The purpose of this blog is to provide an introduction to Mareva injunctions and the test that has to be met for a Court to grant such an injunction. The term “Mareva injunction” stems from the seminal English case of Mareva Compania Naviera SA v International Bulkcarriers SA, [1975] 2 Lloyd’s Rep 509). Generally, Mareva injunctions temporarily restrain responding parties from dissipating or conveying their own property/assets, pending a final determination of the underlying dispute. Mareva injunctions are granted only in the clearest of cases, as Mareva injunctions are tantamount to execution before judgement.
Courts have the discretion to issue Mareva injunctions pursuant to Section 101 of the Courts of Justice Act, RSO 1990, c C43 and Rule 40.01 of the Rules of Civil Procedure, RRO 1990, Reg 194. Further, to obtain a Mareva injunction, the following test must be met: (1) the moving party has a strong prima facie case; (2) there is proof of irreparable harm; (3) the balance of convenience favours granting the injunction; (4) there are some grounds for believing the responding party has assets within the jurisdiction of the Ontario Court; and (5) there are some grounds for believing there is a serious risk that the responding party will remove property or dissipate assets before judgement is awarded.
A Mareva injunction can also be brought on an ex-parte basis; that is, without notice to the other side. If the motion is brought without notice, the following criteria must also be met: (6) full and fair disclosure of all material matters in the knowledge of the moving party; and (7) particulars of the claim against the responding party, setting out the grounds of the claim and the amount thereof, and fairly stating the points that could be made against the responding party. Absent unusual circumstances (the case law is sparse on what may or may not be accepted as “unusual circumstances”), the moving party is also required to (8) provide an undertaking as to damages (as is normally required for any interlocutory injunction). This blog will only discuss the first (5) factors.
In terms of the first prong of the test (i.e. a strong prima facie case), a judge must be satisfied that there is a strong likelihood on the law and evidence presented that the moving party will ultimately be successful in proving the allegations set out in applicable pleading.
With respect to proof of irreparable harm, irreparable harm is harm that cannot be quantified in monetary terms or otherwise cannot be cured, usually because one party cannot collect damages from the other. The probability of irreparable harm increases as the probability of recovering damages decreases.
In regards to the balance of convenience, being the third prong of the test, the Court must consider which of the parties will suffer greater harm from either granting or denying the interim order, pending a determination on the merits. In Shi v Chen, the Court found that the balance of convenience favoured issuing a Mareva injunction; there was prejudice to the moving party because there was a risk that the assets would leave the jurisdiction, leaving insufficient assets to satisfy an eventual monetary judgement. Meanwhile, there was no evidence that ordering the Mareva injunction would prejudice the responding party.
The fourth prong of the test is straightforward as the moving party simply has to provide evidence that there are assets in Ontario. As for the fifth prong of the test, the moving party must demonstrate grounds for believing there is a serious risk that the responding party will remove property or dissipate assets before judgement is awarded. The critical question here revolves around the responding party’s intent. A Mareva injunction should only be issued if the responding party’s purpose in removing assets from the jurisdiction or dissipating or disposing of them is to avoid judgement. Proof of the risk of removal/dissipation of assets may, in the appropriate case, be inferred from the surrounding circumstances of the party’s misconduct. The list of relevant factors for the Court’s consideration is non-exhaustive and includes: a responding party’s attempt to cover up their tracks; a responding party’s attempt to destroy, hide or alter evidence; and any conduct demonstrating the traditional badges of fraud.
It is important to carefully consider the facts and circumstances of one’s case before proceeding with a Mareva injunction. As noted, it is an extraordinary remedy which the Court will grant only sparingly.
