Case reference: Lakhani v. Gilla Enterprises Inc. 2019 ONSC 1727
This historical case summary discusses the decision identified above. Later decisions and legislative changes may affect how it applies today. Obtain legal advice about your circumstances.
The plaintiffs sold their company V Inc. to the defendant GE Inc., a subsidiary of the defendant G Inc., pursuant to a share purchase agreement. V Inc.’s business did not prosper, and it ultimately made a voluntary assignment into bankruptcy. The defendants failed to pay the plaintiffs. G Inc. had originally planned on spinning off its marijuana-related business to V Inc., but now intended to spin off that business to another company, Hystyle. The plaintiffs sued the defendants for breach of the share purchase agreement and for an oppression remedy. The defendants counterclaimed, alleging that they were fraudulently induced to purchase the V Inc. shares by the defendants’ misrepresentations. The plaintiffs brought a motion for a Mareva injunction restraining V Inc., G Inc., GE Inc. and Hystyle from dissipating V Inc.’s assets and for an injunction restraining the spin-off of the marijuana related business to Hystyle.
Held, the motion should be dismissed.
Except in rare circumstances, the usual criteria for granting interlocutory relief, and not some lesser standard, should be applied when injunctive relief is sought in oppression remedy cases. The dictates of fairness were not so overwhelming in this case that it would be appropriate to forgo compliance with the traditional considerations associated with an interlocutory injunction. The plaintiffs had a strong prima facie case, but they fell far short of satisfying the other criteria for any injunctive order, particularly the extraordinary Mareva injunction. The plaintiffs had failed to show that they would suffer irreparable harm if the requested order was not granted, and the balance of convenience highly favoured allowing GE Inc., G Inc. and Hystyle to carry on business. Moreover, the defendants had a strong prima facie counterclaim.
Mareva injunctions
Section 101 of the Courts of Justice Act provides the court with the jurisdiction to grant interlocutory injunctions including Mareva injunctions. Section 101 states:
Injunctions and receivers
101(1) In the Superior Court of Justice, an interlocutory injunction or mandatory Order may be granted or a receiver or receiver and manager may be appointed by an interlocutory Order, where it appears to a judge of the court to be just or convenient to do so.
Terms
(2) An Order under subsection (1) may include such terms as are considered just.
A Mareva injunction is an injunctive order that restrains the defendant from dissipating assets or from conveying away his or her own property pending the court’s determination in the proceedings. In its effect, it is prejudgment execution. It is a rare and extraordinary order.
For a Mareva injunction, the plaintiff must establish
(1) a strong prima facie case;
(2) irreparable harm if the remedy for the defendant’s misconduct were left to be granted at trial;
(3) the balance of convenience favours granting an interlocutory injunction;
(4) the defendant has assets in the jurisdiction; and
(5) that there is a serious risk that the defendant will remove property or dissipate assets before judgment (United States of America v. Yemec (2005), 75 O.R. (3d) 52, [2005] O.J. No. 1165 (Div. Ct.); Aetna Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2, [1985] S.C.J. No. 1; DeMenza v. Richardson Greenshields of Canada Ltd. (1989), 74 O.R. (2d) 172, [1989] O.J. No. 3231 (Div. Ct.); Chitel v. Rothbart (1982), 39 O.R. (2d) 513, [1982] O.J. No. 3540 (C.A.).). Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction.
*source: Ontario Reports
