Executive Summary: Key Legal and Evidentiary Issues

• Appropriateness of awarding costs for interlocutory injunction motions prior to trial.

• Reasonableness of the quantum of costs claimed by the plaintiffs in comparison to the defendant’s costs.

• Determination of whether substantial indemnity or partial indemnity costs should be awarded.

• Impact of a Mareva injunction on asset preservation and the parties’ positions pending trial.

• Consideration of whether a finding of fraud had been made at this stage.

• Allocation of costs to be payable to the successful party at the conclusion of trial rather than immediately.

Facts of the case

Zhiyuan Xiao, Yupei Wang, and 1000715652 Ontario Inc. (the plaintiffs) brought an action against Qiang He (the defendant), seeking the preservation of assets through a Mareva injunction. The plaintiffs claimed $1.8 million and argued that the injunction was necessary to prevent dissipation of assets pending the outcome of the litigation. On April 23, 2025, an ex parte Mareva injunction was granted, and on July 29, 2025, Justice Charney extended this injunction after considering submissions from both sides. The defendant’s cross-motion to discharge the injunction was dismissed.

Discussion of policy terms and relevant clauses

The Mareva injunction is a powerful interlocutory remedy designed to freeze a defendant’s assets to ensure that any judgment obtained by the plaintiff is not rendered ineffectual. In this case, the injunction required the defendant’s lawyer to hold approximately $500,000 in trust. The plaintiffs also provided an undertaking in damages, a standard requirement in such cases, to compensate the defendant if it is later found that the injunction was unwarranted.

Arguments on costs

Following the decision to extend the injunction, the parties could not agree on costs. The plaintiffs sought costs on a substantial indemnity basis (80%) amounting to $60,374.66, or alternatively, partial indemnity (60%) totaling $46,459.84. They argued that a finding of fraud justified the higher indemnity and that their costs were reasonable, especially given that the defendant’s own costs were significantly higher. The defendant, however, contended that costs should be awarded “in the cause,” meaning that the issue should be decided at the conclusion of the trial, as is common in interlocutory injunctions.

Judicial reasoning and authorities considered

Justice Charney reviewed recent case law and legal commentary, noting that courts generally reserve costs for interlocutory injunctions to be determined at trial. This approach avoids the risk of injustice should the ultimate outcome at trial differ from the interim result. The judge emphasized that, although the plaintiffs had established a strong prima facie case, there had not yet been a final finding of fraud. As such, substantial indemnity costs were not warranted at this stage. The judge also found the plaintiffs’ partial indemnity costs claim to be reasonable, particularly given the complexity of the evidence and the need to address the defendant’s arguments regarding full and fair disclosure.

Ruling and outcome

Justice Charney fixed the costs of the motion at $46,459.84 on a partial indemnity basis. However, these costs are not immediately payable; instead, they are to be awarded to whichever party is ultimately successful at trial. This means that the actual payment of costs will depend on the outcome of the full proceeding. No specific monetary award is granted at this stage, as the costs are “in the cause” and will be resolved with the final judgment.