Civil asset recovery
1 Parallel proceedings
Is there any restriction on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter?
No. Nothing precludes a civil proceeding from progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter. In fact, section 11 of the Criminal Code, RSC 1986, Chapter C 46, explicitly permits such parallel proceedings.
In which court should proceedings be brought?
Before commencing a claim, a decision should be made about which province the claim should proceed in. Claimants are presumptively entitled to pursue their claims in any province, but normally do so in the place in which the subject matter of the dispute arose (which is also generally where the relevant parties are located). The presumption may be negated if the defendant demonstrates there is no 'real and substantial' connection between the claim and the claimant's chosen province, or demonstrates that the chosen forum is not the most convenient for the parties under the principle of forum non conveniens (Van Breda v Village Resorts, 2012 SCC 17).
Notably, faced with a forum non conveniens argument, courts will consider, among other things, the law that will govern the dispute. The fact that the law of another province (or international jurisdiction) will govern the dispute is not dispositive, but is one factor that may impact whether the court declines to exercise jurisdiction. However, under Canadian conflict of laws principles, even if a claim proceeds before the courts of a particular province, the courts may apply the law of another province (or international jurisdiction) in appropriate circumstances (eg, if a contract mandates application of a particular jurisdiction's laws). As a result, choosing a particular Canadian province in which to bring a claim may not result in the laws of that province being applied and may therefore limit the substantive advantages to be gained.
Regardless of the province, claims generally proceed in the provincial superior courts, which have court offices in most notable municipalities across each province. The provincial superior courts are also divided by certain subject matters, such as bankruptcy, and commercial and small claims (in Ontario, for example, under C$25,000). The judges of those subject matter divisions are specialists in those areas, and unique procedures often exist to streamline the court process. Certain claims meeting enumerated criteria may also be heard in the Federal Court. While headquartered in Ottawa, the Federal Court also has locations across Canada.
What are the time limits for starting civil court proceedings?
The time limits for commencing civil actions are prescribed by provincial legislation. Each province has legislation addressing limitations periods generally (eg, general tort or contract actions). The general limitation periods range from two to six years, depending on the province. In recent years, amendments in various provinces have seen the shortening of general limitation periods, with two years increasingly emerging as the chosen time period. In some general limitation legislation, other more specific causes of action are also addressed. For instance, the province of Manitoba's Limitation of Actions Act, CCSM, Chapter L 150, provides a six-year limitation period in respect of any fraudulent misrepresentation action. In addition, each province has subject-matter specific legislation that, in some instances, provides different limitation periods. For example, Ontario's Securities Act provides a three-year limitation period in respect of certain securitiesbased claims.
Common law provides that, unless specifically altered by legislation, the clock will not begin to run on any limitation period until such time as the claim is 'discovered'. Discovery occurs when the person with the claim actually learned of the facts giving rise to the claim, or when a 'reasonable person' with the abilities of and in the circumstances of the claimant would have had such knowledge. Some provinces, including Ontario, have codified the common law discovery principle. There remain, however, certain exceptions to the principle, including, most notably, in cases involving those lacking the capacity to commence claims such as minors or persons with certain disabilities.
In what circumstances does the civil court have jurisdiction? How can a defendant challenge jurisdiction?
The provincial superior courts will generally have jurisdiction simpliciter over civil asset recovery matters. Although the courts maintain the inherent jurisdiction to control their own procedure, a presumption in favour of jurisdiction is generally applied. As discussed in question 2, a defendant, however, may challenge the court's jurisdiction, either by advancing the position that there is no 'real and substantial' connection between the dispute and the province, or that the chosen jurisdiction is a forum non conveniens because there is 'clearly a more appropriate' jurisdiction in which the claim should proceed. In such a case, the defendant would typically request that the court direct the action to proceed, if at all, in another jurisdiction or simply permanently stay the action. The leading Canadian case on issues of jurisdiction is Van Breda v Village Resorts, 2012 SCC 17.
5 Time frame
What is the usual time frame for a claim to reach trial?
The time frame for a claim to reach trial varies significantly, often based on the nature of the claim, the province in which the claim is being advanced and the particular court in which the claim is commenced. For instance, in Ontario, the Superior Court of Justice has a Commercial List Division that specialises in complex financial disputes, and often hears claims involving asset tracing and recovery. A claim on the Commercial List is likely to be advanced more quickly than in a regular division of the same court. Still, litigation is a long process and claims can often take multiple years to reach trial, particularly if the parties engage in multiple interlocutory motions. For this reason, pre-judgment asset tracing and preservation mechanisms such as Mareva injunctions can be critical.
6 Admissibility of evidence
What rules apply to the admissibility of evidence in civil proceedings?
Admissibility of evidence is either governed by provincial or federal legislation, depending on the subject matter of the dispute. In asset recovery matters, provincial legislation will most often apply. In Ontario, the relevant legislation is the Evidence Act and Ontario's Rules of Civil Procedure. For federal matters, the most relevant legislation is the Canada Evidence Act.
In an effort to increase efficiency and decrease wait times, courts have rules available for summary judgment motions, which can avoid the need for full trials. In Ontario, although the court retains discretion to order viva voce (oral) evidence, evidence on any motion is typically advanced by way of written affidavit. Affiants are cross-examined outside of court and the judge hearing the motion is provided copies of the examination transcripts. Further, on a motion, hearsay evidence is generally permissible, although the court is permitted to consider the weight to be given to such evidence. At a civil trial, the opposite is true. The presumptive trial process includes viva voce evidence and a prohibition on hearsay, both features that can lengthen and complicate trials by way of motions.
What powers are available to compel witnesses to give evidence?
There are various powers available to compel witnesses to give evidence at different stages of a proceeding. Each province has procedural rules governing how and when a witness may be compelled to give evidence. For instance, Ontario's Rules of Civil Procedure provide a mechanism to compel an examination for discovery of 'any person who there is reason to believe has information relevant to a material issue in the action' (Rule 31.10), and to summons a witness to trial (Rule 53.04). In addition, in common law, a party may obtain a Norwich Pharmacal or 'disclosure order' requiring a third party to provide evidence relevant to tracing assets and discovery claims, including testimony. Courts can also issue 'letters rogatory' requesting a foreign court to compel the evidence of a witness in a foreign jurisdiction.
8 Publicly available information
What sources of information about assets are publicly available?
Common sources of publicly available information include personal property security searches (to find registered security interests on assets such as vehicles), litigation searches (to find ongoing court proceedings and previously rendered judgments) and land registry searches (to find information about real property ownership, including any encumbrances on title). Generally, most information beyond these sources is not publicly available.
9 Cooperation with law enforcement agencies
Can information and evidence be obtained from law enforcement and regulatory agencies for use in civil proceedings?
There are various means to seek information and evidence from law enforcement and regulatory agencies. These include applications for information disclosure under the municipal, provincial or federal freedom of information acts, and applications for production of information obtained by police in the course of a criminal investigation. In the latter case, applications are made to the court pursuant to the common law test originally articulated by the Ontario Court of Appeal in P (D) v Wagg. Under the Wagg test, the court will consider factors such as privilege, public interest immunity and whether there exists a prevailing public interest in non-disclosure that overrides the promotion of the administration of justice through full access of litigants to relevant information.
10 Third-party disclosure
How can information be obtained from third parties not suspected of wrongdoing?
The provincial superior courts may, upon request, order production for inspection of documents in the control of a third party provided the documents are not privileged and the court is satisfied that the documents are relevant to a material issue in the action and it would be unfair to require the requesting party to proceed without having access to the documents (eg, under Rule 30.10 of Ontario's Rules of Civil Procedure).
A party may also move before the court on an ex parte basis for a Norwich Pharmacal or 'disclosure' order. Such orders are most commonly granted to allow for disclosure of confidential information such as bank statements or other financial information. In considering whether to order disclosure, the court will consider whether the requesting party has demonstrated the following:
- a reasonable claim on the merits;
- a relationship between the third party (with the confidential information) and the claim;
- that the third party is the only practicable source of information;
- that the third party can be indemnified for the costs of the disclosure; and
- that the interests of justice favour the obtaining of the disclosure (GEA Group AG v Ventra Group, Ontario Court of Appeal).
11 Interim relief
What interim relief is available pre-judgment to prevent the dissipation of assets by, and to obtain information from, those suspected of involvement in the fraud?
In order to prevent the dissipation of assets, a party may move before the court for a Mareva injunction, also often called a 'freezing order'. As the name suggests, such an injunction aims to freeze the assets of an alleged wrongdoer pending the resolution of a claim on its merits. In order to obtain a Mareva injunction, a requesting party must demonstrate, among other things, a strong prima facie case of fraud and a real risk of dissipation. Mareva injunctions are almost always obtained ex parte and, in such cases, the moving party is required to provide full and fair disclosure of all material facts, including those facts that may favour the defendant. In addition, an undertaking as to any damages caused by the injunction is required.
In order to obtain information from those suspected of involvement in the fraud (as opposed to innocent third parties, in which case a Norwich order is appropriate), a party may request that the court issue an Anton Piller order. Such an order is obtained without notice and effectively serves as a private search warrant, requiring a defendant to allow the claimant to search premises and seize evidence in order to avoid destruction of such evidence. An independent supervising solicitor is commonly required to ensure the order is fairly understood and its limits are respected. As with a Mareva injunction, the moving party is required to make full disclosure of all material facts and provide an undertaking as to damages.
12 Non-compliance with court orders
How do courts punish failure to comply with court orders?
Where parties to a court order fail to comply, a contempt of court order may be issued. The purpose of a contempt order is to compel compliance with the civil order. As a sanction for contempt, the court may render further orders against the non-compliant party, including fines or even imprisonment.
In Ontario, for instance, contempt orders may be issued under Rule 60.11 of the Rules of Civil Procedure. The Rule requires a three- part test to be met:
- the order that was breached must clearly and unequivocally state what was to be done;
- the party that breached the order must have done so deliberately and wilfully; and
- the evidence must establish contempt beyond a reasonable doubt (Children's Aid Society of Ottawa-Carleton v C (T), Ontario Superior Court of Justice).
13 Obtaining evidence from other jurisdictions
How can information be obtained through courts in other jurisdictions to assist in the civil proceedings?
In appropriate circumstances, Canadian courts will issue written requests to foreign courts. Such 'letters of request' are the same as the better-known letters rogatory process and consist of a request to a foreign court to compel the attendance of a person in the foreign jurisdiction to be examined under oath. Many provinces have codified their rules regarding letters of request, including Rule 34.07 of Ontario's Rules of Civil Procedure.
14 Assisting courts in other jurisdictions
What assistance will the civil court give in connection with civil asset recovery proceedings in other jurisdictions?
Following the Supreme Court decisions in Morguard Investments v De Savoye and Beals v Saldanha, Canadian courts are generally expected to recognise and enforce the judgments of the courts of other provinces and foreign jurisdictions anywhere in the world.
Canadian courts will recognise and enforce judgments of foreign (non-Canadian) courts absent a demonstration of the following:
- the foreign court lacked jurisdiction over the dispute based on the Canadian 'real and substantial' connection test for assuming jurisdiction;
- the foreign judgment was obtained by fraud unknown by the defendant at the time of the judgment;
- an issue with the foreign procedure or due process gives rise to questions about natural justice; or
- the foreign judgment is contrary to Canadian concepts of basic morality.
15 Causes of action
What are the main causes of action in civil asset recovery cases, and do they include proprietary claims?
The following are the main causes of action for civil asset recovery:
- tort claims, including fraud, fraudulent misrepresentation, knowing assistance, conspiracy and conversion;
- breach of contract claims;
- equitable claims such as unjust enrichment; and
- proprietary claims such as breach of trust.
What remedies are available in a civil recovery action?
There are multiple remedies available in a civil recovery action. As noted question 11, there are preliminary remedies focused on preservation of assets and disclosure of information. Remedies at the conclusion of an action on the merits are as follows:
- a monetary award as compensation for damage;
- tracing and accounting of misappropriated funds;
- disgorgement of any profits;
- seizure of assets;
- interest on the amount of any damages award (pre-judgment and
- post-judgment); and
- costs and disbursements of the opposing party.
17 Judgment without full trial
Can a victim obtain a judgment without the need for a full trial?
Yes. For instance, a victim can obtain default judgment if the defendant fails to comply with the proper timelines and procedures in an action. In Ontario, Rule 19 provides that, in such circumstances, a claimant may have the defendant noted in default and thereafter move for judgment without notice or the need for a full trial.
In a defended action, a victim can also move for summary judgment, which, in Ontario, is governed by Rule 20 of the Rules of Civil Procedure. To obtain summary judgment, the claimant must demonstrate that there is no genuine issue requiring a trial. Following the recent Supreme Court of Canada decision of Hryniak v Mauldin, summary judgment is available when the court is able to make the necessary findings of fact, apply the law to the facts and provide a proportionate, more expeditious and less expensive means to achieve a just result (relative to a trial). Summary judgment rules can be utilised to resolve all or part of a claim.
18 Post-judgment relief
What post-judgment relief is available to successful claimants?
The post-judgment relief available primarily includes the relief set out in question 19.
What methods of enforcement are available?
The primary methods utilised to execute a judgment against judgment debtors who do not voluntarily comply with judgments include the following:
- garnishment of bank accounts or wages, with the assistance of a sheriff;
- obtaining a writ of seizure and sale allowing the judgment creditor, with the assistance of a sheriff, to seize certain of the judgment debtor's assets and sell them at public auction;
- injunctions to freeze and prevent the dissipation of assets; examinations under oath regarding assets in aid of execution (in
- examinations under oath regarding assets in aid of execution (in Ontario, under Rule 60.18 of the Rules of Civil Procedure); and
- applications to the court for the appointment of a receiver, to either supervise the judgment debtor's affairs or take control of the debtor's assets.
In addition, a claimant or judgment creditor can bring a fraudulent conveyance claim in either the underlying action or in an effort to enforce a judgment. The limitation periods governing fraudulent conveyance claims must be carefully considered as they typically start to run from the time of the transfer itself (and, therefore, potentially prior to obtaining judgment). As such, it is often prudent to include such claims in the underlying action.
Legislation relevant to the process of enforcing judgments includes, in Ontario, the Bailiffs Act, RSO 1990, Chapter B 2, and the Execution Act, RSO 1990, Chapter E 24. In addition, as noted in question 12, if a judgment debtor fails to comply with a judgment, the claimant may seek a contempt of court order.
20 Funding and costs
What funding arrangements are available to parties contemplating or involved in litigation and do the courts have any powers to manage the overall cost of that litigation?
Historically, strict adherence to the doctrine of champerty and maintenance meant that courts insisted that litigants maintain fully autonomous control over their claims regardless of financial realities. This approach led to a prohibition on litigation funding arrangements based on public policy rationales such as protecting vulnerable litigants from abuses, including high interest rates, ensuring lawyers' duties of loyalty and confidentiality were not compromised, and otherwise maintaining lawyers' professional judgement and efficacy.
More recently, however, courts loosened the restrictions on litigation funding. In 2015, building on the precedents seen in the Canadian class action realm, the Ontario Superior Court of Justice confirmed that funding arrangements are available in commercial litigation, holding there is 'no reason why such funding would be inappropriate in the field of commercial litigation', a sentiment clearly encompassing fraud and asset recovery actions (Schenk v Valiant Pharmaceuticals International). Such an approach has been motivated by the courts' acknowledgement that litigation funding arrangements can promote access to justice. Courts, however, retain discretion to disallow such third-party arrangements that deprive the litigant of too much control over, or benefit from, the claim.
In addition, in instances where a receiver or trustee has been appointed (for example, in cases of investment fraud or a bankruptcy), courts retain discretion over the payment from the estate to the receiver or trustee, and to their counsel and other advisers.
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Originally published in Getting the Deal Through
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.