The Ontario Court of Appeal recently reinstated a lower court’s contempt finding against a lawyer who paid himself $60,000 and returned $440,000 to his client, a financial advisor facing multiple legal proceedings for defrauding his clientele.
When a cheque for $500,000 was unexpectedly delivered to the lawyer by his financial advisor client whose assets were frozen by the injunction, without any instructions regarding its use, the lawyer deposited the funds into his trust account, in keeping with Law Society regulations. However, after unsuccessfully attempting to settle the litigation in which the Mareva injunction was granted, the lawyer followed his client’s instructions and returned the funds to his client (less the legal fees). Years later, after the financial advisor went out of business and disappeared, his creditors, including the party who had sued him and obtained the injunction, learned of the hundreds of thousands of dollars that had flowed through the lawyer’s trust account and back to the advisor. After the lawyer was initially found in contempt, the lower court set aside the contempt finding, after allowing fresh evidence, including an affidavit from a respected Ontario lawyer, who testified that the lawyer for the financial advisor had acted in a manner that was consistent with the practice of counsel generally. However, the plaintiff successfully appealed to the Ontario Court of Appeal, which reinstated the contempt finding, disregarded the fresh evidence and ordered that the lawyer pay the plaintiff’s costs of the contempt proceedings. The lawyer is seeking leave to appeal from the Supreme Court of Canada. This case serves to reinforce both the potency of the Mareva injunction, but also the importance of instructing experienced counsel when dealing with such matters. In such circumstances, Mareva injunctions could be combined with mandatory financial disclosure, immediate cross-examination and the appointment of a receiver at the front end of the process, thereby minimizing the likelihood of undisclosed assets disappearing along with the defendant. To read the full case click here.