Aetna Financial Services v. Feigelman, 1985 CanLII 55 (SCC), [1985] 1 SCR 2
Aetna Financial Services Limited (Defendant) Appellant;
and
Joel Jerome Feigelman, Ruth Feigelman, Mary Goldberg, R. L. L. Holdings Ltd. and Pre‑Vue Company (Canada) Ltd. (Plaintiffs) Respondents;
and
Allan Lax and Jeffrey Burke Defendants.
1983: September 26; 1985: January 31.
Present: Ritchie*, Dickson, Beetz, Estey, McIntyre, Chouinard and Wilson JJ.
*Ritchie J. took no part in the judgment.
on appeal from the court of appeal for manitoba
Injunction ‑‑ Mareva injunction ‑‑ Interlocutory order restraining transfer of assets to another province pending trial ‑‑ Order made against federally incorporated company with exigible assets in other provinces ‑‑ Whether or not Mareva injunction available ‑‑ Whether or not Mareva injunction appropriate in federal system given the circumstances.
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 CanLII 102 (ON SC), [1953] O.R. 843; American Cyanamid Co. v. Ethicon Ltd., 1975 CanLII 2598 (FC), [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), 1978 CanLII 1260 (ON SC), 88 D.L.R. (3d) 446, 7 C.P.C. 57; Bedell v. Gefaell (No. 2), 1938 CanLII 65 (ON CA), [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), 1916 CanLII 433 (MB KB), 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), 1981 CanLII 2889 (ON SC), 126 D.L.R. (3d) 62; Campbell v. Campbell (1881), 29 Gr. 252; Toronto (City of) v. McIntosh (1977), 1977 CanLII 1284 (ON SC), 16 O.R. (2d) 257; Mills and Mills v. Petrovic (1980), 1980 CanLII 1871 (ON SC), 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), 1970 CanLII 271 (ON CA), 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), 1982 CanLII 3020 (NS SC), 141 D.L.R. (3d) 498; Liberty National Bank & Trust Co. v. Atkin (1981), 1981 CanLII 1792 (ON SC), 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), 1981 CanLII 2876 (ON SC), 122 D.L.R. (3d) 498; Quinn v. Marsta Cession Services Ltd. (1981), 1981 CanLII 1829 (ON SC), 34 O.R. (2d) 659; Chitel v. Rothbart (1982), 1982 CanLII 1956 (ON CA), 39 O.R. (2d) 513; Humphreys v. Buragalia (1982), 1982 CanLII 2993 (NB CA), 135 D.L.R. (3d) 535; Sekisui House Kabushiki Kaisha (Sekisui House Co.) v. Nagashima (1982), 1982 CanLII 800 (BC CA), 42 B.C.L.R. 1, 33 C.P.C. 42; BP Exploration Co. (Libya) v. Hunt (1980), 1980 CanLII 2492 (NWT SC), 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), 1982 CanLII 3015 (MB CA), 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
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".
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.
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.
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".
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.
- 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?
- 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 CanLII 102 (ON SC), [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 CanLII 2598 (FC), [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.
- 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), 1978 CanLII 1260 (ON SC), 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 CanLII 65 (ON CA), [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), 1916 CanLII 433 (MB KB), 26 Man. Rep. 269.
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:
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), 1981 CanLII 2889 (ON SC), 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), 1978 CanLII 1260 (ON SC), 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.
where generally the processes of the court must be protected even by initiatives taken by the court itself;
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), 1977 CanLII 1284 (ON SC), 16 O.R. (2d) 257 (Ont. H.C.J.); and Mills and Mills v. Petrovic (1980), 1980 CanLII 1871 (ON SC), 30 O.R. (2d) 238 (Ont. H.C.J.)
quia timet injunctions were generally permitted under extreme circumstances which included a real or impending threat to remove contested assets from the jurisdiction.
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.
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.
- 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.
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.
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.
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.
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.
- 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.
- 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.
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:
The plaintiff must demonstrate a good arguable case;
The assets in question need not be limited to money but could include goods within the jurisdiction;
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.
- 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.
- 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.
The Australian court referred to the judgment of Schroeder J.A. in Bradley Bros. (Oshawa) Ltd. v. A to Z Rental Canada Ltd. (1970), 1970 CanLII 271 (ON CA), 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.
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.
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.
- 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.
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), 1982 CanLII 3020 (NS SC), 141 D.L.R. (3d) 498; see also Liberty National Bank & Trust Co. v. Atkin (1981), 1981 CanLII 1792 (ON SC), 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.
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.
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.
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), 1981 CanLII 2876 (ON SC), 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), 1981 CanLII 1829 (ON SC), 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), 1982 CanLII 1956 (ON CA), 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.
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 ...."
In other provinces the courts have reached approximately the same result. The New Brunswick Court of Appeal in Humphreys v. Buragalia (1982), 1982 CanLII 2993 (NB CA), 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), 1982 CanLII 800 (BC CA), 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.
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.
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), 1980 CanLII 2492 (NWT SC), 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.
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.
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.
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.
- In the Province of Quebec, provision is found in the Code of Civil Procedure for action upon judgments outside the Province of Quebec.
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.
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.
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.
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.
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.
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.
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.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.
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.
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.
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.
