Asset-freezing injunctions, commonly referred to as Mareva injunctions, are among the most powerful remedies available in civil litigation. They allow courts to freeze a defendant’s assets before a final judgment is rendered to prevent the dissipation of assets that could otherwise frustrate the enforcement of a future judgment.
Because of the extraordinary nature of this remedy, courts apply strict legal tests both when granting and when reviewing such injunctions. A recent decision of the Ontario Superior Court of Justice illustrates how a Mareva injunction may be dissolved as the evidentiary foundation for the order weakens over the course of the case.
In Li v. Bai et al., the court ultimately discharged a Mareva injunction against two corporate defendants after concluding that the plaintiff had not established a strong prima facie case against them and that the factual basis for the injunction had been undermined by a more complete evidentiary record. The ruling provides important guidance on the evidentiary thresholds for maintaining asset-freezing orders in fraud litigation and highlights the risks of pursuing such remedies against peripheral defendants.
The dispute arose from an alleged private mortgage investment scheme involving several individuals and corporate entities. The plaintiff claimed that between 2020 and 2024, she advanced substantial funds to one of the defendants, who represented that he operated a private mortgage business specializing in high-interest lending secured by real estate. The plaintiff alleged that the defendant assured her that her money would be used only for primary mortgages and that she would receive interest at a rate of 10–11 percent.
Over time, the plaintiff advanced more than $1.8 million in funds and received partial repayments. However, the repayments slowed and eventually stopped, leaving an alleged outstanding balance of approximately $1,051,500.
The plaintiff alleged that the individual defendant had committed fraud and fraudulent misrepresentation. She further claimed that several corporations, including the two corporate defendants involved in the motion, were used as vehicles to facilitate the alleged scheme. In particular, the plaintiff asserted that the corporate defendants had knowingly participated in the misuse of her funds and were therefore jointly liable.
In October 2024, the plaintiff successfully brought an ex parte motion seeking a Mareva injunction against all defendants. An ex parte motion is brought without notice to the opposing parties, typically because of urgency or a risk that giving advance notice could allow assets to be moved or concealed.
The court granted the requested injunction, freezing the defendants’ assets in Ontario pending further order. The order was subsequently extended several times while the litigation progressed.
The injunction had significant consequences for the corporate defendants. Their accounts were frozen, and although some limited operating permissions were later granted, the order continued to restrict how their funds could be used. Eventually, the two corporations brought a motion seeking to have the Mareva injunction dissolved as it applied to them.
Ontario courts recognize that Mareva injunctions are extraordinary remedies that interfere with a party’s ability to control its own property. For that reason, courts apply a structured analysis when deciding whether to dissolve such an order.
The court in this case confirmed that several factors must be considered, including:
Importantly, the defendants seeking to dissolve the injunction bear the burden of demonstrating that these factors justify setting aside the order. However, where the evidentiary foundation supporting the original injunction no longer exists, courts may find that maintaining the injunction is no longer appropriate.
The corporate defendants argued that the Mareva injunction had caused substantial operational and reputational harm.
They submitted that the order had:
The court accepted that the injunction had caused some harm and could continue to affect the companies’ operations. However, the court also observed that Mareva injunctions inevitably cause some degree of harm to the affected parties.
For the purpose of dissolving the injunction, the key question was not whether harm existed, but whether the harm was sufficiently severe to justify lifting the order. The court concluded that the evidence did not demonstrate “real and pervasive” or irreparable harm. As a result, this factor alone did not justify dissolving the injunction.
The most significant issue in the motion concerned whether the evidentiary record had evolved in a way that undermined the original justification for the Mareva injunction.
When the injunction was first granted, the plaintiff relied on evidence suggesting that the individual defendant controlled the corporate defendants. Further, the plaintiff alleged that the corporations may have been dissipating assets in a way that could prevent the plaintiff from recovering damages.
However, by the time of the motion to dissolve the injunction, the evidentiary record had developed considerably. The court examined the full record and found several important facts that had not been clear when the injunction was initially granted.
The court noted that the plaintiff’s statement of claim alleged that the individual defendant was the “controlling mind” of the corporate defendants.
However, the evidence demonstrated that the individual defendant:
The evidence also showed that the corporations had significant independent operations. They managed more than $9.7 million in loan receivables secured by over 20 mortgages, while only a small portion of their investments originated from the individual defendant.
The court found that the size of the individual defendant’s investments did not demonstrate that he exercised de facto control over the corporations. As a result, the central allegation that he controlled the companies became much weaker when examined against the full record.
The record also revealed further details about how the plaintiff’s money moved through the transactions.
Evidence showed that $300,000 of the plaintiff’s funds had been traced to investments made by the individual defendant in loans facilitated by one of the corporations.
However, the corporations had never received funds directly from the plaintiff. The evidence indicated that the corporations believed the individual defendant was the sole investor in those transactions and therefore followed his instructions regarding the distribution of repayments. The court concluded that this explanation was credible and consistent with the documentary record.
The plaintiff argued that the corporations’ payments to her demonstrated their knowledge of her investments. However, the court found that these payments were insufficient to establish corporate wrongdoing.
Some payments appeared to have been made as referral fees, while others were payments that the individual defendant had directed the corporations to send on his behalf.
The court concluded that these payments were consistent with the individual defendant acting as an investor who had requested that funds be forwarded to third parties. They did not establish that the corporations were involved in fraud or knowingly participated in it.
Another key issue in the original Mareva injunction was the alleged dissipation of assets. The plaintiff pointed to the repayment and redistribution of funds from certain mortgage projects as evidence that the corporations were moving assets to avoid liability.
However, the court found that the corporations had provided credible explanations for these transactions. In particular, the court noted that the corporations believed the individual defendant was the sole investor in the projects. Further, the plaintiff had not directly invested funds with the corporations or communicated with them regarding the transactions.
Given these circumstances, the repayment of investors and distribution of funds according to the investor’s instructions did not indicate an attempt to defeat a potential judgment.
After reviewing the updated record, the court concluded that the balance of convenience favoured dissolving the Mareva injunction against the corporate defendants.
The court identified several reasons for this conclusion. First, the record no longer supported a strong prima facie case that the corporations had committed fraud or were liable for the alleged misrepresentations.
Second, the evidence did not establish a real risk that the corporations would dissipate assets to avoid a future judgment.
Third, the court noted that other assets already secured by the existing injunction—including equity in the individual defendant’s residence and remaining investment funds—were sufficient to cover the amount claimed by the plaintiff. In these circumstances, maintaining the injunction against the corporations was no longer justified.
The court ultimately ordered that:
The court also awarded $20,000 in costs to the corporate defendants for the motion.
Fraud allegations, asset-tracing disputes, and emergency injunctions can dramatically alter the course of civil litigation. Mareva injunctions in particular can freeze assets, disrupt business operations, and expose parties to significant legal risk before a trial even occurs.
The commercial litigation lawyers at Milosevic & Associates represent individuals, investors, businesses, and financial institutions in complex commercial disputes, fraud claims, and urgent injunction proceedings. If you are involved in a high-stakes dispute involving frozen assets or allegations of financial misconduct, early strategic legal advice can make a critical difference. Contact the firm online or call (416) 916-1387 to schedule a confidential consultation.
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