Mareva Injunction Applies to Trust Funds

Photo: Giovanni Dallorto

Photo: Giovanni Dallorto

Flouting a court order is always a bad idea, Ontario Court of Appeal has found, in a case in which a lawyer used trust funds to pay for legal services while his client was subject to a Mareva injuction.

In Sabourin and Sun Group of Companies v. Laiken 2013 ONCA 530 (CanLII), the Court of Appeal held that a lawyer, Peter W.G. Carey, was in contempt of court. Carey used trust funds to pay legal fees, returning the balance to his client, in breach of a court order.

A Mareva injunction is a type of extraordinary interlocutory relief. It temporarily “freezes” a defendant’s assets during a legal proceeding, to keep him from selling or moving assets out of the Court’s jurisdiction. It aims to prevent judgment enforcement frustration.

Order Deemed ‘Overly Restrictive’

The client, Sabourin, was subject to a Mareva injunction obtained in 2006. The injunction expressly applied to moneys held in trust; it did not provide for the payment of legal fees or living expenses. Both parties and the Court later agreed that the Order was overly restrictive. A court variation left it to the parties to work out appropriate terms, but the Order was not amended.

Carey later said he had an “honest belief” that he was acting properly. He testified in Superior Court: “I was abiding by my obligations as a solicitor, both in terms of my obligations to the client and my obligations as an officer of the court.”

A Motions judge had found that “Unprofessional or sloppy practice, if that is ultimately found to be the case here, is not contempt of court.”

Letter and Spirit Violated

The appeal court found that conclusion was a legal error. Writing for the court, Justice Robert J. Sharpe said: “A finding that Sabourin was a rogue bent on flouting the court’s process was implicit in the grant of the Mareva order… In my view, Carey committed an act that violated both the letter and the spirit of the Mareva order… Carey knew of the order and he violated it.”

The court found that orders must be followed, whether a licensee agrees with the terms or not. “It is well-established that court orders must be respected, even if they were improperly or improvidently granted.”

Sanction was limited to costs because the court found it did not have authority to order compensation. The applicant must pursue a claim for damages in a proceeding that “affords a proper procedural framework for its adjudication,” the appeal court found.

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