In Sherif Gerges Pharmacy Professional Corporation et al. v. Niam Pharmaceuticals Inc. et al., the Ontario Superior Court of Justice (Commercial List) declined to grant either a Mareva injunction or a preservation order in the context of a dispute between two businesses, despite finding a strong prima facie case that the respondent had converted funds.
The decision confirms that even where a party does not dispute transferring assets without the other’s knowledge or consent, the court will still require clear evidence of a risk of future dissipation of assets before granting the extraordinary relief.
Background
The applicant, Sherif Gerges, and the respondent, Adesh Vora, were equal shareholders and directors of a company that owned three commercial properties in Toronto. In April 2024, Mr. Vora unilaterally removed Mr. Gerges as a director and sold the properties without Mr. Gerges’ knowledge or consent. Nearly CA$3 million in net proceeds were generated from the sales, most of which were transferred to other corporations controlled by Mr. Vora.
Mr. Gerges brought an urgent motion seeking:
- A Mareva injunction freezing an amount equivalent to the net sale proceeds;
- A preservation order under Rule 45.02 of the Rules of Civil Procedure; and
- Production of records tracing the disposition of funds.
The Court’s decision
The court dismissed the motion in its entirety.
The test for a Mareva injunction requires the moving party to establish (1) a strong prima facie case; (2) particulars of its claim against the respondents, fairly stating the points made against it by the respondents; (3) grounds for believing that the respondents have assets in Ontario; (4) grounds for believing that there is a risk of the respondent’s assets being removed from Ontario, dissipated or disposed of before a judgment or award is satisfied; and (5) an undertaking as to damages.
With respect to the Mareva injunction, the court accepted that there was a strong prima facie case in conversion: Mr. Vora did not dispute that the he sold the properties and transferred funds without authorization (although he argued that the applicant would not succeed at a trial as a result of set-off claims against the applicant).
However, the court held that there were no grounds for believing that there was a risk of the respondent’s assets being removed from Ontario, dissipated or disposed of before a judgment or award is satisfied – the fourth requirement of a Mareva injunction. The court held that the focus should be on the availability of assets to satisfy a judgment when assessing the risk of dissipation of assets, not on the dishonest conduct of the respondent.
Here, the court emphasized that Mr. Vora held substantial assets in Ontario, including interests in jointly held pharmacy businesses (with the applicant) and shares in a corporation that were subject to trading restrictions (such that they could not be sold or otherwise dissipated), and had consented to hold over CA$689,000 in trust pending further court order. Therefore, the court was not persuaded that there was a real risk of dissipation of Mr. Vora’s assets and Mr. Gerges would not be left in a position where he could not collect damages. The court did, however, order that the amount held by the respondents’ counsel be held pending further court order.
The test for a preservation order under Rule 45.02 requires among other things that the specific funds be readily identifiable when the order is sought. In declining to grant a preservation order, the court found that the proceeds of sale no longer existed as a “readily identifiable fund” within the meaning of Rule 45.02, having already been disbursed across various entities.
Finally, the court declined to order immediate production of further documents, holding that the request was better addressed through ordinary procedural channels in the main application.
The court awarded CA$25,000 in costs to Mr. Vora.
Key takeaways
The decision illustrates the court’s cautious approach to Mareva and preservation relief. Even where unauthorized conduct is conceded, as it was here, this will not, on its own, justify a freezing order. The moving party must demonstrate a real risk of future dissipation of assets and identify a specific fund for preservation. Where the respondent can establish that there will be assets available should judgment be rendered, a Mareva injunction will not issue.
Counsel seeking a Mareva injunction should be prepared to lead clear and contemporaneous evidence of a real risk of future dissipation — not merely point to past misconduct or unauthorized dealings. Where funds have already been moved, preservation relief will likely not be granted unless counsel identifies assets that remain available.
For more information on this topic, please reach out to the authors, Chloe Snider and Camila Maldi.
