Appeal Watch: Leave Denied for B.C. Powerhouses and Gendreau

SCC Refuses to Hear B.C. Case Employing Mareva Injunction

What relief is available to a party when the opposing party threatens to dissipate all of his assets before a judgement is rendered? In these circumstances, a party can ask the courts to impose what has come to be known as a Mareva injunction to restrain the opposing party from disposing of any of their assets until an order is made by the court. Named for the UK decision Mareva Compania Naviera S.A. v International Bulkcarriers Ltd., [1975] 2 Lloyd’s Rep 509 (CA), James Farley explains that the purpose of a Mareva “is to prevent assets from being dissipated or concealed within the domestic jurisdiction or to prevent their disappearance outside the jurisdiction.”

The test for a Mareva injunction carries a high threshold, and as a result, the courts have applied it sparingly in Canada. However, the Supreme Court of Canada recently denied leave to appeal in a bizarre case from British Columbia where the BC Supreme Court granted a Mareva injunction against the defendant who threatened to move to Australia to live with his parents so the plaintiffs “would get a dry judgment as he had no assets.”

The facts of 567 Hornby Apartments Ltd. v Le Soleil Hospitality Inc., 2009 BCSC 711, are somewhat complicated. The defendant/plaintiff by counterclaim is Le Soleil Hotel, a strata development in Vancouver’s downtown comprised of residential and commercial strata lots. While most of the lots were part of the hotel’s operations, some of them were owned by individuals who leased them back to the hotel. Dr. Andrew Louie owned the commercial lots that were leased back to the hotel restaurant, but after disagreement with the hotel operator  he removed his lots from the hotel and opened a competing hotel operation within the same building together with 567 Hornby Apartment Ltd. and its owner Syed Noamani. In response, Le Soleil commenced an action for an injunction to restrain the competing operation. This action initially settled out of court with letter of intent that entitled Le Soleil to lease Dr. Louie’s commercial lots, as well as the option to purchase the lots. However, Dr. Louie failed to follow through with these agreements, so Le Soleil commenced an action to enforce the terms of the letter. 567 Hornby Apartments also brought an action claiming it was entitled to the right to first refusal, which Le Soleil counterclaimed, with an action seeking an injunction restraining Mr. Nomani from disposing of any assets.

At the BC Supreme Court, Le Soleil submitted that because there was “a real risk of asset dissipation” the circumstances were appropriate to warrant an order for injunctive relief.

Justice Dickson applied the test for granting a Mareva injunction, as set out in Tracy v Instaloans Financial Services Centres (BC) Ltd., 2007 BCCA 481, which requires the court to consider:

(a)      the existence of a strong prima facie case or a good arguable case (there is no strict formula); and

(b)      having regard to all relevant factors in the case, whether granting an injunction would be just and convenient (in other words, the balance of convenience).

In considering the evidence, Justice Dickson emphasized that the courts must consider whether granting a Mareva would be “just and equitable in all the circumstances of the case.” She concluded that on the facts of this case, Le Soleil had made out a strong prima facie case against the defendants, and in the absence of any evidence of prejudice moving from the defendants, she concluded that balance of convenience tipped in favour of ordering an injunction on these facts.

According to James Farley, the Mareva injunction received formal approval from the Supreme Court of Canada in Aetna Financial Services Ltd. v Feigelman, [1985] 1 SCR 2, though the Court also “cautioned that care should be exercised to avoid having them become a form of ‘litigious blackmail.’” The complicated facts of Le Soleil lead one to question what was really going on between the parties at the time. However, to an outsider, this story appears to be a case of an initially amiable business partnership gone terribly wrong. What this case really boils down to is money and power. This point is illuminated by the fact that both Dr. Louie and Mr. Noamani had the desire, and the means, to have this case appealed all the way to the highest court in the country.

In her judgement, Justice Dickson referred to the concerns expressed by Justice Huddart in Mooney v Orr, 1994 CanLII 1779, which has been cited as the leading B.C. case on the matter. In calling for a flexible approach to the Mareva test, Justice Huddart emphasized that the court should also consider the potential for abuse of process where a litigant disavows a judgement against him.

Some such persons may choose to prosecute or defend a claim in the courts of a jurisdiction where they reside or carry on business.  If such a person is successful, he or she retains the fruits of that victory.  If such person loses, the choice of whether to pay the judgment remains effectively with the loser.  I do not think that reasonable and knowledgeable members of the British Columbia public who support our courts would consider such a person entitled to the use of our courts if he demonstrates an unwillingness to honour obligations imposed on him by those courts.

By protecting against losing litigants who may feel inclined to jump ship before a judgement is ordered, the Mareva injunction helps to ensure that court orders are meaningfully enforced. It’s potential to discourage the abuse of litigation is a worthy cause, though its harsh impact on a party’s assets require the courts to take a cautionary approach. The high threshold required to pass the balance of convenience test applied by the BC courts ensures that these competing interests are protected.

Gendreau Denied Leave to Appeal

The Charter of Rights and Freedoms guarantees a right to counsel in criminal matters, so the court is going to cut little slack for defendants who choose to represent themselves.  That was the lesson learned by the applicant in R v Gendreau, which was denied leave to appeal to the Supreme Court on March 15.  The applicant was convicted of sexual assault and unlawful confinement in 2009 for an assault on a former co-worker and has his conviction upheld by the Court of Appeal of Alberta.

The applicant elected to represent himself. However, the trial judge chose to appoint counsel for the purpose of cross-examining the complainant.  The grounds for appeal were whether the statutory power permitting a judge to appoint counsel to conduct the cross‑examination violates s. 7 of the Charter and whether s. 486.3(2) of the Criminal Code is intra vires. The trial judge noted that “Subsection 486.3(2) of the Criminal Code permits a trial judge to appoint counsel for cross-examination of a witness where he or she is of the opinion that it should be done ‘in order to obtain a full and candid account from the witness.’”  The Court of Appeal held that the judge exercised this discretion appropriately in this case.  Indeed, in a case of sexual assault, it is understandable that the trial judge may believe that a self-represented defendant could not obtain a full and candid account from the witness in cross-examination.

At the Court of Appeal, the appellant argued that the appointment of counsel for cross-examination was inappropriate, and also that “because of a lack of guidance from the trial judge, he did not know that, after the 911 recording was admitted into evidence, he could recall the complainant for the purpose of cross-examining her on alleged inconsistencies between that call and her testimony at trial” and that his application to introduce fresh evidence not in his factum was denied.  The Court of Appeal pointed out that “individuals who choose to represent themselves are entitled to a fair trial; they are not entitled to the kind of legal advice or strategy from the trial judge that would be expected of counsel.”  While it is unclear why the appellant chose to represent himself given his right to counsel in the criminal context, his subsequent defenses indicate that he believed he ended up at a procedural disadvantage as a result.

The facts in this case led readily to a conviction and it does not appear any injustice occurred. However, the procedural complexity that makes self-representation impractical is a serious access to justice issue.  While a constitutional right to counsel in criminal and a limited number of civil matters makes counsel available to most in these contexts, the inability to afford counsel makes is a major deterrent to pursuing most civil matters.  As the trial judge indicated, the court is not expected to offer legal advice and strategy to a self-represented litigant but they are still entitled to a fair trial.  Given the limited knowledge a layperson will have of the intricacies of both criminal and civil procedure, however, one can question whether offering a “fair” trial to an unrepresented party is possible at all.