On January 21, 2013, Justice D. M. Brown of the Ontario Superior Court of Justice released a decision that is sure to become an invaluable resource for civil litigators in Ontario. In York University v Michael Markicevic, Justice Brown provides a detailed analysis of the legal principles of summary judgment, the interpretation of releases, Mareva injunctions, certificates of pending litigation, Anton Piller orders, and fraudulent conveyances.
This case involves allegations of fraud against Michael Markicevic, a former employee of York University. York University terminated Mr. Markicevic's employment without cause. As part of this termination, Mr. Markicevic received almost $700,000 and the parties signed a release that effectively barred York University from bringing any claims against Mr. Markicevic arising from Mr. Markicevic's employment that York University knew, or ought to have known, at the time of his termination. At that time, York University was arguably aware of only several thousand dollars' worth of losses from fraudulent invoices that were approved by Mr. Markicevic. It wasn't until more than a year later that York University discovered that more than $1.2 million was diverted from York University through a fraudulent invoicing scheme and that Mr. Markicevic had also benefitted from improvement work done at his home by York University employees.
There were several issues before Justice Brown, including whether the release barred York University from pursuing a fraud claim against Mr. Markicevic, whether property that Mr. Markicevic transferred to his wife after his termination was a fraudulent conveyance, and whether York University was entitled to seize Mr. Markicevic's computer and prevent the defendants from disposing of their assets pending a trial.
The defendants, which included Mr. Markicevic's wife and daughter, brought motions for summary judgment to resolve two issues: (1) that the release that Mr. Markicevic signed barred York University from commencing a claim in fraud against him; and (2) that a property transferred from Mr. Markicevic to his wife after his termination was not a fraudulent conveyance. Justice Brown dismissed the defendants' motions for summary judgment.
On the issue of the release, Justice Brown held that a genuine issue requiring a trial existed as to whether the release could bar any or all of York University's claims. At the heart of this holding was the uncertainty of York University's actual knowledge of the alleged fraudulent activity of Mr. Markicevic, and Mr. Markicevic's failure to disclose the existence of the possible claim at the time executing the release.
On the issue of the fraudulent conveyance claim, Justice Brown held that there were sufficient badges of fraud, or key indicators that the court relies on, to create a genuine issue requiring a trial.
Justice Brown also dismissed York University's motions for an Anton Piller order to seize Mr. Markicevic's computer and for a Mareva injunction to freeze the defendants' assets, but did order a certificate of pending litigation against the properties of the defendants. For these motions, the judge held that the documentary record was insufficient to impose such serious sanctions against the defendants without the claim being decided on its merits. Instead, Justice Brown elected to grant "a more tailored form of relief" in the form of a certificate of pending litigation.
The distinction between Mareva relief and a certificate of pending litigation is noteworthy. Mareva injunctions are broad and quite powerful, which also means that courts will not grant this type of relief unless a plaintiff meets very strict criteria including demonstrating a strong prima facie case for fraud or other misconduct as well as a real risk that assets will be removed outside of the ordinary course of business. In addition, the plaintiff must also give an undertaking as to damages, meaning that the plaintiff agrees to compensate the defendant for any damages she suffers as a result of the injunction if the plaintiff is ultimately unsuccessful at trial. A certificate of pending litigation, on the other hand, is based in statute and only requires a reasonable claim for an interest in land - no undertaking as to damages is required. Despite this lower standard, this remedy can be almost as effective as a Mareva injunction. A certificate of pending litigation is registered on title, meaning it persists even if the and gives notice to anyone who intends to deal with the property that there is a pending claim that has the potential to affect the ownership on title. This type of encumbrance, while not completely restraining a party's ability to deal with her assets, signals
This case not only reinforces the new standard for summary judgment motions, but also provides a wealth of information and legal analysis on a broad range of relief. This case is a must-read for anyone practicing in the area of civil fraud, and will likely be an essential tool for any litigator addressing any of these issues in the future.
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