Bank’s “dirty hands” deprive it of Mareva injunction even though test met
December 1st, 2010
In the case of Royal Bank of Canada v. Boussoulas[i], the Ontario Superior Court declined RBC’s request to appoint an interim receiver and grant a Mareva injunction against the defendants, who, it was alleged, were continuing their business through a succession of companies in order to avoid repaying RBC loans.
RBC met the first part of the test for a Mareva injunction, namely that it had a strong prima facie case against the defendants. Stinson J. held that RBC’s security documents were, on their face, enforceable and that the debt of one of the corporations controlled by the defendants was not being seriously contested. He also found that there was a real risk that the defendants were dissipating assets contrary to the usual or ordinary course of business which, in turn, supported granting a Mareva injunction.
Stinson J. then considered whether RBC’s conduct disentitled it to the relief it was seeking. RBC had apparently overstated its case and made unsupportable allegations in its notice of motion, factums and affidavits which, the Court held, was unacceptable at any stage of a proceeding. Stinson J. held that because RBC overstated its case, the Court was impeded in performing its function on the motion and that it would be impossible for a judge to distinguish between fact and argument. He made note of affidavits that contained “elaborations of parties’ positions and argumentative statements disguised as fact.”
The judge took particular exception with RBC’s allegations of fraud on the part of the defendants, allegations of which RBC failed to adduce evidence (or prove). Moreover, the judge found that RBC’s representatives made assertions of fact that were simply untrue, for example, by swearing in an affidavit that significant funds had been diverted by the defendants but then admitting on cross-examination that there was no evidence to support that assertion. In fact, RBC’s representatives were forced to concede that they had no personal knowledge or evidence to support some of their beliefs and conclusions that were stated as facts in their affidavits. RBC had also included allegations regarding criminal proceedings against one of the defendants, which Stinson J. held to be of “no moment” on the motion before him.
Telling was the judge’s opinion that it was no answer for a party to say: “this motion was brought on notice – the defendant had every opportunity to respond with his side of the story.” The judge held that every party, and their lawyers, has a duty to be fair, accurate and candid with the court and to not overstate or misstate their case. As such, despite the fact that it had met the test for a Mareva injunction, RBC was not entitled to that relief by virtue of what the judge referred to as its own “conduct and shortcomings.”