Written by Jim Schmidt
An important pre-trial remedy in cases of fraud is the Mareva injunction, now more commonly called a “freezing order”. This remedy, in simple terms, allows the victim of a fraud, as a plaintiff in the civil courts, to prevent the defendant (the alleged fraudster) from disposing of or dealing with his or her assets, except under strict conditions.
The test used by the courts to determine whether to issue a freezing order varies to some extent from province to province, partly as a consequence of the Supreme Court of Canada not having comprehensively opined on freezing orders since the mid-1980’s in Aetna Financial Services Ltd. v. Feigelman, 1985 CanLii 55 (SCC).
In Alberta and Ontario, the test for a freezing order—consistent with the Aetna case from 1985—requires, among other things, that the plaintiff demonstrate, as to the merits of the fraud claim, a “strong prima facie case”.
Last week, in R. v. Canadian Broadcasting Corp., 2018 SCC 5, a unanimous Supreme Court of Canada concluded, in a case involving so-called “mandatory” pre-trial injunctions, that a strong prima facie case means a “strong likelihood”, on the law and the evidence, that the plaintiff will be successful at trial in proving the allegations made against the defendant.
Applied to a request for a freezing order, usually brought in exigent circumstances when all the evidence has not been fully developed, this means that a plaintiff must show a strong likelihood that it will be successful at trial in proving the defendant committed a fraud.
Does the Law Need to be Revisited?
The Aetna case was decided over 30 years ago when freezing orders were a relatively new development in the law. Today, with rapid globalization, and fast-paced, transnational frauds being committed, one may question whether it is reasonable to expect a plaintiff to show that, not only will it likely succeed against the defendant at trial, but that the likelihood is strong.
Perhaps the better formulation of the requirement is the English one (coming from the jurisdiction where freezing orders were first recognized and developed). In Linsen International Ltd. v. Humpuss Sea Transport Pte Ltd., [2011] EWHC 2339 (Comm) at para 5, the court confirmed the continuing English position that an applicant for a freezing order need only establish—as to the merits of its claim—a “good arguable case”, i.e., one that is capable of serious argument, although not necessarily one that the judge would consider has a better than 50 percent chance of succeeding at trial.
Bennett Jones