Atlas Copco Canada Inc. is the Canadian division of a multinational corporation that supplies mining and construction equipment. Dirk Johannes Plate worked for Atlas for nearly 40 years, starting in his home country of the Netherlands. In 1993 he transferred to Atlas Canada, where he served as general manager.
As an expatriate employee, Mr. Plate was entitled to various benefits that were not available to Canadian employees, including an annual housing allowance of $60,000, plus fully paid trips to his home in the Netherlands. Under company rules, however, he could not enrol in Atlas’s Canadian pension plan. He remained a member of the Dutch pension plan, the terms of which were not as favourable as the provisions of the Canadian plan.
Mr. Plate was unhappy with the benefits provided by the Dutch pension plan, and began to complain about this as early as one year after he started work with the Canadian subsidiary. According to Atlas, this dissatisfaction led Mr. Plate to conspire with the company’s controller, its director of human resources, and it’s outside pension benefits insurer to divert company funds to purchase annuities and other assets for himself and other executives. Atlas dismissed Mr. Plate and the others, then commenced legal proceedings seeking a Mareva injunction to freeze the conspirators’ assets until the dispute could be determined at trial.
Although Atlas Canada claimed that the executives had defrauded it of over $20 million, the Mareva motion focused on some $1.44 million in annuities registered in the names of Mr. Plate and his wife Maria Plate.
Atlas Canada obtained an interim order freezing the assets of Mr. Plate and his wife, and of the defendant Leo Caron, the Atlas Canada director of human resources, as well as Mr. Caron’s former wife Jeannette Bourque, pending a hearing of the Mareva motion on a full evidentiary record. After various adjournments and amendments to the timetable for the motion, the motion came on for a determination before Madam Justice Mesbur, who delivered her decision on April 11, 2011.
Neither Mr. Caron on nor his ex-wife Jeannette Bourque filed any material on the motion, nor did Maria Plate. In the end, only Dirk Plate opposed the Mareva injunction. He took the position that Atlas Canada had failed to meet the test for granting a Mareva against him, and asked that the existing order be dissolved. The plaintiff Atlas Copco asked the court to continue that order, and to extend the asset freeze so that it would cover all of Mr. Plate’s assets anywhere in the world.
Mesbur, J. granted an order freezing Mr. Plate’s Ontario assets (including the annuities) until trial, but declined the request for a worldwide Mareva. She stated that injunctions are an extraordinary remedy, meaning that they are granted when the moving party can satisfy the following requirements:
- has the moving party established that there is a serious case to be tried?
- if the injunction is denied, would damages be an adequate remedy in the event that the plaintiff later succeeds at trial?
- is the plaintiff’s undertaking to pay damages in the event that an injunction is granted and the plaintiff loses at trial adequate compensation for the defendants?
- does the balance of convenience favour an injunction?
- is an injunction justified after consideration of the strength of the plaintiff’s case?
She took notice of the principle that execution is not available prior to judgment, and that the term “execution” includes orders impounding assets or otherwise restricting the defendant’s right to make use of his property. Since the Mareva injunction is an exception to this general rule, the test on a Mareva motion is more stringent than the test that applies on an ordinary injunction motion.
In order to obtain a Mareva injunction, the plaintiff must show that it has a strong prima facie case on liability and that there is a real risk that the defendant will remove assets from the jurisdiction or dissipate them in order to prevent the plaintiff from recovering damages after judgment. In addition, the balance of convenience must be in the plaintiff’s favour.
The outcome of the motion turned primarily on the question of whether or not the plaintiff had made out a strong prima facie case of fraud as against the defendant Dirk Plate.
Mr. Plate took the position that the annuities were purchased with the approval of the director of human resources (the defendant Leo Caron), as part of an agreement to top up his pension so as to make it equivalent to the Canadian plan. He claimed that this was done with the knowledge of the Atlas Copco pension committee, as well as the company’s outside pension plan actuary. As evidence to support his position, he pointed to a February 2001 e-mail from Mr. Caron to himself confirming an agreement to include Mr. Plate in the Canadian pension system, retroactive to January of 1983. He claimed that this e-mail was copied to the secretary of the pension committee, who forwarded it to the outside actuaries.
Mr. Plate also relied on a July, 2001 e-mail from Mr. Caron to the company’s actuary confirming that Mr. Plate was enrolled in the Canadian plan. In addition, the actuary sent a letter in March of 2002 providing Mr. Caron with an estimate of Mr. Plate’s retirement income from “the two registered Company pensions [sic] plans”.
Mr. Plate’s position was undermined by evidence provided by the company showing that Mr. Plate’s contract always classified him as an expatriate employee, and thus not entitled to participate in the Canadian pension plan. The minutes of the company’s pension committee and of the Board of Directors contained no reference to enrolling Mr. Plate in the Canadian plan, or to buying annuities to compensate him for the supposed pension plan shortfall. This course of action was never authorized in writing by Mr. Plate’s superiors, but only in the e-mail from Mr. Caron to Mr. Plate. No copy of that e-mail could be found in any Atlas file.
In addition, there was a discrepancy between the actuarial calculation of the cost of an annuity to top up Mr. Plate’s Dutch pension, which came in at just over $450,000, and the actual annuities purchased for a total of $1.44 million. Further, Mr. Plate began to draw on the annuities in 2007, four years prior to his planned retirement date.
The most damning evidence against Mr. Plate, however, was the fact that Mr. Caron confessed to participating in the fraudulent scheme, and gave sworn testimony that it was Mr. Plate himself who told him to buy the annuities. In addition, the defendant David Hillier, the company controller, had confessed to participating in the scheme and had paid back some of the stolen funds to the company.
When Atlas Copco Canada learned of the fraudulent scheme, it terminated Mr. Plate’s employment. Some two weeks following termination, Mr. Plate transferred ownership of a jointly owned Dutch property into his wife’s name alone. Not long after that, he did the same thing with two jointly held Québec properties. He also tried to dispose of the annuities after his dismissal.
Based on this evidence, Madam Justice Mesbur concluded that the plaintiff had made out a strong prima facie case of fraud.
The judge concluded that Mr. Plate’s dealings with his properties immediately after his termination were highly suspicious, and led to an inference that he was attempting to insulate himself against judgment. Mr. and Mrs. Plate provided inconsistent explanations for the property transfers, leading to the conclusion that a Mareva injunction was an appropriate remedy as against Mr. Plate.
Since Atlas Copco had produced evidence from a bookkeeper with the company’s pension benefits insurer establishing that the Plates’ annuities had been purchased with company funds, the annuities constituted assets forming the subject matter of the litigation, and they could be preserved pending trial under rule 45 of the Rules of Civil Procedure. The Québec assets were now in Maria Plate’s name, and she had not opposed the plaintiff’s motion to continue the injunction freezing those assets until trial. The question to be determined, then, was whether a Mareva injunction could be issued restraining Mr. Plate from dealing with assets located outside of Canada.
Mesbur, J. described the Mareva injunction as an “order in personam.” Since Ontario was the proper forum for the case, the Ontario court had personal jurisdiction over Mr. Plate and was thus in a position to issue a Mareva injunction with worldwide application. The judge concluded, however, that the injunction should not be expanded beyond the property in Ontario.
Although the company alleged that the defendants were responsible for defalcations totalling as much as $20 million, as of the date of the motion they had put forward a compelling case with respect to some $1.8 million, most of which could be traced to the annuities preserved under Rule 45. There was thus no evidentiary basis for issuing a Mareva injunction to cover all of Mr. Plate’s assets, wherever situated.
The decision imposes a very high evidentiary standard on a plaintiff seeking to restrain the disposal of assets by means of a Mareva injunction. The evidence indicating that Mr. Plate had defrauded the company was extremely strong. There was also evidence indicating that further monies had gone missing during Mr. Plate’s tenure with the company. Even so, it appears that the court was not prepared to expand the scope of the Mareva in the absence of evidence showing that Mr. Plate himself was responsible for the disappearance of the additional funds, or that those funds could be traced to a specific asset under his ownership.
Richard Hayles, B.A., J.D.
Link: Atlas Copco Canada Inc. v. Hillier, Plate, et al., CanLII – 2011 ONSC 2277 (CanLII)
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