The Mareva injunction is a powerful tool for levelling the playing field when dealing with those who, left to their own devices, would dissipate their assets, with a view to frustrating the claims of their creditors. While the commencement of litigation is the traditional juncture to seek such extraordinary relief, based in part on the idea that a defendant might then take steps to dissipate assets, it is not the only stage of the process at which such an order is available. If a Mareva was either not granted, or not sought, at the front end of the process, but then a money judgment is obtained, some defendants might then take steps to remove, conceal or consume assets, while an appeal is pending, thereby exploiting the automatic stay of execution imposed. Only when some defendants face the looming consequences of litigation, do they decide to take steps to insulate themselves from the impact of execution on the judgment. In both cases, the end-goal of such parties is to make themselves judgment proof. A recent Ontario case serves as a reminder that a post-judgment stay of execution need not be considered a barrier to freezing assets, whether or not the underlying litigation was based in fraud.
In our recent blog post we described our successful appeal to the British Columbia Court of Appeal, which overturned the lower court’s decision to set aside a Mareva injunction. While that case was unique in its consideration of the intersection of the enforcement of international arbitral awards and the use of the Mareva injunction, Canadian courts have a history of supporting the use of this tool after ruling on the merits of a case.
In American Environmental Container Corp. v. Kennedy, a decision of the Honourable Mr. Justice R.F. Goldstein of the Ontario Superior Court of Justice, decided this past summer, the Court reaffirmed the principle that Mareva injunctions are available to assist creditors seeking to protect and preserve assets post-judgment, but pre-execution. This case, as do many involving post-judgment Mareva injunctions, looked to the 1999 decision of Justice Sachs, Lamont v. Kent. In Lamont, the plaintiff was seeking a Mareva injunction six days after Justice Sachs granted a money judgment, but dissolved a previously-issued pre-judgment Mareva injunction. Immediately after judgment was granted, the plaintiff was advised by one of the financial institutions where the defendants had bank accounts that the defendants wanted to withdraw all of their funds from their bank accounts. In the face of that evidence, Justice Sachs noted that, “there is even greater justification for restraining a defendant from dissipating his or her assets after judgment than before the plaintiff’s claim has even been determined”, going on to point out the obvious fact that, in terms of meeting the strong prima facie case branch of the Mareva injunction test, the litigation has already been determined by judgment. Other recent decisions in Ontario, such as O.K. Tire Stores Inc. v. McLaughlin and Complex Sportivo Inc. v. Maharaj apply this same principle to grant post-judgment Mareva injunctions.
The Ontario Court of Appeal has also recently confirmed, in the 2012 case of Carmen Alfano Family Trust (Trustee of) v. Piersanti, that Mareva injunctions, being “protective and preservative in nature”, do not constitute “steps under the Trial Judgment or for its enforcement” and, accordingly, are permitted in the face of an appeal, despite the automatic stay in enforcement under Rule 63 of the Rules of Civil Procedure. Just as a party is free to issue a writ of execution and file same with the Sherriff’s office, as long as they do not instruct or direct the Sherriff to enforce same, so too, a plaintiff can seek to freeze assets until an appeal is decided.
These recent cases serve as useful reminders that support for the post-judgment use of the Mareva dates back to the early days of the remedy’s creation in the Courts of England. While the Mareva injunction remains a vital pre-judgment tool for preventing the dissipation of assets, (which these days can be achieved with the push of a button), it is important to remember that this extraordinary remedy is not, and, in fact, never was, intended to be confined to pre-judgment scenarios.