Last Wednesday the B.C. government filed a suit against Malik, his wife, two relatives and two family companies. The government's lawsuit alleges that Malik violated a security agreement which he signed when he borrowed $6.4 million to pay for his legal fees. The government's legal action includes freezing the sale or mortgaging of several properties including a house in Shaughnessy, a Yaletown warehouse being used for the family's Papillon clothing operation, and the Executive Inn in Harrison Hot Springs. Malik had signed these properties as collateral in the fall of 2003 to the government in exchange for his legal defence loan. The attorney-general filed mortgages totalling $1.6-million against these properties.

The government's lawsuit asserts the government's right to receive proceeds from the sale of any of these properties before mortgages to friends and family members are paid. The government claims that mortgages registered in the names of friend and family members are "made with intent to delay, hinder or defraud the petitioner of its just and lawful remedies and are void."