December 4th, 2012
I often get calls from lawyers around the world wondering what kinds of remedies are available to protect their clients doing business in Canada. In this series, I will discuss a few of the unusual and extraordinary remedies that one can access in Ontario.
One of the most significant of these is the Mareva order, a form of injunction which “freezes” assets so that a defendant to an action cannot dissipate or conceal his assets so as to frustrate a judgment. Named for the House of Lords case Mareva Compania Naviera S.A. v International Bulkcarriers Ltd., this remedy was first recognized as part of the inherent jurisdiction of the court by Lord Denning in 1975, and was endorsed by the Supreme Court of Canada in Aetna Financial Services Ltd. v. Feigelman.
A Mareva injunction is generally sought by the plaintiff prior to trial with the goal of preventing a defendant from dissipating assets in response to the threat of litigation.
In order to obtain a Mareva injunction, the claimant must satisfy the court that it has a strong prima facie case and that but for the issuance of the order, irreparable harm would be suffered by the plaintiff. Because Mareva is often sought ex parte, the plaintiff must make full and frank disclosure of all material matters, whether favourable to its case or not. Failure to make proper disclosure may later lead to the injunction being dissolved and/or a heavy adverse costs award.
A Mareva injunction precludes the defendant from transferring or liquidating any assets other than in the ordinary course. Having the effect of “freezing” all a defendant's assets and potentially on a world-wide basis, the measure is often described as draconian.
The United States Supreme Court has ruled against recognizing Mareva orders (Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc.). However, this ruling has been overcome by legislation in certain states, particularly in insolvency matters.
Another interesting remedy, often sought in conjunction with a Mareva order, is an Anton Piller order. I'll discuss Anton Piller orders in my next post.