Canada: Supreme Court Of Canada Decision Cautions - Lawyers, Banks, Brokers, And Other Third Parties Holding Funds Subject To Freezing Injunction

Last Updated: April 22 2015
Article by David A. Crerar and Ross McGowan

Most Read Contributor in Canada, September 2016

Carey v. Laiken 2015 SCC 17 a recent Supreme Court of Canada decision, found a lawyer in contempt of court for returning funds to his client that were subject to a Mareva freezing injunction. This decision serves as a caution to banks, brokerage houses, and other third-party persons and institutions holding client funds.


In the prior litigation leading to the decision, one Ms Laiken sued her broker, Mr Sabourin, whom she claimed had defrauded her of some $800,000. She obtained a Mareva order prohibiting Mr Sabourin and anyone having notice of the order from "disposing of, or otherwise dealing with" any of his assets. Mr Sabourin was represented by Mr Carey, a Toronto lawyer. A few months after the freeze order, Mr Sabourin sent Mr Carey a cheque for $500,000. On several occasions, Mr Carey used the funds to pay his fees: such payments were permitted under the order. Mr Sabourin told Mr Carey to use the remaining funds to settle claims of other creditors. No settlement was achieved, and Mr Sabourin instructed Mr Carey to return the remaining funds ($440,000). He did so. Mr Sabourin's business failed and he disappeared. Ms Laiken was awarded over $1million in her claim against Mr Sabourin but of course a significant potential means of collecting on that award was now lost. Ms Laiken applied to have Mr Carey found in contempt.


The Supreme Court of Canada confirmed that Mr Carey was guilty of contempt of court when he transferred the funds to his client. To be guilty of contempt, the person need not have the deliberate intent to breach a court order. All that need be shown is that the person did a deliberate act that was contrary to the terms of the order.

Mr Carey argued that he should not be found in contempt for complying with what he understood to be his professional obligations in following his client's instructions and returning the funds, all without disclosing these acts to the court or the claimant. He also argued that no contempt should be found as the funds were always beneficially owned by the client. Both arguments were rejected by the Supreme Court: neither ownership nor perceived professional obligations will serve as a defence.


On its face, the decision equally applies to financial institutions and other third parties in possession of funds of a client who is the subject of an asset-freezing injunction or other court order such as a garnishing order. In most cases, such orders will be sent to all financial institutions that the defendant has dealt with in the past, thus providing notice and setting up potential liability.

Findings of contempt against third parties are rare in Canadian law, but there are precedents in the United Kingdom. In R. (Revenue & Customs Prosecution Office) v. Lloyds TSB Plc [2007] EWHC 2393 (Admin), the financial institution defendant was found in contempt for transferring its client's frozen funds into a new account without advising the claimant, even though the transfer was well-intentioned and even though no losses occurred.


There is some (qualified) reassurance for financial institutions. First, the Court in Carey v. Laiken acknowledges, without deciding one way or the other, that some legal rulings in the United Kingdom and Australia hold that third parties will not be found in contempt unless they show a conscious intent to interfere with the administration of justice. Second, at least in the UK, a financial institution or other party transferring its client's funds in breach of a court order will not, in addition to contempt, face financial liability for breach, leading to reimbursement to the claimant of the transferred funds: Customs and Excise Commissioners v. Barclays Bank plc, [2006] UKHL 28. That said, there is no guarantee that Canadian courts will follow the lead of the UK courts, and both questions remain open in Canada, as shown by two cases.

In Kovacs v. TD Bank Financial Group, 2010 ONSC 3469, the Court declined to strike a claim that sought compensation from a bank for improper transfer of funds allegedly transferred in breach of a court order; the issue of potential liability was never determined as the case settled. Notably, the Carey v. Laiken case also claims personal liability against Mr Carey: this aspect of the case, as of yet undetermined, may lead to a court finding of whether or not a third party such as a bank or financial institution will be required to reimburse the plaintiff for funds that they let slip away from potential execution by releasing them to the defendant.


It goes without saying that a financial institution or other third party served with a freezing order, or other order directing the treatment of a client's funds, should tread very cautiously and take no actions with respect to those funds without seeking legal advice and securing the permission of the court (or, if appropriate, the party obtaining the order). Generally, where an order permits the client to withdraw living (or other stipulated) expenses, the prudent course is to:

1. Confirm proper service, and then freeze all accounts identified in the order, and consider whether the order impedes or affects the bank's lending status with the client and ability to access accounts to apply to client indebtedness to the bank;

2. Have the client provide a summary of necessary living expenses, based on the wording of the order, and seek instructions and consent from the client to deal with the funds in such manner as most appropriate to manage the account during the term of the freeze, including obtaining written consent from the client to discuss such with counsel for the party that obtained the order;

3. Propose to counsel for the party that obtained the order that funds be deposited on a monthly basis into a new account for the client's permitted use; and

4. Do not move or release the funds until and unless the party that obtained the order provides written consent in accord with the order (if permitted by its terms), or the court approves such an arrangement.

The Carey and Lloyds decisions make clear that any institution receiving a freezing order must not unilaterally implement what it believes to be a practical way of dealing with that order, but must ensure that the proposed mechanism is approved of by the party that acquired the order, or, if that party refuses, the court.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.