Defendant Jailed After Failing to Comply with Mareva Order
The motion judge found that Mr. Kahn “did not produce the documents that were subject to the Mareva Order…” and further that “Cash House and Mr. Kahn intentionally operated the business of Cash House on an ongoing basis since the inception of the Mareva Order on May 5, 2015 utilizing the bank account(s) of 245 [Ontario].” Despite having found the defendants in contempt, the motion judge scheduled the sanction hearing to occur two (2) months later to provide the defendants with ample time to “purge” or rectify their contempt. When Mr. Kahn returned to court for the sanction hearing, the motion judge found that his documentary productions had again fallen short and demanded that Mr. Kahn “forthwith supply the Plaintiff, through counsel, with a comprehensive and detailed written inventory of the documents contained in each of the approximately 1,000 bankers boxes.” Further, the motion judge struck the defendants’ statement of claim and sentenced Mr. Kahn to 90 days imprisonment to be served on weekends. The Defendants appealed the motion judge’s ruling on the following grounds:
- the Mareva Order was unclear and ambiguous;
- the motion judge failed to correctly apply the test for striking a pleading;
- the motion judge provided insufficient reasons for his judgment;
- the motion judge awarded costs on a substantial indemnity basis without providing the defendants with an opportunity to make submissions;
- the motion judge ordered a custodial sentence which is disproportionate to the violation in this instance.
A Mareva Injunction can be a good way of preventing a party to litigation from hiding assets or moving them to foreign jurisdictions. While they vary drastically, a standard Mareva Injunction works to freeze the assets of a defendant to ensure that a plaintiff will not be deprived of a remedy if they are successful at trial. Courts are weary of making such orders, however, because they prejudice a party often at an early stage of litigation and long before any actual fault is found. Further, courts worry that Mareva Injunctions can be used as a tool of litigation-blackmail because they can cost companies a considerable amount of money by halting their business activities. This is why establishing the need for a Mareva Order typically requires the moving party to establish a strong prima facie case—meaning that a court must find that the moving party has a strong likelihood of succeeding at trial. Especially given that Mareva Injunctions are often sought on an ex-parte basis, or without the input of the party who is subject to the Mareva Order, the likelihood that a miscarriage of justice occurs is higher than usual.
The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.