Executive Summary: Key Legal and Evidentiary Issues

• Whether the motion judge’s ex parte, in-writing order authorizing monthly withdrawals conflicted with a prior case conference order directing that both motions be addressed together with full materials and submissions.
• The extent to which procedural fairness was breached when funds were released without notice to the appellants or RBC and without giving them an opportunity to respond or make submissions.
• The propriety of permitting a “living expenses” allowance from allegedly fraudulent funds in the context of a Mareva-type freezing scenario before a proper inter partes hearing.
• The admissibility of fresh evidence on appeal, particularly materials showing the appellants and RBC did not receive or know of the motion in-writing and the earlier Chalmers J. directions.
• The legal effect of Civil Practice Court directions that contemplated interlocutory and even substantive orders at a case conference, and whether a single judge could undermine that structure through a separate motion in-writing.
• The appropriate remedial response where interlocutory orders are made without notice in a fraud-related banking dispute, including quashing the orders, restoring funds to the account, and awarding appeal costs.

Background and factual context

Panelized Building Solutions Inc. and Lumber City Inc. were commercial parties whose accounting department email was allegedly hacked by an unknown third-party fraudster. As a result of this cyber-fraud, they were duped into wiring $412,758.32 to a Royal Bank of Canada (RBC) account, believing they were paying a legitimate supplier rather than a fraudster’s account. The account in question was held by an individual, Handel Edwards, who became centrally involved in the ensuing litigation over the frozen funds. Faced with the suspected fraud and the imminent risk that the funds could be dissipated, the appellants moved urgently in the Ontario Superior Court of Justice. They sought, among other things, an order freezing the RBC account and disclosure regarding that account, in order to preserve the allegedly misdirected funds and trace what had happened to them. Around the same time, Mr. Edwards, as the RBC account holder, brought his own motion to obtain the release of the funds in the account. This created a procedural situation where competing interests over the same pot of money—suspected proceeds of fraud—had to be managed within the court’s case management and interlocutory processes.

Procedural history and the competing motions

On May 13, 2025, the parties appeared before Chalmers J. in Civil Practice Court. Recognizing the urgency and complexity of the matter, Chalmers J. directed that both motions—the appellants’ urgent freezing/disclosure motion and Mr. Edwards’ motion to release funds—were to be dealt with together “as quickly as possible” at a case conference. To structure this process, Chalmers J. set a timetable for the exchange of motion materials leading up to the case conference. Importantly, his endorsement expressly stated that the case conference judge could make procedural orders, orders for interlocutory relief, and, in appropriate cases, even substantive orders. Each side was instructed to serve a concise case conference memorandum (up to five double-spaced pages) setting out their position on the motion and why they should succeed. In other words, the parties were clearly told that their disputes over the funds, including any freeze or release orders, would be addressed at an inter partes case conference where they would file materials and make submissions. This direction formed the backbone of the procedural framework that the Divisional Court later found had been undermined.

The impugned orders of the motion judge

Despite the existing case conference directions, a separate motion in-writing proceeded before another judge, Akazaki J. (the motion judge), on May 30, 2025, based on materials that were not served on the appellants or on RBC. On that motion in-writing, the motion judge granted Mr. Edwards authority to withdraw $10,000 per month for three months from the RBC account. This functioned as a form of “living expenses” allowance often associated with a Mareva or freezing context, but it was granted without prior notice to the parties who had sought to freeze the account and without the inter partes case conference contemplated by Chalmers J. As soon as the appellants and RBC received the order, their counsel contacted the court, contending that there had been a mix-up in the court system. They pointed to the earlier endorsement of Chalmers J., emphasizing that the dispute over the funds was supposed to be addressed at a case conference with proper materials and submissions from all sides. They promptly provided the court with both the Chalmers J. endorsement and their motion materials. In response, the motion judge issued a second endorsement the same day. He asserted that there was no conflict with the order of Chalmers J. because that order did not actually grant a temporary Mareva injunction but only directed a case conference. He further stated that his order was simply permitting a monthly living-expenses withdrawal from the account—something he indicated he would have granted even on the return of a Mareva injunction. RBC then implemented the first $10,000 payment to Mr. Edwards in accordance with the motion judge’s order.

Intervention by another judge and the path to the Divisional Court

After the initial payment was made, further judicial intervention became necessary. On July 2, 2025, Koehnen J. ordered that RBC was not required to make any additional payments from the account to Mr. Edwards until the Divisional Court dealt with a motion for leave to appeal. That motion for leave was ultimately granted, allowing the appellants to challenge the pair of interlocutory orders made by the motion judge on May 30, 2025. In preparation for the appeal, the appellants brought a motion to introduce fresh evidence. They sought to put before the Divisional Court (1) the materials they had sent to the motion judge after his first order and (2) further documentation explaining the procedural history, including the fact that they had never been served with the motion in-writing materials. The Divisional Court found this evidence credible and noted that it could not reasonably have been before the motion judge at the outset, given that the appellants had not been aware of the in-writing motion. Because the material could affect the appeal’s outcome, the court held that it satisfied the test for admission of fresh evidence set out in R. v. Palmer, allowing the appeal to be decided on a more complete factual backdrop.

Legal framework: Mareva-type relief and procedural fairness

At the heart of the appeal was the tension between the urgent need to preserve alleged fraud proceeds and the fundamental requirement of procedural fairness. The appellants’ original motion was in the nature of Mareva relief—seeking to freeze an account and prevent dissipation of funds. Such relief can, in exceptional circumstances, be granted ex parte or on short notice, but the usual expectation is that affected parties will, as soon as feasible, have an opportunity to be heard and present materials. Chalmers J.’s case conference order provided such a path by directing that both sides file materials and appear before a judge with authority to grant interlocutory and even substantive orders. By contrast, the motion judge’s approach effectively bypassed this framework. He permitted the release of funds in a living-expenses allowance from the disputed account, without prior notice to the parties seeking to freeze the account and without giving them the hearing they had been told to expect. The Divisional Court emphasized that once the motion judge became aware of the earlier Civil Practice Court directions and the fact that the appellants and RBC had not been served or heard, the duty of procedural fairness required a reconsideration of his orders.

Errors identified by the Divisional Court

The Divisional Court, per O’Brien J., identified two principal errors in the motion judge’s handling of the matter. First, the court held that the motion judge erred in refusing to vary his order when he was informed of the existing case conference order of Chalmers J. That earlier order had directed that both competing motions would be dealt with promptly at a case conference, with the case conference judge empowered to make necessary interlocutory orders. The motion judge’s unilateral authorization of living-expense withdrawals from the account effectively short-circuited that process, releasing funds without the parties having had a chance to file their materials or make submissions as specifically contemplated by the earlier directions. Second, the Divisional Court found a clear breach of procedural fairness. When counsel for the appellants and RBC contacted the court after receiving the first May 30 order, their communications made it plain that they had not been aware of the motion in-writing and that they expected, based on Chalmers J.’s endorsement, to be able to argue their positions at a case conference. In those circumstances, refusing to reconsider the order—despite knowing the affected parties had had no real opportunity to be heard—was, in the Divisional Court’s view, an error going to the core of fair process in interlocutory matters.

Outcome, remedies, and monetary consequences

Given these findings, the Divisional Court allowed the appeal from the interlocutory orders. It quashed both of the motion judge’s May 30, 2025 orders, thereby undoing the authorization for ongoing monthly withdrawals from the RBC account. To address the funds that had already been released under the impugned order, the court directed that Mr. Edwards must return the $10,000 previously paid out of the RBC account back into that account within 30 days. This step was restorative rather than compensatory, aiming to reconstitute the disputed fund so that it could be properly dealt with in the ongoing litigation and any future, procedurally fair motions. In terms of costs, the Divisional Court held that the appellants were entitled to recover their costs of both the appeal and the motion for leave to appeal. The court fixed those costs in the amount of $17,500 on an all-inclusive basis. The successful party in the Divisional Court was therefore the appellants, Panelized Building Solutions Inc. and Lumber City Inc., and the total amount ordered in their favour in this decision was $17,500 in costs, with the additional $10,000 repayment directed back into the RBC account rather than paid directly to them.