Canada: Alberta Court Of Appeal Reinforces The Need For Caution And Candour In Seeking Ex Parte Mareva Injunctions And Anton Piller Orders

The Alberta Court of Appeal recently provided a clear reminder to legal counsel: applicants must carefully adhere to their duties of candour and full disclosure when bringing applications without notice (ex parte applications), especially when the orders sought impose severe remedies on absent respondents, such as Anton Piller orders and Mareva injunctions/attachment orders.

In Secure 2013 Group Inc. v Tiger Calcium Services Inc., (Secure Group), the Court of Appeal set aside a combined Mareva injunction/attachment order and several Anton Piller orders obtained against four individual and seven corporate defendants. The court cautioned lawyers (and litigants more broadly) to take care in bringing ex parte applications for Mareva injunctions, attachment orders and Anton Piller orders. As the court makes clear, not only must the orders be reasonable, the application for the orders must be brought a timely manner and must be presented to the court in a manner that accurately and candidly discloses the material facts relevant to both sides of the dispute.


BACKGROUND

The litigation in Secure Group was a multi-party and multi-million dollar lawsuit, which arose out of the plaintiffs' acquisition of a 67% interest in Tiger Calcium Services Inc. (Tiger), one of the plaintiffs in the action. In an 86-page statement of claim, the plaintiffs advanced multiple causes of action against the defendants, including allegations of material misrepresentation, concealment of information, breach of contractual and fiduciary obligations, intentional interference with contractual relations, and theft of proprietary records.

The plaintiffs sought to bring an urgent ex parte application for a Mareva injunction and Anton Piller orders against the defendants. The chambers judge granted the orders sought, which included remedies freezing several of the defendants' assets until the litigation was resolved (the Mareva injunction/attachment order) and authorizing the plaintiffs to attend at the defendants' premises, without notice, and seize their records (the Anton Piller orders).

In allowing the appeal, the court emphasized three key principles: (1) the exceptional nature of ex parte applications; (2) the serious and invasive consequences of Mareva injunctions, attachment orders, and Anton Piller orders; and (3) the duty of candour.

Ex Parte applications

The fundamental principle that parties have the right to be heard before their rights are negatively affected runs counter to ex parte applications, which by definition do not allow one side of the dispute to be heard. It is for this reason that the party seeking ex parte relief must disclose all material facts to the court, including facts adverse to the applicant's position.

Fulfilling the duties of candour and full disclosure are especially critical in seeking Mareva injunctions, attachment orders and Anton Piller orders, as these are highly intrusive remedies that impose significant consequences on defendants. Applicants must therefore take caution to ensure that all material information related to the application is disclosed to the court, that such orders are only sought in exceptional circumstances, and that the terms of the orders are not overreaching.

Anton Piller orders and Mareva injunctions

The plaintiffs sought Anton Piller orders to search, among other premises, the registered offices (which were law firms) and accounting firms of certain defendants. As the court noted, searching the registered office of a defendant (often a law firm) or the office of the defendant's accountant is "generally 'unwarranted'" (para 69), and the requirements for obtaining such orders are strict. Applicants must demonstrate that there is a real risk the defendant may destroy incriminating records in their possession before their records are exchanged. There was no such risk demonstrated by the plaintiffs in Secure Group respecting the records at the law firms and accounting firms.

The terms of the Anton Piller orders were also overreaching and overbroad, including indiscriminate application to all defendants, overly broad categories of seizure, and a lack of confidentiality requirements and limits on the use of seized records.

The Court of Appeal further took issue with the Mareva injunction/attachment order. In particular, the chambers judge granted unlimited attachment of the assets of 11 defendants, without any financial caps correlating to the value of the claims against each defendant, as required by the Civil Enforcement Act in respect of attachment orders.

Duty of candour

The Court of Appeal found that the plaintiffs' failure to disclose material facts to the chambers judge during the application was "inexcusable" (para 83). The breach of the plaintiffs' duty of candour ranged from redacting key provisions from the Share Purchase Agreement, to relying on unsubstantiated speculations and materially overstating the evidence. Although the plaintiffs provided almost 2000 pages of evidence, they omitted documents that were vital to the issues before the chambers judge.

The plaintiffs also failed to disclose information that was adverse to their position. Of the vendor's 49 representations in the Share Purchase Agreement, only four were included in evidence. Provisions of the Share Purchase Agreement that could have raised limitations issues for the plaintiffs' claim were not included.

TAKE-AWAY

Secure Group reminds counsel and clients that Mareva injunctions, attachment orders, and Anton Piller orders are intrusive remedies that can subject parties to serious consequences. Obtaining these orders requires strict adherence to legal tests and restraint in their application. Applicants to ex parte applications for these remedies must take caution in obtaining these orders to ensure the applications are brought promptly, and all relevant information is disclosed. Given the strict requirements of Mareva injunctions, attachment orders, and Anton Piller orders, parties should seek the guidance of legal counsel with experience in obtaining such relief.

Ontario and British Columbia have developed model orders intended to address some of the issues respecting Mareva injunctions/attachment orders and Anton Piller orders noted by the Court of Appeal in Secure Group. These model orders appear designed to ensure that critical items, including reasonable time limits and financial caps on assets attached, are included in such orders in those provinces. In our view, Alberta would benefit from a model order of its own, which would also take into account the express provisions of the Civil Enforcement Act in respect of attachment orders.


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For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.

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