In Li et al. v. Barber et al., the Ontario Superior Court of Justice dismissed a motion by two “Freedom Convoy” organizers to release $200,000 of previously frozen funds needed to retain legal counsel to defend a class action lawsuit. Notwithstanding the nuances of this particular case, this decision is important because the court clarified that the defendants needed to meet a high evidentiary threshold to access frozen funds.
The underlying facts of this case are well-known. A putative class proceeding was initiated on behalf of the citizens of Ottawa against the organizers, participants, and fundraisers of the so-called “Freedom Convoy” and the associated “occupation” of downtown Ottawa last year.
Earlier in 2022, Justice MacLeod issued a Mareva injunction, freezing funds that were raised on social media platforms to support the participants of the Freedom Convoy. That decision attracted widespread attention because it was one of the first of its kind that involved cryptocurrencies and it was the first time a Mareva injunction was granted in a non-fraud tort class proceeding. In advance of a hearing to challenge the injunction, the parties agreed to dissolve the Mareva injunction with the funds to be held by an escrow agent. This escrow fund held amounts that had been subject to the Mareva injunction, but also funds from other sources, including funds that were frozen pursuant to a restraint order under the Criminal Code. As part of the agreement, any freezing order on the personal assets of the defendants was lifted.
The moving parties, B.J. Dichter and Chris Garrah, are two of the defendants in the proposed class action. They brought the motion in order to access $200,000 from the “Mareva-bucket” of the escrow fund to defend themselves in the class action.
Decision & Analysis
Justice MacLeod dismissed the motion.
Usually, where the injunction freezes assets of a defendant over which the plaintiff makes no proprietary claim, the defendant can access funds for ordinary living expenses, including their ordinary legal expenses. Justice MacLeod distinguished between a typical Mareva injunction and the escrow agreement that was entered into here. The frozen funds were not intended for the personal use of the defendants. Those funds were comprised of contributions by members of the public to the Freedom Convoy. He clarified that access to those frozen funds “should not be granted lightly because it would effectively subject the frozen funds to the “death of a thousand cuts” and would risk undoing the effect of the agreement reached between the parties when the injunction was lifted and the escrow fund established.”
An important factor in the determining whether a defendant should have access to the frozen funds is whether the fund at issue would be their only means of paying for their defense. In this case, Justice MacLeod was not convinced that the defendants had met this bar. Analogizing to the “impecuniosity” concept from security for cost cases, Justice MacLeod held that the defendants had not made the requisite full and frank disclosure to support their claim of impecuniosity. The defendants, according to Justice MacLeod, had merely made “bald statements” that they could not afford counsel.
In addition, the moving parties failed to submit a bill of cost or litigation budget for the $200,000 requested. The assertion by each moving party that they required $100,000, without any further support or context, does not meet the requirement for access to frozen funds.
While there are aspects of this case that make it unique, it reiterates that access to frozen funds is not automatic. Depending on the circumstances, moving parties may need to demonstrate that access is necessary and that the amount sought is appropriate. It will be interesting to see if other courts consider Justice MacLeod’s borrowing of the “impecuniosity” concept in more traditional Mareva injunction circumstances. This decision is a good reminder that plaintiffs have options when faced with requests for frozen funds that may significantly erode the pot for eventual recovery.
* With thanks to Anton Rizor for his assistance with this article.