|
Injunctions - Mareva (2). Tabrizi v. Farjami
In Tabrizi v. Farjami (Div Ct, 2026) the Divisional Court dismissed an appeal, this brought against "a decision .... setting aside a Mareva injunction .... ex parte".
The court considers the duty of the moving party seeking an ex parte motion order for full 'disclosure of all material facts' - and the test for setting such order aside, here in this Mareva injunction context:[20] Rule 39.01(6) of the Rules of Civil Procedure states that where a motion is made without notice, the moving party has the obligation to make full and fair disclosure of all material facts. This rule also provides that failure to comply with this obligation “is in itself sufficient ground for setting aside any order obtained on the motion”.
[21] For the purpose of this disclosure obligation, a material fact is any fact that would have been weighed or considered by the motion judge in deciding the issues, regardless of whether its disclosure would have changed the outcome. The test for materiality is an objective one. See Stans Energy Corp. v. Kyrgyz Republic, 2015 ONSC 3236 at para. 5 (Div. Ct.) (“Stans Energy”) and United States of America v. Friedland, [1996] O.J. No. 4399 at paras. 36-37 (Gen. Div.) (“Friedland”).
....
c. Analysis
[24] The issue of whether the Appellants failed to disclose material facts in their ex parte motion is a question of mixed fact and law. See Factor Gas Liquids Inc. v. Jean, 2010 ONSC 2454 at para. 28. As I explain below, I am of the view that the motion judge made no extricable error of law in his materiality analysis. Accordingly, the applicable standard of review with respect to this issue is whether the motion judge made a palpable and overriding error.
[25] The motion judge applied the correct legal test. At paragraph 21 of his reasons, he discusses what needs to be disclosed on an ex parte motion and he refers to relevant case law. At paragraph 32 of his reasons, he finds that the details of what each plaintiff lent “would have been important for any judge reviewing the motion materials”, and he notes that the total amount of the alleged loans appeared to be an important consideration in Leiper J.’s ruling. It is clear from the motion judge’s reasons that he understood that a material fact is any fact that, viewed objectively, would have been weighed or considered by the motion judge in deciding the issues, regardless of whether its disclosure would have changed the outcome.
....
b. Applicable legal principles
[36] As stated above, Rule 39.01(6) of the Rules of Civil Procedure provides that where a moving party makes a motion without notice, the failure to make full and fair disclosure of all material facts is in itself sufficient ground for setting aside any order obtained on the motion.
[37] In Chitel v. Rothbart, 1982 CanLII 1956 (Ont. C.A.) (“Chitel”), the Court of Appeal stated the following:There is no necessity for citation of any authority to state the obvious that the plaintiff must, in securing ex parte interim injunction, make full and frank disclosure of the relevant facts, including facts which may explain the defendant’s position if known to the plaintiff. If there is less than this full and accurate disclosure in a material way or if there is a misleading of the court on material facts in the original application, the court will not exercise its discretion in favour of the plaintiff and continue the injunction. [38] This statement was adopted by our Court in Stans Energy at para. 38.
[39] In Friedman, Sharpe J. (as he then was) similarly stated as follows at para. 28:If the party seeking ex parte relief fails to abide by this duty to make full and frank disclosure by omitting or misrepresenting material facts, the opposite party is entitled to have the injunction set aside. That is the price the Plaintiff must pay for failure to live up to the duty imposed by the law. Were it otherwise, the duty would be empty and the law would be powerless to protect the absent party. [40] This statement has been repeatedly cited by judges of the Superior Court of Justice and others.
[41] While the statements in Chitel and Friedman seem to suggest an absolute rule and an automatic setting aside of an order in the event of a failure to make full and frank disclosure of material facts, it has been recognized in the case law that the failure to make full and frank disclosure is not invariably fatal. The court has a residual discretion to continue the order, make a new order or vary the order. It has been stated that if dissolution would result in an injustice, then the punitive rationale for dissolution may be outweighed. See, e.g., United States of America v. Yemec, 2003 CanLII 23436 at para. 42 (Ont. S.C.J.); aff’d by 2005 CanLII 8709 (Ont. Div. Ct.); Two-Tyme at para. 21; and Han v. Ham, 2017 ONSC 4903 at paras. 11-12.
[42] In O2 Electronics Inc. v. Sualim, 2014 ONSC 5050 at para. 75 (“O2”), Perell J. set out a number of factors that the court should consider in exercising its discretion to continue an injunction in circumstances of non-disclosure. He stated the following:[75] However, the court has discretion and may continue an interlocutory injunction, if the undisclosed facts were not material or the non-disclosure was not intentional. In exercising its discretion to continue the injunction in circumstances of non-disclosure, the court should consider: (a) the practical realities that there is often urgency or an emergency that explains why the motion is made without notice; (b) whether facts were intentionally suppressed or whether simple carelessness or ignorance was the cause of the non-disclosure; (c) the pervasiveness of the non-disclosure; (d) the difficulty of determining what is a material or an immaterial non-disclosure; and (e) the significance to the outcome of the motion of the matters that were not disclosed to the court[.] [43] I note that the discretion described by Perell J. applies in cases where the undisclosed facts were not material or where the non-disclosure was not intentional. The undisclosed facts were found to be material in this case. I discuss the issue of intention further below.
[44] While a residual discretion exists, a failure to disclose material facts will still result in most cases in the setting aside of the order obtained ex parte. In Estate of Marla Bennett v. Islamic Republic of Iran, 2013 ONSC 6832 at para. 18(vi) (“Bennett”), Brown J. (as he then was) stated that if a finding of material non-disclosure is made, the court is not stripped of all of its discretion, but, generally speaking, the ex parte order will be set aside. Corbett J. made a similar observation in Robert Half Canada Inc. v. Jeewan, 2004 CanLII 1532 at para. 35 (Ont. S.C.J.) (“Jeewan”):Where a party fails to make full disclosure at a without notice motion, in general the order obtained is set aside for that reason. This remedy is not an inflexible one, and the degree of non-disclosure and the culpability for that non-disclosure must be weighed against the prejudice to the plaintiff in being denied its injunction[.] c. Analysis
[45] Both parties agree that, even if a finding of material non-disclosure is made, the court can, in its discretion, nevertheless continue an ex parte order. I agree that the court has a residual discretion to continue an ex parte order in spite of material non-disclosure if dissolution would result in an injustice.
[46] However, I also agree with the Respondents that Ontario courts have not adopted a formal two-part test applicable to motions to set aside an ex parte order for material non-disclosure. In fact, in many cases, the court’s residual discretion is not explicitly mentioned or considered. See, e.g., Stans Energy at paras. 44-45 and Shaw Communications Inc. v. Young, 2021 ONSC 7918 at paras. 19, 25-27.
[47] I also note that most of the cases relied upon by the Appellants on this issue are cases where the court found that the non-disclosed facts were not material: see, e.g., Paradigm Change Consulting Inc. v. Boparai, 2024 ONSC 7068 at para. 92; Two-Tyme at paras. 41-42; O2 at para. 83; Waters Estate v. Henry, 2022 ONSC 5485 at paras. 7-8; and Pardhan v. Coca-Cola Ltd., 2003 FCA 11 at para. 25. This is obviously a different situation than the situation in the present case where the non-disclosure has been found to be material. The Appellants also rely on a number of cases that are not on point. For instance, the Appellants rely on the decision of this Court in 2092280 Ontario Inc. v. Voralto Group Inc., 2018 ONSC 2305. However, this case does not deal with a request to set aside a Mareva injunction because of material non-disclosure, and no finding of material non-disclosure was made in first instance or before the Divisional Court.
[48] Consequently, it is my view that the motion judge did not err in law by not expressly instructing himself to follow a two-part test that is not widespread in the case law. It is also my view, based on the motion judge’s reasons, that he knew that a finding of material non-disclosure did not automatically lead to the setting aside of the Mareva injunction. In other words, the reasons show that the motion judge did not consider himself bound to set aside the Mareva injunction after his finding of material disclosure. In coming to this conclusion, I rely on the following, among other things:a. In his discussion of the applicable legal principles, the motion judge uses the word “can”, not “must” or other mandatory word. For instance, he states in paragraph 21 that “[t]he order can be set aside” and “selective exclusion of information can be fatal”.
b. Also in paragraph 21, the motion judge notes that the breach of Rule 39.01(6) is a “sufficient ground” for setting the original order aside. Saying that something constitutes a sufficient ground for a particular result does not mean that it automatically triggers the result.
c. The motion judge cites cases where the court’s discretion to continue a Mareva injunction in spite of material non-disclosure is discussed. Among other things, the motion judge refers to O2 and Elsley v. Bordynuik, 2013 ONSC 1210 in paragraph 21 of his reasons.
d. The motion judge’s statement at paragraph 13 that “[t]he breach of the duty of full and frank disclosure was significant enough for the court to protect the integrity of its process” indicates that he did not engage in a mechanical exercise and considered whether the significance of the breach required that action be taken to protect the court’s process.
e. In paragraphs 33 and 34 of his reasons, the motion judge considers the argument that he should not set aside the Mareva injunction because the “secondary plaintiffs” were allegedly unaware of the non-disclosure. The discussion of this issue shows that the motion judge did not consider that the setting aside of the Mareva injunction was an automatic and inevitable outcome. [49] Given my conclusion that the motion judge was aware that a finding of material non-disclosure did not automatically lead to the setting aside of the Mareva injunction, the remaining question is whether the motion judge erred by not exercising his discretion not to set aside the Mareva injunction.
[50] On an appeal of a judge’s discretionary decision, an appellate court will intervene only where the discretion has been exercised on a wrong principle of law or where a clear error has been made. See Rimon v. CBC Dragon Inc., 2024 ONCA 128 at para. 14.
[51] In my view, the Appellants have not established that the motion judge failed to exercise his discretion on a wrong principle of law or made a clear error.
[52] The fact that other judges may have exercised their discretion differently does not establish a clear error. Further, establishing a clear error is difficult in light of the following principles or propositions that have been recognized in the case law: (a) an ex parte order is generally set aside when a finding of material non-disclosure is made (see Bennett at para. 18(vi) and Jeewan at para. 35); (b) a court may dissolve an injunction obtained ex parte if there was material non-disclosure, notwithstanding that it otherwise would have been appropriate to continue it (see O2 at para. 74); and (c) respect for the duty of full and frank disclosure is especially important in relation to Mareva injunctions because, by their very nature, they are liable to cause substantial prejudice to the defendant (see Friedland at para. 35).
[53] These principles show that the usual outcome in cases of material non-disclosure in relation to Mareva injunction is the setting aside of the injunction, despite the fact that such cases typically involve serious allegations of fraud and some evidence in support of such allegations (given that a Mareva injunction was initially granted). As noted in National Bank Trust v. Yurov, [2016] E.W.H.C. 1913 at para. 18(d) (Comm.), “a strong case on the merits will never be a good excuse for a failure to disclose material facts.”
[54] In light of these principles, it is my view that the circumstances of this case would need to be extremely compelling to support a conclusion that the motion judge erred in not exercising his discretion not to set aside the Mareva injunction. Such compelling circumstances are not present, especially given the frailties in the evidence identified by the motion judge. The fact that this case includes allegations of fraud and evidence in support of such allegations is not in itself sufficient to conclude that the motion judge’s decision not to set aside the Mareva injunction constituted a clear error in the exercise of his discretion.
[55] Further, contrary to the Appellants’ argument, the motion judge did not ignore the Respondents’ contemptuous conduct and the merits of the Appellants’ case. The motion judge considered and balanced many factors in determining to set aside the Mareva injunction, including the following:a. The Appellants made admissions of selected disclosure (para. 35 of the reasons).
b. The Respondents’ failure to disclose was more egregious than the Appellants’ (paras. 13 and 34 of the reasons).
c. The breach of the duty of full and frank disclosure was significant (para. 13 of the reasons).
d. Despite the material non-disclosure, the Appellants may still have been able to establish a strong case against the Respondents (para. 32 of the reasons).
e. The Appellants did not all have the same level of knowledge and a number of them may not have known about the non-disclosure (paras. 33-34 of the reasons).
f. Given the uncertainty as to the amount of liability, the certificates of pending litigation on the properties may have been adequate to prevent dissipation and a blanket worldwide freezing of assets may not have been required (para. 32 of the reasons).
g. There is a need to protect the integrity of the court’s process in relation to ex parte motion (paras. 13 and 22 of the reasons). [56] As noted above. the court’s residual discretion could be exercised in cases where the dissolution of the order would result in an injustice. While not stated expressly, it is clear from the motion judge’s reasons – including the balancing of the factors set out in the previous paragraph – that he was not of the view that the dissolution of the Mareva injunction would result in an injustice. In light of the evidentiary issues identified by the motion judge, the uncertainty as to the amount of liability, the motion judge’s observation that the certificates of pending litigation may have been adequate to prevent dissipation instead of a blanket worldwide freezing of assets, and the fact that the certificates of pending of litigation were still in place when the motion was determined, I cannot conclude that it was a clear error for the motion judge not to find that a dissolution of the Mareva injunction would result in an injustice.
[57] I also note that the evidence before the motion judge was that the non-disclosure was at least partially intentional. For instance, the Appellant Afshin Nabifar states in his responding affidavit that he did not consider the omissions in issue to be relevant when preparing the motion materials for the Mareva injunction, but he also states the following: “I acknowledge that these omissions were not disclosed earlier due to my fear that raising them might cause issues among the Plaintiffs.” The responding affidavit of the Appellant Saeed Tabrizi contains an identical statement. Similarly, the Appellant Mehdi Saidi-Yousefi states the following in his responding affidavit: “These omissions were not disclosed earlier because I feared raising them might create conflict among the Plaintiffs.” Thus, the “main” Appellants decided not to mention in their affidavits certain facts that were relevant to the narrative that they were advancing and the broad relief they were seeking in order to conceal these same facts from their friends and family members who had also lent money to the Respondents.
[58] Accordingly, I find that the Appellants have not established that the motion judge erred in applying the test applicable to the setting aside of Mareva injunctions or that he erred in the exercise of his discretion. . Sakab Saudi Holding Company v. Al Jabri
In Sakab Saudi Holding Company v. Al Jabri (Ont CA, 2026) the Ontario Court of Appeal dismissed an appeal, here brought against a Divisional Court appeal ruling that mostly upheld a Superior Court ruling that dismissed a motion "requiring the respondents to produce two categories of information", these being law firm trust ledgers and unredacted bank statements.
Here the court considers the sometimes solicitor-client-privileged status of a client's bank records and the practicalities of Mareva injunctions:[115] The appellants also raise concerns about the impact the Divisional Court’s holding will have on Norwich orders. I am not persuaded by this concern. If, under a Norwich order, a bank made production of banking records that a client believed contained privileged information, it would be open to the client to move to obtain appropriate relief to protect the privilege. Production by a bank under an order obtained on an ex parte basis would not waive the client’s privilege.
VI. Conclusion
[116] While a theme of the appellants’ submissions is the need to foster the efficacy of Mareva injunctions, the appellants have not argued that they have an independent right under the Mareva Orders to disclosure from law firms. They concede, as they must, that law firm records, even for a client subject to a Mareva order, are accessible by them only if not privileged. The ability to rebut the presumption of privilege, or to show that the crime-fraud exception applies to a particular record, appropriately balances two important interests: the integrity of court orders, and the protection of a privilege which serves the administration of justice and is to be as close to absolute as possible. As I have found, there was no error in the disposition below that the appellants failed to rebut the presumption of privilege and that the crime-fraud exception did not apply. . Aquino (Re)
In Aquino (Re) (Ont CA, 2026) the Ontario Court of Appeal dismissed a BIA insolvency appeal, this brought against two orders: the first "adjudging the appellant bankrupt and appointing [a] trustee of his bankrupt estate" and the second "determining that a pre-existing Mareva injunction, granted in litigation that resulted in a substantial judgment against the appellant (the “TUV litigation”), remained and continued in full effect until further order of the court (the “Mareva Order”).
The court considers a Mareva injunction, here in an insolvency context:3. The Mareva Order
[49] The Mareva Order, styled as having been made in the TUV litigation, by its terms enjoins the appellant for an indefinite period of time as a form of post judgment execution. It does not operate pending the determination of claims or defences in the TUV litigation; those have already been determined. Although pre-trial Mareva injunctions are interlocutory orders, it is difficult to fit this order into that category. In some situations, a post judgment order that finally determines a party’s access to funds is final for the purpose of appeal: B&M Handelman Investments Ltd. v. Curreri, 2011 ONCA 395, 278 O.A.C. 199, at para. 16. This order has an analogous character. Moreover, the order was made after the Bankruptcy Order, the effect of which is to remove the capacity of the appellant with respect to his property, including (once the stay of the Bankruptcy Order terminates by the disposition of the appeal from it) any right to challenge the Mareva Order. In these circumstances, the Mareva Order is final and is appealable as of right pursuant to s. 6(1)(b) of the CJA.
[50] The appellant’s principal argument concerning the propriety of granting the Mareva Order is that the bankruptcy judge failed to address, head on, his assertion that the General Mareva Order, which the bankruptcy judge’s order continued, merged in the judgment in the TUV litigation, and ceased to be in effect. He points to authorities that Mareva injunctions are generally thought of as a pre-trial remedy, and the need to specify in them the exact terms on which they cease to apply. He argues that the General Mareva Order ended when judgment in the TUV Litigation was first given.
[51] I reject this submission. The General Mareva Order specifically stated its termination date. It stated that it remained in effect until varied by further order of the court. It was not varied until addressed, and extended by, the Mareva Order made by the Bankruptcy Judge.
[52] The appellant also submits that the Mareva Order creates uncertainty given the bankruptcy. I do not accept that argument.
[53] Ordinarily, upon the making of a bankruptcy order, a judgment creditor would not be permitted to ask for further post judgment relief against the debtor to assist in execution of its judgment, since s. 69.3(1) of the BIA provides:Subject to subsections (1.1) and (2) and sections 69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy. [54] However, the court has the power to declare that the stay does not apply to a particular step by a particular creditor: s. 69.4. Although she did not put it in those terms, the bankruptcy judge effectively exercised that power as she stated that she was satisfied that making the Mareva Order was “complementary to the powers afforded to [the appellant’s] trustee in bankruptcy”.
[55] I see no reversible error in that exercise of discretion. It was appropriate to prevent any purported dealings with or dissipation of assets by the appellant while the bankruptcy trustee was readying itself to seek out and take control of the assets legally vested in it. The stay of the Bankruptcy Order resulting from the appellant’s appeal of it confirms the wisdom of keeping the restraints on dissipation of assets in place.
[56] Accordingly, I would dismiss the appeal from the Mareva Order.
|
