue is a question of the extent to which the appellants may use resources to fund Dr Saad’s day-to-day expenses and legal costs, and the oversight of the court in respect to those questions. The contempt motion, at this stage in the case, is towards the “coercive” rather than the “penal” end of the spectrum of civil contempt proceedings.
[44] Further, even in contempt proceedings at the “penal” end of the spectrum, a moving party is not precluded from building their case for contempt after they have commenced a contempt motion. In the administrative context, where an investigation has become predominantly “criminal” rather than “administrative”, the state’s administrative investigative powers may be curtailed, but recourse to search and seizure authorized by a warrant is still available. In the context of a civil contempt motion, where the court concludes that the matter is predominantly “penal” and protections against self-incrimination and the right to silence preclude further compelled disclosure, alternative means for gathering evidence may still be available, such as an Anton Piller order or an order for third party production. It is not the case that a moving party’s ability to assemble evidence is brought to a halt by commencing a contempt motion. . Ontario v. Madan
In Ontario v. Madan (Ont CA, 2023) the Court of Appeal, in a fraud lawsuit by the province, noted statutory remedies - including Mareva injunction and preservation orders - under the Civil Remedies Act:[27] In October 2020, Ontario obtained an ex parte Mareva injunction and a preservation order under the Civil Remedies Act, 2001, S.O. 2001, c. 28. The appellants subsequently consented to the continuation of the Mareva injunction and the preservation order.
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