A Mareva injunction freezes a defendant’s assets to avoid their dissipation and to enable a judgment to be later satisfied. Ontario courts have found that the injunction is limited to circumstances where there is a real risk of removal, dissipation or disposition of assets to avoid the consequences of a judgment. Chitel v. Rothbart, 39 O.R. (2d) 513. In a recent decision in HZC Capital, Inc. v. Lee, 2019 ONSC 4622, the court expounded on the proof needed to obtain such an extraordinary remedy.
There, the fraud involved a series of real estate development projects wherein it was alleged that there was a conspiracy to improperly obtain acquisition fees and hide that activity. There was no evidence of off shore assets or businesses or any indication that the defendants may move their assets off shore to avoid the judgment or they will not be in a position to pay the judgment. The court noted that the primary consideration for a Mareva injunction is the actual risk the defendant will hide or likely will hide assets. This proof must be established by more than mere speculation. Thus, a strong prima facie case of fraud alone is insufficient where the circumstances of the fraud itself taken in the context of the surrounding circumstances do not support the inference of dissipation. The evidence must show a real risk that the defendant will try to put assets out of the reach of the plaintiff.
Thus, counsel need to be prepared to support the real risk of dissipation or disposition with evidence that is straight-forward and compelling to provide a court with sufficient evidentiary support to freeze a defendant’s assets. An extraordinary remedy requires a persuasive set of circumstances to avoid the inequity to a plaintiff.
Read more about Eric “Rick” S. Rein and the International Asset Recovery and Enforcement Group here.