In my last article, I discussed Norwich orders and what you can do when money has disappeared but you don't have good information about where the funds went and who is behind it. Picking up on the trail of the funds may only solve part of the problem.

Litigation takes time, and money can move remarkably quickly. Even if you identify the recipient and have a strong claim to recover the funds, that may not mean much if, by the time you obtain judgment, the money has been transferred again, moved outside Canada, converted into other assets or simply spent.

That is where a Mareva injunction, sometimes called a freezing order, can become important.

From a high level - a Mareva injunction allows the court to restrain a defendant from moving or disposing of assets while the litigation is underway. The point is not to provide security for the claim or to put the plaintiff ahead of other creditors. It is to prevent a defendant from frustrating the litigation by moving assets beyond the reach of an eventual judgment.

Not surprisingly, courts are cautious about granting this kind of relief. Starting a lawsuit does not give you the right to freeze the other side's assets, nor is a concern that the defendant may ultimately be unable to pay enough. A Mareva injunction is an exceptional remedy. The applicant must have a sufficiently strong underlying case and evidence supporting a real concern that assets may be moved or dissipated before judgment. 

Timing can be critical. In the right circumstances, a Mareva application can be brought without advance notice to the defendant. The obvious reason for that is to address the concern that assets will disappear and providing notice of an application to freeze them may defeat the purpose of the application altogether.

There is a trade-off. Asking a court to freeze assets without first hearing from the other side carries significant obligations. The applicant must make proper disclosure to the court and will ordinarily be required to give an undertaking as to damages in case it later turns out that the injunction should not have been granted.

For businesses dealing with fraud, misappropriation or the suspicious diversion of funds, this is where Norwich and Mareva orders can work particularly well together. A Norwich order can help you find where the money went. A Mareva injunction can help make sure it is still there when the litigation catches up.

These types of remedies are often characterized as extraordinary pre-judgment remedies. Every case differs and whether and how to employ these legal tools as part of your litigation strategy will depend on the facts of the case and how quickly the facts are changing. 

Stay tuned for an option on how to preserve evidence before it can be deleted!

Craig Alcock is a commercial litigator who advises businesses on complex disputes, risk management, and efficient dispute resolution strategies focused on achieving practical outcomes.