Injunctive relief, such as a Mareva order, is powerful in civil litigation cases. This type of legal remedy may be requested and granted in certain situations where it is appropriate to freeze a defendant’s assets before trial to ensure they cannot be depleted. To spend any money, the party must seek authorization from the court.
So, what happens when a party fails to comply with a Mareva order? More specifically, how should a plaintiff proceed when they have evidence of the defendant’s non-compliance or seek to obtain further evidence of such? Ontario’s Divisional Court recently provided guidance concerning a contempt motion.
Mareva order granted regarding civil fraud claim
In Sakab Saudi Holding Company v. Saad Khalid S Al Jabri, the plaintiff commenced a lawsuit against the defendants on January 21, 2021, alleging that the primary defendant, Dr. Saad, had defrauded them of approximately $3.5 billion. On the same day, the Commercial Court granted a without notice Mareva order which froze all of the primary defendant’s assets worldwide, including those held on his behalf by third parties.
In granting this remedy, the Court was satisfied with a prima facie fraud case against Dr. Saad. The Mareva order required the defendant to provide a sworn asset declaration within ten days, submit to cross-examination, and further provided that he could be “imprisoned, fined, or have his assets seized” if he failed to comply. The Mareva order was continued “until further variation or order of the court” occurred.
The primary defendant was cross-examined twice and provided additional written responses in August 2021.
Plaintiffs allege frozen assets being dissipated
On August 27, 201, the plaintiffs brought a motion for a finding that the primary defendant was in contempt of court due to alleged breaches of the Mareva order. Specifically, the plaintiffs claimed that the frozen assets were being used to pay for a portion of the primary defendant’s living expenses and legal fees. In support of this argument, the plaintiffs sought to rely on evidence obtained pursuant to the production obligations imposed by the Mareva order.
In September, the defendants brought several motions, including a motion to strike the Compelled Evidence from the plaintiff’s record in the contempt motion. The primary defendant relied on his right to silence, fundamental justice, and his right against self-incrimination under the Canadian Charter of Rights and Freedoms.
Plaintiffs bring contempt motion seeking Defendants’ compliance with Mareva order
The plaintiffs subsequently brought a motion seeking an order requiring the primary defendant to answer undertakings, produce documents and his lawyers’ trust accounts, and rule that such evidence is “‘fully admissible’ in the contempt motion.”
After hearing the parties’ arguments, the motion judge, Justice Cavanaugh, made an order dismissing the motions, and the Divisional Court granted leave to appeal.
Justice Corbett noted that the plaintiffs, in retrospect, may have instead sought to seek remedies for “non-compliance” with the Mareva order rather than seeking findings of contempt. However, Justice Corbett went on to state that the court has flexible tools to enforce its orders and secure compliance. The Court then went on to analyze the grounds of appeal as set out below.
Self-Incrimination in Contempt Proceedings
The Court agreed that the plaintiffs were entitled to rely on “compelled evidence” obtained per the Mareva order. However, it rejected section 7 and section 13 Charter arguments put forward by the defendants.
The Court found that the motion judge did err by refusing to order production by the defendants with respect to the contempt motion. Further, the Court found that the contempt motion was “coercive” as it intended to encourage the defendants’ compliance with the Mareva order rather than penal. Based on this, the proceedings were not criminal in nature, and the Charter protection under section 11(c) against self-incrimination did not apply. The Court went on to note that “compelled information is inherent to the civil litigation process.”
Contempt motion evidentiary record
The Court provided a roadmap for parties seeking to build an evidentiary record for a contempt motion, regardless of whether the motion is “punitive” or “coercive.” It went on to explain that even in motions intended to penalize an individual, protections against self-incrimination would be engaged.
Alternative remedies to contempt motions
The Divisional Court noted that a contempt motion is not the only avenue that can be pursued to rectify a defendant’s non-compliance with the Mareva order. The Court explained that non-compliance with Mareva orders occurs “frequently” due to assets being used to pay for legal expenses. Instead, the Court highlighted the fact that a motion judge should “take a swift and practical route to compel the party to bring themselves into compliance.” It is not uncommon for parties who have assets subject to a Mareva order to request a variance order from the court in order to access such assets.
Appeal Dismissed; Cross-Appeal Allowed
The Court dismissed the defendant’s appeal and allowed the plaintiffs’ cross-appeal.
This decision helps provide a reminder to those seeking to enforce a party’s compliance with a Mareva order through alternative and less severe measures than a contempt motion. Further, in this case, for example, the defendants could have completed a fairly routine process and sought an order from the Court authorizing the use of the assets subject to the Mareva order to pay for legal costs and living expenses. By doing so, litigation delay and other difficulties, as noted by the Court, could have also been avoided.
Contact the Lawyers at Milosevic & Associates for Trusted Advice on Injunctive Relief
The skilled litigation lawyers at Milosevic & Associates in Toronto regularly assist clients with disputes relating to civil fraud and those seeking injunctive relief. We help clients understand how the law applies to their situation, and we work closely with clients to determine the options available to them and position them for the best possible resolution. Call us at 416-916-1387 or reach out to us online to speak with a member of our team and learn how we can help you.