Written by Munaf Mohamed, Michael Mysak and Raphael Jacob
A recent decision by the Alberta Court of Appeal (ABCA) reminds us that counsel must take care to provide a balanced view of both sides and not overreach in their asks when seeking an ex parte application, lest the court set aside the sought orders entirely. In Secure 2013 Group Inc v Tiger Calcium Services Inc, 2017 ABCA 316 [Secure 2013 Group], the ABCA set aside a number of ex parte Mareva injunctions, attachment orders and Anton Piller orders against 14 parties for issues related to disclosure, overreaching terms and delay in seeking relief.
In Secure 2013 Group, the plaintiffs commenced an action against six individuals and seven corporations following their acquisition of a 67% controlling interest in Tiger Calcium Services Inc [Tiger]—one of the largest manufacturers of calcium chloride products in Western Canada. Smokey Creek, owned by two of the defendants, continued to own the remaining 33% interest of Tiger.
The plaintiffs sought relief under multiple causes of action including: material misrepresentations resulting in the plaintiffs overpaying for Tiger shares by $44.3 million, that problems with an industrial-scale plant were concealed from Tiger's board of directors by the defendants, misappropriation of Tiger labor for personal benefit and collusion by the defendants to have Tiger lease equipment from a company they partially owned at above-market rates while hiding their involvement in said company.
The plaintiffs sought Mareva injunctions (a temporary injunction freezing the assets of a party to an action) and Anton Piller orders (which allow a party to search premises and seize evidence). The plaintiffs also sought attachment orders, which would prevent the selling of assets until resolution of the action, which were considered by the chambers judge in conjunction with the Mareva injunctions. On November 30, 2016, the chambers judge granted the orders which were the subject of the appeal in this case.
Strekaf JA had several issues with the various orders sought by the plaintiffs that can be categorized under three broad headings.
1. Disclosure Issues
The ABCA primarily took issue with the plaintiffs' disclosure and candour. Strekaf JA noted that while the plaintiffs had provided almost 2000 pages of evidence, they failed to include the complete Share Purchase Agreement that was at the heart of this dispute—only 14 highly-redacted pages had been included. She considered the limited disclosure in the context of this action to be inexcusable. She further noted that adverse information to the plaintiffs' position had not been disclosed to the chambers judge. She specifically highlighted two such instances. In the first, the plaintiffs failed to note that the alleged claim that Tiger's resources had been used for personal benefit may not be an actionable wrong and further might even be statute-barred. Second, the plaintiffs included affidavit evidence that Tiger carried out maintenance work at no charge, but did not disclose to the chambers judge that the Equipment Rental Agreements provided that the lessee (Tiger) was responsible for repairs and maintenance.
Several of the plaintiffs' claims were also based on either unsubstantiated speculation or overstatements of the evidence. For instance, speculation that a box seen on security footage may have contained proprietary and confidential information when there was no evidence to support this conclusion and an assertion that Tiger's Chief Engineer had misappropriated corporate funds based on unexecuted loan agreements and joint real estate purchases that may well have been legitimate.
2. Overreaching Terms
The proposed Anton Piller orders were broad and contained identical provisions against every defendant despite the significant differences in the actual claims advanced against each one. The scope of included documents was likewise broad and ambiguous and went beyond what was either reasonable or necessary. There were also substantial privacy concerns related to the orders given that there was no prescribed mechanism to protect the appellants' non-privileged confidential information or commercially sensitive information and neither were any confidentiality requirements imposed. Finally, whereas a typical Anton Piller order lasts for 10-14 days, the proposed order would remain in force for 60 days and the plaintiffs could apply to have that time limit extended.
The Mareva/attachment orders suffered from similar deficiencies. There was an unlimited attachment of the assets of the four individuals and seven companies with no financial caps in place. Where different causes of action are alleged against multiple parties, differential financial caps should have been included depending on the specific advanced claim and relevant evidence. Unlimited Mareva injunctions are only to be granted where the need can be justified by compelling evidence—there was no such evidence in this case. The Mareva/attachment orders further failed to include any expiry date in contravention of statutory requirements under the Civil Enforcement Act. Finally, the proposed spending limits on individuals of $5,000 per month for living expenses and $10,000 per month for legal expenses was deemed unrealistically low.
3. Delay in Seeking Relief
Strekaf JA was also troubled by the eight-week delay between when the original application date was cancelled to when it was rescheduled with no explanation by the plaintiffs as to why. Further, several of the plaintiffs' filed affidavits had been sworn in 10 weeks before the application was heard so evidently the plaintiffs had been preparing for the application for quite some time. Ex parte applications will involve some element of urgency and a party otherwise entitled to an injunction may lose that right on account of delay. Finally, the plaintiffs also failed to establish that the legal requirements to grant an Anton Piller order, Mareva injunction or attachment order were present with respect to each party.
In total, only two of the 20 orders sought were upheld by the ABCA. Thus, the Court reminds us in Secure 2013 Group that ex parte applications are extraordinary and will only be granted where a party can successfully prove that they are necessary. Given that the other party is not present to defend themselves, the applicant for an ex parte application must act in good faith and make full and candid disclosure of the relevant facts—including any relevant information that might be adverse to his or her own position. Further, the specific ex parte orders sought in this case are severe remedies. Such orders should be tailored to each adverse party, not ask for more than necessary and provide some measure of consideration to the needs of the adverse parties. Finally, ex parte applications must be brought to the court in circumstances where urgency and haste are factors.