Imagine a plaintiff who has started an action for fraud, breach of contract or trust, or misappropriation. Just after the claim is issued, the plaintiff learns that the defendant’s house may be sold, funds may be moved, and there is talk of leaving Canada. In that situation, waiting for trial may mean winning too late. A judgment on paper is of little value if the assets are gone before enforcement begins.
Now flip the coin. Imagine a defendant who says the claim is exaggerated, or simply wrong. The defendant may be selling a house for ordinary family reasons, or simply dealing with a mortgage renewal or refinancing. Yet the plaintiff suddenly brings a motion to freeze the property. The effect can be immediate and serious. The sale may collapse. Financing may be disrupted.
That is why a Mareva injunction, also called a non-dissipation order, sits at a difficult intersection of urgency and fairness.
Because the Mareva injunction is such a powerful tool, Ontario courts do not grant it easily. The leading case, Chitel et al. v. Rothbart et al., 1982 CanLII 1956 (ON CA), establishes five strict requirements a plaintiff must meet:
The plaintiff must provide the court with all material facts related to the case. This obligation includes sharing information that may be unfavourable to the plaintiff or that could support the defendant’s position. If the court finds that the plaintiff withheld important details, the injunction may be cancelled immediately.
The plaintiff must explain the claim clearly, including the legal basis of the claim, the amount being claimed, and the main points the defendant is expected to make in response. This is not a remedy for vague allegations. The court must be able to see a strong prima facie case on the evidence filed.
I personally believe this should actually be the very first test on the list.
The plaintiff must show the defendant has specific assets in Ontario (usually real estate, bank accounts, or shares) that can be frozen. The order must point to real, identifiable property, meaning it cannot be a blanket freeze on “everything the defendant owns.”
The plaintiff must demonstrate that there is a genuine and imminent risk the defendant will remove assets from Ontario or waste them to avoid paying a potential judgment.
This requirement is stringent, the plaintiff must provide specific evidence of a real risk rather than just expressing a general fear or suspicion. Hearsay or gossip, such as statements from anonymous relative or bystander, is not enough to constitute an imminent risk. As explained in 1910878 Ontario Inc v. 2551204 Ontario Inc (2020), it’s held that hearsay evidence is generally only permitted for non-contentious facts. If an affidavit contains inadmissible hearsay, the court may strike it out or simply disregard it.
The plaintiff must give a formal promise to the court to compensate the defendant for any financial losses suffered due to the injunction. If the court later determines the order was unjustified, the plaintiff is responsible for the damages caused by freezing the defendant’s property or accounts.
One important note:
None of the above five legal tests requires the plaintiff to prove that the money taken by the defendant was actually used to buy the specific property that the plaintiff wants to freeze.
In general, the court does not look at the “real facts” (because it can’t), instead it only looks at the evidence before it. And the level of evidence required to freeze someone’s house is very high. As confirmed in O2 Electronics Inc. v. Sualim, 2014, where it held that the plaintiff must show a strong prima facie case and a serious risk that the defendant will remove or dissipate assets before judgment. The court will only grant the order if it is satisfied the defendant’s real purpose is to avoid paying the judgment.
A Twist:
However (a big “however”), at the end of the day, if the defendant has clearly done wrong and the judge feels sympathy for the plaintiff, the court can still grant the non-dissipation order based on equity principles, even if the five tests are not perfectly met.
A Twist to Twist:
Okay now, there is a practical question every plaintiff should ask: is it really worth the lawyer fees to bring this motion? The only good reason to seek a freeze is the genuine fear of “winning too late.” This means the plaintiff should never use a Mareva motion out of anger or to punish the defendant. Here are three obvious reasons why:
- In most lawsuits, the plaintiff believes they are right and wants to finish the case quickly without distractions. Bringing an unnecessary non-dissipation motion only helps the defendant, as it creates side issues, wastes time, and pulls everyone off the main track.
- These urgent motions cost legal fees. Before rushing in, the plaintiff should pause and ask himself yourself honestly: is the defendant truly about to sell the house and flee? Are the legal fees truly worth it?
- Never forget the fifth test above, which is the undertaking as to damages. Imagine this:
- The housing market is falling
- the plaintiff wins the non-dissipation motion hearing and freezes the house
- The defendant cannot sell his $3 million house until years later, when it finally sells for only $2 million
- The court later decides the order was unnecessary
- The defendant can then come after the plaintiff for the $1 million loss.
In short, these are the real twists that every Ontario litigant needs to understand before fighting a Mareva motion. Of course, if the defendant is truly about to flee, a Mareva motion is the plaintiff’s best, and probably only realistic option. In that situation, the plaintiff should not hesitate or be overly concerned about legal fees, the plaintiff should tell his lawyer immediately to file an urgent motion request, get the hearing scheduled as quickly as possible, and freeze the defendant’s assets before it is too late.
