What is the test for vacating a Mareva injunction/attachment order?
The Plaintiff was an operator in the oil and gas industry, and held oil and gas assets in British Columbia and Alberta. Its monetary obligations to the British Columbia Oil and Gas Commission (“BCOGC”) and the Alberta Energy Regulator (“AER”) exceeded $67 million. The Court appointed a Receiver, and the latter discovered that the Plaintiff had transferred a total of $3,650,000 to the Defendants, citing a promissory note and three payout loans. The Receiver also determined that the Defendants had subsequently transferred a total of $3,300,000 to Hong Kong accounts held by the Defendants’ secretary/treasurer.
Accordingly, the Plaintiff, via its Receiver, sought and obtained a Mareva “injunction/attachment” Order concerning certain assets of the Defendants. The Order contained a “come-back clause,” which permits any interested person to apply to the court to seek a variation or discharge of the Order. The Defendants applied to challenge the Order, arguing that the evidence that the Receiver used to obtain the Order was hearsay evidence and not direct evidence.
Injunction and attachment orders are different forms of a similar order. The attachment order arises from the Civil Enforcement Act. A Mareva injunction derives from the Court’s equitable jurisdiction to grant injunctive relief, more specifically set forth in the Judicature Act. The Court’s analysis focused on whether the Plaintiff met the tests for granting either, or both.
When seeking a Mareva injunction, the plaintiff must show a strong prima facie case for its suit, and also that there is a real risk that the respondent will remove assets from the jurisdiction, or dissipate them, in order to avoid execution under a judgment. Like a Mareva injunction, for the applicant to obtain an attachment order, it must show some risk of dissipation of assets. Pursuant to the CEA, the applicant must also show a “reasonable likelihood of success at trial.”
In this case, AER and BCOGC had proven their claims. The Receiver sought to recover the Plaintiff’s assets and property for the benefit of the Plaintiff’s creditors. There was a prima facie case, or a reasonable likelihood, that those claims against the Plaintiff would be established. The Defendants did not provide the Court with any evidence to show the legitimacy of the transfers made by the Plaintiff, no evidence to show that they had actually lent funds to the Plaintiff, no general or other security agreement to support their registration at the Alberta Personal Property Security Registry, and no explanation of a valid business purpose for the transfers. Said differently, the Defendants did not provide the Court with anything that would permit it to vacate the Order. The hearsay evidence remained uncontradicted.
The Court found that there was a real risk that the Plaintiff would remove assets from the jurisdiction, or dissipate them, in order to avoid allowing those assets to be distributed among its creditors. In fact, it had already done so. The Defendants had already transferred monies to Hong Kong, out of the reach of the Receiver.
The Defendants argued that they would suffer irreparable harm by the continuation of the Order, as they “cannot operate” with their bank accounts frozen by the Order. They provided no supporting evidence for this contention. The Court noted that it did not even know the nature of the Defendants’ business, which they claimed they could not operate in the face of the Order. Accordingly, the Court concluded that the Defendants would not suffer any irreparable harm because of the continuation of the Order.
The Receiver was unable to recover monies from the Defendants’ secretary/treasurer in Hong Kong for the benefit of the Plaintiff’s creditors. The balance of convenience weighed heavily in favour of maintaining the Order. As a result, the Court dismissed the Defendants’ application to vacate the Order.
Judge: The Honourable Justice K.D. Yamauchi
Counsel: Kelsey Meyer, Justin Lambert and Michael Selnes of Bennett Jones LLP for the Plaintiff; and Elmer Chiu of Elmer Chiu Legal Centre for the Defendants
By Matilda Lici