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Winning a judgment does not help much if the defendant has moved the money by the time you get it. A Mareva injunction is the court’s answer to that problem: an order that stops a defendant from disposing of or hiding assets while a lawsuit is under way.
What a Mareva injunction does
The order is named after an English case from the 1970s and is now a standard tool in Canadian courts, including the Court of King’s Bench of Alberta. It usually restrains the defendant from dealing with specified assets, or with assets up to a stated value, until the case is decided or the court orders otherwise. It does not give the claimant ownership of anything or a priority over other creditors.
Orders can be narrow, covering a single account or property, or broad. Courts can also order a defendant to disclose what assets they hold so the freeze can be policed. In some cases the order reaches assets held outside the province or the country.
What a court generally needs to see
In Canada the leading test comes from the Supreme Court of Canada’s Aetna Financial Services v. Feigelman decision. In outline, the applicant must show a strong case on the merits, that the defendant has assets in the jurisdiction, that there is a real risk those assets will be removed or dissipated to defeat a judgment, and that the balance of convenience favours the order.
Because these applications are often made without notice to the defendant, the applicant has a duty of full and frank disclosure. Leaving out unhelpful facts can lead to the order being set aside. Applicants are normally also asked to give an undertaking to compensate the defendant if the freeze turns out to have been unjustified.
Risks and practical points
A freeze can damage a business, so courts do not grant one on suspicion alone. Evidence of actual steps, such as transfers to relatives or sudden sales below value, carries far more weight than a general worry. Costs can be high and an unsuccessful application can be expensive.
If you are on the receiving end, an order does not mean you cannot pay ordinary living or business expenses. Orders commonly include carve-outs for these, and you can apply to vary the order.
If you think assets are being moved
- Write down what you have seen: transfers, sales, closed accounts, with dates and amounts.
- Keep the underlying contract, invoices and correspondence together so the strength of your claim is easy to show.
- Do not contact the other side about the assets before speaking to a lawyer, since it can prompt the very movement you fear.
- Ask your lawyer about the cost of the undertaking and what happens if the order is later set aside.