Frozen But Available: The Limits Of A Mareva Injunction

In the recent decision Trade Capital Finance Corp. v Cook, the Ontario Court of Appeal considered a claim of a non-party creditor over the defendant's funds that were subject to a Mareva injunction.1 While the decision focuses on a specific aspect of a Mareva injunction, as discussed further below, it serves as a reminder of how this equitable remedy can be obtained and used in commercial litigation, and of the limits of this remedy.

A Mareva injunction, which is often referred to as a "freezing order", is an extraordinary, equitable remedy intended to prevent a genuine risk that a defendant would dissipate assets prior to the conclusion of a trial or action. The jurisdiction to grant a Mareva injunction derives from a superior court's inherent jurisdiction to grant an injunction when it appears to be just or convenient to do so. While Mareva injunctions are typically granted on a motion brought by a plaintiff, their primary function is to maintain the integrity of the court process by preventing the defendant from dissipating assets and becoming judgment-proof.

In order to establish that granting a Mareva injunction would be just or convenient, the plaintiff must show the following to the court:

a strong prima facie case on the merits; a real risk that the defendant will remove or dissipate assets before the judgment; and the balance of convenience favours the plaintiff. A Mareva injunction is, therefore, a discretionary remedy which entitles the court to balance the parties' respective interests.

In Trade Capital Finance Corp. v Cook, the plaintiff, Trade Capital Finance Corp., brought an action against various defendants to recover funds it claimed to have paid as a victim of fraud. Among other things, Trade Capital sought a declaration that the defendants received funds belonging to Trade Capital and tracing orders with respect to those funds. Trade Capital obtained a Mareva injunction on an ex parte basis which applied to all assets of the defendants, including the defendant The Cash House Inc. ("TCHI").

In a separate and unrelated action, TCHI made a claim against Maple Trust and others, which claim was dismissed against Maple Trust. Maple Trust was awarded costs, and filed Writs of Seizure and Sale with respect to those costs awards which it intended to enforce against a particular account of THCI (referred to as the 701 account in the decision). It brought a motion to vary the Mareva injunction to allow it to seize the funds from...