By Jeff Li
You are suing a defendant. The defendant is depleting his assets, by selling, making transfer to friends or to a trust. If this case, you will normally go to the court and obtain an order to freeze the defendant’s assets, or a “Mareva injunction”, so that the defendant will still have money to pay you if you are awarded substantial damages.
Things go much more complicated if a lawsuit goes beyond the border of one single country. Imagine that you are suing a defendant in a foreign country. The defendant does not have many assets in that country but have significant properties in Canada and some other countries. The defendant does not have sufficient connection with Canada (except for his properties existing here) so that the Canadian court will not assume jurisdiction over the dispute. In this case, can a Canadian court still order a Mareva injunction to freeze the defendant’s assets in Canada, or even his assets in all other countries in the world?
The answer would be no in the early 1990s. However, Canadian courts has since changed their positions. The court realizes that the above scenario happens frequently in today’s interconnected world, and that it is extremely unfair for a party who obtains remedy in one jurisdiction but cannot effect it because of the un-cooperating foreign jurisdiction. In fact, since 1991, a Quebec court is allowed to order such a free-standing Mareva injunction and other remedies in aid of foreign proceedings with the new Civil Code of Quebec entering into force. Since then Article 3138 of the Code provides that a “Quebec authority may order provisional or conservatory measures even if it has no jurisdiction over the merits of the dispute.”
Before long the case law in English Canada made important steps forward. Canadian courts used to follow the English leading case Siskina (owners of Cargo Lately Laden on Board v. Distos Compania Naviera S.A.), decided by the Privy Council in the United Kingdom in 1979. Accordingly, a court would only issue a Mareva injunction if the case was to be determined in the court’s jurisdiction. In the Supreme Court of Canada decision BMWE v. Canadian Pacific Ltd. [1996] 2 S.C.R. 495, however, Justice McLachlin (now Chief Justice of the Supreme Court) squarely rejected the rationale in Siskina. While BMWE did not deal with the issue of Mareva injunction, it made it possible for a Canadian court to grant free-standing injunction relief.
In a series of litigations United States v. Friedland, courts in both British Columbia and Ontario issued Mareva injunction while the substantive issues of the case was decided elsewhere. In Friedland No. 1, Justice Spencer of the British Columbia Supreme Court held that there was “strong authority” in BMWE to support the disposition that the court possessed jurisdiction to award Mareva injunction to prohibit the defendant from removing assets from the province, pending the outcome of the case in Colorado. In Adler, Coleman Clearing Corp. (Trustee of) v. Roddy Diprima Ltd., Justice Harvey recognized that BMWE and Friedland No. 1 are clear authority that “an interim injunction may be granted to prevent removal of assets so that they are available for execution in a foreign judgment.”
While it is clear that Canadian courts will issue Mareva injunctions to preserve assets in the court’s jurisdiction, it is less clear whether a Canadian court will order an injunction with respect to a party’s assets world-wide. After all, since the property is located outside Canada, it may just be more effective to have the injunction issued from a local court that has jurisdiction over such property. Thus, the courts have repeatedly warned that worldwide Mareva injunctions will be awarded only in extreme and rare case. For worldwide Mareva injunctions in aid of foreign proceedings, more stringent requirements should be followed. Despite this, scholars have argued that there are such “ultra-extreme” circumstances that justify the issuance of such type of order.
Recent case law suggests that the circumstances justifying worldwide Mareva injunctions may not be that rare. In Obégi v. Kilani (2011 ONSC 1636), Justice Ratushny of the Ontario Superior Court confirmed that the court has jurisdiction to order worldwide Mareva injunctions in aid of foreign proceedings, and such jurisdiction to order such orders should be distinguished from the court’s jurisdiction over the underlying cause of action. (To be continued)