Obtaining Marevas During Times Of Increased Fraud

• Published date: 23 June 2020
• Law Firm: McCarthy Tétrault LLP
• Author: Mr Daniel Thomas, Andrew Matheson, Miranda Lam, Julie-Martine Loranger, Shana Wolch and Susan Wortzman
• Subject Matter: Criminal Law, White Collar Crime, Anti-Corruption & Fraud

Unique circumstances created by COVID-19 have broadened companies' exposure to employee and counter-party fraud.

Fraud risk has increased due to budgetary constraints, use of new supply chain partners, a compromised ability to deploy traditional compliance, relaxed due diligence, reduced oversight of employees in light of work from home, and pressures associated with bringing products to market.

However, our experience during the pandemic has been that courts across Canada remain ready, willing and able to consider urgent fraud-related relief, such as Mareva injunctions.

Urgent response to fraud during COVID-19

When indications of employee or counter-party fraud arise, rapid investigation and intervention are essential to identify and terminate wrongful conduct and resulting harm, gather and preserve vital evidence, and maintain the chances of meaningful recovery for loss.

Despite the pandemic, it is still possible for companies to respond to fraud urgently and effectively, including by accessing Courts quickly for extraordinary relief in appropriate cases. For instance, in Ontario, the Commercial List has special expertise in Mareva (asset freeze), Norwich (pre-action discovery) and Anton Piller (civil search) orders, making the Commercial List particularly well-suited for time-sensitive fraud-related relief (provided that a case meets the Commercial List's eligibility criteria). From the beginning of COVID-19, the Commercial List has been hearing and deciding urgent matters. Our experience with a recent fraud case, which started and settled by judgment within four weeks, demonstrates that such matters are being addressed very quickly by the Commercial List, notwithstanding the pandemic.

Companies are well-advised to contact financial institutions believed to have received the proceeds of a fraud as soon as possible. Financial institutions are well-motivated to cooperate in fraud investigation and recovery, but they must be mindful of their duties to customers, including confidentiality. Accordingly, companies that have been defrauded should not only reach out to relevant financial institutions but also move quickly to obtain a court-ordered Mareva.

The Mareva Order

The Mareva injunction is a powerful instrument of fraud recovery, which, like several others, Canada imported from the United Kingdom.¹ On an application for an interim Mareva injunction, a moving party must demonstrate: (1) a strong prima facie case; (2) that the defendant has assets in the...