Cheng v. Qu Fei Cheng

Decision 1: Bring the Mareva motion together with the appeal — treat asset preservation as the operative goal

The conventional response to losing a CPL on material non-disclosure grounds is to appeal alone, hope to overturn the discharge, and live with whatever timeline the appeal produces. That route exposes the plaintiff to ongoing dissipation risk: months pass; the property at issue may be sold or encumbered; no asset is protected in the interim. We did not take that route.

We brought the Mareva injunction motion in tandem with the appeal. Associate Justice La Horey herself had identified the door at para. 76 of her reasons: where dissipation concerns extend beyond a specific interest in land, a Mareva injunction is the appropriate remedy. Critically, an injunction is a remedy granted only by a Superior Court judge, not an Associate Justice — meaning the Mareva motion could not have been brought before La Horey AJ in any event. The appeal hearing before Koehnen J. was the procedurally appropriate forum to seek both the appellate review and the alternative pre-judgment remedy. By framing both before a Superior Court judge in a single hearing, we ensured that even an unsuccessful appeal would deliver a substantive asset-preservation outcome.

Decision 2: Build the strong prima facie case on the daughter’s own admissions, not on disputed Separation Agreement interpretation

A Mareva injunction requires a strong prima facie case (Chitel v. Rothbart, 1982 CanLII 1956). The natural place to anchor the prima facie case is the Separation Agreement itself — signed by all parties, requiring the transfer back. But the daughter contested the binding effect of the Separation Agreement, and that contest was preserved for trial. We did not rely on the Separation Agreement as the load-bearing argument.

We anchored on the daughter’s own conduct. First, her admission that she had tried to transfer the condominium but couldn’t because the mortgagee would not accept Mr. Cheng. That admission strongly implied she understood she had an obligation to transfer. Second, the Conditional Gift Agreement she sent to Mr. Cheng three days after the sale, which proposed staged delivery of the sale proceeds to him — structurally inconsistent with her position that the proceeds were entirely her own. Koehnen J. accepted both points at paras. 20–21: “This strongly suggests that Ms. Cheng understood that she had an obligation to transfer the condominium to the plaintiff. The Conditional Gift Agreement in my view suggests further that Ms. Cheng knew she had an obligation to transfer the proceeds of sale of the condominium to the plaintiff as a result of the Separation Agreement.” Anchoring on the daughter’s own conduct sidestepped the Separation Agreement-interpretation contest entirely.

Decision 3: Press the dissipation evidence on multiple specific grounds

The dissipation branch of Chitel is often the toughest to prove. Generic concerns about a defendant’s wealth management do not satisfy it; the plaintiff must persuade the court that the defendant is about to remove assets or dispose of them out of the ordinary course of business so as to make future tracing remote. We built the dissipation case on multiple specific grounds.

First: the daughter had already disposed of the condominium and the Lindvest property — two of three relevant assets. Second: although she retained title to Anndale, Toronto trial timelines being what they are, there would be ample time to encumber or transfer that property before any judgment. Third: the daughter had recently dropped her dog off with Mr. Cheng and instructed him to take care of it, with no explanation — conduct consistent with an intention to leave the country. Koehnen J. accepted at paras. 24–25 that these grounds collectively satisfied the dissipation branch. Multiple specific concerns rather than one decisive concern is what made the case persuasive.

Decision 4: Seek relief from the undertaking in damages under Rule 40.03 — do not let the plaintiff’s lack of assets defeat the injunction

The standard requirement for an injunction is that the moving party give an undertaking in damages: if the injunction turns out to have been wrongly granted, the moving party will compensate the responding party. An undertaking from a moving party with very limited assets is, in practical terms, worth little — and that thin undertaking is sometimes sufficient reason for a court to refuse the injunction. Mr. Cheng was earning approximately $35,000 per year; his current net worth was approximately $9,500.

We invoked Rule 40.03 of the Rules of Civil Procedure, which permits the court to relieve a party seeking an injunction of the obligation to provide an undertaking in damages. The relief argument was that Mr. Cheng’s lack of assets was itself the consequence of the daughter’s failure to transfer the condominium — that is, the very conduct the injunction was sought to address. Koehnen J. accepted at paras. 28–29: “The fact that the plaintiff has no assets is due in large part to Ms. Cheng’s failure to transfer the condominium to him as she undertook to do in the Separation Agreement. It would be inequitable to allow her to rely on that failure to deprive the plaintiff of the ability to seek an injunction.” The undertaking-in-damages requirement was waived. Without that waiver, the injunction would have been difficult to obtain.

1. Material non-disclosure on an ex parte CPL motion has real teeth. Even where the underlying interest in property is sufficient to support a CPL, the court can vacate the order if the moving party did not place all material facts before the ex parte court. Letters to mortgagees or banks characterizing prior transfers, opposing parties’ known positions, and timing facts about pending sales all need to be disclosed. The remedy for retaining a CPL after non-disclosure is rare; the plaintiff must instead look for alternative pre-judgment remedies.

2. A Mareva injunction backstops a failed CPL where the security-for-loss claim is stronger than the interest-in-land claim. CPLs require a triable interest in land. A Mareva injunction requires a strong prima facie case for monetary recovery and dissipation risk. Where the plaintiff’s real claim is to value lost (here, the value of a condominium that should have been transferred) rather than to a specific identified parcel, the Mareva test fits the claim better and the balancing of factors differs. La Horey AJ’s observation that “a certificate of pending litigation is intended only to protect an interest in land where other remedies would be ineffective” explicitly contemplates the Mareva alternative.

3. Rule 40.03 relief from the undertaking in damages is available where the plaintiff’s lack of assets is itself caused by the defendant’s breach. A thin or worthless undertaking is sometimes a basis for refusing an injunction. Rule 40.03 permits the court to relieve the moving party of the undertaking obligation. Where the plaintiff’s asset-poor position is the consequence of the very conduct the injunction is sought to address, the equitable case for waiver is strong. Plaintiffs in this position should expressly invoke Rule 40.03 and connect the asset position to the defendant’s breach.