In a recent decision, Ontario’s Divisional Court reviewed the requirements for succeeding in obtaining a Mareva injunction, and, more importantly, reaffirmed the importance of such an injunction in fraud cases.
In 2092280 Ontario Inc v. Voralto Group Inc, 2018 ONSC 2305, the Appellants sought leave to appeal a decision of a motion judge, who refused to grant an ex parte(without notice) Mareva injunction as against the Respondents, to restrain them from disposing of or dissipating their assets. The Appellants were a landlord and contractor who had allegedly been defrauded by the Respondents in a scam involving the illegal dumping of waste.
The Decision Below
In support of their ex parte motion for a Mareva injunction, the Appellants adduced evidence of allegedly fraudulent activity carried out by the Respondents, including that (i) one Respondent had previously been convicted for illegal dumping and other fraudulent or illegal activity, (ii) another Respondent was the subject of a criminal investigation, and (iii) the Respondents illegally dumped 1,500 truckloads of industrial waste on property owned by one of the Appellants.
The motion judge declined to grant the relief ex parte, citing delay by the Appellants in advancing their claim for injunctive belief, and a lack of direct evidence that the Respondents were actually dissipating assets. Having not been persuaded that relief without notice to the Respondents was warranted, the motion judge ordered that the motion for a Mareva injunction be brought on notice.
Without giving notice to the Respondents, the Appellants sought leave to appeal the decision of the motion judge.
The Divisional Court’s Review of Principles Regarding Mareva Injunctions
The Court summarized the well-known requirements for succeeding on a motion for a Mareva injunction:
(1) The plaintiff must make full and frank disclosure of all material matters within his or her knowledge.
(2) The plaintiff must give particulars of the claim against the defendant, stating the grounds of the claim thereof, and the points that could fairly be made against it by the defendant.
(3) The plaintiff must give grounds for believing that the defendant has assets in the jurisdiction.
(4) The plaintiff must give grounds for believing that there is real risk of the assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with so that the plaintiff would be unable to satisfy a judgment awarded to him or her.
(5) The plaintiff must give an undertaking as to damages.
In response to the apparent delay by the Appellants in advancing their claim for injunctive relief as cited by the motion judge, the Court also confirmed that “timeliness” is not one of the five requirements for a Mareva injunction. Though delay might be a relevant factor in certain cases, especially when urgency is advanced as a reason for moving without notice, it is not relevant when the basis for moving without notice is the risk that assets will be dissipated.
Mareva Injunctions in Fraud Cases
In identifying the importance of protecting victims of fraud, the Court explained that: