Appellant, a federally incorporated company with
head office in Montreal and offices in Toronto, factored accounts receivable
for its clients on a recourse/non‑recourse basis. Its operations for its
Manitoba clients were largely contracted to its Montreal office as its now‑closed
Manitoba office had been primarily to promote business. The assets in question,
valued at about $270,000, had been acquired from collection in receivership
proceedings concerning appellant's other Manitoba client and was about to be
transferred to one of appellant's offices out of Manitoba. Appellant had
appointed a receiver when respondent Pre‑Vue defaulted on debentures
issued to and held by it. Respondent Pre‑Vue and its stockholders later
brought an action for unliquidated damages arising from the allegedly improper
appointment of the receiver and obtained an ex parte interlocutory order
from the Court of Queen's Bench enjoining the movement of assets out of
Manitoba. An application to set aside the Mareva injunction was
dismissed but the injunction's terms were modified to set a ceiling to the
value of the assets affected. The Court of Appeal found this type of injunction
to be available and varied the injunction granted only to the extent of
allowing its discharge through the posting of security. The three threshold
issues here are: (a) is a Mareva injunction available in Manitoba as a
matter of law; (b) is it available in these circumstances; (c) is the
discretion of the court of first instance properly reviewable on appeal.
Held: The appeal should
be allowed.
The rightful removal of assets in the ordinary
course of business by a resident respondent to another part of the federal
system will not of itself trigger an exceptional remedy such as the Mareva
injunction. The gist of the Mareva injunction is the right to freeze
exigible assets when found in the jurisdiction, wherever the defendant may
reside, providing there is a cause of justiciable action between plaintiff and
defendant in the courts of the jurisdiction. Unless there is a genuine risk of
disappearance of assets, however, either inside or outside the jurisdiction,
the injunction will not issue. The harshness of the Mareva injunction,
which is usually issued ex parte, is relieved against or justified in
part by the Rules of Practice which allow the defendant an opportunity
to move against the injunction immediately. The injunction is in personam
and affords no priority to the potential creditor.
Neither the presence nor the absence of legislation
granting remedies similar to the Mareva injunction precludes the
issuance of a protective injunction. The entitlement to issue a Mareva
injunction springs from the authority of the court at law to make the order and
the qualification of the respondent under the rules and tests applied by the
courts in doing so.
One factor considered below was the intention of
appellant to transfer assets to Quebec. Assets exceeding the value of assets
affected by the order under appeal are in Ontario, a province with which
Manitoba has arrangements for the reciprocal enforcement of judgments. As well,
Quebec accords a means of enforcement of Manitoba judgments rendering
ineffective any argument that the respondent would be exposed to some
inevitable or irreparable loss if the assets of appellant were transferred from
Manitoba to Quebec. In addition, respondent had extensive and easily
enforceable rights under the Bankruptcy Act and the Canada Business
Corporations Act in the event of an attempt to defraud creditors through
a business default or a winding up of the company.
While the superior provincial courts undoubtedly
have the statutory power to issue a Mareva injunction, the rules as
developed in England do not properly reflect the federal concern in these
circumstances. Considerations of jurisdiction‑‑Mareva cases
were to prevent removal of assets from the jurisdiction and the subsequent
defeat of a creditor's claim‑‑are more complex in the federal
context than in a unitary state. In some ways "jurisdiction" in these
circumstances extends to the national boundaries, or, in any case, beyond the
provincial boundary of Manitoba. In the Canadian federal system, appellant, a
federally incorporated company, was not a foreigner or even a non‑resident
in that it was capable of residing throughout Canada and did so in Manitoba.
Appellant did not intend to default on its obligations. It did not seek to
defraud its Manitoba creditors or the legal processes of the Manitoba courts
through a clandestine transfer of its assets and it did not remove those assets
from the national jurisdiction in which it maintained its corporate existence.
Finally, there are the procedures of pursuit open to the respondents in tracing
these assets through to their destination in Quebec or in recovering from the
assets of the appellant in Ontario.
An appellate court should not intervene and alter a
discretionary order issued by a court of first instance where no sufficient
error in law on the part of the courts below has been revealed. The appeal
court here, however, did not give due consideration and weight to the position
of the courts and of the parties when dealing with an interlocutory quia
timet order in a federal jurisdiction. For this reason the Court must
intervene where, apart from this consideration, intervention would be
unwarranted.
Cases Cited
Lister & Co. v. Stubbs, [1886‑90] All E.R. 797, applied; Pivovaroff v. Chernabaeff
(1977), 16 S.A.S.R. 329; Nippon Yusen Kaisha v. Karageorgis, [1975] 3
All E.R. 282; Mareva Compania Naviera SA v. International Bulkcarriers SA,
[1980] 1 All E.R. 213; Rasu Maritima SA v. Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara, [1977] 3 All E.R. 324; Third Chandris Shipping
Corp. v. Unimarine SA, [1979] 2 All E.R. 972, considered; Chesapeake and
Ohio Railway Co. v. Ball, [1953] O.R. 843; American Cyanamid Co. v.
Ethicon Ltd., [1975] A.C. 396; Law Society of Upper Canada v.
MacNaughton, [1942] O.W.N. 551; Burdett v. Fader (1903), 6 O.L.R.
532 (affirmed (1904), 7 O.L.R. 72); Barclay‑Johnson v. Yuill,
[1980] 3 All E.R. 190; OSF Industries Ltd. v. Marc‑Jay Investments Inc.
(1978), 88 D.L.R. (3d) 446, 7 C.P.C. 57; Bedell v. Gefaell (No. 2),
[1938] O.R. 726; Hepburn v. Patton (1879), 26 Gr. 597; Pacific
Investment Co. v. Swan (1898), 3 Terr. L.R. 125; Ferguson v. Ferguson
(1916), 26 Man. Rep. 269; Great Western Railway Co. v. Birmingham &
Oxford Junction Railway Co. (1848), 2 Ph. 597, 41 E.R. 1074; Rosen v.
Pullen (1981), 126 D.L.R. (3d) 62; Campbell v. Campbell (1881), 29
Gr. 252; Toronto (City of) v. McIntosh (1977), 16 O.R. (2d) 257; Mills
and Mills v. Petrovic (1980), 30 O.R. (2d) 238; Aslatt v. Southampton
(Corporation of) (1880), 16 Ch.D. 143; Hawes v. Szewezyk, [1979] 2
A.C.W.S. 274; De Beers Consolidated Mines, Ltd. v. United States, 325
U.S. 212 (1945); Robinson v. Pickering (1881), 16 Ch.D. 660; Bradley
Bros. (Oshawa) Ltd. v. A to Z Rental Canada Ltd. (1970), 14 D.L.R. (3d)
171; Z Ltd v. A, [1982] 1 All E.R. 556; Parmar Fisheries Ltd. v.
Parceria Maritima Esperanca L. DA. (1982), 141 D.L.R. (3d) 498; Liberty
National Bank & Trust Co. v. Atkin (1981), 31 O.R. (2d) 715, 121 D.L.R.
(3d) 160; Rahman (Prince Abdul) bin Turki al Sudairy v. Abu‑Taha,
[1980] 1 W.L.R. 1268; A J Bekhor & Co. v. Bilton, [1981] 2 All E.R.
565; Z Ltd. v. A‑Z and AA‑LL, [1982] 2 W.L.R. 288; Cretanor
Maritime Co. v. Irish Marine Management Ltd., [1978] 1 W.L.R. 966; Iraqi
Ministry of Defence v. Arcepey Shipping Co. S.A., [1980] 2 W.L.R. 488; Canadian
Pacific Airlines Ltd. v. Hind (1981), 122 D.L.R. (3d) 498; Quinn v.
Marsta Cession Services Ltd. (1981), 34 O.R. (2d) 659; Chitel v.
Rothbart (1982), 39 O.R. (2d) 513; Humphreys v. Buragalia (1982),
135 D.L.R. (3d) 535; Sekisui House Kabushiki Kaisha (Sekisui House Co.) v.
Nagashima (1982), 42 B.C.L.R. 1, 33 C.P.C. 42; BP Exploration Co.
(Libya) v. Hunt (1980), 114 D.L.R. (3d) 35, referred to.
Statutes and Regulations Cited
Absconding Debtors Act, R.S.O. 1980, c. 2, s. 2.
Canada Business
Corporations Act , 1974‑75‑76 (Can.), c.
33.
Common Law Procedure Act, 1854, 17 & 18 Vict., c. 125.
Corporations Act, 1976 (Man.), c. 40, C.C.S.M., c. 225, ss. 186, 187.
Fraudulent Conveyances Act, C.C.S.M., c. F‑160.
Fraudulent Conveyances Act, R.S.O. 1980, c. 176.
Garnishment Act, C.C.S.M., c. G‑20.
Judicature Act, 1972 (N.S.), c. 2, s. 39(9).
Judicature Act, R.S.A. 1980, c. J‑1, s. 13(2).
Judicature Act, R.S.N. 1970, c. 187, s. 21(n).
Judicature Act, R.S.N.B. 1973, c. J‑2, s. 33 am. 1981 (N.B.) c. 6, s. 1.
Judicature Act, R.S.O. 1980, c. 223, s. 19(1).
Judicature Act, R.S.P.E.I. 1974, c. J‑3, s. 15(4).
Law and Equity Act, R.S.B.C. 1979, c. 224, s. 36.
Queen’s Bench Act, C.C.S.M., c. C‑280, s. 59.
Queen’s Bench Act, R.S.S. 1978, c. Q‑1, s. 45(8).
Reciprocal Enforcement of
Judgments Act, C.C.S.M., c. J‑20.
Supreme Court Act, 1981, 1981 (U.K.), c. 54, s. 37(3).
Supreme Court of
Judicature (Consolidation) Act, 1925, 15 & 16
Geo. 5, c. 49, s. 45(1).
Civil Code, art. 179, 1220.
Civil Procedure Rules, (N.S.) R. 43.02.
Code of Civil Procedure, R.S.Q., c. C‑25, art. 178, 179, 180, 752.
Federal Court Rules, Rule 470(1).
Queen’s Bench Rules, (Man.) R. 330(1), 526, 582.
Queen’s Bench Rules, (Sask.) R. 389.
Rules of Practice, R.R.O. 1980, R. 540, R. 372.
Supreme Court Rules, (Alta.) R. 468.
Authors Cited
Halsbury’s Laws of England, 3rd ed., vol. 21, London, Butterworth & Co., 1957.
Halsbury’s Laws of England, 4th ed., vol. 18, London, Butterworths, 1977.
Halsbury’s Laws of England, 4th ed., vol. 24, London, Butterworths, 1979.
Kerr, William W. Kerr
on Injunctions, 6th ed., London, Sweet & Maxwell, 1927.
McAllister, Debra M.
"Mareva Injunctions", 28 C.P.C., 1.
Rogers, Brian M. and
George W. Hately. "Getting the Pre‑Trial Injunction" (1982), 60
Can. Bar Rev. 1.
Sharpe, Robert J. Injunctions
and Specific Performance, Toronto, Canada Law Book, 1983.
Stockwood, David.
" ‘Mareva’ Injunction" (1981‑82), 3 Advocates’ Q.
85.
APPEAL from a judgment of the Manitoba Court of
Appeal (1982), 143 D.L.R. (3d) 715, 19 Man. R. (2d) 295, [1983] 2 W.W.R. 97,
dismissing an appeal from a judgment of Wilson J. dismissing an application to
set aside an ex parte interlocutory injunction granted by Wilson J.
Appeal allowed.
D’Arcy C. H. McCaffrey, Q.C., for the appellant.
W. P. Riley, Q.C.,
and Peter Sim, for the respondents.
The judgment of the Court was delivered by
1. Estey
J.‑‑The Manitoba Court of Appeal affirmed the trial judge's
order granting an injunction which restrained the appellant from transferring
certain identified assets out of Manitoba to the appellant's offices in either
Toronto or Montreal. This appeal raises squarely and simply the question of the
availability of interlocutory orders restraining a defendant in a civil action
from disposing of or handling assets in any specific way prior to trial. In
England this is said to have originated in a proceeding now identified by the
expression "Mareva injunction".
2. The facts are few and simple. The
appellant Aetna Financial Services Limited (for convenience hereinafter called
"Aetna") is a company incorporated under the Canada Business
Corporations Act , 1974‑75‑76 (Can.), c. 33, with its head
office in the City of Montreal and offices in Toronto. At one time it had an
office in Manitoba for the promotion of business but not for the processing of
business. At the present time the company has contracted its operations
largely, if not entirely, to the Montreal office. Its operations consist of the
factoring of accounts receivable for its clients on a basis of recourse or non‑recourse.
In this business Aetna had only two accounts or customers in the Province of
Manitoba, one of them being the respondent Pre‑Vue Company (Canada) Ltd.
The asset in question was acquired from the collection in receivership
proceedings concerning the second Manitoba customer Sekine. This realization
was in the approximate sum of $270,000 which Aetna was about to transfer to its
offices outside Manitoba, either Toronto or Montreal, when these proceedings
were commenced.
3. When the respondent Pre‑Vue
Company (Canada) Ltd. (for convenience hereinafter called "Pre‑Vue")
went into default under the debentures issued to and held by Aetna, Aetna
appointed a receiver by extra‑judicial unilateral action according to an
asserted right under the debenture. The appointment of the receiver was
subsequently confirmed by the Court of Queen's Bench in Manitoba. The
appointment of the receiver was without prejudice to any action by Pre‑Vue
or its shareholders against Aetna or the receiver. The action against which the
present application for injunction rests arose out of this. By statement of
claim dated March 30, 1981 Pre‑Vue and its shareholders commenced action
claiming unliquidated damages, and alleging, inter alia, that Aetna, in
contravention of the terms of the debenture, failed to give Pre‑Vue the
allotted time to cure its default, and therefore the appointment of the
receiver was improper. There may well be issues arising out of this appointment
of the receiver but they are not of concern in the disposition of this appeal
dealing as it does with the interlocutory injunction only. Some two years after
the confirmation by the Court of the appointment of the receiver‑manager,
the respondents applied for and obtained the injunction in question, wherein it
was ordered that the appellant be:
. . . restrained and
enjoined, until the further order of the Court, from removing from Manitoba or
otherwise disposing of or dealing with any of its assets within Manitoba,
including and in particular any monies paid to or received by the receiver‑manager
appointed by the Defendant, Aetna Financial Services Limited, to take control
and possession of the property and undertaking of Sekine Canada Ltd., save in
so far as such assets do not exceed in value the sum of $997,711.21.
In July 1982, an application to set aside this ex parte
interlocutory order was dismissed. The terms of the injunction were modified,
however, so as to restrict the movement of assets by Aetna only to the extent
of $250,000.
4. In the Court of Appeal, the majority
determined that an injunction of the type herein issued by the Trial Division
was available under the law of the Province of Manitoba and that in the
circumstances the exercise of discretion by the learned trial judge should not
be the subject of intervention by the Court of Appeal. The majority varied the
judgment of the Trial Division only to the extent of "permitting the
discharge of the injunction, on the posting of security by Aetna".
5. Huband J.A. dissented, not on the
grounds that the so‑called Mareva injunction is not available in
law in the Province of Manitoba, but that under the circumstances injunctive
relief should not have been granted. His Lordship summarized his position:
It seems to me that a
Mareva injunction should be issued in this jurisdiction only where a strong
case has been made out that it is necessary to do so to prevent an imminent
injustice.
Far from a strong case, I
think the present application for injunctive relief is decidedly weak. It has
none of the elements of fraud or sham or movement of assets in order to escape
lawful claims which have become part of the jurisprudence justifying Mareva‑type
injunctions.
6. There are three threshhold issues:
(a) As a matter of law, is this type of injunction
available in Manitoba?
(b) Is this type of injunction available in the
circumstances revealed in the record on this appeal?
(c) Is the exercise of discretion by the court of
first instance properly reviewable on appeal?
7. The rule as to the availability of an
interlocutory injunction generally has been variously stated but, in my view,
it is convenient to refer to the succinct description of that order as found in
Chesapeake and Ohio Railway Co. v. Ball, [1953] O.R. 843, where McRuer
C.J.H.C. stated, at pp. 854‑55:
The
granting of an interlocutory injunction is a matter of judicial discretion, but
it is a discretion to be exercised on judicial principles. I have dealt with
this matter at length because I wish to emphasize how important it is that
parties should not be restrained by interlocutory injunctions unless some
irreparable injury is likely to accrue to the plaintiff, and the Court should
be particularly cautious where there is a serious question as to whether the
plaintiff would ever succeed in the action. I may put it in a different way: If
on one hand a fair prima facie case is made out and there will be
irreparable damage if the injunction is not granted, it should be granted, but
in deciding whether an interlocutory injunction should be granted the
defendant's interests must receive the same consideration as the plaintiff's.
Reconsideration of the requirement that the plaintiff must show a
"strong prima facie case" has come in the wake of the decision
of the House of Lords in American Cyanamid Co. v. Ethicon Ltd., [1975]
A.C. 396. However, the other principles enunciated by McRuer C.J.H.C. remain
unimpaired. As a general proposition, it can be fairly stated that in the
scheme of litigation in this country, orders other than purely procedural ones
are difficult to obtain from the Court prior to trial. Where the injunction
maintains the status quo in a way which is fair to both sides, the order
is attainable; but, simply because the order would not injure the defendant is
not sufficient reason to move the Court to grant what is generally regarded as
an extraordinary intervention. In Law Society of Upper Canada v. MacNaughton,
[1942] O.W.N. 551, Rose C.J.H.C. stated at p. 551:
I have always understood
the rule to be that the question is not whether the injunction will harm the
defendant, but whether it is probable that unless the defendant is restrained,
wrongful acts will be done which will do the plaintiff irreparable injury.
8. A second and much higher hurdle facing
the litigant seeking the exceptional order is the simple proposition that in
our jurisprudence, execution cannot be obtained prior to judgment and judgment
cannot be recovered before trial. Execution in this sense includes judicial
orders impounding assets or otherwise restricting the rights of the defendant
without a trial. This was enunciated by Cotton L.J. in Lister & Co. v.
Stubbs, [1886‑90] All E.R. 797, at p. 799, as follows:
I know of
no case where, because it is highly probable if the action were brought the
plaintiff could establish that there was a debt due to him by the defendant,
the defendant has been ordered to give a security till the debt has been
established by the judgment or decree.
Similarly, the limited availability of an injunction to enjoin a
defendant from disposing of his assets was referred to in Burdett v. Fader
(1903), 6 O.L.R. 532, (affirmed (1904), 7 O.L.R. 72), at p. 533, by Boyd C.:
The
plaintiff may or may not get judgment in the case, but he proposes to restrain
the sale or disposition of this stock by the defendant till that is finally
determined.
There
is no authority for such a course in an action of tort. If the plaintiff is a
creditor before judgment, he can sue on behalf of himself and all creditors to
attack a fraudulent transfer. If the plaintiff is a judgment creditor, he can
proceed by execution to secure himself upon the debtor's property. But if the
litigation is merely progressing and the status of creditor not established, it
is not the course of the Court to interfere quia timet and restrain the
defendant from dealing with his property until the rights of the litigants are
ascertained.
The principle has been restated in modern times in Barclay‑Johnson
v. Yuill, [1980] 3 All E.R. 190, where Megarry V.C. stated, at p. 193:
In broad terms, this
establishes the general proposition that the court will not grant an injunction
to restrain the defendant from parting with his assets so that they may be
preserved in case the plaintiff's claim succeeds. The plaintiff, like other
creditors of the defendant, must obtain his judgment and then enforce it. He
cannot prevent the defendant from disposing of his assets pendente lite merely
because he fears that by the time he obtains judgment in his favour the
defendant will have no assets against which the judgment can be enforced. Were
the law otherwise, the way would lie open to any claimant to paralyse the
activities of any person or firm against whom he makes his claim by obtaining
an injunction freezing their assets.
This problem has been stated and restated many times in this country in
the courts of Manitoba and elsewhere: OSF Industries Ltd. v. Marc‑Jay
Investments Inc. (1978), 88 D.L.R. (3d) 446, 7 C.P.C. 57 (Ont. H.C.); Pivovaroff
v. Chernabaeff (1977), 16 S.A.S.R. 329; Bedell v. Gefaell (No. 2),
[1938] O.R. 726 (C.A.); Hepburn v. Patton (1879), 26 Gr. 597; Pacific
Investment Co. v. Swan (1898), 3 Terr. L. R. 125; Ferguson v. Ferguson
(1916), 26 Man. Rep. 269.
9. The general rule in Lister has
had wide application in the law. See Sharpe, Injunctions and Specific
Performance (1983), at pp. 94‑97. However, the abhorence which the
common law has felt toward allowing execution before judgment has always been
subject to some obvious exceptions:
1. for the preservation of assets, the very subject
matter in dispute, where to allow the adversarial process to proceed unguided
would see their destruction before the resolution of the dispute:
To a large extent this
exception to the Lister rule has been codified in the various provincial
and federal procedural rules. Rule 330(1) of The Queen's Bench Rules
(Man.) is typical and provides:
330 (1) The court may, on the application of any party and on such terms as
may be just, make an order for the detention or preservation of property, being
the subject of the action, ...
See also: Ontario, Rules of Practice, R.R.O. 1980, Reg. 540, R.
372;
Federal Court Rules,
Rule 470(1);
Nova Scotia, Civil
Procedure Rules, R. 43.02;
Saskatchewan, The
Queen’s Bench Rules, R. 389;
Alberta, The Supreme
Court Rules, R. 468.
That the courts had jurisdiction to make an order for the preservation
of property pending litigation was, however, recognised even prior to passage
of the Rules. In Great Western Railway Co. v. Birmingham & Oxford
Junction Railway Co. (1848), 2 Ph. 597, 41 E.R. 1074, Cottenham L.C.
observed, at p. 1076, as follows:
It is certain that the
Court will in many cases interfere and preserve property in statu quo
during the pendency of a suit, in which the rights to it are to be decided, and
that without expressing, and often without having the means of forming,
any opinion as to such rights. It is true that no purchaser pendente lite
would gain a title; but it would embarrass the original purchaser in his suit
against the vendor, which the Court prevents by its injunction. Such are the
cases Echliff v. Baldwin (16 Ves. 267), Curtes v. Lord
Buckingham (3 V. & B. 168), Spiller v. Spiller (3 Swan.
556), per Lord Redesdale in Dow. 440. It is true that the Court will not so
interfere, if it thinks that there is no real question between the parties; but
seeing that there is a substantial question to be decided, it will preserve the
property until such question can be regularly disposed of. In order to support
an injunction for such purpose, it is not necessary for the Court to decide
upon the merits in favour of the Plaintiff.
Although the Great Western Railway case, supra, was
decided before Lister v. Stubbs, supra, it is nonetheless still
accepted that an injunction to preserve the very subject‑matter of the
action is not to be equated with an injunction of the Mareva variety.
This distinction was recently restated by Craig J. in Rosen v. Pullen
(1981), 126 D.L.R. (3d) 62, at pp. 74‑75:
It is unnecessary for the
Court to consider the present case on the basis of a Mareva injunction
because the very subject‑matter of the action is the letter of credit in
question. It is not a case of an action against a defendant based on a debt
where there is a likelihood that the defendant will remove available assets.
See Williston & Rolls, The Law of Civil Procedure, vol. 2 (1970), p.
585, cited with approval by Lerner J. in OSF Industries Ltd. v. Marc‑Jay
Investments Inc. (1978), 20 O.R. (2d) 566 at p. 567, 88 D.L.R. (3d) 446 at
p. 447, 7 C.P.C. 57, as follows:
(a) An
injunction will not be granted to restrain a defendant from parting with or
encumbering his property before a creditor has established his right by
judgment.
The result would be
entirely different if the property likely to be disposed of is the very subject
matter of the litigation.
2. where generally the processes of the court must be protected
even by initiatives taken by the court itself;
3. to prevent fraud both on the court and on the adversary:
In Campbell v. Campbell
(1881), 29 Gr. 252, both the general rule and the exception to it on the basis
of fraud, were succinctly stated by Boyd C. at p. 254‑55, as follows:
Where no fraud has been
committed the Court will not restrain a defendant from dealing with his
property at the instance of a creditor or person who has not established his
right to proceed against that property. But where a fraudulent disposal has
actually been made of the defendant's property, (as is admitted by the demurrer
in this case,) then the Court will intercept the further alienation of the
property, and keep it in the hands of the grantee under the impeached
conveyance, until the plaintiff can obtain a declaration of its invalidity, and
a recovery of judgment for the amount claimed.
More recent cases in which
the fraud exception have been applied include Toronto (City of) v. McIntosh
(1977), 16 O.R. (2d) 257 (Ont. H.C.J.); and Mills and Mills v. Petrovic
(1980), 30 O.R. (2d) 238 (Ont. H.C.J.)
4. quia timet injunctions were generally permitted under
extreme circumstances which included a real or impending threat to remove
contested assets from the jurisdiction.
10. Initially the Court of Appeal of the
United Kingdom found its jurisdiction to issue this type of quia timet
order in a section of the judicature legislation that ultimately became s.
45(1) of the Supreme Court of Judicature (Consolidation) Act, 1925, 15
& 16 Geo. 5, c. 49, which authorizes the court to issue an injunction where
it appears to the court "to be just or convenient" that the order
should be made. In the rise of the Mareva injunction in the Court of
Appeal, the source of authority for the Supreme Court was found to reside in
this provision which can be traced back through a succession of statutes
reaching back to at least The Common Law Procedure Act, 1854, 17 &
18 Vict., c. 125. In later pronouncements concerning this type of injunction,
the jurisdiction to do so has been traced even further back into the antiquity
of the London Commercial Court. As we shall see, Canadian legislation has
followed the same course as s. 45. Lister, supra and many other
authorities, notably Aslatt v. Southampton (Corporation of) (1880), 16
Ch.D. 143, have made it clear, however, that these words in the statute do not
authorize a court to issue an injunction "because the Court thought it
convenient". Nor in the words of the authors of Halsbury’s Laws of
England (4th ed.), vol. 24, p. 518, paragraph 918, has this provision
altered the general rules applying to the issuance of interlocutory injunctions.
11. Section 19(1) of the Ontario Judicature
Act is to the same effect as the United Kingdom provision, as are most of
the comparable provisions in provincial statutes across the country:
British Columbia, Law
and Equity Act, R.S.B.C. 1979, c. 224, s. 36
Alberta, Judicature Act,
R.S.A. 1980, c. J‑1, s. 13(2)
Saskatchewan, The
Queen’s Bench Act, R.S.S. 1978, c. Q‑1, s. 45(8)
Manitoba, The Queen’s
Bench Act, C.C.S.M., c. C280, s. 59
Ontario, Judicature Act,
R.S.O. 1980, c. 223, s. 19(1)
Nova Scotia, Judicature
Act, 1972 (N.S.), c. 2, s. 39(9)
New Brunswick, Judicature
Act, R.S.N.B. 1973, c. J‑2, s. 33, am. 1981 (N.B.), c. 6, s. 1
Prince Edward Island, Judicature
Act, R.S.P.E.I. 1974, c. J‑3, s. 15(4)
Newfoundland, The
Judicature Act, R.S.N. 1970, c. 187, s. 21(m)
We are here particularly concerned with s. 59(1) of The Queen’s
Bench Act of Manitoba, supra.
12. The Quebec Code of Civil Procedure,
R.S.Q., c. C‑25, provides for interlocutory injunctions in art. 752
"where the applicant appears to be entitled to it". These words,
given their plain meaning, clothe the court with at least as much authority and
latitude as the jurisdiction to enjoin where it is found "to be just and
convenient". The article goes on to provide against the very eventuality
contemplated by the application for the Mareva‑type of order here:
... and it is considered
to be necessary in order to avoid serious or irreparable injury to him or a
factual or legal situation of such a nature as to render the final judgment
ineffectual.
The authority of the Superior Court to respond to an application based
on the appropriate facts and demonstrated in the manner prescribed by the Code
is at least equal to that of the superior courts of the other provinces.
13. The statutory powers of the courts in
Manitoba to issue such injunctive relief is undoubted; the question is, as
Hamilton J. put it in Hawes v. Szewezyk, unreported, noted at [1979] 2
A.C.W.S. 274, should the jurisdiction be exercised? This question can only be
answered by balancing the principles enunciated in Lister on the one
hand, and those of Rasu, infra, on the other.
14. In Lister itself, the
issue turned on the narrow distinction on the facts of that case between the
debtor‑creditor relationship on the one hand (wherein no judicial
intervention would be authorized before trial) and the cestui que trust
relationship on the other hand (where judicial intervention would intervene to
protect the trust res). Lister itself recognized at least three
exceptions to the general principle: firstly, where the res of the
action was demonstrably the property of the claimant; secondly, where the
relationship between the adversaries included a condition whereby the defendant‑debtor
could not, without the acquiescence of the claimant‑creditor, defend the
claim; and thirdly, the trustee‑beneficiary relationship.
15. While the law has long known exceptions to
the Lister rule, it wasn't until a series of Maritime disputes arose
that the courts consciously began to build up a special code of rules or sub‑rules
for the intervention by the court before judgment, and indeed, before trial,
where circumstances warranted such action in the interest of the parties, the
community and the law generally. Beginning in 1975, these exceptions to the
Lister rule came into judicial prominence. They have been grouped by the
courts, and legal writers generally, under the new legal generic, the Mareva
Injunction.
16. Beginning in early 1975, there were four
cases in England arising in the shipping business where the rule in Lister
was suspended. These are, in their chronological order:
‑‑Nippon
Yusen Kaisha v. Karageorgis, [1975] 3 All E.R. 282;
‑‑Mareva
Compania Naviera SA v. International Bulkcarriers SA, [1980] 1 All E.R.
213.
‑‑Rasu
Maritima SA v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, [1977] 3
All E.R. 324;
‑‑Third
Chandris Shipping Corp. v. Unimarine SA, [1979] 2 All E.R. 972.
In the midst of this development process in the United Kingdom came the
Australian case, Pivovaroff v. Chernabaeff, supra, which reviewed
the English authorities but declined to follow them.
17. In Nippon, supra, the
shipowners, being unable to locate the defendant charterers, commenced an
action for overdue hire and moved on an ex parte basis, as the
defendants could not be located, for an order enjoining the defendants from
transferring out of the jurisdiction moneys known to be in a London bank
account in the name of the defendants. The order was granted as asked, Lord
Denning M.R. stating, at p. 283:
It
seems to me that the time has come when we should revise our practice. There is
no reason why the High Court or this court should not make an order such as is
asked for here. It is warranted by s 45 of the Supreme Court of Judicature
(Consolidation) Act 1925 which says the High Court may grant a mandamus or
injunction or appoint a receiver by an interlocutory order in all cases in
which it appears to the court to be just or convenient so to do. It seems to me
that this is just such a case.
Lane L.J. agreed because of the danger of the plaintiff's losing money
". . . to which he is admittedly entitled", although no one made such
an admission, as the defendant at no stage of the process appeared.
18. Mareva, supra, followed one
month later although it was not reported until 1980. In Mareva, the
defendant charterers again did not appear and the reference to their argument
in Lord Denning's judgment appears to be in error. The ship was out of the
jurisdiction, the defendants had disappeared, and the shipowners sought to
enjoin the disposal of moneys known to be in a London bank account in the name
of the defendants. Because the order in Nippon had been made without any
reference to the Lister case, the High Court, on ex parte
application, had refused the injunction. In the Court of Appeal the Lister
case was avoided by reliance upon s. 45 of the Supreme Court of Judicature
(Consolidation) Act, 1925 mentioned above in the Nippon case and
upon a commentary on the resultant powers of the court in Halsbury's.
Lord Denning then continued, at p. 215:
In my
opinion that principle applies to a creditor who has a right to be paid the
debt owing to him, even before he has established his right by getting judgment
for it.
In explanation of this conclusion, the Master of the Rolls stated on
the same page:
There is money in a bank
in London which stands in the name of these charterers. The charterers have
control of it. They may at any time dispose of it or remove it out of this
country. If they do so, the shipowners may never get their charter hire. The ship
is now on the high seas.
Lord Roskill, in concurring, distinguished the Lister case on
the basis that by a clause in the charterparty, the shipowners "have a
lien upon . . . all sub‑freights for any amounts due under this Charter .
. .". The order in Mareva, it can be seen, was therefore based on
the broad powers given to the court under its jurisdictional statute and in
part, at least in the view of one member of the court, on the existence of a
contractual lien by the plaintiffs against the prepaid sub‑charterparty
revenues temporarily within the jurisdiction of the United Kingdom court.
19. In 1977, the Court of Appeal confirmed the
denial of such an injunction in Rasu, supra. The defendants were
clearly outside the jurisdiction but had some assets, or interest in assets,
inside the U.K. The debt claimed by the plaintiff arose under a charterparty
between the plaintiff as a shipowner and the defendants as charterers. Some
actions taken by the defendants were capable of interpretation as an effort to
transfer or deal with their assets which were in the U.K. in a manner which
would put them beyond the reach of the creditors. The injunction was denied,
not because there was not a prima facie case of liability, but because
the nature of the goods under attack was such that they were wholly unrelated
to the action and the claim arising in the plaintiffs, the title to the
equipment in question was unclear, the removal of the goods as planned to
Germany increased the likelihood of the plaintiffs being able to obtain a Mareva‑like
injunction there, and the seizure and sale of the equipment would realize only
a fraction of their true worth as an integral part of a plant being built by
the defendants in Indonesia. What is important in the case is the catalogue of
matters which Lord Denning set out in his judgment as being those to be taken
into consideration by the court in determining whether the exercise of
discretion under statute should occur. These matters are:
1. The plaintiff must demonstrate a good arguable
case;
2. The assets in question need not be limited to
money but could include goods within the jurisdiction;
3. Where the injunction might compel the defendant
to provide security, it might tilt the scales in favour of issuance of the
injunction.
In justifying the earlier decisions of Nippon and Mareva,
the Master of the Rolls found roots for such an order in the practice in the
courts in the City of London, particularly the commercial courts, where the
seizure orders, or injunction orders, were issued substantially to compel the
defendant to appear and provide bail or security. The historical prerequisite
was absence of the defendant from the jurisdiction. Lord Denning noted that the
practice, apparently, has long been followed in the United States, except that
it has been limited to cases where debt is due from the defendant in a
liquidated discernible amount. See De Beers Consolidated Mines, Ltd. v.
United States, 325 U.S. 212 (1945), at pp. 222‑23. Similar remedies
have been, and continue to be, in widespread use in the maritime towns of
continental Europe. Accordingly, Lord Denning observed, at p. 332:
Now
that we have joined the Common Market it would be appropriate that we should
follow suit, at any rate in regard to defendants not within the jurisdiction.
By so doing we should be fulfilling one of the requirements of the Treaty of
Rome, that is the harmonisation of the laws of the member countries.
He then returned to the theme of the Lister principle at p. 332
when he stated:
So far
as concerns defendants who are within the jurisdiction of the court and have
assets here, it is well established that the court should not, in advance of
any order or judgment, allow the creditor to seize any of the money or goods of
the debtor or to use any legal process to do so.
There appears to be a discrepancy between these comments of the learned
Master of the Rolls and those at p. 336 of the report where His Lordship
stated:
I think the courts have a
discretion, in advance of judgment, to issue an injunction to restrain the
removal of assets, whether the defendant is within the jurisdiction or outside
it.
The trial judge in Rasu added the further qualification that the
plaintiff "has what appears to be an indisputable claim against a defendant"
and reference is made with approval to this condition by the Master of the
Rolls. In Rasu, the turning point in the line of reasoning seems to be
reached when the defendants, unlike the defendants in Mareva and Nippon,
appeared in court to defend the claim.
20. The final dissertation in the Court of
Appeal of the United Kingdom on the subject of these injunctions to which I
wish, at present, to refer is found in Third Chandris, supra,
again principally through the judgment of Lord Denning. Here the injunction was
issued in the court of first instance and confirmed by the Court of Appeal,
apparently because the defendants were outside the jurisdiction, provided no
financial returns in the proceedings, or indeed in Panama, the country of
registry of the defendants' business, but did have a bank account in London in
which had been deposited the proceeds of a subcharterparty entered into after
the execution by the defendants of the charter party from the plaintiff
shipowners. The extraordinary factual feature was that the injunction
restrained the removal from the jurisdiction of moneys in the defendants'
London bank account, although the evidence clearly indicated that the account
was in overdraft. Again, the Master of the Rolls catalogued the hurdles which a
plaintiff must surmount in order to obtain this type of injunction. They are
much the same as in Rasu except that (at p. 985) the Master of the Rolls
placed more emphasis on the requirement that the plaintiff demonstrate belief in
a risk that the assets would be removed before the judgment or award is
satisfied. "The mere fact that the defendant is abroad is not by itself
sufficient". Additionally, a contrast is drawn between a foreign
corporation of substance and one operating in a country where no financial
disclosure is required and nothing is placed before the court to ascertain the
magnitude of the risk of non‑payment of any judgment recovered by the
plaintiff. In particular, His Lordship went on to observe, at p. 985:
There is no reciprocal
enforcement of judgments. It is nothing more than a name grasped from the air,
as elusive as the Cheshire cat.
Lawton L.J. referred to the fact that the defendant's assets may be
ships flying `the so‑called flags of convenience' with little or no trace
of substantive worth in the defendant, in or outside the jurisdiction. At p.
987 he expressed the sense of risk which must be found by the court to exist
before the issuance of these extraordinary injunctions:
There must be facts from
which the Commercial Court, like a prudent, sensible commercial man, can
properly infer a danger of default if assets are removed from the jurisdiction.
The mere fact that the defendant was a foreign corporation was not, in
the view of Lawton L.J., by itself, sufficient to justify this injunction.
21. In Pivovaroff v. Chernbaeff, supra,
Chief Justice Bray, of the Supreme Court of South Australia, set aside the
injunction which had been granted to a plaintiff to restrain the defendants from
disposing of some real estate which was unrelated to the personal injury claims
of the plaintiff. The injunction had been granted on the basis of a belief held
by the plaintiff that the defendant, upon the sale of such assets, might leave
the country before the trial of the action. The Chief Justice did not follow
the Mareva cases, largely because the defendant resided in the
jurisdiction, but His Lordship added at p. 338:
I am far from satisfied
that even in the case of a defendant outside the jurisdiction with assets
within it it would be proper to issue an injunction of the type in question
here.
The Chief Justice found no escape from the general principle enunciated
in Robinson v. Pickering (1881), 16 Ch.D. 660, per James L.J. at
p. 661:
You
cannot get an injunction to restrain a man who is alleged to be a debtor from
parting with his property.
The Chief Justice then added, at p. 338:
Those cases do not contain
any exception for defendants outside the jurisdiction.
22. The Australian court referred to the
judgment of Schroeder J.A. in Bradley Bros. (Oshawa) Ltd. v. A to Z Rental
Canada Ltd. (1970), 14 D.L.R. (3d) 171, in the Court of Appeal of Ontario,
where authorities were applied with the same result. Both courts shied away
from the obvious danger of judicial interference with the operations of
corporate enterprises where a creditor might see in many management dealings a
real risk of loss of assets before the creditor would be able to demonstrate
his claim.
23. The United Kingdom Mareva rule
might, as Lord Denning observed in Rasu, find harmony with the British
position in the Common Market, but, as pointed out in Pivovaroff, supra,
that consideration has no relevancy in Australia, nor indeed would it have any
relevancy in any country not bound by the Treaty of Rome.
24. As for the asserted jurisdiction founded
on the judicature legislation in the United Kingdom, Chief Justice Bray
described s. 45 as "a machinery section". In the words of the learned
authors of Halsbury’s Laws of England (3rd ed.), vol. 21, p. 348,
paragraph 729 [Halsbury’s Laws of England (4th ed.), vol. 24, p. 518,
paragraph 918], s. 45 "did not alter the principles upon which the court
acted in granting injunctions". To the same effect, see Kerr on
Injunctions (6th ed. 1927), p. 6. Furthermore, Chief Justice Bray in Pivovaroff,
supra, at p. 340, thought that:
It
would seem unlikely that an alternative process of summary execution in
anticipation of judgment, available for unliquidated damages as well as for
liquidated debts due and payable, should have been slumbering unsuspected for
over a century in the interstices of s. 29(1) and its predecessor and its
analogues.
The learned justice was there referring to the Australian counterpart
of s. 45 discussed by the Court of Appeal of the United Kingdom in the Mareva
cases.
25. What therefore sprung out of the fertile
ground of jurisprudence in the mid‑1970's in the courts of the United
Kingdom as a limited interlocutory injunctive remedy for plaintiffs who were in
pursuit of ubiquitous charterers of shipping, has matured into a sub‑principle
or exception to a general rule of long standing. The plaintiff in the United
Kingdom must demonstrate that he has a good arguable case. At least once (Rasu,
supra, at p. 333), the courts have required the plaintiff to show an
indisputable claim against the defendant. There must be assets of the defendant
within the jurisdiction susceptible to execution. The defendant need not be
outside the jurisdiction. There must be a real risk that the remaining
significant assets of the defendant within the jurisdiction are about to be
removed or so disposed of by the defendant as to render nugatory any judgment
to be obtained after trial. Mareva injunctions are therefore available
not just to prevent the removal of assets from the jurisdiction, but also disposal
within the jurisdiction. This has been made certain by the enactment of s.
37(3), Supreme Court Act, 1981, 1981 (U.K.), c. 54, which reads in part:
37.‑‑...
(3) The
power of the High Court . . . to grant an interlocutory injunction restraining
a party to any proceedings from removing from the jurisdiction of the High
Court, or otherwise dealing with, assets located within that jurisdiction shall
be exercisable in cases where that party is, as well as in cases where he is
not, domiciled, resident or present within that jurisdiction.
However, Lord Denning in Z Ltd. v. A, [1982] 1 All E.R. 556, at
p. 561, opines that this was the position prior to the enactment. The claim no
longer need be limited to debt or liquidated damages. The general rule requiring
that the balance of convenience must favour the issuance of the order still
exists. The overriding consideration qualifying the plaintiff to receive such
an order as an exception to the Lister rule is that the defendant
threatens to so arrange his assets as to defeat his adversary, should that
adversary ultimately prevail and obtain judgment, in any attempt to recover
from the defendant on that judgment. Short of that, the plaintiff cannot treat
the defendant as a judgment‑debtor, the defendant's right to defend the
claim may not be impaired, and the defendant in proper circumstances may,
within such an order, pay current expenses incurred in the ordinary course of
his business.
26. The gist of the Mareva action is
the right to freeze exigible assets when found within the jurisdiction,
wherever the defendant may reside, providing, of course, there is a cause
between the plaintiff and the defendant which is justiciable in the courts of
England. However, unless there is a genuine risk of disappearance of assets,
either inside or outside the jurisdiction, the injunction will not issue. This
generally summarizes the position in this country, including the Nova Scotia
Trial Division in Parmar Fisheries Ltd. v. Parceria Maritima Esperanca L.
DA. (1982), 141 D.L.R. (3d) 498; see also Liberty National Bank &
Trust Co. v. Atkin (1981), 31 O.R. (2d) 715, 121 D.L.R. (3d) 160, where
Montgomery J. of the High Court of Ontario granted a Mareva injunction
against a domestic defendant and restrained dealing with assets within the
jurisdiction. These general rules are summarized by Lord Denning in Rahman
(Prince Abdul) bin Turki al Sudairy v. Abu‑Taha, [1980] 1 W.L.R.
1268, at p. 1273; see also A J Bekhor & Co. v. Bilton, [1981] 2 All
E.R. 565, and Z Ltd. v. A‑Z and AA‑LL, [1982] 2 W.L.R. 288.
27. The harshness of the Mareva
injunction, issued usually ex parte, is relieved against or justified in
part by the Rules of Practice which allow the defendant, faced by risk of loss,
an opportunity to move against the injunction immediately. On the other hand,
the Court of Appeal of England seems to have blessed the practice of using this
injunction as a means of coercing a vulnerable defendant into providing
security in order to head off irreparable loss from the paralysis which follows
the issuance of this type of injunction.
28. While the Mareva injunction is
undoubtedly in personam, it matters not that on occasion the courts have
classified it as in rem (see Cretanor Maritime Co. v. Irish Marine
Management Ltd., [1978] 1 W.L.R. 966, at pp. 974‑75), because the
injunction affords no priority to the potential creditor, for to do so would,
in the words of Goff J., "rewrite the . . . law of insolvency": Iraqi
Ministry of Defence v. Arcepey Shipping Co. S.A., [1980] 2 W.L.R. 488, at
p. 494. Unsecured creditors holding a Mareva injunction cannot hold a
preferred position over other claimants. Hence the practice of including in the
order the right to meet legitimate debt payments accruing in the ordinary
course of business.
29. The courts in Canada have given this type
of injunction a mixed reception. The earlier decisions in the Ontario courts
are reflected in Bradley Bros., supra, where the Court of Appeal
continued the principle of Lister, supra. Lerner J., in the High
Court of Ontario, in a post‑Mareva decision, maintained the same
position: OSF Industries Ltd. v. Marc‑Jay Investments Inc. supra,
p. 448. By 1981 the High Court appeared to assume that a quia timet
jurisdiction was available on a more restricted basis than the Mareva
formula provided in the United Kingdom. See Liberty National Bank &
Trust Co. v. Atkin, supra; Canadian Pacific Airlines Ltd. v. Hind
(1981), 122 D.L.R. (3d) 498, where Grange J., as he then was, while raising the
question of the existence of the Mareva principle in Ontario, found such
dishonesty in the defendant's conduct that it was a certainty that he would
dispose of all his assets in order to frustrate the plaintiff; and Quinn v.
Marsta Cession Services Ltd. (1981), 34 O.R. (2d) 659, where such an
injunction issued on the application of the rules of Third Chandris Shipping
Corp., supra. The Court of Appeal of Ontario reviewed the
conflicting authorities in Chitel v. Rothbart (1982), 39 O.R. (2d) 513,
and although it refused the injunction in the circumstances of that case, it
recognized in a detailed and comprehensive review of the authorities that the
jurisdiction existed in the court to grant such a remedy in a proper case. The
test there established (per MacKinnon A.C.J.O., at pp. 532‑33) is
somewhat narrower than that generally applied by the courts in the United
Kingdom:
The applicant must
persuade the court by his material that the defendant is removing or there is a
real risk that he is about to remove his assets from the jurisdiction to avoid
the possibility of a judgment, or that the defendant is otherwise dissipating
or disposing of his assets, in a manner clearly distinct from his usual or
ordinary course of business or living, so as to render the possibility of
future tracing of the assets remote, if not impossible in fact or in law.
30. The condition precedent to entitlement to
the order is the demonstration by the plaintiff of a "strong prima
facie case" (p. 522) and not merely as stipulated in some of the U.K.
authorities, "a good arguable case", (per Lord Denning in Rasu,
supra, and per Megarry V.C. in Barclay‑Johnson v. Yuill,
supra.) In summary, the Ontario Court of Appeal recognized Lister
as the general rule, and Mareva as a "limited exception" to
it, the exceptional injunction being available only where there is a real risk
that the defendant will remove his assets from the jurisdiction or dissipate
those assets to avoid the possibility of a judgment ...."
31. In other provinces the courts have reached
approximately the same result. The New Brunswick Court of Appeal in Humphreys
v. Buragalia (1982), 135 D.L.R. (3d) 535, placed the basis for this kind of
injunction on the danger that the defendant will abscond or dispose of his
assets so as to prevent realization on any ultimate judgment. The earlier view
of the Manitoba Court of Queen's Bench was expressed by Hamilton J. in Hawes
v. Szewezyk, supra, where he concluded that the Mareva rule
was "a dangerous innovation" and even if technically within the
jurisdiction of the court, was one that "should not be exercised".
The British Columbia Court of Appeal, in Sekisui House Kabushiki Kaisha
(Sekisui House Co.) v. Nagashima (1982), 42 B.C.L.R. 1, 33 C.P.C. 42,
recognized the general principles developed around this interlocutory
injunction in the courts of the United Kingdom.
32. It has been argued by the appellant that
the Mareva injunction has no place in the laws of this country because
provincial legislation has filled the gap by providing statutory remedies. In
Manitoba the appellant points to The Fraudulent Conveyances Act,
C.C.S.M., c. F‑160; The Garnishment Act, C.C.S.M., c. G‑20; The
Court of Queen’s Bench Rules, Chapter XXIV (Attachment), Rule 582; and
Chapter XIX (Examination of Judgment Debtors, Attachment of Debts) Rule 526,
‘garnishee’ procedures. In other provinces, similar legislation and rules are
to be found. In Ontario, for example, there is the Absconding Debtors Act,
R.S.O. 1980, c. 2, s. 2, which authorizes the seizure of property of a resident
of the province who leaves for the purpose of defrauding or defeating
creditors; Rule 372 of the present Rules of Practice which provides for
the preservation of the subject‑matter of the proceeding; and the Fraudulent
Conveyances Act, R.S.O. 1980, c. 176, which authorizes preventive orders
where the plaintiff establishes a valid claim and prima facie that the
conveyance in question was fraudulent. It is said by counsel for the appellant
that this type of statute indicates a legislative intent to provide interim
relief of a type described in the statutes and no more. On this line of
reasoning the courts, it is said, should not "legislate" by adopting
the sweeping rules of the Mareva line of cases. This should be a matter
for the legislature which is better placed to assess the problem, its incidence
in the community and the range of solutions available. One should not assume
that the British legislature has been entirely silent apart from s. 45, supra.
See Halsbury’s Laws of England (4th ed.), vol. 18, p. 166, paragraph
358, where reference is made to statutory authority to set aside fraudulent
conveyances. However, the United Kingdom legislation is not as far‑reaching
as appears to be the case in this country.
33. The Manitoba Court of Appeal divided on
the relevance of these statutes. The majority, speaking through Matas J.A.,
took the view that such legislation and rules of court provide for relief in
specific circumstances and do not preclude the invocation by the court of s.
59(1) of The Queen’s Bench Act for the issuance of a preventive
injunction in the nature of the Mareva injunction. A similar view has
been expressed by Tallis J., now of the Saskatchewan Court of Appeal, in BP
Exploration Co. (Libya) v. Hunt (1980), 114 D.L.R. (3d) 35, at p. 58.
Huband J.A., in dissent, acknowledged that the aforementioned statutes and
rules of court do not assist the respondent here as there is no liquidated demand
or debt or a conveyance in fraud of creditors. An attaching order might avail
but the rule is more precise in its requirements than the Mareva rules
as they presently stand. As the respondent was "registered to do business
in Manitoba" and has an "authorized agent to accept service" (to
quote Huband J.A.), the respondent could not qualify for an attaching order. In
the result, the learned justice would preclude recourse to a Mareva
order where specific remedies are available at law, and if not so available,
then "the courts should be cautious to fill the void by a Mareva
injunction". There are helpful discussions as to the significance of these
and other provincial statutes in relation to Mareva injunctions in
Stockwood, " `Mareva' Injunctions" (1981), 3 Advocates’ Q.
85; Rogers and Hately, "Getting the Pre‑Trial Injunction"
(1982), 60 Can. Bar. Rev. 1; and McAllister, "Mareva
Injunctions" (1982), 28 C.P.C. 1. Reference is made in the British
cases to the availability of bankruptcy legislation which would allow the
ultimately successful plaintiff to set aside any disposition made in fraud of
creditors by way of preference or improper dealing. The same condition exists
in this country where the federal Bankruptcy Act has uniform application
throughout the country.
34. I do not believe the presence of
provincial or federal legislation of the type discussed above can preclude the
issuance of a protective injunction or narrow the breadth of expression
employed in s. 59(1) of the Manitoba Queen’s Bench Act. If the court has
the authority under such a legislative provision properly construed, then that
authority must be expressly reduced by other legislation directed to the
problem. Such is not the case here. That answer, of course, does not assist in
determining the proper practice of the court when dealing with an application
for this type of interlocutory injunction other than to find jurisdiction in
the court to respond in a proper case.
35. Before leaving this aspect of the matter,
one should make note of the appellant's submission that the Bankruptcy Act
of Canada is available to the respondent in the event that improper disposition
is made of the appellant's assets followed by an assignment or petition under the
Bankruptcy Act. This was a consideration in the early Mareva
judgments in England. It is not decisive on the point of jurisdiction to make,
or the propriety in these circumstances to issue, a Mareva injunction.
The order was not made for the purpose of protecting the respondent from the
consequences of any ultimate bankruptcy procedures. The entitlement springs, if
it does at all, from the authority of the court at law to make the order and
the qualification of the respondents under the rules and tests applied by the
court in doing so. The Bankruptcy Act, which at times may be relevant to
the issue presented to the chambers judge on a Mareva application, is
not a controlling consideration, particularly on the facts in this appeal.
36. The majority of the Court of Appeal
considered that:
One of
the factors which is relevant in this case is the clear intention of Aetna to
transfer its assets from Manitoba to Montreal, albeit that the intention is
openly expressed. And Quebec is not a reciprocating province with respect to
enforcement of judgments.
The Manitoba Reciprocal Enforcement of Judgments Act, C.C.S.M.,
c. J‑20, provides the machinery for the enforcement in Manitoba of judgments
of the courts in other Canadian provinces which have reciprocal arrangements
with the Province of Manitoba. The Act also provides for the entry into such
arrangements for the registration in other provinces of judgments of the courts
of Manitoba. With the exception of Quebec, all the provinces of Canada, the
Northwest Territories and the Yukon Territory have entered into such reciprocal
arrangements and have like statutes. Twenty‑five per cent of the assets
of the appellant are in the Province of Ontario exceeding the value of the
assets of the appellant in Manitoba which are affected by the order under
appeal. The Manitoba Act and the Ontario Act each require service upon the
defendant to have been effected in the province of judgment in order to qualify
such judgment for registration and enforcement in the other province (Ontario,
in this case). The record here does not expressly show that the appellant was
served within the Province of Manitoba with a writ or other originating
instrument, or with the notice of motion for this injunction. The respondent
is, however, a federal company with an office in Manitoba and was at all
relevant times doing business in Manitoba. Under the Corporations Act of
Manitoba, 1976 (Man.), c. 40, C.C.S.M., c. C225, such corporations are required
to register and to nominate an agent for service, all as noted by Justice
Huband in dissent below. More importantly, the appellant appeared in and
thereby attorned to the jurisdiction of the court in Manitoba. Thus, any
judgment which may arise in these proceedings in Manitoba will qualify for
registration enforcement under the Ontario statute and hence could be executed
there against the Ontario assets of the appellant in the same manner as though
judgment had been issued out of the Supreme Court of Ontario.
37. In the Province of Quebec, provision is
found in the Code of Civil Procedure for action upon judgments outside
the Province of Quebec.
178. Any defence which was or might have been set up to the original action
may be pleaded to an action brought upon a judgment rendered out of Canada.
179. Any defence which might have been set up to the original action may be
pleaded to an action brought upon a judgment rendered in any other province of
Canada, provided that the defendant was not personally served with the action
in such other province or did not appear in such action.
180. Any such defence cannot be pleaded if the defendant was personally
served in such province, or appeared in the original action, except in any case
involving the decision of a right affecting immoveables in this province, or
the jurisdiction of a foreign court concerning such right.
In such proceedings reliance may be had upon art. 1220 of the Civil
Code of the Province of Quebec which supplements the procedure under art.
179, supra, by providing for the proof of judgments from courts outside
the Province of Quebec. The Civil Code differentiates between foreign
judgments and those emanating from the courts of other provinces, and provides
in the latter case for a limited process where the defendant in the extra‑provincial
proceeding was served in the province or appeared in a court of that province.
The action in Quebec, upon any judgment later obtained in Manitoba by the
respondent, would be a formal process of enforcement not different in substance
and execution from the proceedings under the Ontario reciprocal statute. In the
result, Quebec accords a means of enforcement of Manitoba judgments but the
converse (which is of no concern in this appeal) is not the case because the
reciprocity machinery in the Manitoba statute has not been brought into play.
The access to the enforcement procedures under the laws of Quebec renders
ineffective, in my view, any argument that the respondent was exposed to some
inevitable or irreparable loss if, at the time any judgment issues in the
courts of Manitoba, the assets of the appellant have been transferred from
Manitoba to Quebec. Furthermore, Ontario is qualified as a "reciprocating
state" under the Manitoba legislation, and the appellant, according to the
record herein, had assets in that province in excess of the assets impounded in
Manitoba by the order under appeal.
38. A large part of the respondent's factum
filed herein, and of argument made in this Court, centered upon the winding
down of the appellant's business which presumably has created a risk of default
by the appellant in meeting its obligations. The factum goes further and says
that by reason of this trend, in early 1982, "for all practical purposes,
Aetna ceases to exist". The argument is not made that the respondent will
go into bankruptcy or be wound up. Essentially, this line of submission must
lead to the proposition that while the appellant "will not go into
bankruptcy or default" (extract from respondent's factum), there is, in
the words of the respondent's factum, "a sufficient risk of Aetna
defaulting in its obligations to justify granting a Mareva
injunction". Such a default would, of course, invite a petition or force
an assignment under the Bankruptcy Act. In either case, the respondent
has extensive and easily enforceable rights. One right the respondent does not
have, with or without the Mareva injunction `in aid', is a priority or
preference if indeed the appellant has, as the respondent has elaborately
calculated in its submissions in this Court, become insolvent. It would not
appear from the facts revealed on the record that there is any intention on the
part of the appellant to default in any obligation to the respondent or to
anyone else. An affidavit filed by the appellant states that ". . . Aetna
is currently meeting all its liabilities as they become due". The deponent
in this affidavit, Jean‑Paul Lafontaine, was cross‑examined by
counsel for the respondent generally, but no questions were directed to this
bald statement which remains uncontradicted in the record. This statement is
obviously vital on the key question of the existence of any real risk of loss
in the respondent as a basis for the issuance of this exceptional interlocutory
order.
39. However, even assuming the appellant is
wound up by its two shareholders, the Traders Group and the Royal Bank of
Canada, it is a federal company. If it is solvent, the provisions of the
incorporating Act, the Canada Business Corporations Act , supra,
apply. Dissolution may be effected only on "discharge of any
liabilities". Provision is made for notice to creditors and liquidation is
conditional upon "adequately providing for the payment or discharge of all
its obligations" (s. 204(7) (d)). All of this procedure is made
subject to court supervision on the application of the officer designated in
the statute or "any interested person", which includes a creditor
such as the respondent. The Manitoba Corporations Act, supra, ss.
186 and 187, requires a federal corporation to register under the Act and to
appoint an agent for service of process in Manitoba. Thus there is a detailed
pattern under the combined corporation legislation, provincial and federal, to
cover a surrender of charter as a method of avoiding the payment of debts.
40. On the other hand, if the appellant is
insolvent, the remedies under the Bankruptcy Act apply and not the
procedures under the Canada Business Corporations Act . A Mareva
injunction can neither advance nor interfere with these procedures.
41. All the foregoing considerations, while
important to an understanding of the operation of this type of injunction,
leave untouched the underlying and basic question: do the principles, as
developed in the United Kingdom courts, survive intact a transplantation from
that unitary state to the federal state of Canada? The question in its simplest
form arises in the principles enunciated in the earliest Mareva cases
where the wrong to be prevented was the removal from "the
jurisdiction" of assets of the respondent with a view to defeating the
claim of a creditor. It has been found by the courts below that there was no
such wrongdoing here. An initial question, therefore, must be answered, namely,
what is meant by "jurisdiction" in a federal context? It at least
means the jurisdiction of the Manitoba court. But is the bare removal of assets
from the Province of Manitoba sufficient? The appellant is a federally
incorporated company with authority to carry on business throughout Canada. In
the course of so doing, it moves assets in and out of the provinces of Manitoba,
Quebec and Ontario. No breach of law is asserted by the respondent. No improper
purpose has been exposed. It is simply a clash of rights: the respondents'
right to protect their position under any judgment which might hereafter be
obtained, and the appellant's right to exercise its undoubted corporate
capacity, federally confirmed (and the constitutionality of which is not
challenged), to carry on business throughout Canada. The appellant does not
seek to remove the assets in question from the national jurisdiction in which
its corporate existence is maintained. The writ of the Manitoba court runs
through judgment, founded on service of initiating process on the appellant
within Manitoba, into Ontario under reciprocal provincial legislation, and into
Quebec by reason of the laws of that province, supra. None of these
vital considerations was present in the United Kingdom where Mareva was
conceived to fend off the depradations of shady mariners operating out of far‑away
havens, usually on the fringe of legally organized commerce. In the Canadian
federal system, the appellant is not a foreigner, nor even a non‑resident
in the ordinary sense of the word. It is capable of `residing' throughout
Canada and did so in Manitoba. It is subject to execution under any Manitoba
judgment in every part of Canada. There was no clandestine transfer of assets
designed to defraud the legal process of the courts of Manitoba. There is no
evidence that this federal entity has arranged its affairs so as to defraud
Manitoba creditors. The terminology and trappings of Mareva must be
examined in the federal setting. In some ways, `jurisdiction' extends to the
national boundaries, or, in any case, beyond the provincial boundary of
Manitoba. For other purposes, jurisdiction no doubt can be confined to the
reach of the writ of the Manitoba courts. These parameters will have to develop
in Canada as did the Mareva principle in the courts of the United
Kingdom. The laws of this country, as developed here from jurisprudence
originating in the United Kingdom and variously adopted in some of the
provinces, have long included quia timet orders when justice and the
protection of the judicial process required. Mareva is a refinement made
necessary to accommodate in the same laws the primary principle of Lister.
All this is as true in Canada as in the United Kingdom. I conclude that nothing
has taken this jurisdiction away from the superior courts in the provinces. In
establishing the rules under which superior courts will issue such
interlocutory orders in this country, one must not apply in toto or
verbatim the dicta of the decisions in other legal systems though they may have
much in common with those of Canada. The Mareva consideration arising in
this appeal is the effect of a rightful removal of assets in the ordinary
course of business by a resident defendant to another part of the federal
system. This by itself will not trigger such an exceptional remedy as it well
might do in the United Kingdom where the jurisdiction of the court and the
boundaries of the country coincide. Even there, it will be seen in Rasu
Maritima, supra, an interlocutory injunction was not issued on the
removal of assets from the United Kingdom in part because the assets were being
moved to another country of the Common Market where the law recognized judgment
before trial and indeed execution before judgment. That reasoning is much
amplified in its introduction into a federal system. The South Australian
court, as we have seen in Pivovaroff, supra, has declined to
adopt the Mareva principles.
42. Taking this added federal consideration
into account, should the injunction have been issued in the first instance and
renewed in the Court of Appeal? The Mareva rules of the United Kingdom
as developed in our courts, do not, in my view of the circumstances here
existing, properly reflect the federal concern. The movement of the assets in
question was announced in public pronouncements of the two stockholders of the appellant
and by the appellant itself. The respondents were expressly made aware of the
impending transfer. There is no finding in either court below of any improper
motive behind this transfer of assets. The transfer, indeed, was carried out in
the ordinary course of business and reflected the history of the conduct of the
appellant's business in the past in Manitoba. The appellant never did retain
assets in its Manitoba branch operation, either before the appellant commenced
dealings with the respondent or thereafter. There is no finding of any
intention by the appellant to default on its obligations, either generally or
to the respondent, if in law such an obligation is later found to exist. The
appellant has not been found to be insolvent and the Court of Appeal expressly
ruled this element out as a consideration governing the issuance or denial of
the injunction. Finally, there is the federal fact and the procedures of
pursuit open to the respondent in tracing these assets through to their
destination in Quebec, or in recovering from the assets of the appellant in
Ontario.
43. There is still, as in the days of Lister,
a profound unfairness in a rule which sees one's assets tied up indefinitely
pending trial of an action which may not succeed, and even if it does succeed,
which may result in an award of far less than the caged assets. The harshness
of such an exception to the general rule is even less acceptable where the
defendant is a resident within the jurisdiction of the court and the assets in
question are not being disposed of or moved out of the country or put beyond
the reach of the courts of the country. This sub‑rule or exception can
lead to serious abuse. A plaintiff with an apparent claim, without ultimate
substance, may, by the Mareva exception to the Lister rule, tie
up the assets of the defendant, not for the purpose of their preservation until
judgment, but to force, by litigious blackmail, a settlement on the defendant
who, for any one of many reasons, cannot afford to await the ultimate
vindication after trial. I would, with all respect to those who have held
otherwise, conclude that the order should not have been issued under the
principles of interlocutory quia timet orders in Canadian courts
functioning as they do in a federal system.
44. Finally, there is the question as to
whether the appellate tribunal may properly step in and alter a discretionary
order, such as an interlocutory order, issued by a court of first instance
where no sufficient error in law on the part of the courts below has been
revealed, or where the order in question was issued based upon a wrong or inapplicable
principle of law. Where no significant error of law is revealed, in short, an
appellate court should not intervene. We do not here have the benefit of
reasons from the judge of first instance, Wilson J., issuing the order, but we
do have the reasons of the Court of Appeal. That court, with all respect to
those members who confirmed the issuance of the order, did not give due
consideration and weight to the position of the courts and the position of the
parties before those courts when dealing with an interlocutory quia timet
order in a federal jurisdiction. Though I would have come to the opposite
conclusion even aside from that element of the law involved in these
proceedings, interference with the exercise of discretion in issuing the order
would, apart from this consideration, be unwarranted. It is, however, in my
view, an error of law relating to the application of the principles properly
governing the execution of the court's discretion in favour of the respondent
in issuing the quia timet interlocutory order, and accordingly, I would
intervene and set aside such order.
45. I therefore would allow the appeal and set
aside the injunction issued in the courts below, with costs to the appellant
throughout.
Appeal allowed with costs.
Solicitor for the appellant: D’Arcy C. H. McCaffrey,
Winnipeg.
Solicitor for the respondents: William P. Ripley,
Winnipeg.
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