Mareva Injunctions: Freezing Assets Before Judgment

The remedy of a Mareva injunction is so named having adopted the name of the plaintiff company in a 1975 English Court of Appeal decision (Mareva Compania Naviera SA v. International Bulkcarriers SA). Such an order prohibits the dissipation of the defendant’s assets. In effect, it provides a form of pre-judgment execution and has the effect of freezing a defendant’s assets so they cannot be disposed of or transferred pending the outcome of the litigation.  As a result, it is a difficult remedy to obtain and is a rare and extraordinary order.

A Mareva injunction is most often awarded on a ten-day temporary basis and then extended or denied at the actual hearing.

Elements Needed to Prove the Necessity of a Mareva Injunction

To be successful in such a motion the moving party must first establish the following:

1. That it has a strong prima facie case;
2. That the defendant owns assets in Ontario;
3. That there is a real risk that those assets will be removed or sold before judgment likely done to avoid payment.

Secondly, the plaintiff still must meet the tests established for an interlocutory injunction, being:

• That there is a serious issue to be tried;
• That the plaintiff will suffer irreparable harm if the remedy is not granted;
• That the balance of convenience favours the granting of an interlocutory injunction. In other words, will the Mareva injunction, if granted, cause less harm to the defendant than not granting it would cause to the plaintiff in the circumstances.

Thirdly, the plaintiff must, in its materials in support of its ex parte (without notice) motion, disclose all material facts as set out in the Ontario Court of Appeal decision in Chitel v. Rothbart et all.

This requirement also stems from English precedent and is a requirement of the common law in Canada as well by virtue of its application by our courts. These factors are applicable to all ex parte motions and those for an injunction. They are as follows:

1. The plaintiff must make full and frank disclosure of all matters in their knowledge which reasonably are material for the judge to know;
2. The plaintiff should give particulars of their claim against the defendant, stating the ground(s) of the claim and the amount thereof, and fairly state the points made against it by the defendant;
3. The plaintiff must reasonably establish that the defendant has assets in the relevant jurisdiction and that there is some risk that the assets may be moved before a judgment or award is satisfied;
4. The plaintiff must give an undertaking as to damages.

A “material fact” is simply information that is essential to establishing one’s case and as well any facts whose absence may affect the outcome of the motion. This step is codified in the Rules of Civil Procedure at Rule 39.06 which reads as follows:

Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.

A Remedy Granted Only in Exceptional Circumstances

The process to obtain a Mareva injunction onerous and difficult for the plaintiff. They are intended to be that way as the remedy, which is granted without notice to the defendant, is made by the judge after hearing only one side of the story. Further, it is obvious that such an order will prejudice the defendant.

If you have a question about civil fraud, asset recovery, injunctive relief, enforcement of foreign judgments or similar, the highly skilled Toronto corporate lawyers at Milosevic & Associates can help. We can provide you with advice and guidance suited to your unique situation. Call us at 416-916-1387 or contact us online to learn more about how we can help.