Docstoc

Table of Contents - UBC Faculty of Law

Document Sample
Table of Contents - UBC Faculty of Law Powered By Docstoc
					                                       1


WINTER 2009




LAW 443




COURSE MATERIALS



CREDITORS’
REMEDIES



Professors: B. Rebane and E. Edinger
                                                                                                                                                2



                                                       Table of Contents

Table of Contents................................................................................................................... 2
CHAPTER 1 ............................................................................................................................. 9
  Regulation of the Credit System and of Extra-Judicial Debt Collection .......................................9
     (1) Regulation of Particular Transactions .................................................................................9
     (2) Control of the Credit Rating System ...................................................................................9
     (3) Regulation of Debt Collection ...........................................................................................10
     (4) Judgments Without Civil Actions ......................................................................................11
CHAPTER 2. PREJUDGMENT REMEDIES ..................................................................................11
  (1) Pre-Judgment Garnishment ..................................................................................................12
        Knowles v. Peter .................................................................................................................12
        Editor’s Note.......................................................................................................................12
        Busnex Business Exchange Ltd. v. Canadian Medical Legacy Corp. ...................................13
        Redekopp Mills Ltd. v. Canadian Timber Management & Reforestations Inc. ..................15
        Pybus v. National Credit Counsellors of Canada ................................................................19
  (2) The Mareva Injunction ..........................................................................................................24
        Aetna Financial Services Ltd. v. Feigelman.........................................................................26
        Mooney v. Orr [1] ...............................................................................................................43
        Mooney v. Orr [2] ...............................................................................................................53
        Editor’s Note.......................................................................................................................65
        Silver Standard Resources Inc. v. Joint Stock Co. Geolog ...................................................66
        Hickman v. Kaiser ...............................................................................................................79
        Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd. .................................................83
CHAPTER 3. LAWS RELATING TO THE JUDGMENT ................................................................ 100
  (1) Default Judgment ................................................................................................................100
        Bache Halsey Stuart Shields Inc. v. Charles et al; Dobell, Third Party ..............................101
        Editor’s Note.....................................................................................................................102
  (2) Summary Judgment and Summary Trial .............................................................................103
     Supreme Court Rules, R.18 and R.18A. .................................................................................103
        American Buildings Co. v. Surrey Iron Works Ltd.............................................................103
        Editor’s Note.....................................................................................................................106
        MacMillan v. Kaiser Equipment Ltd. ................................................................................106
  (3) Interest ................................................................................................................................111
     (a) Pre-Judgment Interest ....................................................................................................112
     (b) Post-Judgment Interest...................................................................................................112
                                                                                                                                                  3

  (4) Limitation Periods ...............................................................................................................112
        Limitation Act ...................................................................................................................112
        Young v. Younge ...............................................................................................................114
        Young v. Verigin ................................................................................................................116
  (5) Foreign Judgments ..............................................................................................................121
        De Savoye v. Morguard Investments Ltd. et al. ...............................................................121
  (6) Stays of Execution ...............................................................................................................132
        Morguard Real Estate Investment Trust v. Davidson.......................................................132
        Voth Bros. Construction (1974) Ltd. v. National Bank of Canada ....................................134
        Attorney General v. Lau & Lau .........................................................................................136
        Litecubes, LLC v. Northern Light Products Inc. (c.o.b. Glowproducts.com) .....................142
CHAPTER 4. INFORMATION ACQUISITION – BASIC PROCEDURES AFTER JUDGMENT ............ 146
  (1) Examination and Execution.................................................................................................147
     A. General ...........................................................................................................................147
     B. Pre-Examination Procedure ...........................................................................................148
     C. The Examination .............................................................................................................148
     D. Special Problems Arising under Examination in Aid of Execution .................................149
             Examination of a Person Other Than the Judgment Debtor ..................................................... 149
             Examination of a Spouse ........................................................................................................... 149
             Court Order in the Event of Difficulty........................................................................................ 149
             Examination of a Mortgagor after an Order Nisi of Foreclosure .............................................. 151
     E. Enforcement ...................................................................................................................151
     F. Post-Examination Considerations ...................................................................................152
  (2) Subpoena to Debtor ............................................................................................................152
     A. General .............................................................................................................................152
     B. Pre-Hearing Procedure .....................................................................................................153
     C. The Hearing ......................................................................................................................153
     D. Committal for Failure to Obey an Order of the Examiner .............................................155
         Blaxland v. Fuller ..............................................................................................................155
CHAPTER 5. EXECUTION BY WRIT OF SEIZURE AND SALE AND THE JUDGMENTS ACTS 1838 AND
1840 CHARGING ORDER ...................................................................................................... 161
  (1) Writ of Seizure and Sale ......................................................................................................162
     (i) Goods, Chattels and Effects .............................................................................................162
         Vancouver A. & W. Drive-Ins Ltd. v. United Food Services Ltd. .......................................162
         Bank of B.C. v. 225280 B.C. Ltd. .......................................................................................177
         Mortil v. International Phasor Telecom Ltd. ....................................................................179
         Editor’s Note.....................................................................................................................181
                                                                                                                                            4

         Law and Equity Act ...........................................................................................................181
         Lloyds and Scottish Finance v. Modern Cars and Caravans (Kingston) Ltd. .....................182
         Editor’s Note.....................................................................................................................190
         Boyce (Re) (T.D.) ...............................................................................................................190
         Cybulski v. Bertrand..........................................................................................................194
     (ii) Money and Securities for Money ....................................................................................204
         Canadian Mutual Loan & Investment Co. v. Nisbet .........................................................204
         Re Trustee Act: Re Patmore .............................................................................................206
         Bank of British Columbia v. 225280 B.C. Ltd. ...................................................................210
  2. Judgments Acts 1838 and 1840 ............................................................................................210
         Judgments Act 1838, 1 & 2 Victoria .................................................................................211
         Judgments Act 1840, 3 & 4 Victoria .................................................................................212
         Consumer Imagenet Inc. v. Infinitron International Inc. ..................................................213
  (3) Exemptions..........................................................................................................................220
         Re Lee and Rathsburg et al. ..............................................................................................220
         Royal Bank of Canada v. Nguyen ......................................................................................223
CHAPTER 6. EXECUTION AGAINST LAND .............................................................................. 234
         Schiava (Re), Re Execution Act .........................................................................................234
         Butler-Lafarge Ltd. v. Lowe ..............................................................................................235
         Bank of Montreal v. Jacques ............................................................................................239
         Martin Commercial Fueling Inc. v. Virtanen ....................................................................242
         Canadian Imperial Bank of Commerce v. Muntain and Muntain (Muntain Painting and
         Decorating) and Muntain .................................................................................................249
         First Western Capital v. Wardle .......................................................................................253
         Hankin Furniture Industries Ltd. v. Gill.............................................................................258
         Property Law Act ..............................................................................................................262
         Roadburg v. British Columbia ...........................................................................................263
         Editor’s Note.....................................................................................................................271
         Strata Plan VIS 4534 v. Seedtree Water Utility Co. ..........................................................272
CHAPTER 7. ATTACHMENT OF DEBTS .................................................................................. 273
  (1) The Definition......................................................................................................................274
         Canadian Bank of Commerce v. Dabrowski, Dabrowski and Hunt ..................................274
         Vater v. Styles and Metropolitan Life Ins. Co. ..................................................................275
         Bel-Fran Investments Ltd. v. Pantuity Holdings Ltd. and Bank of Montreal ....................277
         Vancouver A & W Drive-Ins Ltd. v. United Food Services ................................................283
         Editor’s Note:....................................................................................................................283
         Access Mortgage Group Ltd. v. Stuart..............................................................................283
         Ahaus Developments Ltd. v. Savage ................................................................................286
                                                                                                                                                 5

         Editor’s Note.....................................................................................................................293
  (2) Jurisdiction ..........................................................................................................................294
         Bank of Nova Scotia v. Mitchell ........................................................................................294
         Bank Act............................................................................................................................301
         Univar Canada v. PCL Packaging Corp. .............................................................................302
  (3) Priorities ..............................................................................................................................304
         British Columbia Millwork Products Ltd. v. Overhead Door Sales (Vancouver) Ltd. .......304
         Evans v. Silicon Valley IPO Network .................................................................................308
         Pacific Forest Industries Ltd. v. Twin Stag Timber Ltd......................................................318
CHAPTER 8. EQUITABLE EXECUTION .................................................................................... 320
  (1) Equitable Receivers .............................................................................................................320
         Vancouver A & W Drive-Ins Ltd. v. United Food Services ................................................321
         NEC Corp. v. Steintron International Electronics Ltd. ......................................................325
         Interclaim Holdings Ltd. v. Down .....................................................................................332
         Klyne v. Young (sub nom. C.M.K. v. Young) ......................................................................338
  (2) Equitable Changing Order ...................................................................................................347
         Chima v. Hayduk ...............................................................................................................348
         Rennison v. Sieg................................................................................................................350
         Editor’s Note.....................................................................................................................352
         Canada (Deputy Minister of National Revenue, Customs, Excise and Taxation – M.N.R.) v.
         Millar ................................................................................................................................352
CHAPTER 9. EXEMPTIONS, IMMUNITIES AND PRIORITIES .................................................... 360
  (1) Exemptions and Immunities from Process Debtors: with Special Rights ...........................360
     (i) Provincial Legislation........................................................................................................360
         Court Order Enforcement Act ...........................................................................................361
         Insurance Act ....................................................................................................................361
         Sykes (Re) .........................................................................................................................361
         Workers Compensation Act ..............................................................................................374
         Crown Proceeding Act ......................................................................................................374
     (ii) Federal Legislation ..........................................................................................................374
         Canada Pension Plan ........................................................................................................374
         Old Age Security Act .........................................................................................................375
         Indian Act..........................................................................................................................376
         Crown Liability and Proceedings Act ................................................................................376
  (2) Creditors with Special Rights ..............................................................................................376
         Woodworker Lien Act .......................................................................................................377
         Repairers Lien Act .............................................................................................................377
         Family Maintenance Enforcement Act .............................................................................378
                                                                                                                                            6

  (3) The Partial Abolition of Priority ..........................................................................................386
         Tan et al. v. American Corporate Suites (Canada) Inc. .....................................................386
         Benjamin Moore & Co. Ltd. v. Finnie ...............................................................................389
         Hankin Furniture Industries Ltd. v. Gill.............................................................................390
         MacMillan Bloedel Ltd. v. Kasiks River Contracting .........................................................391
CHAPTER 10. ENFORCEMENT OF FEDERAL COURT JUDGMENTS ........................................... 394
         British Columbia (Deputy Sheriff, Victoria) v. Canada (B.C.C.A.) .....................................394
         Hong Kong Bank of Canada v. Canada (B.C.C.A.) .............................................................403
CHAPTER 11. REVIEWABLE TRANSACTIONS ......................................................................... 407
  (1) The Fraudulent Conveyance Act .........................................................................................408
         McGuire v. Ottawa Wine Vaults Co..................................................................................408
         Canadian Imperial Bank of Commerce v. Boukalis (B.C.C.A.) ..........................................412
         Solomon v. Solomon et al.................................................................................................419
         Chan v. Stanwood .............................................................................................................426
  (2) The Fraudulent Preference Act ...........................................................................................437
         Re Canadian Imperial Bank of Commerce v. Ash .............................................................437
         Toronto-Dominion Bank v. Terrace Bavarian Inn Ltd., et al .............................................441
CHAPTER 12. BUILDERS’ LIENS ............................................................................................. 443
         Ken Lawter Holdings Ltd. v. Steen Panduro Holdings Ltd. ...............................................443
  (1) The Crown ...........................................................................................................................450
         O. & O. Contractors Ltd. v. Bank of Nova Scotia ..............................................................451
  (2) The Lien and the Holdback Provisions ................................................................................454
     (i) The Owner ........................................................................................................................454
         Westburne Supply (B.C.) v. Sentinel Electric Ltd. .............................................................454
         Strata Property Act ...........................................................................................................457
         Strata Property Regulation ...............................................................................................458
     (ii) The Lien Claimants: Classification and Time for Filing ....................................................459
         Deal S.r.l. v. Cherubini Metalworks Ltd. ...........................................................................459
         Chaston Construction Corp. et al. v. Henderson Land Holdings (Canada) et al. ..............462
         Pacific West Systems Supply Ltd. v. Rayman Construction Ltd........................................478
         J.W. Price Construction Ltd. v. Costco Wholesale Corp. ..................................................482
         Northern Thunderbird Air Ltd. v. Royal Oak Mines Inc. ...................................................487
     (iii) The Holdback ..................................................................................................................496
         Shimco Metal Erectors Ltd. v. North Vancouver (District) ...............................................496
     (iv) Discharge of Liens...........................................................................................................500
         Westburne Industrial Enterprises Ltd. v. Lougheed Towers Ltd. .....................................500
         F.A.P. Construction Ltd. v. RMC Ready-Mix Ltd. ..............................................................505
  (3) Damages for Wrongful Filing ..............................................................................................506
                                                                                                                                             7

         Editor’s Note.....................................................................................................................506
  (4) The Trust Provisions ............................................................................................................507
     (i) The Trustee, Corporate Directors, and the Trust Money ................................................507
         Commercial Union Assurance Co. of Canada v. Surrey (City) ..........................................507
         British Columbia Buildings Corp. v. Arbour Contracting Ltd. ...........................................508
         Henry Electric Ltd. v. Farwell (B.C.C.A.) ............................................................................511
         Mackenzie Redi-Mix Co. v. Miller Contracting Ltd. (B.C.C.A.) ..........................................519
     (ii) Third Parties: Constructive Trustees ...............................................................................522
         Groves-Raffin Construction Ltd. v. Canadian Imperial Bank of Commerce and Bank of
         Nova Scotia .......................................................................................................................522
  (5) Distribution and Priorities ...................................................................................................534
         Conder v. North Star Construction Co..............................................................................534
         Edwards Welding Ltd. v. Howe & Wilson Construction Ltd. ............................................538
         Fraser Valley Edelweiss Credit Union v. Van Weston et al ..............................................541
Appendix: Statutory Materials ............................................................................................ 545
  Builders’ Lien Act ......................................................................................................................545
     Builders’ Lien Forms Regulation ...........................................................................................575
     Builders’ Lien Public Bodies Holdback Account Exemption Regulation ...............................581
  Business Practices and Consumer Protection Act.....................................................................583
     Part 1 — Definitions and Application ...................................................................................584
     Part 2 — Unfair Practices .....................................................................................................587
     Part 7 — Debt Collection ......................................................................................................593
     Part 9 — Licences .................................................................................................................600
     Part 10 – Inspections and Enforcement ...............................................................................605
     Debt Collection Industry Regulation ....................................................................................608
  Court Order Enforcement Act ...................................................................................................615
     Part 1 — Attachment of Debts .............................................................................................618
     Part 2 — Reciprocal Enforcement of Court Orders ..............................................................629
     Part 3 — Asbestos Litigation ................................................................................................634
     Part 4 — Canada — United Kingdom Convention ...............................................................635
     Part 5 — Enforcement of Court Orders................................................................................635
     Court Order Enforcement Exemption Regulations ..............................................................684
     Jurisdictions Declared to be Reciprocating States ...............................................................685
  Court Order Interest Act ...........................................................................................................686
     Part 1 — Prejudgment Interest ............................................................................................686
     Part 2 — Postjudgment Interest ..........................................................................................688
  Creditor Assistance Act .............................................................................................................689
  Enforcement of Canadian Judgments and Decrees Act ...........................................................705
                                                                                                                                           8

Family Maintenance Enforcement Act .....................................................................................712
  Part 1 — Definitions and Interpretation ..............................................................................714
  Part 2 — Enforcement by the Director ................................................................................717
  Part 3 — Enforcement Mechanisms ....................................................................................723
  Part 4 — General ..................................................................................................................750
Fraudulent Conveyance Act ......................................................................................................758
Fraudulent Preference Act ........................................................................................................759
Securities Transfer Act ..............................................................................................................764
Court Rules Act: Supreme Court Rules ......................................................................................779
  Rule 1 — Citation, Application and Interpretation ..............................................................781
  Rule 42 — Enforcement of Orders .......................................................................................784
  Rule 42A — Examination in Aid of Execution.......................................................................794
  Rule 43 — Sales by the Court ...............................................................................................796
  Write of Seizure and Sale .....................................................................................................798
  Writ of Sequestration ...........................................................................................................799
  Subpoena to Debtor .............................................................................................................800
  Notice of Motion for Committal...........................................................................................802
  Order of Committal ..............................................................................................................804
  Order to Register Foreign Judgment ....................................................................................806
  Warrant ................................................................................................................................807
                                                                                                 9



                                         CHAPTER 1


      Regulation of the Credit System and of Extra-Judicial Debt Collection



Since World War II, consumer credit in Canada has grown at an explosive rate. Considerable
discussion has been devoted to identifying the causes and the cures for consumer debt and
there has been some legislative activity in relation to the matter. Nevertheless, consumer debt
continues to grow.

Over the decades, British Columbia enacted various statutes designed to regulate certain kinds
of transactions creating debts, to control the credit rating system, to provide for debt
counselling and mediation, to regulate extra-judicial collection of debts, and to enable a creditor
to obtain a judgment without actually instituting a civil action.

The massive Business Practices and Consumer Protection Act, S.B.C. 2004, c.2 is a consolidation
of a number of these provincial statutes relating to the credit system and to extra judicial debt
collection. Some portions of the Act are reproduced in the Statutory Materials.




(1) Regulation of Particular Transactions

One of the matters the Act regulates is consumer transactions. A “consumer transaction” is
defined in s.1.

Part 2 of the Act, Unfair Practices, can be traced to the now repealed Trade Practices Act.
Section 4 of the Act defines a “deceptive act or practice” and s.8 defines an “unconscionable act
or practice”. Both kinds of acts and practices are prohibited and proof of an unconscionable act
or practice renders the transaction unenforceable (s. 10).

Part 10 of the Act, Inspections and Penalties, (not reproduced) provides for various remedies
and penalties which are available administratively and/or judicially.

Part 11 of the Act is titled Administration. It provides for a Director and Inspectors and the Act
bestows on them the authority and obligation to administer and enforce the provisions of the
Act.




(2) Control of the Credit Rating System

Part 6 of the Business Practices and Consumer Protection Act, titled Credit Reporting, is the
consolidated version of the now repealed Credit Reporting Act. It is reproduced in the Statutory
                                                                                                10

Materials.

A consumer’s ability to obtain credit from a retailer or a loan from a bank or finance company
depends upon his credit rating. Before deciding to advance credit, the prospective lender will do
a credit check, which means that he will seek a report on the consumer from a credit bureau.
Every city has credit bureaus whose business consists of assembling, collating and dealing in
information about consumer debtors. Such a bureau obviously provides a useful service to a
retailer or lender. But consumers complained that a credit check, done without their knowledge
or consent, violated their right to privacy. Also, consumers did not have access to their dossier
at a credit bureau and could not determine their own credit rating or correct erroneous or
outdated information in the dossier.

Part 6 of the Act is intended to correct these problems. It protects consumers’ privacy by
limiting those who may have access to a credit report, requiring the consumer’s consent in
advance to a credit check and restricting the information that a credit report can contain. The
Act requires that the information be reliable and up-to-date. The Act also sets out a procedure
whereby a consumer can find out his credit rating and deal with any derogatory material in his
credit dossier. If the consumer is denied credit because of the adverse credit checks, the retailer
or lender must so advise the consumer. The consumer has a right to inspect his dossier at the
credit bureau and to add his own information to it, contradicting or explaining adverse material.




(3) Regulation of Debt Collection

The Criminal Code contains a number of sections which might be appropriate for acts done by
persons engaging in self-help to collect debts. Two of the sections most likely to be invoked are
sections 346 and 372 :

             346. (1) Every one commits extortion who, without reasonable justification or excuse
             and with intent to obtain anything, by threats, accusations, menaces or violence
             induces or attempts to induce any person, whether or not he is the person
             threatened, accused or menaced or to whom violence is shown, to do anything or
             cause anything to be done.

                                                     […]

             (2) A threat to institute civil proceedings is not a threat for the purposes of this
             section.

             372. (1) Every one who, with intent to injure or alarm any person, conveys or causes
             or procures to be conveyed by letter, telegram, telephone, cable, radio or otherwise
             information that he knows is false is guilty of an indictable offence and liable to
             imprisonment for a term not exceeding two years.

             (2) Every one who, with intent to alarm or annoy any person, makes any indecent
             telephone call to that person is guilty of an offence punishable on summary
             conviction.

             (3) Every one who, without lawful excuse and with intent to harass any person,
                                                                                                11

          makes or causes to be made repeated telephone calls to that person is guilty of an
          offence punishable on summary conviction.

However, Part 7 of the Business Practices and Consumer Protection Act, formerly the Debt
Collection Act, is by far the more useful statute for the control of improper debt collection
practices.

Part 7, reproduced in the Statutory Materials, is intended to control the collection practices of
everyone, including lawyers. Section 114 sets out the general prohibition on harassment. It
defines harassment as, inter alia, the use of undue, excessive or unreasonable pressure. The
following provisions describe and prohibit various forms of improper and prohibited collection
practices.

Debt collectors must be licensed but, by BC regulation 295/2004 (Statutory Materials) certain
classes of debt collectors are exempt from the licensing requirement.

Remedies for debtors who have been the victims of improper debt collection practices are
found in Part 10 of the Act.




(4) Judgments Without Civil Actions

It is possible in certain circumstances to become a judgment creditor without bringing a civil
action.

The Criminal Code authorizes the criminal court to make compensation or restitution orders at
the time of sentencing the accused and that order can be filed in the superior court and become
enforceable like a civil judgment.

The Creditor Assistance Act (Statutory Materials) provides an extra-judicial process for the
acquisition of a certificate by the creditor. The certificate has the effect of a judgment in terms
of enforcement remedies.




                      CHAPTER 2. PREJUDGMENT REMEDIES

The common law did not permit a creditor to interfere with the property of a debtor before
judgment. The case most often cited for this proposition is Lister v. Stubbs (1890) 45 Ch. D. 1
where Cotton L.J. stated that a plaintiff in England was not entitled to “an injunction to restrain
a man who is alleged to be a debtor from parting with his property.”

In British Columbia the common law position has been qualified. Once a creditor has
commenced an action or, at least, is about to commence an action, there are two remedies
available. Each, however, is hedged about with conditions.
                                                                                                   12



                              (1) Pre-Judgment Garnishment

   Court Order Enforcement Act, R.S.B.C. 1996 c. 78 (reproduced in Statutory Materials), s. 3.



                                         Knowles v. Peter
                               (1954) 12 W.W.R. (N.S.) 560 (B.C.S.C.)

1 WILSON, J. — I have decided that the affidavit filed in support of the application for a
garnishing order made herein is defective in that the cause of action is not sufficiently set forth.
It must not be forgotten that the attachment of debts before judgment is an extraordinary
process, unique in our law, whereby a defendant is deprived of the use of his property before
any judgment is rendered against him. There must therefore be a meticulous observance of the
requirements of the Attachment of Debts Act RSBC, 1948, ch. 20, and of sec. 3 thereof which
requires the plaintiff or his solicitor or agent to describe the “nature of the cause of action.” This
does not, of course, call for a statement of claim but it does call for a succinct and informative
statement and the words “for debt on a chattel mortgage” do not describe a cause of action
known to me. A chattel mortgage is a form of security; it may or may not contain covenants to
pay; it may contain a covenant by a surety. But here I am left to guess what is meant and the
fact that I would probably be right if I guessed that the defendant was a mortgagor who had
covenanted to pay does not entitle me to say that the plaintiff has complied with the Act. I cite
from the judgment of Allen, C.J. in Whittimore v. Herbert (1878) 18 NBR 361:

       “… beyond question the cause of action must be stated in the affidavit used on an
       application for a garnishee order … with sufficient particularity to enable the judge to
       decide, intelligently, whether it is such a one as is provided for in the Attachment Act
       and with such certainty as would subject the plaintiff to an indictment for perjury if the
       statement of it should be untrue.”

2 I do not think the affidavit herein comes up to that standard. The garnishing order is struck
out.



Editor’s Note: The “meticulous observance” requirement as put forth in Knowles v. Peter has
been qualified in subsequent cases. The following is extracted from the case of Myron Balagno
& Associates Ltd. v. Rajan, (October 14, 1999), Vancouver C993240 (B.C.S.C.):

       The extent to which the prescribed forms must be followed is governed by the
       frequently cited rule laid down by Wilson, C.J.S.C. in Knowles v. Peter (1954), 12 W.W.R.
       560 – “a meticulous observance” of the requirements of the Act. Subsequent decisions
       applying this test are usefully collected in Thomson Canada Limited/Thompson Canada
       Limitee v. Monday Publications Ltd. ([1997] B.C.J. No. 460supra):

           [16] Although there must be strict compliance with the statutory requirements
                governing its issuance (Knowles v. Peter (supra)), as has been recognized in a
                number of cases, meticulous observance does not go so far as to require
                technical perfection (Mutual of Omaha Insurance Company v. Gestion
                Professionelle (Autorema) Inc. et al, [1990] B.C.J. No. 1807, (3 August 1990),
                                                                                               13

                 Vancouver C903935 (S.C.)) or ridiculous compliance (Cooper Yacht Charters
                 Ltd. v. Sea to Sky Leisure (1991) Ltd. (1994), 22 C.P.C. (3d) 39 (B.C.S.C.)).

           [17] Rather, “[t]he main thing is to ensure that no one is misled even though he or
                she may be momentarily puzzled” (Winroc Gypsum Supplies (B.C.) Ltd. v. Delta
                Drywall Ltd. (1984), 51 B.C.L.R. 285 (S.C.)); that “[t]he document, taken as a
                whole, clearly informs the reader of its true message” (Winroc Gypsum
                Supplies (B.C.) Ltd. v. Delta Drywall Ltd. (supra); and that there is no confusion
                or uncertainty –that is, the reader is not left to guess what is meant (Cooper
                Yacht Charters Ltd. v. Sea to Sky Leisure Ltd. (supra); Knowles v. Peter (supra)).



                Busnex Business Exchange Ltd. v. Canadian Medical Legacy Corp.
                                       1999 BCCA 78

1 MACKENZIE J.A.:— This is an appeal by Canadian Medical Legacy Corp. (“Legacy”) against the
dismissal of its application to set aside a garnishing order and release the sum of $299,991.10
paid into Court by the garnishee.

2 The respondent Busnex Business Exchange Ltd. (“Busnex”) commenced action against Legacy
for commission or, in the alternative, compensation on a quantum meruit basis for services
rendered.

3 Legacy contended that the order should have been set aside and the funds released on two
principal grounds. First, the Busnex claim as pleaded in the statement of claim is not a
liquidated demand sufficient to satisfy the statutory test set out in the Court Order Enforcement
Act, R.S.B.C. 1996, c. 78. Second, the claim has not been set out with sufficient particularity in
the material supporting the application to satisfy the test. The two issues are related.

4 The statement of claim alleged that Legacy made an agreement, referred to as the fee
agreement, that provided that Busnex would assist Legacy in locating and introducing a business
available for purchase in return for a commission. With the assistance of Busnex, Legacy made
an agreement to purchase the shares of two Alberta companies. The statement of claim alleged
that the “total consideration” for the share purchase was calculated to be $4.2 million (later
increased by amendment to $4.8 million). The commission was calculated at $272,500.

5 The share purchase agreement was not completed. The statement of claim alleged that
Legacy either repudiated the agreement or failed “to reasonably pursue the steps required to
complete” it. Completion of the share purchase agreement was the event that would have
triggered payment of the commission.

6 A similar claim for commission, when the principal reneged on an underlying sales contract,
came before the English Court of Appeal in Alpha Trading Ltd. v. Dunnshaw-Patten Ltd., [1981] 1
All E.R. 482. The court concluded that a term should be implied in the agency contract that the
principal would not breach the underlying contract and deprive the agent of its commission. The
agent’s claim was upheld, but it was characterized as a claim for damages. In my opinion, that
reasoning is applicable here and the claim for commission based on Legacy’s alleged breach of
the share purchase contract is a claim for damages and not debt.

7 The statute requires that the affidavit in support of the application for a garnishing order set
                                                                                                  14

out:

            (iii) the nature of the cause of action,

            (iv) the actual amount of the debt, claim or demand, and
            (v) that it is justly due and owing, after making all just discounts. (s. 3(2)(d).)

8 The claim must be either a debt or liquidated demand to meet the statutory test. The
Chambers judge cited the definition of liquidated demand adopted by Donald J. in Drayton v.
W.C.W. Western Canada Water Enterprises Inc. (1989)63 D.L.R. (4th) 71 at 73:

       The operative test as to what constitutes a liquidated demand is expressed in Standard Oil
       Co. of B.C. Ltd. v. Wood (1964), 47 W.W.R. 494 at p. 497 (B.C. Co Ct.):

       Debt or Liquidated Demand.– A liquidated demand in the nature of a debt, i.e., a specific
       sum of money due and payable under or by virtue of a contract. Its amount must either be
       already ascertained or capable of being ascertained as a mere matter of arithmetic. If the
       ascertainment of a sum of money, even though it be specified or named as a definite
       figure, requires investigation, beyond mere calculation, then the sum is not a ‘debt or
       liquidated demand,’ but constitutes ‘damages.’ [Emphasis added in original]

9 This claim is not debt, for the reason set out above. It can otherwise be a liquidated demand
only if it is a “specific sum” which is either “already ascertained or capable of being ascertained
as a mere matter of arithmetic”.

10 The claim for damages is for the loss of the amount of commission that would have been
payable had the agreement been completed. The amount claimed, $272,500 plus GST, was
calculated on a “total consideration” under the share purchase agreement, stated by the
statement of claim (after amendment) to be $4.8 million. That total consideration was not set
out in the share purchase agreement. That agreement provided that Legacy would buy the
shares of the Alberta companies for an amount stated to be the audited book value of the
shareholders equity and shareholders loans as of a specific date, 30 September 1996, plus $1
million for goodwill. Busnex alleged that the total consideration also included debts of the
Alberta companies to be assumed by Legacy on the purchase.

11 The figure of $4.8 million in the statement of claim was based on estimates. The audited
book value of the shareholders’ equity and shareholders’ loans was estimated to be $1.3
million. The debts to be assumed were estimated to total $2.5 million. The material did not
include any financial statements of the companies to be purchased that would permit the court
to test the reasonableness of the estimates.

12 The share purchase agreement was not completed and the audits were never performed.
The determination of the total consideration at trial will involve a reconstruction of what the
figures would have been if the share purchase agreement had been completed. Some of the
audited figures were to be based on inventories which were not made, adding to the difficulty
of any reconstruction.

13 In summary, the claim is for damages for loss of the commission on a consideration never
quantified, except on the basis of estimates. Busnex has attempted to overcome the
indeterminacy by providing an estimated value of the total consideration, based on estimates in
                                                                                                15

the affidavit material of the several items to be included in the total. Apart from the $1 million
for goodwill, all of the figures are estimates that are subject to challenge.

14 The amount claimed is fundamentally dependent upon the estimates. With respect to the
contrary view of the Chambers judge, I do not think it is an amount that is already ascertained
or capable of being ascertained as a mere matter of arithmetic. In my opinion, the amount
claimed for damages is not a liquidated demand.

15 The share purchase agreement provided for the payment to Busnex of a non-refundable
deposit of $50,000 on signing. The statement of claim alleges that $30,000 of that deposit
remains unpaid. Busnex also claims on an unpaid bill to Legacy for unrelated services in the
amount of $32,100. I think those claims are properly regarded as claims in debt which have
been sufficiently supported on the material. I would allow the appeal and direct the release of
the funds paid into court, except for the amount of $62,100.



            Redekopp Mills Ltd. v. Canadian Timber Management & Reforestations Inc.
                         (6 April, 1998), Dawson Creek 12098 (B.C.S.C.)

WILSON J.:—

I.

1 In this action the plaintiff claims against the defendant for the balance said to be owing on a
contract for the sale of timber. In response to a garnishing order before judgment, the
defendant's banker paid into court the sum of $61,623.22. The defendant applied to release the
garnishment, in whole or in part, pursuant to s. 6(1) of the Court Order Enforcement Act. The
question raised on that application is: What is just in all the circumstances? My order is that
one-half of the fund paid into court be paid out to the defendant.

II.

2     For the purposes of this application only, I find the following facts.

3 In 1996 the plaintiff acquired a harvesting licence to certain timber near Chetwynd, British
Columbia. Over a period of several weeks, in late 1996 and into early 1997, representatives of
the parties carried on discussions, directed to the end that the defendant would buy standing
timber included in the licence.

4 The discussions led to the preparation and execution, by both parties, of a document dated
31 January 1997. The document is entitled "Timber Purchase Agreement". The paragraph
numbered "4" of that document reads:

             The agreed to price of $60.40 per cubic metre will be directly provided from the
             various market/mill sources to Redekopp Mills Ltd. This price includes road use and
             maintenance, permits permitting access to and into the woodlot covered by Licence
             No. A47377B.

5 The arrangement between the parties contemplated that the defendant would fall, yard
and deliver the resulting logs to a mill, in this case, Finlay Forest Industries Inc., at McKenzie,
                                                                                                  16

British Columbia. The mill was directed to remit stumpage fees, on the timber, direct to the
Province of British Columbia; and the balance, less repayment of a road-related advance, to the
plaintiff.

6    Stumpage fees on the timber varied by grade of log.

7    By letter dated 6 February 1997, the defendant wrote to Finlay Forest Industries, in part:

            Further to our letter of contractual confirmation sent to you this a.m. please arrange
            the payment deductions as follows below:

                   1) Stumpage as per your contract, estimated at $55.00 per cu. metre.

                   2) Direct payment to Redekopp Mills of $5.40 per cu. metre, less the $2.50
                   per cu. metre as manner of repayment of the funds provided for the road use
                   payment on their behalf.

8 A copy of that letter of 6 February 1997 was not brought to the plaintiff's attention, until
after the commencement of this lawsuit.

9 The total volume of logs delivered by the defendant to the mill is 15,534.26 cubic metres. At
a rate of $60.40 per cubic metre, the sum involved is $938,269.30. The stumpage fee on that
volume, paid to the Province of British Columbia, is $793,059.24. The plaintiff claims that its
agreement with the defendant provided that it should receive the difference of $145,210.02. It
has received, to date, $83,885.00. Its liquidated claim in this action is for the balance of
$61,325.02.

10 The action was commenced 2 April 1997. Concurrently, a garnishing order before
judgment, directed to Finlay Forest Industries Inc., was granted by the Registrar, on the
pleadings as they then presented. The amount attached by that order was $33,706.31. The
garnishee responded by paying that sum into court on 10 April 1997. On the application of the
defendant, that order was set aside, by consent, and the fund attached paid out to the
defendant.

11 On 29 August 1997 the plaintiff filed an amended statement of claim. On 6 October 1997
the garnishing order before judgment, which is the source of the present application, was
granted. In response to it, the defendant's banker paid into court the sum of $61,623.22, on 24
October 1997. The defendant's funds were available for that attachment, in part, by reason of a
recent transfer of funds from its line of credit, to its current account.

12 The attachment has had an adverse effect on the defendant's business operations.
Without those funds, the defendant does not have the financial resources necessary to
adequately pursue business opportunities, in Saskatchewan and Alberta, the venues of its
current focus of attention. In the result, opportunities have been lost, and projects undertaken
have been more expensive, thereby reducing the defendant's traditional margin of profit.

13 The defendant is a small company, engaged primarily, as I understand it, in buying,
harvesting and selling timber. Apparently, the harvesting is carried out for the defendant
through logging contractors.

14    Apart from the attached fund, the defendant has no exigible assets in the Province of
                                                                                                   17

British Columbia.

III.

15 The plaintiff pleads the written document of 31 January 1997 as the basis of its claim. The
defendant appears to plead that the parties' agreement is that the plaintiff was to be paid a net
of $5.40 per cubic metre, after deduction of a fixed, consistent stumpage rate of $55.00 per
cubic metre. Alternatively, the defendant pleads that it was induced to enter into the
agreement by an oral representation by the plaintiff that the stumpage rate was a fixed rate at
$55.00 per cubic metre. The defendant calls that representation an "oral warranty".

16 The defendant counterclaims for monetary damages said to have been caused to it by the
plaintiff's failure to perform the road work obligations imposed on it by the agreement.

IV.

17 The Act empowers the court to release a garnishment, in whole or in part, where the court
considers it just in all of the circumstances so to do. Counsel are agreed that the principles I
must apply, in giving content to the notion of "just in all the circumstances", are well
established.

18 One of the factors to be considered, is the "strength of the plaintiff's case". The plaintiff
sues on a written agreement. The defendant says that the agreement is partly oral and partly in
writing. It may be that the oral component propounded by the defendant could be found to
contradict the written component. However, the defendant relies on Gallen v. Butterley. I think
Gallen has been the subject of considerable explanation. I do not pretend to decide whether the
proposed oral evidence is, or is not admissible. Indeed, it seems to me that the plaintiff itself
will seek to lead oral evidence, by way of expert opinion, on "custom in the trade", to explain
the meaning of its "road maintenance" obligations, in defence of the defendant's counterclaim.
For the purposes of this application, however, I would characterize the plaintiff's case as
"strong".

19 A second factor to be considered is "hardship" to the defendant. In Webster, hardship was
modified by the adjective "undue". In Saxe v. Kayne, [1992] B.C.J. No. 1794, the modifier was
the adjective "some". As usual, a determination on the basis of the noun alone is comparatively
straightforward. It is the addition of the modifiers which introduces the complexity. I am
satisfied that the attachment causes hardship to the defendant. I am not satisfied that, in the
course of these litigious proceedings, that it is "undue".

20 A third factor for consideration is "necessity". That is to say, is this attachment necessary
to secure a recovery to the plaintiff if it is successful in its claim. To put it another way, why tie
up this money if there is some other recourse in satisfaction of any judgment the plaintiff may
recover. In my opinion, the onus is on the defendant to demonstrate that a release of the
garnishment is just in all the circumstances. The capital position of the defendant is a matter
within its own knowledge. No particularization of the capital position has been disclosed. I
presume, therefore, that the defendant has no exigible assets in British Columbia.

21 Furthermore, the defendant appears to be concentrating its area of operations outside of
the Province of British Columbia. I find, therefore, that the attachment is "necessary" at least to
some extent, as I shall presently explain.
                                                                                                  18

22   Those are some of the factors to be considered. Others I have considered are these.

23 Attachment before judgment is an extraordinary remedy. If the bulk of the plaintiff's claim
had not been for a liquidated sum, the remedy would not be available to it. The parties are
quarrelling with one another because they did not take the time to adequately record their
promises to one another. Neither of them is blameless in that regard.

24 Second, although the defendant has no exigible assets in British Columbia, and although
the principals of the defendant have not gone so far as to guarantee payment of any judgment,
in favour of the plaintiff, they have undertaken not to distribute the retained earnings of the
defendant among themselves. That is an undertaking I think meant to be relied upon. And I
have. Any departure from it could have severe consequences for the principals of the
defendant.

25 Third, the earlier attachment garnisheed funds from the mill. Money was paid into court,
but subsequently released by consent. Nevertheless, the defendant took no steps to secure
itself against the possibility of subsequent attachments.

26 This may be a question of naivety, however, it does demonstrate that this defendant,
faced with the dispute, did not organize its affairs in such a way as to evade the plaintiff's claim.

27 Finally, before the Min-En substantive issue was heard by the Court of Appeal, a
preliminary application was made by the attaching creditor, for an order that the order of the
Chambers Judge be stayed pending the hearing of its appeal. The matter was heard by Mr.
Justice Esson.

28 The garnishing order had attached $170,000.00, which was paid into court. The Chambers
Judge released the garnishing order except to the extent of $31,000.00. The plaintiff appealed.

29 His Lordship reviewed the arguments advanced by the defendant with respect to the
notion of hardship. He then went on to say, at p. 340:

           ... That matter, I think, is important. To some extent it cuts both ways. It does
           indicate that the defendant is not so clearly a stable and solvent organization that it
           can, without difficulty, overcome the withholding of its cash from it. I do not say that
           that indicates insolvency but it is a matter to be taken into consideration in
           considering, as I must on this application, what the risk is to the plaintiff. It is to be
           borne in mind that I am only considering whether the money should remain in court
           pending the hearing of the appeal.

30   And, at page 341:

              What I propose to do in the circumstances is to try to achieve a measure of justice
           to both parties ...

31 Although they were made in a different context, those observations by Mr. Justice Esson
commend themselves to me with compelling force.

32 In a balancing of all of the circumstances of this case, I do not think it would be just to
absolutely deprive the defendant of its operating capital. Should the defendant be successful, in
whole or in part, in this action, opportunities lost will not be recoverable. I think it should be
                                                                                             19

permitted to carry on its business, albeit at a reduced level, during the six weeks pending the
trial.

33    Order accordingly.



                           Pybus v. National Credit Counsellors of Canada
                                          2006 BCSC 1196

1 MASTER CALDWELL:— This is an application brought by the defendant to set aside a series
of garnishing orders issued, before judgment, by the plaintiff. The defendant also applies for
payment out of all monies paid into court pursuant to such garnishing orders.

2    The garnishing orders in question, and the sums attached by each are as follows:

     (1) February 13, 2006     $200.00
     (2) March 31, 2006        $18 057.71
     (3) May 19, 2006          $11.36

3 The defendant says that a further $7,500 has been attached by one of these garnishing
orders or a later order but that as of the date of this application, those monies have not yet
been paid into court.

4 The defendant says firstly that the garnishing orders and supporting affidavits have never
been served on the defendant as required by s. 9(2) of the Court Order Enforcement Act which
reads:

        A copy of the garnishing order must be served at once, or within a time allowed by the
        judge or registrar by memorandum endorsed on the order, on the defendant, judgment
        debtor or person liable to satisfy the judgment or order.

5 In fact it appears that, in addition, neither the Writ of Summons nor the Statement of Claim
have been served.

6 The defendant says further that the claim of the plaintiff is not for a liquidated amount and
is therefore not properly subject to prejudgment garnishment, and finally that not all discounts
have been recognized and accounted for by the plaintiff.

7 The plaintiff acknowledges that none of the pleadings, including the garnishing orders and
supporting affidavits have yet been properly served on the defendant. The plaintiff says that
this was due to inadvertence and that no prejudice has befallen the defendant due to the fact
that the defendant received some or all of the garnishing orders and supporting affidavits from
the court file. Such searches were occasioned upon the defendant discovering that monies had
been successfully garnished out of its working bank accounts.

8 The plaintiff argues further that his claim is for a simple liquidated sum and that all just
discounts have been had and taken.

Background

9    The plaintiff was hired by the defendant as a credit counsellor in or about August of 2003.
                                                                                                20

His status as employee as opposed to independent contractor is at issue.

10 The plaintiff alleges that he was to be paid on a straight 50% commission basis. No written
contract is provided in support of this allegation, but a series of commission reports are
provided which appear to show commission paid at the rate of 50% from at least February,
2004 until the fall of 2004. In September, 2004 the plaintiff appeared to have been paid at the
rate of 40% commission. In October, 2004 the rate appears to have returned to 50% and
thereafter settled in at the reduced rate of 40% until January, 2006 when the plaintiff left his
employment/contract with the defendant.

11 The plaintiff alleges that the ultimate split with the defendant arose because he had never
agreed to a reduction in commission to 40% from 50%. He says that the plaintiff unilaterally
changed the rate and thus breached the employment contract. He says further that his damages
are simply the liquidated amount obtained by calculating the difference between the 40%
commission which he was paid for September, 2004 and November, 2004 to January, 2006
inclusive and the 50% commission which he says he was owed for that period.

12 The defendant says that the plaintiff was released for cause on January 20, 2006. The
defendant alleges a different method of calculating commission for the period of August, 2003
through to April, 2005, which involved the value of the deposits made by clients, who made the
"sale" and a scale of 40% or 50% based on whether the funds exceeded $10,000 or not. The
defendant says that in April, 2005 this structure changed to a base amount plus a bonus
structure for cash volumes over $15,000, $25,000 and $35,000 levels.

13 Again, as with the plaintiff's material, no written contract of employment or other relation
is provided by the defendant in its material. In this regard there is neither an initial written
agreement from August, 2003 produced nor is there a written agreement produced evidencing
the alleged "change" in April, 2005.

The Law

14 It has long been recognized that prejudgment garnishment is an extraordinary remedy and
that it requires meticulous observance of the statutory requirements which allow for the
process; see Knowles v. Peter, [1954] B.C.J. No. 34 (Wilson J.).

15     Meticulous does not equal perfection. While certain portions of the statutory
requirements may be capable of being perfectly performed, others, such as the requirement
under s. 9(2) of the Court Order Enforcement Act that a copy of the garnishing order must be
served "at once" import a spirit of reasonable practicality in the process. I find support for this
position in the decision of Judge Auxier in the case of PICS Smartcard Inc. v. Cybux Cash Card
Co., [2003] B.C.J. No. 261. While recognizing the extraordinary nature of the process and the
requirement for meticulous observance as stated in Knowles supra, Judge Auxier went on to
examine the issue of service of documents, the efforts made to effect same and the timing of
the actual service. In PICS supra action was commenced on December 19, 2002. A prejudgment
garnishing order was issued on that same day and resulted in the full amount of the claim being
paid into court. On January 9, 2003 the defendant filed an application to set aside the garnishing
order and to have the monies attached under the order paid out to the defendant. The
application was heard January 21, 2003. Service of the relevant documents was made by the
plaintiff upon the defendant on that day just prior to the application being heard. The total time
from issuance of the claim to the date of service was 32 or 33 days. In considering s. 9(2) of the
Court Order Enforcement Act, Judge Auxier said:
                                                                                                  21


       6. Here, as is clear from the foregoing, the garnishing order was obtained December
       19th and still had not been served more than a month later. Certainly not service "at
       once".

       7. The Claimant's response to this point is that they were unable to determine how to
       serve the Defendant. A company search done December 19, 2002 found nothing under
       the name "The Cybux Cash Card Company". Thus the Claimant had no registered office
       to serve.

       8. That may be an issue in and of itself, but it's not an excuse for non service. Rule 2(3) of
       the Small Claims Rules outlines various methods of service on a company. One is by
       registered mail to the registered office, but other options include:

              (b) by leaving a copy ...

                      (ii) at the place of business of the company, with a receptionist or a
                      person who appears to manage or control the company's business there,
                      or

                      (iii) with a director (or) officer ... of the company

       9. The Affidavits filed by each party include copies of correspondence between the two.
       The Claimant clearly knew the street address at which the Defendant carried on business
       yet it does not appear than any attempt was made to effect service there.

       10. I note, too, section 9(4) of the Act:

              A copy of a garnishing order issued out of the Provincial Court in respect of a
              proceeding under the Small Claims Act may be served by mailing a copy to the
              person to be served by registered mail to the last known post office address of
              that person (emphasis mine).

       And section 9(5):

              If it is made to appear to a judge or registrar that prompt personal service of the
              order on the defendant, judgment debtor or person liable to satisfy the judgment
              or order cannot be effected, the judge or registrar may make an order for
              substituted or other service, or for the substitution of notice for service, by letter,
              public advertisement or otherwise, as may be just.

       11. No application for substituted service was ever made by the Claimant.

       12. So there has not been compliance with section 9. Should this lead to an order setting
       aside the garnishing order and releasing the monies paid into court?

16 In the case before me, the Writ was issued on February 2, 2006 and the first garnishing
order was issued 11 days later, on February 13, 2006. That garnishment apparently resulted in a
payment of $200 being made into court. On or about March 20, 2006 counsel for the defendant
wrote to counsel for the plaintiff advising that he represented the defendant herein,
acknowledging that he was aware of certain garnishment and requesting as follows:
                                                                                                22

       Please provide us with your client's Statement of Claim so that we may file our Defence
       accordingly. Meanwhile, we ask that you not take default judgment without prior notice
       to us.

       We look forward to hearing from you.

17 It is not disputed that the above correspondence was received by counsel for the plaintiff
on or about March 20, 2006. The response of the plaintiff's counsel was not to deliver the
pleadings and garnishment documents to defendant's counsel but rather to issue further
garnishment on March 31, 2006 and May 18, 2006 which attached $18,057.71 and $11.36
respectively. As of the date of hearing on July 13, 2006 service had not yet been effected on the
defendant either directly or via counsel.

18 On the material before me, I find that there has not been meticulous observance of the
requirement that the garnishing order be served on the defendant "at once" pursuant to s. 9(2)
of the Court Order Enforcement Act. Even addressing these facts within the context of
meticulous observance of a spirit of practicality, a delay of some six and a half months in the
face of written requests for delivery, falls far short of what is required.

19 Having found that the plaintiff failed to comply with the requirements of s. 9(2) of the
Court Order Enforcement Act, must such a finding necessarily lead to an order setting aside the
garnishing orders? In the case of Nguyen v. McElwain, [1993] B.C.J. No. 2600, Maczko J. held
that even though the strict requirements of the Court Order Enforcement Act had not been met,
the resulting garnishing order is voidable rather than strictly void. He went on to determine that
the court retains a discretion to order that monies being held in court as a consequence of
defective but successful garnishment proceedings continue to be held in court until issues of
liability have been determined. This discretion was expressly considered by Judge Auxier in PICS
supra and by Davies J. in the case of Stafford Frey Cooper Professional Corp. v. Image Finders
Photo Agency, [2002] B.C.J. No. 2730. In that case, Davies J. was dealing with an appeal from a
Master's decision to set aside a garnishing order which he found to have been granted on the
basis of a misleading affidavit. The plaintiff argued before the Master and before Davies J. that
the plaintiff would be prejudiced by the setting aside of the prejudgment garnishing order in
that if it succeeded on its claim, it would hold an empty judgment. The plaintiff further argued
that such prejudice should have been specifically addressed by the Master and should have led
him to exercise his discretion to refuse to set aside the garnishing order. The plaintiff relied on
the decision of Maczko J. in Nguyen supra.

20   In addressing this ground of appeal, Davies J. said at paragraph 42-47:

       42. I must express my concern about what I see as a conflict between the discretionary
       principles expressed in Nguyen and the principles enunciated in the leading case of
       Knowles v. Peter (1954) 12 W.W.R. (N.S.) 560 (B.C.S.C.).

       43. In Knowles v. Peter, Wilson J. (as he then was) spoke of the requirement for the
       "meticulous observance" of the requirements of the Court Order Enforcement Act before
       the extraordinary remedy of a prejudgment garnishing order should be granted. It seems
       to me that the exercise of a remedial discretion to relieve a garnishing creditor of the
       obligation to meticulously observe the provisions of the Court Order Enforcement Act is
       fundamentally at odds with the propositions advanced by Wilson J. in Knowles v. Peters.

       44. The Nguyen decision has, however, previously been considered by this Court on two
       occasions. Although in neither case were the discretionary principles expressed in
                                                                                                23

       Nguyen applied, both decisions accepted the proposition that such a discretion exists.

       45. In Spruceland Terminals, [1996] B.C.J. No. 124 (S.C.) Master Bishop decided that the
       affidavit in support of the garnishing order in that case materially misstated evidence
       and held that the garnishing order must be set aside. He then considered the plaintiff's
       argument that he should, on the authority of Nguyen, exercise his discretion to allow the
       garnishing order to stand due to the defendant's delay in applying to set it aside. In
       dismissing the plaintiff's application, Master Bishop said at para. 30:

              Although I agree the order requested here is discretionary, there are no factors
              present that persuade me that I ought to exercise it in favour of the plaintiff. The
              facts in this case are much different than those in Nguyen v. McElwain, supra.

       46. In Hooker v. Canadian Timber Management, [1998] B.C.J. No. 339 (S.C.), supra,
       Master Chamberlist (as he then was) determined that the affidavit in support of the
       garnishing order in that case was deficient in that it contained no formula or basis for
       determining how the amount owing was arrived at, and that the garnishing order must
       accordingly be set aside. In considering the potential applicability of Nguyen, he stated
       at para. 18:

              In Nguyen v. McElwain, [1993] B.C.J. No. 2600, (B.C.S.C.) Vancouver Registry No.
              C931328, December 13, 1993, Maczko J., having found that the affidavit in
              support of the garnishing order did not adequately comply with section 4 of the
              Court Order Enforcement Act, went on to determine that such non-compliance
              made the garnishing order merely voidable and not void. In the circumstances of
              that case, which involved considerable delay by the garnishee in bringing on a
              notice of intention to dispute, Maczko J. exercised his discretion not to set aside
              the garnishing order. It appears his Lordship exercised his discretion to deal with
              the prejudice that would accrue to the plaintiff if he were to allow the order to
              be set aside on an extremely late application by the garnishee.

       47. Given that Nguyen is a reasoned decision of this Court which has not previously been
       adversely commented upon, and notwithstanding the apparent conflict between the
       principles expressed in Nguyen and those expressed in Knowles v. Peters, supra, I have
       determined that I am bound to follow the Nguyen decision. See: Re: Hansard Spruce
       Mills Ltd., [1954] 4 D.L.R. 590 (B.C.S.C.).

21   Having found that such a discretion does exist, Davis J. went on to say at paragraph 61:

       In my opinion, to the extent that a discretionary power to relieve against non-
       compliance with the Court Order Enforcement Act in the obtaining of prejudgment
       garnishing order does exist, it will rarely, if ever, be invoked before the plaintiff has
       reduced its claim to judgment, and only then in circumstances of innocent non-
       compliance.

22 In the present case the plaintiff expresses concerns regarding the financial viability of the
defendant and by implication, his ability to collect on any judgment should he succeed at trial.
The defendant by the affidavit of Brad Desaulniers expressly addresses that concern and states
that the defendant has sufficient assets to pay the "outstanding commissions." Whether that
phrase refers to the amount claimed by the plaintiff or the commissions based on the
defendant's calculations is unclear.
                                                                                                   24

23 In all of the circumstances I find that the plaintiff failed to meticulously observe the
statutory requirements relating to prejudgment garnishment The result is a presumption that
the garnishing orders should be set aside and any monies attached be paid out of court, subject
to the discretion of the court as referred to by Maczko J. in Nguyen supra. I find insufficient
reason to exercise my discretion in favour of the plaintiff in this case and concur with the
comments of Davies J. in Stafford supra. In all of the circumstances of the application before
me, I decline to exercise any discretion which I may have to allow the garnishing orders before
judgement, which are the subject of this application, to stand. All of the garnishing orders
referred to in paragraphs 1, 3, and 5 of the Notice of Motion are herby set aside and all monies
paid into court pursuant to such garnishing orders are ordered to be paid out to the defendant
or to the defendant's solicitor in trust for the defendant.

24 Regarding paragraph 7 of the defendant's Notice of Motion I decline to make a blanket
order dealing with all other possible garnishing orders, however, the file does indicate that one
further prejudgment order was issued on June 15, 2006. That garnishing order is also set aside
and any monies attached by it are ordered paid out on the same terms as noted above.

25 In light of my findings regarding the failure to meticulously observe the statutory
requirements regarding prejudgment garnishment, I have not addressed the issue of whether or
not the claim is for a liquidated amount.

26   The defendant is entitled to its costs in any event of the cause.




                                 (2) The Mareva Injunction

Until the mid-nineteenth century London enjoyed the custom of foreign attachment. This
custom permitted a plaintiff, bringing an action against a foreign defendant, to make an ex
parte application for an order of seizure of the defendant’s assets within the jurisdiction. This
prejudgment seizure was designed to ensure that the foreign defendant would show up for the
trial. In the event that the defendant failed to appear, the plaintiff could realize upon sufficient
assets to satisfy the debt.

The reorganization of the courts resulted in the demise of this particular custom. The Lister v.
Stubbs principle prevailed until 1975. In that year, Lord Denning decided two cases which
radically changed debtor-creditor law. The first case in point of time was Nippon Yusen Kaisha v.
Karageorgis [1975] 1 W.L.R. 1093 (C.A.) but it was the second case which gave its name to the
new remedy: Mareva Cornpania Naviera v. International Bulk Carriers S.A. [1975] 2 Lloyds
L.R.509 (C.A.). The defendant in each case was foreign and Lord Denning was able to distinguish
Lister v. Stubbs and grant an injunction prohibiting the defendant from removing assets from
the jurisdiction.

The first Canadian case to deal with an application for a Mareva injunction was B.P. Exploration
Co. (Libya) Ltd. v. Hunt (1980) 23 A.R. 271 (N.W.T.S.C.). In that case and the cases that followed,
English case law was adhered to with varying degrees of consistency. In each province the
authority for issuing such injunctions was to be found in legislation similar to that in force in B.C.
which, in turn, is virtually identical to English legislation relied on by Lord Denning in 1975. In
B.C., s. 39 of the Law and Equity Act, R.S.B.C. 1996, c. 253, provides:

Injunction or mandamus may be granted or receiver appointed by interlocutory order
                                                                                              25


  39     (1) An injunction or an order in the nature of mandamus may be granted or a receiver
             or receiver manager appointed by an interlocutory order of the court in all cases
             in which it appears to the court to be just or convenient that the order should be
             made.

         (2) An order made under subsection (1) may be made either unconditionally or on
             terms and conditions the court thinks just.

         (3) If an injunction is requested either before, at or after the hearing of a cause or
             matter, to prevent any threatened or apprehended waste or trespass. the
             injunction may be granted if the court thinks fit, whether the person against
             whom the injunction is sought is or is not in possession under any claim of title or
             otherwise
             or. if out of possession, does or does not claim a right to do the act sought to be
             restrained under any colour of title, and whether the estates claimed by both or
             by either of the parties are legal or equitable.

The Supreme Court of Canada has now considered the merits of this new creditor’s remedy.
Aetna Financial Services Ltd. v. Feigelman [1985] 2 W.W.R. 97 (S.C.C.) affirms the existence of
the Mareva injunction. It leaves unanswered, however, many questions as to its availability.
                                                                                                  26
                            Aetna Financial Services Ltd. v. Feigelman
                                   [1985] 2 W.W.R. 97 (S.C.C.)

     Appeal from a judgment of the Manitoba Court of Appeal, [1983] 2 W.W.R. 97, 36 C.P.C.
20, 143 D.L.R. (3d) 715, 19 Man. R. (2d) 295, dismissing an appeal from a judgment of Wilson J.
dismissing an application to set aside an ex parte interlocutory injunction granted by Wilson J.

    31st January 1985. The judgment of the court was delivered by

1 ESTEY J.:— The Manitoba Court of Appeal affirmed the trial judge's order granting an
injunction which restrained the appellant from transferring certain identified assets out of
Manitoba to the appellant's offices in either Toronto or Montreal. This appeal raises squarely
and simply the question of the availability of interlocutory orders restraining a defendant in a
civil action from disposing of or handling assets in any specific way prior to trial. In England this
is said to have originated in a proceeding now identified by the expression "Mareva injunction".

2     The facts are few and simple. The appellant Aetna Financial Services Limited (for
convenience hereinafter called "Aetna") is a company incorporated under the Canada Business
Corporations Act, 1974-75-76 (Can.), c. 33, with its head office in the City of Montreal and
offices in Toronto. At one time it had an office in Manitoba for the promotion of business but
not for the processing of business. At the present time the company has contracted its
operations largely, if not entirely, to the Montreal office. Its operations consist of the factoring
of accounts receivable for its clients on a basis of recourse or non-recourse. In this business
Aetna had only two accounts or customers in the Province of Manitoba, one of them being the
respondent Pre-Vue Company (Canada) Ltd. The asset in question was acquired from the
collection in receivership proceedings concerning the second Manitoba customer Sekine. This
realization was in the approximate sum of $270,000 which Aetna was about to transfer to its
offices outside Manitoba, either Toronto or Montreal, when these proceedings were
commenced.

3 When the respondent Pre-Vue Company (Canada) Ltd. (for convenience hereinafter called
"Pre-Vue") went into default under the debentures [page8] issued to and held by Aetna, Aetna
appointed a receiver by extra-judicial unilateral action according to an asserted right under the
debenture. The appointment of the receiver was subsequently confirmed by the Court of
Queen's Bench in Manitoba. The appointment of the receiver was without prejudice to any
action by Pre-Vue or its shareholders against Aetna or the receiver. The action against which the
present application for injunction rests arose out of this. By statement of claim dated March 30,
1981 Pre-Vue and its shareholders commenced action claiming unliquidated damages, and
alleging, inter alia, that Aetna, in contravention of the terms of the debenture, failed to give Pre-
Vue the allotted time to cure its default, and therefore the appointment of the receiver was
improper. There may well be issues arising out of this appointment of the receiver but they are
not of concern in the disposition of this appeal dealing as it does with the interlocutory
injunction only. Some two years after the confirmation by the Court of the appointment of the
receiver-manager, the respondents applied for and obtained the injunction in question, wherein
it was ordered that the appellant be:

       ... restrained and enjoined, until the further order of the Court, from removing from
       Manitoba or otherwise disposing of or dealing with any of its assets within Manitoba,
       including and in particular any monies paid to or received by the receiver-manager
       appointed by the Defendant, Aetna Financial Services Limited, to take control and
       possession of the property and undertaking of Sekine Canada Ltd., save in so far as such
       assets do not exceed in value the sum of $997,711.21.

In July 1982, an application to set aside this ex parte interlocutory order was dismissed. The
                                                                                         27
terms of the injunction were modified, however, so as to restrict the movement of assets by
Aetna only to the extent of $250,000.

4 In the Court of Appeal, the majority determined that an injunction of the type herein issued
by the Trial Division was available under the law of the Province of Manitoba and that in the
circumstances the exercise of discretion by the learned trial judge should not be the subject of
intervention [page9] by the Court of Appeal. The majority varied the judgment of the Trial
Division only to the extent of "permitting the discharge of the injunction, on the posting of
security by Aetna".

5 Huband J.A. dissented, not on the grounds that the so-called Mareva injunction is not
available in law in the Province of Manitoba, but that under the circumstances injunctive relief
should not have been granted. His Lordship summarized his position:

       It seems to me that a Mareva injunction should be issued in this jurisdiction only where a
       strong case has been made out that it is necessary to do so to prevent an imminent
       injustice.

       Far from a strong case, I think the present application for injunctive relief is decidedly
       weak. It has none of the elements of fraud or sham or movement of assets in order to
       escape lawful claims which have become part of the jurisprudence justifying Mareva-
       type injunctions.

6   There are three threshold issues:

       (a) As a matter of law, is this type of injunction available in Manitoba?

       (b) Is this type of injunction available in the circumstances revealed in the record on this
       appeal?

       (c) Is the exercise of discretion by the court of first instance properly reviewable on
       appeal?

7 The rule as to the availability of an interlocutory injunction generally has been variously
stated but, in my view, it is convenient to refer to the succinct description of that order as found
in Chesapeake and Ohio Railway Co. v. Ball, [1953] O.R. 843, where McRuer C.J.H.C. stated, at
pp. 854-55:

       The granting of an interlocutory injunction is a matter of judicial discretion, but it is a
       discretion to be exercised on judicial principles. I have dealt with this matter at length
       because I wish to emphasize how important it is that parties should not be restrained by
       interlocutory injunctions unless some irreparable injury is likely to accrue to the plaintiff,
       and the Court should be particularly cautious where there is a serious question as to
       whether the plaintiff would ever succeed in the [page10] action. I may put it in a
       different way: If on one hand a fair prima facie case is made out and there will be
       irreparable damage if the injunction is not granted, it should be granted, but in deciding
       whether an interlocutory injunction should be granted the defendant's interests must
       receive the same consideration as the plaintiff's.

Reconsideration of the requirement that the plaintiff must show a "strong prima facie case" has
come in the wake of the decision of the House of Lords in American Cyanamid Co. v. Ethicon
Ltd., [1975] A.C. 396. However, the other principles enunciated by McRuer C.J.H.C. remain
unimpaired. As a general proposition, it can be fairly stated that in the scheme of litigation in
                                                                                                28
this country, orders other than purely procedural ones are difficult to obtain from the Court
prior to trial. Where the injunction maintains the status quo in a way which is fair to both sides,
the order is attainable; but, simply because the order would not injure the defendant is not
sufficient reason to move the Court to grant what is generally regarded as an extraordinary
intervention. In Law Society of Upper Canada v. MacNaughton, [1942] O.W.N. 551, Rose C.J.H.C.
stated at p. 551:

       I have always understood the rule to be that the question is not whether the injunction
       will harm the defendant, but whether it is probable that unless the defendant is
       restrained, wrongful acts will be done which will do the plaintiff irreparable injury.

8 A second and much higher hurdle facing the litigant seeking the exceptional order is the
simple proposition that in our jurisprudence, execution cannot be obtained prior to judgment
and judgment cannot be recovered before trial. Execution in this sense includes judicial orders
impounding assets or otherwise restricting the rights of the defendant without a trial. This was
enunciated by Cotton L.J. in Lister & Co. v. Stubbs, [1886-90] All E.R. 797, at p. 799, as follows:

       I know of no case where, because it is highly probable if the action were brought the
       plaintiff could establish [page11] that there was a debt due to him by the defendant, the
       defendant has been ordered to give a security till the debt has been established by the
       judgment or decree.

Similarly, the limited availability of an injunction to enjoin a defendant from disposing of his
assets was referred to in Burdett v. Fader (1903), 6 O.L.R. 532, affirmed (1904), 7 O.L.R. 72, at p.
533, by Boyd C.:

       The plaintiff may or may not get judgment in the case, but he proposes to restrain the
       sale or disposition of this stock by the defendant till that is finally determined.

       There is no authority for such a course in an action of tort. If the plaintiff is a creditor
       before judgment, he can sue on behalf of himself and all creditors to attack a fraudulent
       transfer. If the plaintiff is a judgment creditor, he can proceed by execution to secure
       himself upon the debtor's property. But if the litigation is merely progressing and the
       status of creditor not established, it is not the course of the Court to interfere quia timet
       and restrain the defendant from dealing with his property until the rights of the litigants
       are ascertained.

The principle has been restated in modern times in Barclay-Johnson v. Yuill, [1980] 3 All E.R.
190, where Megarry V.C. stated, at p. 193:

       In broad terms, this establishes the general proposition that the court will not grant an
       injunction to restrain the defendant from parting with his assets so that they may be
       preserved in case the plaintiff's claim succeeds. The plaintiff, like other creditors of the
       defendant, must obtain his judgment and then enforce it. He cannot prevent the
       defendant from disposing of his assets pendente lite merely because he fears that by the
       time he obtains judgment in his favour the defendant will have no assets against which
       the judgment can be enforced. Were the law otherwise, the way would lie open to any
       claimant to paralyse the activities of any person or firm against whom he makes his
       claim by obtaining an injunction freezing their assets.

This problem has been stated and restated many times in this country in the courts of Manitoba
and elsewhere: OSF Industries Ltd. v. Marc-Jay Investments Inc. (1978), 88 D.L.R. (3d) 446, 7
[page12] C.P.C. 57 (Ont. H.C.); Pivovaroff v. Chernabaeff (1977), 16 S.A.S.R. 329; Bedell v. Gefaell
(No. 2), [1938] O.R. 726 (C.A.); Hepburn v. Patton (1879), 26 Gr. 597; Pacific Investment Co. v.
                                                                                               29
Swan (1898), 3 Terr. L.R. 125; Ferguson v. Ferguson (1916), 26 Man. Rep. 269.

9 The general rule in Lister has had wide application in the law. See Sharpe, Injunctions and
Specific Performance (1983) at pp. 94-97. However, the abhorrence which the common law has
felt toward allowing execution before judgment has always been subject to some obvious
exceptions:

       1. for the preservation of assets, the very subject matter in dispute, where to allow the
       adversarial process to proceed unguided would see their destruction before the
       resolution of the dispute:

              To a large extent this exception to the Lister rule has been codified in the various
              provincial and federal procedural rules. Rule 330(1) of The Queen's Bench Rules
              (Man.) is typical and provides:

                      330(1) The court may, on the application of any party and on such terms
                      as may be just, make an order for the detention or preservation of
                      property, being the subject of the action, ...

                      See also: Ontario, Rules of Practice, R.R.O. 1980, Reg. 540, R. 372; Federal
                      Court Rules, Rule 470(1); Nova Scotia, Civil Procedure Rules, R. 43.02;
                      Saskatchewan, The Queen's Bench Rules, R. 389; Alberta, The Supreme
                      Court Rules, R. 468.

              That the courts had jurisdiction to make an order for the preservation of property
              pending litigation was, however, recognised even prior to passage of the Rules. In
              Great Western Railway Co. v. Birmingham & Oxford Junction Railway Co. (1848),
              2 Ph. 597, 41 E.R. 1074, Cottenham L.C. observed, at p. 1076, as follows:

                      It is certain that the Court will in many cases interfere and preserve
                      property in statu quo during [page13] the pendency of a suit, in which the
                      rights to it are to be decided, and that without expressing, and often
                      without having the means of forming, any opinion as to such rights. It is
                      true that no purchaser pendente lite would gain a title; but it would
                      embarrass the original purchaser in his suit against the vendor, which the
                      Court prevents by its injunction. Such are the cases Echliff v. Baldwin (16
                      Ves. 267), Curtes v. Lord Buckingham (3 V. & B. 168), Spiller v. Spiller (3
                      Swan. 556), per Lord Redesdale in Dow. 440. It is true that the Court will
                      not so interfere, if it thinks that there is no real question between the
                      parties; but seeing that there is a substantial question to be decided, will
                      preserve the property until such question can be regularly disposed of. In
                      order to support an injunction for such purpose, it is not necessary for the
                      Court to decide upon the merits in favour of the plaintiff.

              Although the Great Western Railway case, supra, was decided before Lister v.
              Stubbs, supra, it is nonetheless still accepted that an injunction to preserve the
              very subject-matter of the action is not to be equated with an injunction of the
              Mareva variety. This distinction was recently restated by Craig J. in Rosen v.
              Pullen (1981), 126 D.L.R. (3d) 62 at pp. 74-75:

                      It is unnecessary for the Court to consider the present case on the basis of
                      a Mareva injunction because the very subject-matter of the action is the
                      letter of credit in question.
                                                                                               30
               It is not a case of an action against a defendant based on a debt where there is a
               likelihood that the defendant will remove available assets. See Williston & Rolls,
               The Law of Civil Procedure, vol. 2 (1970), p. 585, cited with approval by Lerner J.
               in OSF Industries Ltd. v. Marc-Jay Investments Inc. (1978), 20 O.R. (2d) 566 at p.
               567, 88 D.L.R. (3d) 446 at p. 447, 7 C.P.C. 57, as follows:

                      (a) An injunction will not be granted to restrain a defendant from parting
                      with or encumbering his property before a creditor has established his
                      right by judgment.

               The result would be entirely different if the property likely to be disposed of is
               the very subject matter of the litigation.

       2. where generally the processes of the court must be protected even by initiatives
       taken by the court itself;


       3. to prevent fraud both on the court and on the adversary:

               In Campbell v. Campbell (1981), 29 Gr. 252, both the general rule and the
               exception to it on the basis of fraud, were succinctly stated by Boyd C. at p. 254-
               55, as follows:

                  Where no fraud has been committed the Court will not restrain a defendant
                  from dealing with his property at the instance of a creditor or person who has
                  not established his right to proceed against that property. But where a
                  fraudulent disposal has actually been made of the defendant's property, (as is
                  admitted by the demurrer in this case,) then the Court will intercept the
                  further alienation of the property, and keep it in the hands of the grantee
                  under the impeached conveyance, until the plaintiff can obtain a declaration
                  of its invalidity, and a recovery of judgment for the amount claimed.

               More recent cases in which the fraud exception have been applied include
               Toronto (City of) v. McIntosh (1977), 16 O.R. (2d) 257 (Ont. H.C.J.); and Mills and
               Mills v. Petrovic (1980), 30 O.R. (2d) 238 (Ont. H.C.J.).

       4. quia timet injunctions were generally permitted under extreme circumstances which
       included a real or impending threat to remove contested assets from the jurisdiction.

10 Initially the Court of Appeal of the United Kingdom found its jurisdiction to issue this type
of quia timet order in a section of the judicature legislation that ultimately became s. 45(1) of
the Supreme Court of Judicature (Consolidation) Act, 1925, 15 & 16 Geo. 5, c. 49, which
authorizes the court to issue an injunction where it appears to the court "to be just or
convenient" that the order should be made. In the rise of the Mareva injunction in the Court of
Appeal, the source of authority for the Supreme Court was found to reside in this provision
which can be traced back through a succession of statutes reaching back to at least The
Common Law Procedure Act, 1854, 17 & 18 Vic., c. 125. In later pronouncements concerning this
type of injunction, the jurisdiction to do so has been traced even further back into the antiquity
of the London Commercial Court. As we shall see, Canadian legislation has followed the same
course [page15] as s. 45. Lister, supra and many other authorities, notably Aslatt v. the
Southampton (Corporation of), (1880), 16 Ch.D. 193, have made it clear, however, that these
words in the statute do not authorize a court to issue an injunction "because the Court thought
it convenient". Nor in the words of the authors of Halsbury’s Laws of England (4th ed.), Vol. 24,
p. 518, paragraph 918, has this provision altered the general rules applying to the issuance of
                                                                                                   31
interlocutory injunctions.

11 Section 19(1) of the Ontario Judicature Act is to the same effect as the United Kingdom
provision, as are most of the comparable provisions in provincial statutes across the country:

       British Columbia, Law and Equity Act, R.S.B.C. 1979, c. 224, s. 36;
       Alberta, Judicature Act, R.S.A. 1980, c. J-1, s. 13(2);
       Saskatchewan, The Queen's Bench Act, R.S.S. 1978, c. Q-1, s. 45(8);
       Manitoba, The Queen's Bench Act, C.C.S.M., c. C280, s. 59;
       Ontario, Judicature Act, R.S.O. 1980, c. 223, s. 19(1);
       Nova Scotia, Judicature Act, 1972 (N.S.), c. 2, s. 39(9);
       New Brunswick, Judicature Act, R.S.N.B. 1973, c. J-2, s. 33, am. 1981 (N.B.), c. 6, s. 1;
       Prince Edward Island, Judicature Act, R.S.P.E.I. 1974, c. J-3, s. 15(4);
       Newfoundland, The Judicature Act, R.S.N. 1970, c. 187, s. 21(m).

We are here particularly concerned with s. 59(1) of The Queen's Bench Act of Manitoba, supra.

12 The Quebec Code of Civil Procedure, R.S.Q., c. C-25, provides for interlocutory injunctions
in art. 752 "where the applicant appears to be entitled to it". These words, given their plain
meaning, clothe the court with at least as much authority and latitude as the jurisdiction to
enjoin where it is found "to be just and convenient". The article goes [page16] on to provide
against the very eventuality contemplated by the application for the Mareva-type of order here:

       ... and it is considered to be necessary in order to avoid serious or irreparable injury to
       him or a factual or legal situation of such a nature as to render the final judgment
       ineffectual.

The authority of the superior court to respond to an application based on the appropriate facts
and demonstrated in the manner prescribed by the Code is at least equal to that of the superior
courts of the other provinces.

13 The statutory powers of the courts in Manitoba to issue such injunctive relief is
undoubted; the question is, as Hamilton J. put it in Hawes v. Szewezyk, unreported, noted at
[1979] 2 A.C.W.S. 274, should the jurisdiction be exercised? This question can only be answered
by balancing the principles enunciated in Lister on the one hand, and those of Rasu, (infra) on
the other.

14 In Lister itself, the issue turned on the narrow distinction on the facts of that case between
the debtor-creditor relationship on the one hand (wherein no judicial intervention would be
authorized before trial) and the cestui que trust relationship on the other hand (where judicial
intervention would intervene to protect the trust res). Lister itself recognized at least three
exceptions to the general principle: firstly, where the res of the action was demonstrably the
property of the claimant; secondly, where the relationship between the adversaries included a
condition whereby the defendant-debtor could not, without the acquiescence of the claimant-
creditor, defend the claim; and thirdly, the trustee-beneficiary relationship.

15 While the law has long known exceptions to the Lister rule, it wasn't until a series of
Maritime disputes arose that the courts consciously began to build up a special code of rules or
sub-rules for the intervention by the court before judgment, and indeed, before trial, where
circumstances warranted such action in the interest of the parties, the community and the law
generally. Beginning in 1975, these exceptions to the Lister rule came into [page17] judicial
prominence. They have been grouped by the courts, and legal writers generally, under the new
legal generic, the Mareva Injunction.
                                                                                           32
16 Beginning in early 1975, there were four cases in England arising in the shipping business
where the rule in Lister was suspended. These are, in their chronological order:

      Nippon Yusen Kaisha v. Karageorgis, [1975] 3 All E.R. 282;
      Mareva Compania Naviera SA v. International Bulkcarriers SA, [1980] 1 All E.R. 213.
      Rasu Maritima SA v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, [1977] 3
       All E.R. 324;
      Third Chandris Shipping Corp. v. Unimarine SA, [1979] 2 All E.R. 972.

In the midst of this development process in the United Kingdom came the Australian case,
Pivovaroff v. Chernabaeff, supra, which reviewed the English authorities but declined to follow
them.

17 In Nippon, supra, the shipowners, being unable to locate the defendant charterers,
commenced an action for overdue hire and moved on an ex parte basis, as the defendants could
not be located, for an order enjoining the defendants from transferring out of the jurisdiction
moneys known to be in a London bank account in the name of the defendants. The order was
granted as asked, Lord Denning M.R. stating, at p. 283:

       It seems to me that the time has come when we should revise our practice. There is no
       reason why the High Court or this court should not make an order such as is asked for
       here. It is warranted by s. 45 of the Supreme Court of Judicature (Consolidation) Act,
       1925 which says the High Court may grant a mandamus or injunction or appoint a
       receiver by an interlocutory order in all cases in which it appears to the court to be just
       or convenient so to do. It seems to me that this is just such a case.

Lane L.J. agreed because of the danger of the plaintiff losing money "... to which he is
admittedly [page18] entitled", although no one made such an admission, as the defendant at no
stage of the process appeared.

18 Mareva, supra, followed one month later although it was not reported until 1980. In
Mareva, the defendant charterers again did not appear and the reference to their argument in
Lord Denning's judgment appears to be in error. The ship was out of the jurisdiction, the
defendants had disappeared, and the shipowners sought to enjoin the disposal of moneys
known to be in a London bank account in the name of the defendants. Because the order in
Nippon had been made without any reference to the Lister case, the High Court, on ex parte
application, had refused the injunction. In the Court of Appeal the Lister case was avoided by
reliance upon s. 45 of the Supreme Court of Judicature (Consolidation) Act, 1925 mentioned
above in the Nippon case and upon a commentary on the resultant powers of the court in
Halsbury’s. Lord Denning then continued, at p. 215:

       In my opinion that principle applies to a creditor who has a right to be paid the debt
       owing to him, even before he has established his right by getting judgment for it.

In explanation of this conclusion, the Master of the Rolls stated on the same page:

       There is money in a bank in London which stands in the name of these charterers. The
       charterers have control of it. They may at any time dispose of it or remove it out of this
       country. If they do so, the shipowners may never get their charter hire. The ship is now
       on the high seas.

Lord Roskill, in concurring, distinguished the Lister case on the basis that by a clause in the
charterparty, the shipowners "have a lien upon... all sub-freights for any amounts due under
this charter...." The order in Mareva, it can be seen, was therefore based on the broad powers
                                                                                                 33
given to the court under its jurisdictional statute and in part, at least in the view of one member
of the court, on the existence of a contractual lien by the plaintiffs against the prepaid sub-
charterparty [page19] revenues temporarily within the jurisdiction of the United Kingdom court.

19 In 1977, the Court of Appeal confirmed the denial of such an injunction in Rasu, supra. The
defendants were clearly outside the jurisdiction but had some assets, or interest in assets,
inside the U.K. The debt claimed by the plaintiff arose under a charterparty between the
plaintiff as a shipowner and the defendants as charterers. Some actions taken by the
defendants were capable of interpretation as an effort to transfer or deal with their assets
which were in the U.K. in a manner which would put them beyond the reach of the creditors.
The injunction was denied, not because there was not a prima facie case of liability, but because
the nature of the goods under attack was such that they were wholly unrelated to the action
and the claim arising in the plaintiffs, the title to the equipment in question was unclear, the
removal of the goods as planned to Germany increased the likelihood of the plaintiffs being able
to obtain a Mareva-like injunction there, and the seizure and sale of the equipment would
realize only a fraction of their true worth as an integral part of a plant being built by the
defendants in Indonesia. What is important in the case is the catalogue of matters which Lord
Denning set out in his judgment as being those to be taken into consideration by the court in
determining whether the exercise of discretion under statute should occur. These matters are:

       1. The plaintiff must demonstrate a good arguable case;

       2. The assets in question need not be limited to money but could include goods within
       the jurisdiction;

       3. Where the injunction might compel the defendant to provide security, it might tilt the
       scales in favour of issuance of the injunction.

In justifying the earlier decisions of Nippon and Mareva, the Master of the Rolls found roots for
[page20] such an order in the practice in the courts in the City of London, particularly the
commercial courts, where the seizure orders, or injunction orders, were issued substantially to
compel the defendant to appear and provide bail or security. The historical prerequisite was
absence of the defendant from the jurisdiction. Lord Denning noted that the practice,
apparently, has long been followed in the United States, except that it has been limited to cases
where debt is due from the defendant in a liquidated discernible amount. See De Beers
Consolidated Mines, Ltd. v. United States, 325 U.S. 212 (1945), at pp. 222-23. Similar remedies
have been, and continue to be, in widespread use in the maritime towns of continental Europe.
Accordingly, Lord Denning observed, at p. 332:

       Now that we have joined the Common Market it would be appropriate that we should
       follow suit, at any rate in regard to defendants not within the jurisdiction. By so doing
       we should be fulfilling one of the requirements of the Treaty of Rome, that is the
       harmonisation of the laws of the member countries.

He then returned to the theme of the Lister principle at p. 332 when he stated:

       So far as concerns defendants who are within the jurisdiction of the court and have
       assets here, it is well established that the court should not, in advance of any order or
       judgment, allow the creditor to seize any of the money or goods of the debtor or to use
       any legal process to do so.

There appears to be a discrepancy between these comments of the learned Master of the Rolls
and those at p. 336 of the Report where His Lordship stated:
                                                                                            34
       I think the courts have a discretion, in advance of judgment, to issue an injunction to
       restrain the removal of assets, whether the defendant is within the jurisdiction or
       outside it.

The trial judge in Rasu added the further qualification that the plaintiff "has what appears to be
an indisputable claim against a defendant" and reference is made with approval to this
condition by the Master of the Rolls. In Rasu, the turning point in the line of reasoning seems to
be reached [page21] when the defendants, unlike the defendants in Mareva and Nippon,
appeared in court to defend the claim.

20 The final dissertation in the Court of Appeal of the United Kingdom on the subject of these
injunctions to which I wish, at present, to refer is found in Third Chandris, supra, again
principally through the judgment of Lord Denning.

Here the injunction was issued in the court of first instance and confirmed by the Court of
Appeal, apparently because the defendants were outside the jurisdiction, provided no financial
returns in the proceedings, or indeed in Panama, the country of registry of the defendants'
business, but did have a bank account in London in which had been deposited the proceeds of a
sub-charterparty entered into after the execution by the defendants of the charterparty from
the plaintiff shipowners. The extraordinary factual feature was that the injunction restrained
the removal from the jurisdiction of moneys in the defendants' London bank account, although
the evidence clearly indicated that the account was in overdraft. Again, the Master of the Rolls
catalogued the hurdles which a plaintiff must surmount in order to obtain this type of
injunction. They are much the same as in Rasu except that (at p. 985) the Master of the Rolls
placed more emphasis on the requirement that the plaintiff demonstrate belief in a risk that the
assets would be removed before the judgment or award is satisfied. "The mere fact that the
defendant is abroad is not by itself sufficient." Additionally, a contrast is drawn between a
foreign corporation of substance and one operating in a country where no financial disclosure is
required and nothing is placed before the court to ascertain the magnitude of the risk of non-
payment of any judgment recovered by the plaintiff. In particular, His Lordship went on to
observe, at p. 985:

       There is no reciprocal enforcement of judgments. It is nothing more than a name
       grasped from the air, as elusive as the Cheshire cat.

Lawton L.J. referred to the fact that the defendant's assets may be ships flying "the so-called
flags [page22] of convenience" with little or no trace of substantive worth in the defendant, in
or outside the jurisdiction. At p. 987 he expressed the sense of risk which must be found by the
court to exist before the issuance of these extraordinary injunctions:

       There must be facts from which the Commercial Court, like a prudent sensible
       commercial man, can properly infer a danger of default if assets are removed from the
       jurisdiction.

The mere fact that the defendant was a foreign corporation was not, in the view of Lawton L.J.,
by itself, sufficient to justify this injunction.

21 In Pivovaroff v. Chernabaeff, supra, Chief Justice Bray, of the Supreme Court of South
Australia, set aside the injunction which had been granted to a plaintiff to restrain the
defendants from disposing of some real estate which was unrelated to the personal injury
claims of the plaintiff. The injunction had been granted on the basis of a belief held by the
plaintiff that the defendant, upon the sale of such assets, might leave the country before the
trial of the action. The Chief justice did not follow the Mareva cases, largely because the
defendant resided in the jurisdiction, but His Lordship added at p. 338:
                                                                                                35

       I am far from satisfied that even in the case of a defendant outside the jurisdiction with
       assets within it it would be proper to issue an injunction of the type in question here.

The Chief Justice found no escape from the general principle enunciated in Robinson v.
Pickering (1881), 16 Ch. D. 660, per James LJ. at p. 661:

       You cannot get an injunction to restrain a man who is alleged to be a debtor from
       parting with his property.

The Chief Justice then added, at p. 338:

       Those cases do not contain any exception for defendants outside the jurisdiction.

22 The Australian court referred to the judgment of Schroeder J.A. in Bradley Bros. (Oshawa)
Ltd. v. A to Z Rental Canada Ltd. (1970), 14 D.L.R. [page23] (3d) 171, in the Court of Appeal of
Ontario, where authorities were applied with the same result. Both courts shied away from the
obvious danger of judicial interference with the operations of corporate enterprises where a
creditor might see in many management dealings a real risk of loss of assets before the creditor
would be able to demonstrate his claim.

23 The United Kingdom Mareva rule might, as Lord Denning observed in Rasu, find harmony
with the British position in the Common Market, but, as pointed out in Pivovaroff, supra, that
consideration has no relevancy in Australia, nor indeed would it have any relevancy in any
country not bound by the Treaty of Rome.

24 As for the asserted jurisdiction founded on the judicature legislation in the United
Kingdom, Chief justice Bray described s. 45 as "a machinery section". In the words of the
learned authors of Halsbury’s Laws of England (3rd ed.), vol. 21, p. 348, paragraph 729;
[Halsbury’s Laws of England (4th ed.), vol. 24, p. 518, paragraph 918], s. 45 "did not alter the
principles upon which the court acted in granting injunctions". To the same effect, see Kerr on
Injunctions (6th ed., 1927), p. 6. Furthermore, Chief Justice Bray in Pivovaroff, supra, thought
that:

       It would seem unlikely that an alternative process of summary execution in anticipation
       of judgment, available for unliquidated damages as well as for liquidated debts due and
       payable, should have been slumbering unsuspected for over a century in the interstices
       of s. 29(1) and its predecessor and its analogues.

The learned justice was there referring to the Australian counterpart of s. 45 discussed by the
Court of Appeal of the United Kingdom in the Mareva cases.

25 What therefore sprung out of the fertile ground of jurisprudence in the mid-1970's in the
courts of the United Kingdom as a limited interlocutory injunctive remedy for plaintiffs who
were in pursuit of ubiquitous charterers of shipping, has matured into a sub-principle or
exception to a [page24] general rule of long standing. The plaintiff in the United Kingdom must
demonstrate that he has a good arguable case. At least once (Rasu, supra, at p. 333), the courts
have required the plaintiff to show an indisputable claim against the defendant. There must be
assets of the defendant within the jurisdiction susceptible to execution. The defendant need not
be outside the jurisdiction. There must be a real risk that the remaining significant assets of the
defendant within the jurisdiction are about to be removed or so disposed of by the defendant
as to render nugatory any judgment to be obtained after trial. Mareva injunctions are therefore
available not just to prevent the removal of assets from the jurisdiction, but also disposal within
the jurisdiction. This has been made certain by the enactment of s. 37(3), Supreme Court Act,
                                                                                                 36
1981, 1981 (U.K.), c. 54, which reads in part:

       37. ...

       (3) The power of the High Court... to grant an interlocutory injunction restraining a party
       to any proceedings from removing from the jurisdiction of the High Court, or otherwise
       dealing with, assets located within that jurisdiction shall be exercisable in cases where
       that party is, as well as in cases where he is not, domiciled, resident or present within
       that jurisdiction.

However, Lord Denning in Z Ltd. v. A [1982] 1 All E.R. 556 at p. 561 opines that this was the
position prior to the enactment. The claim no longer need be limited to debt or liquidated
damages. The general rule requiring that the balance of convenience must favour the issuance
of the order still exists. The overriding consideration qualifying the plaintiff to receive such an
order as an exception to the Lister rule is that the defendant threatens to so arrange his assets
as to defeat his adversary, should that adversary ultimately prevail and obtain judgment, in any
attempt to recover from the defendant on that judgment. Short of that, the plaintiff cannot
treat the defendant as a judgment-debtor, the defendant's right to defend the claim may not be
impaired, and the defendant in proper circumstances may, within [page25] such an order, pay
current expenses incurred in the ordinary course of his business.

26 The gist of the Mareva action is the right to freeze exigible assets when found within the
jurisdiction, wherever the defendant may reside, providing, of course, there is a cause between
the plaintiff and the defendant which is justiciable in the courts of England. However, unless
there is a genuine risk of disappearance of assets, either inside or outside the jurisdiction, the
injunction will not issue. This generally summarizes the position in this country, including the
Nova Scotia Trial Division in Parmar Fisheries Ltd. v. Parceria Maritima Esperanca L. DA. (1982),
141 D.L.R. (3d) 498; see also Liberty National Bank & Trust Co. v. Atkin (1981), 31 O.R. (2d) 715,
121 D.L.R. (3d) 160, where Montgomery J. of the High Court of Ontario granted a Mareva
injunction against a domestic defendant and restrained dealing with assets within the
jurisdiction. These general rules are summarized by Lord Denning in Rahman (Prince Abdul) bin
Turki al Sudairy v. Abu-Taha, [1980] 1 W.L.R. 1268, at p. 1273; see also A.J. Bekhor & Co. v.
Bilton, [1981] 2 All E.R. 565, and Z Ltd. v. A-Z and AA-LL [1982] 2 W.L.R. 288.

27 The harshness of the Mareva injunction, issued usually ex parte, is relieved against or
justified in part by the Rules of Practice which allow the defendant, faced by risk of loss, an
opportunity to move against the injunction immediately. On the other hand, the Court of
Appeal of England seems to have blessed the practice of using this injunction as a means of
coercing a vulnerable defendant into providing security in order to head off irreparable loss
from the paralysis which follows the issuance of this type of injunction.

28 While the Mareva injunction is undoubtedly in personam, it matters not that on occasion
the courts have classified it as in rem (see Cretanor Maritime Co. v. Irish Marine Management
Ltd., [page26] [1978] 1 W.L.R. 966 at 974-75), because the injunction affords no priority to the
potential creditor, for to do so would, in the words of Goff J., "rewrite the... law of insolvency":
Iraqi Ministry of Defence v. Arcepey Shipping Co. S.A., [1980] 2 W.L.R. 488 at p. 494. Unsecured
creditors holding a Mareva injunction cannot hold a preferred position over other claimants.
Hence the practice of including in the order the right to meet legitimate debt payments accruing
in the ordinary course of business.

29 The courts in Canada have given this type of injunction a mixed reception. The earlier
decisions in the Ontario courts are reflected in Bradley Bros., supra, where the Court of Appeal
continued the principle of Lister, supra. Lerner J., in the High Court of Ontario, in a post-Mareva
decision, maintained the same position: OSF Industries Ltd. v. Marc-Jay Investments Inc., supra,
                                                                                                  37
p. 448. By 1981 the High Court appeared to assume that a quia timet jurisdiction was available
on a more restricted basis than the Mareva formula provided in the United Kingdom. See
Liberty National Bank & Trust Co. v. Atkin, supra; Canadian Pacific Airlines Ltd. v. Hind (1981),
122 D.L.R. (3d) 498, where Grange J., as he then was, while raising the question of the existence
of the Mareva principle in Ontario, found such dishonesty in the defendant's conduct that it was
a certainty that he would dispose of all his assets in order to frustrate the plaintiff; and Quinn v.
Marsta Cession Services Ltd. (1981), 34 O.R. (2d) 659, where such an injunction issued on the
application of the rules of Third Chandris Shipping Corp., supra. The Court of Appeal of Ontario
reviewed the conflicting authorities in Chitel v. Rothbart (1982), 39 O.R. (2d) 513, and although
it refused the injunction in the circumstances of that case, it recognized in a detailed and
comprehensive review of the authorities that the jurisdiction existed in the court to grant such a
remedy in a proper case. The test there established (per MacKinnon A.C.J.O., at pp. 522-23) is
somewhat narrower than that [page27] generally applied by the courts in the United Kingdom:

       The applicant must persuade the court by his material that the defendant is removing or
       there is a real risk that he is about to remove his assets from the jurisdiction to avoid the
       possibility of a judgment, or that the defendant is otherwise dissipating or disposing of
       his assets, in a manner clearly distinct from his usual or ordinary course of business or
       living, so as to render the possibility of future tracing of the assets remote, if not
       impossible in fact or in law.

30 The condition precedent to entitlement to the order is the demonstration by the plaintiff
of a "strong prima facie case" (p. 522) and not merely as stipulated in some of the U.K.
authorities, "a good arguable case", (Per Lord Denning in Rasu, supra, and per Megarry V.C. in
Barclay-Johnson v. Yuill, supra.) In summary, the Ontario Court of Appeal recognized Lister as
the general rule, and Mareva as a "limited exception" to it, the exceptional injunction being
available only where there is a real risk that the defendant will remove his assets from the
jurisdiction or dissipate those assets "to avoid the possibility of a judgment..."

31 In other provinces the courts have reached approximately the same result. The New
Brunswick Court of Appeal in Humphreys v. Buragalia (1982), 135 D.L.R. (3d) 535, placed the
basis for this kind of injunction on the danger that the defendant will abscond or dispose of his
assets so as to prevent realization on any ultimate judgment. The earlier view of the Manitoba
Court of Queen's Bench was expressed by Hamilton J. in Hawes v. Szewezyk, supra, where he
concluded that the Mareva rule was "a dangerous innovation" and even if technically within the
jurisdiction of the court, was one that "should not be exercised". The British Columbia Court of
Appeal, in Sekisui House Kabushiki Kaisha (Sekisui House Co.) v. Nagashima (1982), 42 B.C.L.R. 1,
33 C.P.C. 42, recognized the general principles developed around this interlocutory injunction in
the courts of the United Kingdom.
                                                                                  [page28]
32 It has been argued by the appellant that the Mareva injunction has no place in the laws of
this country because provincial legislation has filled the gap by providing statutory remedies. In
Manitoba the appellant points to The Fraudulent Conveyances Act, C.C.S.M., c. F-160; The
Garnishment Act, C.C.S.M. c. G-20; the Court of Queen's Bench Rules, Chapter XXIV
(Attachment), Rule 582; and Chapter XIX (Examination of Judgment Debtors, Attachment of
Debts), Rule 526, "garnishee" procedures. In other provinces, similar legislation and rules are to
be found. In Ontario, for example, there is the Absconding Debtors Act, R.S.O. 1980, c. 2, s. 2,
which authorizes the seizure of property of a resident of the province who leaves for the
purpose of defrauding or defeating creditors; Rule 372 of the present Rules of Practice which
provides for the preservation of the subject matter of the proceeding; and the Fraudulent
Conveyances Act, R.S.O. 1980, c. 176, which authorizes preventive orders where the plaintiff
establishes a valid claim and prima facie that the conveyance in question was fraudulent. It is
said by counsel for the appellant that this type of statute indicates a legislative intent to provide
interim relief of a type described in the statutes and no more. On this line of reasoning the
                                                                                              38
courts, it is said, should not "legislate" by adopting the sweeping rules of the Mareva line of
cases. This should be a matter for the legislature which is better placed to assess the problem,
its incidence in the community and the range of solutions available. One should not assume that
the British legislature has been entirely silent apart from s. 45, supra. See Halsbury’s Laws of
England (4th ed.), vol. 18, p. 166, paragraph 358, where reference is made to statutory
authority to set aside fraudulent conveyances. However, the United Kingdom legislation is not
as far-reaching as appears to be the case in this country.

33 The Manitoba Court of Appeal divided on the relevance of these statutes. The majority,
speaking through Matas J.A., took the view that such legislation and rules of court provide for
relief in specific circumstances and do not preclude the invocation by the court of s. 59(1) of The
Queen's Bench Act for the issuance of a preventive injunction in the nature of the Mareva
injunction. A [page29] similar view has been expressed by Tallis J., now of the Saskatchewan
Court of Appeal, in BP Exploration Co. (Libya) v. Hunt (1980), 114 D.L.R. (3d) 35, at p. 58. Huband
J.A., in dissent, acknowledged that the aforementioned statutes and rules of court do not assist
the respondent here as there is no liquidated demand or debt or a conveyance in fraud of
creditors. An attaching order might avail but the rule is more precise in its requirements than
the Mareva rules as they presently stand. As the respondent was "registered to do business in
Manitoba" and has an "authorized agent to accept service" (to quote Huband J.A.), the
respondent could not qualify for an attaching order. In the result, the learned justice would
preclude recourse to a Mareva order where specific remedies are available at law; and if not so
available, then "the courts should be cautious to fill the void by a Mareva injunction". There are
helpful discussions as to the significance of these and other provincial statutes in relation to
Mareva injunctions in Stockwood, "Mareva" Injunctions (1981), 3 Advocates' Q. 85; Rogers and
Hately, Getting the Pretrial Injunction (1982), 60 Can. Bar. Rev. 1; and McAllister, Mareva
Injunctions (1982), 28 C.P.C. 1. Reference is made in the British cases to the availability of
bankruptcy legislation which would allow the ultimately successful plaintiff to set aside any
disposition made in fraud of creditors by way of preference or improper dealing. The same
condition exists in this country where the federal Bankruptcy Act has uniform application
throughout the country.

34 I do not believe the presence of provincial or federal legislation of the type discussed
above can preclude the issuance of a protective injunction or narrow the breadth of expression
employed in s. 59(1) of the Manitoba Queen's Bench Act. If the court has the authority under
such a legislative provision properly construed, then that authority must be expressly reduced
by other legislation directed to the problem. Such is not the case here. [page30] That answer, of
course, does not assist in determining the proper practice of the court when dealing with an
application for this type of interlocutory injunction other than to find jurisdiction in the court to
respond in a proper case.

35 Before leaving this aspect of the matter, one should make note of the appellant's
submission that the Bankruptcy Act of Canada is available to the respondent in the event that
improper disposition is made of the appellant's assets followed by an assignment or petition
under the Bankruptcy Act. This was a consideration in the early Mareva judgments in England. It
is not decisive on the point of jurisdiction to make, or the propriety in these circumstances to
issue, a Mareva injunction. The order was not made for the purpose of protecting the
respondent from the consequences of any ultimate bankruptcy procedures. The entitlement
springs, if it does at all, from the authority of the court at law to make the order and the
qualification of the respondents under the rules and tests applied by the court in doing so. The
Bankruptcy Act, which at times may be relevant to the issue presented to the chambers judge
on a Mareva application, is not a controlling consideration, particularly on the facts in this
appeal.

36   The majority of the Court of Appeal considered that:
                                                                                                 39

       One of the factors which is relevant in this case is the clear intention of Aetna to transfer
       its assets from Manitoba to Montreal, albeit that the intention is openly expressed. And
       Quebec is not a reciprocating province with respect to enforcement of judgments.

The Manitoba Reciprocal Enforcement of Judgments Act, C.C.S.M., c. J-20, provides the
machinery for the enforcement in Manitoba of judgments of the courts in other Canadian
provinces which have reciprocal arrangements with the Province of Manitoba. The Act also
provides for the entry into such arrangements for the registration in other provinces of
judgments of the courts of Manitoba. With the exception of Quebec, all the provinces of
Canada, the Northwest Territories [page31] and the Yukon Territory have entered into such
reciprocal arrangements and have like statutes. Twenty-five per cent of the assets of the
appellant are in the Province of Ontario exceeding the value of the assets of the appellant in
Manitoba which are affected by the order under appeal. The Manitoba Act and the Ontario Act
each require service upon the defendant to have been effected in the province of judgment in
order to qualify such judgment for registration and enforcement in the other province (Ontario,
in this case). The record here does not expressly show that the appellant was served within the
Province of Manitoba with a writ or other originating instrument, or with the notice of motion
for this injunction. The respondent is, however, a federal company with an office in Manitoba
and was at all relevant times doing business in Manitoba. Under The Corporations Act of
Manitoba, 1976 (Man.) c. 40, C.C.S.M., c. C225, such corporations are required to register and
to nominate an agent for service, all as noted by justice Huband in dissent below. More
importantly, the appellant appeared in and thereby attorned to the jurisdiction of the court in
Manitoba. Thus, any judgment which may arise in these proceedings in Manitoba will qualify for
registration enforcement under the Ontario statute and hence could be executed there against
the Ontario assets of the appellant in the same manner as though judgment had been issued
out of the Supreme Court of Ontario.

37 In the Province of Quebec, provision is found in the Code of Civil Procedure for action upon
judgments outside the Province of Quebec.

       178. Any defence which was or might have been set up to the original action may be
       pleaded to an action brought upon a judgment rendered out of Canada.

       179. Any defence which might have been set up to the original action may be pleaded to
       an action brought upon a judgment rendered in any other province of Canada, provided
       that the defendant was not personally served with the action in such other province or
       did not appear in such action.

       180. Any such defence cannot be pleaded if the defendant was personally served in such
       province, or [page32] appeared in the original action, except in any case involving the
       decision of a right affecting immoveables in this province, or the jurisdiction of a foreign
       court concerning such right.

In such proceedings reliance may be had upon art. 1220 of the Civil Code of the Province of
Quebec which supplements the procedure under art. 179, supra, by providing for the proof of
judgments from courts outside the Province of Quebec. The Civil Code differentiates between
foreign judgments and those emanating from the courts of other provinces, and provides in the
latter case for a limited process where the defendant in the extra-provincial proceeding was
served in the province or appeared in a court of that province. The action in Quebec, upon any
judgment later obtained in Manitoba by the respondent, would be a formal process of
enforcement not different in substance and execution from the proceedings under the Ontario
reciprocal statute. In the result, Quebec accords a means of enforcement of Manitoba
judgments but the converse (which is of no concern in this appeal) is not the case because the
                                                                                             40
reciprocity machinery in the Manitoba statute has not been brought into play. The access to the
enforcement procedures under the laws of Quebec renders ineffective, in my view, any
argument that the respondent was exposed to some inevitable or irreparable loss if, at the time
any judgment issues in the courts of Manitoba, the assets of the appellant have been
transferred from Manitoba to Quebec. Furthermore, Ontario is qualified as a "reciprocating
state" under the Manitoba legislation, and the appellant, according to the record herein, had
assets in that province in excess of the assets impounded in Manitoba by the order under
appeal.

38 A large part of the respondent's factum filed herein, and of argument made in this court,
centered upon the winding down of the appellant's business which presumably has created a
risk of default by the appellant in meeting its obligations. The factum goes further and says that
by reason of this trend, in early 1982, "for all practical purposes, Aetna ceases to exist". The
argument is not made that the respondent will go into bankruptcy [page33] or be wound up.
Essentially, this line of submission must lead to the proposition that while the appellant "will not
go into bankruptcy or default" (extract from respondent's factum), there is, in the words of the
respondent's factum, "a sufficient risk of Aetna defaulting in its obligations to justify granting a
Mareva injunction". Such a default would, of course, invite a petition or force an assignment
under the Bankruptcy Act. In either case, the respondent has extensive and easily enforceable
rights. One right the respondent does not have, with or without the Mareva injunction "in aid",
is a priority or preference if indeed the appellant has, as the respondent has elaborately
calculated in its submissions in this Court, become insolvent. It would not appear from the facts
revealed on the record that there is any intention on the part of the appellant to default in any
obligation to the respondent or to anyone else. An affidavit filed by the appellant states that "...
Aetna is currently meeting all its liabilities as they become due". The deponent in this affidavit,
Jean-Paul Lafontaine, was cross-examined by counsel for the respondent generally, but no
questions were directed to this bald statement which remains uncontradicted in the record.
This statement is obviously vital on the key question of the existence of any real risk of loss in
the respondent as a basis for the issuance of this exceptional interlocutory order.

39 However, even assuming the appellant is wound up by its two shareholders, the Traders
Group and the Royal Bank of Canada, it is a federal company. If it is solvent, the provisions of
the incorporating Act, the Canada Business Corporations Act, supra, apply. Dissolution may be
effected only on "discharge of any liabilities". Provision is made for notice to creditors and
liquidation is conditional upon "adequately providing for the payment or discharge of all its
obligations" (s. 204(7)(d)). All of this procedure is made subject to court supervision on the
application of the officer designated in the statute or "any interested person", which includes a
creditor such as the respondent. The Manitoba Corporations Act, [page34] supra, ss. 186 and
187, requires a federal corporation to register under the Act and to appoint an agent for service
of process in Manitoba. Thus there is a detailed pattern under the combined corporation
legislation, provincial and federal, to cover a surrender of charter as a method of avoiding the
payment of debts.

40 On the other hand, if the appellant is insolvent, the remedies under the Bankruptcy Act
apply and not the procedures under the Canada Business Corporations Act. A Mareva injunction
can neither advance nor interfere with these procedures.

41 All the foregoing considerations, while important to an understanding of the operation of
this type of injunction, leave untouched the underlying and basic question: do the principles, as
developed in the United Kingdom courts, survive intact a transplantation from that unitary state
to the federal state of Canada? The question in its simplest form arises in the principles
enunciated in the earliest Mareva cases where the wrong to be prevented was the removal
from "the jurisdiction" of assets of the respondent with a view to defeating the claim of a
creditor. It has been found by the courts below that there was no such wrongdoing here. An
                                                                                                  41
initial question, therefore, must be answered, namely, what is meant by "jurisdiction" in a
federal context? It at least means the jurisdiction of the Manitoba court. But is the bare removal
of assets from the Province of Manitoba sufficient? The appellant is a federally incorporated
company with authority to carry on business throughout Canada. In the course of so doing, it
moves assets in and out of the provinces of Manitoba, Quebec and Ontario. No breach of law is
asserted by the respondent. No improper purpose has been exposed. It is simply a clash of
rights: the respondents' right to protect their position under any judgment which might
hereafter be obtained, and the appellant's right to exercise its undoubted corporate capacity,
federally confirmed (and the constitutionality of which is not challenged), to carry on business
throughout Canada. The appellant does not seek to remove the assets in [page35] question
from the national jurisdiction in which its corporate existence is maintained. The writ of the
Manitoba court runs through judgment, founded on service of initiating process on the
appellant within Manitoba, into Ontario under reciprocal provincial legislation, and into Quebec
by reason of the laws of that province, supra. None of these vital considerations was present in
the United Kingdom where Mareva was conceived to fend off the depredations of shady
mariners operating out of far-away havens, usually on the fringe of legally organized commerce.
In the Canadian federal system, the appellant is not a foreigner, nor even a non-resident in the
ordinary sense of the word. It is capable of "residing" throughout Canada and did so in
Manitoba. It is subject to execution under any Manitoba judgment in every part of Canada.
There was no clandestine transfer of assets designed to defraud the legal process of the courts
of Manitoba. There is no evidence that this federal entity has arranged its affairs so as to
defraud Manitoba creditors. The terminology and trappings of Mareva must be examined in the
federal setting. In some ways, "jurisdiction" extends to the national boundaries, or, in any case,
beyond the provincial boundary of Manitoba. For other purposes, jurisdiction no doubt can be
confined to the reach of the writ of the Manitoba courts. These parameters will have to develop
in Canada as did the Mareva principle in the courts of the United Kingdom. The laws of this
country, as developed here from jurisprudence originating in the United Kingdom and variously
adopted in some of the provinces, have long included quia timet orders when justice and the
protection of the judicial process required. "Mareva" is a refinement made necessary to
accommodate in the same laws the primary principle of Lister. All this is as true in Canada as in
the United Kingdom. I conclude that nothing has taken this jurisdiction away from the superior
courts in the provinces. In establishing the rules under which superior courts will issue such
interlocutory orders in this country, one must not apply in toto or verbatim the dicta of the
decisions in other legal systems though they may have much in common with those of Canada.
The Mareva consideration arising in this appeal is the effect of a rightful removal of assets in the
ordinary course [page36] of business by a resident defendant to another part of the federal
system. This by itself will not trigger such an exceptional remedy as it well might do in the
United Kingdom where the jurisdiction of the court and the boundaries of the country coincide.
Even there, it will be seen in Rasu Maritima, supra, an interlocutory injunction was not issued on
the removal of assets from the United Kingdom in part because the assets were being moved to
another country of the Common Market where the law recognized judgment before trial and
indeed execution before judgment. That reasoning is much amplified in its introduction into a
federal system. The South Australian court, as we have seen in Pivovaroff, supra, has declined to
adopt the Mareva principles.

42 Taking this added federal consideration into account, should the injunction have been
issued in the first instance and renewed in the Court of Appeal? The Mareva rules of the United
Kingdom as developed in our courts, do not, in my view of the circumstances here existing,
properly reflect the federal concern. The movement of the assets in question was announced in
public pronouncements of the two stockholders of the appellant and by the appellant itself. The
respondents were expressly made aware of the impending transfer. There is no finding in either
court below of any improper motive behind this transfer of assets. The transfer, indeed, was
carried out in the ordinary course of business and reflected the history of the conduct of the
appellant's business in the past in Manitoba. The appellant never did retain assets in its
                                                                                               42
Manitoba branch operation, either before the appellant commenced dealings with the
respondent or thereafter. There is no finding of any intention by the appellant to default on its
obligations, either generally or to the respondent, if in law such an obligation is later found to
exist. The appellant has [page37] not been found to be insolvent and the Court of Appeal
expressly ruled this element out as a consideration governing the issuance or denial of the
injunction. Finally, there is the federal fact and the procedures of pursuit open to the
respondent in tracing these assets through to their destination in Quebec, or in recovering from
the assets of the appellant in Ontario.

43 There is still, as in the days of Lister, a profound unfairness in a rule which sees one's
assets tied up indefinitely pending trial of an action which may not succeed, and even if it does
succeed, which may result in an award of far less than the caged assets. The harshness of such
an exception to the general rule is even less acceptable where the defendant is a resident
within the jurisdiction of the court and the assets in question are not being disposed of or
moved out of the country or put beyond the reach of the courts of the country. This sub-rule or
exception can lead to serious abuse. A plaintiff with an apparent claim, without ultimate
substance, may, by the Mareva exception to the Lister rule, tie up the assets of the defendant,
not for the purpose of their preservation until judgment, but to force, by litigious blackmail, a
settlement on the defendant who, for any one of many reasons, cannot afford to await the
ultimate vindication after trial. I would, with all respect to those who have held otherwise,
conclude that the order should not have been issued under the principles of interlocutory quia
timet orders in Canadian courts functioning as they do in a federal system.

44 Finally, there is the question as to whether the appellate tribunal may properly step in and
alter a discretionary order, such as an interlocutory order, issued by a court of first instance
where no sufficient error in law on the part of the courts below has been revealed, or where the
order in question was issued based upon a wrong or inapplicable principle of law. Where no
significant error of law is revealed, in short, an appellate court should not intervene. We do not
here have the benefit of reasons from the judge of first instance, Wilson J., [page38] issuing the
order, but we do have the reasons of the Court of Appeal. That court, with all respect to those
members who confirmed the issuance of the order, did not give due consideration and weight
to the position of the courts and the position of the parties before those courts when dealing
with an interlocutory quia timet order in a federal jurisdiction. Though I would have come to the
opposite conclusion even aside from that element of the law involved in these proceedings,
interference with the exercise of discretion in issuing the order would, apart from this
consideration, be unwarranted. It is, however, in my view an error of law relating to the
application of the principles properly governing the execution of the court's discretion in favour
of the respondent in issuing the quia timet interlocutory order, and accordingly, I would
intervene and set aside such order.

45 I therefore would allow the appeal and set aside the injunction issued in the courts below,
with costs to the appellant throughout.

          Appeal allowed with costs.
                                            *****

Erratum, published at [1990] 3 S.C.R., page iv
   [1985] 1 S.C.R. p. 35, line b-1 of the English version, Read "the depredations of shady
mariners" instead of "depradations of shady mariners".
Errata, published at [1990] 3 S.C.R., page iv
   [1985] 1 S.C.R. p. 35, line b-1 of the English version. Read "the depredations of shady
mariners" instead of "depradations of shady mariners".
Errata, published at [1985] 1 S.C.R., page iv
   [1985] 1 S.C.R. p. 38, line f-4 of the English version. Read "Riley" instead of "Ripley".
                                                                                               43
[1985 1 S.C.R. p. 22, line c-1 of the English version. Read "Pivovaroff v. Chernabaeff" instead of
"Pivovaroff v. Chernbaeff".



                                         Mooney v. Orr [1]
                                 (1994), 98 B.C.L.R. (2d) 318 (S.C.)

     Application for Mareva Injunction

1 September 30, 1994. NEWBURY J.: – The defendants in this action seek an ex parte Mareva
injunction against the plaintiff and defendant by counterclaim, Mr. Mooney. If only because it is
brought in the middle of a complex trial (now in its ninth week) currently being heard before
another judge of this Court, the application is unusual; but even more noteworthy is the fact
that the injunction, if granted, would extend to restrain Mr. Mooney (a resident of this
province) from dealing with any of his assets, including those situate outside British Columbia.
As far as I am aware, no Canadian court has granted a Mareva injunction that purports to have
such extra-territorial effect. Indeed a judge of this Court ruled in 1989 that he did not have the
jurisdiction to do so: see Zellers Inc. v. Doobay 34 B.C.L.R. (2d) 187). Mr. McAlpine argues,
however, that subsequent decisions in England and Australia have affected the validity of that
ruling and that the courts in Canada, no less than in other jurisdictions, must heed the "insistent
demand of justice which gave birth to the remedy of Mareva injunctions ... that it extend, in
appropriate cases, to a defendant's assets outside of the jurisdiction." (Hospital Products Ltd. v.
Ballabil Holdings Pty. Ltd. [1984] 2 N.S.W.L.R. 662 (S.C.) at 665.)

2 The specific order sought herein is threefold – first that Mr. Mooney by himself, his agents,
servants or trustees, be restrained from disposing of or dealing with any of his assets, whether
held directly or indirectly, and wherever situate, until the final disposition of this action; second,
that within 14 days of service of the order upon him, he disclose the full value of his assets,
identifying their location and how they are held; and last, that Coopers & Lybrand Ltd. be
appointed as a receiver of those assets and that within 21 days of the order, Mr. Mooney
transfer to the receiver such assets as are located outside the jurisdiction of this Court. It is also
proposed that the entire order be subject to a proviso as follows:

       "... in so far as this Order purports to have any effect outside of the jurisdiction of this
       court, no person shall be affected by it or concerned by the terms of it until this Order is
       declared enforceable or registered or enforced by a foreign court, unless that person is:

               (a) a party to this Action or an officer or an agent appointed by Power of
               Attorney of a party to this Action; or

               (b) a person who is subject to the jurisdiction of this court and given written
               notice of this Order at his, her or its residence or place of business within the
               jurisdiction."

This is a modified version of the proviso formulated by the Court of Appeal in one of the seminal
English cases on the subject of 'worldwide' Mareva orders, Babanaft International Co. SA v.
Bassatne et al. [1989] 1 All E.R. 433.

The Jurisdiction Question

3 In Babanaft, the defendants were Lebanese nationals who led an "unusually peripatetic"
lifestyle. Vinelott, J. had ruled at the end of a trial that they were liable to the plaintiff in an
amount in excess of 15 million. He initially granted a Mareva injunction restraining the
                                                                                                  44
defendants from disposing of assets in the United Kingdom, but the plaintiff then applied to
have the order extended to their assets abroad. These appeared to be considerable, but were
scattered in various jurisdictions including the United Kingdom, Switzerland, Panama, Libera and
the Dutch Antilles. The judge found that the plaintiff was "likely to meet considerable difficulties
in ascertaining the extent of the assets available to meet the judgment it has obtained, and in
enforcing that judgment" and that the defendants "would be likely to take any step open to
them to frustrate or delay execution of the judgment." Accordingly, and to ensure that they did
not dispose of assets before the plaintiff could consider "whether it can take effective steps to
execute the judgment in the jurisdiction where those assets are situate", Vinelott, J. granted the
extension. The defendants were restrained from dealing with their assets ex juris without giving
the plaintiff reasonable notice of their intention to do so, on the reasoning that:

       Once the existence of an asset which [the defendants] propose to deal has been
       disclosed, it will be open to [the plaintiff] to take any steps available in the jurisdiction
       where the asset is situate to execute the judgment or prevent [the defendants] from
       disposing of it, or, if appropriate, to make a further application to this court for, for
       instance, the appointment of a receiver. An injunction in those limited terms would not,
       it seems to me, create the difficulties developed by counsel for the defendants. [Quoted
       at [1989] 1 All E.R. 437.]

4 The defendants appealed Vinelott, J.'s order, relying on Ashtiani v. Kashi [1986] 2 All E.R.
970 (C.A.), where the Court had held that an order for discovery of assets made ancillary to the
grant of a Mareva injunction must be restricted to requiring disclosure of assets within the
jurisdiction. In Babanaft, however, the Court of Appeal substantially qualified this ruling. It held
that "in appropriate cases, though these may well be rare, there is nothing to preclude our
courts from granting Mareva-type injunctions against defendants which extend to their assets
outside the jurisdiction." (at 440). This jurisdiction was grounded in s. 37 of the English Supreme
Court Act 1981, which gave the English High Court the power to grant injunctions or appoint
receivers "in all cases in which it appears to the Court to be just and convenient to do so" –
wording very similar to that of s. 36 of the Law and Equity Act of this province, R.S.B.C. 1979, c.
224. The Court rejected the argument that ss. 37(3) of the statute, which referred to orders
restraining a party from removing or otherwise dealing with assets located within the
jurisdiction, meant that Mareva injunctions must be limited to assets located within the
jurisdiction. According to Kerr, L.J:

       The purpose of sub-s (3) was not to restrict the territorial ambit of Mareva injunctions
       but to ensure that there should be no discrimination against the persons not domiciled,
       resident or present within the jurisdiction. Subsection (3) does not restrict the scope,
       geographical or otherwise, of sub-s (1). And it is perhaps worth noting that the
       appointment of a receiver pursuant to sub-s (1) may extend to assets located outside the
       jurisdiction, whether moveable or immoveable (See 8 Halsbury’s Laws (4th ed.) para.
       648 (Conflict of Laws) and 39 ibid para. 855 (Receivers).

       And, in regard to the proper scope of the exercise of the court's discretion, the practice
       is clearly still in a state of development which has moved on since then. Thus, the
       Australian courts have not followed the policy indicated in Ashtiani v. Kashi by granting
       Mareva injunctions before judgment covering assets located in other Australian
       jurisdictions .... [440].

At the same time, recognizing that an unqualified injunction over foreign assets would involve
an "exorbitant assertion of extra-territorial jurisdiction over third parties" and that the Court
could exert only in personam jurisdiction, their Lordships added the following proviso to the
proposed order:
                                                                                               45
       Provided always that no person other than the defendants themselves shall in any wise
       be affected by the terms of this order ... or concerned to inquire whether any instruction
       given by or on behalf of either defendant or by anyone else, or any other act or omission
       of either defendant or anyone else, whether acting on behalf of either defendant or
       otherwise, is or may be a breach of this order ... by either defendant. [at 450]

5 As indicated, the applicant in Babanaft was a judgment creditor – a fact that provided one
basis for distinguishing the case from Ashtiani v. Kashi, supra: see the comments of Kerr, L.J. at
444-5, Neill, L.J. at 449, and Nicholls, L.J. at 451-2. This distinction was noted in Zellers Inc. v.
Doobay by Melnick, L.J.S.C. (as he then was), who continued:

       The Mareva injunction, although still relatively new in the legal world, is still an
       extraordinary remedy, particularly when sought in these circumstances, ex parte before
       judgment. Notwithstanding those cases discussed in these reasons which either have
       taken or in obiter discussion would be inclined to take the Mareva injunction beyond
       Ashtiani, I am of the view that the more restrictive approach in Ashtiani is the better
       one. I conclude that I do not have the jurisdiction to order a Mareva injunction to affect
       assets of Doobay or others in her family outside the jurisdiction of this Court. Zellers has
       already followed what I feel to be the appropriate course of action, that is, commencing
       an action in the Province of Ontario where the asset in question is known to be. In any
       event, I am of the view that the weight of authority is against the extension of the
       Mareva injunction to the Ontario property. [at 195]

6 Since the ruling in Zellers the reluctance of the English courts to grant Mareva injunctions
with extra-territorial effect in pre-judgment situations has been overcome. A series of
judgments made in an action called Derby & Co. Ltd. and Others v. Weldon and Others provides
the most extensive and helpful exposition of subsequent developments, although they do not
stand alone: see also Republic of Haiti v. Duvalier [1989] 1 All E.R. 456; Interpol Ltd. v. Galani
[1987] 1 All E.R. 981; and MacLaine Watson & Co. Ltd. v. International Tin Council (No. 2) [1988]
23 All E.R. 257; and Goth v. Goth [1992] 1 All E.R. 920. In Derby v. Weldon (No. 1) [1989] 1 All
E.R. 470, the Court of Appeal ruled that a Chambers judge had misdirected himself in refusing a
'worldwide' injunction on the basis of Ashtiani notwithstanding his findings that there were
grounds for supposing that the defendants had acted dishonestly, "coupled with the fact that
they have the ability to lock away assets in inaccessible overseas companies." Parker, L.J.
reasoned as follows:

       The mere fact that the plaintiff shows a good arguable case and a real risk of disposal or
       hiding of English assets, the requisites for an internal Mareva, clearly cannot by itself be
       sufficient to justify an extra-territorial Mareva either worldwide or at all. Such a Mareva
       would clearly be unjustified if, for example, there were sufficient English assets to cover
       the appropriate sum, or if the court were not satisfied that there were foreign assets or
       that there was a real risk of disposal of the same, or if it would in all the circumstances
       be oppressive to make the order.

       Here, however, it is accepted that there are foreign assets. The judge has found,
       correctly in my view, that there is a high risk of disposal of such assets. The English assets
       are wholly insufficient to afford protection. The defendants are clearly sophisticated
       operators who have amply demonstrated their ability to render assets untraceable and a
       determination not to reveal them.

       In those circumstances it appears to me that there is every justification for a worldwide
       Mareva, so long as, by undertaking or proviso or a combination of both, (a) oppression
       of the defendants by way of exposure to a multiplicity of proceedings is avoided, (b) the
       defendants are protected against the misuse of information gained from the ordinary
                                                                                                 46
       order for disclosure in aid of the Mareva, (c) the position of third parties is protected [at
       474-5].

7 In Derby v. Weldon (No. 2) [1989] 1 All E.R. 1002, the Court dealt inter alia with whether the
third defendant, resident in Panama (where it was doubtful an order of an English court would
be recognized), and the fourth defendant, which had no assets in England, should be the
subjects of a worldwide Mareva injunction and whether an order for disclosure of assets and for
the appointment of a receiver was appropriate. The Court affirmed its general jurisdiction to
make a worldwide order pre-judgment, emphasizing the need for courts to adapt to the
changing conditions in which sophisticated parties can dissipate or conceal assets. Lord
Donaldson of Lymington, M.R. said this:

       The fundamental principle underlying this jurisdiction is that, within the limits of its
       powers, no court should permit a defendant to take action designed to ensure that
       subsequent orders of the court are rendered less effective than would otherwise be the
       case. On the other hand, it is not its purpose to prevent a defendant carrying on business
       in the ordinary way or, if an individual, living his life normally pending the determination
       of the dispute, nor to impede him in any way in defendant himself against the claim. Nor
       is its purpose to place the plaintiff in the position of a secured creditor. In a word, whilst
       one of the hazards facing a plaintiff in litigation is that, come the day of judgment it may
       not be possible for him to obtain satisfaction of that judgment fully or at all, the court
       should not permit the defendant artificially to create such a situation.

       The jurisdictional basis of the Mareva injunction is to be found in s. 37(1) to (3) of the
       Supreme Court Act, 1981 ...

       In Beddow v. Beddow (1878) 9 Ch D 89 at 93 Jessel M.R. said:

               'I have unlimited power to grant an injunction in any case where it would be right
               or just to do so: and what is right or just must be decided, not by the caprice of
               the Judge, but according to sufficient legal reasons or on settled legal principles.'

       That remains the position to this day, the only issue being whether in particular
       circumstances the grant is 'right or just'. What changes is not the power or the principles
       but the circumstances, both special and general, in which the courts are asked to
       exercise this jurisdiction. This can and does call for changes in the practice of the courts.
       We live in a time of rapidly growing commercial and financial sophistication and it
       behoves the courts to adapt their practices to meet the current wiles of those
       defendants who are prepared to devote as much energy to making themselves immune
       to the courts' orders as to resist in the making of such orders on the merits of their case.
       Hence it comes about that ... this is a developing branch of the law [at 1006-7].

8 On the two specific questions I have noted, the Court ruled that its discretion to make
worldwide Mareva orders should not be precluded by the fact that a defendant has assets in the
jurisdiction, of however little value. Again in the words of Lord Donaldson, M.R., "the existence
of sufficient assets within the jurisdiction is an excellent reason for confining the jurisdiction to
such assets, but, other considerations apart, the fewer the assets within the jurisdiction, the
greater the necessity for taking protective measures in relation to those outside it." Nor did the
Court accept that the inability of a plaintiff to enforce specifically a Mareva injunction in another
jurisdiction precluded such an order, since in the event of disobedience, the English court still
retained the right to bar the defendant's right to defend. However, in order to avoid the
"circular effect" which the Babanaft proviso was having with respect to extra-territorial orders
under the European Judgments Convention, the Court suggested modified wording as follows:
                                                                                                 47
       Provided that, in so far as this order purports to have any extra-territorial effect, no
       person shall be affected thereby or concerned with the terms thereof until it shall be
       declared enforceable or be enforced by a foreign court and then it shall only affect them
       to the extent of such declaration or enforcement unless they are (a) a person to whom
       this order is addressed or an officer of or an agent appointed by a power of attorney of
       such a person or (b) persons who are subject to the jurisdiction of this court and (i) have
       been given written notice of this order at their residence or place of business within the
       jurisdiction, and (ii) are able to prevent acts or omissions outside the jurisdiction of this
       court which assist in the breach of the terms of this order.

9 In Derby v. Weldon (No. 6) [1990] 3 All E.R. 263, the Court of Appeal was asked to decide
whether various deposits and other assets of the defendants which had come into the
possession of the Court-appointed receiver should be ordered returned to Switzerland and
whether other assets (the "external assets") should be transferred out of that country.
Switzerland was unlikely to recognize or enforce an English judgment and its laws prohibited a
foreign receiver from transacting business in that country. Again, the Court did not regard the
possibility of non-recognition or non-enforcement of the English judgment as an absolute bar to
the granting of relief in personam. Dillon, L. J. noted:

       "To regard the grant of a Mareva injunction not as a matter of territorial jurisdiction to
       be exercised court by court throughout the various countries of the world where it may
       be appropriate but as a matter of unlimited jurisdiction in personam of the English court
       over persons who have properly been made parties, under English procedure, to
       proceedings pending before the English court is consistent with the approach of the
       English court to the appointment of receivers of the British and foreign assets of English
       companies. The court has always been ready to appoint a receiver over the foreign as
       well as the British assets of an English company, even though it is recognized that in
       relation to foreign assets, the appointment may not prove effective without assistance
       from a foreign court ....

       ... The object of a Mareva injunction is stated by Lord Donaldson, M.R. in Derby v.
       Weldon (No. 2)... as being that within the limits of its powers no court should permit a
       defendant to take action designed to ensure that subsequent orders of the court are
       rendered less effective than would otherwise be the case .... I see no reason why that
       should not extend, in principle and in an appropriate case, to ordering the transfer of
       assets a jurisdiction in which the order of the English court after the trial of the action
       will be recognized ...." [at 272-3]

Having confirmed that it had jurisdiction, the Court however ruled that the step of ordering that
the assets in Switzerland be transferred elsewhere was unnecessary in that the assets appeared
"safe from dissipation under the present regime" (under which they were being held by the
receiver and another person jointly); and that the order sought would be inappropriate in
respect of the external assets, given the limited extent to which it could be enforced in the
Swiss courts.

10 Parallel to the development in England of the extra-territorial Mareva injunction, various
courts in Australia have granted the remedy in appropriate cases, also on the basis of in
personam authority grounded in statutes similar to the Law and Equity Act of this province: see
Re Clunies – Ross; ex parte Totterdell et al. (1987) 72 A.L.R. 241 (F.C. Aust.); Coombs and Barei
Constructions Pty. Ltd. v. Dynasty Pty. Ltd. and Coombs [1986] 42 S.A.S.R. 413 (S.C.); Hospital
Products Ltd. v. Ballabil Holdings Pty. Ltd., supra; and Jackson v. Sterling Industries Ltd. (1987)
71 A.L.R. 457 (H.C. Aust.). Like their English counterparts, Australian judges have emphasized
that extra-territorial orders may be justified both as a "matter of logic and as a matter of
commercial reality". As noted by Rogers, J. in the Hospital Products Case, supra,:
                                                                                                 48

       "I should say at the outset that it appears to me that the purpose nominated as the
       raison d'être for the remedy could fail to be satisfied in given circumstances if the belief
       is restricted to assets within the jurisdiction. To take the most simple situation, let it be
       assumed that a defendant, within the jurisdiction, has assets overseas against which
       execution could be levied in the event of judgment being obtained against the defendant
       within the jurisdiction. Is the court powerless to prevent such a defendant from
       transferring the foreign assets into the anonymity of a numbered Swiss bank account in
       the face of clear statements by the defendant of an intention to do so? Putting the
       question another way, why should the attempt of a defendant, within the jurisdiction, to
       make himself judgment proof in relation to foreign assets be any more permissible or
       any less inimical to the proper administration of justice than similar action with respect
       to locally owned assets? ... Is there premium to be placed on foresight in removal of
       assets before the grant of injunctive relief where the purpose is to render the defendant
       judgment proof?" [at 664].

11 In my view, this reasoning is compelling both as a matter of logic and as a matter of
commercial reality in this jurisdiction as well. The reasons for extending Mareva injunctions to
apply to foreign assets are valid in British Columbia no less than in England and Australia – the
notion that a court should not permit a defendant to take action designed to frustrate existing
or subsequent orders of the court, and the practical consideration that in this day of instant
communication and paperless cross-border transfers, the courts must, in order to preserve the
effectiveness of their judgments, adapt to new circumstances. Such adaptability has always
been, and continues to be, the genius of the common law.

12 Accordingly, I conclude that the developments I have described do constitute an evolution
of the law sufficient to warrant a reconsideration of this Court's ruling in Zellers Inc. v. Derby,
supra. Melnick, L.J.S.C. himself recognized in that case that Babanaft had broken new ground,
and that Ashtiani, on which he relied fairly heavily, was likely not the "last word" on Mareva
injunctions. Since then, the authority of Ashtiani has been effectively superseded. Furthermore,
the defendant in Zellers was alleged to be dissipating her assets in Ontario, and as clearly
indicated by the Supreme Court of Canada in Aetna Financial Services Ltd. v. Feigelman [1985] 2
W.W.R. 97, the risk of a defendant's frustrating a judgment creditor by transferring assets to
another province in Canada is much less than in a case where the other jurisdiction is non-
reciprocating. (Parenthetically, I also note here that the judgment of Estey, J. for the Court in
Aetna seems to have left open the possibility of Mareva injunctions with extra-territorial effect:
at 117, he observed that "unless there is a genuine risk of disappearance of assets, either inside
or outside the jurisdiction, the injunction will not issue.") Thus I believe it is open to me to
depart from the conclusion reached in Zellers concerning the jurisdiction to grant 'worldwide'
Mareva injunctions generally, and to do so without doubting in any way the actual result
reached in that case, with which result I respectfully agree. On the question of jurisdiction, then,
I regard this Court as having the authority, in an appropriate case, to restrain a party who is
properly subject to the jurisdiction of the Court, from transferring or dealing with assets,
including assets ex juris, where necessary to prevent his frustrating an order or possible future
order of this Court.

The Case at Bar

13 Is this, then, an 'appropriate case'? As with any Mareva injunction, it is trite law that the
applicants must, after making full disclosure of all relevant and material facts in their
knowledge, satisfy the Chambers judge that they have a "strong prima facie case" (see Aetna
Financial Services, supra, at 118) and that there is a "real risk" of removal or dissipation of his
assets to avoid judgment. (Aetna, supra, at 119; Sekisui House Co. Ltd. v. Nagashima et al.
(1982) 42 B.C.L.R. 1 (B.C.C.A.) at 6; Sharpe, Injunctions and Specific Performance (2nd ed., 1993)
                                                                                               49
at 2.870.) Where an applicant seeks to enjoin the transfer of assets worldwide, one grafts onto
these conditions the further requirement that there exist assets ex juris the disposition or
concealment of which would be likely to frustrate any judgment obtained against the
defendant. And, although it is not necessary to prove that the defendant does not have assets in
the jurisdiction, the less the value of those assets, the more likely the Court is to grant relief
with extra-territorial effect: see Derby v. Weldon (No. 2), supra, at 1009.

14 Underlying all these elements in each case is the realization that a Mareva injunction can
result in substantial harm and inconvenience to a defendant, which harm and inconvenience are
obviated only in part by the undertaking as to damages normally required to be given by the
applicant. The courts are understandably unwilling to allow Mareva injunctions, much less those
with extra-territorial effect, to become the norm, especially before a judgment has been given
against the defendant. This is why the "risk" must be a "real" and substantiated one, not simply
an apprehension arising out of the suspicion that normally exists between litigants, or a
stratagem to obtain security for costs not otherwise available under the Rules. As noted by
Nicholls, L.J. in Derby v. Weldon (No. 1), supra:

       An order restraining a defendant from dealing with any of his assets overseas, and
       requiring him to disclose details of all his assets wherever located, is a draconian order.
       The risk of prejudice to which, in the absence of such an order, the plaintiff will be
       subject is that of the dissipation or secretion of assets abroad. This risk must, on the
       facts, be appropriately grave before it will be just and convenient for such a draconian
       order to be made. It goes without saying that before such an order is made the court will
       scrutinize the facts with particular care.... I do not think that it is correct, that if an order
       is made in the present case regarding overseas assets, such an order will become, or
       should become, the norm in cases where a restraint order is made regarding assets
       within the jurisdiction [at 478].

15 Bearing these comments in mind, I turn to the question of whether the applicants in the
case at bar have shown that they have a strong prima facie case in the action, and that there is a
real risk that any judgment they might obtain would be frustrated by the transfer or
concealment of assets outside the jurisdiction. The first issue is easily resolved. I do not intend
in these reasons to recount the evidence before me, but having read the pleadings, (which
concern a large commercial transaction and contain allegations of breach of contract and
fiduciary duty, fraud and conspiracy), excerpts from the testimony given by Mr. Mooney at trial
thus far, and other documents adduced by the applicants, I find that a good arguable case on
the applicants' counterclaim against Mr. Mooney (the amount of which is close to $1,000,000)
has been made out. It is perhaps unnecessary to add that that conclusion is and will remain
entirely irrelevant to the trial judge, who may very well reach the opposite conclusion once all
the evidence is in. For this reason, I agree with Mr. McAlpine's determination that this
application would not have been properly brought before the trial judge. Both the substance
and appearance of justice would be brought into question had that judge been asked to hear
evidence and to determine the issues before me on an ex parte basis. (On this procedural point,
see also the summary of In re All Starr Video at 1993 Times L.R. 171 (March 25, 1993)).

16 The more difficult issue is that of "real risk." Mr. McAlpine does not contend that Mr.
Mooney has no assets in British Columbia, but the evidence of searches of public records
suggests that those assets are not sufficient to satisfy even the judgments that are now
outstanding and registered against him in this province. These judgments, both given by the
English High Court, are in the amounts of 34,426 and 767,069 respectively – in excess of
$1,750,000 (Cdn.). The fact that they remain unsatisfied, together with the fact that holders of
the first judgment are attacking the transfer by Mr. Mooney of his West Vancouver residence to
his wife for $1 in 1992 as a fraudulent conveyance, are cause for concern.
                                                                                                  50
17 As for what assets Mr. Mooney holds in British Columbia, it appears that he holds, directly
or through a company known as Hudson Holdings Ltd., certain shares in a VSE traded company
known as Clarion Environmental Technologies Inc. ("Clarion") and that he has been selling his
own shares over the last many months by private transaction. Clarion's recent financial results
were such that none of the performance shares (held by Hudson Holdings Ltd.) still held in
escrow qualify to be released as yet. One deponent, a lawyer familiar with the VSE rules and
practice, predicts that Clarion will have negative cash flow as at its present year end, so that the
shares are unlikely to be released in the near future. Mr. McAlpine's searches also indicate that
Mr. Mooney is a director and/or officer of Hudson Holdings Ltd., Hudson Developments Ltd. and
Hudson Equities Ltd., none of which holds any real property in British Columbia.

18 Of more significance is the affidavit evidence provided by a business associate of Mr.
Mooney's, Mr. Nicholson. He first became acquainted with Mr. Mooney when the latter
expressed an interest in investing in Mr. Nicholson's company through his (Mr. Mooney's)
company, Hanover Holdings Corporation. (In the trial of this action, Mr. Mooney has testified
that he has no direct or indirect interest whatsoever in this corporation, but Mr. McAlpine has
provided a copy of an agreement dated July 6, 1989 between another company and Hanover
Holdings Corporation, described as incorporated under the laws of the British Virgin Islands,
which was signed by Mr. Mooney on its behalf.) Mr. Nicholson deposes to the course of dealings
he had with Mr. Mooney in 1989-90, during which Mr. Mooney told him that he had control of
various companies, including Hanover Holdings, Jannock Investments (C.I.) Ltd., and Galena
Investments (C.I.) Ltd., the latter two of which would appear to be incorporated in the Channel
Islands. Mr. Mooney also introduced him to a Mr. Ian Ledger as a trustee of "General Trust",
located in Monaco, and, says Mr. Nicholson:

       22. As part of my 'tutoring' in the acquisition of the Concord Group Mr. Mooney
       described to me his model for structuring complex commercial transactions. The
       objective, he explained, was to move all assets offshore so as to make yourself 'bullet
       proof' from creditors in the event the deal went wrong. More specifically, Mr. Mooney
       described the model as follows:

               (a) to set up various offshore companies owed by a trust in another jurisdiction,
               such as the British Virgin Islands or Turks and Caicos;

               (b) all the shares in those companies were to be held as bearer shares;

               (c) The nominee beneficiaries of the trust were to be international charitable
               organizations such as the Red Cross;

               (d) The trust was to be structured in such a fashion that the nominee
               beneficiaries would not receive any of the income or capital of the trust; and

               (e) In this manner, all the assets of the trust were controlled by the trustee who
               acted on Mr. Mooney's instructions.

       23. By structuring affairs in this manner, Mr. Mooney stated that one could make oneself
       'impenetrable' or words to that effect from the claims of one’s creditors.

       24. Furthermore, Mr. Mooney stated that he had previously employed this type of trust
       structure in relation to the acquisition of an English collection agency.

       26. During the period that I was assisting Mr. Mooney, he explained to me that he was
       experiencing marital problems with his third wife. As I had recently been through divorce
       proceedings, Mr. Mooney confided in me that he intended to conceal his offshore assets
                                                                                        51
       from his wife whom he anticipated would be bringing divorce maintenance proceedings
       against him.

19 Mr. McAlpine engaged a private investigating firm in London to inquire further into the
nature, location and value of Mr. Mooney's assets in Europe and the manner in which they are
held. It is here that he encountered a serious evidentiary difficulty. The investigations manager
of that firm deposed to the results of the firm's investigation, as reported to him by the
individual investigator assigned to the file. However, that investigator's name was contained
only in a second affidavit, which Mr. McAlpine was unable to provide except "under seal", which
I ruled was not open to him. Second, the sources of the investigator's information were not
disclosed, since according to the manager, his firm's methods are "closely guarded trade secrets
and cannot be revealed without jeopardizing all [its] future inquiries and operations" in Monaco
and elsewhere.

20 Mr. McAlpine acknowledged the "general rule", applied with particular stringency to ex
parte applications, that where affidavit evidence is based on information and belief, the
deponent must state the source of the information. As noted in Starr v. Gower et al. (1956) 18
W.W.R. 184, (B.C.C.A.), "if the source of the information is not disclosed in other material on the
motion the offending paragraphs are regarded as worthless and not to be looked at by the
Court." (at 188). Mr. McAlpine contends that R. 52(8)(b), which permits a Chambers judge to
admit "other forms of evidence", taken together with R. 51(10)(b), create a discretion to admit
affidavit evidence that might otherwise be inadmissible, and that that discretion should be
exercised here in the same way that information received from police informants is admitted
without disclosure of the identity of the informant. That "privilege", however, is based on the
"importance of the rule of informers in the solution of crimes and the apprehension of
criminals": per Corey, J.A. (as he then was) in R. v. Hunter (1987) 34 C.C.C. (3d) 14 (Ont. C.A.),
quoted in Sopinka, Lederman and Bryant, The Law of Evidence in Canada (1992) at 804. The
same reasoning does not in my view apply to private investigators involved in carrying out the
wishes of private litigants in civil cases, and one would require very strong authority before
extending it to such persons, notwithstanding that the disclosure of their sources might be
embarrassing to their sources or jeopardize future investigations. In the absence of such
authority I conclude that the affidavit of the investigation firm's manager, as well of course as
that of the individual investigator, are not admissible. The affidavits are to be returned to Mr.
McAlpine as unfiled.

21 Even so, I am of the view that the evidence that is properly before me – in particular, the
existence of the two unsatisfied judgments registered in British Columbia and the evidence of
Mr. Mooney's predilection and experience in the use of offshore trusts and companies to make
himself "bulletproof" – are sufficient to show a relative deficiency of assets held by Mr. Mooney
in the province and that there is a "real risk" of his transferring or concealing significant assets
elsewhere. Obviously, I make no conclusive finding of impropriety or dishonesty on Mr.
Mooney's part, or that he has taken or intends to take any particular action in any particular
jurisdiction. It may well be that at the end of the day his activities outsider Canada will prove to
be entirely above-board and that if judgment is entered against him, he will attend promptly to
its payment. I say only that given what is before me, there is a significant chance that any
judgment the applicants might obtain in these proceedings would be frustrated by Mr.
Mooney's transfer or concealment of assets ex juris.

The Order

22 I turn next to the terms of the draft order Mr. McAlpine proposes. My first difficulty is with
the second part of the order, which requires Mr. Mooney to disclose the full value of his assets
as well as to identify their nature and location. I agree that disclosure of the nature and location
of the assets is a necessary adjunct of the restriction on disposition (see Sekisui House, supra.;
                                                                                             52
and Derby v. Weldon (No. 2), supra, at 1014) and I note that disclosure of value seems to be
required by the English courts as a matter of course. I suspect, however, that a real hardship
might be worked on Mr. Mooney were he required to obtain appraisals of non-liquid assets
such as real property or shares in private companies. Accordingly, the order should be modified
to require that Mr. Mooney indicate the value only of those assets that are publicly traded
shares, bank deposits or similar securities, or where the value can be ascertained without the
necessity of expert appraisal evidence.

23 Also in connection with the "disclosure" aspect of the order, I note that the applicants
have not included an undertaking on their part not to make use of the information so disclosed
by Mr. Mooney in proceedings abroad without the leave of this Court. Such an undertaking was
said by the Court in Derby v. Weldon (No. 1) to be "reasonable protection ... to ensure that the
information compulsorily disclosed is not misused now that it does not lead to the defendants
being harassed or oppressed by having to face litigation ... in overseas courts throughout the
world." (supra, at 477). That approach seems a sound one, and again, the order should be
amended accordingly.

24 The third part of the order contemplates the appointment of Coopers & Lybrand Ltd. as
the receiver of Mr. Mooney's assets and the transfer to it, within 21 days, of assets that are
outside the jurisdiction of this Court. There is no evidence as to whether the proposed receiver
has offices abroad such that it is in a position to take possession of Mr. Mooney's foreign assets
in the various jurisdictions where they are located; and it is not clear to me whether the
applicants intend that assets in other jurisdictions be transferred to this province. If so, I suspect
that the tax consequences of such transfers could be disastrous to Mr. Mooney, quite apart
from the complexities of trust and corporate law that could be encountered. At this stage I
therefore propose to require that the prior approval of either this Court or Mr. Mooney be
obtained before the receiver would be empowered to move an asset from one jurisdiction to
another. The order will therefore go, subject to the addition of the following words, beginning
at the end of the first paragraph on page 5 of the draft:

       ... of this Court, provided however that this Order shall not be construed to require or
       empower the Receiver to alter the situs of any of the Assets which are situate outside
       the jurisdiction of this Court, without the prior consent of either the said J. David
       Mooney or of this Court.

25 The applicants have included in the order a proviso based on the refined Babanaft proviso
suggested in Derby v. Weldon (No. 2), supra, at 1013. Their suggested wording, quoted at page
3 above, is satisfactory, except that the words "has been" should be inserted prior to "given
written notice" in subparagraph (b) at page 6 of the draft.

26 Last, I note that the applicants' undertaking as to damages referred to in the draft order,
mentions damages sustained only by the defendants by counterclaim or any third party served
with notice of the order. The undertaking must be extended to damages that Mr. Mooney might
suffer by reason of the granting of the injunction, should he ultimately prevail at trial. After all,
it is he who stands to be prejudiced most by the granting of this injunction ex parte.

27 Mr. Mooney will be authorized to apply to set aside or vary the order upon giving two
days' notice to the defendants' solicitors of his intention to do so.

28   Subject to the foregoing, the order will go.

       Application allowed.
                                                                                                   53

                                        Mooney v. Orr [2]
                                (1994), 100 B.C.L.R. (2d) 335 (S.C.)

1 November 24, 1994. HUDDART J.:— This application by David Mooney to discharge or
dissolve a Mareva injunction raises three important questions with regard to this extraordinary
form of interlocutory relief.

       (1) what should be the practice of the court when a plaintiff seeks a Mareva injunction
       with ancillary mandatory orders (to list assets and to transfer them to a receiver) during
       the trial;

       (2) should the test of the merits of the plaintiff's case differ when the application is:

               (a) made during the trial to the trial judge;

               (b) to restrain the movement of assets situate outside of British Columbia (or
               Canada) before the commencement of proceedings;

               (c) to require that foreign assets be transferred to a receiver.

       (3) should the test for determining whether grounds exist for believing that the
       defendant has assets, and that there is a real risk of their disposal or dissipation to avoid
       the consequences of judgment, vary with the terms and conditions of the order sought?

2 These questions arise because the defendants obtained a world-wide Mareva injunction ex
parte before Madam Justice Newbury on September 24, during a recess in the trial over which I
had been presiding for some 37 days. (The trial has since continued for a further 14 days and is
estimated to continue for 10 more days when counsel are available.) She determined that this
court should exercise its jurisdiction over Mr. Mooney, a resident of British Columbia, to grant
such an injunction for what appears to be the first time in Canada, certainly in British Columbia.

3 In granting the injunction and in requiring Mr. Mooney to provide an affidavit listing his
assets within 14 days and to transfer the foreign assets to a receiver with 21 days, Madam
Justice Newbury applied the three-fold test that has been developed in England for a worldwide
Mareva injunction: (i) a good arguable case; (ii) assets ex juris; and (iii) a real risk of removal or
dissipation of those assets to avoid judgment. She recognized that underlying these elements is
the requirement that the granting of a particular injunction in a particular case must be fair and
just as between the parties.

4 On the hearing of this application, Mr. Mooney accepted that this court has jurisdiction to
make an in personam order against him containing the provisions of the ex parte order. He said,
however, that the application for the order should have been brought before the trial judge to
avoid the problems inherent in trying to put a fair summary of the evidence before a chambers
judge unfamiliar with the evidence at the trial and to prevent the application from being
available for use as a trial tactic.

5 After being persuaded that I should hear the application to discharge or dissolve the
injunction and hearing oral argument on this application, counsel agreed with my suggestion
that this application might proceed in two stages. First I would review the materials placed
before the chambers judge to see if there was material non-disclosure such that the injunction
should be discharged and advise them of the result. Second I would receive written argument
on the two grounds for dissolving the injunction put forward by Mr. Dives in his initial argument.
If I refused to discharge the injunction for material non-disclosure I would include my reasons
                                                                                               54
for doing so with my reasons on the application to dissolve it.

6 These, then, are my reasons for not discharging or dissolving the injunction. I am grateful to
counsel for their thorough review of the development of the remedy. In the course of these
reasons, I will answer the three questions they raised. I begin with the first, then turn to the
reasons for not discharging the order of Madam Justice Newbury, before considering the other
two questions in my reasons for not dissolving the injunction.

The procedure for a mid-trial application

7 It has long been settled practice in this province that a judge asked to set aside an ex parte
order made by another judge should refer the application to the judge who made the order. The
second judge should hear the application only in the event the first judge is not available or
consents. This practice applies to applications to discharge an order for irregularity and to
applications to dissolve an injunction. This practice restricts the exercise of the power of the
second judge, but it does not detract from it. If the second judge decides to hear the application
it should be heard de novo as to both the law and the facts. See Gulf Islands Navigation Ltd. v.
Seafarers' International Union of North America (Canadian District) et al. (1959), 18 D.L.R. (2d)
625 (B.C.C.A.).

8 It is an equally well settled practice that once a judge begins to hear evidence in an action,
all applications for interlocutory relief are made to the trial judge in open court.

9 These rules of practice collide when a plaintiff wants to apply for a Mareva injunction.
Applications for Mareva injunctions are invariably made ex parte because it is implicit in such an
application that the plaintiff believes the defendant to be a rogue. Rogues are likely to take
notice as an invitation to dispose of, secrete, or dissipate assets. Modern communications has
given them the ability to do so within moments.

10 Faced with this conflict in practice, counsel for the defendants looked for authority. He
found one decision of the English Court of Appeal. In re All Starr Video Ltd, [Mar. 25, 1993]
Times L.R. 171 (C.A.) makes it clear that it is "wholly wrong" to bring an application ex parte
during an inter partes hearing. Such an application gave counsel for the applicant an unfair
advantage. Lord Justice Dillon also said the application should be made in open court in the
presence of counsel for the respondent. I think he was right on both points.

11 Mr. McAlpine suggests that the dearth of English authority for mid-trial applications may
be explained by the Rules of the Supreme Court. Order 29.1(1) of the English Rules permits an
application for the grant of an injunction "before or after the trial of the cause or matter".
Unlike Order 29.1(1), the comparable British Columbia Rule 45 does not imply a restriction on
motions during trial. That does not explain the absence of authority in Canada. I think it more
likely that trial judges make rulings on any such applications orally in the context of the
exigencies of the trial process and that they are not reported. The devastating effect such
orders have on defendants must inevitably affect the trial process itself.

12 However, counsel for the defendants understood this decision to require only that an
application ex parte not be brought before the trial judge. He asked the Chief Justice to direct
that another judge hear the application. The Chief Justice assigned the application to Madam
Justice Newbury, who heard the ex parte application without my knowledge. She granted the
application, providing written reasons on September 30. The order was entered that day and
served on Mr. Mooney on October 3.

13 Mr. Dives, on behalf of Mr. Mooney, almost immediately asked me to hear an application
to set aside the order, either for irregularity or on the merits. He was of the view that any
                                                                                              55
interlocutory application brought mid-trial should be heard by the trial judge. He considered
that the court in In re All Starr Video had good reason to reach that conclusion. Such decisions
must be made with regard to the degree of advancement of the trial, the manner in which the
trial has proceeded, and all the evidence at trial. Mr. Dives thought that my hearing this
application would help to correct what he considered a fundamental error on the part of
opposing counsel, the bringing of the original application before someone other than the trial
judge.

14 Concerns about dissipation on notice could be avoided by placing the materials before the
court in the presence of opposing counsel without notice. The trial judge could grant a "stay
put" or status quo order until the matter could be fully argued, without reviewing the materials
if opposing counsel wished time to review them for relevancy or prejudice. Thus could concerns
about tainting the trial judge with evidence relevant only to the application and not to the
issues at trial be avoided. After hearing both counsel, the trial judge could refer the application
to another judge where appropriate. She would do so after taking account of the benefits that
would be achieved and foregone by such a referral as counsel saw them.

15 It is not uncommon in these courts that such an interim injunction be granted to preserve
the status quo pending notice and a hearing inter partes. Indeed, such a procedure is often the
most just. In the companion action I am hearing together with this action, before the trial began
Mr. Justice Blair granted a Mareva injunction against Thomas Orr, Jr. to be in place until the
application could be heard by the pre-trial management judge on notice to counsel for Mr. Orr.
On the inter partes hearing Mr. Justice Macdonald replaced the injunction with an order for
security.

16 Mr. McAlpine would have preferred that the application to set aside the injunction be
brought before Madam Justice Newbury, but acceded to Mr. Dives' argument when he
understood that I agreed with the result in In re All Starr Video. In retrospect, I am still
convinced that decision is correct. As I read the materials placed before Madam Justice
Newbury I came to understand what a difficult task Mr. McAlpine undertook when he set out to
summarize fairly the evidence relevant to the application. Such a summary would not have been
necessary had the application been made during the trial. Whatever decision was reached
would have been definitive. The saving of time, and therefore money, of the litigants and the
public, would have been considerable. Moreover, the trial judge has the advantage of having
heard the parties and at least some of the peripheral witnesses. She will have a sense of the
effect on the parties' interests that cannot be transmitted on paper to another judge. Unless a
Mareva injunction is seen as "simply a form of security for a [likely?] future judgment creditor",
as suggested by one learned writer, the interest of both parties must be considered on an
application brought ex parte. (see Berryman, J., "Remedies" (1991), ch. 7: "Interlocutory
Injunctions & Procedures: the Mareva Injunction" by Stanley Sadinsky, at p. 181)

17 I felt comfortable acceding to Mr. Dives' request that I hear Mr. Mooney's application to
set aside the injunction because of the provisional nature of any ex parte order, and because
Mr. Mooney accepted the decision of Madam Justice Newbury that this court has jurisdiction to
grant a worldwide Mareva injunction. I do not want these reasons to be read as casting any
doubt on the practice of this court. Only the exceptional circumstances of this case would have
persuaded me to hear an application to set aside an injunction granted by a colleague who
would have been available to hear the application within 10 days.

18 At the hearing of the application I varied the order to avoid immediate prejudice to Mr.
Mooney's business and to otherwise maintain the status quo until further submissions could be
made and these reasons given.

Should the ex parte injunction be discharged for material non-disclosure?
                                                                                                  56

19 It is well settled that a party applying ex parte for a Mareva injunction must make full and
fair disclosure of all material facts known to him and make proper inquiries for any additional
relevant facts before making the application. Such facts must include those relevant to the
defendant's position, to the extent it is known. If there is less than full accurate disclosure or if
there is a misleading of the court about material facts in the original application the order will
be discharged. Chitel v. Rothbart (1982), 69 C.P.R. (2d) 62, 141 D.L.R. (3d) 268 (Ont. C.A.); Gulf
Islands Navigation Ltd., supra; Canadian Pacific Railway v. United Transportation Union, Local
144 et al. (1970), 14 D.L.R. (3d) 497 (B.C.S.C.)

20 The level of disclosure required by a strict reading of the authorities is a practical
impossibility in a case like this one, particularly in the middle of the trial. Mr. Mooney is making
a straight-forward claim for compensation for services rendered in bringing a willing and able
purchaser to the vendors, but the defendants deny an agreement with that purchaser, the
plaintiff in the companion action for breach of contract. The defendants' counter-claim against
Mr. Mooney is for breach of fiduciary duty, breach of contract, and conspiracy (with Harold
Dorfman, the principal of the alleged purchaser) to defraud. An ex parte chambers application is
not a trial and should not be turned into one by demands for an unrealistic standard of
disclosure. Disclosure must be full in the sense that it must be adequate to the demands of the
particular application and always fair to the absent defendant. Re Philip's Manufacturing Ltd.
(1991), 60 B.C.L.R. (2d) 311 (B.C.S.C.).

21 The attack on the original materials focused on the merits of the counter-claim. Mr.
Mooney's claim and the Orrs' counterclaim rest on assessments as to credibility. Rarely can a
judge assess credibility on affidavits or at a trial until all the evidence has been heard and the
submissions made. A conspiracy to defraud has usually to be inferred from behaviour. No one
can say whether or not such a conspiracy has been established until all the evidence has been
heard, the arguments made, and the facts as to behaviour found.

22   The nature of this case is important for two reasons.

23 First, it would have been very difficult to summarize all the relevant evidence "so as to
make full disclosure of all relevant and material facts" because virtually all the evidence from 37
days of trial and that anticipated from witnesses to be heard during the remaining 19 days was
relevant to the credibility of the three main actors: Mr. Orr, Mr. Mooney, Mr. Dorfman.
Judgments as to materiality are inevitably coloured by one's view of the case.

24 Second, a judge, be she the trial judge hearing a contested application or a chambers judge
hearing an ex parte application, must reach a conclusion as to the strength of the case being put
forward without making findings as to credibility. She is in a position, as Mr. Dives put it, not
unlike that of a judge being asked to decide a no evidence motion or a committal for trial,
although the standard will differ from that of a prima facie case.

25 Where there is evidence or potential evidence from which facts can be found that give rise
to the necessary inferences, it will be difficult to say that there is not a strong prima facie case
or a good arguable case, if such evidence is assumed to be credible. In other words, either side
"might well win", as Mustill J. expressed the test colloquially in Ninemia Maritime Corp v. Trave
Schiffahrtsgesellschaft mbH & Co, [1984] 1 All E.R. 398 (Q.B.D.) before going on (at 404) to
describe the test this way:

       In these circumstances, I consider that the right course is to adopt the test of a good
       arguable case, in the sense of a case which is more than barely capable of serious
       argument, and yet not necessarily one which the judge believes to have a better than 50
       percent chance of success.
                                                                                                57

26 On balance I thought that the task of putting before the chambers judge a summary of the
evidence so that she would have a fair picture from which to assess the strength of the case for
the purpose of crossing the threshold to Mareva relief was adequately accomplished. Mr. Dives'
opening submission, which was put before her in its entirety, put Mr. Mooney's position fairly.

27 Similar considerations led me to a similar conclusion with regard to the second and third
elements of the test Madam Justice Newbury adopted from English authorities. She accepted
the evidence of Donald Nicholson, who had not then testified at the trial, as having established
them, taken in conjunction with excerpts from the evidence Mr. Mooney gave at trial. Without
rejecting Mr. Nicholson's sworn evidence she could not have reached any other conclusion but
that Mr. Mooney had access to assets in an offshore trust, and the predilection for concealing
them in an impenetrable web designed to frustrate creditors, including those with judgments.
That predilection was inferred from a statement in Mr. Nicholson's affidavit that Mr. Mooney
intended to conceal his offshore assets from his wife. Mr. Nicholson did not say that at trial. Mr
Mooney is living with the same wife, to whom he transferred their matrimonial home.

28 There was no suggestion that evidence of Canadian assets of Mr. Mooney was concealed,
which, if it had been before Madam Justice Newbury should have persuaded her that an
injunction having extra-territorial effect was not necessary. The only non-disclosure suggested
that would have gone to the fairness of any injunction being granted, as opposed to its
particular nature, is the failure to advise her about the Mareva injunction granted to Mr.
Dorfman against Thomas Orr, Jr. That injunction is a matter of record and was available to
Madam Justice Newbury.

29   Thus, I refused to discharge her order for irregularity.

Should the injunction be dissolved?

30 I approach my task on this aspect of the application heeding the direction of the Court of
Appeal in Gulf Islands Navigation, supra. This is a hearing de novo.

31 Two considerations support Mr. Dives' view that I must return to fundamentals in
considering Mr. Mooney's application to set aside the injunction and its ancillary orders. This is
the first application for a worldwide injunction in British Columbia where counsel for a
defendant has been heard. And so far as counsel are aware, this is the first time a trial judge has
been asked to consider whether a Mareva injunction should be granted.

32 Mr. Dives does not dispute seriously that the threshold test has been met, whether the
test be that a good arguable case or a strong prima facie case. He does say, however, that the
strength of the case is one of the factors to be considered when making the fundamental
assessments required by section 36 of the Law and Equity Act, i.e. whether it is just or
convenient to make the order, and if so, what terms and conditions are just.

33 His fundamental point is that Mr. Mooney has done nothing since he met Mr. Orr that has
not been part of his longstanding manner of doing business and living. He says that an applicant
for a Mareva injunction must demonstrate at least that the defendant has moved assets or
threatens to move assets so as to make them less exigible. For him, the fact that a party may
have structured his affairs so that he is not amenable to execution is one of the exigencies of
litigation and one of the facts that give rise to litigation. He does not see such a defendant as
having an obligation to gather up assets to make himself more susceptible to execution. He sees
the Mareva jurisdiction as designed to prevent a course of action to avoid the effect of
particular litigation, rather than a method of giving security to a plaintiff.
                                                                                           58
34 This submission requires a careful consideration of the doctrinal basis for the remedy, as
Mr. Dives recognized.

35 One decision of the English Court of Appeal suggests that it may be moving in the direction
of a stricter scrutiny of the merits of the plaintiff's case and of more concern for the defendant's
interests. Such scrutiny is seen to involve a consideration, not only of the strength of the case,
but of all factors relevant to the overall fairness of the relief being sought. This indicates a
movement away from the fixed formula of the established test.

36 In Polly Peck International plc v. Nadir (No 2), [1992] 4 All E.R. 769 (C.A.) Scott L.J. wrote at
775:

       A Mareva injunction could not ever be justified unless at least a fair arguable case for
       liability could be shown. But the strength of the case sufficient to support the grant of a
       Mareva injunction is dependent to some extent on the consequences to the defendant
       of the injunction, as well, of course, as on the consequences to the plaintiff if an
       injunction is not granted.

Later in his reasons he reinforced his concern for the interests of the defendant, saying (at 782):

       As a general principle, a Mareva injunction ought not to interfere with the ordinary
       course of business of the defendant. It is not intended to give the plaintiff security in
       advance of judgment but merely to prevent the defendant from defeating the plaintiff's
       chances of recovery by dissipating or secreting away assets.

Lord Donaldson MR, in listing the general principles underlying the Mareva jurisdiction, included
(at 785) this:

       It is not the purpose of a Mareva injunction to prevent a defendant acting as he would
       have acted in the absence of a claim against him.

37 Lest the reader think that his views were heading in the direction of the test for other
interlocutory injunctions, he also said (at 786) that the approach established in American
Cyanamid Co. v. Ethicon Ltd., [1975] AC 396 had no application to the grant or refusal of Mareva
injunctions "which proceed on principles which are quite different from those applicable to
other interlocutory injunctions." Lord Parker had expressed a somewhat different view in Derby
& Co. Ltd. v. Weldon (No 1), [1989] 1 All E.R. 469 (C.A.), where he said that the only difference
between the two, was that on a Mareva application the plaintiff had to show a good arguable
case rather than a serious question to be tried.

38 It is not clear that this concern for balancing the interests of the parties has become part of
the practice of the English courts, which appears to be applying, without modification, the test
set down in Derby (No 1) (at 475) and Derby & Co. Ltd. v. Weldon (No 2), [1989] 1 All E.R. 1002
(C.A.) at 1009 which Madam Justice Newbury applied. The only wrinkle is that exceptional
circumstances must be established to justify a worldwide injunction. Foreign residence and a
history of complicated international business dealings satisfied that requirement in Re Bank of
Credit and Commerce International SA (No 9), [1994] 3 All E.R. 764.

39 Canadian courts have generally adopted and applied the English authorities, but without
considering their discretion to be controlled by the strictures of the English test. The Supreme
Court of Canada, in its only consideration of the Mareva jurisdiction, suggested a somewhat
stricter approach in a unanimous decision holding that superior courts have the jurisdiction to
grant an injunction freezing exigible assets found in the jurisdiction. In Aetna Financial Services
Limited v. Feigelman et al, [1985] 2 W.W.R. 97 (S.C.C.) the Supreme Court said that the litigant
                                                                                               59
seeking such an exceptional order would have to overcome two hurdles. The first was to
establish that it was probable that unless the defendant was restrained, wrongful acts would be
done which would do the plaintiff irreparable injury. The second was to overcome the rule in
Lister & Co. v. Stubbs, 45 Ch. D. 1, [1886-90] All E.R. Rep. 797 (C.A.) at 799 against ordering a
defendant to give security before judgment. Mr. Justice Estey, writing for the court, summarized
(at 116 to 117) what he understood to be the English and Canadian position in these words:

       The general rule requiring that the balance of convenience must favour the issuance of
       the order still exists. The overriding consideration qualifying the plaintiff to receive such
       an order as an exception to the Lister rule is that the defendant threatens to so arrange
       his assets as to defeat his adversary, should that adversary ultimately prevail and obtain
       judgment, in any attempt to recover from the defendant on that judgment. Short of
       that, the plaintiff cannot treat the defendant as a judgment debtor, the defendant's right
       to defend the claim may not be impaired and the defendant in proper circumstances
       may within such an order, pay current expenses incurred in the ordinary course of
       business.

       The gist of the Mareva action is the right to freeze exigible assets when found within the
       jurisdiction, wherever the defendant may reside, providing, of course, there is a cause
       between the plaintiff and the defendant which is justiciable in the courts of England.
       However, unless there is a genuine risk of disappearance of assets, either inside or
       outside the jurisdiction, the injunction will not issue.

It recognized (at 117) that the Court of Appeal of England had blessed the practice of using the
injunction to coerce a vulnerable defendant into providing security in order to head off
irreparable loss from the paralysis which follows the issuance of this type of injunction. It
commented on the somewhat narrower test established by the Ontario Court of Appeal in
Chitel v. Rothbart (1982), 39 O.R. (2d) 513 and on the general acceptance of the English
principles by the British Columbia Court of Appeal in Sekisui House Kabushiki Kaisha (Sekisui
House Co.) v. Nagashima (1982), 42 B.C.L.R. 1. It also commented on the need for caution in
transplanting principles developed in a unitary state to the federal state of Canada. But only in
the passages I have quoted can one find guidance on how to approach an application for a
domestic Mareva injunction. Worldwide injunctions came later in England so were not
considered at all.

40 Such judicial parsimony accords with the view that new remedies should develop with
each set of circumstances requiring decision. The Supreme Court seems to have been content to
let the superior courts develop their own policies for the exercise of the discretion it decided
they had either under provincial legislation, including court rules, or inherently in the power to
make effective their process.

41 Counsel referred me to surprisingly little local authority. In Gateway Village Investments
Ltd v. Sybra Food Services Ltd. (1987), 12 B.C.L.R. (2d) 234 (B.C.S.C.) Madam Justice Southin took
account of the Supreme Court's view that generally a court should not restrain a defendant
from dealing with his assets in another province, where a judgment creditor could enforce its
judgment reciprocally. She preferred a practical approach and granted an injunction that she
recognized was to secure a potential judgment. She distinguished Aetna on the grounds that the
amount of money was small, that the cost of chasing the defendant would be high, and that the
defendant did not argue prejudice or provide evidence as to its financial probity. The strength of
the plaintiff's case did not seem to play any role in her decision, although it is implicit in her
reasons that the defendant had an arguable case because she set aside a default judgment at
the same hearing.

42   In continuing the injunction against Mr. Orr in what I have called the companion case
                                                                                              60
(3473 Investments Ltd v. Orr (Sept. 30, 1992), Vancouver C916920 (B.C.S.C.), Mr. Justice
Macdonald), the court accepted the argument of Mr. McAlpine that Aetna required a strong
prima facie case to cross the threshold. He then considered the strength of the plaintiff's case
relative to the strength of the counterclaim in fixing security at $1 million. He seemed to have
taken into account the factors counsel considered relevant in order to find the appropriate
balance between the interests of the two parties, including Mr. Orr's taking up permanent
residence in England and undisputed intention to remove his assets from Canada. He did not
refer to English authorities.

43 This relaxed approach to applications for Mareva injunctions may be seen as fitting well
with the established approach for granting interim injunctions in British Columbia. While there
is a longstanding two-pronged test for the granting of an interim injunction, the Court of Appeal
cautioned in B.C. (A.G.) v. Wale (1986), 9 B.C.L.R. (2d) 333 (C.A.) at 346, that "... the judge must
not allow himself to become the prisoner of a formula. The fundamental question in each case
is whether the granting of an injunction is just and equitable in all the circumstances of the
case." The Court of Appeal affirmed the traditional test in Canadian Broadcasting Corp. v. CKPG
Television Ltd. (1992), 64 B.C.L.R. (2d) 96 (C.A.) and added (at 102) that:

       Resort to the decided cases in which the test has been applied will provide the necessary
       limits to that flexibility, not so much through what those cases say, but more through
       what they decide about whether an interim injunction should be granted on each set of
       particular facts.

44 The comparable approach to a Mareva injunction would be to require a strong prima facie
(which seems to have been favoured in Aetna, supra) or a good arguable case (as expounded in
Ninemia, supra,) to cross the threshold, and then to balance the interests of the two parties,
having regard to all the relevant factors in each case, to reach a just and convenient result.
Included in such factors will be evidence that establishes the existence of assets within British
Columbia (for a domestic injunction) or outside (for a national or international injunction) and a
real risk of their disposal or dissipation so as to render nugatory any judgment.

45 But also included will be whatever other factors counsel consider relevant in the particular
circumstances. A non-exhaustive list of such factors drawn from the authorities includes: the
nature of the transaction (local, national, international) giving rise to the cause of action, the
risks inherent in that transaction, the residency of the respondent, enforcement rights for
judgment creditors in the jurisdiction where the respondent's assets are located, the amount of
the claim, the history of the respondent's conduct.

46 In my view this approach reflects the practical approach this court has been taking on
contested applications and permits the flexibility needed to take account of the wide variety of
circumstances that give rise to applications such as the one before me, both in deciding whether
to make an order, and in deciding the appropriate terms and conditions. It will be rare that a
Mareva order is unconditional.

47 Madam Justice Newbury demonstrated this approach when she collapsed her analysis of
the evidence relevant to proof of assets within and/or outside the jurisdiction with that relevant
to the requirement to establish a real risk of removal or dissipation before concluding (at 22)
that the evidence was:

       ... sufficient to show a relative deficiency of assets held by Mr. Mooney in the province
       and that there is a 'real risk' of his transferring or concealing significant assets elsewhere.

       ...
                                                                                             61
       ... there is a significant chance that any judgment the applicants might obtain in these
       proceedings would be frustrated by Mr. Mooney's transfer or concealment of assets ex
       juris.

48 This approach permits factors taken into account on applications for ordinary injunctions
to be considered on these extraordinary applications as well: the relative strength of the parties'
cases, evidence of irreparable harm one way or the other, potential effects on third parties,
factors affecting the public interest. It also permits the balancing of the convenience of the
parties and the tailoring of the remedy to fit the circumstances.

49 In other words, it prevents the judge from becoming a prisoner of a fixed formula and
places the emphasis where it belongs, on the justice and fairness of the order inter partes. It is
fair to both sides, because, while maintaining the burden on the plaintiff to establish grounds
for the application, it justifies calling upon the defendant to meet the case brought by the
plaintiff, by putting forth evidence to support his position.

50 By this approach, the ultimate question becomes, is it fair and just that the applicant
should have the right to monitor the movement or expenditure of capital assets by the
respondent during the course of the proceedings between them?

51 Along the route to an answer, the court must consider whether and to what extent the
justification put forth in a particular case permits that right. This question directs attention to
the value underlying the court's examination of whether there is real risk of dissipation of
domestic assets and/or foreign assets, whether that analysis is performed as part of the three-
pronged test that predominates at the ex parte stage or of the underlying "fit and just" test
likely to be given flesh only at the inter partes continuation hearing.

52 Implicit in the framing of this question is the view that Mareva injunctions are available not
only to restrain the active dissipation of assets, but also as a form of security. In my view it is
only fair to state directly what courts are doing in fact.

53 It is with this view of the established law and practice that I have approached my analysis
of the evidence before me.

54   The threshold test is satisfied.

55 At this stage of the trial I can say that all parties remain potential judgment creditors for
the reasons set out earlier. As when 3473 obtained the injunction against Mr. Orr, the primary
defence to the claim of Mr. Mooney remains the counterclaim. It remains utterly impossible at
this stage of the trial to say whether one or other of the parties is more likely to win. Thus, the
strength of the case is a neutral factor in the decision whether to continue the injunction and
the monitoring of the movement of such capital assets as Mr. Mooney may have stashed
abroad before he met Mr. Orr.

56 Mr. McAlpine says that the evidence is persuasive that Mr. Mooney has both the capacity
and inclination from which can be inferred the intention to hide assets from potential judgment
creditors among whom he includes the Orrs. I agree. However, the evidence does not establish
the probability or even a real risk that Mr. Mooney is about to do the Orrs irreparable injury.
Indeed, it does not establish that he will do anything to harm the Orrs. It establishes only that
Mr. Mooney has structured his affairs well before he met Mr. Orr so as to protect any offshore
property he may have from execution. He has shown no inclination to dissipate his B.C. assets
or to transfer them abroad.

57   The real question on this application becomes whether this court will restrain a litigant like
                                                                                             62
Mr. Mooney from dealing freely with capital assets already abroad before the proceeding was
commenced, and probably before the cause of action arose. This is a different issue from that of
active and imminent dissipation of assets for which the Supreme Court of Canada approved the
use of the Mareva injunction in Aetna, supra, as an exception to the long-standing practice of
not requiring security before judgment.

58 It follows from my view of the law and practice in this province with regard to domestic
Mareva injunctions that it is open to me to do just that. The English Court of Appeal devised the
Mareva injunction for marauding charterers. It is equally well-suited to marauding deal-makers,
to ensure that those B.C. residents who structure their business and personal lives to preserve
assets out of sight and attack, may be enjoined from dealing with those assets except under the
court's supervision during litigation. I am encouraged in reaching this conclusion by the decision
of the Supreme Court of South Australia in Coombs & Barei v. Dynasty Pty Ltd (1986), 42 S.A.S.R.
413 (Millhouse J).

59 Fundamental to the exercise of the jurisdiction where no dissipation or secretion is
imminent, will be the court's concern to protect its process from abuse. A litigant cannot be
permitted to use the court to his advantage, while effectively disavowing in advance any
judgment against him.

60 Whether this extension of existing principles is seen as an expansion of the exercise of
discretion given by the Law and Equity Act or inherent in the court's ability to control its
process, I am of the view that such a discretion must be exercised whenever it is required to
ensure the effective administration of justice in British Columbia.

61 It is common knowledge within the commercial world that many ordinarily law-abiding
citizens of prosperous countries with well-supported legal institutions, as well as rogues and
citizens of countries with less well-supported justice systems, are removing assets to tax
favourable jurisdictions where they remain out of sight and attack. Some such persons may
choose to prosecute or defend a claim in the courts of a jurisdiction where they reside or carry
on business. If such a person is successful he or she retains the fruits of that victory. If such a
person loses, the choice of whether to pay the judgment remains effectively with the loser. I do
not think that reasonable and knowledgeable members of the British Columbia public who
support our courts would consider a person such a person entitled to the use of our courts if he
demonstrates an unwillingness to honour obligations imposed on him by those courts.

62 The circumstances of each situation will determine whether justice requires an injunction
and a listing of assets or the transfer of assets to a receiver, not to enhance the claimant's
rights, but to ensure that those reasonable people who pay for the administration of justice in
this province are not affronted by the impotence of the court in the face of those who choose to
order their affairs so as to keep all their options for themselves.

63 Mr. Dives says that a dry judgment is one of the risks of litigation and of doing business
with a person who has structured his affairs so as to be execution-proof. There is merit to that
argument in the circumstances of the parties.

64 Mr. Orr did business with a B.C. resident and Canadian citizen, who, to his knowledge, had
experience with offshore structures designed to minimize income tax, to protect wealth from
various forms of attack (creditors, spouses and other family members), and to ensure income.
He knew how Mr. Mooney does business and lives. Indeed, this experience seems to have been
one of the qualities that attracted Mr. Orr to Mr. Mooney in October, 1989. He also would have
known that Mr. Mooney had property in British Columbia and that he had a prosperous lifestyle
suggestive of substantial assets.
                                                                                                    63
65 Were it clear that Mr. Mooney had sufficient Canadian assets to satisfy the claim, no
injunction would issue. His Canadian assets, however, are not sufficient to satisfy the judgments
presently registered against him, even if those judgment creditors are successful in setting aside
the transfer of his West Vancouver home to his wife. Mr. Mooney's continuing failure to pay
two English judgments totalling over $1.75 million registered in British Columbia, establishes
that he is either unwilling or unable to take ex juris assets to the United Kingdom for that
purpose. It is equally likely that he will find himself unwilling or unable to bring ex juris assets to
British Columbia to pay any judgment the Orrs may obtain.

66 Only by inference can one find that Mr. Mooney has any assets ex juris. In his opening
submissions, Mr. McAlpine said that Mr. Mooney had no exigible assets anywhere, so could
prosecute his claim and defend the counter claim with impunity because he was effectively
judgment proof. Such a statement was designed to make me aware that Mr. Mooney's
credibility might be affected by his impecuniosity. At trial Mr. Mooney denied any interest as a
beneficiary or trustee in any trust and any interest in any offshore corporation. He agreed that
he has had from time to time authority to direct monies indirectly held by offshore trusts. He
has not denied having property offshore. It is in his nature, as it must be in the nature of all who
structure their affairs offshore, to keep his personal and business affairs very private. This
secretive manner may be designed to protect wealth. It may also be designed to give the
appearance of wealth so as to ensure the capacity to continue to earn income by deal-making
with other people's wealth. Either conclusion is consistent with the evidence of Mr. Nicholson at
trial.

67 Mr. Nicholson, on whose affidavit evidence Madam Justice Newbury relied, has now
testified at the trial. Accepting his testimony as credible, it establishes at best that Mr. Mooney
had the power to direct any funds being held in one or more discretionary trusts after being
received from three companies, two of which may have assets. Mr. Mooney may be able to
obtain payment for services rendered to offshore companies, and, as a result he may have
funds in offshore bank accounts.

68 Mr. Nicholson's testimony does not prove that Mr. Mooney has assets ex juris, that he has
transferred assets offshore since the cause of action arose, or that he intends to do so. It does,
however, establish that he has the expertise and vehicles available to do these things, that he
has expressed a preference for carrying on business using offshore vehicles to minimize income
tax and protect wealth, and that he directed two transactions through such a structure.

69 The evidence as a whole establishes that Mr. Mooney has the ability to benefit from
offshore trusts designed to minimize income tax, permit the conversion of income to capital,
and ensure income to him. It also permits the inference that he has property abroad.

70 The Orrs seek an injunction to prevent the movement of such property. They seek a listing
of assets to make such property easier to find and monitor. They seek a transfer to a receiver to
make the property available to process after judgment.

71 Privacy and freedom to deal with one's property as one wishes are cherished rights in our
free enterprise system of living and doing business. Courts have long accepted that they should
interfere as little as possible with those rights where not directed to do so by statute. The
legislature of this province, through s. 36 of the Law and Equity Act, has seen fit to bestow
authority on this court to grant an interlocutory injunction whenever it is "just or convenient" to
do so. The Court of Appeal has said that a judge from whom an injunction is sought should not
become "the prisoner of formula".

72 Were I to apply the formula developed in the authorities, I would not be able to continue
the injunction against Mr. Mooney. In my view that formula requires evidence from which I
                                                                                        64
could infer that Mr. Mooney is about to cause irreparable harm to the Orrs so as to render
impotent the court's process.

73 There is no such evidence. There is no evidence that he has removed any assets from
Canada since this cause of action arose or that he has made any assets less exigible since he met
Mr. Orr. Mr. Mooney simply intends to continue living and carrying on business as he always
has. The harm was done before the parties met, when whatever property Mr. Mooney may
have was placed in jurisdictions where a judgment creditor is unlikely to be able to follow it or
the income earned by its investment.

74 Without an injunction and a listing order, it is highly unlikely that the Orrs will be able to
recover on any judgment they may receive. Even with such an order they will face an uphill
struggle. Only with the appointment of a receiver is it possible they may obtain sufficient
cooperation of Mr. Mooney to make recovery possible. Yet the requirement to transfer assets
to a receiver will have a devastating effect on Mr. Mooney's business, well beyond the chilling
effect inherent in any Mareva injunction. A receiver is not an effective deal-maker and deals,
broadly-speaking, are how Mr. Mooney makes a living and develops wealth.

75 Taking account of the convenience of both parties, I have reached the conclusion that the
injunction should be continued and that Mr. Mooney should list his world-wide assets in an
affidavit within seven days of the release of these reasons, the same to be filed with the court
and not available for public search. In line with the order of Madam Justice Newbury, Mr.
Mooney should also indicate the value of those assets that are publicly traded shares, bank
deposits or similar securities, or where the value can be ascertained without the necessity of
expert appraisal evidence. However, at this point in time, he should not be required to transfer
his property to a receiver. If further evidence becomes available after the listing of the assets,
the defendants may re-apply for the appointment of a receiver.

76 I make this order because I am persuaded that the veil of secrecy must be lifted to permit
the defendants to see whether there is any substance to their view and the court's tentative
conclusion that Mr. Mooney has stowed assets out of the jurisdiction in an effort to avoid attack
on them, not only from the Orrs in this matter, but from any opposing party in any litigation
anywhere in the world. The injunction should continue until that listing has been made. Once
that affidavit has been filed with the court, Mr. Mooney may re-apply to dissolve the injunction.
That affidavit should disclose all companies for whom he has performed services since
December 18, 1990 and any trusts from which he has received money or property directly or
indirectly since that date.

77 I am persuaded that the veil of secrecy must be lifted and that the injunction must
continue, at least until full disclosure of Mr. Mooney's property and sources of income has been
made, for several reasons. Mr. Mooney resides in British Columbia, where he carries on
business as a venture capitalist through Hudson Holdings Ltd. He brought this action against the
Orrs to obtain relief with regard to a contract alleged to have been made in British Columbia
between other British Columbia residents and a resident of the United Kingdom. He is a
judgment debtor. There is evidence that Mr. Mooney has the capacity to invest, indirectly, in
substantial enterprises. He has a history of carrying on business offshore, out of reach of
judgment creditors. In the absence of any evidence to the contrary, it is a fair inference that he
has access to property abroad, since he does not have sufficient property in Canada to permit
investments on the scale that interest him. Mr. Mooney has never suggested that he is
impecunious. The assets he acknowledges, however, are not sufficient to support the style of
living and doing business revealed by the evidence at trial. In my view, these factors outweigh
the consideration that Mr. Orr knew with whom he was dealing, when he asked Mr. Mooney for
help in selling his family's real estate portfolio in October, 1989.
                                                                                        65
78 Counsel may address variations of the terms and conditions of the present order at their
convenience.

               Application dismissed.



Editor’s Note: In Reynolds v. Harmanis (1995), 39 C.P.C. (3d) 364 (B.C.S.C.), the plaintiff applied
ex parte for an interlocutory world-wide Mareva injunction. Esson C.J. refused the application
on the ground that the plaintiff had failed to show a “strong prima facie case” on the merits of
the claim for damages for breach of contract. The proper test was the more stringent “strong
prima facie case,” rather than the more liberal, “good arguable case,” which was the test used
in the leading English cases. Also, the plaintiff could only show a “possibility”, not a “real risk”
that the defendant would dispose of or conceal assets to avoid a judgment. He added that in
weighing the balance of convenience on such applications, judges should be concerned about
the harmful effects of granting the injunction on the defendant and on third parties. The effect
would be to put the defendant out of business unless he or she put up security for the amount
of the claim, which Supreme Court of Canada in Aetna thought was unfair. It seems that the
British Columbia Supreme Court will take a very cautious approach to future applications for
world-wide Marevas.

In Grenzservice Speditions GmhH v. Jans (1995), 15 B.C.L.R. (3d) 370 (S.C.) the plaintiffs, German
customs brokers and their insurers, sued the defendants for restitution of $4 million (Can.)
based on unjust enrichment arising out of the fraudulent disappearance of goods imported into
Germany and the evasion of German customs duties. Because of the defendants’ fraud, the
plaintiffs had to pay the duties to the German government, and sought to recover their losses
from the defendants in British Columbia. Criminal charges of fraud, and false pretences had
been laid and arrest warrants issued against the defendants in Germany. Before the charges
were laid, the defendants had relocated to British Columbia, and acquired landed immigrant
and citizenship in Canada, but a confederate was caught and imprisoned in Germany on the
same charges. The plaintiffs alleged that the defendants had used the ill-gotten gains to buy
ranch and timber land and personal assets in the Cariboo. The plaintiffs filed a lis pendens on
the land, and it was also encumbered by builders’ liens. The plaintiffs obtained an ex parte
interlocutory appointment of an equitable receiver (a firm of chartered accountants) over the
defendants’ assets; a Mareva injunction; and an order to search the defendants’ premises, akin
to but broader than an Anton Piller order. The search order authorised the receiver and the
plaintiffs’ solicitor, with the assistance of the R.C.M.P., to search the defendants’ ranch for illicit
Deutschmarks suspected of having been smuggled into Canada and did not contain the usual
protections in the standard Anton Piller order. The plaintiffs’ lawyer failed to keep the search
within the terms of the order, and it included a search for documents other than money,
including an examination of defendants’ privileged solicitor-client communications found on the
premises.

The defendants applied to set aside the injunction and for the removal of the plaintiffs’ firm of
solicitors from the case for exceeding the terms of the order. Huddart J. varied the terms of the
Mareva injunction to permit expenditure by the defendants of funds for living expenses and
business purposes, but would not dissolve it, and removed the plaintiffs’ law firm from the
record because of the misconduct in regard to the execution of the search order. The plaintiffs
had to return to the defendants and could not use in the litigation anything obtained during or
derived from the search. The judge criticised the wording of the search order as departing from
the usual Anton Piller form, and suggested that the defendants might have a claim at trial for
damages against the plaintiffs in regard to the faulty execution of the search order.
                                                                                                66


                     Silver Standard Resources Inc. v. Joint Stock Co. Geolog
                                 [1998] B.C.J. No. 2887 (B.C.C.A.)

1 NEWBURY J.A.:— This appeal raises questions of interest not only to commercial litigants,
but also to the increasing number of persons who for whatever reason prefer to resolve their
business disputes by arbitration rather than adjudication. As the case illustrates, such persons
can still find themselves obliged to resort to court process when particular protective or
enforcement measures become necessary. Two such measures are considered here: the
"Mareva" injunction, the remedy fashioned by Equity (beginning with Mareva Compania
Naviera S.A. v. International Bulkcarriers S.A. [1975] 2 Lloyd's Rep. 509 (C.A.)) to deal with the
movement of funds or other assets across jurisdictional borders; and the pre-judgment
garnishment order instituted by the Court Order Enforcement Act of British Columbia. Of course,
neither of these remedies is given as a matter of absolute right to a plaintiff, and in this
instance, the question arises as to their availability in light of s. 8 of the International
Commercial Arbitration Act, which requires the court to stay any action that the parties have
agreed should be remitted to arbitration.

FACTS

2 In June of this year, the appellant Silver Standard Resources Inc. ("Silver Standard"), a B.C.
company, commenced an action against the defendant "Geolog", a Russian company, to recover
the Canadian equivalent of $3,213,450.87 (U.S.). This was the sum of various loans Silver
Standard had made directly to Geolog and expenses it had paid on Geolog's behalf to the co-
defendant, Cominco Ltd. Immediately after filing its writ, Silver Standard obtained an order ex
parte, enjoining Cominco from making any payments or advances to Geolog "as proceeds
derived from concentrated ore ... until the final disposition of this action or until further order
of this court", and directing Cominco to pay into court any funds due to Geolog. As well, Silver
Standard obtained a pre-judgment garnishing order directed to Cominco, in the amount of
$4,049,865.68 (Canadian). That order has not yet been served on the garnishee.

3 After some procedural skirmishes, Geolog and the third defendant "Dukat", also a Russian
company, applied to have the Mareva injunction and garnishment order set aside. They were
successful at the end of a four-day hearing in the court below, although the Chambers judge
stipulated that his order was not to come into operation until three days after the date of its
pronouncement. (The Court's reasons are reported at [1998] B.C.J. No. 2117.) Within that three-
day period, Silver Standard applied to this court for leave to appeal and for a stay of the
Chambers judge's order. Leave was granted, subject to one variation – that Cominco was at
liberty to pay to Geolog some $800,000 (U.S.), being the amount by which the amount owing by
Cominco to Geolog exceeded Silver Standard's claim in this action. The hearing of this appeal
was expedited because of the exigent circumstances surrounding the claim, particularly the
precarious financial positions of Geolog and Dukat and the latter's employees, about whom
more will be said below.

4 The factual findings made by the Chambers judge are generally not challenged for purposes
of this appeal. He found that various loans made by Silver Standard to Geolog between January
and June 1998 had been advanced pursuant to the so-called "framework agreements" under
which Silver Standard agreed to arrange and/or provide financing to Geolog for the purpose of
developing certain gold and silver deposits in eastern Siberia. In return, Silver Standard was to
receive, inter alia, shares in Geolog. Various advances made on Geolog's behalf by Silver
Standard to Cominco, totalling approximately $500,000 (U.S.), were also found to have been
made "under and for purposes of the framework agreements".
                                                                                          67
5    The framework agreements comprise a complicated set of interrelated documents
concluded in 1996 between Silver Standard and Geolog. . Most important of these was an
"Exclusive Co-operation Agreement". It contained a choice of law clause (Russian law was to
govern) and provided that any dispute "arising out of or relating to this agreement, or any
alleged breach thereof" was to be "settled by arbitration under the provisions of Swedish
Arbitration." Other ancillary agreements contained similar terms: a Share Purchase Agreement
dated December 5, 1996, for example, was to be governed by Swedish law, and stated:

       s. 5.1 Single arbitrator. Any dispute arising between any of the parties under or in
       respect of this Agreement shall be referred to arbitration to be determined by a single
       arbitrator to be appointed by the parties hereto in either Vancouver, British Columbia or
       Magadan, Magadanskaya Oblast or, failing agreement on the location, in Stockholm,
       Sweden.


6 The Court found there was "no real dispute" that the loans and advances detailed in Silver
Standard's Statement of Claim had been made to Geolog. It also found, however, that there
were "arbitrable disputes" concerning the extent to which Silver Standard was entitled to shares
in Geolog, whether the loans evidenced by two letter agreements between the parties were yet
due and payable, and whether Geolog would be entitled to damages from Silver Standard as a
result of the latter's alleged failure to perform its obligations under the various agreements.

7 This led the Court to ss. 8 and 9 of the International Commercial Arbitration Act, R.S.B.C.
1996, c. 233 (the "Act"). They provide:

       s. 8 (1) If a party to an arbitration agreement commences legal proceedings in a court
       against another party to the agreement in respect of a matter agreed to be submitted to
       arbitration, a party to the legal proceedings may, before or after entering an appearance
       and before delivery of any pleadings or taking any other step in the proceedings, apply
       to that court to stay the proceedings.

       (2) In an application under subsection (1), the court must make an order staying the legal
       proceedings unless it determines that the arbitration agreement is null and void,
       inoperative or incapable of being performed.

       (3) Even if an application has been brought under subsection (1) and even if the issue is
       pending before the court, an arbitration may be commenced or continued and an
       arbitral award made.

       s. 9 It is not incompatible with an arbitration agreement for a party to request from a
       court, before or during arbitral proceedings, an interim measure of protection and for a
       court to grant that measure.

Applying s. 8 to the case at bar, the Chambers judge found that he was required to stay Silver
Standard's action. (I understand Silver Standard is appealing this ruling.) The granting of the stay
made it unnecessary for him to consider the question of forum conveniens that had been raised
by counsel.

8 Assuming (without deciding) that the Court had jurisdiction, notwithstanding the stay, to
continue the Mareva injunction as an "interim measure of protection" under s. 9 of the Act, the
Chambers judge then moved to the "real question" before him the balance of convenience. The
adverse effect an injunction would have on Dukat, possibly an innocent third party, obviously
weighed heavily in his judgement against continuing the order. It appeared very likely that 95
percent of the funds owing by Cominco to Geolog were in turn owing by Geolog to Dukat for ore
                                                                                             68
concentrates supplied by the latter. Although the authenticity of the Geolog-Dukat agreement
had been challenged by Silver Standard, there was evidence that as early as October 1, 1997,
Geolog had told Cominco it would be sending "concentrate belonging to the company which
operates the Dukat Mine". This made it unlikely, the Chambers judge said, that the arrangement
was a concoction or subterfuge. If the concentrates were not paid for by Cominco when due,
Dukat would obviously suffer, since it was admittedly bankrupt. If Dukat were cut off from
funds, its employees, who are unpaid miners in Siberia, would also be deprived of their pay.

9 The other major consideration in the Court's analysis was the lack of evidence to suggest
Geolog had "purposely arranged its affairs so as to make itself judgment-proof in the province
of British Columbia. Geolog happens to be a Russian company with its assets based in Russia."
(para. 47) The Russian company was simply proposing to pay Dukat amounts owed in the
ordinary course of business. In this connection, the Chambers judge relied heavily on Aetna
Financial Services Ltd. v. Feigelman [1985] 1 S.C.R. 2, 15 D.L.R. (4th) 161. Aetna is of course the
starting point for any discussion of Mareva injunctions in Canada. There the Court adopted a
markedly cautious approach to such injunctions, at least in the interprovincial setting,
emphasizing the potential for "profound unfairness in a rule which sees one's assets tied up
indefinitely pending trial of an action which may not succeed, and even if it does succeed, which
may result in an award of far less than the caged assets." (at 37) Estey J. cited with apparent
approval the following passage from Chitel v. Rothbart (1982) 141 D.L.R. (3d) 268 (Ont. C.A.):

       The applicant must persuade the court by his material that the defendant is removing or
       there is a real risk that he is about to remove his assets from the jurisdiction to avoid the
       possibility of a judgment, or that the defendant is otherwise dissipating or disposing of
       his assets, in a manner clearly distinct from his usual or ordinary course of business or
       living, so as to render the possibility of future tracing of the assets remote, if not
       impossible in fact or in law. [at 289]

10 The Chambers judge weighed the foregoing considerations against the facts that Geolog
was said to be insolvent, Dukat was admittedly so, and that therefore Silver Standard "stood to
lose its security to pay an arbitration award should the injunction be dissolved". He concluded
that the balance of convenience was against the continuation of the order:

       When I weigh the evidence in the light of the foregoing law I must conclude that it is not
       just and convenient that a Mareva injunction issue. My dominant reasons for this
       conclusion are: (1) the monies sought to be attached by the injunction are owing by
       Cominco to Geolog and will be taken to Russia by Geolog in the ordinary course of
       business; (2) there is no evidence of any scheme by Geolog to avoid payment of any
       judgment that might be rendered in British Columbia; and (3) the evidence indicates a
       high likelihood that the rights of a third party, Dukat GOK, and its workers, will be
       affected by the Mareva injunction. [para. 62]

In the result, the Mareva injunction was released, subject to the three-day delay earlier
described. The garnishment order was also released, but I shall return to that topic later in
these reasons.

ANALYSIS

Mareva Injunction

11 At the hearing of this appeal on October 21, counsel for all three parties provided us with
extensive submissions concerning Mareva injunctions in general and in particular, the
significance of the debtor's ordinary course of business, its intentions or "motivation" in wishing
to remit funds out of the jurisdiction, and the interests of third parties, in determining the
                                                                                            69
balance of convenience in each case. Mr. Gouge on behalf of Silver Standard submitted that the
payments sought to be restrained herein would have constituted fraudulent preferences and
would have been enjoined under one or both of the Fraudulent Preference Act, R.S.B.C. 1996, c.
164, and the Bankruptcy Act, R.S.C. 1985, c. B-3, if Geolog had been resident in Canada. This
submission involved a sub-issue – whether a payment of money to a creditor in reduction of a
pre-existing debt can be a fraudulent preference under the Fraudulent Preference Act.

12 There are authorities that suggest a negative answer to this question, including Campbell
v. Roche (1891) 18 O.A.R. 646 at 650-1 (aff'd sub nom Campbell v. Patterson [1893] 21 S.C.R.
645 at 651), Re Pontiac Forest Products Ltd. (1982), 44 C.B.R.(N.S.) 251 (Ont. S.C.), Jones v.
Thorpe [1979] 6 W.W.R. 362 (B.C.S.C.), and Smeds v. Olney (1990), 3 C.B.R. (3d) 85 (B.C.S.C.), at
96-7. On the other hand, as noted by the Law Reform Commission of British Columbia in its
1988 Report on Fraudulent Conveyances and Preferences, some courts on other occasions,
including this court in B.C. Central Credit Union v. Metro Co-operative Services (1982), 37
B.C.L.R. 94, seem to have proceeded on the assumption that an insolvent debtor's payment of
money to a creditor is an unlawful preference. The better view appears to be that such a
payment in respect of a pre-existing debt is not caught by the statute: see the Law Reform
Commission Report at 36-39.

13 Mr. Gouge's argument in respect of the Bankruptcy Act did not suffer from the same
deficiency: s. 95(1) of that statute makes no exception for payments made in the ordinary
course of business or made to creditors, but deems every payment made by an insolvent person
in favour of a creditor "with a view to giving that creditor a preference of the other creditors" to
be void if made or taken within three months of the date of initial bankruptcy.

14 Assuming in any event that remedies under one or both statutes would have been
available to Silver Standard if Geolog had been resident or carried on business in Canada, Mr.
Gouge argued that international comity favours assisting a plaintiff to collect on an arbitral
award that might be obtained, albeit in Sweden or Russia. The judgment of the Supreme Court
of Canada in De Savoye v. Morguard Investments Ltd. [1990] 3 S.C.R. 1077, which suggested a
"full faith and credit" approach to questions of enforcement of judgments between provinces,
also seemed (in obiter) to favour the adoption of a similar approach to non-resident defendants
and foreign judgments, including arbitral awards. La Forest J. cited, for example, Von Mehren
and Trautman ("Recognition of Foreign Adjudications: A Survey and a Suggested Approach" in
(1968) 81 Harv. L. Rev. 1601), who wrote that "[t]he ultimate justification for according some
degree of recognition is that if in our highly complex and interrelated world each community
exhausted every possibility of insisting on its parochial interests, injustice would result and the
normal patterns of life would be disrupted." (See also, H.E. Yntema, "The Objectives of Private
International Law" (1957) 35 Can. Bar Rev. 721, quoted in Morguard at 1097.) La Forest J.
suggested, again in obiter, that "what must underlie a modern system of private international
law are principles of order and fairness, principles that ensure security of transactions with
justice."

15 As for the fact that the parties in the case at bar had agreed on an arbitration clause, thus
removing jurisdiction over their dispute from courts of law, Mr. Gouge cited another decision of
the Supreme Court of Canada, Brotherhood of Maintenance of Way Employees Canadian Pacific
System Federation v. Canadian Pacific Ltd. [1996] 2 S.C.R. 495. There it was held that although
the Canada Labour Code constituted a comprehensive code for settling labour disputes by
arbitration, the Supreme Court of British Columbia nevertheless had the power to grant an
interim injunction as a matter of inherent jurisdiction. I did not understand counsel for the
defendants to dispute that the court in this case retains a similar jurisdiction, which of course is
confirmed by the terms of s. 9 of the International Commercial Arbitration Act quoted earlier.

16   The most difficult hurdle faced by Silver Standard was the Chambers judge's ruling that (to
                                                                                             70
paraphrase his reasons at para. 57) a Mareva injunction should almost never be issued in the
absence of a "scheme to avoid judgment creditors" or where the assets in question are being
removed from the jurisdiction in the ordinary course of business. (To my mind, these are two
sides of the same coin – i.e., where payments are seen to be made in the ordinary course of
business – e.g., to persons who have supplied goods or services normally required for the
operation of the enterprise – such payments are obviously unlikely to be part of a scheme to
make the enterprise judgment-proof.) Counsel for Geolog referred us to numerous cases from
both England and Canada to the effect that before a Mareva injunction will be granted, it must
be shown the defendant is likely to place his assets outside the jurisdiction for the purpose of
defeating a possible judgment creditor – in other words, that the defendant intends to abuse
the jurisdictional rules. Reference was made, for example, to Iraqi Ministry of Defence v.
Arcepey Shipping Co. S.A. [1980] 2 W.L.R. 488 (Q.B.), where Goff, J. (as he then was) varied a
Mareva injunction to permit a foreign defendant to apply certain of its assets to the repayment
of a loan outside the jurisdiction. He observed:

       A reputable businessman who has received a loan from another person is likely to regard
       it as dishonourable, if not dishonest, not to repay that loan even if the enforcement of
       the loan is technically illegal by virtue of the Moneylenders Acts. All the intervenors are
       asking is that the defendants should be free to repay such a loan if they think fit to do so,
       not that the loan transaction should be enforced. For a defendant to be free to repay a
       loan in such circumstances is not inconsistent with the policy underlying the Mareva
       jurisdiction. He is not in such circumstances seeking to avoid his responsibilities to the
       plaintiff if the latter should ultimately obtain a judgment; on the contrary, he is seeking
       in good faith to make payments which he considers he should make in the ordinary
       course of business. I cannot see that the Mareva jurisdiction should be allowed to
       prevent such a payment. To allow it to do so would be to stretch it beyond its original
       purpose so that instead of preventing abuse it would rather prevent businessmen
       conducting their businesses as they are entitled to do. [at 495; emphasis added]

Accordingly, notwithstanding that there was only one asset of the defendant available and it
was not large enough to satisfy the claims of both the intervenors and the plaintiffs, the Court
modified the Mareva order to permit payment of £200,000 out of England.

17 More recently, in Polly Peck International plc v. Nadir (No. 2) [1992] 4 All E.R. 769 (C.A.),
the Court lifted a Mareva injunction that had prevented the Central Bank of Northern Cyprus
from moving its foreign currency reserves from London in the face of a large claim by the
plaintiff for misapplication of funds. This was done even though the defendant was likely to
remove all its assets immediately from the United Kingdom, thus making any judgment
obtained by the plaintiff ultimately worthless. Part of the Court's reluctance to continue the
injunction was obviously due to the fact that the defendant was a central bank; however, the
remarks of Lord Donaldson M.R. were framed in broader terms:

         I therefore turn to the principles underlying the [Mareva] jurisdiction.

              (1) So far as lies in their power the courts will not permit the course of justice to
              be frustrated by a defendant taking action, the purpose of which is to render
              nugatory or less effective any judgment or order which the plaintiff may
              thereafter obtain.

              (2) It is not the purpose of a Mareva injunction to prevent a defendant acting as
              he would have acted in the absence of a claim against him. Whilst a defendant
              who is a natural person can and should be enjoined from indulging in a spending
              spree undertaken with the intention of dissipating or reducing his assets before
              the day of judgment, he cannot be required to reduce his ordinary standard of
                                                                                               71
               living with the view to putting by sums to satisfy a judgment which may or may
               not be given in the future. Equally no defendant, whether a natural or a juridical
               person, can be enjoined in terms which will prevent him from carrying on his
               business in the ordinary way or for meeting his debts or other obligations as they
               become due prior to the judgment being given in the action ....

               (4) It is not the purpose of a Mareva injunction to render the plaintiff a secured
               creditor, although this may be the result if the defendant offers a third party
               guarantee or bond in order to avoid such an injunction being imposed. [at 785-6;
               emphasis added]

18 Following the lead of the Supreme Court of Canada in Aetna, supra, many judges in British
Columbia have also required as a condition of granting a Mareva injunction that the plaintiff
show an intention on the defendant's part to remove its assets from the jurisdiction or dissipate
them in order to avoid the possibility of a judgment: see, for example, United Oilseed Products
Ltd. v. North American Car (Canada) Ltd. [1986] B.C.J. No. 262 (B.C.C.A. in Chambers); Lombard
Dairy Cheese Ltd. v. Grisnich, [1994] B.C.J. No. 1090, (B.C.S.C., Vancouver Registry C940642,
dated May 11, 1994), Schaefer v. Fisher, [1997] B.C.J. No. 359, (B.C.S.C., Vancouver Registry
C970306, dated February 13, 1997); cf. Northern Sales Co. Ltd. v. Government Trading Corp. of
Iran (1989) 37 B.C.L.R. (2d) 73 (B.C.S.C.), where Spencer J. noted at 77 that "Not all the cases
insist" on the "condition" that the plaintiff prove an intention on the part of the defendant to
defeat judgment.

19 Many of the foregoing cases were considered by Huddart J. (as she then was) in Mooney v.
Orr (1994) 100 B.C.L.R. (2d) 335 (B.C.S.C.). The facts of that case were unusual in that the
defendant by counter-claim was found to have had "both the capacity and inclination from
which can be inferred the intention to hide assets from potential judgment creditors" including
the plaintiff by counter-claim. At the same time, however,

       ... the evidence does not establish the probability or even a real risk that Mr. Mooney is
       about to do the Orrs irreparable injury. Indeed, it does not establish that he will do
       anything to harm the Orrs. It establishes only that Mr. Mooney has structured his affairs
       well before he met Mr. Orr so as to protect any offshore property he may have from
       execution. He has shown no inclination to dissipate his B.C. assets or to transfer them
       abroad.

       The real question on this application becomes whether this court will restrain a litigant
       like Mr. Mooney from dealing freely with capital assets already abroad before the
       proceeding was commenced, and probably before the cause of action arose. This is a
       different issue from that of active and imminent dissipation of assets for which the
       Supreme Court of Canada approved the use of the Mareva injunction in Aetna, supra, as
       an exception to the long-standing practice of not requiring security before judgment. [at
       350-1; emphasis added]

In that context, Huddart J. suggested a "relaxed approach" to applications for Mareva
injunctions under which provincial superior courts could develop their own policies for the
exercise of the discretion and avoid becoming prisoners of a formula' (a phrase taken from the
often-quoted judgment of McLachlin, J.A. (as she then was) in B.C. (Attorney General) v. Wale
(1986) 9 B.C.L.R. (2d) 333 (B.C.C.A.), at 346 (aff'd at [1991] 1 S.C.R. 62.) By taking a flexible
approach, the court may take account of a wide variety of circumstances, including "the relative
strengths of the parties' cases, evidence of irreparable harm one way or the other, potential
effects on third parties, and factors affecting the public interest." (at 349) Further, Huddart J.
said, such an approach:
                                                                                                72
       ... prevents the judge from becoming a prisoner of a fixed formula and places the
       emphasis where it belongs, on the justice and fairness of the order inter partes. It is fair
       to both sides, because, while maintaining the burden on the plaintiff to establish
       grounds for the application, it justifies calling upon the defendant to meet the case
       brought by the plaintiff, by putting forth evidence to support his position.

       By this approach, the ultimate question becomes, is it fair and just that the applicant
       should have the right to monitor the movement or expenditure of capital assets by the
       respondent during the course of the proceedings between them?

       Along the route to an answer, the court must consider whether and to what extent the
       justification put forth in a particular case permits that right. This question directs
       attention to the value underlying the court's examination of whether there is real risk of
       dissipation of domestic assets and/or foreign assets, whether that analysis is performed
       as part of the three-pronged test that predominates at the ex parte stage or of the
       underlying "fit and just" test likely to be given flesh only at the inter partes continuation
       hearing. [at 350]

20 I agree with this approach, which in my view is true to the historical roots of injunctions
generally and Mareva injunctions in particular. Thus I would be reluctant to adopt a hard and
fast rule, as counsel for the defendants urged upon us, that a Mareva injunction may never be
made or continued unless there is a fraudulent intent on the part of the debtor; or where the
payment in question is one proposed to be made in the ordinary course of business; or where it
would materially and adversely affect an innocent third party. (In the latter regard, Mr.
Moshonas referred us to Galaxia Maritime S.A. v. Mineralimportexport (Eleftherios) [1982] 1 All
E.R. 796 (C.A.) at 800, Northern Sales Co. Ltd. v. Gov't. Trading Corp. of Iran, supra, at 75-6. But
this factor cannot be taken too far, for almost every Mareva injunction is likely to inconvenience
another party in some way.) The overarching consideration in each case is the balance of justice
and convenience between the parties, and those concepts can embrace many factors that do
not fit easily into the "rules" or "conditions" advanced by the defendants.

21 Having said that, however, it is clear that in most cases, it will not be just or convenient to
tie up a defendant's assets or funds simply to give the plaintiff security for a judgment he may
never obtain. Courts will be reluctant to interfere with the parties' normal business
arrangements, and affect the rights of other creditors, merely on the speculation that the
plaintiff will ultimately succeed in its claim and have difficulty collecting on its judgment if the
injunction is not granted.

22 What makes the case at bar difficult is that the factors in the plaintiff's favour are very
strong: Silver Standard appears to have a good claim for repayment of its loans and advances
while Geolog's counter-claim is very difficult to assess; and as earlier noted, if the injunction is
released, there is almost no doubt that Silver Standard will not recover any award it obtains.
Even if Geolog had assets elsewhere, there is no reciprocal legislation for the enforcement of
judgments between Russia and British Columbia or other means by which a judgment against
Geolog could realistically be enforced.

23 The Chambers judge had before him all the relevant facts and law. He was also reluctant to
set down a hard and fast rule. In his words:

       I am not prepared to go so far as to hold that a Mareva injunction should never be issued
       where funds or assets are being removed from the province in the ordinary course of
       business and there is no evidence of any scheme to avoid judgment creditors. There
       might be special circumstances where such an order is warranted, although at present, I
       cannot imagine what those circumstances might be. I am, however, of the opinion that
                                                                                                 73
        such an order should not generally be made. [para. 57]

As an appellate court, we are in a position to interfere with the Chambers judge's exercise of his
discretion only if he acted on a wrong principle or was otherwise clearly wrong in his conclusion.
I cannot say that that occurred, and indeed I believe he properly applied the law to the facts
before him. It may be that the cautious approach to Mareva injunctions favoured in Aetna now
requires some refinement almost 15 years later in light of the globalization of business
transactions and the speed with which assets may now be moved across borders. As Mooney v.
Orr indicates, the law is moving incrementally in that direction. At present, however, the
balance of convenience and justice is generally seen to weigh against the granting of an
injunction that will prevent a defendant from paying a debt incurred in the ordinary course of
business, simply in order to provide pre-judgment security to a plaintiff. That factor, and the
consideration of Dukat's position, led the Chambers judge to conclude that the Mareva
injunction should be set aside in this case. No basis for our interference has been shown.

Garnishment Order

24 There does, of course, exist a statutory means by which a plaintiff may obtain pre-
judgment security – the garnishment order. In this regard, s. 3 of the Court Order Enforcement
Act, R.S.B.C. 1996, c. 78, provides:

        (2) A judge or a registrar may, on an application made without notice to any person by

                (a) a plaintiff in an action, ... on affidavit by himself or herself or his or her
                solicitor or some other person aware of the facts, stating, ...

                (d) if a judgment has not been recovered,

                    (i) that an action is pending,

                    (ii) the time of its commencement,

                    (iii) the nature of the cause of action,

                    (iv) the actual amount of the debt, claim or demand, and

                    (v) that it is justly due and owing, after making all just discounts,

                and stating in either case

                (e) that any other person, hereafter called the garnishee, is indebted or liable to
                the defendant, judgment debtor or person liable to satisfy the judgment or
                order, and is in the jurisdiction of the court, and

                (f) with reasonable certainty, the place of residence of the garnishee,

        order that all debts due from the garnishee to the defendant, judgment debtor or
        person liable to satisfy the judgment or order, as the case may be, is attached to the
        extent necessary to answer the judgment recovered or to be recovered, or the order
        made, as the case may be.

Also relevant are s-ss. (1) and (2) of s. 5:

        (1) If a garnishing order is made against a defendant or judgment debtor, he or she may
                                                                                           74
       apply to the registrar or to the court in which the order is made for a release of the
       garnishment, ....

       (2) If, under subsection (1), the registrar or judge considers it just in all the
       circumstances, he or she may make an order releasing all or part of the garnishment ....

25 The Chambers judge in case at bar stated that the power to set aside a garnishing order if
the court considers it "just" in all the circumstances, is a broad discretion. He then reasoned as
follows:

       To obtain a Garnishing Order Before Judgment there must be, amongst other things, an
       action that is "pending": s. 3(2)(d)(i). In the present case, an action was pending when
       the Garnishing Order was obtained, but by reason of this judgment, the action has now
       been stayed.

       A Garnishing Order Before Judgment has certain similarities to a Mareva injunction. It
       ties up assets of the defendant without there being any judgment yet obtained.

       In my opinion, for the reasons I have already stated for setting aside the Mareva
       injunction combined with the fact that the action has now been stayed, it is just to order
       release of all of the garnishment. It is so ordered. [paras. 68-70; emphasis added]

26     It was not clear whether the Chambers judge considered Trade Fortune Inc. v.
Amalgamated Mill Supplies Ltd. (1994) 113 D.L.R. (4th) 116, the facts of which are remarkably
close to those of the case at bar. In Trade Fortune, the plaintiffs were Greek corporations which
were suing a British Columbia corporation under a charter-party agreement. The agreement
provided for the arbitration of any disputes in London and under English law. The plaintiffs had
begun proceedings to appoint an arbitrator, but a few months later also brought an action in
Supreme Court for the amount alleged to be owing by the defendant. A garnishing order
obtained before judgment was served on the Royal Bank. The bank paid the full amount of the
plaintiffs' claim, some $97,000, into court. The defendant applied to set aside the garnishment
proceedings on the ground inter alia that since the charter-party agreement had provided for
arbitration in London, the plaintiffs should not be permitted to bring a concurrent action in
British Columbia and garnishee the disputed debt.

27 The Court rejected this argument after reviewing at some length the International
Commercial Arbitration Act, the UNCITRAL Model Arbitration Law referred to therein, and two
texts on international commercial arbitration. These supported the conclusion that, in the
words of Bouck J., "the concept of protection' in s. 9 [of the International Commercial
Arbitration Act] includes the right of an arbitrating party to obtain a garnishee order before
judgment in order to secure funds for payment of the eventual arbitration award." (at 121).

28 The Court then moved to the question of the stay to be ordered under s. 8 of the Act,
which the plaintiffs had agreed to as long as the stay did not affect its right "to take further
protective proceedings under s. 9 of the Act if so advised." The defendant argued that if the
action were stayed and the arbitration proceeded to an award, then:

       ... the dispute is res judicata because the B.C. claim merges in the award. To recover
       payment of the award, the plaintiff must move to enforce the award in a separate
       proceeding brought by way of petition under s. 8 of the International Commercial
       Arbitration Act. On the happening of that event, [counsel for the defendant] says the
       plaintiffs cannot proceed to judgment in this action. Section 15 of the Court Order
       Enforcement Act only allows payment out of money garnisheed to a "judgment
       creditor". He contends the plaintiffs can never be judgment creditors in this action by
                                                                                              75
       reason of merger of their claim into the award.

       Alternatively, he submits that the plaintiffs can never become judgment creditors in this
       action because the only way they can enforce the award is by a separate proceeding
       under s. 8 of the Act. Hence, upon the stay of the proceedings the monies in court
       should be paid back to the defendant. No cases were cited by counsel for the defendant
       in support of these allegations. [at 126]

29 Bouck J. declined to accept the defendant's argument and described at length the means
by which an award obtained by the plaintiffs could be enforced by a British Columbia court. In
his words:

       ... it appears that the plaintiffs may enforce any award they receive in the English
       arbitration by either:

              (a) suing on the award in an English court, obtaining a judgment and suing on the
              judgment in this court, or

              (b) applying for a judgment against the defendant in the English courts under the
              English arbitration statutes and then suing on that judgment in this court, or

              (c) suing on the award in this court, or

              (d) suing on the original cause of action in this court, or

              (e) applying to this court to "enforce" the award under s. 35 of the International
              Commercial Arbitration Act. Presumably that means the court will convert the
              award into a judgment.

       There is one other alternative where a successful party elects to recover a judgment on
       the award in the foreign court. If the foreign country where the award and judgment
       were obtained is a reciprocating jurisdiction, rather than suing on the judgment, the
       successful party may elect to register the foreign judgment in this province under Part 2
       of the Court Order Enforcement Act, Reciprocal Enforcement of Court Orders. [at 128]

The Court then concluded that since the plaintiffs' original claim would not be merged into the
arbitration award, there was no law preventing them from pursuing their lawful demands until
such time as they were paid in full. The application to stay the action was found not to have the
effect of setting aside the garnishment order, and accordingly, the Court directed that the
monies paid into court were to be retained pending the outcome of the arbitration and
subsequent proceedings.

30 Counsel in their submissions before us and in the court below did not contend that Trade
Fortune was wrongly decided and indeed conceded the court had the jurisdiction to grant a
garnishment order whether or not a stay were granted. It is therefore difficult to understand
why the Chambers judge in the case at bar felt that the fact the action had been stayed, cast
doubt on whether the action was still "pending" or constituted a reason to order the release of
the garnishment. Section 9 of the International Commercial Arbitration Act makes it clear that
the granting of an "interim measure of protection" is not inconsistent with an international
arbitration arrangement, which of course includes the obligation to grant a stay under s. 8 of
that statute. Presumably, as Mr. Gouge suggests, the availability of interim protective measures
encourages parties to place more confidence in proceeding by arbitration than they otherwise
would. Accordingly, I believe the Chambers judge erred in holding that the granting of the stay
under s. 8 meant that the garnishment order should be released.
                                                                                                  76

31 The Chambers judge also indicated he was setting aside the order for the same reasons for
which he had set aside the Mareva injunction – i.e., because there was no intention on Geolog's
part to "avoid" any judgment the plaintiff might ultimately obtain, and because of the effect a
Mareva injunction would have on Dukat and its employees. Not-withstanding Mr. Phillips'
argument to the contrary, I believe the Chambers judge equated the test for the granting of a
Mareva injunction, an equitable remedy, with the circumstances in which the statutory
garnishment procedure can be set aside pursuant to s. 5(2) of the Court Order Enforcement Act,
and that he erred in doing so. Aside from the obvious point that the onus is different in each
case, I am not aware of any authority that requires as a condition of garnishment that the
debtor be shown to have an intention to avoid paying any judgment that may ultimately be
entered against him, nor of any authority that would indicate the lack of such an intention is
even relevant to the question. Further, the Chambers judge did not allude to any of the other
factors normally considered in applications to set aside garnishment orders, notwithstanding his
observation that the discretion is a broad one. British Columbia courts have made it clear that
the discretion to set aside a garnishment order where it is "just in all the circumstances" permits
consideration of a broad range of factors, including the strength or weakness of each party's
case: per Seaton J.A. in Min-En Laboratories Ltd. v. Westley Mines Ltd. and Ventures West
Minerals Ltd. (1983) 57 B.C.L.R. 259 at 260. The Court in that case went on to note the
comments of Bouck J. in Webster v. Webster (1979) 12 B.C.L.R. 172, that:

       One can only assume s. 3B [the predecessor of what is now s. 5] was intended to provide
       a remedy where there is undue hardship, abuse, or the order is unnecessary. I do not
       mean these examples to be exhaustive; rather they are tests which may help in deciding
       what is "just in all the circumstances". [at 177]

The Court in Min-En continued:

       I agree with that observation. I think that it was that observation that was agreed to in
       this court. I do not think that what was said in either court limits the word
       "circumstances" in s. 6. The section says "all the circumstances" and I emphasize "all". To
       demand that it be limited in the manner suggested would take away the effect of those
       words. [at 261]

The Court also declined to "encrust" (what was then) s. 6 with a list of circumstances in which
the discretion may be exercised, and rejected the argument that the discretion requires a
defendant to show "exceptional circumstances".

32 I have already mentioned the Chambers judge's finding in this case that there was "no real
dispute" that the loans and advances comprising Silver Standard's claim were in fact made to
Geolog. As he noted, the "real dispute" was whether all the loans are due and payable and
whether Geolog is entitled to damages for alleged breaches of the framework agreements by
Silver Standard. As far as "necessity" is concerned, it is very unlikely there will be any funds that
will be available for any ultimate award obtained by Silver Standard if the garnishment is
released. I consider also that the claim in question relates to loans made to Geolog, which has
had the use of those funds but has nevertheless become indebted to Dukat. In these
circumstances, it seems to me that the exigent financial positions of Geolog and Dukat should
not weigh as heavily as they might in a claim of a different nature.

33 Thus, although the decision as to whether a garnishment order should be released is
obviously a discretionary one, it is my view the Chambers judge did err in law in acting on the
basis of the reasons which had led him to set aside the Mareva injunction, "combined with the
fact that the action has now been stayed". In my view, the defendant did not meet the onus on
it to show that it was just in all the circumstances that the order be released, and indeed the
                                                                                                   77
wider range of factors that fall to be considered under s. 5(2) militate in favour of the order.

34 This brings me to the question of alleged technical defects which Geolog and Dukat claim
are fatal to the garnishment order obtained by Silver Standard on June 24, 1998. Silver Standard
objects at the outset that Geolog should not be permitted to raise these matters when it failed
to do so in its "outline" filed in the court below pursuant to R. 65(10) or in its oral submissions
to the Chambers judge. Although it would have been better if these arguments had been made
earlier, it is clearly not in the interests of justice to hold counsel to matters raised in their
"outlines" as if they were pleadings and require that the parties now return to Supreme Court
Chambers to argue new matters. I therefore propose to address these arguments, on which
counsel have made lengthy written submissions to this court.

35   In this regard, I set out a chronology of the relevant facts:

June 21, 1998:      Silver Standard issued demand for payment of its outstanding
                    loans to Geolog in the amount of $3,064,500 (U.S.) plus the
                    reimbursement of advances made on Geolog's behalf to Cominco
                    and the Environmental Committee of the Russian Federation in the
                    amounts of $474,302.87 and $22,448 (U.S.), respectively. [Because
                    the amounts of these advances were not the subject of the
                    garnishing order, they are not relevant to the matters being
                    considered.]
June 22, 1998:      Silver Standard filed a Writ, supported by an affidavit from Mr.
                    Quartermain, its President, to the effect that the total amounts
                    lent by Silver Standard to Geolog were $3,064,500 (U.S.). Also on
                    this date, a garnishing order before judgment was issued referring
                    to the total amount of loans and advances described above.
June 23, 1998:      Silver Standard filed an Amended Writ supported by a second
                    affidavit from Mr. Quartermain. In this affidavit, he stated that an
                    error had been made in (only) the cumulative total amount of the
                    loans and that the correct total amount was $2,716,700 (U.S.). The
                    endorsement on the Writ was also amended to claim that amount,
                    which was also stated in Canadian currency as $3,953,341, having
                    been converted at the rate of $1.4552 in effect as at the close of
                    business on June 22.
June 24, 1998:      A second pre-judgment garnishment order was granted, supported
                    by an affidavit of Mr. Holtby, Silver Standard's senior geologist. He
                    stated that the amount sought under the order was $4,048,969.68
                    (Cdn.) being the equivalent of $2,716,700 (U.S.) converted at the
                    rate of $1.4904 which was in effect as at the close of business on
                    June 23, 1998.
August 7, 1998:     The Statement of Claim was filed, using the amount stated in the
                    Amended Writ of $3,953,341.84 (Cdn.) or $ $2,716,700 (U.S.),
                    using the June 22 conversion rate of $1.4552 stated in the
                    Amended Writ.

I note at the outset in response to an argument of Dukat's counsel, that the fact the first
garnishment order was not proceeded with and a second one was obtained, should not taint or
render defective the second order. The case is obviously very different from that considered by
the Court in Richardson Greenshields of Canada Ltd. v. McKim et al. (1987) 14 B.C.L.R. (2d) 101
(B.C.S.C.), where the garnishee paid the money into court under a defective order and the
plaintiff purported to "consent" to payment of the funds to the garnishee and then to take out a
second order under which the funds were paid back into court. In the case at bar, the first
garnishment order was not acted upon in any way, the error was properly corrected, and a new
                                                                                                78
order was sought and obtained.

36 Geolog's first objection is that although both affidavits filed in support of the garnishment
order and the Statement of Claim referred to indebtedness in the amount of $2,716,700 (U.S.),
the Canadian currency equivalent stated in Mr. Holtby's affidavit (filed in support of the second
garnishment order) was some $95,000 higher than the amount referred to in the Statement of
Claim. This, of course, occurred because the exchange rate between American and Canadian
funds had changed between June 23 and June 24. Mr. Phillips contends that because the
statutory requirements applicable to garnishment orders must be strictly complied with, that
"inconsistency, even without more, gave Geolog the right to have the Garnishing Order set
aside."

37 Further, counsel note s. 1 of the Foreign Money Claims Act, R.S.B.C. 1996, c. 155, which
provides:

       s.1 (1) If, before making an order for the payment of money arising out of a claim or loss,
       the court considers that the person in whose favour the order will be made will be most
       truly and exactly compensated if all or part of the money payable under the order is
       measured in a currency other than the currency of Canada, the court must order that
       the money payable under the order will be that amount of Canadian currency that is
       necessary to purchase the equivalent amount of the other currency at a chartered bank
       located in British Columbia at the close of business on the conversion date.

       (2) The conversion date is the last day, before the day on which a payment under the
       order is made by the judgment debtor to the judgment creditor, that the bank referred
       to in subsection (1) quotes a Canadian dollar equivalent to the other currency.

It is said that because a decision on the part of the court is required under s. 1(1), Silver
Standard's claim is not in respect of a liquidated amount, i.e., a claim the quanti-fication of
which is capable of being "ascertained as a mere matter of arithmetic". In this regard, Mr.
Phillips cites McIntyre v. Gibson (1908) 17 Man. R. 423 (Man. C.A.), which involved a claim in
tort for unascertained damages before judgment; Black v. H. & F. Mill Co. Ltd. [1947] 2 D.L.R.
229 (B.C.S.C.), which involved a claim for damages for breach of contract; and Pe Ben Industries
Company Ltd. v. Chinook Construction & Engineering Ltd. [1977] 3 W.W.R. 481 (B.C.C.A.), which
involved in part a claim for labour and equipment had not been a subject of agreement
between the parties. After reviewing various cases, including McIntyre v. Gibson, Robertson J.A.
for this court concluded at 486 that "unliquidated damages, whether arising in tort or in
contract, cannot be the subject matter of a garnishing proceeding."

38 I have no doubt that those cases were correctly decided, but the case at bar is obviously
distinguishable. Indeed, it is difficult to conceive of circumstances in which a claim for the
repayment of a loan made to a defendant would not be a liquidated claim. The fact that at the
end of a trial the court has a discretion to decide what conversion rate should be applied so as
to ensure the plaintiff's true and exact compensation should not operate to change that fact. In
this regard, I agree with Master Patterson who in similar circumstances in Leaton Leather &
Trading Co. Ltd. v. Tak Kong Ngai, [1997] B.C.J. No. 1660, (B.C.S.C., Vancouver Registry C972956,
dated July 9, 1997) ruled that a statement in an affidavit of an amount due in foreign currency,
with a conversion rate and the equivalent in Canadian dollars, set out a liquidated demand that
satisfied the requirements of the Court Order Enforcement Act. As Mr. Gouge argues, moreover,
if it were otherwise, a creditor suing for a debt expressed in a foreign currency could never issue
a garnishing order before judgment.

39 Similar considerations apply as well to Mr. Phillips' argument regarding the "discrepancy"
or "inconsistency" between the Statement of Claim and Mr. Holtby's affidavit which arose as a
                                                                                              79
result of the change in conversion rates. In my view, it was incumbent on the plaintiff to state
the appropriate conversion rates and to convert the American funds to Canadian funds in the
documents that were filed on the different dates on which they were filed. Far from being a
"discrepancy", the currency differential between the two dates was a relevant fact that existed
quite apart from the litigation. The plaintiff would have been open to criticism, and perhaps
attack, had it not carried out its calculations accurately with reference to the exchange rates
prevailing on the dates of the respective documents.

40 For these reasons, I cannot accede to Geolog's arguments that the garnishment order was
technically defective and must therefore be set aside.

41 In my view it follows that the garnishing order before judgment should not have been
released. I would allow the appeal to the extent of restoring the garnishing order, but I would
dismiss the appeal insofar as the Mareva injunction is concerned.



                                       Hickman v. Kaiser
                                (1996) 28 B.C.L.R. (3d) 195 (S.C.)

1 HOLMES J.:— Mr. John Hickman III ("Hickman"), one of the debtors, applies to set aside the
ex parte order of Parrett J. made August 16, 1996 restraining him from dealing with his assets
wherever situate. The plaintiffs, in turn, apply for a variation of the order as indicated in the
form of a varied draft order appended to their Notice of Motion.

2 The plaintiffs obtained a judgment June 17, 1991 in the Bankruptcy Court of the Southern
District of Texas, Victoria Division, for $2,877,825.12 (U.S.) against Hickman and the several
other named debtor companies and trusts with which he was associated.

3 The basis of the judgment was that Hickman had through fraud, theft or misappropriation
during his tenure as Trustee of a pension fund established by the defendant Palm Beach County
Utilities Corporation, wrongfully removed to his own benefit substantial sums from the trust.

4 The judgment obtained was for triple damages. The plaintiffs registered the judgment in
Idaho on March 29, 1996. This was a jurisdictional convenience as Idaho is a reciprocating state
to British Columbia under Part II of the Court Order Enforcement Act. Texas is not. On July 5,
1996 the judgment was registered in British Columbia by order of Master Brandreth-Gibbs. The
judgment as registered in British Columbia with accrued interest and conversion to Canadian
currency amounts to $3,285,468.33 plus $903,827.33; approximately $4.2 million.

5 On August 6, 1996 Dohm A.C.J. granted the issuance of a Writ of Seizure and Sale in respect
of Hickman's assets and on August 16, 1996 the world wide Mareva injunction in issue was
granted on ex parte motion by Parrett J. On September 10, 1996 Arkell J. dismissed Hickman's
application to set aside the orders registering the judgment and authorizing the Writ of Seizure.

6    Counsel followed the procedurally correct course of seeking to have the present
applications returned to Parrett J. for hearing. As Parrett J. was unavailable he released the
matter to enable it to be heard by any available judge of the Court.

7 In these circumstances the matter stands to be heard de novo as to both the law and the
facts. As a reviewing judge I am however constrained from discharging the order of the judge of
first instance only by reason that I might conclude I would have exercised an available discretion
differently. [See Gulf Islands Navigation Ltd. v. Seafarers' International Union of North America
(Canadian District) (1959), 27 W.W.R. 652 at 654 (S.C.); aff'd (1959), 28 W.W.R. 517 (C.A.)].
                                                                                                 80

8 I first reviewed the evidence as disclosed by the file which was before Parrett J. on August
16, 1996 together with his Reasons for Judgment. I then considered the additional evidence
filed by the parties since that hearing.

9   Parrett J. held at p.3 of his Judgment:

       I am perfectly satisfied on the material I have been taken through that the plaintiff has a
       strong prima facie case, and I am equally satisfied that there is evidence that there are
       some assets within this jurisdiction and that there is substantial evidence of Mr. Hickman
       or his corporations disposing of substantial quantities of assets in the form of various
       share certificates in recent weeks or months.

10 I agree with his conclusion. The evidence then, and now, indicates disposal of share
interests by Hickman within this jurisdiction and the receipt by him and a controlled Debtor
company of substantial funds that do not appear to have stayed in British Columbia. Hickman
recently deposed that:

       For the most part, the salary I received as an officer and director for Motion Works
       Group Limited, was spent in the ordinary course for such things as food, clothing,
       housing, educational expenses for children, medical expenses, debt servicing and other
       ordinary living expenses and for no other purposes.

               [Affidavit of John Hickman 111, sworn October 21, 1996, para.24].

11 Counsel for the plaintiffs expressed reluctance in accepting this explanation at face value.
Given the basis for the original judgment against Hickman, together with his concealment of it
from both shareholders of Motion Works Group Limited and Vancouver Stock Exchange
regulatory authorities, that reluctance is understandable.

12 Counsel for Hickman argues that the plaintiffs are not entitled to a Mareva injunction in
circumstances where they have a registered judgment within the jurisdiction. In usual
circumstances that is a principle that would likely prevail. However, I do not discern Southin J. in
NEC Corporation v. Steintron International Electronics Ltd., [1985] B.C.J. No. 245, 3 October
1985, Vancouver Registry C853762, (B.C.S.C.) is suggesting that is always so. No history of fraud,
concealment, or removal of assets from the jurisdiction appears to have occurred, or was
reasonably feared, in that case.

13 In Traff v. Evancic, [1995] B.C.J. No. 1089, (B.C.C.A.), Goldie J.A. found that the defendants'
assets consisted of real estate within the province and no allegation against the defendant
companies, the alter ego of Evancic who defrauded the plaintiffs, that they had assets in British
Columbia which were about to be removed. In the case at bar the history of Hickman, through
the agency of his companies or Trusts, had a demonstrated history of moving assets. It is alleged
that Hickman, and his alter ego company Buffalo Capital, had recently either converted to cash
and was concealing assets arising from his business dealings while in Vancouver, or more likely,
had already removed assets from the province. I do not consider Goldie J.A. was generalizing in
his finding a Mareva injunction was not warranted. He was confining it to the factual matrix of
the proceeding before him.

14 I am in agreement with the observations of Farquharson J. in Orwell Steel (Erection and
Fabrication) Ltd. v. Asphalt and Tarmac (U.K.) Ltd., [1984] 1 W.L.R. 1097 that:

       There is accordingly, in my judgment, power to grant an interlocutory injunction
       between final judgment and execution.
                                                                                               81

       If there is such a power, there seems to be no logical reason why a Mareva injunction
       should not be used in aid of execution. Indeed, in one sense it could be said that there is
       greater justification for restraining a defendant from disposing of his assets after
       judgment than before any claim has been established against him. It is true that there is
       a variety of methods for enforcing execution as set out in R.S.C., Ord. 45, r. 1 and once
       the plaintiff has obtained judgment it may be said that he should pursue the remedies
       provided by the rules rather than extend the application of Mareva injunctions still
       further. The answer to that objection is that, as has been frequently pointed out, the
       Mareva injunction acts in personam on the defendant and does not give the plaintiff any
       rights over the goods of the defendant nor involve any attachment of them. In this
       context it would have the effect of preserving the defendant's goods until execution
       could be levied upon them; and the remedies of injunction and execution can take effect
       side by side. Such was the view of Robert Goff J. in Stewart Chartering Ltd. v. C. & O.
       Managements S.A., [1980] 1 W.L.R. 460 where he continued a Mareva injunction
       granted before judgment in aid of execution. Plainly an injunction will only be granted
       where the plaintiff can adduce evidence of a kind which normally supports an
       application for a Mareva injunction, namely, that there are grounds for believing that
       the judgment debtor will dispose of his assets to avoid execution. Perhaps such grounds
       may be more readily established after judgment than before it.

15 I was referred to the comments in Alers-Hankey v. Solomon, [1994] B.C.J. No. 1201
(B.C.S.C.) of Melvin J. that the grant of a Mareva injunction should transcend mere movement of
assets from the jurisdiction and require evidence permitting an inference the removal of the
assets was to defeat a potential claim. In my view that approach has been met in the case at
bar. There is evidence to support an inference that Hickman caused at least some of his assets
to leave this province by the time his past dealings resulting in the judgment now registered in
British Columbia became known to investors, shareholders and the regulatory authorities.

16 In this regard Hickman would be astute enough to have inferred that if word of his
emerging prominence in the world of business and finance in British Columbia were to reach
the judgment holders to whom he had neglected payment they might seek to recover upon
their languishing judgment debt.

17 The Reasons of Parrett J. demonstrate he was aware of the appropriate legal test for grant
of the injunction, and that he correctly applied it. I cannot better summarize the many
appropriate considerations than did Huddart J. in Mooney v. Orr (1994), 33 C.P.C. (3d) 31
(B.C.S.C.) at p.46:

       This relaxed approach to applications for Mareva injunctions may be seen as fitting well
       with the established approach for granting interim injunctions in British Columbia. While
       there is a longstanding two-pronged test for the granting of an interim injunction, the
       Court of Appeal cautioned in British Columbia (Attorney General) v. Wale (1986), 9
       B.C.L.R. (2d) 333 (C.A.), at p.346, that "...the judge must not allow himself to become the
       prisoner of a formula. The fundamental question in each case is whether the granting of
       an injunction is just and equitable in all the circumstances of the case." The Court of
       Appeal affirmed the traditional test in Canadian Broadcasting Corp. v. CKPG Television
       Ltd. (1992), 64 B.C.L.R. (2d) 96, and added (at p.102) that:

           Resort to the decided cases in which the test has been applied will provide the
           necessary limits to the flexibility, not so much through what those cases say, but
           more through what they decide about whether an interim injunction should be
           granted on each set of particular facts.
                                                                                                 82
       The comparable approach to a Mareva injunction would be to require a strong prima
       facie (which seems to have been favoured in Aetna, supra) or a good arguable case (as
       expounded in Ninemia, supra) to cross the threshold, and then to balance the interests
       of the two parties, having regard to all the relevant factors in each case, to reach a just
       and convenient result. Included in such factors will be evidence that establishes the
       existence of assets within British Columbia (for a domestic injunction) or outside (for a
       national or international injunction) and a real risk of their disposal or dissipation so as
       to render nugatory any judgment.

       But also included will be whatever other factors counsel consider relevant in the
       particular circumstances. A non-exhaustive list of such factors drawn from the
       authorities includes: the nature of the transaction (local, national, international) giving
       rise to the cause of action, the risks inherent in that transaction, the residency of the
       respondent, enforcement rights for judgment creditors in the jurisdiction where the
       respondent's assets are located, the amount of the claim, the history of the respondent's
       conduct.

       In my view this approach reflects the practical approach this court has been taking on
       contested applications and permits the flexibility needed to take account of the wide
       variety of circumstances that give rise to applications such as the one before me, both in
       deciding whether to make an order, and in deciding the appropriate terms and
       conditions. It will be rare that a Mareva order is unconditional.

18 There is no question the plaintiffs must fully and fairly disclose all material evidence known
to them pertaining to the matters in question when seeking an ex parte Mareva injunction.
Counsel for Hickman argues this obligation of full and fair disclosure was not met.

19 I have carefully considered the evidence as to the circumstances surrounding the
misappropriation of funds leading to the original judgment, and in particular what portion of the
loss the plaintiffs in fact recovered from Hickman, and other sources, as derived from the
plaintiffs material before Parrett J. and in light of later material now filed by Hickman in support
of his present application. I certainly discern nothing that shows Hickman in a better light, or
detracts from the deceit involved in the original misappropriation. The conduct of Hickman
appears to have given rise to the imposition of triple damages as a punitive measure.

20 I have reviewed and considered the issue of non-disclosure in light of the explanation
articulated by Sharpe J. of the Ontario Court, General Division, in U.S.A. v. Robert Friedland,
[1996] O.J. No. 4399, 5 November 1996, File No. 96-CU-109731 at p.12:

       The duty of full and frank disclosure is, however, not to be imposed in a formal or
       mechanical manner. Ex parte applications are almost by definition brought quickly and
       with little time for preparation of material. A plaintiff should not be deprived of a
       remedy because there are mere imperfections in the affidavit or because
       inconsequential facts have not been disclosed. There must be some latitude and the
       defects complained of must be relevant and material to the discretion to be exercised by
       the Court.

21 In my view no omission in respect of the evidence before Parrett J. was relevant and
material to the discretion he exercised in the grant of the Mareva injunction. I am of the view
there was neither omission nor misrepresentation of any fact necessary to the conclusions
expressed by Parrett J. in his Reasons for Judgment. Any differences or further information now
apparent on the whole of the evidence would not in my view have led Parrett J. to any different
result than the one reached.
                                                                                               83
22 I do accept however that a case has been made by counsel for Hickman for a variation of
the term of the injunction order. Parrett J., concurrent with the injunctive relief granted, also
ordered that Hickman prepare and deliver an affidavit of disclosure as to his assets and their
location. Hickman has now complied. Further, close to four months has passed without the
plaintiffs having conducted an Examination in Aid of Execution in respect of their judgment.

23 I attribute no fault, nor do I criticize any party, for that process not having occurred. I
accept the explanations of counsel. Hickman was not available for certain time periods, counsel
for others, and the present applications to set aside the injunction were commenced and
pending hearing. It appears however there is no present impediment to an early Examination.

24 Hickman has deposed that the effect of the Mareva injunction hampers the continuation
of his affairs as an international entrepreneur. The evidence as to this prejudice is not specific
and I do not have the impression it is of pressing urgency or concern. The nature of a world
wide Mareva injunction, post-judgment, is however an extraordinary remedy. Although its use
here is justified, I am of the view that in all the now known circumstances it ought to be an
interim injunction for a defined term. This is not a matter where there is yet to be a trial.
Execution upon the judgment is all that remains.

25 In the result therefore I will allow the amendments in accordance with the varied order
prepared and annexed to the plaintiffs' Notice of Motion save and except as to the reduction of
the exempted monthly living expense allowance. It will remain at $7,500 a month as ordered by
Parrett J. Any variation of that amount should only occur when more specific evidence is
presented indicating the sum to be unreasonable, and providing evidence from which a
determination as to what is appropriate can be determined.

26 The order of Parrett J. in respect of the injunctive relief granted, will however be varied as
to its term so as to expire 90 days following completion of an Examination in Aid of Execution of
Hickman. This contemplates that Hickman will make himself available to be examined without
delay, and that the plaintiffs expeditiously pursue the Examination. The plaintiffs have liberty to
apply to extend the above expiry date upon seven days' notice.

27 Success on the applications has been divided. The parties will each bear their separate
costs.



                    Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd.
                                          2007 BCCA 481

The judgment of the Court was delivered by

1 M.E. SAUNDERS J.A.: – These are two class actions. In June 2006 the representative plaintiff
Ms. Tracy obtained a worldwide Mareva injunction, an impound order requiring the defendants
to place all funds from sale of the businesses in issue in a lawyer's trust account, and an order
requiring the defendants to file affidavits listing all their assets. The Mareva injunction was
given without an undertaking as to damages from Ms. Tracy.

2   The orders were made at the same time as the order certifying the actions as class actions.

3 The appellants are the defendants in the actions. The corporate appellants are companies
that have been in the payday loan and title loan business. I shall refer to them as the Instaloans
companies. The individual appellants are the officers, directors and shareholders of the
Instaloans companies. Collectively the appellants contend that the learned chambers judge
                                                                                              84
erred in granting the Mareva injunction, in impounding certain assets, and in ordering a listing
affidavit in over-broad terms.

4 The terms of the orders appealed are appended to these reasons for judgment as Schedules
"A" and "B". The reasons for judgment by which the orders were made may be found at 2006
BCSC 1018.

5 The actions are similar to actions that have been before this Court on several occasions,
most recently Kilroy v. A OK Payday Loans Inc., 2007 BCCA 231, 278 D.L.R. (4th) 193. In Kilroy
this Court upheld a judgment on liability, concluding that fees, charges and interest charged by
a payday loan company to borrowers, collectively resulted in a payment by class members of
interest at a criminal rate contrary to s. 347(1)(b) of the Criminal Code.

6 In these two actions, Ms. Tracy contends that fees, charges and interest paid to the
Instaloans companies on payday loan agreements and title loan agreements constituted interest
at a criminal rate contrary to s. 347(1)(b) of the Criminal Code. She seeks an order requiring the
Instaloans companies to disgorge all unlawful fees received by them, as well as all amounts
received in the title loan business from the sale of vehicles, over and above lawful charges. Ms.
Tracy seeks as well to pierce the corporate veil and to recover from the individual defendants,
alleging conspiracy. Against all defendants she seeks punitive damages.

7 The Instaloans companies, except 864556 Alberta Ltd., were first joined in MacKinnon v.
National Money Mart (S030527) an action against more than 20 defendants operating more
than 18 payday loan companies. In that action Mr. MacKinnon sought restitution and damages
for fees alleged to be contrary to s. 347(1) of the Criminal Code. Proposed class proceedings
were also commenced in both Alberta and Ontario in respect of the Instaloans companies.

8 On March 1, 2005, the certification application in MacKinnon was dismissed on the basis
that the issues in respect of the fees paid to different companies were not common issues and
the class action was not found to be the preferable procedure for resolution of the plaintiff's
claims: 2005 BCSC 271. That action was subsequently dismissed by consent against the
Instaloans companies on April 8, 2003.

9 On or around April 21, 2005, the Instaloans business was sold to Rent-Cash Inc. for a cash
payment of $39.5 million. Rent-Cash Inc., a publicly traded company, was a competitor of
Instaloans operating a payday loan business known as The Cash Store.

10 On April 29, 2005, Ms. Tracy commenced the action against the appellants in respect of
the Instaloans' payday loan business. On August 15, 2005, she commenced her second action in
respect of their title loan business.

11 In the meantime, matters proceeded in the Ontario action, Bruley v. 864556 Alberta Ltd.,
formerly known as Instaloans Financials Solutions Centre Ltd. et al., (Court File No. 05-CV-
294691CP). In October 2005, counsel in the Ontario action delivered materials in support of an
application to certify Bruley as a national class proceeding and to approve a settlement. The
terms of the settlement provided for a minimum payment of $1.28 million and a maximum
payment of $8 million.

12 Ms. Tracy on behalf of the British Columbia claimants elected not to share in the
settlement, with the result that the Ontario settlement was approved for Instaloans' borrowers
except those in British Columbia.

13 In the present application, Ms. Tracy relied upon statements made in correspondence
placed before the judge approving the Bruley settlement. One letter is from the accounting firm
                                                                                         85
Watson Aberant that had acted as advisors to the individual defendants in that action. That
letter stated:

       We have acted as accountants for the Corporate Defendants for several years. In that
       capacity, we have information as to the recorded assets and liabilities of the Corporate
       Defendants. As accounting and tax advisors to the Individual Defendants for the last
       several years, we have information as to their reported assets and liabilities. Based on
       this information:

               As of August 1, the cutoff date closest to the date of filing the Bruley claim,
               August 5, 2005:

                      a. The Corporate Defendants have net assets not exceeding $1.7 million;
                      and

                      b. The Individual Defendants have exigible assets not exceeding $1 million.

                                                                      [Emphasis added.]

14 Another letter is from the law firm of Fraser Milner. It stated, referring to the Watson
Aberant letter:

       We have been asked to provide an independent commentary on the sale of the business
       assets of Instaloans to Rent-Cash Inc. and a subsidiary thereof, effective April 21, 2005,
       the dispensation of the proceeds derived therefrom and the various debtor protection
       strategies historically implemented by Tim Latimer and Marc Arcand (the "Individuals")
       and Instaloans. We have had no previous solicitor/client relationship with either
       Instaloans or the Individuals prior to this retainer.

       ...

       Subject to the assumptions and understandings conveyed to [McLennan Ross] and set
       out in this letter and subject to the qualifications and restrictions set out in this letter,
       we are satisfied that a judgment rendered against Instaloans and the Individuals in due
       course in the class action proceedings will go unsatisfied except to the extent of the
       attachment of the assets referred to in the Watson Aberant Opinion.

                                                                      [Emphasis added.]

15   In addition, the affidavit filed by counsel in Bruley read:

       Apart from the vagaries of litigation, it appeared to us that Instaloans had no substantial
       assets but was simply a group of shell companies operating out of retail locations and
       employing low paid staff. Thus, in the event that we were able to obtain a judgment
       against Instaloans, we would likely have been left with uncertain rights of recovery
       against the individual directors and officers, who might not have personal assets to meet
       a claim, and who had likely received sophisticated advice on asset protection.

16 Ms. Tracy filed her application for a Mareva injunction and listing affidavit March 16, 2006.
She relied on the above related sequence of events, the letters before the Ontario Court in
Bruley, the affidavit filed in Bruley, and the fact the appellants have no assets in British
Columbia, to support her contention that the appellants had or were organizing their affairs to
make themselves judgment proof and that a Mareva injunction and listing affidavit were
essential to the ability of class members to recover any sums the Court may order the
                                                                                                86
appellants to pay in this action.
The Reasons for Judgment

17 In her reasons for judgment granting the orders, the chambers judge applied the two-part
test set out by Huddart J. in Mooney v. Orr (1994), 100 B.C.L.R. (2d) 335, [1995] 3 W.W.R. 116
(S.C. Chambers) (Mooney No. 2):

       The comparable approach to a Mareva injunction would be to require a strong prima
       facie (which seems to have been favoured in Aetna, supra) or a good arguable case (as
       expounded in Ninemia, [1984] 1 All E.R. 398) to cross the threshold, and then to balance
       the interests of the two parties, having regard to all the relevant factors in each case, to
       reach a just and convenient result. Included in such factors will be evidence that
       establishes the existence of assets within British Columbia (for a domestic injunction) or
       outside (for a national or international injunction) and a real risk of their disposal or
       dissipation so as to render nugatory any judgment. (para. 44)

18 The chambers judge then referred to Silver Standard Resources Inc. v. Joint Stock Co.
Geolog (1998), 168 D.L.R. (4th) 309, 59 B.C.L.R. (3d) 196 (C.A.), in which this Court approved the
approach taken in Mooney No. 2:

       [92] ... In [Silver Standard], Newbury J.A. said that "[t]he overarching consideration in
       each case is the balance of justice and convenience between the parties" (para. 20). She
       went on to state at para. 21:

               ... it is clear that in most cases, it will not be just or convenient to tie up a
               defendant's assets or funds simply to give the plaintiff security for a judgment he
               may never obtain. Courts will be reluctant to interfere with the parties' normal
               business arrangements, and affect the rights of other creditors, merely on the
               speculation that the plaintiff will ultimately succeed in its claim and have
               difficulty collecting on its judgment if the injunction is not granted.

19 The chambers judge also noted at para. 93 that Aetna Financial Services Ltd. v. Feigelman,
[1985] 1 S.C.R. 2, [1985] 2 W.W.R. 97 required, on the balance of justice and convenience, that
"the plaintiff establish there is a genuine risk of disappearance of assets."

20 The chambers judge found that Ms. Tracy had established she had a good arguable case,
including against the individual defendants. Referring to 642947 Ontario Ltd. v. Fleischer (2001),
56 O.R. (3d) 417, 209 D.L.R. (4th) 182 (C.A.) at 68, she said:

       [95] The plaintiff has a good arguable case that the fees charged constitute interest in
       excess of the criminal rate; that the individual defendants as the directors and officers of
       the corporate defendants directed that wrongful thing to be done; and in light of the
       foregoing, that the court will pierce the corporate veil to affix liability to those
       individuals.

21 On the issue of the balance of convenience, the chambers judge referred to the earlier
decision of Newbury J. (as she then was) in Mooney v. Orr (1994), 98 B.C.L.R. (2d) 318 (S.C.
Chambers) (Mooney No. 1), dealing with the ex parte application for a Mareva injunction. In
Mooney No. 1 Newbury J. had quoted from Derby & Co. Ltd. v. Weldon (No. 2), [1989] 1 All E.R.
1002 (C.A.) at 325:

       The fundamental principle underlying this jurisdiction [to issue a worldwide order pre-
       judgment] is that, within the limits of its powers, no court should permit a defendant to
       take action designed to ensure that subsequent orders of the court are rendered less
                                                                                              87
       effective than would otherwise be the case. On the other hand, it is not its purpose to
       prevent a defendant carrying on business in the ordinary way or, if an individual, living
       his life normally pending the determination of the dispute, nor to impede him in any way
       in defending himself against the claim. Nor is its purpose to place the plaintiff in the
       position of a secured creditor. In a word, whilst one of the hazards facing a plaintiff in
       litigation is that, come the day of judgment it may not be possible for him to obtain
       satisfaction of that judgment fully or at all, the court should not permit the defendant
       artificially to create such a situation. [emphasis in Mooney No. 1]

22 The chambers judge referred to passages of Mooney No. 1 confirming the adaptability of
the courts to new circumstances, the need to ensure a defendant does not take action designed
to frustrate existing or subsequent orders of the court, and the caution to be applied in ensuring
that there is a real risk of removal or dissipation of assets to avoid judgment. She then held:

       [104] I am satisfied that the plaintiff has established a real risk of dissipation of assets,
       or, as some of the cases have put it, the "defendant taking action, the purpose of which
       is to render nugatory or less effective any judgment or order which the plaintiff may
       thereafter obtain": Polly Peck International plc v. Nadir (No. 2), [1992] 4 All E.R. 769
       (C.A.). The sale of the business assets for $39.5 million, combined with the evidence
       before the Court on the national class action settlement is sufficient to establish a real
       risk.

23 In the result, the chambers judge found that the balance of convenience favoured the
injunction, provided that it was crafted so as not to interfere with the ordinary business of the
defendants.

24 The chambers judge next addressed the prospect of relieving Ms. Tracy from the obligation
to provide an undertaking, and said:

       [106] ... I am satisfied that it is appropriate in this case not to require an undertaking:
       these proceedings are brought by the plaintiff, whose wherewithal is limited, on her own
       behalf and on behalf of others in similar circumstances. To require an undertaking would
       defeat the plaintiff's ability to obtain an injunction for the class. Given the circumscribed
       injunction in this case, damages, if any, have been minimized.

25 Last, the chambers judge rejected the submission that the Court lacked jurisdiction
because the defendants do not reside here and may not have assets in British Columbia. She did
so, on the basis that a Mareva injunction is an in personam remedy for which British Columbia
courts have jurisdiction over defendants who have attorned to the jurisdiction of the Court.
The Issues

26 On this appeal the appellants contend that the chambers judge erred in issuing the Mareva
injunction in:

       1) failing to apply the proper test for granting a Mareva injunction;

       2) ordering the injunction where the evidence does not support it and where none of the
       traditional hallmarks of conduct of a Mareva defendant are present; and

       3) failing to address Ms. Tracy's delay in seeking the injunction.

27 Further, the appellant contends that the judge erred in the terms of the listing affidavit by
going beyond what is required to monitor compliance.
Discussion
                                                                                                  88

28 The central issue in this appeal is the basis upon which a Mareva injunction may be
granted. This question engages as a first step the criteria for the granting of an interlocutory
injunction, and thereafter the finer points put upon a Mareva injunction in recognition of its
special place as an exception to the rule that a party is not entitled to pre-judgment execution.
To a degree this question also engages the proper role of Mareva injunctions in class
proceedings, as the class proceedings aspect and the policy favouring the facilitation of a
conglomerate of relatively small claims excused Ms. Tracy from providing an undertaking. The
result is an order of potentially great impact on the defendants which does not contain within it
the balancing aspect of jeopardy, for the effect of this order is to prohibit general use of assets
without the balance of a personal undertaking.

29 This Court, in Silver Standard, approved the two-armed test for a Mareva injunction set out
by Huddart J. in Mooney No. 2. Mooney No. 2 states the criteria differently than does the
Supreme Court of Canada in Aetna Financial, a case engaging different circumstances. Other
courts of appeal in Canada have formulated the criteria differently, steering away from the
approach articulated in British Columbia. Thus, the first question is whether the approach of
Mooney No. 2 fits within the approach taken by the Supreme Court of Canada in Aetna
Financial, or whether it requires modification.

30 I start with a brief review of the law relating to interlocutory injunctions of the usual sort.
In B.C. (A.G.) v. Wale (1986), 9 B.C.L.R. (2d) 333, [1987] 2 W.W.R. 331 (C.A.), aff'd [1991] 1 S.C.R.
62, McLachlin J.A. described the traditional test in British Columbia for the granting of an
interlocutory injunction as two-part: (i) is there a fair question to be tried, and (ii) does the
balance of convenience favour the granting of an injunction? She then said as to a three-part
test at p. 345:

       The decision in Amer. Cyanamid Co. v. Ethicon Limited [1975] A.C. 396, ... (H.L.), may be
       read as suggesting a three-stage test for the granting of interlocutory injunctions rather
       than the two-stage test to which I have referred, the requirements being (1) a fair
       question to be tried, (2) irreparable harm, and (3) balance of convenience favouring the
       injunction. While I prefer to view the requirement of irreparable harm as integral to the
       assessment of the balance of convenience between the parties, the practical effect of
       the two approaches is the same.

31   Madam Justice McLachlin described the essential question at p. 346:

       Having set out the usual procedure to be followed in determining whether to grant an
       interlocutory injunction, it is important to emphasize that the judge must not allow
       himself to become the prisoner of a formula. The fundamental question in each case is
       whether the granting of an injunction is just and equitable in all the circumstances of the
       case. Professor Sharp warns against the danger of insisting on slavish adherence to
       precise formulae in Injunctions and Specific Performance (1983), at paras. 186-89:

               The terms "irreparable harm", "status quo", "balance of convenience" do not
               have a precise meaning. They are more properly seen as guides which take colour
               and definition in the circumstances of each case. More importantly, they ought
               not to be seen as separate, watertight categories. These factors relate to each
               other, and strength on one part of the test ought to be permitted to compensate
               for weakness on another. It is not clear that the Cyanamid approach allows for
               this, and the decision suggests a misleading mechanical approach. The Manitoba
               Court of Appeal [in Lambair Ltd. v. Aero Trades (Western) Ltd. (1978), 87 D.L.R.
               (3d) 500, leave to appeal to the S.C.C. refused October 4, 1978] has quite
               properly held that "it is not necessary ... to follow the consecutive steps set out in
                                                                                               89
               the American Cyanamid judgment in an inflexible way; nor is it necessary to treat
               the relative strength of each party's case only as a last step in the process."

               The traditional "checklist" approach permits the individual judge to analyze all
               the factors coherently. It does not, however, require him to do so, and the
               flexibility, which permits one judge to weigh and balance the risk accurately,
               allows another to depart from the central question and allows for uncertainty
               and unevenness in approach. The checklist does not specifically relate the factors
               to one another, and while it provides a valuable guide in coming to the proper
               result, it has failed to articulate clearly an appropriate overall approach.

               Treating the checklist as a "multi-requisite test" will often produce results which
               do not reflect the balance of risks and do not minimize the risk of non-
               compensable harm ...

               The checklist of factors which the courts have developed – relative strength of the
               case, irreparable harm, and balance of convenience – should not be employed as
               a series of independent hurdles. They should be seen in the nature of evidence
               relative to the central issue of assessing the relative risks of harm to the parties
               from granting or withholding interlocutory relief.

                                                                       [Emphasis added.]

32 Some months after this Court's decision in B.C.(A.G.) v. Wale, the Supreme Court of
Canada in Manitoba (Attorney General) v. Metropolitan Stores Ltd., [1987] 1 S.C.R. 110, 38
D.L.R. (4th) 321 used the three-part test: (i) is there a serious question to be tried, (ii) is there
irreparable harm, (iii) does the balance of convenience favour the injunction? This approach was
affirmed in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 111 D.L.R.
(4th) 385.

33 The articulation of the criteria set out in B.C.(A.G.) v. Wale is often followed in British
Columbia; for example, Canadian Broadcasting Corp. v. CKPG Television Ltd., [1992] 3 W.W.R.
279, 64 B.C.L.R. (2d) 96 (C.A.), and was not disapproved by the Supreme Court of Canada when
B.C.(A.G.) v. Wale was before it in 1991. However, the three-part test of Metropolitan Stores
also has application. In all of this, the caution expressed by Professor Sharp and noted by
McLachlin J.A., that there is danger in slavish adherence to precise formulation, must be
remembered. This is because the criteria are only a judicial expression or explanation of the
statutory authority for injunctions in s. 39(1) of the Law and Equity Act, R.S.B.C. 1996, c. 253:

       39(1) An injunction or an order in the nature of mandamus may be granted or a receiver
       or receiver manager appointed by an interlocutory order of the court in all cases in
       which it appears to the court to be just or convenient that the order should be made.

                                                                       [Emphasis added.]

34 The law on Mareva injunctions sits within this general framework. The history of Mareva
injunctions is recounted in Aetna Financial by Estey J. The convenient starting place is Lister &
Co. v. Stubbs, [1886-90] All E.R. 797 (C.A.). There Cotton L.J. affirmed the rule that security for a
debt will not be ordered before judgment even where success of the claim is highly probable.
Exceptions to this referred to in Aetna Financial at pp. 12-14 are:

       1. for the preservation of assets, the very subject matter in dispute, where to allow the
       adversarial process to proceed unguided would see their destruction before the
       resolution of the dispute ...;
                                                                                                90

       2. where generally the processes of the court must be protected even by initiatives
       taken by the court itself;

       3. to prevent fraud both on the court and on the adversary ...;

       4. quia timet injunctions ... generally permitted under extreme circumstances which
       included a real or impending threat to remove contested assets from the jurisdiction.

35 Aetna Financial concerned the fourth exception, a quia timet injunction. In Aetna Financial,
Estey J. grappled with the jurisdiction of a Canadian court to issue a Mareva injunction. He
concluded that the courts must exercise caution, and that the issue of removing assets from a
jurisdiction bore different considerations in a federal state such that a province-to-province
transfer lacked the impact of a transfer outside the federal jurisdiction.

36 In reaching this conclusion, Estey J. first alluded to the classic criteria for an interlocutory
injunction and then dealt with what he terms "the second and higher hurdle" created by the
general rule against execution before judgment. He considered the jurisdiction to issue a
Mareva injunction and, referring to Chitel v. Rothbart (1982), 39 O.R. (2d) 513 (C.A.), said at pp.
26-27:

       ... although [the Court of Appeal of Ontario] refused the injunction in the circumstances
       of that case, it recognized in a detailed and comprehensive review of the authorities that
       the jurisdiction existed in the court to grant such a remedy in a proper case. The test
       there established (per MacKinnon A.C.J.O., at pp. 532-33) is somewhat narrower than
       that generally applied by the courts in the United Kingdom:

           The applicant must persuade the court by his material that the defendant is
           removing or there is a real risk that he is about to remove his assets from the
           jurisdiction to avoid the possibility of a judgment, or that the defendant is otherwise
           dissipating or disposing of his assets, in a manner clearly distinct from his usual or
           ordinary course of business or living, so as to render the possibility of future tracing
           of the assets remote, if not impossible in fact or in law.

           The condition precedent to entitlement to the order is the demonstration by the
           plaintiff of a "strong prima facie case" (p. 522) and not merely as stipulated in some
           of the U.K. authorities, "a good arguable case", (per Lord Denning in Rasu, [1978]
           Q.B. 644, and per Megarry V.C. in Barclay-Johnson v. Yuill, [1980] 1 W.L.R. 1259). In
           summary, the Ontario Court of Appeal recognized Lister as the general rule, and
           Mareva as a "limited exception" to it, the exceptional injunction being available only
           where there is a real risk that the defendant will remove his assets from the
           jurisdiction or dissipate those assets to avoid the possibility of a judgment ...

           In other provinces the courts have reached approximately the same result. ...

37   Mr. Justice Estey concluded on this note of caution at p. 37:

       There is still, as in the days of Lister, a profound unfairness in a rule which sees one's
       assets tied up indefinitely pending trial of an action which may not succeed, and even if
       it does succeed, which may result in an award of far less than the caged assets. The
       harshness of such an exception to the general rule is even less acceptable where the
       defendant is a resident within the jurisdiction of the court and the assets in question are
       not being disposed of or moved out of the country or put beyond the reach of the courts
       of the country. This sub-rule or exception can lead to serious abuse. A plaintiff with an
                                                                                             91
       apparent claim, without ultimate substance, may, by the Mareva exception to the Lister
       rule, tie up the assets of the defendant, not for the purpose of their preservation until
       judgment, but to force, by litigious blackmail, a settlement on the defendant who, for
       any one of many reasons, cannot afford to await the ultimate vindication after trial. I
       would, with all respect to those who have held otherwise, conclude that the order
       should not have been issued under the principles of interlocutory quia timet orders in
       Canadian courts functioning as they do in a federal system.

38 In contrast, Mooney No. 2 concerned the second exception referred to by Estey J., the
court acting to protect its own process.

39 In Mooney No. 2, the plaintiff had a monetary claim on an agreement denied by the
defendant. The defendant counterclaimed. The plaintiff was found to have always organized his
affairs by stowing assets out of the jurisdiction. It was the attempt to use the court's process to
recover a monetary judgment while simultaneously putting his assets beyond the reach of an
order for costs or a monetary judgment on the counterclaim that was in issue.

40   In that context, Huddart J. cited B.C.(A.G.) v. Wale at paras. 43 and 44:

       [43] This relaxed approach to applications for Mareva injunctions may be seen as fitting
       well with the established approach for granting interim injunctions in British Columbia.
       While there is a longstanding two-pronged test for the granting of an interim injunction,
       the Court of Appeal cautioned in British Columbia (Attorney General) v. Wale (1986), 9
       B.C.L.R. (2d) 333 ... (C.A.), at 346, that "... the judge must not allow himself to become
       the prisoner of a formula. The fundamental question in each case is whether the
       granting of an injunction is just and equitable in all the circumstances of the case." The
       Court of Appeal affirmed the traditional test in Canadian Broadcasting Corp. v. CKPG
       Television Ltd. (1992), 64 B.C.L.R. (2d) 96, ... (C.A.) and added (at p. 102) that:

               Resort to the decided cases in which the test has been applied will provide the
               necessary limits to that flexibility, not so much through what those cases say, but
               more through what they decide about whether an interim injunction should be
               granted on each set of particular facts.

       [44] The comparable approach to a Mareva injunction would be to require a strong
       prima facie (which seems to have been favoured in Aetna, supra) or a good arguable
       case (as expounded in Ninemia, supra,) to cross the threshold, and then to balance the
       interests of the two parties, having regard to all the relevant factors in each case, to
       reach a just and convenient result. Included in such factors will be evidence that
       establishes the existence of assets within British Columbia (for a domestic injunction) or
       outside (for a national or international injunction) and a real risk of their disposal or
       dissipation so as to render nugatory any judgment.

41 The Mooney No. 2 approach was affirmed by this Court in Silver Standard. There, in the
context of a foreign defendant entitled to receive funds from a Canadian defendant, the Court
approved an order setting aside a Mareva injunction against the foreign defendant and
reinstated a garnishing order against the second defendant. In doing so, Newbury J.A., for the
Court, considered the criteria for a Mareva injunction. With reference to Mooney No. 2, she
held:

       [20] I agree with this approach, which in my view is true to the historical roots of
       injunctions generally and Mareva injunctions in particular. Thus I would be reluctant to
       adopt a hard and fast rule, as counsel for the defendants urged upon us, that a Mareva
       injunction may never be made or continued unless there is a fraudulent intent on the
                                                                                              92
       part of the debtor; or where the payment in question is one proposed to be made in the
       ordinary course of business; or where it would materially and adversely affect an
       innocent third party. (In the latter regard, Mr. Moshonas referred us to Galaxia Maritime
       S.A. v. Mineralimportexport (Eleftherios), [1982] 1 All E.R. 796 (C.A.) at 800, Northern
       Sales Co. v. Government Trading Corp. of Iran, [1991] B.C.J. No. 3088, at 75-6. But this
       factor cannot be taken too far, for almost every Mareva injunction is likely to
       inconvenience another party in some way.) The overarching consideration in each case is
       the balance of justice and convenience between the parties, and those concepts can
       embrace many factors that do not fit easily into the "rules" or "conditions" advanced by
       the defendants.

       [21] Having said that, however, it is clear that in most cases, it will not be just or
       convenient to tie up a defendant's assets or funds simply to give the plaintiff security for
       a judgment he may never obtain. Courts will be reluctant to interfere with the parties'
       normal business arrangements, and affect the rights of other creditors, merely on the
       speculation that the plaintiff will ultimately succeed in its claim and have difficulty
       collecting on its judgment if the injunction is not granted.

       ...

       [23] ... As an appellate court, we are in a position to interfere with the Chambers judge's
       exercise of his discretion only if he acted on a wrong principle or was otherwise clearly
       wrong in his conclusion. I cannot say that that occurred, and indeed I believe he properly
       applied the law to the facts before him. It may be that the cautious approach to Mareva
       injunctions favoured in Aetna now requires some refinement almost 15 years later in
       light of the globalization of business transactions and the speed with which assets may
       now be moved across borders. As Mooney v. Orr indicates, the law is moving
       incrementally in that direction. At present, however, the balance of convenience and
       justice is generally seen to weigh against the granting of an injunction that will prevent a
       defendant from paying a debt incurred in the ordinary course of business, simply in
       order to provide pre-judgment security to a plaintiff. That factor, and the consideration
       of Dukat's position, led the Chambers judge to conclude that the Mareva injunction
       should be set aside in this case. No basis for our interference has been shown.

42 Counsel for the appellants urged us to apply the three-part test, as refined by five extra
requirements set out in Front Carriers Ltd. v. Atlantic & Orient Shipping Corp., 2006 FC 18 at
para. 16 [which are said to come from Third Chandris Shipping Corp. v. Unimarine S.A., [1979] 1
Q.B. 645, 2 Lloyd's Rep. 184 (C.A.), and Marine Atlantic Inc. v. Blyth (1993), 113 D.L.R. (4th) 501
(F.C.A.)]:

       1. The plaintiff should make full and frank disclosure of all matters in his knowledge
       which are material for the judge to know.

       2. The plaintiff should give particulars of his claim against the defendant, stating the
       ground of his claim and the amount thereof, and fairly stating the points made against it
       by the defendant.

       3. The plaintiff should give some grounds for believing that the defendant has assets [in
       the jurisdiction].

       4. The plaintiff should give some grounds for believing that there is a risk of the assets
       being removed before the judgment or award is satisfied.

       5. The plaintiff must, of course, give an undertaking in damages ... [which] in a suitable
                                                                                             93
       case ... should be supported by a bond or security: and the injunction only granted on it
       being given, or undertaken to be given

43 The appellants bolster their submission by reference to Clark v. Nucare PLC, 2006 MBCA
101, 274 D.L.R. (4th) 479, wherein the Manitoba Court of Appeal held:

       [41] In my opinion, the preponderance of authority supports the view that Mareva
       injunctions are unavailable against defendants who do not evidence an intention to
       frustrate the plaintiff's potential judgment. See, for example, R. v. Consolidated Fastfrate
       Transport Inc. (1995), 125 D.L.R. (4th) 1 (Ont. C.A.) at 12, Marine Atlantic Inc. v. Blyth
       (1993), 113 D.L.R. (4th) 501 (F.C.A.), Scotia Wholesale Ltd. and Flynn v. Magliaro (1987),
       81 N.S.R. (2d) 201 (S.C.A.D.).

       [42] I also agree with the observation of Professor Robert J. C. Deane, "Varying the
       Plaintiff's Burden: An Efficient Approach to Interlocutory Injunctions to Preserve Future
       Money Judgments" (1999), 49 Univ. of Toronto L.J. 1, UTLJ 61 (QL), when he concludes
       that, in the absence of improper intention, an injunction may still be granted where
       there is a very compelling and strong claim. As Estey J. observed in Aetna, "Mareva was
       conceived to fend off the depradations [sic] of shady mariners operating out of far-away
       havens, usually on the fringe of legally organized commerce" (at p. 35).

In Clark, Scott C.J.M., speaking for the Court, rejected the suggestion that a Mareva injunction
may serve simply as a form of security.

44 I do not consider that the general approach to Mareva injunctions in British Columbia
requires modification. It may, however, require clarification and a reminder that it is a species of
interlocutory injunction with special requirements. Those requirements relate to the general
rule against pre-judgment execution and may vary depending on the nature of the exception
into which the injunction fits (with reference to the four categories of exception given as
examples in Aetna Financial). While the term "Mareva injunction" is used to denote any order
impounding assets or freezing assets before judgment (outside of statutory remedies such as
builders liens or garnishing orders), they are not all alike. Awareness of the root issue is helpful
in sorting out the exercise of discretion.

45 Unlike a quia timet injunction, in which the issue is removal of assets from the jurisdiction,
an injunction to protect the processes of the court may not involve extra-territorial
considerations but may engage issues of dissipation. But at its root, the issue is the risk of harm
through either dissipation of assets or removal of them to a place beyond the court's reach.

46 In all cases, great caution is to be shown to avoid the mischief of litigious blackmail or
bullying, and due regard must be paid to the basic premise that a claim is not established until
the matter is tried. Great unfairness may be occasioned, and the administration of justice
brought into disrepute, by an order which impounds assets before the merits of the claim are
decided. It is useful to recall the words of Huddart J.A. in Grenzservice Speditions Ges.m.b.H. et
al. v. Jans et al. (1995), 129 D.L.R. (4th) 733, 15 B.C.L.R. (3d) 370 (S.C.) at 755-756 at p. 23:

       [Mareva and Anton Pillar orders] represent an extraordinary assumption of power by the
       judiciary. Judges must be prudent and cautious in their issue.

47 At the same time, assets are easily moved from jurisdiction to jurisdiction, and if, as in
Mooney, a party seeks the intervention of the court and also seeks to put his assets beyond
reach, the court has the ability to respond. As said by Newbury J. in Mooney No. 1:

       [11] ... The reasons for extending Mareva injunctions to apply to foreign assets are valid
                                                                                               94
       in British Columbia no less than in England and Australia – the notion that a court should
       not permit a defendant to take action designed to frustrate existing or subsequent
       orders of the court, and the practical consideration that in this day of instant
       communication and paperless cross-border transfers, the courts must, in order to
       preserve the effectiveness of their judgments, adapt to new circumstances. Such
       adaptability has always been, and continues to be, the genius of the common law.

48 With this background, I turn to the order appealed. It is an order made in the exercise of
discretion. In B.C.(A.G.) v. Wale, McLachlin J.A. defined the task for this Court in these terms at
p. 344:

       It is trite law that, the order appealed from being discretionary, this Court will not
       interfere unless it is demonstrated that the judge of first instance erred in principle or
       made an order not supported by the evidence or it appears that the decision will result
       in an injustice. ...

49 The issue can also be formulated as a question of whether the judge of first instance erred
in the exercise of her discretion in that no weight or not sufficient weight has been given to
relevant considerations: Friends of the Old Man River Society v. Canada (Minister of Transport),
[1992] 1 S.C.R. 3 at 76-77.

50   The first aspect of the appeal is the order made as against the companies.

51 The chambers judge issued the injunctions against all defendants on the basis that Ms.
Tracy had "made out the first condition: that her claim advances a good arguable case"; and
that she had "established a real risk of dissipation of assets, or, '... the defendant taking action,
the purpose of which is to render nugatory or less effective any judgment or order which the
plaintiff may thereafter obtain'". She based this latter conclusion on the "sale of the business
assets for $39.5 million, combined with the evidence before the Court on the national class
action settlement" which she found "sufficient to establish a real risk". She found the balance of
convenience favoured granting the injunction.

52 The corporate appellants contend that the chambers judge erred in assessing the strength
of the action, at least in the magnitude of potential damages.

53 Counsel for Ms. Tracy says the claim is for all revenues over and above lawful interest plus
punitive damages, an amount that could approach the proceeds from the sale of the Instaloans
companies.

54 The chambers judge used the test of "good arguable case". I do not consider that a strict
formula should be applied. Whereas, the Supreme Court of Canada in Aetna appeared to favour
"strong prima facie case", that Court also appeared to leave considerable room for courts to
frame the test as fits the nature of the case before them. Mooney No. 2 recognized both
standards, "strong prima facie case" and "good arguable case," as formulations that have been
used. I expect that the difference in words is a difference without practical consequence. In
either case, it is more than an arguable case, and may be met by an assessment that does not
reach the "bound to succeed" threshold.

55 As against the Instaloans companies, and given the conclusion of this Court in Kilroy, supra,
I have no doubt that the central claim that the companies charged interest at a rate contrary to
the Criminal Code meets the test.

56 The quantum, however, is a different matter. Where, as here, the assets sought to be
impounded are a large sum, I consider that it is incumbent upon the applicant to establish that
                                                                                              95
the extent of the viable claim bears some relation to the value of assets sought to be
impounded or frozen. This was not done in this case, and the issue of the scale of the order was
not addressed by the chambers judge.

57 On my review of the evidence, mindful that this Court is not well placed to assess the
evidence afresh but endeavouring to get a sense of the realistic scale of the claim, I note that
there is evidence that the pan-Canadian value of the Instaloans business book in the class
period was about $80 million. Likewise there is evidence that British Columbia accounted for
about 18% of that amount. Even assuming the entire amount of the charges were recoverable,
these numbers put the value of the plaintiffs' claims at considerably less than the $39.5 million
sought to be impounded, or the open-ended amount caught by the language of the injunction.

58 But for the evidence before the court on the actual scale of the assets of the Instaloans
companies as not exceeding $1.7 million, I would consider this evidentiary gap sufficient to
direct the matter back to the trial court for consideration of the merits of the claim, including
the quantum of damages alleged, in the context of the terms of the injunction sought.

59 In this case, however, it is clear that the central claim against the companies has a degree
of merit that would justify an injunction restraining the disposal of assets that are not greater
than $1.7 million. From the evidence filed that appears to be the assets held by the companies
at the time of the Bruley settlement.

60 The next issue is the question of the balance of convenience. In this, the issue of
irreparable harm plays a significant part, such that it must be considered, whether addressed
separately or under the balance of convenience issue.

61 The chambers judge found that the balance favoured the injunction, largely because of the
risk of dissipation of assets. This finding of potential for non-recovery may be viewed as a
conclusion of irreparable harm for purposes of a Mareva injunction. Here, it tilted the balance in
favour of this extraordinary remedy.

62 The appellants say that the evidence could not reasonably support this conclusion. The
evidence they say, amounts to no more than evidence: (i) of the sale of the business at a time
when there was no action in British Columbia, (ii) in a transaction that we know, because of its
nature, was negotiated over a period of some months (and thus not done to take advantage of
the discontinuance in MacKinnon), (iii) with parties that had an historic asset protection
strategy, (iv) resulting in the dispersal of sale proceeds between the date of the sale and
September 2005. They note that the evidence shows that some of the companies were limited
partnerships. They say there is no evidence that the companies have defaulted on their
obligations. They refer to a term of the Bruley settlement whereby principals of the companies
commit to making up the companies' shortfall in monies committed under that plan as evidence
negating the concern that the companies have adopted a strategy of defaulting on their legal
obligations.

63 This case may well be at the outer limits of a threat of dissipation of assets. The evidence
in support of the injunction does not reveal steps taken to dispose of assets after the action was
commenced. At most there is a reference to an unexplained historical strategy of protection of
assets, reference to a limited partnership, and evidence of the apparent dispersal of sale
proceeds in the general time frame of the action's commencement and while there was
litigation outstanding in other provinces. We do not know whether those proceeds were already
bespoke at the time of the sale, or compelled by agreement to flow out of the companies soon
after receipt of the funds. As is often stated, a Mareva injunction does not create a security, and
could not give priority to the claimants over security already existing, or that may exist in the
future. Nor do we have evidence that the companies defaulted on obligations of the past.
                                                                                                 96

64 The granting of an injunction, however, is discretionary. The chambers judge concluded
that the history recited above created a real risk of dissipation of assets. It seems to me that,
although the evidence was not strong, it was open to her to draw that conclusion. Combined
with the evidence that little in the way of corporate assets remain in the companies (a feature
that impacts upon the balance of convenience), and that the case against the companies is
strong, the conclusion was sufficient to permit her to exercise her discretion by issuing an
injunction against the companies. I would not interfere with that aspect of the order.

65 I turn now to the injunction freezing the assets of the two shareholders. This aspect of the
order, in my view, stands in a different position than does the order against the company in that
it is more aggressive. It is trite law that the corporate veil is not easily pierced. While the
chambers judge correctly referred to the principle that permits a court, in the guise of
considering fraud or conspiracy, to pierce that veil, it is to be remembered that the kernel of
this case is in the lending activities of the companies. In that sense a claim against the
shareholders, even if it succeeds, is the secondary, not primary, conclusion on liability.

66 It is not clear to me that the case for damages against the shareholders has the same
strength as the case against the companies. The impugned activities here were an established
part of the consumer finance industry and were obvious to any viewer. To say this claim is
strong is to assume a type of behaviour on the part of shareholders and directors that is not, on
my review of the affidavits filed, in evidence. Thus while I cannot say the case against the
shareholders has no merit, likewise I would not accord it the strength I accord the case against
the companies. In my view the chambers judge erred in according this claim sufficient merit to
satisfy the first criterion for injunctive relief.

67 Further, in my view, the chambers judge erred in failing to consider the quantum of
damages that may be assessed against the individuals as part of her determination that the
injunction in the terms ordered, was justified.

68 Moreover, I do not consider that the balance of convenience favoured the injunction.
There is, on my review of the affidavit material filed, no evidence that the principals of the
companies have taken steps since the action was commenced to move assets outside of the
jurisdiction, or have defaulted on obligations, or otherwise dissipated assets in the sense
discussed in the many cases as justifying this pre-judgment order.

69 Whether couched as a failure to meet the higher second hurdle, or as a failure to meet the
classic criteria for an injunction in the context of the relief sought, the result is the same. The
individual defendants have not had their day in court, and yet, by the order, are compelled to
reveal all of their assets and are strictly limited in their use of such assets. Those are
consequences generally faced by a judgment creditor, not a mere litigant. In the circumstances
revealed in the record, I consider that the degree of caution required on an application for a
Mareva injunction has not been applied.

70 This factor alone persuades me that the second and higher hurdle, discussed in Aetna
Financial, that must be met on an application to enjoin a party from using his or her own assets
prior to judgment, has not been met.

71 It is relevant, as well, to this discussion that the order was made in a class action. The
policy favouring class actions is set out in Western Canada Shopping Centres Inc. v. Dutton,
2001 SCC 46, [2001] 2 S.C.R. 534. It must be remembered that class actions provide the
plaintiff's side of the case with advantages not enjoyed by a plaintiff in an ordinary action. One
advantage in British Columbia is protection as to costs. This extra leverage in the litigation was a
matter that should have been considered by the chambers judge, in my respectful view. The
                                                                                         97
order as it stands compounds the plaintiff's advantage. In these circumstances, it tips the
playing field away from anything that could approximate level ground.

72 Lastly, there is the matter of the lack of an undertaking as to damages. For good reasons
stemming from the class action nature of the case, the chambers judge did not require an
undertaking from Ms. Tracy. However, in that conclusion she again tipped the field in favour of
the plaintiff. In the result an order was issued against the individual defendants, tying up their
assets for anything other than ordinary living expenses, in effect freezing their business life,
while there was little jeopardy faced by Ms. Tracy in the event she does not establish damages
against them to a scale anywhere near the magnitude of the assets frozen.

73 In my view the order as it affects the assets of the individual respondents must be set
aside.

74 I turn now to the listing affidavit. A listing affidavit was first ordered in British Columbia in
Sekisui House Kabushiki Kaisha v. Nagashima (1982), 42 B.C.L.R. 1 (C.A.). The purpose is to
permit enforcement of the order. As I would set aside the Mareva injunction against the
individual appellants, the order requiring them to list their assets must also be set aside.
However, the order as it relates to the Instaloans companies is fit, and I would not disturb it.

75 The third aspect of the order was the provision impounding the assets derived from the
sale of the businesses. In my view, that order ought not to have issued at this time. The purpose
of the listing affidavit is to ensure compliance. There is no evidence that more than that is
required. In the event Ms. Tracy obtains judgment and on execution discovers that assets were
not disclosed that should have been, or that the funds listed were dissipated, she will have her
remedy against the company and its directing minds for failure to comply with the injunction
and the listing affidavit. Ms. Tracy will also have recourse to full execution procedures available
to all judgment creditors.

76 Last, is the matter of time. As courts have repeatedly said, a Mareva injunction is
extraordinary. I do not consider that an injunction should issue without a commitment by the
applicant to expedite the trial. Whether an interim injunction with an end date should be
considered to focus the parties' minds on the need to bring the matter to a conclusion, is a
matter for the chambers judge. However, in any case, it is not in the interests of the
administration of justice that a Mareva injunction should persist for an indefinite period. The
expected duration of such an order should be addressed before it is made.

77 For these reasons, I would allow the appeal to the extent of setting aside the order as
against the individual appellants, and the order impounding the proceeds from the sale of the
businesses that are still in the control of the corporate appellants.

M.E. SAUNDERS J.A.
M.A. ROWLES J.A.:— I agree.
J.E. HALL J.A.:— I agree.
A.D. THACKRAY J.A.:— I agree.
P.D. LOWRY J.A.:— I agree.

                                             *****

                                          SCHEDULE "A"

10. The Defendants, by themselves or by their agents, servants, employees or directors or
otherwise, are restrained from selling, mortgaging, pledging, transferring, assigning,
diminishing, or otherwise disposing of or dealing with any of their assets wherever situated,
                                                                                                   98
whether those assets are held directly or indirectly by them or any one or combination of them
or through any company, trust, partnership or other entity beneficially owned or controlled by
the Defendants or any one or combination of them (the "Assets") including without limiting the
generality of the foregoing, any of the sale proceeds of the $39.5 million in cash paid by
Rentcash Inc. for the purchase of the Instaloans business assets (the "Instaloans Sale
Proceeds"), until the final disposition of this action or until further order of this Court, except as
to transfer any of the Instaloans Sale Proceeds in accordance with the terms of this Order or
except as is necessary:

       (a) for the payment of ordinary living expenses of the Defendants Tim Latimer and Marc
       Arcand or for those Defendants to carry on their ordinary course of business, provided
       that to the extent of doing so involves the disposition of capital assets held in any way by
       any of the Defendants, the proceeds of any such disposition are to be deposited in the
       trust account of McLennan Ross, the solicitors for the Defendants, to be released in
       accordance with the terms of this Order; or

       (b) for the Defendants to comply with their obligations under the Settlement Agreement
       approved by Order of the Ontario Superior Court of Justice made December 5, 2005 in
       Bruley v. 864556 Alberta Ltd. formerly known as Instaloans Financial Solutions Centres
       Ltd. et al., Court File No. 05-CV-294691CP.

11. The Defendants shall cause any funds held in trust for them or any one or combination of
them from the Instaloans Sale Proceeds, including but not limited to the $1 million to be held in
trust for a period of one year from the date of the sale of the Instaloans assets to Rentcash Inc.,
as set out in the Form 51-102F Business Acquisition Report dated July 5, 2005 by Rentcash Inc.,
to be deposited in the trust account of the law firm of McLennan Ross, solicitors for the
Defendant, either immediately or at such time as the terms upon which any such funds are held
in trust permit the funds to be dealt with, and any funds so deposited shall be held by
McLennan Ross to be released in accordance with the terms of this Order.

12. The Defendants shall, within 14 days of the date of this Order, make and serve upon the law
firm of Hordo & Bennett, solicitors for the Plaintiff at [...], Vancouver, British Columbia, an
Affidavit identifying with full particularity the nature of the Assets and their exact location as of
the date of the Order sought, and whether the Assets are held in their names or any of them, or
jointly held by any one or combination of them with any others, or held by one or more
nominees or trustees, or otherwise on the Defendants' behalf or on behalf of any one or
combination of them, and disclosing the values of the Assets in respect of those Assets whose
values can be readily determined without requiring the deponent of the Affidavit to retain an
appraiser, and, without limiting the generality of the foregoing, specifying:

       (a) the identity of all bank or other accounts in the name of any of the Defendants, or
       jointly held by any one or combination of them with any others, or held by nominees,
       trustees or otherwise on behalf of any of the Defendants, and the sum standing to the
       credit of each such account;

       (b) the name and address of any person or entity that may have possession, custody or
       control of the Assets;

       (c) the particulars of the disposition of the Instaloans Sale Proceeds, including the name,
       address and function of each person or entity to whom the Instaloans Sale Proceeds or
       any portion thereof was transferred, including full particulars as to the date and means
       of transfer, any bank or other accounts to which the proceeds were transferred and the
       reason for the transfer of the proceeds;
                                                                                           99
       (d) any companies or trust located outside the jurisdiction of this Court for whom the
       Defendants or any one of them have performed services since April 21, 2005;

       (e) any companies or trust located outside of the jurisdiction of this Court from which
       the Defendants or any one of them have received money or property directly or
       indirectly since April 21, 2005; and

       (f) any companies or trust located outside of the jurisdiction of this Court in which the
       Defendants, or any one of them, has any interest whatsoever, direct or indirect, legal or
       otherwise or from which any of the Defendants has a right, ability or expectation of
       receiving a benefit.

                                           SCHEDULE "B"

10. The Defendants, by themselves or by their agents, servants, employees or directors or
otherwise, are restrained from selling, mortgaging, pledging, transferring, assigning,
diminishing, or otherwise disposing of or dealing with any of their assets wherever situated,
whether those assets are held directly or indirectly by them or any one or combination of them
or through any company, trust, partnership or other entity beneficially owned or controlled by
the Defendants or any one or combination of them (the "Assets") including, without limiting the
generality of the foregoing, any of the sale proceeds of the $39.5 million in cash paid by
Rentcash Inc. for the purchase of the Instaloans business assets (the "Instaloans Sale
Proceeds"), until the final disposition of this action or until further order of this Court, except as
to transfer any of the Instaloans Sale Proceeds in accordance with the terms of this Order or
except as is necessary:

       (a) for the payment of ordinary living expenses of the Defendants Tim Latimer and Marc
       Arcand or for those Defendants to carry on their ordinary course of business, provided
       that to the extent of doing so involves the disposition of capital assets held in any way by
       any of the Defendants, the proceeds of any such disposition are to be deposited in the
       trust account of McLennan Ross, the solicitors for the Defendants, to be released in
       accordance with the terms of this Order; or

       (b) for the Defendants to comply with their obligations under the Settlement Agreement
       approved by Order of the Ontario Superior Court of Justice made December 5, 2005 in
       Bruley v. 864556 Alberta Ltd, formerly known as Instaloans Financial Solutions Centres
       Ltd. et al., Court File No. 05-CV-294691CP.

11. The Defendants shall cause any funds held in trust for them or any one or combination of
them from the lnstaloans Sale Proceeds, including but not limited to the $1 million to be held in
trust for a period of one year from the date of the sale of the Instaloans assets to Rentcash Inc.,
as set out in the Form 51-102F Business Acquisition Report dated July 5, 2005 by Rentcash Inc.,
to be deposited in the trust account of the law firm of McLennan Ross, solicitors for the
Defendant, either immediately or at such time as the terms upon which any such funds are held
in trust permit the funds to be dealt with, and any funds so deposited shall be held by
McLennan Ross to be released in accordance with the terms of this Order.

12. The Defendants shall, within 14 days of the date of this Order, make and serve upon the law
firm of Hordo & Bennett, solicitors for the Plaintiff at [...], Vancouver, British Columbia, an
Affidavit identifying with full particularity the nature of the Assets and their exact location as of
the date of the Order sought, and whether the Assets are held in their names or any of them, or
jointly held by any one or combination of them with any others, or held by one or more
nominees or trustees, or otherwise on the Defendants' behalf or on behalf of any one or
combination of them, and disclosing the values of the Assets in respect of those Assets whose
                                                                                          100
values can be readily determined without requiring the deponent of the Affidavit to retain an
appraiser, and, without limiting the generality of the foregoing, specifying:

       (a) the identity of all bank or other accounts in the name of any of the Defendants, or
       jointly held by any one or combination of them with any others, or held by nominees,
       trustees or otherwise on behalf of any of the Defendants, and the sum standing to the
       credit of each such account;

       (b) the name and address of any person or entity that may have possession, custody or
       control of the Assets;

       (c) the particulars of the disposition of the Instaloans Sale Proceeds, including the name,
       address and function of each person or entity to whom the Instaloans Sale Proceeds or
       any portion thereof was transferred, including full particulars as to the date and means
       of transfer, any bank or other accounts to which the proceeds were transferred and the
       reason for the transfer of the proceeds;

       (d) any companies or trust located outside the jurisdiction of this Court for whom the
       Defendants or any one of them have performed services since April 21, 2005;

       (e) any companies or trust located outside of the jurisdiction of this Court from which
       the Defendants or any one of them have received money or property directly or
       indirectly since April 21, 2005; and

       (f) any companies or trust located outside of the jurisdiction of this Court in which the
       Defendants, or any one of them, has any interest whatsoever, direct or indirect, legal or
       otherwise or from which any of the Defendants has a right, ability or expectation of
       receiving a benefit.




                CHAPTER 3. LAWS RELATING TO THE JUDGMENT




                                     (1) Default Judgment



The default judgment (Rules of Court 17 and 25 and Small Claims Rules Rule 6) is often used by
the creditor or debt collector. The debtor who realizes he owes the debt but cannot or will not
pay often chooses to ignore the process of the court. In such cases, where the claim is for debt
or liquidated demand, a default judgment may be entered for the sum claimed plus pre-
judgment interest (Rules of Court 17(3) or 25(4).

The procedure is relatively simple. The writ is served (or the statement of claim is delivered, the
writ having been served). A search of the court registry is done for the appearance (or
statement of defence), and a praecipe is obtained marked “Nil”. Proof of service or proof of
delivery of statement of claim is filed, and then a praecipe for final judgment is filed. Finally, the
judgment and bill of costs are drafted and final judgment is entered.
                                                                                             101
A default judgment, although it confers all the rights and remedies concomitant with a regularly
obtained judgment, is subject to being set aside on one of two grounds. If the defendant can
establish that there was a procedural defect in the proceedings leading up to the judgment
(such as a defective service) then the defendant can have the judgment set aside as of right at
any time (see Hudson’s Bay Co. v. Kallweit (1976) 2 B.C.L.R. 92 (Co. Ct.)) In such an application
the judge has no power to impose any terms upon the applicant except as to costs (Stokes
Exploration Management Ltd. v. Advance Geophysics Ltd. and Kirwan [1972] 1 W.W.R. 192
(B.C.C.A.).

The following case is an example of a default judgment set aside ex debito justitiae.



               Bache Halsey Stuart Shields Inc. v. Charles et al; Dobell, Third Party
                              (1982) 140 D.L.R. (3d) 378 (B.C.S.C.)

1 SPENCER J.:— The defendant, Edward C. Dobell, applies by notice of motion for an order
that a default judgment pronounced against him the 2nd day of September, 1981 is void, or in
the alternative that it is no longer enforceable against him. The original cause of action was
against this respondent and George W. Charles, since deceased, for a liquidated sum alleged
owing by them jointly and severally as the balance on a trading account for purchases on a
commodities exchange. The defendant Dobell entered an appearance for himself and inscribed
his defence on the foot of the notice of appearance. In due course the plaintiff moved for an
order to strike out Dobell's defence

       "in that it discloses no reasonable defence, or alternatively for an order that the
       proceeding herein continue as if no appearance had been entered or defence filed by
       the defendant, pursuant to Rules 19(24)(a) and 2(5)(a), (d), and (g) of the Supreme Court
       Rules".

2 When that motion came on before the learned chambers judge the only matter dealt with
was the question of whether a reasonable defence was disclosed. Notice of the motion had
been given to Dobell but he did not appear on its return. The learned chambers judge made an
order that the defence be struck out and then went on to make a further order that the plaintiff
recover judgment against the defendant. Dobell was served with a copy of the order and has
subsequently taken steps to obtain leave to file a new defence based upon merits he has
subsequently raised. That application was dismissed. He has also undergone various
proceedings by way of execution. Now he attacks the default judgment upon the ground that
since judgment was not sought against him in the notice of motion the court was without
jurisdiction to make the second part of its order. Mr. Twining argues that the court was limited
to striking out the defence and that on that motion no default judgment should have been
granted. He referred me to R. 52(11)(a) which limits the powers of a court on an application in
chambers to the granting or refusing of the relief claimed in whole or in part or to disposing of
any question arising on the application. I am in agreement with Mr. Twining's position that "any
question arising on the application" must have reference to questions raised by the specific
form of the notice of motion and cannot have reference to questions which go substantially
beyond the motion.

3   Rule 2 (1) provides that

       "Unless the court otherwise orders, a failure to comply with these rules shall be treated
       as an irregularity and does not nullify a proceeding, a step taken or any document or
       order made therein."
                                                                                               102
4 Inasmuch as the Rules of Court require notice to any person who has entered an
appearance of any order which the court may be asked to make against him, the failure to give
notice here would be an irregularity. I disregard the fact that pursuant to 8.25(4) where there is
no defence, as here after this defence had been struck out, default judgment for a liquidated
sum could be entered without notice to the defendant who had appeared, because that was not
what happened in this case. In this case it was the court which was asked to and which gave
judgment, no notice having first been given to the defendant. Apart from being a breach of the
Rules, however, there is in my opinion a broader basis upon which the impugned order may be
attacked. It was a judgment given without notice to the defendant and therefore under
circumstances where he was deprived of his right to be heard. Such a judgment is contrary to
the rules of natural justice and is, in my opinion, capable of being declared a nullity for that
reason rather than being treated merely as an irregularity for a breach of the rules. In Marsh v.
Marsh (1945) A.C. 271 Lord Goddard at p.284 propounded a test for distinguishing a nullity as
being an irregularity which causes a failure of natural justice. I think the default judgment here
did that. In Craig v. Ranseen (1943) 1 A.E.R. 108 at 113 Lord Greene M.R. dealt with another
case where an order was made pursuant to an application where no notice was given to the
defendant. He found that to be a nullity and said:

       "Those cases appear to me to establish that an order which can properly be described as
       a nullity is something which the person affected by it is entitled ex debito justitiae to
       have set aside. So far as the procedure for having it set aside is concerned, it seems to
       me that the court in its inherent jurisdiction can set aside its own order; that an appeal
       from the order is not necessary."

5 Until a judgment of this court is set aside as being a nullity the defendant would ignore it at
his peril. He cannot simply say it is a nullity without doing more. Here he applies for a
declaration that this order is void and I have reached the conclusion that I should declare it a
nullity and set it aside. In doing that I do not overlook the provisions of 8.19(24) which gives
power to a judge in chambers, having ordered a defence to be struck out, to continue and give
judgment. Nor do I overlook the fact that the original notice of motion upon which the plaintiff
moved to strike out the defence specified R.19(24)(a) as one of the rules upon which the
plaintiff would rely. I simply say that a defendant, particularly an unrepresented defendant,
ought not to be left to guess at the relief which the plaintiff will seek but should have his
attention drawn specifically to what it is that the chambers judge will be asked to do. Here the
defendant was never told but was left to guess whether the chambers judge would be asked to
give judgment after the defence was struck out.

6 I therefore order that the default judgment against the defendant Dobell in this case be
declared to be a nullity and be set aside. I do not touch that part of the learned chamber judge's
order which struck out the original defence. Dobell will therefore be in the position of one who
has failed to file a defence.

7 Although this order goes ex debito justitiae I make no order for costs in favour of the
defendant since this motion could and should have been brought promptly after the awarding
of the default judgment, thus avoiding the subsequent expense of execution proceedings taken
by the plaintiff.



Editor’s Note: Even if there are no defects in the procedure used to obtain the judgment, the
defendant may request that the court exercise its discretion in the defendant’s favour to set
aside the default judgment and grant leave to defend. If the Court so chooses to exercise its
discretion it will require that the defendant satisfy a number of onerous conditions. The
following principles were outlined by Hinds, Co. Ct. J. in Miracle Feeds v. D. & H. Enterprises
                                                                                               103
(1979) B.C.L.R. 58, at 61:

       it appears that in order for a defendant to succeed on an application to set aside a default
       judgment, he must show:

             1. That he did not wilfully or deliberately fail to enter an appearance or file a
             defence to the plaintiffs claim;

             2. That he made application to set aside the default judgment as soon as
             reasonably possible after obtaining knowledge of the default judgment, or give an
             explanation for any delay in the application being brought;

             3. That he has a meritorious defence or at least a defence worthy of investigation;
             and

             4. That the foregoing requirements will be established to the satisfaction of the
             court through affidavit material filed by or on behalf of the defendant.

A difficult issue which has arisen in connection with the setting aside of default judgments
concerns the fate of execution processes already issued and the question of whether the court
selling aside the default judgment can attach conditions to that exercise of discretion. See, e.g.,
Hegedus v. Luciani (1981) 23 C.P.C. 282 (Ont. S.C.) and Kurt Orban Canada Inc. v. Demilo
Developments Ltd. et al. (1987) 7 (B.C.C.A.).




                       (2) Summary Judgment and Summary Trial




Supreme Court Rules, R.18 and R.18A.

The summary judgment procedure (see Rules of Court R. 18) permits a plaintiff to obtain a
judgment without going to trial so long as the defendant has no good defence and there are no
triable issues raised by the pleadings (see Hughes v. Sharp (1969), 68 W.W.R. 706 (B.C.C.A.) and
Marr v. Clark (1977), 3 B.C.L.R. 154 (B.C.S.C.)).



                         American Buildings Co. v. Surrey Iron Works Ltd.
                                   [1980] B.C.L.R. 145 (C.A.)

On appeal from the decision of Hyde, L.J.S.C.

The judgment of the Court was delivered by

1   McFARLANE J.A. (orally): – We need not call on you, Mr. Crawford.

2 His Honour Judge Hyde, sitting as a local judge of the Supreme Court, allowed an application
by the defendant, now respondent in this case, under Supreme Court Rule 18 subrule (6) for
summary judgment, dismissing the plaintiff's claim against the defendant, and the plaintiff now
                                                                                               104
appeals from that summary dismissal of its action.

3 The facts are, I think, substantially not in dispute. In December, 1977, an agreement was
entered into between the appellant and respondent for the supply by the appellant to the
defendant in Coquitlam, in this province, of pre-engineered metal buildings. The agreed sum to
be paid to the appellant for the period of the contract was expressed to be $89,464.00 (U.S.);
that is to say, United States dollars.

4 Upon a difference of some kind arising regarding delays to and performance of the contract,
the appellant filed a Mechanics Lien in the land registry in New Westminster for the amount of
the contract price, but expressed as simply dollars, not referring to U.S. dollars.

5 In that proceeding an order was made by His Honour, discharging the claim of lien from the
title upon payment into court to satisfy the sum of money of an amount, according to the
appellant's factum, expressed as $89,464.00, plus $1,500.00 as security for costs, totalling, if my
arithmetic be correct, $90,964.00. Subsequently, again to take the facts from the appellant's
factum, an agreement to settle the outstanding claims of the appellant against the respondent
was made. The terms of the settlement were:

        (a) That the appellant should receive from the monies in court $83,990.36, again without
        any specific description as U.S. dollars or Canadian dollars.

        (b) That the respondent should receive the balance of the money then in court and

        (c) That upon payment out of court the appellant and respondent would each release
        and discharge the other from any and all claims present or future, relating to the subject
        matter of the action in which the money was paid into the County Court.

6 Subsequently, on the 20th of June, 1978, an order was made for payment out of court of
the monies, in accordance with the agreed settlement.

7 A document described as a release and discharge, which is quoted in the reasons for
judgment of His Honour Judge Hyde, was executed under date of 26th of June, 1978. That
document is a formal release by the appellant of "any and all claims of any nature and kind
whatsoever" which the appellant against the respondent "ever had, now has or which its
successors or assigns or any of them hereafter can, shall or may have for or by reason of any
cause, matter or thing whatsoever existing up to the present time with respect to the purchase
of ... steel building ..." et cetera.

        "And without limiting the generality of the foregoing, for or by reason of any cause,
        matter or thing contained in or referred to in Mechanics Lien affidavits filed in the New
        Westminster Land Registry Office ..."

8    I am not reading the whole of the release.

9 The action in which the order now under appeal was made was instituted by the appellant
in the Supreme Court of this province on September 28th, 1978 and seeks to recover the
difference between the original contract price, as it was expressed in American dollars, and the
amount of Canadian dollars which the appellant has actually received under the settlement.

10 That is the action which was summarily dismissed by His Honour, as I indicated at the
opening of these reasons for judgment.

11    His honour said in the conclusion of his reasons:
                                                                                               105

       "The point at issue here properly belonged, in my judgment, to the first action. It may
       not have been pursued because of inadvertance, ..."

And he concluded:

       "I agree with the defendant's position that the plaintiff's claim in this action is res
       judicata."

12 With respect to his honour, I would not have put the case on the basis of res judicata. It
seems to me that the claim made in the action out of which this appeal arises has no merit
whatsoever by reason of the existence of the agreed settlement, the payment out of court and
the release, rather than on the basis of res judicata.

13 Counsel for the appellant relied on the judgment of this court in Hughes v. Sharp (1969) 68
W.W.R. 706. In that case Mr. Justice Tysoe used language, which I will paraphrase as follows:

       "The litigant must be allowed his day in court, and must not be deprived of a trial in the
       ordinary way unless it is manifestly clear that he is without a defence that deserves to be
       tried."

14 I change those latter words to, "Unless it is manifestly clear that his claim has no merit and
does not deserve to be tried."

15   Mr. Justice Tysoe, referring to the function of a judge hearing such applications continued:

       "His duty and power are limited to determining whether, on the relevant facts and
       applicable law, there is a bona fide triable issue."

16 In my opinion, in the present case it is manifestly clear that the plaintiff's claim is without
legal substance or merit, and I am further of the opinion that no bona fide triable issue is raised
by the statement of claim or by the affidavits filed in support of it. Thus, the words which I have
just paraphrased from the judgment in Hughes and Sharp were applied in this court in another
case of Burns and Wing Investments Ltd. (1979) 14 B.C.L.R. at page 100. There is a comment
made by our brother Seaton in that case to which I think it appropriate to refer, in view of the
argument which was addressed to us this morning by counsel for the appellant. That argument
suggested that there may arise in this case a basis for amendment of the Statement of Claim so
as to claim rectification or fraud, or that there was a fundamental error involved in the
settlement agreement going to the root of the matter. That makes it, I think, advisable for me to
refer to what Mr. Justice Seaton said in the Burns case. While agreeing with our brother Bull in
dismissing the appeal, he added:

       "Similarly, the proceedings might differ. This step is properly taken at the beginning of
       the litigation. The Statement of Claim might be amended and there might be a reply, and
       so I think a strict view of pleadings should not be taken on a motion of this sort."

17 With great respect, I think I must point out that that statement made by our brother
Seaton was a statement made by him alone. It does not constitute a statement made on behalf
of the court in the disposition of the appeal in the Burns case. In my opinion, it is too broadly
stated. There are circumstances, no doubt, in which a judge hearing an application for summary
judgment, either on behalf of the plaintiff or the defendant, might properly take into
consideration the possibility of amendment. That is not the case here, in my opinion.

18   It was also submitted to us as a ground of appeal that His honour Judge Hyde erred in
                                                                                             106
refusing to allow the cross-examination of Mr. Pearce upon two affidavits filed in support of the
motion for summary dismissal of the plaintiff's claim.

19    Dealing with that, his honour said:

        "No useful purpose would be served by cross-examinations of counsel who represented
        the parties at the proceedings giving rise to these documents; and I decline to order the
        attendance for cross-examination of Mr. Pearce."

20 That exercise of discretion by the chambers judge was one which I am unable to say was,
in all of the circumstances, wrong. Moreover, I think it was the correct exercise of his discretion.

21    In short, I see no merit in this appeal. I would dismiss it.

22    HINKSON J.A.:— I agree.

23    MACDONALD J.A.: – I agree.



Editor’s Note: The summary trial procedure (see Rules of Court, R. 1 8A) can also be used to
resolve a dispute without a full-scale trial. The following case sets out the principles of practice
for chambers judges in determining whether to grant applications for summary trial under R. 1
8A.



                                 MacMillan v. Kaiser Equipment Ltd.
                                [2004] B.C.J. No. 969; 2004 BCCA 270

The judgment of the Court was delivered by

OPPAL J.A.:—

INTRODUCTION

1 After a five-day summary trial held under Rule 18A of the Rules of Court, Allan J. dismissed
the action of the appellant, Donald Mark MacMillan, for negligent misrepresentation, breach of
contract, inducing breach of contract and unjust enrichment. The neutral citation of her reasons
for judgment is [2003] B.C.J. No. 1006, 2003 BCSC 672.

2    In this appeal Mr. MacMillan has raised the following grounds:

        1. whether the trial judge erred in proceeding under Rule 18A of the Rules of Court;

        2. whether the trial judge erred in concluding that the entire agreement clause in a
        written contract was not rebutted or modified by a collateral agreement; and

        3. whether the trial judge erred in finding that a draft agreement made in 1996 was not
        enforceable.

BACKGROUND

3    Mr. MacMillan is an inventor of tools for use in the drywalling industry. In 1990 and 1991,
                                                                                            107
through Concorde Tool Corporation ("Concorde"), Mr. MacMillan applied for patents for five
inventions. One such patent, for an adjustable length handle, proved to be quite valuable. Prior
to 13 June 1990 all outstanding shares in Concorde were owned by Mr. MacMillan and
Raymond Bernier.

4 In 1990, the respondents Yee Bun Lee and David Fung, as well as one David Dick,
incorporated the respondent LFD Industries Ltd. ("LFD"). Mr. Lee, through the respondent
Kaiser International Developments Ltd. ("Kaiser"), owned 60% of the outstanding shares of LFD.
Mr. Fung, through ACDEG International Ltd. ("ACDEG") held 20%. Mr. Dick personally held the
remaining 20% of LFD's shares.

5 In June 1990, the parties entered into two agreements. The first was a share purchase
agreement (the "1990 Share Purchase Agreement") between Concorde, LFD and Messrs.
MacMillan and Bernier. Under its terms, LFD purchased all outstanding shares in Concorde and
Concorde assigned to LFD all intellectual property that it held and used. The 1990 Share
Purchase Agreement contained a so-called "entire agreement" clause which read as follows:

       10.4 Whole Agreement. This Agreement contains the whole agreement between the
       Vendors and the Purchaser in respect of the purchase and sale contemplated hereby and
       there are no warranties, representations, terms, conditions or collateral agreements,
       express or implied, or otherwise other than expressly set forth in this Agreement.

6    The second agreement made was a consulting agreement (the "1990 Consulting
Agreement") between Mr. MacMillan and Concorde, the execution of which was required under
the 1990 Share Purchase Agreement. The 1990 Consulting Agreement was essentially an
employment contract under which Mr. MacMillan would be an independent contractor. It
provided that Mr. MacMillan would disclose to Concorde "all designs, rights to sell patents or
patentable concepts", stipulated that the patents would be the property of Concorde and
required that Mr. MacMillan not claim any interest in them. Like the 1990 Share Purchase
Agreement, the 1990 Consulting Agreement contained an entire agreement clause.

7 The 1990 Consulting Agreement was for a four-year term commencing 15 June 1990. Mr.
MacMillan alleges that around the time the 1990 Consulting Agreement terminated in 1994
certain events occurred that lie at the heart of the dispute between the parties in this appeal.

8 Mr. MacMillan contends that Messrs. Lee, Fung and Dick, acting on behalf of LFD and in
their personal capacities, offered him an equity position in Concorde. According to Mr.
MacMillan, the parties had discussed the prospect of him acquiring shares as early as 1990. Mr.
MacMillan specifically alleges that later, in either November or December 1995, he and Mr. Lee
"shook hands" in order to confirm an agreement whereby he would receive 10% of the shares in
Concorde. Mr. MacMillan says that it was the promise of an equity interest that induced him to
continue providing his services and to cooperate in the assignment of patents. He says that a
memorandum Mr. Lee wrote to Mr. Fung in October 1995 confirms the knowledge of LFD's
stakeholders in this regard. Part of that memorandum reads as follows:

       [Mr. MacMillan] is not on board. There is a real crisis here. We have increased our cash
       to him to $35,000 in order to renew the agreement with him for assignment of patents...
       [H]e has refused our offer. He knows well that our past agreement is no longer valid as
       we are in total default of our commitments.

       ...

       The most important and the most urgent help that I need from you is in connection with
       the patents.... Unless I hear from you very soon, I shall use my judgement to pay for any
                                                                                              108
       price and use any other reasonable means to secure the assignment of the patents.

9 The respondents' position throughout this litigation has been that there was no firm
agreement for Mr. MacMillan to receive any shares in Concorde and that the most that can be
said is that an agreement was contingent upon a number of matters being addressed and
"sorted out".

10   On this point, the trial judge found as follows, at para. 28 of her reasons:

       Memoranda between the principals of Concorde demonstrate that they knew MacMillan
       hoped to acquire equity in the company. From time to time, they discussed different
       mechanisms for MacMillan earning or being given an equity interest but no clear
       consensus emerged on the terms under which such equity would be acquired.

11 In any event, when the 1990 Consulting Agreement terminated in June 1994, Mr.
MacMillan continued his employment with Concorde. Between May 1994 and February 1995,
Mr. MacMillan applied for four patents for tools that he had invented or improved. At trial, he
maintained that those patents were "outside the scope of his employment". His position was
contentious, to say the least. The trial judge concluded that the 1990 Consulting Agreement
precluded him from claiming entitlement for tools that he invented while employed as a
consultant by Concorde.

12 In 1994, Mr. Dick reduced his shareholding in LFD to 5%. The remaining shares were held
by Kaiser, ACDEG and Mr. Lee's brother-in-law, the respondent Alfred Po-Hong Ma.

13 In November 1995, Mr. MacMillan and Kaiser entered into an employment agreement (the
"1995 Employment Agreement"), pursuant to which Mr. MacMillan agreed to serve as
Concorde's vice-president of operations. Kaiser paid Mr. MacMillan $35,000 as consideration for
his agreement that all past, present and future patents and patentable concepts, including
those registered in his name, were and would be the exclusive property of Kaiser.

14 It should be noted that Mr. MacMillan received independent legal advice by counsel who
certified that he voluntarily agreed to be bound by the entire contents of the 1995 Employment
Agreement after having received legal advice with respect to those contents. It is also crucial to
note that the 1995 Employment Agreement contained an entire agreement clause. That clause
read as follows:

       This contract constitutes the entire agreement between the parties with respect to the
       employment and appointment of [Mr. MacMillan] and any and all previous agreements,
       written or oral, express or implied, between the parties or on their behalf relating to the
       employment and appointment of [Mr. MacMillan] by the Employer, are terminated and
       cancelled and each of the parties releases and forever discharges the other of and from
       all manner of actions, causes of action, claims and demands whatsoever, under or in
       respect of any agreement.

15 On 1 October 1996, Messrs. Lee and MacMillan signed a so-called draft agreement in
principle (the "1996 Draft Agreement in Principle"). Clause 12 of the document provided that it
was "meant to be additional or supplementary to" the 1995 Employment Agreement and
subject to the latter's conditions. The document described its purpose in these terms:

       We both agree that the fundamental spirit of this agreement is to encourage and to
       ensure that Mark MacMillan will work closely and harmoniously together so that
       someday Mark MacMillan can proudly say and we gladly and indisputably agree that he
       is not given the very lucrative rewards by us, he is in fact through his own personal
                                                                                       109
       involvement and his own personal contribution earning his own lucrative rewards with
       the Company as the platform and that his personal involvement and contribution is
       making our dream possible.

16   Clause 9 of the 1996 Draft Agreement in Principle reads as follows:

       With a clear understanding that the recovery of [Concorde] shares from Mr. David Dick
       and Mr. David Fung will provide a real and substantial mutual benefits to both, Mark
       MacMillan agrees to do everything in his power, including the immediate submission of
       an affidavit and testimony to support recovery of these shares. In light of this support
       and to fulfill prior loose understandings, the following will take place:

               Through, and with your help and co-operation, 50% of any Concorde] shares we
               can recover from David Fung and David Dick will be allocated to you. Our
               objective is to recover the full outstanding 25% of [Concorde] shares. This will
               provide Mark with 12.5% of [Concorde] shares with a view to promote the
               recovery of shares. We will support Mark MacMillan in the two legal disputes
               between David Fung and Mark MacMillan....

                        [Underlining emphasis added; italics in original.]

17 It is apparent that the document was prepared without legal advice or assistance,
particularly as Messrs. Lee and Fung held shares in LFD, not Concorde.

18 On 27 February 1997, Kaiser terminated Mr. MacMillan's employment, alleging cause.
However, the letter of termination did not specify any particular cause. Mr. MacMillan's
dismissal shortly followed Kaiser registering with the U.S. Patent Office assignments of patents
by Mr. MacMillan and Concorde to it.

19 In May 1997, Mr. MacMillan commenced five actions against Mr. Lee, Kaiser and Concorde
in Provincial Court, Small Claims division. In December 1997, he and Mr. Dick established a new
company, Northstar Tool Corporation, which is in the business of developing and marketing
drywall tools. In 1999, the respondent Axia Incorporated ("Axia") (of which the respondent
Ames Taping Tools Systems Company is an unincorporated division) purchased patents held by
Kaiser and Concorde.

20 In April 2000, Mr. MacMillan commenced this action, and on 30 April 2003, the court
below made an order dismissing it. Mr. MacMillan seeks a new order remitting the matter for
trial.

ANALYSIS

Whether the trial judge erred in proceeding under Rule 18A

21 Counsel for Mr. MacMillan argues that the trial judge erred in interpreting the 1995
Employment Agreement on a summary trial basis since a fair determination of the issue
required her to determine the validity of promises of shares alleged to be collateral to the
agreement, respecting which there were serious credibility issues. He argues that the judge
could not fairly have interpreted the agreement in light of the fact that it was necessary to
consider extrinsic evidence marred by questions of credibility.

22 The principles relating to the applicability of the summary trial procedure are not in
dispute. It should be noted that the mere fact that there is a conflict in the evidence does not in
and of itself preclude a chambers judge from proceeding under Rule 18A. A summary trial
                                                                                                  110
almost invariably involves the resolution of credibility issues for it is only in the rarest of cases
that there will be a complete agreement on the evidence. The crucial question is whether the
court is able to achieve a just and fair result by proceeding summarily.

23 The leading case on the applicability of Rule 18A is Inspiration Management Ltd. v.
McDermid St. Lawrence Ltd. (1989), 36 B.C.L.R. (2d) 202 (C.A.). In that case, the chambers judge
had dismissed the plaintiff's application for judgment under Rule 18A because she said that
judgment ought not to be given under the rule "unless it is clear that a trial in the usual way
could not possibly make any difference in the outcome". In allowing the appeal, McEachern
C.J.B.C. set out the policy reasons for the rule at 211:

       [Rule 18A] was added to the Rules of Court in 1983 in an attempt to expedite the early
       resolution of many cases by authorizing a judge in chambers to give judgment in any
       case where he can decide disputed questions of fact on affidavits or by any of the other
       proceedings authorized ... unless it would be unjust to decide the issues in such a way.

24 He continued at 212 by quoting with approval this passage from Placer Development Ltd.
v. Skyline Explorations Ltd. (1985), 67 B.C.L.R. 366 at 386 (C.A.) [Placer Development]:

       The rule must, however, be applied only where it is possible to do justice between the
       parties in accordance with the requirements of the rule itself and in accordance with the
       general principles which govern judges in their daily task of ensuring that justice is done.

25   He then said this, at 214:

       In deciding whether it will be unjust to give judgment the chambers judge is entitled to
       consider, inter alia, the amount involved, the complexity of the matter, its urgency, any
       prejudice likely to arise by reason of delay, the cost of taking the case forward to a
       conventional trial in relation to the amount involved, the course of the proceedings and
       any other matters which arise for consideration on this important question.

26   Finally, in relation to evidentiary problems, he said this at 215-16:

       Lastly, I do not agree ... that a chambers judge is obliged to remit a case to the trial list
       just because there are conflicting affidavits. In this connection I prefer the view
       expressed in [Placer Development, supra]. Subject to what I am about to say, a judge
       should not decide an issue of fact or law solely on the basis of conflicting affidavits even
       if he prefers one version to the other. It may be, however, notwithstanding sworn
       affidavit evidence to the contrary, that other admissible evidence will make it possible to
       find the facts necessary for judgment to be given....

27 In Orangeville Raceway Ltd. v. Wood Gundy Inc. (1995), 6 B.C.L.R. (3d) 391 (C.A.), this Court
affirmed the decision of a chambers judge who granted summary judgment where credibility
was the decisive issue through reliance on undisputed documentary evidence.

28 There is no doubt that this case was complex from an evidentiary perspective. Mr.
MacMillan's contention that the respondents promised him an equity position in Concorde was
based on oral promises alleged to have been made by several of the respondents at various
points in time.

29 The judge concluded, in spite of the evidentiary conflicts, that she was able to deal with
the matter on a summary basis. At the outset of her reasons, at para. 2, she stated:

       ... I propose to examine the "final" proposed amended statement of claim against the
                                                                                             111
       background of the documentary evidence. If the plaintiff's pleadings cannot withstand
       that scrutiny, then it is unnecessary to analyze the defendants' extensive attacks on the
       plaintiff's credibility.

30   She concluded on this point with the following words, at paras. 72-73:

       ... While there are serious credibility issues in this case that, in my view, are not
       amenable to summary resolution, the defendants argue that the necessary facts can be
       determined on the basis of the extensive documentary evidence.

       I have concluded that the matter is suitable for disposition by summary judgment.

31 It is clear that the judge was alive to the conflicts in the evidence. She was able to resolve
the conflicts by making reference to and relying on the extensive documentary evidence before
her. I agree with her decision in that regard.

32 The decision to proceed in a summary manner was sound for two other reasons. First, a
conventional trial in this case would necessarily have involved lengthy proceedings coming at
prohibitive cost. From that perspective, it made good sense to proceed under Rule 18A. Second,
the judge had examined the law and concluded (as do I, below) that the facts alleged by Mr.
MacMillan, even taken at face value, gave rise to no claim in law. A conflict in the evidence
cannot require a trial where the evidence in question is irrelevant to the legal issues at hand.

33 This is a case in which the chambers judge obviously weighed the arguments carefully and
determined that she could fairly try the case under Rule 18A. I do not think that she exercised
her discretion improperly. For these reasons, Mr. MacMillan's argument on this issue must fail.

                                                …

CONCLUSION

55 In summary, I do not believe that the trial judge, Allan J., erred in concluding that she could
try this case on a summary basis by relying on the plaintiff's pleadings and accepting at face
value the allegations contained in them. The decision to proceed under Rule 18A did not result
in any prejudice or injustice to Mr. MacMillan since she accepted as factual his allegations
contained in his pleadings. Moreover, I cannot conclude that the trial judge erred in refusing to
consider the collateral promises alleged by Mr. MacMillan in light of the entire agreement
clause in the 1995 Employment Agreement. Finally, I agree with the finding of the trial judge
that the 1996 Draft Agreement in Principle is not an enforceable agreement.

56   For these reasons I would dismiss the appeal.

OPPAL J.A.
DONALD J.A.:— I agree.
SAUNDERS J.A.:— I agree.




                                         (3) Interest
                                                                                           112
(a) Pre-Judgment Interest

See Part I of the Court Order Interest Act, R.S.B.C., 1996, c. 79, ss. 1-6, reproduced in the
Statutory Materials.




(b) Post-Judgment Interest

See Part 2 of the Court Order Interest Act, supra, ss. 7-9.




                                     (4) Limitation Periods



                                            Limitation Act
                                     R.S.B.C. 1996, c. 266 as am.

Definitions

1 In this Act …

       “extraprovincial judgment” means a judgment, order or award other than a local
       judgment;

       “local judgment” means the following:

                  (a) a judgment, order or award of

                         (i) the Supreme Court of Canada relating to an appeal from a British
                         Columbia court,

                         (ii) the British Columbia Court of Appeal,

                         (iii) the Supreme Court of British Columbia,

                         (iv) the Provincial Court of British Columbia, and

                         (v) an arbitration under the Commercial Arbitration Act;

                  (b) an arbitral award to which the Foreign Arbitral Awards Act or the
                  International Commercial Arbitration Act applies;

       “judgment” means an extraprovincial judgment or a local judgment; …

       “writ of execution” includes an order for seizure and sale issued under the Small Claims
       Rules.
                                                                                                    113
Limitation periods

3 ...

        (3) After the expiration of 10 years after the date on which the right to do so arose a
        person may not bring any of the following actions:

                (f) on a local judgment for the payment of money or the return of personal
                property.

        (4.1) A person must not bring an action on an extraprovincial judgment for the payment
        of money

                (a) after the time for enforcement has expired in the jurisdiction where that
                judgment was made, or

               (b) later than 10 years after the judgment became enforceable in the jurisdiction
               where the judgment was made.

Cause of action extinguished

9 (1) On the expiration of a limitation period set by this Act for a cause of action to recover any
debt, damages or other money, or for an accounting in respect of any matter, the right and title
of the person formerly having the cause of action and of a person claiming through the person
in respect of that matter is, as against the person against whom the cause of action formerly lay
and as against the person’s successors, extinguished.

(2) On the expiration of a limitation period set by this Act for a cause of action specified in
column 1 of the following table, the title of a person formerly having the cause of action to the
property specified opposite the cause of action in column 2 of the table and of a person
claiming through the person in respect of that property is, as against the person against whom
the cause of action formerly lay and as against the person’s successors, extinguished.


                       Column 1                                            Column 2
                    Cause of action                                        Property
For conversion or detention of goods.                 The goods.
To enforce an equitable estate or interest in land.   The equitable estate or interest.
To redeem collateral, in the possession of the
                                                      The collateral.
secured party.
To realize on collateral in the possession of the
                                                      The collateral.
debtor.
To recover trust property or property into which      The trust property can be traced, as the case may
trust property can be traced.                         be.
For the possession of land by a person having a
right to enter for a condition subsequent broken or   The land.
a possibility of reverter of a determinable estate.

Completion of enforcement process

11 (1) Despite section 3 or 9, if, on the expiration of the limitation period set by this Act with
respect to actions on judgment, there is an enforcement process outstanding, the judgment
creditor or the judgment creditor’s successors may do any of the following:
                                                                                              114
                 (a) continue proceedings on an unexpired writ of execution, but the writ may not
                 be renewed;

                 (b) commence or continue proceedings against land on a judgment registered
                 under Part 5 of the Court Order Enforcement Act, but the registration may not be
                 renewed unless those proceedings have been commenced;

                 (c) continue proceedings in which a charging order is claimed.

       (2) If a court makes an order staying execution on a judgment, the running of time with
       respect to the limitation period set by this Act for actions on that judgment is postponed
       or suspended for so long as that order is in force.



                                          Young v. Younge
                               [1985] B.C.J. No. 2342, 62 B.C.L.R. 154

Reasons for judgment were delivered by Esson J.A. and concurred in by Craig J.A. Separate
reasons were delivered by Nemetz C.J.B.C.

1   NEMETZ C.J.B.C.:— My brother Esson will deliver the first judgment.

2 ESSON J.A. (orally): – This is an appeal from a decision of the Honourable Judge Hogarth,
sitting as a local judge.

3 The action is one for debt based upon an earlier judgment of the Supreme Court of British
Columbia. That judgment arose out of an action based on events which took place in 1969. The
action came to trial before Mr. Justice Verchere in 1973. On October 23rd, 1973, judgment was
pronounced in favour of the plaintiffs against the present defendant for a number of amounts
totalling about $70,000.

4 There is evidence of some attempts at execution and some attempts to locate the
defendant. The defendant says that there was an examination in aid of execution which he
attended in 1975, but that he heard nothing further about the plaintiffs' claims against him until
this action was commenced on October 17th, 1983. That date was within six days of the
expiration of the limitation period fixed by s. 3 of the Limitations Act which, so far as relevant,
reads as follows:

       "3. ...

                 (2) The following actions shall not be brought after the expiration of 10 years
                 after the date on which the right to do so arose: ...

                        (f) an action on a judgment for the payment of money or the return of
                        personal property."

       "Action" is defined in s. 1. of the said Act to include:

                 "any proceeding in a court and any exercise in a self-help remedy".

5 The defendant put in a statement of defence pleading that the matters put forward by the
plaintiff were res judicata. This action, as is clear from the statement of claim, is one upon the
judgment itself which, of course, is a different cause of action from the original cause of action
                                                                                                115
in the 1969 action. So there can be no question of res judicata.

6 After the pleadings were closed, the defendant launched an application under Rule 18 to
have the action dismissed, and the plaintiff brought a motion under the same rule for judgment.
The defendant's application was dismissed and the plaintiffs' application allowed. It is from that
order that this appeal is brought.

7 The action is somewhat unusual in that not many instances will be found of actions being
brought here upon a judgment in an earlier action in this Province. Actions on foreign
judgments, of course, are quite common. However, there is no rule which would prevent such
an action and, indeed, it obviously is contemplated by the provisions of the Limitations Act to
which I have referred.

8 The only case to which we have been referred which has arisen under the present
Limitations Act in respect of this issue is Toore, Toore, Kaila and Didhu v. Braich, Sidhu and Sidhu
12 B.C.L.R. 303. That is a judgment of Judge van der Hoop, sitting as a local judge. The
circumstances there were somewhat similar in that a second action had been commenced just
before the ten year limitation period expired. The plaintiff applied for default judgment and the
matter was referred to Judge van der Hoop by the Registrar to determine whether it was an
appropriate case in which to give judgment. He held that it was. He went on to say this:

       "Obviously, a plaintiff cannot, immediately after obtaining one judgment of the court,
       start action on that judgment, obtain judgment on such action together with costs of the
       second action and thereafter ad infinitum pile judgment after judgment with costs on
       the original judgment, and, therefore, it must be determined in each case whether the
       new action does constitute an abuse of the process of the court."

9 I think that that is a correct approach to the issue; that is, there must be limits upon the
right of a plaintiff to rest upon his judgment and to extend the time for pursuing the defendant
by issuing new writs. Essentially, that is to be determined by deciding whether there has been
an abuse of process.

10 Mr. Blewett, in his able submissions to us, has relied particularly upon the judgment of
Farris, C.J.S.C., in Holme v. Holme [1947] 1 W.W.R. 633. In that case Chief Justice Farris held that
an action on an earlier judgment was available but, in the circumstances of that case, he refused
to allow recovery. The action was one based upon an order under the Deserted Wives'
Maintenance Act. The real ground of decision was that it was not a final and conclusive
judgment as to the amount payable. It was a case in which, over a period of nineteen years, the
wife had "hoarded" her right to maintenance. Those are particular circumstances which simply
do not arise in this case.

11 I would refer to a decision of the Court of Appeal of Alberta which is considered in that
case; that is Muirhead v. Newman [1931] 1 W.W.R. 589. Of particular importance is this passage
in the judgment of Mr. Justice Walsh, which is quoted by Chief Justice Farris at p. 635:

       "The law is perfectly clear that an action is maintainable on a judgment of a court of
       record for a sum certain in money."

12 There was no reference in Muirhead v. Newman to the question whether a defendant
could raise an issue based on abuse of process. There are some observations in that case which
might be taken to indicate that no such defence would be available. But it does not seem that
there was an issue raised on that question. In my respectful view, the position as set out by
Judge van der Hoop in Toore v. Braich is substantially correct.
                                                                                             116
13 We have been referred to the affidavits filed by both parties here. There were efforts by
the plaintiffs to recover but, for a long time, they were unable to locate the defendant. It
therefore became necessary to issue a writ to preserve their right of recovery. There is no
evidence of any effort by the defendant to in any way meet his obligations. I can see nothing
which could raise a triable issue as to whether there has been an abuse of process. As the
matter came before Judge Hogarth, that was the only issue upon which he could properly have
refused to give judgment to the plaintiffs. I can see no ground for interfering with his decision
and I would dismiss the appeal.

14 NEMETZ C.J.B.C.:— I agree with my brother. I would just add that Halsbury, 2nd ed., vol.
19, paragraph 574, p. 270, sets out in substance what my brother has said in his judgment. I
agree with his reasons.

15   CRAIG J.A.:— I agree.

16   NEMETZ C.J.B.C.: – The appeal is dismissed.



                                         Young v. Verigin
                              [2007] B.C.J. No. 2427, 2007 BCCA 551

The judgment of the Court was delivered by

1 M.V. NEWBURY J.A.: – On January 18, 1996, after a jury trial lasting eight days, the plaintiff
Mr. Herb Young obtained judgment against Mr. Verigin in the Supreme Court of British
Columbia in the amount of $7,500 for assault, nuisance and breach of privacy. Mrs. Hester
Young (now deceased) obtained judgment in the same amount for nuisance and breach of
privacy. The judgments, which were treated as one for purposes of this appeal, languished for
almost ten years: Mr. Verigin paid neither any amount on account of principal nor any post-
judgment interest. Then, on January 16, 2006, Mr. Young on his own behalf and as executor of
his wife's estate commenced a new action seeking judgment in the amount of $23,289.86
(being the principal amount of the original judgment(s) plus interest calculated to January 1,
2006), and post-judgment interest and costs. The matter came on for hearing pursuant to Rule
18A in October, 2006 before Mr. Justice Melnick.

2 The plaintiffs made no bones about the fact that, as Melnick J. stated, their action was
brought to avoid the consequences of s. 3(3)(f) of the Limitation Act, R.S.B.C. 1996, c. 266. It
states:

       After the expiration of 10 years after the date on which the right to do so arose a person
       may not bring any of the following actions: ...

               (f) on a local judgment for the payment of money or the return of personal
               property.

The word "action" is defined in s. 1 to include "any proceeding in a court and any exercise of a
self-help remedy", and "local judgment" is defined to include, inter alia, a judgment of the
Supreme Court of British Columbia.

3 Although one might not expect that a limitation could be "avoided"; or that the time within
which a judgment may be enforced could be effectively extended, by means of a second action,
the wording of s. 3(3)(f) obviously contemplates that an action may be brought on an existing
judgment. In this respect, s. 3(3)(f) is similar to the original English limitations statute, the Real
                                                                                              117
Property Limitation Act, 1833, 3 and 4 Will. 4, ch. 27, section 40 of which provided in part that
"... no action or suit or other proceeding shall be brought to recover any sum of money secured
by any mortgage, judgment or lien ... but within twenty years next after a present right to
receive same shall have accrued to some person capable of giving a discharge or release of the
same ...".

4 In Farran v. Beresford (1843) 10 Cl. & F. 319, 8 E.R. 764, and Farrell v. Gleeson (1844) 11 Cl.
& F. 702, 8 E.R. 1269, the House of Lords ruled that a judgment creditor who has sued afresh on
a judgment on which execution has not been taken is entitled to the advantage of the new
limitation period on the new judgment. The new judgment was originally obtained by means of
the writ of scire facias (sci. fa.) and later, by means of the writ of revivor created by the
Common Law Procedure Act, 1852, 15 & 16 Vict., ch 76 (The latter was abolished in 1883). The
history of these writs was discussed at length by the Saskatchewan Court of Appeal in Stubbs v.
Allen [1934] 2 W.W.R. 459, where Turgeon J.A. said that a party whose judgment was about to
become barred by a limitation could "always have proceeded, and he may still proceed, to keep
his claim alive by bringing an action on the judgment within the statutory period and proceeding
to a new judgment." (At 468; see also Martin J.A. at 468.) Stubbs was referred to with approval
by this court in Singh v. Singh (1942) 57 B.C.R. 372 (C.A.), per McDonald C.J.B.C., who also
reviewed the history of the writs of sci.fa. and revivor at 375-8 (For a more recent discussion,
see also Lowsley et al. v. Forbes [1998] UKHL 34, [1998] 3 All E.R. 897 at 900).

5 The right to sue on a judgment was, however, qualified in one respect: in Pritchett v. English
and Colonial Syndicate [1899] 2 Q.B. 428 at 435, Lindley, M.R stated that where a plaintiff who
has obtained a garnishment order brings an action "without any necessity", he or she runs the
risk of having it stayed as an abuse of process. This ruling was relied on by the editors of
Halsbury’s Laws of England (1st ed., 1911) for the proposition that "... if an English judgment
can be enforced in some other way it is an abuse of process of the Court to bring an action upon
it." (Vol. 19, para. 574.)

6 In its 1974 Report on Limitations, the Law Reform Commission of British Columbia
considered whether to retain an effective right of "revival" of a judgment by obtaining a new
judgment. The Commission's Ontario counterpart had recommended in 1969 in its Report on
Limitation of Actions that the right be abolished:

       While the Commission considered actions on a judgment or order should be made
       subject to a longer period than other actions, it also concluded that there should be a
       point at which a judgment debtor should be free from the threat of further action. If the
       twenty-year period has almost run (and this will mean from the date of the last part
       payment or acknowledgement of the debt in instances where part payment or
       acknowledgement has been made) the judgment creditor should not be able to start
       time running afresh by bringing an action on the old judgment and obtaining a new one.
       If nothing has been done to enforce the payment of the judgment debt for such a long
       time, this might indicate that the judgment debt had, in fact, been paid. At common law,
       lapse of time could raise a presumption that a debt had been paid, albeit that the
       presumption was rebuttable. After the passage of many years, evidence of the payment
       may have been lost or destroyed. Furthermore, if a judgment debtor has been unable to
       make a payment for twenty years on a judgment debt, perhaps there is something to be
       said for giving him a fresh start at this point [at 49; emphasis added].

7   The British Columbia Commission did not agree. It reasoned that:

       ... the right of a judgment creditor to bring fresh proceedings on his judgment should be
       retained. A prohibition against that right would not be a limitation but rather the
       abolition of a substantive cause of action. The Commission also feels that the notion of
                                                                                          118
       giving the judgment debtor a fresh start, however worthy it may be, is one more closely
       related to bankruptcy than limitations. [At 35]

The Commission described the policy considerations as follows:

       Few would deny that a judgment should occupy a special position in any scheme of
       limitation laws. A judgment is something more than a mere contract debt or a debt due
       under a specialty. It is a declaration by the Court under which the rights of the parties
       have been determined. Once the time for an appeal has passed there is no room for
       dispute. Furthermore, the successful plaintiff cannot be said to have slept on his rights.
       He has taken action, and as a consequence recovered judgment. It might be argued, with
       considerable justification, that no limitation period whatsoever should exist with respect
       to the enforcement of judgments. It may seem unfair that the plaintiff who has been put
       to the trouble and expense of obtaining a judgment to enforce a right or obligation
       should face a further limitation period with respect to the exercise of his rights under
       the judgment. Why should he not be free to pursue his rights under the judgment at his
       leisure if he so chooses? [At 33-4]

Accordingly, the new statutory regime adopted in British Columbia in 1975 reduced the
limitation on actions on judgments for the payment of money from 20 to ten years but retained
the reference, in what was then the Limitations Act, S.B.C. 1975, c. 37, to actions on existing
judgments. Section 3(2)(f) provided:

       The following actions shall not be brought after the expiration of 10 years after the date
       on which the right to do so arose: ...

               (f) an action on a judgment for the payment of money or the return of personal
               property

(Recently, by the Enforcement of Canadian Judgments and Decrees Act, S.B.C. 2003, c. 29, the
term "local" was inserted before the word "judgment", perhaps in response to this court's
judgment in Jerry S. Grobman Professional Corp. v. Linemayr (1999) 67 B.C.L.R. (3d) 90, 122
B.C.A.C. 147.)

8 The case law since 1975 has developed in accordance with the Law Reform Commission's
recommendation and the previous law, although again, not without a hint of reservation. The
leading decision in this province is Young v. Younge [1985] B.C.J. No. 2342, 62 B.C.L.R. 154 (C.A.).
There, the plaintiffs had obtained judgment for $70,000 against the defendant in 1973. Then, six
days before the expiration of the ten-year limitation period, they started a second action, on the
original judgment, and were granted summary judgment under R. 18. The defendant appealed.
This court, per Esson J.A., noted that the action was "somewhat unusual" in that "not many
instances will be found of actions being brought here upon a judgment in an earlier action in
this Province. Actions on foreign judgments, of course, are quite common." However, he wrote,
there was "no rule which would prevent such an action and, indeed, it obviously is
contemplated by the provisions of the Limitations Act ...".

9 Esson J.A. referred to a decision of van der Hoop L.J.S.C. in Toore v. Braich [1979] B.C.J. No.
1122, 12 B.C.L.R. 303 (S.C.), where that learned judge had granted judgment, but expressed
reservations concerning the possibility of piling "judgment after judgment with costs on the
original judgment". Van der Hoop L.J.S.C. had suggested that "it must be determined in each
case whether the new action does constitute an abuse of the process of the Court." (At 304.)
The Court in Young v. Younge agreed with him that there must be "limits upon the right of the
plaintiff to rest upon his judgment and to extend the time for pursuing the defendant by issuing
new writs. Essentially, that is to be determined by deciding whether there has been an abuse of
                                                                                               119
process." (At 156-7)

10 Esson J.A. also referred to an earlier decision of Farris C.J.S.C. in Holme v. Holme [1947] 1
W.W.R. 633, [1947] 1 D.L.R. 361 (B.C.S.C.), who in turn had referred to Muirhead v. Neuman
[1931] 1 W.W.R. 589, [1931] 2 D.L.R. 519 (Alta. C.A.). In the latter case, Walsh C.J.A. for a panel
of five had said the law was "perfectly clear" that an action is maintainable on a judgment of a
court of record for a sum certain in money. The Chief Justice in Holme v. Holme described this
proposition as "shocking" and found himself unable to follow it. He objected to the possibility of
plaintiffs "piling judgment after judgment with costs" onto honest men who after judgment
were unable to pay their debts, and preferred the statement of the law that appeared in
Halsbury’s to which I have already referred.

11 However, as the Court noted in Young v. Younge, Holme v. Holme was decided on
circumstances that did not arise in the later case, and the Court in Muirhead did not even refer
to whether a defendant could raise an issue based on abuse of process (although some of the
Alberta court's comments might have been taken to support such a view). In any event, Esson
J.A. endorsed Toore v. Braich as "substantially correct". Chief Justice Nemetz in Young v. Younge
also added his endorsement of the statement in Halsbury’s to which Farris C.J.S.C. had referred
in Holme v. Holme (I note that the most recent edition of Halsbury’s maintains the same
proposition: see 4th ed., 2002, vol. 37, at para. 1232).

12 Against this background, Melnick J. in the case at bar stated that in an action on a
judgment, the plaintiff must provide "some evidence to demonstrate that the action is not an
abuse of the process of the court", citing Toore v. Braich and Young v. Younge. He described as
"problematic" the fact the plaintiffs had failed to provide any evidence of steps they had taken
to enforce judgment. In his words:

       ... There is merely evidence that the judgment has not been paid. In argument, Mr.
       Buddenhagen for the plaintiffs made mention of their having made efforts to collect but
       being unsuccessful because the defendant, Mr. Verigan, does not work. However, Mr.
       Buddenhagen said that Mr. Verigan lives in property that is owned by his mother which
       Mr. Verigan is expected to inherit. Mr. Verigan, who represented himself, indicated in
       argument that the property was in fact presently registered in his name and that he is
       employed.

       None of this information from either side was received by the court in affidavit form or
       under oath. None of these statements can form the basis of evidence for the purpose of
       my determining whether or not there has been an abuse of process because of the
       delay. There simply is no evidence upon which I can assess whether there has been an
       abuse of process. ... [At paras. 5-6]

13 On the other hand, he observed, it had not been suggested in the Statement of Defence
that any abuse of process had taken place; nor had Mr. Verigin made any argument to that
effect at the hearing. In the absence of admissible evidence either way, the summary trial judge
concluded that this was not a case in which the plaintiffs had abused the process of the court by
their delay. He granted judgment to the plaintiffs in the amount claimed.

14 On appeal, the defendant's first argument was that since an action on a judgment
effectively amounts to a "procedural means of circumventing the intended operation of the
Limitation Act", a plaintiff's right to obtain judgment by means of another action is limited to
those circumstances in which he or she demonstrates having made good faith but unsuccessful
efforts to collect on the earlier judgment. Counsel for the defendant cites Young v. Younge on
this point, but with respect, I do not read it as implying that the Limitation Act in these
circumstances is being "circumvented" or somehow used improperly. The Court clearly
                                                                                          120
endorsed the statement in Muirhead v. Neuman to the effect that "an action is maintainable on
a judgment of a court of record for a sum certain in money." As has been seen, this has been
the case since at least 1844, and has since then carried the consequence that a new limitation
period begins to run. This principle was recently affirmed by the English Court of Appeal in
Bennett v. Bank of Scotland, [2004] E.W.C.A. Civ. 988, [2004] B.P.I.R. 1122:

       ... it cannot be an abuse of process per se to commence a second action with the object
       of preserving one's rights to take bankruptcy proceedings, absent some other factors
       which, in the particular circumstances of the case, render that unjustifiable. As [Patten
       J.] pointed out ..., by s. 24(1) [of the Limitation Act, 1980] Parliament has permitted a
       party with the benefit of an earlier judgment to commence proceedings on that
       judgment any time within six years of the judgment being obtained. There is no obvious
       policy argument brought into play merely by the institution of such proceedings.

       ... Nor is it an abuse of process for the Bank to continue the proceedings in order to
       protect its position. There are conflicting decisions at first instance as to the effect of the
       six year limitation period in s. 24(1) on the right of a judgment creditor to bring
       insolvency proceedings against the debtor. The decision in Re A Debtor was not cited in
       Lowsley and it has not been expressly overruled. It may well be that it is no longer good
       law. The second action may turn out to have been unnecessary after all. That may have
       costs consequences for the Bank. But I am not persuaded that the second action is
       pointless and has become an abuse of process. The position might have been otherwise
       if Mr Bennett had conceded that it was not too late for the Bank to enforce the 1995
       Judgment by bankruptcy proceedings. Unless or until that has been agreed (and I
       recognize that Mr. Bennett is under no obligation to concede that that is the case) or the
       Bank has been repaid all that is owed, Mr Bennett has not established that it is an abuse
       of process for the Bank to keep the second proceedings on foot in order to protect its
       position on the enforcement of its rights for the recovery of the monies due to it. [Paras.
       24 and 28; emphasis added]

15 The real question for us on this appeal is where the onus lies in respect of an allegation of
abuse of process. On behalf of Mr. Verigin, Mr. Millen argued that the plaintiff is required to
adduce some evidence of reasonable and good faith efforts to collect on the judgment debt,
which have been unsuccessful for some reason. Again with respect, I do not read Young v.
Younge or Toore v. Braich as laying down such a rule and I know of no reason why the usual rule
of procedure – that the defendant must plead the facts of and prove the existence of any
"special defence" – would not apply: see Odgers on Civil Court Actions (24th ed., 1996) at 242-5.
The matter of onus was not dealt with directly in the cases to which we were referred, but again
I note another decision of the English Court of Appeal, E.D. & F. Man (Sugar) v. Haryanto, [1996]
E.W.J. No. 1068, 17 July 1996, where Leggatt L.J. reasoned:

       Suing on a judgment, at all events for the first time, cannot be said to defeat legislative
       policy. That is plain from the very language of s. 24 ... Here the second action was, of
       course, brought within that limitation period, There are two relevant ways of enforcing a
       judgment: by execution and by action. It is plain that the Court will not give judgment in
       an action on a judgment unless satisfied that the action does not constitute an abuse of
       process, having regard, amongst other things, to the availability of execution. It would, in
       my judgment, be for a defendant (or a person in the position of defendant) to show that
       a second action did constitute an abuse of process; the primary obligation is not that of a
       plaintiff to justify the bringing of further proceedings. Because, in the event of abuse of
       process, the court may intervene and refrain from giving judgment in the second action,
       it cannot be said that a second action proceeds without judicial scrutiny, even if the
       second action is a matter of right and not discretion. Of course, it favoured the applicant
       in the present proceedings that it was a matter of discretion, even though, when he
                                                                                            121
       came to exercise it, he exercised it against the applicant. The authorities to which our
       attention has been drawn show that the courts have always held the bringing of the
       second action to be a matter of right, and in my judgment that is what it is ...

This passage was quoted with approval by the Court of Appeal in Bennett v. Bank of Scotland,
supra, at para. 4; and in Johnson v. Gore Wood & Co. [2000] UKHL 65, 1 All E.R. 481 at 499, the
House of Lords noted in passing that the onus to prove abuse of process is on the defendant.

16 Consistent with the foregoing, British Columbia courts have held on many occasions that
where an application is made under R. 19(24) for the striking out of an action on the basis of
abuse of process or any of the other grounds stated in the rule, the onus is on the applicant to
prove those grounds: see, e.g., World Wide Treasure Adventures Inc. v. Trivia Games Inc. (1996)
17 B.C.L.R. (3d) 187 at para. 37, 68 B.C.A.C. 241 (C.A.); and Mohl v. University of British
Columbia, 2006 BCCA 70 at para. 41, 52 B.C.L.R. (4th) 89 (C.A.).

17 In my opinion, it was for Mr. Verigin to show that in the circumstances of this case, the
plaintiffs' action to enforce their previous judgment was an abuse of the court process. No
evidence having been adduced to this effect, and no other basis for abuse of process having
been found by the summary trial judge, he correctly allowed the action to proceed and granted
judgment to the plaintiffs.

18   I would dismiss the appeal.




                                   (5) Foreign Judgments



                         De Savoye v. Morguard Investments Ltd. et al.
                         [1990] 3 S.C.R. 1077, (1990), 76 D.L.R. (4th) 256

                      [Indexed as: Morguard Investments Ltd. v. De Savoye]

Present: Dickson C.J. and La Forest, L’Heureux-Dubé, Sopinka, Gonthier, Cory and McLachlin J.J.

December 20, 1990

APPEAL from a judgment of the British Columbia Court of Appeal, (1988), 27 B.C.L.R. (2d) 155,
29 C.P.C. (2d) 52, [1988] 5 W.W.R. 650, dismissing an appeal from a judgment of Boyd L.J.S.C. in
chambers, (1987), 18 B.C.L.R. (2d) 262, [1988] 1 W.W.R. 87, granting judgment to enforce
judgments in another province for deficiencies in mortgage sales.

Donald J. Livingstone, for appellant.
Peter J. Reardon, for respondents.

The judgment of the Court was delivered by

1 LA FOREST J.:— This appeal concerns the recognition to be given by the courts in one
province to a judgment of the courts in another province in a personal action brought in the
latter province at a time when the defendant did not live there. Specifically, the appeal deals
with judgments granted in foreclosure proceedings for deficiencies on sale of mortgaged
property.
                                                                                               122

                                                                             [page1083]
Facts

2 The respondents, Morguard Investments Limited and Credit Foncier Trust Company,
became mortgagees of lands in Alberta in 1978. The appellant, Douglas De Savoye, who then
resided in Alberta, was originally guarantor but later took title to the lands and assumed the
obligations of mortgagor. Shortly afterwards, he moved to British Columbia and has not resided
or carried on business in Alberta since. The mortgages fell into default and the respondents
brought action in Alberta. The appellant was served with process in the actions by double
registered mail addressed to his home in British Columbia pursuant to orders for service by the
Alberta court in accordance with its rules for service outside its jurisdiction. There are rules to
the same effect in British Columbia.

3 The appellant took no steps to appear or to defend the action. There was no clause in the
mortgages by which he agreed to submit to the jurisdiction of the Alberta court, and he did not
attorn to its jurisdiction.

4 The respondents obtained judgments nisi in the foreclosure actions. At the expiry of the
redemption period, they obtained "Rice Orders" against the appellant. Under these orders, a
judicial sale of the mortgaged properties to the respondents took place and judgments were
entered against the appellant for the deficiencies between the value of the property and the
amount owing on the mortgages. The respondents then each commenced a separate action in
the British Columbia Supreme Court to enforce the Alberta judgments for the deficiencies.
Judgment was granted to the respondents by the Supreme Court in a decision which was upheld
on appeal to the British Columbia Court of Appeal. The appellant then sought and was granted
leave to appeal to this Court, [1989] 1 S.C.R. viii.

                                                                             [page1084]
The Judgments Below

Supreme Court of British Columbia

5 The appellant argued that the respondents were not entitled to enforce the Alberta
judgments because he had never attorned to the jurisdiction of the Alberta court. The chambers
judge, Boyd L.J.S.C., noted that the Alberta court clearly had jurisdiction over the subject
properties and the foreclosure proceedings. Nothing in the material, she noted, indicated that
in granting orders for substitutional service upon the appellant, the Alberta court improperly
exercised its discretion to assume jurisdiction, or that any other court would have been a more
convenient forum in which to adjudicate the matter. She, therefore, concluded that the Alberta
court had jurisdiction to make the orders in question. The judge then reviewed the substance of
the orders and ordered that the respondents were entitled to judgment for the deficiencies:
(1987), 18 B.C.L.R. (2d) 262, [1988] 1 W.W.R. 87.

Court of Appeal

6 The Court of Appeal, in reasons given by Seaton J.A., dismissed the appeal: (1988), 27
B.C.L.R. (2d) 155, [1988] 5 W.W.R. 650, 29 C.P.C. (2d) 52. In its view, the Alberta default
judgments could be enforced on the basis of reciprocity, more specifically reciprocity of
jurisdictional practice in the two provinces. A British Columbia court, it held, should recognize
an Alberta judgment if the Alberta court took jurisdiction in circumstances in which, if the facts
were transposed to British Columbia, the courts of British Columbia would have taken
jurisdiction as well.
                                                                                                   123
The Issue

12 No one denies the Alberta court's jurisdiction to entertain the actions and enforce them
there if it can. It would be surprising if they did. They concern transactions entered into in
Alberta by individuals who were resident in Alberta at the time of the transactions and involve
land situate in that province. Though the defendant appellant was outside Alberta at the time
the actions were brought and judgment given, the Alberta rules for service outside the
jurisdiction permitted him to be served in British Columbia. These rules are similar to those in
other provinces, and specifically British Columbia. The validity of such rules does not [page1087]
appear to have been subjected to much questioning, a matter to which I shall, however, return.

13 The issue, then, as already mentioned, is simply whether a personal judgment validly given
in Alberta against an absent defendant may be enforced in British Columbia where he now
resides.

[LaForest J. reviewed the English background and the state of law in Canada and concluded that
Canadian law, like English law, would recognize a foreign judgment only if the defendant had
been present in the foreign jurisdiction at the time the action was commenced there or had
otherwise submitted in some way.]

Analysis
28 The common law regarding the recognition and enforcement of foreign judgments is firmly
anchored in the principle of territoriality as interpreted and applied by the English courts in the
19th century; see Rajah of Faridkote, supra. This principle reflects the fact, one of the basic
tenets of international law, that sovereign states have exclusive jurisdiction in their own
territory. As a concomitant to this, states are hesitant to exercise jurisdiction over matters that
may take place in the territory of other states. Jurisdiction being territorial, it follows that a
state's law has no binding effect outside its jurisdiction. Great Britain, and specifically its courts,
applied that doctrine more rigourously than other states; see Libman v. The Queen, [1985] 2
S.C.R. 178, which deals with the question in its criminal aspect. The English approach, we saw,
was unthinkingly adopted by the courts of this country, even in relation to judgments given in
sister-provinces.

29 Modern states, however, cannot live in splendid isolation and do give effect to judgments
given in other countries in certain circumstances. Thus a judgment in rem, such as a decree of
divorce granted by the courts of one state to persons domiciled there, will be recognized by the
courts of other states. In certain circumstances, as well, our courts will enforce personal
judgments given in other states. Thus, we saw, our courts will enforce an action for breach of
contract given by the courts of another country if the defendant was present there at the time
of the action or has agreed to the foreign court's exercise of jurisdiction. This, it was thought,
was in conformity with the requirements of comity, the informing principle of private
international law, which has been stated to be the deference and respect due by other states to
the actions of a state legitimately taken within its territory. Since the state where the judgment
was given had power over the litigants, the judgments of its courts should be respected.

                                                                                [page1096]

30 But a state was under no obligation to enforce judgments it deemed to fall outside the
jurisdiction of the foreign court. In particular, the English courts refused to enforce judgments
on contracts, wherever made, unless the defendant was within the jurisdiction of the foreign
court at the time of the action or had submitted to its jurisdiction. And this was so, we saw,
even of actions that could most appropriately be tried in the foreign jurisdiction, such as a case
like the present where the personal obligation undertaken in the foreign country was in respect
of property located there. Even in the 19th century, this approach gave difficulty, a difficulty in
                                                                                             124
my view resulting from a misapprehension of the real nature of the idea of comity, an idea
based not simply on respect for the dictates of a foreign sovereign, but on the convenience, nay
necessity, in a world where legal authority is divided among sovereign states of adopting a
doctrine of this kind.

31 For my part, I much prefer the more complete formulation of the idea of comity adopted
by the Supreme Court of the Unites States in Hilton v. Guyot, 159 U.S. 113 (1895), at pp. 163-64,
in a passage cited by Estey J. in Spencer v. The Queen, [1985] 2 S.C.R. 278, at p. 283, as follows:

       "Comity" in the legal sense, is neither a matter of absolute obligation, on the one hand,
       nor of mere courtesy and good will, upon the other. But it is the recognition which one
       nation allows within its territory to the legislative, executive or judicial acts of another
       nation, having due regard both to international duty and convenience, and to the rights
       of its own citizens or of other persons who are under the protection of its laws ...

As Dickson J. in Zingre v. The Queen, [1981] 2 S.C.R. 392, at p. 400, citing Marshall C.J. in The
Schooner Exchange v. M'Faddon, 11 U.S. (7 Cranch) 116 (1812), stated, "common interest
impels sovereigns to mutual intercourse" between sovereign states. In a word, the rules of
private international law are grounded in the need in modern times to facilitate the flow of
wealth, skills and people across state lines in a fair and orderly manner. Von Mehren and
Trautman have [page1097] observed in "Recognition of Foreign Adjudications: A Survey and A
Suggested Approach" (1968), 81 Harv. L. Rev. 1601, at p. 1603: "The ultimate justification for
according some degree of recognition is that if in our highly complex and interrelated world
each community exhausted every possibility of insisting on its parochial interests, injustice
would result and the normal patterns of life would be disrupted."

32 Yntema (though speaking more specifically there about choice of law) caught the spirit in
which private international law, or conflict of laws, should be approached when he stated: "In a
highly integrated world economy, politically organized in a diversity of more or less autonomous
legal systems, the function of conflict rules is to select, interpret and apply in each case the
particular local law that will best promote suitable conditions of interstate and international
commerce, or, in other words, to mediate in the questions arising from such commerce in the
application of the local laws"; see Hessel E. Yntema, "The Objectives of Private International
Law" (1957), 35 Can. Bar Rev. 721, at p. 741. As is evident throughout his article, what must
underlie a modern system of private international law are principles of order and fairness,
principles that ensure security of transactions with justice.
33 This formulation suggests that the content of comity must be adjusted in the light of a
changing world order. The approach adopted by the English courts in the 19th century may well
have seemed suitable to Great Britain's situation at the time. One can understand the difficulty
in which a defendant in England would find himself in defending an action initiated in a far
corner of the world in the then state of travel and communications. The Symon case, supra,
where the action arose in Western Australia against a defendant in England, affords a good
illustration. The approach, of course, demands that one forget the difficulties of the plaintiff in
bringing an action against a defendant who has moved to a distant [page1098] land. However,
this may not have been perceived as too serious a difficulty by English courts at a time when it
was predominantly Englishmen who carried on enterprises in far away lands. As well, there was
an exaggerated concern about the quality of justice that might be meted out to British residents
abroad; see Lord Reid in The Atlantic Star, [1973] 2 All E.R. 175 (H.L.), at p. 181.

34 The world has changed since the above rules were developed in 19th century England.
Modern means of travel and communications have made many of these 19th century concerns
appear parochial. The business community operates in a world economy and we correctly speak
of a world community even in the face of decentralized political and legal power.
Accommodating the flow of wealth, skills and people across state lines has now become
                                                                                         125
imperative. Under these circumstances, our approach to the recognition and enforcement of
foreign judgments would appear ripe for reappraisal. Certainly, other countries, notably the
United States and members of the European Economic Community, have adopted more
generous rules for the recognition and enforcement of foreign judgments to the general
advantage of litigants.

35     However that may be, there is really no comparison between the interprovincial
relationships of today and those obtaining between foreign countries in the 19th century.
Indeed, in my view, there never was and the courts made a serious error in transposing the
rules developed for the enforcement of foreign judgments to the enforcement of judgments
from sister-provinces. The considerations underlying the rules of comity apply with much
greater force between the units of a federal state, and I do not think it much matters whether
one calls these rules of comity or simply relies directly on the reasons of justice, necessity and
convenience to which I have already adverted. Whatever nomenclature is used, our courts have
not hesitated to cooperate with courts of other [page1099] provinces where necessary to meet
the ends of justice; see Re Wismer and Javelin International Ltd. (1982), 136 D.L.R. (3d) 647
(Ont. H.C.), at pp. 654-55; Re Mulroney and Coates (1986), 27 D.L.R. (4th) 118 (Ont. H.C.), at pp.
128-29; Touche Ross Ltd. v. Sorrel Resources Ltd. (1987), 11 B.C.L.R. (2d) 184 (S.C.), at p. 189;
Roglass Consultants Inc. v. Kennedy, Lock (1984), 65 B.C.L.R. 393 (C.A.), at p. 394.

36 In any event, the English rules seem to me to fly in the face of the obvious intention of the
Constitution to create a single country. This presupposes a basic goal of stability and unity
where many aspects of life are not confined to one jurisdiction. A common citizenship ensured
the mobility of Canadians across provincial lines, a position reinforced today by s. 6 of the
Charter; see Black v. Law Society of Alberta, [1989] 1 S.C.R. 591. In particular, significant steps
were taken to foster economic integration. One of the central features of the constitutional
arrangements incorporated in the Constitution Act, 1867 was the creation of a common market.
Barriers to interprovincial trade were removed by s. 121. Generally trade and commerce
between the provinces was seen to be a matter of concern to the country as a whole; see
Constitution Act, 1867, s. 91(2). The Peace, Order and Good Government clause gives the
federal Parliament powers to deal with interprovincial activities (see Interprovincial Co-
Operatives Ltd. v. The Queen, [1976] 1 S.C.R. 477; as well as my reasons in R. v. Crown
Zellerbach Canada Ltd., [1988] 1 S.C.R. 401 (dissenting but not on this point); see also Multiple
Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161). And the combined effect of s. 91(29) and s.
92(10) does the same for interprovincial works and undertakings.

37 These arrangements themselves speak to the strong need for the enforcement throughout
the country of judgments given in one province. But that is not all. The Canadian judicial
structure is [page1100] so arranged that any concerns about differential quality of justice
among the provinces can have no real foundation. All superior court judges – who also have
superintending control over other provincial courts and tribunals – are appointed and paid by
the federal authorities. And all are subject to final review by the Supreme Court of Canada,
which can determine when the courts of one province have appropriately exercised jurisdiction
in an action and the circumstances under which the courts of another province should recognize
such judgments. Any danger resulting from unfair procedure is further avoided by sub-
constitutional factors, such as for example the fact that Canadian lawyers adhere to the same
code of ethics throughout Canada. In fact, since Black v. Law Society of Alberta, supra, we have
seen a proliferation of interprovincial law firms.

38 These various constitutional and sub-constitutional arrangements and practices make
unnecessary a "full faith and credit" clause such as exists in other federations, such as the
United States and Australia. The existence of these clauses, however, does indicate that a
regime of mutual recognition of judgments across the country is inherent in a federation.
Indeed, the European Economic Community has determined that such a feature flows naturally
from a common market, even without political integration. To that end its members have
                                                                                       126
entered into the 1968 Convention on Jurisdiction and Enforcement of Judgments in Civil and
Commercial Matters.

39     The integrating character of our constitutional arrangements as they apply to
interprovincial mobility is such that some writers have suggested that a "full faith and credit"
clause must be read into the Constitution and that the federal Parliament is, under the "Peace,
Order and Good Government" clause, empowered to legislate respecting the recognition and
enforcement of judgments throughout Canada; see, for example, Black, op. cit., and Hogg, op.
cit. The present case was not, however, argued on that basis, and I need not go [page1101] that
far. For present purposes, it is sufficient to say that, in my view, the application of the
underlying principles of comity and private international law must be adapted to the situations
where they are applied, and that in a federation this implies a fuller and more generous
acceptance of the judgments of the courts of other constituent units of the federation. In short,
the rules of comity or private international law as they apply between the provinces must be
shaped to conform to the federal structure of the Constitution.

40 This Court has, in other areas of the law having extraterritorial implications, recognized the
need for adapting the law to the exigencies of a federation. Thus in Aetna Financial Services Ltd.
v. Feigelman, supra, the Court set aside a court order, a Mareva injunction, issued against a
federally incorporated company with its head office in Montréal and offices in Toronto,
enjoining it from transferring certain assets in Manitoba to one of its offices outside the
province. There this Court clearly expressed the different considerations that distinguished that
case from the English situations where it was sought to prevent the transfer of assets to other
countries. Estey J. had this to say, at pp. 34-35:

       All the foregoing considerations, while important to an understanding of the operation of
       this type of injunction, leave untouched the underlying and basic question: do the
       principles, as developed in the United Kingdom courts, survive intact a transplantation
       from that unitary state to the federal state of Canada? The question in its simplest form
       arises in the principles enunciated in the earliest Mareva cases where the wrong to be
       prevented was the removal from "the jurisdiction" of assets of the respondent with a
       view to defeating the claim of a creditor. It has been found by the courts below that
       there was no such wrongdoing here. An initial question, therefore, must be answered,
       namely, what is meant by "jurisdiction" in a federal context? It at least means the
       jurisdiction of the Manitoba court. But is the bare removal of assets from the Province of
       Manitoba sufficient? The appellant is a federally incorporated company with authority to
       carry on business throughout Canada. In the course of so doing, it moves assets in and
       out of the provinces of Manitoba, Quebec and Ontario. No breach of law is asserted by
       the respondent. No [page1102] improper purpose has been exposed. It is simply a clash
       of rights: the respondents' right to protect their position under any judgment which
       might hereafter be obtained, and the appellant's right to exercise its undoubted
       corporate capacity, federally confirmed (and the constitutionality of which is not
       challenged), to carry on business throughout Canada. The appellant does not seek to
       remove the assets in question from the national jurisdiction in which its corporate
       existence is maintained. The writ of the Manitoba court runs through judgment, founded
       on service of initiating process on the appellant within Manitoba, into Ontario under
       reciprocal provincial legislation, and into Quebec by reason of the laws of that province,
       supra. None of these vital considerations was present in the United Kingdom where
       Mareva was conceived to fend off the depredations of shady mariners operating out of
       far-away havens, usually on the fringe of legally organized commerce. In the Canadian
       federal system, the appellant is not a foreigner, nor even a non-resident in the ordinary
       sense of the word. It is capable of 'residing' throughout Canada and did so in Manitoba.
       It is subject to execution under any Manitoba judgment in every part of Canada. There
       was no clandestine transfer of assets designed to defraud the legal process of the courts
       of Manitoba. There is no evidence that this federal entity has arranged its affairs so as to
                                                                                            127
       defraud Manitoba creditors. The terminology and trappings of Mareva must be
       examined in the federal setting. In some ways, 'jurisdiction' extends to the national
       boundaries, or, in any case, beyond the provincial boundary of Manitoba. For other
       purposes, jurisdiction no doubt can be confined to the reach of the writ of the Manitoba
       courts. [Emphasis added.]

41 A similar approach should, in my view, be adopted in relation to the recognition and
enforcement of judgments within Canada. As I see it, the courts in one province should give full
faith and credit, to use the language of the United States Constitution, to the judgments given
by a court in another province or a territory, so long as that court has properly, or appropriately,
exercised jurisdiction in the action. I referred earlier to the principles of order and fairness that
should obtain in this area of the law. Both order and justice militate in favour of the security of
transactions. It seems anarchic and unfair that a person should be able to avoid legal obligations
arising in one province [page1103] simply by moving to another province. Why should a plaintiff
be compelled to begin an action in the province where the defendant now resides, whatever
the inconvenience and costs this may bring, and whatever degree of connection the relevant
transaction may have with another province? And why should the availability of local
enforcement be the decisive element in the plaintiff's choice of forum?

42 These concerns, however, must be weighed against fairness to the defendant. I noted
earlier that the taking of jurisdiction by a court in one province and its recognition in another
must be viewed as correlatives, and I added that recognition in other provinces should be
dependent on the fact that the court giving judgment "properly" or "appropriately" exercised
jurisdiction. It may meet the demands of order and fairness to recognize a judgment given in a
jurisdiction that had the greatest or at least significant contacts with the subject-matter of the
action. But it hardly accords with principles of order and fairness to permit a person to sue
another in any jurisdiction, without regard to the contacts that jurisdiction may have to the
defendant or the subject-matter of the suit; see Joost Blom, "Conflict of Laws – Enforcement of
Extraprovincial Default Judgment – Reciprocity of Jurisdiction: Morguard Investments Ltd. v. De
Savoye" (1989), 68 Can. Bar Rev. 359, at p. 360. Thus, fairness to the defendant requires that
the judgment be issued by a court acting through fair process and with properly restrained
jurisdiction.

43 As discussed, fair process is not an issue within the Canadian federation. The question that
remains, then, is when has a court exercised its jurisdiction appropriately for the purposes of
recognition by a court in another province? This poses no difficulty where the court has acted
on the basis of some ground traditionally accepted by courts as permitting the recognition and
enforcement of foreign judgments – in the case of judgments [page1104] in personam where
the defendant was within the jurisdiction at the time of the action or when he submitted to its
judgment whether by agreement or attornment. In the first case, the court had jurisdiction over
the person, and in the second case by virtue of the agreement. No injustice results.

44 The difficulty, of course, arises where, as here, the defendant was outside the jurisdiction
of that court and he was served ex juris. To what extent may a court of a province properly
exercise jurisdiction over a defendant in another province? The rules for service ex juris in all
the provinces are broad, in some provinces, Nova Scotia and Prince Edward Island, very broad
indeed. It is clear, however, that if the courts of one province are to be expected to give effect
to judgments given in another province, there must be some limits to the exercise of jurisdiction
against persons outside the province.

45 It will be obvious from the manner in which I approach the problem that I do not see the
"reciprocity approach" as providing an answer to the difficulty regarding in personam judgments
given in other provinces, whatever utility it may have on the international plane. Even there, I
am more comfortable with the approach taken by the House of Lords in Indyka v. Indyka, supra,
                                                                                             128
where the question posed in a matrimonial case was whether there was a real and substantial
connection between the petitioner and the country or territory exercising jurisdiction. I should
observe, however, that in a case involving matrimonial status, the subject-matter of the action
and the petitioner are obviously at the same place. That is not necessarily so of a personal
action where a nexus may have to be sought between the subject-matter of the action and the
territory where the action is brought.

                                                                              [page1105]

46 A case in this Court, Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393, though a
tort action, is instructive as to the manner in which a court may properly exercise jurisdiction in
actions in contracts as well. In that case, an electrician was fatally injured in Saskatchewan while
removing a spent light bulb manufactured in Ontario by a company that neither carried on
business nor held any property in Saskatchewan. The company sold all its products to
distributors and none to consumers. It had no salesmen or agents in Saskatchewan. The
electrician's wife and children brought action against the company under The Fatal Accidents
Act of Saskatchewan claiming the company had been negligent in the manufacture of the light
bulb and in failing to provide an adequate safety system to prevent unsafe bulbs from leaving
the plant and being sold or used. On a chambers motion, the trial judge held that any
negligence would have occurred in Ontario and so the tort was committed out of Saskatchewan.
He, however, granted special leave under a provision of The Queen's Bench Act to commence
an action in Saskatchewan, and made an order allowing service of the statement of claim and a
writ of summons in Ontario. The company successfully appealed to the Saskatchewan Court of
Appeal, but the Court of Appeal's judgment was reversed by this Court.

47 Dickson J. gave the reasons of the Court. The location of a tort, he noted, was a matter of
some difficulty. Normally, he observed, an action for a tort would be brought where the
defendant happened to be, on the theory that the court had physical power over the
defendant. But, he added, that suit could also be brought where the tort had been committed.
Where the situs of the tort was, however, was not an easy question. One theory was that it was
situated where the wrongful action took place (there Ontario). Another would have it that
[page1106] it is the place where the damage occurred. But as Dickson J. noted, at p. 398:

       Logically, it would seem that if a tort is to be divided and one part occurs in state A and
       another in state B, the tort could reasonably for jurisdictional purposes be said to have
       occurred in both states or, on a more restrictive approach, in neither state. It is difficult
       to understand how it can properly be said to have occurred only in state A.

At the end of the day, he rejected any rigid or mechanical theory for determining the situs of
the tort. Rather, he adopted "a more flexible, qualitative and quantitative test", posing the
question, as had some English cases there cited, in terms of whether it was "inherently
reasonable" for the action to be brought in a particular jurisdiction, or whether, to adopt
another expression, there was a "real and substantial connection" between the jurisdiction and
the wrongdoing. Dickson J. thus summarized his view, at pp. 408-9:

       Generally speaking, in determining where a tort has been committed, it is unnecessary,
       and unwise, to have resort to any arbitrary set of rules. The place of acting and the place
       of harm theories are too arbitrary and inflexible to be recognized in contemporary
       jurisprudence. In the Distillers' case and again in the Cordova case a real and substantial
       connection test was hinted at. Cheshire, 8th ed., 1970, p. 281, has suggested a test very
       similar to this; the author says that it would not be inappropriate to regard a tort as
       having occurred in any country substantially affected by the defendant's activities or its
       consequences and the law of which is likely to have been in the reasonable
       contemplation of the parties. Applying this test to a case of careless manufacture, the
                                                                                              129
       following rule can be formulated: where a foreign defendant carelessly manufactures a
       product in a foreign jurisdiction which enters into the normal channels of trade and he
       knows or ought to know both that as a result of his carelessness a consumer may well be
       injured and it is reasonably foreseeable that the product would be used or consumed
       where the plaintiff used or consumed it, then the forum in which the plaintiff suffered
       damage is entitled to exercise judicial jurisdiction over that foreign defendant. This rule
       recognizes the important interest a state has in injuries suffered by persons within its
       territory. It recognizes that the purpose of negligence as a tort is to protect against
       carelessly inflicted injury and thus that the predominating element is damage suffered.
       By tendering his products in the [page1107] market place directly or through normal
       distributive channels, a manufacturer ought to assume the burden of defending those
       products wherever they cause harm as long as the forum into which the manufacturer is
       taken is one that he reasonably ought to have had in his contemplation when he so
       tendered his goods. This is particularly true of dangerously defective goods placed in the
       interprovincial flow of commerce. [Emphasis added.]
48 Before going on, I should observe that if this Court thinks it inherently reasonable for a
court to exercise jurisdiction under circumstances like those described, it would be odd indeed
if it did not also consider it reasonable for the courts of another province to recognize and
enforce that court's judgment. This is obvious from the fact that in Moran Dickson J. derived the
reasonableness of his approach from the "normal distributive channels" of products and, in
particular, the "interprovincial flow of commerce". If, as I stated, it is reasonable to support the
exercise of jurisdiction in one province, it would seem equally reasonable that the judgment be
recognized in other provinces. This is supported by the statement of Dickson J. in Zingre, cited
supra, that comity is based on the common interest of both the jurisdiction giving judgment and
the recognizing jurisdiction. Indeed, it is in the interest of the whole country, an interest
recognized in the Constitution itself.

49 The above rationale is not, as I see it, limited to torts. It is interesting to observe the close
parallel in the reasoning in Moran with that adopted by this Court in dealing with jurisdiction for
the purposes of the criminal law; see Libman, supra. In particular, barring express or implied
agreement, the reasoning in Moran is obviously relevant to contracts; indeed, the same activity
can often give rise to an action for breach of contract and one in negligence; see Central Trust
Co. v. Rafuse, [1986] 2 S.C.R. 147. As Professor Sharpe observes [page1108] in Interprovincial
Product Liability Litigation, op. cit., at pp. 19-20:

       It is inconsistent to permit jurisdiction in tort claims on the basis that the defendant
       should reasonably have foreseen that his goods would reach the plaintiff and cause
       damage within the jurisdiction and, on the other hand, to refuse service out of the
       jurisdiction in contractual actions where the defendant clearly knows that his goods are
       going to the foreign jurisdiction.

50 Turning to the present case, it is difficult to imagine a more reasonable place for the action
for the deficiencies to take place than Alberta. As noted earlier, the properties were situate in
Alberta, and the contracts were entered into there by parties then both resident in the
province. Moreover, deficiency actions follow upon foreclosure proceedings, which should
obviously take place in Alberta, and the action for the deficiencies cries out for consolidation
with the foreclosure proceedings in some manner similar to a Rice Order. A more "real and
substantial" connection between the damages suffered and the jurisdiction can scarcely be
imagined. In my view, the Alberta court had jurisdiction, and its judgment should be recognized
and be enforceable in British Columbia.

51 I am aware, of course, that the possibility of being sued outside the province of his
residence may pose a problem for a defendant. But that can occur in relation to actions in rem
now. In any event, this consideration must be weighed against the fact that the plaintiff under
                                                                                             130
the English rules may often find himself subjected to the inconvenience of having to pursue his
debtor to another province, however just, efficient or convenient it may be to pursue an action
where the contract took place or the damage occurred. It seems to me that the approach of
permitting suit where there is a real and substantial connection with the action provides a
reasonable balance between the rights of the parties. It affords some protection against being
pursued in jurisdictions having little or no connection with the transaction or the parties. In a
world where even the most familiar things we buy and sell originate or are manufactured
elsewhere, and where people are constantly moving from [page1109] province to province, it is
simply anachronistic to uphold a "power theory" or a single situs for torts or contracts for the
proper exercise of jurisdiction.

52 The private international law rule requiring substantial connection with the jurisdiction
where the action took place is supported by the constitutional restriction of legislative power
"in the province". As Guérin J. observed in Dupont v. Taronga Holdings Ltd. (1986), 49 D.L.R.
(4th) 335 (Que. Sup. Ct.), at p. 339, [TRANSLATION] "In the case of service outside of the issuing
province, service ex juris must measure up to constitutional rules." The restriction to the
province would certainly require at least minimal contact with the province, and there is
authority for the view that the contact required by the Constitution for the purposes of
territoriality is the same as required by the rule of private international law between sister-
provinces. That was the view taken by Guérin J. in Taronga where, at p. 340, he cites Professor
Hogg, op. cit., at p. 278, as follows:

       In Moran v. Pyle, Dickson J. emphasized that the "sole issue" was whether
       Saskatchewan's rules regarding jurisdiction based on service ex juris had been complied
       with. He did not consider whether there were constitutional limits on the jurisdiction
       which could be conferred by the Saskatchewan Legislature on the Saskatchewan courts.
       But the rule which he announced could serve satisfactorily as a statement of the
       constitutional limits of provincial-court jurisdiction over defendants outside the
       province, requiring as it does a substantial connection between the defendant and the
       forum province of a kind which makes it reasonable to infer that the defendant has
       voluntarily submitted himself to the risk of litigation in the courts of the forum province.

I must confess to finding this approach attractive, but as I noted earlier, the case was not argued
in constitutional terms and it is unnecessary to pronounce definitively on the issue. In another
passage cited by Guérin J. (at p. 341), Professor Hogg (at pp. 278-79) observes that this is similar
to the position taken in the United States through the instrumentality of the Due Process clause
of the [page1110] Constitution of the United States; see International Shoe Co. v. Washington,
326 U.S. 310 (1945). Whether the Canadian counterpart to the due process clause, s. 7 of the
Charter, though not made expressly applicable to property, might, at least in certain
circumstances, play a role is also unnecessary to determine.

53 There are as well other discretionary techniques that have been used by courts for
refusing to grant jurisdiction to plaintiffs whose contact with the jurisdiction is tenuous or
where entertaining the proceedings would create injustice, notably the doctrine of forum non
conveniens and the power of a court to prevent an abuse of its process; for a recent discussion,
see Elizabeth Edinger, "Discretion in the Assumption and Exercise of Jurisdiction in British
Columbia" (1982), 16 U.B.C. L. Rev. 1.

54 There may also be remedies available to the recognizing court that may afford redress to
the defendant in certain cases such as fraud or conflict with the law or public policy of the
recognizing jurisdiction. Here, too, there may be room for the operation of s. 7 of the Charter.
None of these questions, however, are relevant to the facts of the present case and I have not
given them consideration.
                                                                                                 131
Relevance of Reciprocal Enforcement Legislation

55 I turn finally to an argument faintly pressed by the appellant, namely that the Legislature
of British Columbia, like that of other provinces, appears to have recognized the judicial rules as
adopted in Symon, supra, in the Court Order Enforcement Act, R.S.B.C. 1979, c. 75, and no
addition can, therefore, properly be made to the grounds there stated. In particular, counsel
drew attention to s. 31(6) and especially para. (b) thereof. Section 31(6) reads as follows:

                                                                               [page1111]

       31. ...

                 (6) No order for registration shall be made if the court to which application for
                 registration is made is satisfied that

                        (a) the original court acted either

                            (i) without jurisdiction under the conflict of laws rules of the court to
                            which application is made; or ...

                        (b) the judgment debtor, being a person who was neither carrying on
                        business nor ordinarily resident in the state of the original court, did not
                        voluntarily appear or otherwise submit during the proceedings to the
                        jurisdiction of that court;

56 There is a short answer to this argument. The Reciprocal Enforcement of Judgments Acts in
the various provinces were never intended to alter the rules of private international law. They
simply provided for the registration of judgments as a more convenient procedure than was
formerly available, i.e. by bringing an action to enforce a judgment given in another province;
see First City Capital Ltd. v. Winchester Computer Corp., [1987] 6 W.W.R. 212 (Sask. C.A.). This is
in fact made clear by s. 40 of the British Columbia Act which provides that nothing in the Act
deprives a judgment creditor from bringing an action for enforcement of a judgment. There is
nothing, then, to prevent a plaintiff from bringing such an action and thereby taking advantage
of the rules of private international law as they may evolve over time.

Disposition

57   I would dismiss the appeal with costs.

       Appeal dismissed.
                                                                                                   132


                                     (6) Stays of Execution



                         Morguard Real Estate Investment Trust v. Davidson
                                         2001 BCCA 735

1 LEVINE J.A. (orally):— This is an application by the appellant, Robin Davidson, for an order staying
the execution of the order of Madam Justice Bennett made June 20, 2001.

2 Madam Justice Bennett refused to set aside a default judgment for $300,000 granted by Mr.
Justice Smith (as he then was) on September 16, 1999. The judgment was for the maximum amount of
an indemnity given by the appellant and his business partner, Curtis Hall, for a lease granted to a
company by the respondent, Morguard Real Estate Investment Trust.

3 The appellant sought an order setting aside the default judgment on procedural grounds. The
appellant resides in Winnipeg, Manitoba. Much of the chronology of these proceedings relates to that
fact, although each of the appellant and respondent accuse the other of delay.

4 The default under the lease occurred in April 1998. The appellant did not file an appearance to the
writ filed in September 1998 and served on him in December 1998. The premises were re-let in the
late spring or summer of 1999. The application for default judgment was not made until September
1999, after the damages had crystallized. Counsel for the parties exchanged correspondence and
discussions during the intervening months.

5 Following the granting of default judgment, the respondent, Morguard, attempted to execute on
the judgment against Mr. Hall, who resided within the jurisdiction. Mr. Hall went into bankruptcy, so
Morguard then commenced steps against Mr. Davidson in Manitoba. It registered its judgment under
the Reciprocal Enforcement of Judgments Act, took garnishing proceedings and attempted to examine
Mr. Davidson in aid of execution. The registration was, however, subsequently set aside in November
2000.

6 Mr. Davidson then advised Morguard that he intended to bring an application to set aside the
default judgment. He filed materials in January 2001, but subsequently abandoned his argument on
the Miracle Feeds test (1979), 10 B.C.L.R. p 58, in favour of a number of procedural points. Madam
Justice Bennett dismissed all of them.

7 The appellant raises one of those points as his primary argument on appeal. He says that
Morguard did not comply with Rule 17(2) of the Supreme Court Rules which provides that:

       A plaintiff who wishes to proceed against a defendant under this rule must file proof of service
       of the writ on that defendant and a praecipe endorsed by the Registrar with a notation that no
       appearance has been filed by that defendant.

8 The appellant says that Madam Justice Bennett was wrong to find that Mr. Justice Smith could
accept other evidence in the form of advice from counsel that the writ had been served and no
appearance had been filed. There is no dispute that those facts were true.
                                                                                                       133

9 The tests for a stay, upon which both parties agree, are as set out in the case of R.J.R. MacDonald
Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. In that case, Justices Cory and Sopinka cited the
three-part test set out in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., [1987] 1
S.C.R. 110. The three-part test is:

       First, a preliminary assessment must be made of the merits of the case to ensure that there is a
       serious question to be tried. Secondly, it must be determined whether the applicant would
       suffer irreparable harm if the application were refused. And, finally, an assessment must be
       made as to which of the parties would suffer greater harm from the granting or refusal of the
       remedy pending a decision on the merits....

10 That test is cited in Strazza v. Stupich, [1998] B.C.J. No. 2007 (C.A.); 112 B.C.A.C. 224 (Rowles J.A.
in chambers), and in a more recent judgment of the court in reasons for judgment written by Saunders
J.A. in Coburn v. Nagra, [2001] B.C.J. No. 2128 (C.A.), 2001 BCCA 607. In Coburn, Madam Justice
Saunders reviewed the relevant factors to consider on a stay application summarized by Legg J.A. in
Roe McNeil & Co. v. McNeil (1994), 49 B.C.A.C. 247 and said at paragraph 12:

       Many cases of this Court address the necessity of preserving the subject matter of the
       litigation, the prevention of irremediable damage and the consideration of existing special
       circumstances, referred to above by Mr. Justice Legg in point 2. Absent these considerations, a
       successful party is entitled to the fruits of the judgment appealed. And it is the weight of those
       considerations which determines whether a stay of execution is ordered. Although it is rather
       technical to put it into these terms, this all fits within the rubric of the balance of convenience.
       [Emphasis added.]

11 Applying the three-part test in this case, I will consider first whether there is a serious matter to
be tried. As argued by the appellant there is a low threshold to that test. The appellant must establish
that there is an arguable case, that the case is not frivolous or completely without merit. On this point
I would say only that this case barely meets the threshold.

12 I will comment at this point on the matter raised by the respondent as to whether this appeal
should have been brought only with leave of this court. The respondent says that the order made by
Madam Justice Bennett was made under the Supreme Court Rules on a matter of practice or
procedure and is therefore an interlocutory order under s. 7 of the Court of Appeal Act. I do not intend
to deal with that matter on this application. If the respondent raises it on the appeal, the panel will
deal with it at that time.

13 The second test on the application for a stay is whether irreparable harm will result if the stay is
not granted. Mr. Davidson says that if Morguard is allowed to execute on the judgment, he may have
to declare bankruptcy. He provides no other financial or business information. Simply put, he does not
provide sufficient evidence to satisfy me that execution on this judgment will cause him to suffer
irreparable harm.

14 On the question of the balance of convenience, the appellant argues that Morguard has spent
more than three and a half years pursuing this claim, but without any apparent urgency. That may be
so, but the evidence also shows that it has shown professional courtesy to a series of counsel acting
for Mr. Davidson both in Manitoba and British Columbia, which has consumed many months.
Morguard does not have to prove that it needs the money. It is entitled to the fruits of its judgment
unless there are reasons for it to be subject to a stay.
                                                                                                      134

15 Morguard's counsel has offered to accept a Voth order, whereby Mr. Davidson can deposit the
amount of the judgment with the court, and Morguard will post security for its withdrawal. Counsel
for Mr. Davidson, however, neither suggested nor responded to that suggestion made by counsel for
Morguard.

16 If Mr. Davidson is required to pay the judgment pursuant to execution by Morguard, there is little
doubt that Morguard will be in a position to repay if the appeal is successful.

17 Weighing all of these factors in the context of the three-part test, in my view the appellant has
failed to establish either that he will suffer irreparable harm if execution proceeds or that the balance
of convenience favours a stay.

18   The application for a stay is dismissed. The respondent will have its costs in the appeal.



                    Voth Bros. Construction (1974) Ltd. v. National Bank of Canada
                                     12 B.C.L.R. (2d) 43 (B.C.C.A)

1 LAMBERT J.A.:— Voth Bros. Construction (1974) Ltd., a contractor, brought two actions against
the National Bank of Canada for funds alleged to have been held back by the Bank on two construction
projects. Voth Bros. was successful in both actions and was awarded judgments of $458,258.31 and
$177,331.62 plus court order interest and costs. The Bank appealed and has brought this application
under s. 18 of the Court of Appeal Act for a stay of execution until the appeal is decided.

2 The Bank is willing to provide a letter of credit as security for the payment of any judgment against
it at the conclusion of the appeal. Voth Bros. says it should have the fruits of its judgments, but adds
that it is prepared to provide a letter of credit to assure repayment of all amounts paid to it plus costs
and interest, if the Bank is successful in its appeal. In short, Voth Bros. proposes a Robitaille order.

3 Since both parties are prepared to provide sound security for the full amount that might be
payable to the other at the conclusion of the appeal, the primary question is: Which of the parties has
the better right to the funds in issue, in the meantime?

4 A successful plaintiff is entitled to the fruits of his judgment. He should not be deprived of them
unless the interests of justice require that they be withheld from him until the defendant's appeal is
decided. See the decisions of this Court, in chambers, in Sunshine Vacation Villas v. Hudson's Bay, (6
October 1982, CA820798), Skyline Explorations Ltd. v. Placer Development Ltd., [1985] B.C.J. No. 1933
(27 June 1985, CA004033), 57134 Manitoba Ltd. v. Smith Paper Limited, [1985] B.C.J. No. 2014 (30 July
1985, CA004370), and Jake and Jay Holdings Ltd. v. Barber-Greene Company, [1986] B.C.J. No. 462 (29
May 1986, C.A. 003666). Those decisions rest on s. 18 of the Court of Appeal Act, S.B.C. 1982, c. 7. That
section replaced ss. 32 and 33 of the Court of Appeal Act, R.S.B.C. 1979, c. 74. Sections 32 and 33
made a stay of execution mandatory on provision of security for costs and on provision of adequate
security for the satisfaction of a money judgment. The forerunner of s. 33 was brought into the
Iegislation by S.B.C. 1930, c. 10, which amended R.S.B.C. 1924, c. 52. Before that, the Act was silent
about stays of execution pending appeal.

5 Section 33 of the Court of Appeal Act was in effect when Morrison-Knudsen v. B.C. Hydro (1976),
112 D.L.R. (3d) 397 was decided. Mr. Justice Seaton, for the majority, said this, at p. 404:
                                                                                                      135

       Before the present provisions were introduced in our Act the discretion was broad as it now is
       in England. A successful litigant is not normally deprived of the fruits of litigation in England
       unless there is no reasonable probability of getting them back if the appeal succeeds.
       Section[33] ousts that approach.

6 The repeal of s. 33 left the Court free to adopt the approach that I set out at the beginning of the
previous paragraph. But the views expressed in this passage from Morrison-Knudson, at p. 404,
provide a guide that may be appropriately applied to the new s. 18 of the 1982 Court of Appeal Act:

       The respondents remain the holder of a judgment. It must at this stage be assumed to be a
       correct judgment. The protection of the successful litigant is a pre-condition to the stay. I do
       not think the change so complete that the Judge is shorn of the power to see the background
       and the surrounding circumstances and make an order that does justice between the parties
       while protecting both.

7 The same point should be made with respect to the reasons of Mr. Justice Taggart, for the Court,
in Robitaille v. Vancouver Hockey Club (1980), 26 B.C.L.R. 1. The statutory power has changed, but the
order made in that case still exemplifies an appropriate balancing of the interests of justice.

8 If no order is made for a stay of execution, then a successful plaintiff will be able to compel
satisfaction of its judgment. If the defendant is successful in its appeal, it will have no assurance that
the amount of the judgment will be repaid, or, if it is repaid, that it will carry interest. The plaintiff
might well have had the use of funds to which it was never truly entitled, without paying any interest
for their use, and the defendant might have been deprived for a time of funds, which ultimately are
shown to have been its own funds, without any compensation. (On the question of interest on a
repayment, following a successful appeal, see Rodger v. Comptoir D'Escompte de Paris (1871), L.R. 3
P.C. 465, Merchant Banking Company v. Maud, (1874), L.R. 18 Eq. 659, 43 L.J. Ch. 861 (V.C.), and
Central Electricity Board of Mauritius v. Bata Shoe Co. (Mauritius) Ltd., [1982] 3 All E.R. 1149, [1982] 3
W.L.R. 1061.)

9 To avoid those problems, the practice has been adopted, where the amount involved is significant,
of ordering a stay of execution on payment of the amount of the judgment in to court by the
defendant, and ordering payment out to the plaintiff on terms, first, that if the defendant is successful
on its appeal it will be entitled to interest on the funds repaid to it and, second, that the plaintiff
provide sound security, sufficient to secure the repayment of the amount paid out, together with an
amount representing an estimate of the defendant's costs of the appeal on a party and party basis,
and an amount representing interest on the funds that would be repaid if the defendant were to be
successful in the appeal. See Old Crow Investments Ltd. v. First City Investments Ltd. (5 October 1982,
CA821079), Hammerschmidt v. Neufeld (11 January 1983, CA821514), D.K. Investments Ltd. v. S.W.S.
Investments Ltd., [1985] B.C.J. No. 2265 (12 March 1985, CA003442), Skyline Explorations v. Placer
Developments, [1985] B.C.J. No. 1933 (27 June 1985, CA004033), and 57134 Manitoba Ltd. v. Smith
Paper Limited, [1985] B.C.J. No. 2014 (30 July 1985, CA004370).

10 The advantage of such an order is that it gives the plaintiff the fruits of his judgment as soon as
he is entitled to them, but at the same time it protects the defendant against the risk that he will not
be repaid, and against the loss of the interest he would earn from the use of the money which may
ultimately turn out to have belonged to him all along.

11 In my opinion, s. 18 of the Court of Appeal Act provides ample authority for such an order. And,
having regard to the change brought about by the enactment of the new Court of Appeal Act in 1982,
                                                                                                       136

which permits the successful plaintiff to have the fruits of his judgment, I do not think that the funds
should remain in court after they are paid in by the defendant. So long as the plaintiff is prepared to
provide sound and ample security, they should be paid out to the plaintiff.

12   For those reasons, on each of these two applications, it is ordered that:

       1. on condition that the defendant, appellant, pay the full amount of the judgment, in each
       case, in to court by 20 February 1987, and

       2. on condition that the defendant pay the full amount of the costs of trial, as taxed in favour
       of the plaintiff, in to court, within two weeks of the taxation, and

       3. on condition that the plaintiff be at liberty to obtain payment out of any of the funds in
       court on

               (a) filing in court an undertaking to pay interest, at the rate for funds in court from time
               to time, on any amount that it is required to pay to the defendant following the appeal,
               and

               (b) providing security, to the satisfaction of the Registrar, sufficient to ensure that the
               defendant, if successful in its appeal, will receive repayment of all the funds it has paid
               into court with respect to that judgment, plus interest at the rate set for funds in court
               from time to time, plus party and party costs of the appeal,

the execution in the cause or matter in which the judgment was given and from which the appeal is
brought, in each case, is stayed, pending the outcome of the appeal.

13 By way of further clarification, I should add that all questions in relation not only to the form of
the security but also to the terms that will ensure that the funds are sufficient to meet what may be
the obligations of the plaintiff to the defendant if the defendant's appeal is successful at a time not yet
known, shall be settled by the Registrar of the Court of Appeal.



                                     Attorney General v. Lau & Lau
                                           2002 BCSC 1155

1 BURNYEAT J.:— The Plaintiff applies pursuant to Rule 18A of the Rules of Court for a judgment of
$17,520.00 arising out of lease payments for the 2001 and 2002 rents owing on the property leased by
the Defendants from the Crown and for declarations that the Defendants have forfeited their lease to
the Crown and that the Crown may re-enter and recover possession of the property.

2 The Defendants do not oppose the application for the judgment. However, Mr. and Ms. Lau
submit that they are entitled to relief from forfeiture for the non-payment of their 2001 and 2002
rental payments or, in the alternative, that the Court should grant a stay of the judgment until April 1,
2003 pursuant to Rule 42(21)(a) of the Rules of Court and the Court's equitable jurisdiction.

PREVIOUS APPLICATIONS BEFORE THE COURT

3    The Defendants are lessees of property on the Musqueam Indian Reserve No. 2 ("Musqueam
                                                                                                     137

Park") and are involved in the ongoing rental dispute between the Musqueam Park leaseholders, the
Crown and the Musqueam Indian Band ("Band"). The Defendants have not paid their rent at
Musqueam Park since June, 1998.

4 On March 19, 2001, this Court granted judgment and Court ordered interest against Mr. and Ms.
Lau arising out of the lease payments owing but unpaid in 1999 and 2000. At the same time, the Court
granted Mr. and Ms. Lau relief from forfeiture pursuant to their application under s. 24 of the Law and
Equity Act, R.S.B.C. 1996, c. 253.

5 In discussing the conditions under which the Court will relieve from forfeiture, Melnick, J. in his
March 19, 2001 Reasons for Judgment, [2001] B.C.J. No. 907 at para. 17, noted that the Crown must:
"... accept its share of the responsibility for the state of uncertainty which exists." Melnick, J. also
considered the economic consequences on the Band as a result of the refusal of many tenants to pay
rent, the "significant disparity between the amount of those arrears and the values of their
properties", and the fact that it would be unjust if the Crown could take title to the properties even if
the arrears of rental could be brought current within a reasonable time: "... in relation to the
individual circumstances of each of the defendants." (at para. 24).

6 Mr. and Ms. Lau were ordered to pay $17,520.00 on or before June 7, 2001 but were at liberty to
apply if:

       Any of the defendants find that he or she will not be in a position to abide by the conditions
       that I have set, his or her obligation will be to make such an application before the date due for
       the fulfilment of the condition to pay the arrears of rent and applicable interest if he or she
       believes that there are circumstances which will warrant such an application. (at para. 35).

7 If no application was made or if the sum of $17,520.00 was not paid by June 7, 2001 then the lease
would be forfeited to the Crown and the Crown could re-enter and take possession of the property.

8 Mr. and Ms. Lau. brought an application seeking until April 1, 2003 to pay their 1999 and 2000
rental arrears, to be relieved from forfeiture as a result of their failure to pay their 2001 rent of
$8,760.00, until April 1, 2003 to pay their 2001 rental arrears, to stay execution of the Order of
Melnick, J. rendered March 19, 2001 until the later of April 1, 2003 or the final determination including
the exhaustion of all available appeals of Action No. C995669 (Vancouver Registry)
("Misrepresentation Action") and to be at liberty to apply for further extensions of time to pay their
1999 through 2001 rental arrears or to apply for further stays of execution.

9 I concluded that s. 28 of the Law and Equity Act prohibits the Court from making an order relieving
a party more than once in respect of the same covenant so that I was without the jurisdiction to
relieve Mr. and Ms. Lau from the forfeiture of their right to pay rent(2002 BCSC 87).

10 However, I was prepared to exercise my discretion under Rule 3(2) of the Rules of Court to
extend the June 7, 2001 deadline set by Melnick, J. to April 1, 2003, I was satisfied that I should
exercise my discretion under Rule 42(21)(a) to stay the effect of the Order of Melnick, J. until April 1,
2003 and I was satisfied that I should exercise the inherent jurisdiction available to me to order a stay
of execution in the "special circumstances" which existed.

11 Mr. and Ms. Lau appealed my refusal to relieve them from the forfeiture of the right to pay rent
flowing from their failure to pay their 2001 rent. The Crown appealed my refusal to declare that the
lease was forfeited to the Crown and that the Crown could re-enter and take possession of the
                                                                                                    138

property. Those appeals will be heard together but no date has been set for the hearing of those
appeals. The Joint Appeal Record has been filed, Joint Appeal Books have been ordered, and the
parties contemplate exchanging Appellants' Factums shortly.

12 While the 2001 rent payment had not been made when I heard the applications which were
before me, the Crown did not make any applications regarding the 2001 rental arrears at the time. It is
in that context, that Mr. and Ms. Lau now apply again to be relieved from forfeiture or, in the
alternative, that there be a stay of execution of any new judgment in favour of the Crown.

13 Mr. and Ms. Lau also submit that this application for non-payment of the 2001 and 2002 rents
should be adjourned pending the determination of the two appeals as this Court should await the
decision of the Court of Appeal as to the legal entitlement of Mr. and Ms. Lau to seek relief from
forfeiture. In the circumstances, I have decided that such a delay would be tantamount to either a
further relief from forfeiture or a stay of execution so that the request for an adjournment is denied.

14 As well, I am not in a position to accede to the application of Mr. and Ms. Lau that they be
relieved from the forfeiture of their right to pay rent as a result of their failure to pay the 2001 and
2002 rent owing. I am satisfied that I do not have that jurisdiction and that, even if I am incorrect in
that finding, it will be the Court of Appeal of the Province who will make that determination. The
Crown is entitled to a judgment for $17,520.00 and Court Order Interest Act interest arising out of the
failure of Mr. and Ms. Lau to make the lease payments for 2001 and 2002. The question which arises is
whether it is appropriate to grant a stay of execution on that Judgment.

DISCUSSION AND CASE AUTHORITIES

15   Rule 42(21)(a) of the Rules of Court states:

       The court may, at or after the time of making an order,

              (i) stay the execution of the order until such time as it thinks fit, or,

              (ii) provide that an order for the payment of money be payable by instalments.

16 From the materials before me in December, 2001, it was clear that Mr. and Ms. Lau were unable
to pay their rental arrears. Mr. Lau had been forced to take early retirement from his employment and
it was contemplated that he would be receiving a monthly pension cheque of approximately
$2,500.00 as well as three yearly $10,000.00 (net of tax) lump-sum payments from his former
employer as part of his settlement package.

17 However, Ms. Lau had returned to work as a real estate agent and was hopeful of generating
some income as a result. As well, Mr. and Ms. Lau were two of approximately 100 plaintiffs who had
commenced the Misrepresentation Action against the Crown and the Band claiming civil conspiracy,
misrepresentation, fundamental breach of the leases, abusive taxations such that the value of the
interest in the leases were destroyed, various breaches of duty of care and wrongful appropriation of
leasehold interest, and unspecified damages as a result of the same. Mr. and Ms. Lau are hopeful that
the Misrepresentation Action would produce substantial damages and that these funds would then be
available to satisfy the lease arrears and the tax arrears which would then be owing by Mr. and Ms.
Lau.

18   Since 2001, the situation of Mr. and Ms. Lau and their ability to pay tax arrears has not changed
                                                                                                      139

substantially. In her June 7, 2002 Affidavit, Ms. Lau states that her efforts to re-enter into the
workforce as a real estate agent were largely unsuccessful as she was forced to resign from her firm
when unable to earn sufficient commissions to pay the $1,000.00 per month overhead charges
demanded by her employer. She states that those costs were paid from her personal line of credit and
that the $10,000.00 received by Mr. Lau in January, 2002 was used to pay down her personal line of
credit.

19 However, she states that she returned to work as a real estate agent in April, 2002 with a
different firm, that her new firm does not require her to pay any monthly overhead fees, that she is
actively seeking new listings but that she had not made any commissions as yet. She also states that
Mr. Lau is actively seeking new employment and business opportunities but has not found a new
position. She states that his monthly pension cheque of approximately $2,500.00 "...barely covers the
$1,800.00 minimum monthly payments on our $250,000.00 line of credit, and our household
expenses."

20 Ms. Lau states that the property is not currently listed for sale as it is her belief that the property
would sell for approximately $140,000.00 and this price would not permit Mr. and Ms. Lau to repay
the $250,000.00 line of credit and the rental and tax arrears and would not allow them to recover
their purchase price. Ms. Lau further states that she is advised by her realtor that her realtor:
"...expects that the market for properties in the Musqueam reserve will recover eventually, probably
within the next 12-18 months." Ms. Lau states further:

       It is my intention to list and sell the property when its market value has reasonably recovered.
       However, I am advised by [her realtor]...that banks will still not provide financing for the
       purchase of Musqueam leasehold properties, which I believe has contributed to the low
       market values.

21 Mr. and Ms. Lau indicate the following circumstances favour a stay of execution: (a) in the
absence of such an order, Mr. and Ms. Lau will have lost all of their substantial investment in the
property; (b) Mr. and Ms. Lau will remain indebted to their financial institution for $250,000.00; and
(c) Mr. and Ms. Lau will remain indebted to the Crown for the entire balance due under the lease
subject only to the requirement of the Crown to re-lease in order to mitigate their damages.

22 Mr. and Ms. Lau submit that the Band is deprived of the rental arrears but that the arrears
constitute only a small portion of the Band budget of in excess of $2,000,000 per year and that there
has been no further material filed on behalf of the Band to suggest that services available to members
of the Band are diminished as a result of the failure of Mr. and Ms. Lau to pay the rental payments due
since 1998. In view of the relative equities between themselves and the Band, Mr. and Ms. Lau submit
that it is again appropriate order of stay of execution under the equitable jurisdiction of the Court or
pursuant to Rule 42(21)(a).

23 Mr. and Ms. Lau submit that the protracted litigation between the Crown, the Band and the
Musqueam leaseholders over the amount of rent payable under the lease has resulted in significant
adverse publicity, diminished property values and a reduced ability of leaseholders including Mr. and
Ms. Lau to sell or raise money on the strength of the security of their leasehold property and that, in
light of the dispute, the Crown must bear some responsibility for the decline in the leasehold property
and the defendants inability to raise funds on the security of their property: Northshore Winter Club v.
Co-Operators General Insurance (1996), 1 R.P.R. (3d) 33 (B.C.S.C.) and Copper Beach States Ltd. v.
Flying Tiger Hotels Inc., [1990] B.C.J. No. 2537 (B.C.S.C.) and the reasons for judgment of Melnick, J.,
[2001] B.C.J. No. 907, as quoted above.
                                                                                                      140


24 Mr. and Ms. Lau also submit that the Crown will be monetarily compensated for the late
payment of all rental arrears by way of an order for payment interest pursuant to the Court Order
Interest Act, R.S.B.C. 1996, c. 79 from the date of default to the date of payment and that any lease
and tax arrears will be paid first out of the proceeds from any sale of the property.

25 On the other hand, the Crown submits that the following factors do not favour the granting of a
stay of execution: (a) Mr. and Ms. Lau appear not to have the ability or desire to pay their 2001 and
2002 arrears now or in the future; (b) with the funds that are available to them, Mr. and Ms. Lau have
chosen to pay other creditors rather than the Crown as the monthly pension funds of $2,500.00 and
the first of the three lump-sum retirement payments from the former employer of Mr. Lau were used
to pay down the line of credit with the financial institution of Mr. and Ms. Lau; (c) the Band should not
be required to continue to subsidize tenants who either have no realistic ability to pay their rental
arrears or who chose to apply their resources elsewhere other than to pay their rental obligations; (d)
a stay of the Judgment would prejudice the ability of the Crown to commence action against those
creditors of Mr. and Ms. Lau who have received preferential treatment when Mr. and Ms. Lau used
funds received by them to satisfy other debts; and (e) the exercise of the Court's discretion to delay
collection on the judgment would have the effect of re-writing the fundamental terms of the lease and
deprive the Crown of its contractual right under the lease.

26 In support of that latter proposition, the Crown cites the decision in Barclays Bank of Canada v.
N.B. Cook Corporation Ltd. (1983), 48 B.C.L.R. 364 (B.C.S.C.), where Locke, J., as he then was, dealt
with an application for judgment on a guarantee and a request for either an adjournment of the
motion or a stay of execution of the judgment if granted. After reviewing the security that was in
place, Locke, J. concluded:

       "Sympathetic though I am to companies placed in financial difficulties by present business
       conditions, I cannot see may way clear by the exercise of a discretion to emasculate a contract
       and deprive the plaintiff of a specific contractual right, which is what I would be doing, and
       under these particular circumstances I grant judgment and refuse the relief of adjournment or
       stay of execution..." (at pp. 369-70).

27 There is no one test to determine when a stay of execution should be ordered. In Humberstone
v. Trelle (1910), W.L.R. 145 (Alta. Q.B.), Beck, J. described the power available to the Court under rules
such as Rule 42(21)(a) as follows:

       The power of Courts temporarily to stay the issuing or execution is exercised in an almost
       infinite variety of circumstances in order that the ends of justice may be accomplished; in many
       cases this power operates almost as a substitute for proceedings in equity and enables the
       defendant to prevent inequitable use of the judgment or writ. (at p. 147).

28 Accordingly, the principle set out in Barclays Bank of Canada, supra, is only one factor to be
considered in deciding whether it is an appropriate case to exercise the jurisdiction to order a stay of
execution. There are a number of principles frequently considered by the Court when considering
whether a stay should be granted:

       (a) the Court has the inherent jurisdiction to order a stay of execution "in special
       circumstances": Buxton v. Carriss (1958), 13 D.L.R. (2d) 671 (B.C.C.A.);

       (b) the "balance of convenience" in determining the appropriateness of granting a stay: CTF
                                                                                                      141

       Holdings Ltd. v. Flint Motors, [1996] B.C.J. No. 1526 (B.C.S.C.);

       (c) where the "justice between the parties" requires it, the Court has inherent jurisdiction to
       exercise a stay of judgment and, while the power ought not lightly to be exercised, in a proper
       case in order to avoid unnecessary proceedings and expense, and where it is necessary to do
       justice between the parties: M & P Enterprises Ltd. v. London & Lancashire Guarantee &
       Accident Co. of Canada, (1965), 54 D.L.R. (2d) 284 (Man. Q.B.) and Humberstone v. Trelle,
       supra;

       (d) after weighing the relative prejudice to the parties; Barclays Bank of Canada v. N.B. Cook,
       supra, Borkowich v. Canadian Membership Warehouse Ltd., [1991] B.C.J. No. 651 (B.C.S.C.);

       (e) to enable the Court to protect either litigant: Leskovar v. Saskatchewan Government
       Insurance Office (1964), 51 W.W.R. 46 (Sask. C.A.);

       (f) where there is no outstanding appeal: C.T.F. Holdings Ltd. v. Flint Motors Ltd., [1996] B.C.J.
       No. 1526 (B.C.S.C.); and

       (g) to allow sufficient time to a judgment debtor to prosecute a counterclaim against the
       judgment creditor: Humberstone v. Trelle, supra; Morrison v. Mulry, [1935] 1 W.W.R. 423
       (B.C.S.C.); Masterman v. Malin, (1831) 131 E.R. 168; Wells v. Knott, (1910) 15 W.L.R. 285;
       Olympia Pizza Ltd. v. Moon, [1979] B.C.J. No. 675 (B.C.C.A.); and Re Royal Trust Corp. of Canada
       et al and Kendal Adjusters Ltd., (1984) 13 D.L.R. (4th) 472 (Alta. C.A.).

29 I am satisfied that a stay of execution is appropriate in the circumstances of this case. While it
may well be inevitable that the property must be sold, it is clear that the Crown will have a first charge
against the sale proceeds for any tax arrears and for any lease arrears. In the circumstances, the
Crown will be at liberty to register the judgments that it has obtained against Mr. and Ms. Lau against
the interests of Mr. and Ms. Lau in their property at Musqueam Park. In addition to having the security
of their judgments, the Crown will also have the security of pre and post judgment interest. Mr. and
Ms. Lau will also remain indebted to the Crown for the entire balance owing under the lease so that
any stay of execution leaves the Crown fully protected for the balances owing. On the other hand, Mr.
and Ms. Lau will have lost their substantial investment in the property if the Crown is entitled to the
declarations that they seek. After weighing the relative prejudice to the parties, it is clear that the
Crown has no risk while Mr. and Ms. Lau will lose everything.

30 There is no evidence before me which would allow me to conclude that the members of the
Band are in any way suffering as a result of the refusal of Mr. and Ms. Lau to make the rental
payments due since 1998 or that the members of the Band would suffer if the stay of execution
requested by Mr. and Ms. Lau is made.

31 While a delay in the collection on the judgment may have the effect of re-writing the
fundamental terms of the lease and deprive the Crown of its contractual right under the lease, I am
satisfied that there are special circumstances in this case which requires me to exercise my inherent
jurisdiction and my jurisdiction under Rule 42(21)(a) to accede to the request of Mr. and Ms. Lau. It is
necessary to exercise that discretion in order to do justice between the parties, in order to protect Mr.
and Ms. Lau until the Court of Appeal can make a determination of their entitlement to relief from
forfeiture, and in order that this Court can determine their rights under the Misrepresentation Action.

32   The Crown must bear some responsibility for the decline in the value of the leasehold property
                                                                                                      142

and it would be inappropriate to allow the Crown to have caused some of the decline in the value
while at the same time allowing the Crown to take possession of the property so that the Crown can
then re-lease the property when the true market value is restored.

DECISION

33 The Crown is entitled to a Judgment against Mr. and Ms. Lau for $17,520.00 and pre-judgment
interest. The Crown is also at liberty to register that Judgment and any other judgments against the
interest of Mr. and Ms. Lau in their leased property at Musqueam Park. Otherwise there will be a stay
of execution on the Judgment until April 1, 2003 pursuant to Rule 42(21)(a) of the Rules of Court and
the equitable jurisdiction of the Court. Each party will bear their own costs of this application. I will
remain seized of all applications.



               Litecubes, LLC v. Northern Light Products Inc. (c.o.b. Glowproducts.com)
                                [2007] B.C.J. No. 2276, 2007 BCSC 1545

  R.B.T. GOEPEL J.: –

INTRODUCTION

1 The plaintiffs seek judgment pursuant to Rule 18A. The cause of action is a judgment the plaintiffs
obtained against the defendant in the United States District Court, Eastern District of Missouri, Eastern
Division ("the Missouri Court"). That judgment is under appeal. The defendant applies pursuant to
Rule 54(9) for an order staying this action pending the appeal. Alternatively, it submits there is no real
or substantial connection between the defendant and the State of Missouri and on that basis the
decision of the Missouri Court ought not to be enforced in British Columbia.

2 The defendant's application raises for consideration the circumstances in which an action on a
foreign judgment should be stayed pending appeal. While Rule 54(9) and its predecessors have been
included in the British Columbia court rules for more than 100 years, it has received little judicial
attention.

3    For the reasons that follow, I have decided that the action should be stayed pending
determination of the appeal. I will not comment on the merits of the action, but will for completeness
set out the background to the claim.

BACKGROUND

4 The plaintiff, Carl Vanderschuit ("Vanderschuit"), is the inventor of "Litecubes", which are certain
refreezable ice cubes that light up. Vanderschuit and the corporate plaintiff, Litecubes, L.L.C., have
certain patent rights with respect to Litecubes.

5 The defendant, Northern Light Products., Inc. dba Glowproducts.com ("NLP"), is a company
incorporated in British Columbia. NLP sells a light-up product known as the "Exa Cube". The Exa Cube
was shipped to and sold to customers in Missouri.

6 On April 23, 2004, the plaintiffs commenced an action ("the Missouri Action") against NLP in the
Missouri Court for inter alia, infringement of their patent and trademark arising from NLP's sales of
                                                                                                    143

the Exa Cube.

7 NLP defended the Missouri action and in a counterclaim sought a declaration that the plaintiffs'
patent was invalid and that it had not been infringed. NLP pled that the Missouri Court had jurisdiction
over its counterclaim. It asked the Missouri Court to enter judgment in its favour, dismiss the
complaint and grant the declaratory relief sought in the counterclaim.

8 The Missouri action was heard before a jury from October 3, 2005 to October 7, 2005. The jury
concluded that NLP had breached the plaintiffs' patent. It awarded the plaintiffs USD $150,000 in
damages. The plaintiffs' claims for loss of profits and trademark infringement were dismissed.

9 NLP brought several post-trial motions, including motions to dismiss the plaintiffs' claim due to
lack of subject matter jurisdiction and a motion for a declaratory judgment of non-infringement due to
lack of substantial evidence to support the jury's verdict. On October 25, 2006, the trial judge issued
written reasons dismissing all of NLP's motions and requiring NLP to pay to the plaintiffs:

       (a) reasonable attorney fees incurred by the plaintiffs in litigating the Missouri Action, the
       amount to be assessed at a later date;

       (b) the amount of US $16,607.49 for costs (the Costs Judgment) which consists of various
       disbursements incurred by the plaintiffs in litigating the Missouri Action;

       (c) pre-judgment interest on the monetary judgment to be calculated at the rate of 1.4% from
       April 23, 2004 to August 7, 2005; and

       (d) post-judgment interest on the monetary judgment to be computed daily and compounded
       annually at the rate of 3.97% from October 7, 2005.

10 On February 22, 2007, the trial judge ordered NLP to pay the plaintiffs USD $466,363 in
reasonable attorney fees. The total amount owing, exclusive with interest, is USD $632,970.49. To
date, NLP has not paid the plaintiffs any amount in satisfaction of their judgments.

11 On September 25, 2006, NLP filed an appeal from the trial judgment. NLP has not sought a stay
of execution in the Missouri Court pending the appeal. The appeal is presently expected to be heard
by January, 2008.

STAY OF PROCEEDINGS

12 At common law, a foreign judgment given by a court of competent jurisdiction is enforceable
provided that it is final and conclusive and cannot thereafter in that court be disputed. A judgment
otherwise final is not the less so because it may be the subject of an appeal to a higher court, or
because an appeal is actually pending: Nouvion v. Freeman (1889), 15 App. Cas. 1 (H.L.).

13 In British Columbia, unlike in other common law jurisdictions, a party sued on a foreign judgment
that is under appeal has been long entitled to a stay of proceedings pending determination of the
appeal. The 1906 Rules Consolidation contained Order 58a which read:

       If any action on a foreign judgment, order or decree of any court in British Columbia, the
       defendant, upon proof to the satisfaction of the Court or a Judge that he has taken, or caused
       to be taken, an appeal or other proceeding and the nature thereof in respect of such judgment,
                                                                                                     144

       order or decree, shall be entitled pending the determination of such appeal or other
       proceeding, upon such terms (if any) as the Court or Judge may see fit to impose, to a stay of
       proceedings and that the application for such stay may be made in a summary way in
       chambers at any stage of the action. [My emphasis]

14 Order 58a remained in place without modification until 1976, when it was re-enacted in 1976 as
Rule 54(4). The language of the Rule remained unchanged.

15   In 1986, Rule 54(4) became Rule 54(7). The language was changed to read:

       A defendant in an action on a foreign judgment, on proof that an appeal or other proceeding in
       the nature of an appeal is pending, when the time for an appeal has not expired, may apply for
       an order staying the proceedings until the determination of the appeal or other proceeding on
       terms that the court may approve. [My emphasis]

16   In 1993, Rule 54(7) became the present Rule 54(9), which reads:

       A defendant in an action on a foreign judgment, whether or not it is a reciprocal or enforceable
       judgment, on proof that an appeal or other proceeding in the nature of an appeal is pending,
       and the time for appeal has not expired, may apply for an order staying the proceeding until
       the determination of the appeal or other proceeding on terms that the court may impose.

17 From 1906 to 1986, the Rule was prescriptive: a defendant was entitled to a stay of proceedings
on such terms, if any, as the court may seem fit to impose. Since 1986, a stay is no longer automatic. I
note that the change in wording appears to have been made absent any critical judicial commentary
of the earlier provisions.

18 Under the present Rule, a defendant is no longer automatically entitled to a stay of proceedings
pending an appeal in the original jurisdiction. The provision does not provide any guidance in regards
to the onus of proof on an application for a stay. The question that arises is whether the 1986
amendment was intended to materially change the existing practice. I think not.

19 The Rule is remedial in nature. Its purpose is to ameliorate the common law which allows a party
to proceed on a foreign judgment notwithstanding that the judgment is under appeal and subject to
reversal or variation.

20 There are several policy reasons supporting the proposition that a stay of proceedings should
normally follow when an appeal of a foreign judgment is pending. A stay saves this Court and the
parties the time and expense of litigating the enforcement of a judgment which may ultimately be
reversed. A stay prevents a party from executing on a foreign judgment until the judgment has been
affirmed in the foreign jurisdiction. A stay allows the parties to avoid the procedural problems that can
arise if the foreign judgment is reversed or varied.

21 A judgment granted in this Court is a separate judgment which is not automatically vacated if the
foreign judgment is reversed or varied: Toronto-Dominion Bank v. Prairie Gold Oilfield Services Ltd.
(1990), 71 D.L.R. (4th) 738 (Sask. Q.B.). A judgment of this Court can only be set aside, absent an
appeal, in a new proceeding: Royal Trust Company v. Jones, [1962] S.C.R. 132; D.K. Investments Ltd. v.
S.W.S. Investments Ltd. (1990), 44 B.C.L.R. (2d) 1 (C.A.). Accordingly, if a judgment is granted based on
a foreign judgment which is subsequently successfully appealed, a defendant has to bring a new action
to have the judgment set aside.
                                                                                                      145


22 Granting a stay of proceedings is also consistent with the provisions of the Court Order
Enforcement Act, R.S.B.C. 1996, c. 78 ("COEA"). Pursuant to s. 29 of the COEA, if a judgment has been
given in a reciprocating state, the judgment creditor, without the necessity of bringing a common law
action on the judgment, can apply to have the judgment registered in the Supreme Court. The
judgment, however, cannot be registered if an appeal is pending in the foreign jurisdiction. Whether a
party can proceed on a foreign judgment pending appeal should be a matter of principle and not
dependent on the process chosen to enforce the judgment.

23 The court retains the power to impose terms as a condition of a stay. This is consistent with the
1906 Rule. The court can limit the duration of the stay to ensure that the appeal in the foreign
jurisdiction is promptly pursued. If there is a significant risk that a defendant may dispose of assets,
the court could order the defendant to post security or enjoin it from disposing of any assets other
than in the usual course of business. No such risk has been identified in this case.

24 I note that in Ontario the practice is to grant judgment and then stay execution: Four
Embarcadero Center Venture v. Mr. Greenjeans Corp. (1998), 64 O.R. (2d) 746 (H.J.C.); Arrowmaster
Inc. v. Unique Forming Ltd. (1993), 17 O.R. (3d) 407 (Gen. Div.); Oz. Optics Ltd. v. Dimensional
Communications Inc. [2004] O.J. No. 4543 (S.C.J.) aff'd [2005] O.J. No. 2816 (C.A.). In Ontario, there is
no rule of court that authorizes a stay of proceedings. A stay of proceedings is a broader remedy than
a stay of execution. The latter can only be granted after a judgment has been entered.

25 There are two judgments of this Court dealing with Rule 54(9). In Dunton v. Whitewater West
Recreations Ltd., [1996] B.C.J. No. 2874 (S.C.), the plaintiff had been injured in Colorado on a water
slide installed by the defendant. The plaintiff obtained a judgment in Colorado which the defendant
appealed. The plaintiff initially sought to register the Colorado judgment under the COEA. That
application was dismissed in reasons reported at (1996), 26 B.C.L.R. (3d) 49 (S.C.) because the
judgment was under appeal. The plaintiff then commenced a second proceeding in which he sued on
the foreign judgment. The main issue before the court was whether the parallel proceedings
prevented the plaintiff from suing on their judgment.

26 Melvin J. held that the prior proceedings were not at bar to suing on the judgment. He found that
all of the factual and legal requirements, which are the burdens of the plaintiff in a case on a foreign
judgment, had been met and that it was an appropriate case to grant judgment in accordance with the
common law provisions governing foreign judgments. It was only after judgment had been granted
that Melvin J. gave consideration to Rule 54(9). He stayed execution of the judgment for six months
pending the appeal. He rejected the plaintiff's application that the defendant should secure the
amount of the judgment.

27 In Amalgamated Transit Union, Local 1374 v. Independent Canadian Transit Union (1998), 63
B.C.L.R. (3d) 335 (S.C.), a judgment was obtained against the defendants in Alberta for defamation.
The Alberta judgment was under appeal. The defendants argued that the proceedings should be
stayed pending disposition of the appeal in Alberta or, alternatively, that if the plaintiffs were awarded
judgment the judgment should be stayed.

28 Taylor J. rejected the stay of proceedings finding that the appeal was of little merit. After
granting judgment, he then considered an application for a stay of execution pending disposition of
the appeal. He concluded that a successful litigant should be entitled to the fruits of its judgment
unless the interests of justice dictated otherwise. There was evidence before the court that if the stay
was granted absent security, the judgment might not be ultimately enforceable. He stayed execution
                                                                                                     146

on condition that the defendant secure the full amount of the judgment.

29 Neither judgment considered the Rule's history or purpose. Neither considered the distinction
between a stay of proceedings and a stay of execution. If they had, the results may well have been
different. In the circumstances, I do not believe that either decision is determinative of this
application.

30 In my opinion, the purpose of Rule 54 is to avoid the mischief that can occur when a foreign
judgment is successfully appealed. The rule has long prevented this Court from granting judgments in
such circumstances and there is nothing in its present wording that suggests the practice should
change.

31 Any delay in the plaintiffs obtaining the fruits of their judgment arises from their decision to
bring proceedings in Missouri. If the plaintiffs had brought their action in British Columbia, our Court
of Appeal would determine whether or not a stay would be granted pending appeal. The plaintiffs,
having chosen to proceed in Missouri, cannot now complain if this Court requires the process in
Missouri to be completed in its entirety before giving judgment in this province.

32 The appeal is expected to be heard by January, 2008. I order this action stayed until the earliest
of the appeal decision, or March 1, 2008. If the appeal remains outstanding as of March 1, 2008, NLP
has liberty to apply to extend the stay. On that application, it will have to explain the status of the
appeal. Rule 54(9) protects a defendant only while an appeal is being promptly prosecuted.

33    The plaintiffs' motion for judgment will remain in abeyance during the duration of the stay.

34    The costs of this application will be in the cause.




     CHAPTER 4. INFORMATION ACQUISITION – BASIC PROCEDURES AFTER
                              JUDGMENT

In order to decide what enforcement process to employ (or to ascertain whether it is worthwhile
employing any enforcement process) the judgment creditor needs information concerning the assets
of the judgment debtor. In addition to any self-help methods of acquiring such information, there are
statutorily authorized and regulated procedures which are described in the materials produced below.
These materials were originally prepared by R. Brian McDaniel for the 1980 Mid-winter Meeting of the
Canadian Bar Association in Vancouver, B.C., but they have been revised (though not rewritten) to
incorporate subsequent amendments.

The current procedures are:

        1. Examination in Aid of Execution – Rule 42A, Supreme Court Rules, 1976

        2. Subpoena to Debtor proceedings – Sub-Rules 42(23) to 42(46), Supreme Court Rules, 1976

        3. Payment Hearing – Rule 12 of the Small Claims Rules
                                                                                                   147

These procedures replace:

       1. Marginal Rule 610, Supreme Court Rules, 1961, which covered Examinations in Aid of
    Execution under the old Rules.

       2. Section 58 of the Supreme Court Act, R.S.B.C. 1960 c. 372 which allowed for the Examination
    of a Judgment Debtor and the making of a binding order for payment.

      3. Section 19 of the Arrest and Imprisonment for Debt Act, R.S.B.C. 1960, c. 17 which gave the
    Court power to commit a Judgment Debtor after examination if the grounds existed.

       4. Sections 147 to 160 of the County Courts Act, R.S.B.C. 1960 c. 81 which governed procedure
    on a Judgment Summons.

The Examination in Aid of Execution under Rule 42A of the Rules of Court is an effective first step to
take after obtaining a Judgment, but it will not lead to a binding order for payment. Attendance at the
Examination is compelled by the threat of proceedings for contempt of Court. It does, however, grant
to the judgment creditor a very broad scope of enquiry which will provide information to assist him in
satisfying his judgment. The Examination in Aid of Execution is not limited to monetary judgments.
This remedy serves the same purpose for post-trial procedures as the examination for discovery
serves at the pretrial stage.

The Subpoena to Debtor is only available where the judgment is for the payment of money.
Proceedings taken after the service of the subpoena lead to an order for payment being made which
can be enforced by the special committal procedures set out in Rule 42.

The Small Claims Judgment Summons is a relatively important remedy now that the Small Claims
monetary jurisdiction is [$25,000.00]. The remedy is similar to the old County Court Judgment
Summons and the new Subpoena to Debtor procedures.



                                      (1) Examination and Execution



A. General

The Rules for Examination in Aid of Execution were changed by an Order in Council on November 9,
1979 to be effective on February 1, 1980 under B.C. Regulation Number 517/79. Rule 42A replaces
Sub-Rules 42(19) – (22).

Unless you have been able to obtain information which will assist you in enforcing your Judgment
through searches in the Registries, bank enquiries or other means, Examination in Aid of Execution is
the first step that should be taken after the entry of the judgment. Rule 42A allows the use of the
Examination in Aid of Execution where a Judgment Creditor is entitled to issue execution or otherwise
enforce an Order of the Court. It is not limited to monetary judgments. Although the Rules grant the
remedy to a “Judgment Creditor’, Sub-Rule 42A(9) defines Judgment Creditor as a person entitled to
enforce an Order of the Court and a Judgment Debtor as a person against whom an Order may he
                                                                                                   148

enforced.

The Examination in Aid of Execution might be considered as a prelude to contempt proceedings for a
refusal to obey a mandatory injunction or for refusal to provide access in a matrimonial order.




B. Pre-Examination Procedure

Once the Order has been entered, the Judgment Creditor should make enquiries about the likelihood
of its being satisfied voluntarily. If these enquiries lead nowhere, make arrangements with the Court
Reporter’s Office for a time and place for the Examination. There is no need for a further Order of the
Court to conduct an Examination in Aid of Execution. As a result of Sub-Rule 42A(2), an officer or
director of a Corporate Judgment Debtor and a person liable to execution upon an order against a
partnership or firm can be examined without further order of the Court.

The procedure for compelling the attendance at an Examination in Aid of Execution is set forth in
those portions of Rule 27 which are referred to in Sub-Rule 42A(6).

Sub-Rule 27(2) provides that the Examination is an oral examination on oath. Under Sub-Rule 27(6) a
corporation must disclose the name of a person knowledgeable about the matters in question in the
action. Sub-Rule 27(14) provides that the Examination is to take place at the Registry nearest to the
place where the person to be examined resides unless the Court otherwise orders or the parties to the
Examination consent. It may be necessary therefore, if you have a Victoria Registry action and the
Judgment Debtor resides in Vancouver to have the Examination in Vancouver. There will be no need
to transfer the Court file for the purposes of an Examination in Aid of Execution.

Sub-Rule 27(16) provides that attendance at the Examination is compelled by the personal service of
the Appointment in Form 20 together with witness fees of $20.00 plus 30 cents per kilometer, as
provided in Appendix C, Schedule 3, at least two days before the Examination. Also remember if you
wish to compel the attendance of a Judgment Debtor in his personal capacity and/or in his capacity as
a Director of a Corporate Judgment Debtor you must specify this in the Appointment. Otherwise, the
individual being examined may refuse to answer questions in the capacity not referred to in the
Appointment.




C. The Examination

Rule 27(20) requires the person to be examined to produce all non-privileged documents. The person
to be examined is entitled to counsel (Pope v. Pope, (1942), 3 W.W.R. 412). Sub-Rules (21) – (24) of
Rule 27 and 42A(1) govern the conduct of the Examination in Aid of Execution. The effect of these
Rules and the case law which has interpreted them clearly implies that the Examination in Aid of
Execution is a cross-examination of the severest kind. Anything relevant to the enforcement of or non-
compliance with the order can be raised. Sub-Rule 42A(1) broadens the scope of the Examination in
Aid of Execution from what was previously allowed. The person being examined must reveal all non-
privileged information and is required to inform himself. If the person has not satisfactorily informed
                                                                                                   149

himself, Sub-Rule 27(23) allows an adjournment for that purpose. Under Sub-Rule 27(24) the validity
of objections to questions asked in Examinations in Aid of Execution can be decided upon application
to the Court which may also order the person to submit to further Examination.

If it is intended to examine a person in aid of execution who resides outside of British Columbia, an
application to Court with notice to the person is required. In contrast to cases in which the person to
be examined resides in British Columbia, it appears that where the person to be examined resides
outside of British Columbia the attendance at the Examination in Aid of Execution can be compelled by
service on the solicitor for that person.




D. Special Problems Arising under Examination in Aid of Execution


Examination of a Person Other Than the Judgment Debtor

Sub-Rule 42A(4) allows the Examination of a person other than a party who may have knowledge
relevant to the enforcement of the Court’s Order. This Rule can be particularly helpful in the event
that a fraudulent preference or conveyance is suspected. A Notice of Motion and supporting Affidavits
should be filed setting out the grounds for the belief that a person other than the Judgment Debtor
may have knowledge of the matters relevant to the enforcement of the Order. In the Affidavit, it
would be helpful to quote any relevant aspect of the transcript of the Examination in Aid of Execution
of the Judgment Debtor.



Examination of a Spouse

Sub-Rule 42A(4) raises the interesting problem of whether or not the spouse of the Judgment Debtor
can be examined. In the case of monetary judgments, an Examination in Aid of Execution will
frequently reveal questionable transactions between spouses which will imply that a fraudulent
preference has taken place. There are conflicting decisions of the Supreme Court under old Order 42,
Rule 32 (Marginal Rule 610). In Bank of Montreal v. Dyck (1973), 1 W.W.R. 475, Mackoff (L.J.S.C. as he
then was) ruled that the words “or of any other person” in this Rule allowed the examination of a
spouse. Neither Hutcheon (L.J.S.C. as he then was) in Richardson Securities of Canada v. Liebermar
(1974), 3 W.W.R. 95 or McKay J. in Wolverton & Company Limited v. Robert (Theburge) (Roberge)
(1976), 2 W.W.R. 310 agreed with him. They held that the words “or any other person” did not apply
to the wife of a Judgment Debtor but only to officers of the Debtor Corporation and the like. The
language of Sub-Rule 42A(4) is significantly different than that of Marginal Rule 610, Supreme Court
Rules 1961. It now seems clear that any person, including the spouse, who has knowledge of the
matters relating to the enforcement of an Order may be examined.



Court Order in the Event of Difficulty

Sub-Rule 42A(5) provides that when difficulty arises in execution of enforcement of an Order the
                                                                                                  150

Court may make an Order for the attendance at Examination of a party or person as it sees fit. This is
the Rule that provides the teeth to the Examination for Discovery in Aid of Execution procedure. It
could be used when the person refuses to obey the Appointment, refuses to answer questions or is
generally difficult in matters relating to the enforcement of the Judgment. When one of these
occasions arises, this Rule would allow you to make an application by way of Notice of Motion with
supporting Affidavits to the Court to get a specific Order requiring the attendance at an Examination,
requiring the party to answer specific questions, etc. You then have the clear cut remedy of
proceeding for contempt if an Order under this Sub-Rule is not obeyed.
                                                                                                151

Examination of a Mortgagor after an Order Nisi of Foreclosure

As most Orders Nisi of Foreclosure provide for judgment against the Mortgagor on the personal
covenants contained in the Mortgage, there is no reason why, while the period of redemption is
running, you cannot examine the Mortgagor about other assets which might lead to a speedier
satisfaction of the Order. Authority for this procedure is contained in the B. C. Supreme Court
case of London and Canadian Investment Company v. B. C. Realty Development Corporation
(1934) 3 W.W.R. 319.




E. Enforcement

If a person fails to appear as a result of the proper service of an Appointment and conduct money
the remedy available to the Judgment Creditor is to make an application to have that person
committed for contempt of Court. This remedy arises from the application of Sub-Rule 2(5)(a) and
Rule 56 of the Rules of Court. A person who “refuses or neglects to obey a Subpoena or to attend
at the time and place appointed for his Examination for Discovery” is guilty of contempt of Court.

There is some question as to whether or not an Appointment in Form 20 is a “Subpoena” and
whether or not an Examination in Aid of Execution is an “Examination for Discovery” and the
Court may therefore be reluctant to commit for a refusal to appear after service of the first
Appointment.

If the person refuses to appear after service of the Appointment, the most effective remedy is
probably to make an application to the Court under Sub-Rule 42A(5) to obtain a specific court
order requiring his attendance. A Notice of Motion with the supporting Affidavit setting out the
fact that the party failed to appear in accordance with the Appointment and conduct money will
probably be sufficient to allow the Court to make an Order under this Sub-Rule. If the party does
not appear at the time of the hearing of the motion, the Order must be served upon him
requiring him to attend at the time and place set forth in the Order. If he refuses to attend, there
will be little doubt that he will be in contempt and liable to the consequences of Rule 56.

In proceedings for contempt the liberty of the individual is at stake and accordingly the utmost of
care and adherence to the Rules is required before the Court will punish for contempt, either by
ordering the committal of the individual or by the imposition of a fine, or both. If the person who
has disobeyed the Appointment or the Order for his attendance is sought to be examined as a
director of a corporation, the Court can punish by the imposition of a fine on the corporation or
the committal of the director, or both.

In the case of Stevenson v. Stevenson (1977), 3 B.C.L.R. 7 held that the failure to pay money
ordered by the Court to be paid is contempt but that the party in contempt is not liable for
punishment by the simple failure to pay. Glazer v. Union Contractors et al (1960), 33 W.W.R. 145
affirmed at 34 W.W.R. 193 and 690 (B.C.C.A.) is authority for the proposition that statements on
information and belief in affidavits in support of contempt proceedings will not be allowed.

Sub-Rule 56(7) requires the Notice of Motion and Affidavits in support of proceedings for
contempt to be served on the alleged contemnor at least seven days before the hearing of the
application. The application may be heard summarily in Chambers or may be transferred to the
trial list. If a person is committed to jail, an Order under Rule 56 must be brought before the
                                                                                               152

Court at intervals of not more than seven days.




F. Post-Examination Considerations

Sub-Rule 42A(3) prohibits a person from being examined more than once in the same year
without a Court Order. If you do not get all the information you want at the first Examination, the
creative use of the power to adjourn under Sub-Rule 27(23) may be employed to re-convene the
Examination of the same person within the year.

The Examination of the Judgment Debtor should reveal his dispositions of property and may lead
to the Examination of others under Sub-Rule 42A(4). Under this Rule a Court Order is required for
the Examination of the person other than the Judgment Debtor.

Under Sub-Rule 42A(7), the transcript of the Examination in Aid of Execution may be used in
evidence in the same or subsequent proceedings between the parties or in proceedings between
the Judgment Creditor and the person examined. For example, the transcript of the examination
of a wife or other recipient of the property disposed of under questionable circumstances may be
used in an action under the Fraudulent Preferences or Fraudulent Conveyances Act.

Under Sub-Rule 42A(8) costs are recoverable by the party conducting the Examination.



                                        (2) Subpoena to Debtor



A. General

Sub-Rules 42(23) to (46) set forth a procedure for compelling the attendance of a Judgment
Debtor before an Examiner, the nature of the Examination and the consequences that can befall a
Judgment Debtor as a result of failing to attend or some other form of non-compliance. The
Subpoena to Debtor proceedings should be used if the Judgment Creditor is aware of the financial
position of the Judgment Debtor and there is difficulty in getting the Debtor to satisfy the
Judgment. If your purpose is to simply go on a fishing expedition to obtain information which
might lead to the satisfaction of your Order you are better off following the procedures in Rule
42A. If you wish to obtain a binding Order for payment at the conclusion of your hearing then you
should use the Subpoena to Debtor procedure. The Subpoena to Debtor can only be used when
the Order sought to be enforced is one for the recovery of money or costs. It is a better method
by which to compel attendance than the Examination in Aid of Execution. These Rules contain
three different methods by which the Judgment Debtor might be committed.
                                                                                               153

B. Pre-Hearing Procedure

Before starting the Subpoena to Debtor proceedings, find out from the appropriate Registry the
dates and times when the Examiner hears matters of this sort.

After being given an allotted time by the Registry, the Judgment Creditor must prepare a
Subpoena in Form 51 affixing a copy of the Order sought to be enforced and an Affidavit showing
that the Order is not satisfied and that no Writ of Execution issued by the Creditor is outstanding
against the Debtor.

The endorsement on the back of the Subpoena must set forth clearly the debt owing, the costs
incurred both before and after the Order, the amount paid and dates of payment, and the
interest owing since the date of Judgment.

Rule 42(25) provides that the person to whom the Subpoena to Debtor is directed must be served
personally at least seven days before the date of hearing with the Subpoena and the necessary
conduct money of $6.00 plus reasonable and necessary travelling and lodging expenses. The
Subpoena, as it is probably a Judgment Summons as defined by Section 6 of the Sheriff’s Act,
must be served by a Sheriff.




C. The Hearing

A recent amendment to Sub-Rule 42(26) now makes it clear that the proceeding before the
Examiner after the service of the Subpoena is a “hearing” and not an “Examination”. This small
amendment was probably made necessary as a result of the confusion arising in a few recent
decisions which failed to appreciate at least the semantic differences between Examination in Aid
of Execution and Subpoena to Debtor proceedings.

The hearing takes place before an Examiner who can be the Court Master or a Registrar
designated as such by the Chief Justice. In the main Registries, these hearings invariably take
place before the Registrar or, in Victoria, before the Master.

The scope of the hearing is set forth in Sub-Rule 42(26) and is more limited than under an
Examination in Aid of Execution because the hearing is limited to financial matters. The Judgment
Creditor runs the risk of having the Examiner take over the questioning. Consequently, hearings
under these Rules may not prove to be as fruitful as under Rule 42A.

If you wish to examine a Judgment Debtor both in his own capacity and in his capacity as a
Director of a Company you must specify this in the Subpoena. Otherwise, the Examiner will only
allow you to question him in the capacity under which he has been subpoenaed.

Although the Examiners don’t seem to like it, the hearing can become more like a trial if the
Judgment Creditor or the party subpoenaed is given leave to call witnesses who can be cross-
examined under Sub-Rule 42(28). It is interesting to speculate whether or not a Judgment
Creditor could serve a Subpoena in Form 21 as provided for in Sub-Rule 40(34) – (42) to compel
the attendance of the spouse of the Judgment Debtor at the hearing before the Examiner. As the
leave of the Examiner is required to call a witness in these proceedings, it is unlikely that a
                                                                                                  154

Subpoena to a person to attend as a witness could be enforced in the normal manner.

One of the risks that a Judgment Creditor runs when convening a hearing after the issuance of a
Subpoena to a Debtor is that the Examiner might make an Order that the Creditor doesn’t want. A
possible way of avoiding this is to ask for an adjournment under Sub-Rule 42(29).

Sub-Rule 42(30) sets forth the first of three ways by which the Debtor can be committed to jail
after the issuance of a Subpoena to him. If the Debtor refuses to attend after the proper service
of a Subpoena, the Examiner, if he is a Master or Registrar, can make a report to the Court in
Form 88 fixing a time and place at which the Creditor may appear before the Court without notice
of the person subpoenaed and make an application for committal. In addition, if the Debtor
refuses to be sworn, produce documents, or provide satisfactory answers, the Examiner, if he is
the Master or Registrar, can make a report fixing a time and a place for the person subpoenaed to
appear before the Court. At the time of this Hearing, the creditor, without further notice to the
person subpoenaed, can make an application and the Court can order committal. The Creditor
seeking the remedy of committal must, at the time of the hearing set out in Form 88, be prepared
to prove adequate service of the Subpoena, supporting documents and witness fees.

If the Examiner is the Court, it can make an Order for Committal under Sub-Rule 42(30)(f) at the
time of the hearing, or on a subsequent application. If a subsequent application is made, the
material in support must show that the Examination was originally conducted by the Court or
include Form 88 showing that it was conducted by the Master or designated Registrar (Ellis v.
Newman (1977), 3 B.C.L.R. 339).

If the Creditor who issued the Subpoena fails to appear at the hearing of if the Examiner is of the
opinion that the proceedings are unnecessary and vexatious, the Creditor may be ordered to pay
the person subpoenaed compensation which may be paid forthwith or set-off against the debt.
(See Sub-Rule 42(31))

What constitutes an answer which is “to the satisfaction of the Examiner” presents some
problems. The decisions which deal with this problem seem to imply that if a full and complete
answer is given to the question asked at the hearing, it is satisfactory even if the facts revealed in
the answer suggest fraud or dishonesty.

Sub-Rule 42(32) sets forth the second set of circumstances which may lead to committal. If the
answers given at the time of the hearing lead the Examiner to conclude that the Debtor has dealt
with property with an intent to defraud the Creditor, has unreasonably neglected or refused to
pay the debt or, if the Debtor is a Corporation and the person subpoenaed has somehow
participated in this behavior, the Examiner, if he is a Master or Registrar, may fix a time and place
for the person subpoenaed to appear before the Court at which time the Creditor may apply for
an Order committing that person. If the Examiner is the Court, it may order committal either at
the time of the hearing or at a later date. It has been suggested that this Rule restores to British
Columbia the possibility of imprisonment for mere non-payment of debt. Sub-Rule 42(32)(a)
provides for imprisonment as a civil remedy in the case of a fraudulent disposition of property by
the Judgment Debtor, whether the disposition occurred prior to or after entry of the Judgment
(Re Companies Act; re Natural Health Association (White’s case) (No. 4) (1949), 1 W.W.R. 981).
Improvidence or great carelessness in expenditure will not, by itself, import a fraudulent intent
which would lead to committal under this Section (Cutler v. Chiffey (1921), 1 W.W.R. 686).

After the hearing, Sub-Rule 42(33) allows the Examiner to make various forms of Orders, the most
common of which is the payment of the debt by installments. An Order made by a Master or
                                                                                                155

Registrar has the same effect as the Order of the Court.




D. Committal for Failure to Obey an Order of the Examiner

Sub-Rule 42(34) sets out the third and most common of the committal remedies arising after the
issuance of a Subpoena to a Debtor. If the Debtor fails to pay in accordance with an Order by an
Examiner, the Creditor issues a Notice of Motion in Form 52 and an Affidavit showing that default
has occurred. The Notice of Motion and Affidavit must be served by a Sheriff. Because the relief
claimed is an Order for Committal, the Affidavit must not be based on information and belief. At
least seven days notice must be given to the Debtor of this application and it also appears that he
must again be served with the $20.00 witness fee plus travel expenses.

If the Court is satisfied that the Order has not been obeyed, that the person knew of the Order
and that no good cause has been shown why an Order for Committal should not be made, the
Court can order committal and fix the costs payable by the Debtor without taxation. (Sub-Rule
42(35)). The Order shall be in Form 53 and shall commit the person to prison for a term not
exceeding 40 days. The usual term is 10 days.

Once an Order for Committal has been obtained, it is then up to the Creditor to enforce it. Sub-
Rule 42(37) provides that the Order is good for one year from the day it was made. Sub-Rule
42(38) provides that it can be enforced by delivering the Order to and providing the sheriff with
the necessary money to cover the cost of imprisonment. The basic cost is $10.00 per day which
must be paid by weekly payments of $70.00 in advance but there are other expenses which the
sheriff will no doubt ask you for before proceeding with the arrest.

When the Order and the money are in the hands of the Sheriff, he arrests the Debtor and under
Sub-Rule 42(39), the Debtor once again finds himself in Court. The Court at this point has the right
to hear the matter all over again by directing a stay of execution and fixing a time for a further
hearing to determine whether or not the Order of Committal should be set aside or varied. It is at
this point that compromise arrangements are frequently made. If the order which was the
foundation of the committal proceedings has not been satisfied and if no cause is shown why the
Debtor should not be imprisoned, the Debtor is then taken to the institution set forth in the
Committal Order. Upon payment of the amount due under the Order the Debtor will be released.

Under Sub-Rule 42(42) a Creditor who has obtained an Order for Committal may file a praecipe in
the Registry requesting the discharge of the person committed at any time.

Like all remedies which lead to the imprisonment of an individual, the committal remedy arising
after the issuance of the Subpoena to Debtor will be reluctantly granted and will only be allowed
if there has been strict compliance with all procedural requirements. However, insignificant errors
which have not prejudiced the Debtor will not defeat the application to commit (Kuzyk v. Smith
(1967), 63 D.L.R. (2d) 558).



                                        Blaxland v. Fuller
                             [2004] B.C.J. No. 2145, 2004 BCSC 1338
                                                                                               156

1 McEWAN J. (orally):— The plaintiff applies for an order for committal of the defendant
pursuant to Rule 42(35) which provides:

       (a) The court may order committal if satisfied that

              (i) the order to pay has not been obeyed,

              (ii) the person knew of the order, and

              (iii) the person has not shown good cause why an order of committal should not be
              made against him or her.

       (b) The court may fix the costs payable by the debtor without assessment.

2 This case has a long history before the court. It began as an action brought by the plaintiff and
a party named Blaxland for fraudulent misrepresentation inducing them to invest $100,000 each
in a company operated by the defendant.

3 In January 1991 following a trial, the plaintiff and Mr. Blaxland were successful in obtaining
judgment for the full amount of their claims with interest and costs. Since that time the plaintiff
has pursued collection with very little success. Mr. Blaxland remained in the action until May of
2004, when he settled with Mr. Fuller.

4 The most recent relevant chain of events began on May 27th, 2002, when Registrar Scarth
ordered the defendant to pay $2,000 per month to the plaintiff. On December 16th, 2002, an
application for an order for committal was adjourned by Madam Justice Kirkpatrick to permit the
defendant to bring an application to vary the registrar's order.

5 On February 21st, 2003, the parties appeared before Mr. Justice Stewart. The defendant was
not represented at that time by counsel. Mr. Justice Stewart described the course of proceedings
bluntly:

       It is a situation in which, on the face of it, all was in order for a committal order to be
       made when the case came before the court on December 16th, 2002. There is an entered
       order of the court before me that reveals that what happened on that date was that the
       defendant Mr. Fuller was indulged. He was permitted, in effect, to call a halt to the
       committal proceedings so that he could go off and appear on January 20th, 2003, before a
       master, with a view to having the order that he is in breach varied or altered. The material
       before me establishes by way of an entered order of the court, referring to proceedings
       January 20th, 2003, that he did not appear.

Mr. Justice Stewart concluded:

       I am convinced beyond a reasonable doubt not only that this man is in contempt of court,
       but also that he has had every opportunity to do the necessary to present his case. He has
       had every opportunity to do the necessary to attempt to get before a master to have the
       order that bottoms the application varied. He has had every opportunity to get counsel. It
       is simply a question of the string having run out.

6 Some 16 days into the 40-day committal imposed by Mr. Justice Stewart, counsel for Mr.
Fuller appeared before me ex parte, seeking a stay. I was persuaded to do so temporarily until a
                                                                                                   157

full hearing of the application. That occurred March 26th, 2003. By that time counsel had
produced a series of documents Madam Justice Kirkpatrick has ordered, and I was persuaded to
extend the stay to permit further disclosure, and ultimately, on April 23rd, 2003, to permit the
hearing of the variation application the defendant had previously failed to attend. That hearing
took place over three days in November 2003 and January 2004 before Registrar Scarth.

7 In reasons for judgment released March 26th, 2004, Registrar Scarth reviewed the history of
the matter, including several occasions on which the defendant's credibility had been commented
upon adversely, by Masters and Judges of this court. Registrar Scarth refused to vary her previous
order:

       In my view, the evidence before me supports a conclusion that Mr. Fuller has the ability to
       make the payments required by the order of May 27, 2002, and that he simply continues
       to ignore his obligation to do so. While asking the court to conclude that they are in dire
       financial straits, the Fullers continue to enjoy a very comfortable lifestyle, identical in most
       respects to that considered by Smith J. in 2000. They continue to live on Bowen Island in a
       rental home. They employ a cleaning lady. Mr. Fuller continues to drive an expensive car,
       having now traded in the Land Rover for a Mercedes Benz. The Fullers shop at high-end
       grocery stores. They enjoy meals at restaurants and expensive vacations. Mr. Fuller said
       on cross-examination that he anticipates a vacation in the Barbados in the near future. As
       stated above, it emerged at the hearing of this application that since the order of May 27,
       2002, the Fullers have contracted to purchase a horse, while maintaining that Mr. Fuller is
       unable to make any payments towards the plaintiffs' judgment.

       It is fair to conclude that Mr. Fuller has made no effort to reduce his expenses in order to
       meet his obligations. Mr. Sandrelli submits that the expenses are not relevant given that
       the Fullers' lifestyle is supported entirely through the generosity of friends and family. The
       evidence is that the Fullers are receiving financial contributions from Mrs. Fuller's mother,
       Elizabeth Armour, sufficient to cover most of their expenses. However, on Mr. Fuller's own
       evidence, there are a number of other sources of funds to support their lifestyle. The
       Fullers produce and sell towels under the name Cabanon Design, a name which the Fullers
       started using when their previous business, "At the Cottage," closed following a bailiff's
       seizure. Mr. Fuller has also received income for consulting work and he continues to work
       on promoting novelty products, most recently a micro fibre goggle cleaner called the
       "spanky." The Fullers also received $15,000 in September, 2003 from John Allen, Mr.
       Fuller's associate in the development and marketing of the razzle and the spanky. In my
       view, the evidence that the payment was a loan must be viewed with scepticism given the
       history of the business relationship between Mr. Fuller and Mr. Allen.

       Further, Mr. Fuller has found the resources to repay loans received from friends despite
       having neglected to make payments as required by the order of May 27, 2002.

       Mr. Fuller's vehement statement on cross-examination that the plaintiffs' judgment
       against him does not mean that his life should stop is, in my view, indicative of his attitude
       to the orders of this court. I conclude that it is simply not believable that Mr. Fuller is
       unable to make the payments required by the May 27, 2002, order. Mr. Fuller clearly feels
       no obligation whatsoever to pay any part of the judgment, despite numerous orders that
       he do so. He has been found to have lied under oath and the pattern of false and
       misleading statements continues. It is long past time that Mr. Fuller arrange his affairs to
       pay his debts as ordered by the court as I find he is able to do.
                                                                                                   158

       Mr. Fuller's application to vary or rescind my order of May 27, 2002, is dismissed with
       costs to the plaintiffs.

8 A further anomaly crept into these proceedings following this order, in that more than one
year elapsed from the time the stay was issued to the date the matter was brought back for
removal of the stay and continuation of Mr. Justice Stewart's order. This violated Rule 42(37),
which reads:

       No order of committal shall be enforced after the expiration of one year after the date the
       order was made.

9 Accordingly, the matter has been recommenced and comes before me as a fresh application
of committal pursuant to Rule 42(35). There is no question that the order of Registrar Scarth has
not been obeyed, or that the defendant knew of the order. The question is whether the
defendant has shown good cause why an order for committal should not be made against him.

10 In Microwave Cablevision Ltd. v. Harvard House Ltd., 132 D.L.R. (3d) 570 (B.C.C.A.), the
court, per Seaton J.A. observed of an earlier version of what is now Rule 42(35).

       I do not conclude that the power to take a person in execution has been kept alive. It has
       not. What has been kept alive is the power to commit for contempt for refusal or neglect
       to obey an order. That is why Rule 42(39)(a) has three parts. Mere nonpayment does not
       justify imprisonment. It must be shown that the debtor knew of the order (subcl.
       42(39)(a)(ii)) and then the debtor may show cause (subcl. 42(39)(a)(iii)). If a debtor has
       refused or neglected to obey an order that he could have obeyed, the contempt power of
       the Court may be exercised. Failure to obey an order that he [has] not [been] able to obey
       would not, in the absence of some other ingredient indicating contempt, warrant an order
       under Rule 42(39).

11 The defendant's position is that the power the court exercises under Rule 42(35), being a
power to cite for contempt, requires the elements to be made out beyond a reasonable doubt.
He submits that there must be shown to be an element of wilful or intentional disregard of the
order in order for the power to be exercised. He submits that the court must bear in mind the
nature of civil contempt and cites Roumanis v. Scott, [1998] B.C.J. No. 2462 (C.A.), per Rowles J.,
at paragraph 25:

       The policy goals to be advanced when sentencing for contempt differ depending on
       whether the contempt is civil or criminal in nature. In The Law of Contempt in Canada
       (Toronto: Carswell, 1997), Jeffrey Miller has put it this way at 129:

               As between criminal and civil contempts, the general principle is that criminal
               contempts are to be answered with penal sanctions, while sanctions for civil
               contempts should protect the rights as between private litigants and thus generally
               should be "coercive" (as opposed to punitive).

12 There is no issue in this case that this is a civil and not a criminal contempt in that it lacks the
public character that would engage the controversy between whether the contempt were civil or
criminal.

13 Counsel submits that the defendant has shown he is unable to pay the order of Registrar
Scarth made March 26th, 2004. He submits that in such circumstances the order the plaintiff
                                                                                                 159

seeks would not be coercive, but would, in fact, be punitive.

14 The decision of Registrar Scarth, May 26, 2004, affirmed her own previous decision of May
27, 2002. This in turn was preceded by an order of Madam Justice Smith of December 5, 2000,
also ordering that the defendant pay $2,000 per month.

15 In each case the defendant submitted that he was unable to pay, and in each case that
submission was rejected and the defendant was found to have the means to pay at the level
fixed.

16 A considerable amount of time was spent before me over the nature of the hearing for
committal and whether it operated as, in effect, an appeal of the registrar's order, or as a
rehearing, or whether the registrar's finding as to the defendant's ability to pay ought to be
conclusive before me.

17 I am of the view that the question of committal under Rule 42(35) requires the court to
allow the person affected an opportunity to fully address the matters in issue. Here that issue is
solely whether the defendant has not shown good cause why the order should not be made, the
first two elements having been acknowledged.

18 Where the nature of the inquiry leading to the disobeyed order to pay was, itself, the
question of ability to pay, and that is the basis upon which the defendant addresses the show
cause element of the rule, the evidence may overlap to some degree. This is not to rehear or to
sit on appeal of the findings of the registrar. I pause to say that the registrar's order was not
appealed.

19 Here the defendant has sworn an affidavit September 10, 2004, and submitted his earlier
affidavits of March 11, 25, April 15, 16, 22, October 17, November 7, 20, 27, 2003 and January 26,
2004, in this proceeding.

20 His position is quite simple, and essentially echoes the position he has taken before
Registrar Scarth and on other occasions. He submits that his and his wife's bank statements show
that they have virtually nothing in the way of direct income. There are family allowance payments
to his wife and receipts totalling $9,355.42 for the sale of tea towels and "spankies", the latest of
his several marketing enterprises. He estimates that a remaining inventory of some 160 tea
towels can sold for about $1,250.

21 On May 20, 2004, the defendant made an assignment in bankruptcy. This assignment, I say
in passing, does not act as a stay of the plaintiff's claim, which is founded in fraud.

22   The essence of the defendant's case is found in paragraph 8 of his latest affidavit:

       In essence, Mrs. Armour is financially supporting my family in almost every way. In
       addition, as Mrs. Armour requires virtually fulltime care, Vicki is unable to earn any
       income. Without her assistance we would not even be able to afford rent on a monthly
       basis. While I am attempting to find employment, I have been unable to do so at this time.

Mrs. Armour is the defendant's mother-in-law and Vicki is his wife.

23 The defendant has long maintained that his mother-in-law supports his family. The evidence
is that this support furnishes a comfortable and, by some standards, a lavish way of life.
                                                                                                 160


24 The affidavit is totally unspecific about the defendant's efforts to find employment, or any
impediment to his doing so. The overwhelming tenor of the evidence now, as in the past, is that
the defendant simply chooses to live on the generosity of his mother-in-law and to make no
effort to address the jetsam of liabilities in his wake, including what he owes the plaintiff.

25 The defendant essentially submits that he has no income, and that, if he has no income,
there is nothing the court can do in the way of either ordering him to pay or thereafter
compelling him to pay his debts. He submits that an order that he pay a monthly sum, in the
circumstances, is an order effectively treating money he is given, and to which he has no claim or
right, as income.

26 I think the correct analysis is somewhat different. The defendant is able-bodied and
apparently creative. He has the good fortune to be able to organize his affairs so that he does not
have to work, but can depend on the generosity of others. He uses that generosity as a shield
against his creditors in that he is able to make no effort to pay them while still living well.

27 In such circumstances I think it erroneous to equate income with ability to pay. The
defendant has not shown that he is unable to pay $2,000 per month as ordered. He has simply
shown that his disinclination is subsidized by others.

28 The defendant has, therefore, not shown good cause why an order for committal should not
be made against him.

29 Having failed to do so, I am satisfied beyond a reasonable doubt that the elements for a
committal order under Rule 42(35) have been made out. The defendant shall be committed to
prison for 40 days.

[DISCUSSION BETWEEN COURT AND COUNSEL]

30 THE COURT: On the submission respecting the 40 days, I will simply say this. When the
committal order of Mr. Justice Stewart was interrupted by this manifestation of the court issuing
a stay, the court did so on the basis that, at that time, as matters were put to it, it seemed that
Mr. Fuller might have an arguable case that, had he put a better position before Mr. Justice
Stewart, things might have gone differently.

31 Mr. Justice Stewart, in committing Mr. Fuller to prison for 40 days, noted that to that point,
in his opinion, Mr. Fuller had been indulged. What has happened since that order has, in my view,
been an extraordinary effort on the part of the court, given the entire course of the proceedings
as they are now apparent, to give Mr. Fuller every opportunity to deal with the matters before
the court.

32 I see no reason at this stage, his having been sentenced once to a 40-day period of
incarceration (which was interrupted by this court issuing a stay), and his not having made any
significant effort to deal with the problem of non-payment, or to come into compliance with the
order, in assessing the maximum amount of time I can, which is 40 days, and that is the order as it
stands.

33 THE COURT: With respect to the costs of this matter, on the submissions of counsel, having
heard both of you, I am satisfied that a reasonable figure for costs to fix on the spot is $2,000 and
that will be the order, payable forthwith.
                                                                                                  161


[DISCUSSION BETWEEN COURT AND COUNSEL]

34 THE COURT: The order speaks as of this moment with respect to the requirements necessary
to be completed for the committal. I leave that to counsel.




    CHAPTER 5. EXECUTION BY WRIT OF SEIZURE AND SALE AND THE
         JUDGMENTS ACTS 1838 AND 1840 CHARGING ORDER



Selection by the judgment creditor of an appropriate enforcement process depends on

       (1) the classification of the particular asset;

       (2) the nature of the judgment debtor’s interest in that asset; and

       (3) the location of that asset.

The judgment creditor may find that he has a choice of processes, one process or possibly no
options at all in respect to a particular asset depending on the answers to the three questions
which must be asked.

In the nineteenth century in England, enforcement of money judgments was achieved primarily
by issuance of writs delivered to the Sheriff for execution. Such writs were considered
administrative writs: they were issued as of right. The most commonly employed of these writs
were the writs of capias ad satisfaciendum, fieri facias de bonis, fieri facias de terris and elegit.

S.51 of the Court Order Enforcement Act eliminates the writ of capias ad satisfaciendum as well as
the writ of capias ad respondendum, a writ used to commence an action.

S.80 of the Court Order Enforcement Act eliminates the writs of fieri facias de terris and elegit, a
necessary repeal to permit execution against real property to be adapted to the land registry
system in B.C.

The writ of fieri facias de bonis alone lives on in B.C., though it now appears under different
names. In some federal legislation the writ continues to be known as a writ of fieri facias or fi. fa.
For writs issued from Supreme and County Courts, however, the process is known as a writ of
seizure and sale and the same process issuing out of Small Claim Court is called an Order for
Seizure and Sale.

By whatever name it is known the scope of the process is the same. In B.C. the critical legislation
consists of the Court Order Enforcement Act and the Rules of Supreme Court. One of the major
interpretation problems of that Act turns on its relation to early English reform legislation, the
Judgments Acts, 1838 and 1840. The ultimate questions which the cases in this Chapter are
directed to is “What property can be realized on? and with what process?”
                                                                                                  162



                                 (1) Writ of Seizure and Sale




(i) Goods, Chattels and Effects



                   Vancouver A. & W. Drive-Ins Ltd. v. United Food Services Ltd.
                                  (1981) 13 B.L.R. 89 (B.C.S.C.)

[Having been awarded judgments totalling approximately $45,000 against the co-defendants, the
plaintiffs tried unsuccessfully to execute upon Komarnisky’s Registered Retirement Savings Plan
(R.R.S.P.), which held investments worth $49,000. Komarnisky, the beneficial owner of the plan, is
called the “annuitant” in tax parlance. Yorkshire Trust was the trustee of the plan. Registration of
such a plan with Revenue Canada confers tax benefits on the annuitant. The annuitant can defer
income tax by making tax deductible payments to the trustee. The trustee invests these funds
and the income produced is tax free while the plan continues. When the plan terminates, as it
must eventually, or the annuitant withdraws funds from the plan, income tax is payable. In this
case, the plan had the additional feature of being self-administered, which means that by paying
a fee to the trustee, the annuitant can order the trustee to change investments. The plaintiffs had
served the trustee with garnishing orders but the trustee disregarded them on the ground that an
R.R.S.P. was not attachable. The plaintiffs tried a writ of seizure and sale but the Sheriff would not
serve it. The plaintiffs went to court for advice as to the appropriate remedy.]

           FULTON, J.

5 The applications in each action are identical, with the exception of the dates in parentheses in
paras. 1 and 2, and seek the following relief:

      “1. A Declaration that the self-directed R.R.S.P. plan of the Defendant Komarnisky held by
      the Yorkshire Trust Company, 590 West Pender Street, Vancouver, British Columbia, under
      number 54-7230-3, is exigible by Garnishing Order and for an order that the said Yorkshire
      Trust Company comply with the Garnishing order as served upon it and dated (March 6,
      1980), pursuant to the Court Order Enforcement Act, or

      2. For a declaration that the self-directed R.R.S.P. is exigible by Writ of Seizure and Sale and
      for an Order that the Sheriff for the County of Vancouver comply with the provisions of the
      Writ of Seizure and Sale directed to him and dated the (12th day of June, 1980) , or

      3. For an Order that the Yorkshire Trust Company be directed to sell the funds, stocks and
      securities within the said R.R.S.P. plan and pay to the Plaintiff a sum sufficient to retire its
      judgment, interest and costs and for an order that the Court give all such directions as are
      necessary pursuant to Rule 43 of the Rules of Court, or
                                                                                                 163

      4. For an Order that a Receiver be appointed with power to convert and liquidate all the
      funds, stocks and securities within the said R.R.S.P. plan and to pay over to the Plaintiff
      such a sum as is necessary to retire its judgment, interest and costs herein pursuant to the
      Law and Equity Act and Rules 42(5) and 47 of the Rules of Court, or

      5. For an Order that such stocks, funds, and shares held by the Yorkshire Trust Company
      pursuant to the said R.R.S.P. plan shall stand charged with the amount of payment of the
      Plaintiff's judgment, interest and costs, pursuant to the Judgments Act, 1838, 1 and 2
      Victoria, see 110, Section 14 as amended, or

      6. For an Order for directions concerning the sale of such stocks, funds, securities and
      shares held by the Yorkshire Trust Company pursuant to Rule 42(26) of the Rules of Court."

6 It is established that the judgment debtor, Komarnisky, has made no payment in or towards
satisfaction of either judgment.

7 Certain other facts and admissions should be stated. Mr. Komarnisky admits to being the
owner of the R.R.S.P. and the designated annuitant therein. On his Examination in Aid of
Execution in September of 1979 he estimated the value of the securities held in the Plan as being
between $60,000 and $70,000. He stated that he does not owe any money to the Trustee in
respect thereof.

8 The R.R.S.P. agreement provides that the annuitant may make periodic payments or
premiums to the Trustee to be held in a separate Trust Fund, which fund and the earnings thereof
shall be invested in qualified investments as defined by the Income Tax Act of Canada, which
investments shall be held until maturity of the plan when they shall be converted to cash and the
proceeds used for the purchase of an annuity for the annuitant for his life, with a guaranteed
term not to exceed 15 years.

9 The maturity of the plan is to be the date on which the annuitant attains the age of 71 years
or such earlier date as the annuitant directs the trustee to purchase an annuity. The birthdate is
stated as 17th November 1933, so the year of automatic maturity is 2004. Mr. Komarnisky has
designated his wife as beneficiary of the plan in the event of his death before maturity.

10 The Trustee admits that it holds investments in a Trust Fund pursuant to the R.R.S.P.
agreement, such investments being qualified investments as defined by Sec. 146(1)(g) of the
Income Tax Act, (in this case publicly traded shares of Canadian companies plus "a few thousand
dollars in cash." The manager of the Trustee put the total value at the time of the hearing at
around $49,000, not $60,000 to $70,000 as suggested by Mr. Komarnisky. The value varies with
market fluctuations.

11 The Trust Agreement provides that the terms of the trust shall not be altered except by the
written agreement of the annuitant and the Trustee and subject to acceptance of the variation by
the Minister of National Revenue as allowing the plan still to qualify as an R.R.S.P. within the
meaning of the Income Tax Act. The agreement does provide, however, that the annuitant may
terminate the services of the Trustee and may appoint a new trustee qualified under the
provisions of the Income Tax Act. It is the position of the Trustee, as stated by counsel, that as a
matter of policy it would agree to a termination or collapse of the plan and withdrawal of the
funds by the annuitant on such written request, absent litigation such as this: but that for the
purpose of this litigation its position is that it cannot be required to agree to terminate the plan
and that it stands strictly by the provision of the agreement that the trust shall not be altered (in
                                                                                                164

this context terminated) without its written consent, which it withholds. The Trustee concedes,
however, that the annuitant can in any event appoint a new trustee in accordance with the terms
of the agreement. The Trustee also concedes that the annuitant may revoke the designation of
his wife as beneficiary at any time during his life.

12 The foregoing position of the Trustee regarding the withholding of its agreement to any
alteration in the terms of the trust which, it submits, includes termination or "collapse" of the
plan, must be considered in the light of the following provision of the agreement:

       “13. The annuitant may withdraw funds from his Plan in accordance with the regulations
       of the Income Tax Act of Canada as may be in effect from time to time.

There is no requirement here calling for the consent or agreement of the Trustee to such
withdrawal.

13 In the light of the alternative forms of relief sought, and of the submissions of counsel, it
seems that there are a number of specific preliminary questions which arise as to the nature and
circumstances of the R.R.S.P. itself and of the relations thereby created, the answers to which will
determine whether any, and if so which, of the forms of order asked for can properly be made
here. Those questions are:

       1. What is the true relationship, created by the setting up of this R.R.S.P., as between the
       Trustee and the annuitant? – i.e., a debtor-creditor, or a trust, relationship?

       2. Does the annuitant have an interest in the fund and in the investments and cash
       representing the fund which interest is property of the type which is subject to any form
       of execution process, and if so are the investments of a type which are subject to such
       execution process?

       3. Is the interest of the annuitant in the fund and in the investments and cash representing
       the same, fully vested?

       4. Are there policy considerations which should guide or direct the court in answering
       these questions and/or in granting or withholding any order which the answers to the
       foregoing questions may indicate could otherwise properly be made?

I shall deal with these questions seriatim.

       1. What is the true relationship, created by the setting up of this R.R.S.P., as between the
       Trustee and the annuitant? i.e., a debtor-creditor, or a trust, relationship?

14 The answer to this question appears to have been clearly determined, in this jurisdiction at
any rate, by the decision of our Court of Appeal in McMahon v. Canada Permanent Trust
Company (1980) 2 W.W.R. 438. There it was held, reversing the decision of this Court on the
matter (sub nom Re Papdopoulus (1979) 2 W.W.R. 203), that the relationship is exclusively one of
trust.

15 In that case the issue was whether the trustee under a R.R.S.P, could set off, as against the
claim of the annuitant's trustee in bankruptcy to have the assets in the fund paid over to him, a
debt by the bankrupt – the annuitant – owing to the trustee of the Plan (the respondent before
the Court of Appeal). Delivering judgment for the Court Bull, J.A. said (page 441):
                                                                                                  165


       "I cannot agree that the trust agreement, actually so called, executed by the bankrupt
       with the respondent and covering in minute detail the payments he was to make under
       the agreement, the uses to which those funds were to be put and a myriad of detailed
       terms and conditions of the plan and trust created could be anything but a trust in the
       general legal sense. The respondent was plainly a trustee under the Plan, appointed as
       such and with clear trust duties and obligations. In my view, to refer to or interpret that
       agreement as one creating a simple relationship only of creditor and debtor is quite
       unreal. Credits and debits may, and often do, arise in the execution of trusts between
       trustees, settlors and cestui que trust, that does not in itself change a trust to something
       other than a trust."

16 Bull J.A. came to this conclusion notwithstanding that in that case it was conceded, and
accepted by the court, that the annuitant – the bankrupt – or his trustee in bankruptcy acquiring
all his rights could unilaterally terminate the R.R.S.P. and recover the funds held in the plan."
(page 442). He continued:

       "I do not think that the making of the demand [for payment over of the funds] terminated
       the trust as such. The funds were always held by the respondent in a trust capacity and I
       fail to see how, when a proper demand is made to a trustee to turn over trust funds it held
       to a person or persons entitled, the trustee thereupon ceases to be a trustee and the trust
       funds any less trust funds. The trust was not terminated when the appellant demanded
       the trust funds – only its purpose and scope changed."

17 This decision, in my view, has a bearing also on the question of whether the interest in the
fund is property and subject to execution, and I will refer to it again under that heading. But it
seems clearly to have decided that in respect of the funds themselves the relationship between
the trustee and the annuitant is throughout that of trustee and cestui que trust and at no time
that of debtor and creditor. This being the case, in my view it follows that the securities in the
fund in the hands of the trustee – or indeed the proceeds thereof if they were sold – are not
liable to be attached by way of garnishee proceedings at the instance of a judgment creditor of
the annuitant, for there is no debt as such owing by the trustee to the annuitant.

18 It is fully appreciated that in the case of In Re Gero (1979) 78 D.T.C. 5228, the Federal Court
of Canada concluded that the funds in the hands of the trustee under a R.R.S.P. may be
garnisheed. The court there invoked the dicta of Pigeon, J. in the Supreme Court of Canada case
of Robitaille v. Hins-Dion et al (then unreported) that "...one cannot by a contract shelter his
assets from seizure by his creditors unless as a result of a special disposition of law ... thus it is
perfectly clear that one cannot in making a bank deposit stipulate that it is unseizeable." Walsh, J.
in Re Gero went on to say (page 5229) that although the funds of an annuitant in an R.R.S.P.

       "...are subject to his control, this does not mean that they are sheltered from seizure by
       his creditors, in the absence of a special provision to this effect. They resemble demand
       bank deposits made by him which are undoubtedly seizable."

19 Having thus equated the funds in the R.R.S.P. in that case to bank deposits "which are
undoubtedly seizable" Walsh, J. went on to uphold the Garnishing orders issued with respect to
those funds. There is, however, a clear conflict between the effect of that decision and the
decision of our Court of Appeal in the McMahon case: for although there is no doubt that in law
bank deposits do create a debtor-creditor relationship and are therefore subject to attachment by
Garnishing Order, our Court of Appeal has held that the deposit of funds in an R.R.S.P. does not
                                                                                                166

create a debtor-creditor relationship but rather an exclusively trustee-cestui que trust
relationship. Since this court is not bound by the Federal Court of Canada decision, but is bound
by the decision of our Court of Appeal, it follows that I must respectfully conclude, as I do, that
the funds in this R.R.S.P. are not subject to attachment by Garnishing Order. This, however, does
not dispose of the question of whether they are entirely "sheltered from seizure" (to use the
words of the Gero judgment) which in my view depends on the answer to the second and
subsequent questions posed above, and I turn accordingly to those questions.

       2. Does the annuitant have an interest in the fund and in the investments and cash
       representing the fund which interest is property of the type which is subject to any form
       of execution process, and if so are the investments of a type which are subject to such
       execution process?

20 In my view the interest of the annuitant in the fund and in the assets of the fund – the
investments and cash of which it is made up – is clearly property. That it is property within the
definition of property contained in the Bankruptcy Act and therefore passed as "property" to the
trustee in bankruptcy of the annuitant was decided in Re Lifshen (1977) 78 D.L.R. (3d) 444, a
decision of McLeod, J. of the Saskatchewan Court of Queen's Bench. It is true that the definition
of property contained in that Act is very wide For the Trustee and for the judgment debtor here it
is submitted that, since there is no similar definition of property in the Court Order Enforcement
Act of this province, or in any related statutes – or in the Rules of Court – the interest and the
assets of the fund are not exigible property.

21 I cannot agree with this proposition. In the first place, I respectfully agree with and adopt
the reasoning of McLeod, J. in Re Lifshen (supra) at pages 445-6 as follows:

       "The registered retirement savings plan contracts provide for the plant of funds in the
       hands of a trustee of a plan. The contracts do not divest Lifshen of an interest in the fund.
       That interest is property and as such vests in the trustee in bankruptcy. Property may be
       less valuable because it may not be readily converted to cash or payments under such a
       contract may be related to an external event, as for example the life of Lifshen, but that
       does not mean it is not property.

       Property, as defined in s. 2 and as referred to in s. 47(c) of the Bankruptcy Act, is not
       limited to property which is subject to garnishee.

       A registered retirement savings plan has certain tax deferral benefits, but that does not
       make it other than property, nor does the fact that it may provide periodic payments to
       the owner commencing at a future date under sore arrangement selected by him or,
       failing a selection by him, by the plan trustee.

       ...

       The registered retirement savings plan contract is in effect a trust for the handling of
       monies which belong to Lifshen...."

22 It is true that here, the annuitant has made a designation of his wife as beneficiary in the
event of his death, but in my opinion while this may have a bearing on the question of whether
the entire interest is vested in the annuitant, which I shall consider in discussing the next
question, this does not render the interest in the fund or the assets of the fund any the less
"property" in the context of the question of whether it is the kind of property which is exigible at
                                                                                                    167

the instance of a judgment creditor.

23 The substance of the argument here, as I see it, is that the definition of "property" in the
Bankruptcy Act, under which it was held that the trustee in bankruptcy may claim the funds in an
R.R.S.P. of a bankrupt annuitant, extends specifically to "every description of property, whether ...
legal or equitable ....", and that since there is not in the Court Order Enforcement Act or any other
statute in British Columbia, nor in the Rules of Court, any provision which would extend execution
to equitable interests, the fund is immune.

24 I cannot agree that there is no other provision in this province making equitable interests
subject to execution. I shall deal further with this shortly.

25 I agree, however, that the decision in McMahon (supra) – that is, that the relationship is
purely one of trust – has the effect that the annuitant can have only a beneficial interest in the
fund. A beneficial interest is of course an equitable and not a legal interest. But it is still property.

26   Insofar as the Court Order Enforcement Act is concerned, that statute provides (Sec. 49) that

       "...all goods, chattels and effects of a judgment debtor are liable to seizure and sale under
       a writ of execution against goods and chattels."

I would be inclined to hold that the word "effects" has a sufficiently broad meaning to cover the
interest here. In Black's Law Dictionary (5th Ed.), page 42, the following definition appears:

       "Effects. Personal estate or property, though the term may include both real and personal
       property."

Clearly a beneficial interest in such a fund and in the investments and money comprising it, is
personal property. On the face of it, then, the interest of the judgment debtor in the shares
forming part of the fund is property and the shares should be subject to seizure and sale under a
writ of execution.

27 However, a problem arises in that, although the Court Order Enforcement Act indeed
specifically provides (Sec. 58) that stock and shares in an incorporated company shall be held to
be personal property and may be seized and sold under a writ of execution in the same way as
"other personal property", the reference is to "Shares ... in an incorporated company in the
Province...".

28 Again, I would have endeavoured to see if some interpretation of these words could be
found which does not have the effect of providing that it is only the shares of provincially-
incorporated companies which are so subject to seizure and sale. For it seems entirely anomalous
that a person who has confined his investments to shares in companies incorporated outside the
Province – even though they are publicly traded so that sale and transfer poses no problem –
should be able to shield those assets from seizure and sale at the instance of judgment creditors
under the Court Order Enforcement Act, whereas shares in provincially-incorporated companies
are not so shielded. However, when Sec. 58 is considered together with Secs. 59 to 62 which
immediately follow it, the conclusion is inescapable that the legislation is confined, so far as
seizure and sale of shares under a writ of execution is concerned, to shares of companies
incorporated in this Province.

29   Insofar as this fund may consist of shares in companies which are incorporated elsewhere,
                                                                                               168

then, I must conclude that the remedy of seizure and sale by writ of execution is not available to
the judgment creditors here with respect thereto. The question remains: is this property – the
interest of the judgment debtor in those shares – the kind of property which is exigible by other
means?

30 In my view, it is. For although there are the difficulties that at common law shares in a
company were not exigible, and the judgment creditors are not helped here by our legislation
providing statutory execution, there is still available the process of equitable execution. This is
described in Halsbury (3rd Ed.) para. 159, page 104, as follows:

       "Equitable execution originated in the old practice of the Court of Chancery to assist in
       enforcing a judgment for the recovery of money of a court of ordinary jurisdiction by
       entertaining an application for the appointment of a receiver of such of the interests in
       property of the judgment debtor as could not, owing to the nature thereof, be taken
       under a common law writ of execution."

31 Holding, as I do, that the interest in the fund and in the investments comprising it is personal
property, and is not rendered immune from the claims of creditors, but that due to its nature
neither the remedy of attachment nor of seizure and sale under a writ of execution are available,
the case appears to be one in which the application of the equitable remedy is clearly indicated.
The fact that, and the circumstances in which, this Court will apply the remedy have been long
settled. Thus in Davidge v. Kirby (1901-04) 10 B.C.R., the equitable remedy was denied because
execution at law was available. But Walkem, J. cited and adopted the following statement of the
law as to this equitable relief (page 233):

       "A receiver was appointed by the Court of Chancery in aid of a judgment at law when the
       plaintiff showed that he had sued out the proper writ of execution, and was met by
       certain difficulties arising from the nature of the property which prevented his obtaining
       possession at law, and in these circumstances only did the Court of Chancery interfere in
       aid of a legal judgment for a legal debt. Relief by the appointment of a receiver went on
       the ground that execution could not be had, and therefore it was not execution."

He held (pp. 234-5) that:

       "In any event, the authorities that I have cited are to the effect that a judgment creditor
       must shew that there is a substantial legal impediment in the way of his realizing his
       judgment at law before he will be entitled to such equitable relief as is now claimed."
       (emphasis added)

32 The situation here clearly meets that test. The judgment creditors have legal judgments for
legal debts. The interest of the judgment debtor is personal property, and personal property is
normally subject to execution; however because of the peculiar nature of the major part of the
assets here – shares in incorporated companies – there is a difficulty or impediment in the way of
realizing or obtaining possession under the judgments by way of execution at law.

33 That this equitable assistance is available is made the more clear by the inclusion of Sub-rule
42(5) in the present Rules of Court. That sub-rule provides simply that:

       "An order may be enforced by the appointment of a receiver under R. 47."

This, then, in my view is a proper case for the appointment of a Receiver of the interest of the
                                                                                                  169

judgment debtor in the fund and in the investments and monies comprising the fund.

34 There is, however, the problem that a Receiver does not ordinarily have power to sell so that
for such appointment to have any practical effect by way of satisfaction of the judgment, there
must also be an order for sale. Here again, the power of the Court to order such sale is made clear
by Rule 43 of the Rules of Court, and particularly by sub-rule (1) thereof. Textbooks and case
authorities appear uniformly to hold that the power is a general one and covers all kinds of
property: see, e.g., Fraser and Horn, The Conduct of Civil Litigation in British Columbia Vol. II, Ch.
41, para. 41.3 and cases therein cited.

35 Before concluding the consideration of this question, I should refer to one other authority,
cited in this case by counsel for the Trustee. That is the view expressed by Messrs. Walker and
Ash in Chapter 7 of their work Debtor-Creditor Relations (Butterworth's 1978) at page 7-26. There
it is stated categorically that premiums paid into an R.R.S.P. (and hence, presumably, the
investments purchased therewith) are not seizable by a creditor of the annuitant. But they base
this statement simply on the ground that no debtor-creditor relationship is created by the
R.R.S.P., and no authority is cited to support the view that the beneficial interest therein of the
annuitant is not property which may not be got at by creditors.

36 In my opinion, then, the full answer to question 2 under consideration here is that the
annuitant – the judgment debtor – has an interest in the fund and in the investments and cash of
which it is composed, which is property of the type which is subject to a form of execution
process, and that, provided the interest is fully vested, that interest and the assets of the fund are
exigible by way of an order for the appointment of a receiver and an order for sale.

       3. Is the interest of the annuitant in the fund and in the investments and cash representing
       the same, fully vested?

37 In support of the contention that the assets in the R.R.S.P. are not subject to any execution
process, the trustee and the judgment debtor rely first on the common law rule that an otherwise
exigible interest cannot be taken in execution unless the interest – here a beneficial interest – is
wholly vested in the judgment debtor. Here, it is submitted, the common law rule is reinforced by
the terms of the R.R.S.P. agreement itself and by the Income Tax Act under which that agreement
has its origin and effect. These provisions, according to this argument, have the effect that even
although the interest in the fund and in the investments and cash of which it is composed may be
one that is ordinarily subject to execution process, here they cannot be so exigible because that
interest is not fully vested – the judgment debtor himself could not dispose of them, hence they
cannot be disposed of at the instance of a judgment creditor.

38 There are two branches to this argument. In the first, counsel submit that the annuitant
here cannot have an interest, vested either in possession or in interest, because such an interest
must be one with which the owner thereof can himself deal. But here, the agreement provides
that the terms of the trust cannot be "amended, altered or varied" by the annuitant except with
the written agreement of the Trustee and subject to the approval of the Minister of National
Revenue (Clause 10). Execution in any form involving realization and/or payment over of the
assets of the fund would, according to this argument, be a "collapse" or termination of the plan,
and thus an alteration of the terms of the trust agreement. As previously stated, the position of
the trustee is that it will not agree to any such collapse.

39 Hence, it is submitted, since the annuitant cannot terminate the plan, he has not a vested,
but only a contingent, interest in the fund. That interest, according to this argument, does not
                                                                                                    170

become vested until the earlier of two events occurs: either the annuitant reaches age 71 without
having given any direction to purchase an annuity, in which event the plan matures automatically
(Clause 6), or he reaches age 60 and directs the purchase of an annuity, in which event the plan
matures upon such direction (Clause 6 of the agreement and Sec. 146(2)(b)(iii) of the Income Tax
Act). As the annuitant is now 46 years of age, maturity cannot occur until 16 years from now at
the earliest, and until then, it is submitted, there is no vested interest. And even then, it is argued,
the only thing that can happen is that the assets of the fund be used to purchase an annuity to
provide the retirement income as earlier outlined, and such annuity is not assignable. Hence
there is no interest vested now which can be taken, and nothing that can be taken after the
interest does vest.

40 And further, according to this branch of the argument, since the annuitant here has
designated his wife as recipient of the proceeds of the plan in the event of his death, she also has
a contingent interest in the plan, so that collapse thereof – which necessarily involves termination
of that interest and in turn is necessarily involved in the form of execution process contemplated
here – cannot be brought about without her consent. This, it is submitted, further establishes that
the interest of the annuitant here is not fully vested and is not subject to any form of execution
process.

41 The other branch of this argument is that the collapse of the plan is prohibited by the terms
of the Income Tax Act, which further demonstrates the non-vested nature of the interest. In
support of this second branch of the argument it is submitted that the policy underlying the
legislation providing for the setting up of R.R.S.P.'s, with their tax-deferral benefits, was to
prohibit the collapse of a plan before maturity, and that the terms of the statute give effect to
that policy. Reliance is placed on Sec. 146.(1)(j) which provides that a "retirement savings plan"
means a contract or arrangement (a plan) between an individual and an approved corporation
(here the Trustee) providing for payment to that corporation of monies

       "To be used, invested or otherwise applied by that corporation ... for the purpose of
       providing for the individual, commencing at maturity, a retirement income."

The retirement income, as already seen, is to be provided by purchase, on maturity of the plan, of
an annuity.

42 It is further provided by Sec. 146(2)(a)(i)(A) that such a plan, in order to be registered (as this
one is) shall not provide for the payment, before maturity of the plan, of any benefit except
within a very limited category, including refund of premiums. "Refund of Premiums" is defined in
Sec. 146(1)(h) in such a way as clearly to exclude the payment out, before maturity, of all the
funds in the plan whether by way of collapse of the plan on execution or otherwise. Reliance is
further placed on the fact that it is also expressly provided by Sec. 146(1)(b)(iv)(v) and (vi) that a
"benefit" – payment of which, according to this argument, is not to be provided for in the terms
of a registered plan – includes any amount paid to an annuitant under the plan or resulting from
an amendment or modification of the plan or from the termination thereof.

43 The scheme of the legislation in preventing the collapse or termination of the plan is, it is
argued, made clear by two further facts. First, that by Sec. 146(8) of the Income Tax Act it is
provided that payment of such benefit shall constitute taxable income of the annuitant, and that
by Sec. 153(1)(j) it is provided that the person paying such a benefit out of an R.R.S.P. shall
withhold therefrom the prescribed amount (now 30% thereof) and pay this sum over to the
Receiver General of Canada on account of the income tax thereon to which the annuitant is liable
by virtue of Sec. 146(8). It is conceded – and is not in doubt – that a sale of the assets of the fund
                                                                                                   171

and payment to a Receiver, or transfer of the assets to a Receiver, would constitute payment of a
benefit as outlined and that the first charge thereon would be the payment of this withholding
tax to the Receiver General.

44 In my opinion this submission cannot succeed. First, as to the effect of the agreement itself
as to whether the interest is vested in the annuitant: it cannot have the result contended for. By
Clause 13 it is provided that the annuitant may withdraw funds from the Plan. There is no
limitation on the amount he may withdraw, or on his right and power to withdraw the funds
other than that the right is subject to the regulations of the Income Tax Act in force from time to
time. In my view, for reasons which I shall give when dealing with the second branch of this
argument, there is nothing in the Income Tax Act which prevents him from withdrawing the funds
provided that the tax on the benefit thereby constituted is paid.

45 The right to withdrawal being thus unlimited as between the annuitant and the trustee,
clearly the annuitant can withdraw all the funds – i.e. collapse or terminate the plan. This being
the case then clearly, in this context, his interest is fully vested. It would be strange if it were
otherwise: the plan is set up by the annuitant as settlor, for his own benefit as cestui que trust,
and with his own funds, and it would be peculiar to say the least if he were not to retain the
power to take the funds out of the plan. Having done so expressly by the right to withdraw funds,
the law that a power of revocation must be expressly reserved in order for a settlor to revoke a
trust is also satisfied, as is common sense.

46 Clause 10 is of no assistance to the Defendant or the Trustee here. It clearly does not
contemplate or include the situation where the plan is being collapsed or terminated, but only
where what is desired is to continue the plan although under altered terms. Then only is the
agreement of the trustee to those new terms required – as again is only to be expected. That the
provision contemplates the continuance, not the termination, of the plan is made evident by the
inclusion of the requirement that the new terms be accepted by the Minister of National Revenue
as well, as allowing the plan "still to qualify" as a R.R.S.P. This again but reflects the requirements
of the Act respecting amendments to a plan: the Act does not require acceptance or approval by
the Minister for termination brought about by withdrawal of funds, the only requirement there
being payment of tax on the benefit thereby constituted. To me it is clear that the unrestricted
right to withdraw funds constitutes power to terminate the plan.

47 As to the contingent interest in the fund of the annuitant's wife, this does not alter the fact
that in the context being considered here, the interest of the annuitant in the fund is fully vested.
In my view, the designation of a beneficiary to take the proceeds in the event that the annuitant
dies before maturity of the plan does not derogate from the power of the annuitant to withdraw
the funds and terminate the plan. The annuitant as settlor created the trust and he can continue
it, vary it, or terminate it, in my view, subject only to the limitations in the trust agreement and in
the Income Tax Act. There is no requirement that the consent of a contingent beneficiary,
designated by the settlor, be obtained before the plan can be terminated. In law, her interest may
be said to be contingent not only upon the death of the annuitant occurring before maturity, but
upon a plan still being in existence at that time.

48 This is not comparable to the situation where a trust is created by A, conferring a benefit
upon B for his life, with a remainder to C upon the death of B, without any power of revocation or
termination conferred upon B. There, even though the interest of B becomes vested, the consent
of C is undoubtedly necessary before the trust can be altered or terminated, even though C's
interest is only a contingent one. So it would be if the settlor were to make an inter vivos
settlement of property upon trust for himself for a term of years, without any power of
                                                                                                 172

termination, and had also created a contingent interest therein by designating someone as
beneficiary in the event of his death before expiry of the term: the consent of that contingent
beneficiary would be necessary in order to terminate the trust before maturity – see Waters, The
Law of Trusts in Canada, Ch. 9, "Revocation", pages 269-271.

49 But here the settlor has expressly reserved to himself, by Clause 13 of the deed, a power of
revocation and in my view, in accord with the law there reviewed, does not require the consent
of the contingent beneficiary to withdraw the funds and terminate the plan. That this is so is
made the more evident on consideration of the fact that by the terms of the trust agreement and
by the instrument designating his wife as contingent beneficiary, the power is expressly reserved
to the annuitant to revoke that designation unilaterally.

50 This, in my view, makes it unnecessary to consider further the application of the rule in
Saunders v. Vautier (1841) 4 Beav. 115, 49 E.R. 282, about which there was disagreement in
argument before me. We are here considering the application of equitable aid to execution, and if
there be any problem as to whether the interest of the judgment debtor-annuitant is fully vested,
or whether the consent of his wife is required before he could terminate the trust, then inasmuch
as there is the unrestricted power to revoke that designation, the principle that equity regards as
done that which ought to be done is sufficient answer. A judgment debtor cannot be permitted to
shelter from his creditors assets, over which he has the undoubted power of disposition, by
reliance upon a designation of a contingent interest which designation he has the unrestricted
power to cancel.

51 It was also urged upon me that by the provisions of the Income Tax Act, as reflected in the
trust deed, the Minister of National Revenue has an interest in the fund in the nature of a
beneficial interest, and that I should hold that his consent as beneficiary is also necessary to any
termination by payment out as would occur on execution. I cannot accept this argument.
Revenue Canada simply cannot be characterized as a "beneficiary". Its interest is simply in the
payment of the proper tax on such amounts as may be paid out of the fund from time to time as
benefits, and in seeing that registered plans are not altered or used in ways not authorized by the
Income Tax Act. The only question that arises in this context is whether that Act does operate so
as to deprive the annuitant, even though his interest may be otherwise vested as I have found it
to be, of the right to terminate the trust. I turn to this matter under the second branch of the
argument now being considered.

52 This question may also be answered quite shortly. I can find nothing in the provisions of the
Income Tax Act which have been cited to me, or elsewhere in the Act, which prohibits the
termination of a R.R.S.P.

53 As seen, of the provisions relied upon, Sec. 146(1)(b)(vi) makes clear that any payment out
of a plan following or resulting from termination thereof is a "benefit". And by Sec. 146(2)(a)(i)(A)
it is provided that no plan shall be accepted for registration unless it complies with the condition
that it "does not provide for the payment of any benefit before maturity", except within the
limited category there permitted, which does not include the "benefit" by way of payment over of
the assets after termination.

54 In my view, however, this latter provision has the meaning that no such plan shall be
accepted if it does provide, as part of the scheme or purpose of the plan itself, for payment of
such benefit before maturity. The purpose of the plan, as sanctioned by the legislation, must be
the payment of benefits (with certain limited exceptions) after maturity. It cannot have as its
purpose, or as one of its express terms, the payment of benefits before maturity. But this is not to
                                                                                                 173

say: you shall not terminate the plan; nor is it to say: the plan must contain a provision that it
cannot be terminated.

55 It is one thing to say: you cannot have a plan which provides for payment of benefits before
maturity – which is what Sec. 146(2) (a)(i)(A) says. It is quite a different thing to say: you cannot
have a plan which may be terminated before maturity. I do not find, in a provision which says that
you cannot have a plan which has as its purpose the payment of benefits during its continuance
before maturity, a prohibition against ending that plan before maturity.

56 Indeed, the fact that payment over of the assets of the fund on termination before maturity
is permitted – even contemplated – by the Act is made clear by the fact that, as already noted in
this argument, Sec. 146(8) expressly provides that there shall be included in the taxable income of
a taxpayer for a taxation year "All amounts received by him as a benefit out of or under a
registered retirement savings plan...". Rather than reinforcing any suggestion that termination
resulting in the payment and receipt of such a benefit is prohibited, this in my view clearly
contemplates that such termination may take place and makes the resulting benefit (i.e. payment
over of the fund) taxable. And the same, in my view, is the effect of Sec. 153(1)(j) which, as seen,
requires the person making such payment to withhold and pay over to the Receiver General the
amount of tax payable thereon by the annuitant.

57 In short, in my view the purpose and effect of these and related provisions of the Income
Tax Act are to encourage taxpayers to provide retirement income for themselves by setting up
R.R.S.P.'s, which carry appreciable tax-deferral benefits if their terms comply with the
requirements of the Act and they are administered in accordance therewith. It is not the effect of
these provisions to prohibit the termination of such a plan, but on the contrary to permit it
provided that the treasury is re-imbursed fully the income tax it would have collected had there
been no plan. The purpose and effect of these provisions is to protect the treasury by making it
impossible for a taxpayer to set up a plan, thus obtaining an income tax deferral over a number of
years, and then keep that advantage notwithstanding that he terminates the plan before
maturity. He can do so, but only provided that he pays the tax – which in fact must be withheld.

58 From all the foregoing, I find that the answer to the third question here under consideration
is that the interest of the annuitant in the fund and in the investments and cash representing the
same is fully vested, in that the annuitant has the power either to leave the assets to accumulate
until maturity of the plan, or to terminate the plan by withdrawing the funds at any time before
maturity.

       4. Are there policy considerations which should guide or direct the court in answering
       these questions and/or in granting or withholding any order which the answers to the
       foregoing questions may indicate could otherwise properly be made?

59 There were two main considerations urged upon me as to why, as a matter of policy, I
should find that execution should not issue against this R.R.S.P. – or which, at least, I should keep
before me in considering the question of whether an R.R.S.P. is in fact so subject. The first,
broadly stated, is that such a plan is truly a pension plan: a means whereby people – particularly
the self-employed – are encouraged to set up their own plans for their retirement income.
Further, that participants in a number of other plans – the Canada Pension Plan, the Old Age
Pension Plan, Military pensions, for instance – enjoy statutory protection now from having their
interest in such plans made subject to execution and that the interest of employees in company
pension plans generally cannot be reached either, because there is no interest vested until the
participants reach a certain age. Therefore, it is submitted, that large group of self-employed
                                                                                                     174

persons – and indeed numbers of employed persons who do not have the benefit of group
pension plans – who respond to the opportunity to provide for their own retirement in this way,
should enjoy a similar protection. Certain other more specific considerations were advanced in
support, but they can all be answered, in my view, in the answer to the broad policy
consideration.

60 This is an attractive argument but it must, I consider, be rejected if only on the ground that
there is at least one other policy to the contrary, which has the added weight of being long
settled. That is the policy that one of the first obligations of a debtor is to pay his just debts and
that his available assets should be devoted to that end. This policy is not only a just and equitable
policy, long settled in the law, but it has also the added weight of legislative authority to give it
priority. Thus the legislature has long since enacted statutes authorizing attachment proceedings,
writs of seizure and sale, and other means of execution to assist creditors – and particularly
judgment creditors – to obtain satisfaction of their just debts from the debtors' assets.

61 In summary, there is here a judgment debtor whose debts have not been satisfied. It
appears that his interest in the R.R.S.P. is his only asset within the jurisdiction of this court. I have
found that the interest of the judgment debtor in that R.R.S.P. is of a nature which is subject to
execution process. There is no statute which puts it beyond the reach of that process, so clearly
the legislature has not adopted a policy of making it non-exigible. On the other hand, the
legislature has clearly adopted a policy that judgment debtors' assets are exigible at the hands of
judgment creditors. In the light of that existing policy it is for the legislature, not for the court, to
declare and enact a contrary policy which places an R.R.S.P. beyond reach of creditors. Unless and
until the legislature does, the court must regard the other policy – of exigibility – as overriding.

62 The second main consideration of a policy nature is the tax problem which is created if
execution is ordered. The first payment to come out of the proceeds will be the withholding tax,
which I understand is now fixed at 30%. I am sympathetic to the consequences, but it must be
noted that the taxpayer has had the advantage of the tax-deferrals applicable under the plan to
the sum or sums which he has paid in, and on the earnings of those sums since payment. So it is
not a second tax which will be paid. And again I must note that the legislature has obviously
concluded that the overriding interest is simply the protection of the treasury in this way, not the
placing of the assets beyond the reach of creditors. It will be a burden – and may be a burden on
the judgment creditors as well in the circumstances – but it is clearly a burden which Parliament
has decided it is justified in imposing in order to protect an important and legitimate interest of
the state. It cannot, as I see it, be used as an argument to defeat the legitimate claims of
judgment creditors.

63   The answer to this question must accordingly be, No.

Costs of the Trustee

64 It is clear, then, that the applicants are entitled to an order for a receiver and for sale of the
assets of the fund or such part thereof as does not consist of money. For the trustee, however, it
was submitted that even though not successful in resisting the applications, it is entitled to its
costs and that those costs, on a solicitor-client basis, should be ordered to be paid out of the trust
fund. This on the basis that a trustee is entitled to be indemnified for "reasonable expenses which
have been incurred in the management of the estate, and these include the costs of an action
reasonably defended": Re Dingman (1915) 35 O.L.R. 51 at page 52.

65   The principal authority cited in support of the trustee's position was Re Thompson (1944) 1
                                                                                                   175

D.L.R. 354, a decision of the Ontario High Court, as affirmed on appeal to the Ontario Court of
Appeal. That case was in fact appealed further and dealt with in the Supreme Court of Canada sub
nom Thompson et al v. Lamport et al, (1945) S.C.R. 343. Rand, J. in his judgment, which was
concurred in by the majority, enunciated the general rule as follows (page 356):

       "The general principle is undoubted that a trustee is entitled to indemnity for all costs and
       expenses properly incurred by him in the due administration of the trust: it is on that
       footing that the trust is accepted."

66 I have carefully considered this judgment and the cases referred to therein, and it appears
there is a clear distinction between the situation in the cases in which that rule was developer
and applied and the situation here. In Thompson and those other cases – including Re Dingman
(supra) the litigation out of which the claim for costs arose involved not only the trust funds but
also some act or conduct of the trustee – something which he had done in the past or which it
was sought to compel him to do in the future – in the course or by way of his administration of
the trust itself. The conduct of the trustee, past or proposed, in the discharge of his duties as
trustee, was in issue. Those cases also involved an assertion by some party of entitlement to or an
interest in the trust fund as a continuing trust.

67 It seems to me that this does not at all cover the situation where what is asserted is a claim
by some stranger to be entitled to the fund not as a trust fund but as against the trust itself. Here,
in fact, the claim is that the trust should be terminated any the funds paid over to the applicant
because he has a claim, not against the trustee, but against the cestui que trust. The claim is not
in any way concerned with, nor does it arise out of, the administration of the trust, past or future.
The distinction is clearly indicated by a consideration of the words already quoted from the
judgment of Rand, J. (supra) in the context of the sentence immediately following. The full
passage reads:

       "The general principle is undoubted that a trustee is entitled to indemnity for all costs and
       expenses properly incurred by him in the due administration of the trust: it is on that
       footing that the trust is accepted. These include solicitor and client costs in all proceedings
       in which some question or matter in the course of the administration is raised as to which
       the trustee has acted prudently and properly." (emphasis added)

Clearly, when such a question is involved, it is reasonable and is indeed the duty of the trustee to
take action to defend and preserve the trust as he has shaped it by his administration – and the
costs of such defence will be allowed, even though it be unsuccessful.

68 It is otherwise here, however. As stated, no attack is made upon the trustee's actions, past
or prospective, and no claim is made as beneficiary or would-be beneficiary of the trust. It is
simply a claim that the trust be terminated and the fund paid over to judgment creditors of the
cestui que trust. In my view it is not the duty of the trustee to defend such action itself, unless the
cestui que trust is unable or unwilling to do so. For the trustee has no fiduciary duty to preserve
the fund from the legitimate claims of such creditors: the duty of the trustee, as I see it, is to
ensure that the beneficiary – the cestui que trust – is aware of the claim and is in a position to
dispute the claim of the creditors that the fund is exigible, if he wishes to do so.

69 There can be no question that the trustee acted correctly in disputing the garnishing order.
But once the application was made to court to determine the question of exigibility, the duty of
the trustee is, first, to ensure that the cestui que trust is aware of the claim. Having ascertained
that he is, and that he intends – and is able – to litigate that question, properly represented by
                                                                                                   176

counsel – as was the case here – in my opinion the duty of the trustee is confined at the most to
some form of action in the nature of interpleader, and then to await and abide by the outcome of
the litigation before the court.

70 It might be otherwise if the cestui que trust lacks the capacity to act, or is unable to retain
counsel, but where there is no such disability and where it is obvious that the matter will be fully
litigated as between the parties truly opposed in interest, there is no duty on the trustee to
defend the action as though he were a party. For the trustee can have no interest in the outcome
of that question, beyond or different from the interest of the cestui que trust, and that interest is
fully defended: the only interest of the trustee beyond that can be its purely commercial interest
in continuing to administer the fund, and this is not the sort of interest which can entitle an
unsuccessful defendant to costs.

71 It was submitted that this is a test case of the question of whether execution can be had
against a R.R.S.P. by a judgment creditor, and that this constitutes special circumstances in which
the conduct of the trustee in defending is reasonable – indeed that it had a duty to do so, and so
it is entitled to its costs. I cannot agree – at least, not in this case where the cestui que trust was
prepared to, and did, fully contest the claim. It may be a matter the outcome of which is of
general interest or concern to the trustee – and to trustees of R.R.S.P.'s generally: but this is not
the kind of interest which entitles them to defend when the cestui que trust is defending and then
charge the costs of their unsuccessful defence against the fund. This is particularly so in this case,
where it appears there will be a short fall in the fund to meet the claims of the judgment
creditors, which means that the trustee's costs would in fact have to be borne by those judgment
creditors.

72   In my opinion the trustee must fail in its claim for costs.

Judgment

73 The applicants are entitled to an order for the appointment of a receiver of the interest of
the annuitant Komarnisky in the trust fund and for the sale by the receiver of such part thereof as
does not consist of money – that is, of the investments forming part thereof. It is directed that
out of the proceeds of such sale and out of the monies now forming part of such fund there shall
be paid

      First,       To the Receiver General of Canada the amount as prescribed
                   pursuant to Sec. 153(1)(j) of the Income Tax Act of Canada;

      Second,      To the Yorkshire Trust Company such amount, if any, as may be
                   owing to it as at the date hereof pursuant to Clause 12 of the
                   Agreement plus such further charges pursuant thereto as may be
                   properly occasioned in the course of complying with this order;

      Third,       The balance remaining in the hands of the Receiver shall be paid to
                   the applicants in such proportions between them as may be agreed,
                   to be applied first in payment of their costs of these proceedings if
                   the same have not already been paid, and then in or towards
                   satisfaction of their respective judgments (including the costs
                   thereof), with liberty to apply in the absence of agreement.

74   As to the person to be appointed as Receiver, it was suggested to me by counsel for the
                                                                                              177

applicants that Mr. K.E. Briggs, Assistant General Manager of Yorkshire Trust Company, be
appointed, On consulting my notes I find there does not appear to have been any indication of
agreement or opposition to this suggestion from other counsel. In the circumstances it would not
be normal to appoint as Receiver an officer of a party which has vigorously opposed the
application for such appointment; but as I appreciate the law the court has discretion to do so if
that person is otherwise a proper person and the interests of economy and convenience will be
served thereby (see 32 Halsbury 3rd Ed., paras 654 and 657, pp. 405-6-7; Kerr on Receivers 15th
Ed., Ch. 4, pp. 102-3-4).

75 I can appreciate that certain economies and conveniences would follow from such
appointment: I understand that the share certificates are in the name of the trustee now, and
sales and payment could be made expeditiously and without cost by way of further transfer fees
etc. as would be likely to be incurred if another person were appointed. However, I can also
appreciate that there could be reluctance to accept, as it would appear anomalous for an officer
of the trustee, which was appointed by the settlor to administer the fund in his interest, and
which has opposed the application for execution, to accept appointment as receiver for the
purpose of liquidating that fund and paying the proceeds to an adverse claimant. In any event, in
these circumstances I would not order that Mr. Briggs be appointed receiver unless there is
agreement between counsel on the matter.

76 An alternative would be to appoint an officer of one of the applicants. The same
considerations and authorities referred to above as permitting the appointment of an interested
party – considerations of economy and convenience, etc. – apply here. In such case the order
would include a direction that the trustee, in whose name presumably the share certificates are
registered, endorse the same for transfer and deliver them to the receiver fog sale, at the same
time paying over to the receiver that part of the fund consisting of money; the receiver would
then sell the shares and apply the proceeds and money in the manner set out above.

77   In either case it will be a term of the order that the receiver act without salary.

78 I am prepared to make an order in either form as counsel may agree. If counsel cannot
agree, there will be liberty to apply.

79 It is ordered now, in any event, by consent, that the sum of $209.00 paid into court in Action
No. C786011 be paid out to the solicitors for the Plaintiff in that action.

80 The Plaintiffs are entitled to their costs of these proceedings as against the Defendant
Komarnisky. The order for i such costs is in effect incorporated in the sub-paragraph headed
"Third" in the directions given above.

81   Judgment accordingly.

FULTON J.



                                  Bank of B.C. v. 225280 B.C. Ltd.
                           [1985] B.C.J. No. 2772, 62 B.C.L.R. 294 (BCSC)

25th March 1985
                                                                                               178

1 MacKINNON L.J.S.C.:— The plaintiff has a judgment against the defendant Torkko. The
judgment debtor has a registered retirement savings plan in the form of a cash deposit with the
Bank of British Columbia. The plaintiff applies for a declaration that the proceeds of the R.R.S.P.
are subject to seizure and sale.

2   Sheriff's Services were granted leave to be added as a defendant solely for this motion.

3 There are three sections of the Court Order Enforcement Act which are of significance to this
application:

       49. Except as exempted by sections 64 to 72 or otherwise provided by this Act, all goods,
       chattels and effects of a judgment debtor are liable to seizure and sale under a writ of
       execution against goods and chattels...

       52. Any sheriff or other officer to whom any writ of execution is directed shall seize and
       take any money or bank notes, and any cheques, bills of exchange, promissory notes,
       bonds, specialties or other securities for money, belonging to the execution debtor, and
       may and shall pay and deliver to the execution creditor any money or bank notes which
       are seized, or a sufficient part of it; and shall hold any cheques, bills of exchange,
       promissory notes, bonds, specialties or other securities for money as security for the
       amount by the writ of execution directed to be levied, or as much of it as has not been
       otherwise levied and raised; and the sheriff or other officer may sue in his own name for
       the recovery of the sums secured by it, if and when the time of payment of it has arrived...

       56. Under a writ of execution against goods, the sheriff, or other officer to whom it is
       directed, may seize and sell the interest or equity of redemption in any goods or chattels
       of the execution debtor, and the sale shall convey whatever interest the execution debtor
       had in the goods and chattels at the time of the seizure.

4 Under common law incorporeal or intangible property was not subject to seizure and sale.
R.R.S.P.s are a relatively new creation. It is therefore not surprising that they are not mentioned
by textbook writers when discussing common law principles. In my view, they are clearly
incorporeal.

5 Section 49 provides for the seizure and sale of "all goods, chattels and effects of a judgment
debtor". Counsel for the plaintiff submits that "effects" is wide enough to cover an R.R.S.P.

6 In support, he relies on Vancouver A & W Drive-Ins Ltd. v. United Food Services Ltd.; A & W
Food Services of Canada Ltd. v. Komarnisky (1981), 38 B.C.L.R. 30, Fulton J. stated at pp. 39-40:

       Insofar as the Court Order Enforcement Act is concerned, that statute provides (s. 49) that:

              "49. . . . all goods, chattels and effects of a judgment debtor are liable to seizure
              and sale under a writ of execution against goods and chattels.”

7 I would be inclined to hold that the word "effects" has a sufficiently broad meaning to cover
the interest here. In Black's Law Dictionary, 5th ed. (1979), p. 462, the following definition
appears:

       "Effects. Personal estate or property; though the term may include both real and personal
       property."
                                                                                              179


8 Clearly a beneficial interest in such a fund and in the investments and money comprising it, is
personal property. On the face of it, then, the interest of the judgment debtor in the shares
forming part of the fund is property and the shares should be subject to seizure and sale under a
writ of execution.

9 Counsel for the Sheriff's Services submits this is dicta because the case was decided on
another point. Further, he suggests that it is likely s. 52 was not drawn to the attention of that
trial judge.

10 My reading of s. 49 is that the words "goods, chattels and effects" is an alternative way of
describing tangible property. It is interesting to note that the concluding words in the section
state, "execution against goods and chattels" and does not include "effects".

11 The provisions of s. 49 appear to me to codify the common law. I am strengthened in my
view by considering s. 52. This allows for the seizure – but not sale – of certain categories of
intangible property. To this extent, the common law has been extended. If the word "effects" in s.
49 included intangible property and choses in action, then s. 52 would be superfluous.

12 Similar reasoning was used by Wetmore J. in Jobin-Marrin Co. v. Betts (1905), 1 W.L.R. 369
at 370:

       It is quite clear to me that at common law book debts would not be bound by fi. fa.
       executions or liable to seizure thereunder, and the only question to decide is whether the
       common law has been changed by the Ordinance. It is contended that, inasmuch as Rule
       356 of the Ordinance provides that writs of execution against goods and chattels shall
       bind "all the goods and chattels" of the judgment debtor, book debts are bound. If that
       Rule stood alone, there might be something in the contention on behalf of the judgment
       creditors, but Rule 359 sets out what character of choses in action may be seized under
       execution, and they consist of "any money or bank notes, any cheques, bills of exchange,
       promissory notes, bonds, mortgages, specialties, or other securities for money belonging
       to the execution debtor." Unless book debts come under some one of the subjects so
       specified, they are not liable to seizure. It seems to me that was the intention of the
       legislature, because, if Rule 356 applies to all goods and chattels of the judgment debtor,
       including choses in action, there was no necessity for enacting Rule 359. I also draw
       attention to the judgment of the Supreme Court of British Columbia in Hudson's Bay Co. v.
       Hazlett, 4 B.C.R. 450, which proceeds substantially upon the same lines as I do in this
       judgment.

13 I have concluded the application must fail. This does not mean, of course, that R.R.S.P.s are
not subject to execution by other remedies. I simply hold that they are not subject to seizure and
sale pursuant to s. 49 of the Court Order Enforcement Act.

       Application dismissed.



                           Mortil v. International Phasor Telecom Ltd.
                                   (1988) 23 B.C.L.R. (2d) 354

February 16, 1988. WONG Co. Ct. J.: — “Secrets are easier heard than kept”: Jewish Proverb
                                                                                              180


1 This is an application by the Defendant Judgment Debtor, International Phasor Telecom Ltd.,
for a declaration that its rights in the Phasor Code 1000 Computer Software and instruction
manual for same are not liable under s. 49 of the Court Order Enforcement Act R.S.B.C. 1979, c.
75, to seizure and sale under a writ of execution.

2 At issue is whether a computer software program incorporating a trade secret is exigible for
execution purposes.

3 On May 4, 1987, the Plaintiff Judgment Creditor, Mortil, obtained default judgment against
the Defendant, inclusive of interest and costs, in the amount of $6,946.11. On December 4, 1987,
pursuant to a Writ of Seizure and Sale, one copy of the Defendant's two copies of Phasor Code
1000 Computer Software System and one instruction manual were seized by the Sheriff.

4 The Defendant's business is now defunct but it is the registered owner under the Federal
Trade Marks Act of the trade mark "Phasor Code" used in connection with the distribution of
Phasor Code 1000 Computer Software products and owns the copyright protecting the form in
which the idea for the Phasor Code 1000 Computer Software System is expressed. Basically,
Phasor Code is a System of cryptography to encode and decode classified information put into
computers.

5 The Defendant distributed its Phasor Code 1000 Computer Software products to purchasers
only under licence agreements containing nondisclosure provisions. In addition, copyright notices
were affixed on all Phasor Code 1000 Computer Software products. The following elaborate
security measures were also in place:

       1) The Defendant limited access to the information relating to the software system to key
       employees;

       2) The Defendant required the author of the Phasor Code 1000 Computer Software
       System to sign a confidentiality agreement;

       3) The Defendant established work rules affecting access.

However, in January 1987, the master software copy, from which copies are made for subsequent
sale, was stolen and never recovered.

6 There is a concern by the Defendant that if the copy seized by the Sheriff is sold, under Writ
of Seizure and Sale, the secret nature of the Phasor Code 1000 Computer Software System will be
lost.

7 I think it is established law as outlined by Professor Dunlop in his book "Creditor – Debtor Law
In Canada", 1981, at pp 152-153, that section 49 of the Court Order Enforcement Act and
analogous sections of execution statutes in other Provinces have been restrictively interpreted by
the court to disallow writs of fi. fa. to reach trademarks, patents or industrial design rights
because under common law incorporeal or intangible property was not subject to seizure and
sale. Section 52 of the same Act, however, extended the common law somewhat by permitting
seizure of specified categories of intangible property – which does not include intellectual
property rights.
                                                                                                 181

8 Counsel for the Plaintiff submitted that what was seized by the Sheriff was only the physical
computer software – clearly tangible property and therefore "goods and chattels" – which are
expressly exigible assets under s. 49 of the Court Order Enforcement Act. Provided the purchaser
of the seized computer software does not infringe the trademark or copyright of the Defendant,
the purchased software is no different than the purchase of any brand name product. She also
submitted that if Phasor Code 1000 System was indeed a trade secret, it was no longer such when
the master copy was stolen and never recovered.

9 There is no reported Canadian judicial decision as to whether a tangible asset with a non
divulged trade secret is exigible to a Writ of Seizure and Sale.

10 After consideration, I have concluded that this tangible property, like any other corporeal
asset, is exigible under section 49 of the Court Order Enforcement Act. However, to safeguard the
secret process of the Phasor Code, I direct that its sale be subject to terms. The terms of sale will
be a requirement that the purchaser enter into a trust agreement with the Defendent concerning
nondisclosure and prohibition of unauthorized use of the Phasor Code System, similar to the
terms of the licence agreement required by the Defendant in its ordinary sale to others.

11   If counsel cannot agree on the wording of the terms of sale, they may apply for directions.

12 If the potential purchase is to include the Defendant's intellectual property rights, that is a
matter not within the concern of this application but a matter for negotiation between the
purchaser and the Defendant.

13 As this was a novel point of argument with divided success, there will be no order as to
costs.

       Order accordingly.



Editor’s Note: At common law a writ of fieri facias was said to bind the goods from the time of
issuance. That rule has been modified by statute.



                                        Law and Equity Act
                                        R.S.B.C. 1996, c. 253

Writ of execution to bind goods only from time of seizure

35 (1) In this section, “writ of execution” includes an order for seizure and sale issued under the
Small Claims Rules.

(2) A writ of execution or writ of attachment against the goods of a debtor does not prejudice the
title to the goods acquired by any person in good faith and for valuable consideration before the
actual seizure or attachment under the writ if the person, at the time when the person acquired
the title, had no notice that the writ, or any other writ under which the goods of the owner might
be seized or attached, had been delivered to and remained unexecuted in the hands of the sheriff
or other officer entrusted and charged with the carrying out of the writ of execution.
                                                                                                182




             Lloyds and Scottish Finance v. Modern Cars and Caravans (Kingston) Ltd.
                                     [1966] 1 Q.B. 764 (C.A.)

1 The plaintiffs, Lloyds and Scottish Finance Ltd., formerly trading under the name of Olds
Discount Co. Ltd., carried on business as a hire purchase finance house through agent companies
known as Roadways Transport Development and Port Guarantee Trust. The defendants, Modern
Cars and Caravans (Kingston) Ltd., carried on business as car and caravan dealers. On May 24,
1961, the defendants sold a Bessecar Manor caravan, which they had bought from one Frederick
Wood, to the plaintiffs for the sum of £705. By the contract of sale, the defendants expressly
warranted that the caravan was their sole property unencumbered and they had the right to sell
it free from any lien. The plaintiffs paid the defendants £615 and on the same day let the caravan
to one, Worsfold, under a hire purchase agreement, which provided, inter aIia, that Worsfold
should pay the initial payment of £180 to the defendants as balance of the purchase price due
from the plaintiffs. On June 7, 1961, the sheriff’s officers took possession of the caravan from
Worsfold under a writ of fieri facias.

2 The following statements of facts, setting out the background to the transaction, is [sic] taken
from the judgment of Edmund Davies 3. On December 29, 1060, Mercantile Credit Co. Ltd.
obtained judgment against one, Frederick Wood, for £377 15s. 3d. and costs. That judgment was
never satisfied. A writ of fieri facias was, accordingly, issued and delivered on April 13, 1961, to
Murray, Coombe & Co., the sheriff’s officers, for the purpose of execution, and they in turn
handed to their employee, Allison, a warrant of execution. Wood was at that time living with his
family on a caravan site at Addlestone, and on April 14, 1961, Allison went to the caravan which
was occupied by Mr. and Mrs. Wood and their two children. Having been admitted, he produced
and read out the sheriff’s warrant and explained his mission. Wood told him that he proposed
negotiating payment with the judgment creditor’s solicitor. Mrs. Wood claimed that the caravan
and contents were her property and, at Allison’s request, signed a form of claim to that effect.
Wood confirmed that the caravan and contents belonged to his wife. As it would have been
manifestly most inconvenient for Allison to remain in the caravan, he produced and asked Wood
to sign a walking possession agreement identical in wording with that set out in the Annual
Practice (1963), vol. 2, p. 2840; but this both Wood and his wife refused to do. Allison then told
Wood and his wife that the caravan must not be moved. He handed them a card bearing the
name and address of his employers, as sheriff’s officers, and on the reverse side he wrote the
following words: “Mercantile Credit Co. Ltd. v. Frederick Wood. We hold a High Court Execution
against you. Murray, Coombe & Co.” As Wood had spoken of negotiating with the judgment
creditors’ solicitors (Drury. Hopgood & Co.) Allison also inscribed their name and address on the
face of the card, advised Wood to make them an offer, and added that he would himself notify
them of Mrs. Wood’s claim. He then departed.

3 On April 18, 24, 27 and May 4, 5 and 8 Allison visited the site, satisfied himself that the
caravan was still there, saw Wood, made inquiries as to whether he and his wife had succeeded in
making arrangements with the judgment creditor’s solicitors, and said that he would be returning
in a few days. When he returned on May 10, 12 and 15 he received no reply when he knocked on
the caravan door. On May 19 be found that the caravan had disappeared. In fact, on May 2, the
defendants (through one Mailey) had agreed to buy the caravan from Wood. On May 18 Wood
delivered up the keys and the caravan, the defendants paid him £600 and had it removed.

4   On May 24, 1961, the defendants sold the caravan to the plaintiffs for £795 and on the same
                                                                                                  183

day the plaintiffs let the caravan on hire purchase to one, William Worsfold. The defendants’ offer
to sell the caravan to the plaintiffs was contained in a dealer’s invoice by which the defendants
expressly warranted “that the goods . . . are our sole property unencumbered and that we have
the right to sell such goods free from any lien.” That invoice was attached to the hire purchase
document signed by Worsfold. The plaintiffs paid £615 to the defendants, that being the
purchase price less the sum of £180, the initial payment under the hire purchase agreement,
which Worsfold agreed to pay to the defendants. The remaining sum due from Worsfold under
the hire purchase agreement was £781 1s., being the £615 plus the plaintiffs’ charges of £166 1s,
to be paid in 33 monthly instalments of £21 13s. 11d.

5 Some days before May 24, when they sold the caravan to the plaintiffs, the defendants had
learned from the sheriff's officers of the existence and delivery of the writ of fieri facias against
Wood.

6 On June 7, the whereabouts of the caravan having been traced, the sheriff's officers took it
out of Worsfold's possession. He thereafter stopped his cheque for £180 made out to the
defendants. He had made no further payments to the plaintiffs under the hire purchase
agreement. On June 9 the defendants' solicitors protested to the sheriff against what had been
done, and claimed that when they sold the caravan to the plaintiffs they had passed a good title.
As the sheriff regarded this as laying a claim to the caravan which was adverse to that of the
judgment creditor, he instituted the second interpleader proceedings. Those proceedings
terminated on July 19, when the Court of Appeal affirmed the master's refusal to make any order,
on the grounds that the defendants had clearly in fact and in law made no adverse claim to the
caravan, but, on the contrary, had expressly asserted that they had already sold it to the plaintiffs.
On July 21 the defendants, by their solicitor, orally contended to the plaintiffs' agents, Port
Guarantees Ltd., that the plaintiffs had acquired a good title to the caravan and urged that they
should at once claim it from the sheriff. On the same date the sheriff's solicitors informed the
plaintiffs that the caravan was to be sold on July 31. The plaintiffs then claimed it as their
property, as "… Messrs. Modern Cars and Caravans had bought this particular caravan in good
faith in the open market and they had accordingly good title to possession of the same and to
dispose of it. …" They also informed the defendants of what they had done, and on July 27 the
defendants' solicitor expressed himself as "pleased" by their action.

7 The sheriff thereupon interpleaded for the third time. The legal position was considered for
the first time by the plaintiffs' London solicitor, who came to the conclusion that the claim was
not maintainable as against the sheriff, on the grounds that the seizure and removal of the
caravan was lawful. Accordingly, on August 21, he informed the sheriff that the plaintiffs' claim
was withdrawn. On August 24 Master Lawrence made an order barring the plaintiffs' claim. The
plaintiffs thereafter paid the executive creditor's costs of £9 15s., the sheriff's costs of £14 14s.,
and their own solicitors' costs of £15 15s. in connection with that interpleader, all three sums
being reasonable in amount. The sheriff later had the caravan sold by public auction for 615
guineas, and, after paying off the judgment together with interest and costs, handed the
remaining balance of £122 9s. to Wood's solicitors at their request.

8 In October, 1961, Wood was sentenced to imprisonment for obtaining £600 from Mailey, by
falsely pretending, inter alia, that the caravan was free from any encumbrance when he sold it to
the defendants.

9 On May 11, 1962, the plaintiffs issued a specially indorsed writ claiming damages from the
defendants for breach of the express warranty contained in the dealers' invoice that the caravan
was the defendants' sole property, unencumbered and that they had the right to sell it free from
                                                                                                    184

any lien. They further relied on the terms implied by section 12 of the Sale of Goods Act, 1893.
Their claim for damages, totalling £821 1s. fell under the following heads: (a) purchase monies for
the caravan paid to the defendants, £615; (b) hire purchase charges irrecoverable from Worsfold,
£166 1s.; (c) costs of execution creditor and sheriff paid by the plaintiffs, £24 9s. ; and (d) costs of
plaintiffs' own solicitor in connection with the interpleader claim, £15 15s.

10 They further claimed that by reason of the defendants' breaches of warranty they, the
plaintiffs, were in breach of their implied warranty of title and quiet possession of the caravan
under the hire purchase agreement with Worsfold and were liable to repay to him his initial
payment of £180. They accordingly claimed a declaration that they were entitled to be
indemnified by the defendants against any sum which they might be held liable to pay to
Worsfold by reason of the caravan not being their property unencumbered at the date of the hire
purchase agreement and of the seizure of the caravan from Worsfold by the sheriff.

11 The defendants denied breach of warranty. They contended that on May 21, alternatively,
May 24, 1961, they had a good title to the caravan and that they passed that title to the plaintiffs
free and unencumbered. They denied that the sheriff at any time seized the caravan from Wood,
but contended that even if it was so seized, the sheriff abandoned or withdrew from possession
thereof on April 14, 1961, alternatively, on or by May 5, 1961, and further contended (as was the
fact) that Wood remained in possession of the caravan at all material times until May 18, 1961.
They contended that they purchased the caravan from Wood bona fide and for valuable
consideration and without notice that any warrant had been delivered to and remained
unexecuted in the hands of the sheriff and relied inter alia upon the proviso to section 26 of the
Sale of Goods Act, 1893. They further contended that the plaintiffs in their purchase of the
caravan from them (the defendants) were afforded the protection of the proviso; further, if,
which was denied, they were unable to rely on the proviso to section 26, they did in any event
acquire good title to the caravan from Wood unencumbered only to the extent of the monies
claimed upon the warrant plus costs and interest and that they passed on the title to the plaintiffs
encumbered to no greater extent. They denied breach of the terms of section 12 of the Sale of
Goods Act, 1893.

12 As to damages, they contended that the plaintiffs' claim for the costs paid by them to the
execution creditor, the sheriff and the plaintiffs' own solicitor in connection with the sheriff's
interpleader claim was ill-founded in law.

13 John Shaw for the plaintiffs. It is accepted that Wood was able to pass a good title in the
caravan to the defendants and they in turn to the plaintiffs at any time up until the sheriff sold
the caravan in August, 1961. The title was a good one, notwithstanding the delivery of the writ of
fieri facias and even if one assumed that there was an actual seizure by the sheriff under the writ:
see In re Davies, Ex parte Williams. The plaintiffs therefore acquired a good title to the caravan
from the defendants on May 24, 1961; but the caravan was acquired subject to the sheriff's right
to seizure. On the question whether the sheriff's officer seized the caravan in execution before
the sale by Wood, on April 14 there was a seizure by the sheriff's officer of the caravan and its
contents as against the judgment debtor: see Halsbury’s Laws of England, 3rd ed. (1956), Vol. 16,
p. 55, and Nash v. Dickenson. Where, as in this case, a judgment debtor concurs in the adverse
claim of a third party to the goods, it would in most cases be impossible to get the debtor to
agree to a "walking possession" agreement. It did not follow that in every case there could be no
seizure and no continuance of the seizure unless the sheriff's officer remained throughout on the
premises seized: see Lumsden v. Burnett and In re Cooper (A Bankrupt).

14 If there was a seizure of the caravan by the sheriff's officer on April 14, was that seizure
abandoned before the defendants purchased the caravan from Wood? On the evidence, there
was no abandonment of the seizure. Thus although the defendants transferred a good title in the
                                                                                                  185

caravan to the plaintiffs they did so in breach of the express warranty in their dealer's invoice that
the caravan was unencumbered and also in breach of the warranties as to quiet possession and
freedom from encumbrance implied by section 12 of the Sale of Goods Act, 1893.

15 Alan Garfitt for the defendants. The defendants had no notice that at the time they
purchased the caravan from Wood a writ of fieri facias had been issued against him and were
unaware of the visits paid by the sheriff's officer to the caravan. It was not until some days before
May 24, when the defendants sold the caravan to the plaintiffs, that they learned from the
sheriff's officer of the existence and delivery of the writ against Wood. It is submitted that there
was no seizure of the caravan before June 7. Since the sheriff's officer departed after Wood had
refused to consent to a "walking possession" agreement, there could have been no effective
seizure of the caravan and its contents.

16 Alternatively, even if seizure of the caravan was established, the seizure was abandoned by
May 5 at the latest and before the contract of sale of the caravan entered into between the
parties on May 24. On the question whether there was an abandonment of the seizure, the
answer depended on the intention of the sheriff's officer which was a matter of inference to be
deduced from the evidence as a whole. If a sheriff's officer departed from the debtor's premises
for any reason he abandoned possession and, certainly, as against a third party, the debtors
goods were thereafter free from any encumbrance. As far as outsiders were concerned, seizure
could not be continued even by a "walking possession" agreement signed by the debtor: see
Bower v. Hett; Ackland v. Paynter and Bagshawe's Ltd. v. Deacon. To be effective the seizure
must be maintained by continued personal possession: see Blades v. Arundale. Even a "walking
possession" agreement signed by the judgment debtor would ot [sic] serve to avert abandonment
of the seizure as between the creditor and a third party. The evidence does disclose that the
sheriff abandoned or withdrew from possession on April 14, 1961, or, alternatively, on or by May
5, 1961, and that Wood remained in possession of the caravan at all material times until May 18.
In any event the defendants acquired from Wood a good title unencumbered by the judgment
debt due from his vendor or by any rights possessed by the sheriff under the writ of fieri facias
and this title was in due course passed on to the plaintiffs.

17 Under the proviso to section 26 of the Sale of Goods Act, 1893, a purchaser in good faith and
for valuable consideration gets a good title unfettered by any right of seizure in the sheriff
provided that when he purchased he had no notice that a writ of fieri facias "by virtue of which
the goods of the execution debtor might be seized … had been delivered to and remained
unexecuted in the hands of the sheriff." Where an execution issues, the transaction involves four
stages: (1) delivery of the writ to the sheriff; (2) seizure; (3) the possible payment of the money
after the seizure; and (4) if no payment, sale: see Mortimore v. Cragg and Watson v. Murray &
Co. Until either payment or sale, the writ remains "unexecuted." The defendants having bought
the caravan from Wood in May, and the sheriff's sale not taking place until August, the writ, of
which the defendants had no notice "remained unexecuted" when they purchased the caravan.
As against the sheriff the defendants are protected by the proviso to section 26 and, accordingly,
the plaintiffs in their purchase of the caravan from the defendants were afforded the protection
of the proviso.

18 Even if the defendants were unable to rely on the proviso to section 26, they did in any
event acquire a good title to the caravan from Wood unencumbered only to the extent of the
moneys claimed upon the warrant, namely, £396 2s. 6d., plus costs and interest and they passed
on the title to the plaintiffs a encumbered to no greater extent. The defendants deny breach of
the terms of section 12 of the Sale of Goods Act, 1893.
                                                                                                 186

19 As to damages the plaintiffs' claim for the costs paid by them to the execution creditor, the
sheriff and the plaintiffs' own solicitor in connection with the sheriff's interpleader claim is ill-
founded in law.

20 Shaw in reply. As to seizure, the sheriff's officer could do no more than what he had already
done. If the officer had moved the caravan with the Wood family still inside, and afterwards Mrs.
Wood had laid claim to its ownership, he would have risked involving the sheriff in liability to pay
damages for wrongful execution, wrongful imprisonment and trespass against the person:
see Cave v. Capel.

21 In Swann v. Falmouth (Earl) where a landlord's agent entered the tenant's premises, walked
around them and gave a written notice that he had distrained certain goods lying there for
arrears of rent, and unless the rent was paid or the goods replevied within five days, they would
be sold, and he then went away, it was held that there had been an original seizure and no
abandonment thereof. This decision is relevant to the defendant's argument that even a "walking
possession" agreement signed by the judgment debtor would not serve to avert abandonment of
the seizure as between creditor and third party and also to the question of what constitutes
seizure. "Walking possession" agreements are a common feature today and if abandonment turns
on intention, no valid distinction can be drawn between the judgment creditor and third parties.
There was either abandonment of the seizure or not. In the present case there was no
abandonment of the seizure by the sheriff.

22 The proviso to section 26 only affords protection to a purchaser of the goods against the
right of seizure if the stated conditions are fulfilled: see Samuel v. Duke. The proviso has no scope
for operation where an actual seizure of the debtor's goods has already been effected; and where
this has occurred, it is immaterial whether or not the purchaser from the debtor had notice of the
seizure, or even of the writ. Accordingly, the defendants cannot seek the protection of the
proviso.

23 As to damages, the plaintiffs are entitled to recover reasonable expenses incurred in an
effort to mitigate the damage resulting from the defendants' wrongdoing and it was not for the
defendants to assert that any step to mitigate the damage at their instigation were unreasonable.
The plaintiffs were entitled to recover the costs of the interpleading proceedings paid by them in
addition to compensation for the loss arising under the hire-purchase agreement which now had
no operative effect.
                                                                                     Cur. adv. Vult.
24 May 4. EDMUND DAVIES J. stated the facts and said that it was contended that the
defendants had no notice at the time they bought the caravan from Wood that a writ of fieri
facias had been issued against him, and no knowledge of Allison's visits to the caravan. On May
24 the defendants in turn sold it to the plaintiffs (in circumstances described above) although
they had some days before learned from the sheriff's officers of the existence and delivery of the
writ of fieri facias against Wood. This was, accordingly, not one of those hard cases where both
parties were equally ignorant of the facts. His Lordship continued: I can now turn to the
pleadings. It is admitted that the plaintiffs are entitled to rely upon the express warranty as to
title free from incumbrances [sic] contained in the dealer's invoice of May 24, and also on the
terms implied by section 12 of the Sale of Goods Act, but the defendants deny that on that date
"the caravan was in the custody of the sheriff of Surrey, having previously been seized by him
under a writ of fieri facias issued by Mercantile Credit Co. Ltd."

25 The defence may be thus summarised: (a) that the sheriff never seized the caravan before
June 7, 1961; (b) alternatively, if he ever seized it, he had abandoned the seizure by May 5, 1961,
                                                                                                   187

at the latest and before the contract of sale of the caravan entered into between the parties on
May 24; (c) that even if there had been a seizure and no abandonment thereof, as the defendants
had no knowledge of the existence of the writ when they bought from Wood, by virtue of the
proviso to section 26 of the Sale of Goods Act, 1893, they then acquired an unencumbered title to
the caravan which they in due course passed on to the plaintiffs; (d) that, even if they cannot rely
upon section 26 (which reproduced section 15 of the Statute of Frauds and section 1 of the
Mercantile Law Amendment Act, 1856), they acquired from Wood a title to the caravan
"encumbered only to the extent of the moneys claimed upon the said warrant, namely the sum of
£396 2s. 6d. plus costs and interest, and that they passed on the said title to the plaintiffs
encumbered to no greater extent"; and (e) that the plaintiffs' claim to the items of £24 9s. and
£15 15s. is "ill-founded" in law.

26 That Wood was able to pass a good title to the defendants and they in turn to the plaintiffs
at any time up until the sheriff sold the caravan in August, 1961, is clear on the authorities, and
this notwithstanding delivery of the writ and even assuming an actual seizure by the sheriff
thereunder: see, for example, In re Davies, Ex parte Williams. The plaintiffs, accordingly, acquired
a good title to the caravan from the defendants on May 24. But the question at the threshold of
this case is whether they then acquired it free from or subject to the sheriff's right of seizure. This
not being a sale in market overt, the answer to that question turns upon whether or not the
defendants can rely upon the proviso to section 26 of the Sale of Goods Act, 1893.

27 I turn to the first issue – namely, did Allison (the sheriff's officer) ever seize the caravan in
execution before the sale by Wood? Seizure vel non is a question of fact, turning upon the
circumstances of each particular case, but certain guiding principles have been evolved over the
years, and these are conveniently summarised in Halsbury’s Laws of England, 3rd ed. (1956), Vol.
16, p. 55, in this way – and I am reading from the volume: "For an act of the sheriff or his bailiff to
constitute a seizure of goods, it is not necessary that there should be any physical contact with
the goods seized; nor does such contact necessarily amount to seizure. An entry upon the
premises on which the goods are situate, together with an intimation of an intention to seize the
goods, will amount to a valid seizure, even where the premises are extensive and the property
seized widely scattered, but some act must be done sufficient to intimate to the judgment debtor
or his servants that a seizure has been made, and it is not sufficient to enter upon the premises
and demand the debt. Any act which, if not done with the authority of the court, would amount
to a trespass to goods, will constitute a seizure of them when done under the writ."

28 In the light of the authorities cited in support of this passage, I hold that on April 14 there
was a seizure by the sheriff's officer of the caravan and its contents as against the judgment
debtor. He did not merely demand payment of the debt (as was done in Nash v. Dickinson but,
having entered and told the debtor that he had come to levy execution and read out his warrant,
he handed him the written intimation already referred to. Furthermore, he proffered for
signature a "walking possession" agreement, and he warned Wood and his wife that the caravan
must not be moved.

29 It is said that he should have done more: that he should have asked the Wood family to
leave the caravan, and then locked it up or towed it away. Such a submission is unrealistic, for the
Woods' refusal to sign the agreement indicated clearly that they would not have consented to the
much more drastic course of leaving; and had the officer proceeded to move the caravan with the
Wood family still inside, and after Mrs. Wood had laid claim to its ownership, he would have run a
grave risk of involving the sheriff in liability to pay damages for wrongful execution, wrongful
imprisonment and trespass against the person, as occurred in Cave v. Capel. It would have been
highly inconvenient (though, it seems, physically possible) for him to have remained in the
                                                                                                  188

caravan with its four occupants, and he had no legal right to camp outside on the caravan site.
Having done what he did, he went away. In my judgment, he departed after having effectively
seized the caravan and its contents. It has been submitted that to do so after he had been refused
consent to "walking possession" indicates that he never seized at all. But I interpret this incident
in quite a different way, for in my view the fact that he requested such a consent supports the
view that he was then levying execution.

30 Where, as here, a judgment debtor concurs in the adverse claim of a third party to the
goods, it would in most cases be impossible to get the debtor to agree to walking possession.
Then does it follow that, in every such case, there can be no seizure and no continuance thereof
unless the sheriff's officer remains throughout on the premises? I think that question must be
answered in the negative. In Lumsden v. Burnett, a case relevant mainly to the issue of
abandonment, distress was claimed to have been levied on eight pairs of trousers which were
never actually taken into possession by the sheriff's officer, he merely having obtained the
signature of the debtor's 13-year-old daughter to a "walking possession" agreement, which was
manifestly worthless. The child had no authority to sign this document, but it was nevertheless
held that the officer had effected execution and that it had not been abandoned, although the
most that the officer did thereafter was to visit the premises occasionally to see whether the
goods had been removed.

31 In In re Cooper (A Bankrupt), a sheriff’s officer, intending to levy execution on two caterpillar
tractors, went to the debtor's farm and there handed to an employee two forms stating that
execution had been levied on the two tractors, although they were not removed, and he also
handed him two forms inviting the debtor to agree to walking execution and then left.
Danckwerts J. held (Upjohn J. dubitante) that this constituted a levying of execution. But the
citation of authorities could proceed indefinitely. I hold on the facts of this case that on April 14,
1961, the sheriff's officer seized under the writ the caravan and its contents.

32 Then was that seizure abandoned before the defendants bought the caravan from Wood?
This is again a question of fact, and it is agreed that the answer depends upon the intention of the
sheriff's officer, which is a matter of inference to be deduced from the evidence as & whole. For
the defence it is submitted that if a sheriff's officer leaves the debtor's premises for any reason,
he abandons possession, and, certainly as against a third party, the debtor's goods are thereafter
free from any encumbrance. More particularly, it is submitted that, as far as outsiders are
concerned, seizure cannot be continued even by a "walking possession" agreement signed by the
debtor.

33 Reference must here be made to Bower v. Hett, where Lord Esher M.R. said: "In this case
there was a seizure of goods by the bailiff; but he went out of possession under an arrangement
with the judgment debtor that he might at any time come in again and retake possession of the
goods. He was therefore out of possession."

34 I do not think that these words can be interpreted as meaning that whenever an officer
leaves the debtor's premises he must in all cases be regarded as having abandoned his seizure of
the debtor's goods, in so far as third parties are concerned, and the decision must turn, as I think,
on the wording of the arrangement entered into between the parties. In Ackland v. Paynter
Graham B. said: "I do not mean to lay down the general proposition, that a sheriff can in no case
quit possession without any qualification; but I should consider, that to show it not an
abandonment, he ought to be able most clearly to account for it, as being caused by some urgent
necessity, and to give very satisfactory evidence of that."
                                                                                                   189

35 Bagshawes Ltd. v. Deacon affords an example of failure by the sheriff to produce such
satisfactory explanation of going out of possession. It is to be observed that A. L. Smith L.J. gave
the leading judgment both in that case ll [sic] and in Lumsden v. Burnett, to which reference has
already been made, where possession was held to continue notwithstanding that the sheriff's
officer had left the premises.

36 Counsel for the defendants, relying upon Blades v. Arundale, has submitted that, to be
effective, the seizure must be maintained by continued personal possession. He submits that
even a "walking possession" agreement signed by the judgment debtor would not serve to avert
abandonment of the seizure as between the creditor and a third party. Swann v. Falmouth (Earl)
is relevant to this latter submission as well as to the question of what constitutes seizure. There a
landlord's agent entered the tenant's premises (a wharf), walked around them and gave a written
notice that he had distrained certain goods lying there for arrears of rent, and that unless the rent
was paid or the goods replevied within five days, they would be sold, and he then went away.
Littledale J., after holding that there had been an original seizure and no abandonment thereof,
continued:"The case might have been different, had the question arisen between the landlord
and an execution creditor, or a purchaser for valuable consideration without notice, for the
landlord might, perhaps, be considered to have lost his right as against third persons if he
neglected to give reasonable notice of it." But in these days when "walking possession"
agreements are such a common feature and have even been encouraged in the case of county
court bailiffs by the Lord Chancellor's Department (see Mather on Sheriff and Execution Law, 3rd
ed. (1935), pp. 118-119) it is difficult to see why, if abandonment turns on intention, any
distinction should be drawn between the judgment creditor and third parties, and there are
several reported cases where no such distinction has been made. In my judgment, it is one which
cannot validly be made. There was either abandonment of the seizure, or there was not.

37 In the present case, did the sheriff ever intend to abandon the seizure made by his officer on
April 14? The evidence indicates that he did not. The nine visits paid by his officer between that
date and the disappearance of the caravan, his reporting of Mrs. Wood's claim to the judgment
creditor, and his action in taking out the first interpleader summons, all point unmistakably, in my
view, to the conclusion that at no time did he intend to abandon the seizure. On the body of
evidence I hold that in fact no abandonment took place.

38 Notwithstanding these findings as to seizure on April 14 and non-abandonment thereof,
counsel for the defendants submits that in May his clients acquired from Wood a good title
unencumbered by the judgment debt due from his vendor or by any rights possessed by the
sheriff under the writ, and that this title they in due course passed on to the plaintiffs. The
submission is a startling one, for, baldly stated, it amounts to an assertion that, even although the
sheriff had already seized the caravan, the defendants acquired title free from any liability to
have their property seized.

39 The corollary to this submission would appear to be that they could have demanded its
unconditional surrender by the sheriff. In so far as I was able to follow it, the basis for the
submission appears to be this: (A) Under the proviso to section 26 of the Act of 1893 a purchaser
in good faith and for valuable consideration gets a good title unfettered by any right of seizure in
the sheriff, provided that when he purchased he had no notice that a writ of fieri facias "by virtue
of which the goods of the execution debtor might be seized … had been delivered to and
remained unexecuted in the hands of the sheriff." (B) Where an execution issues, the transaction
involves four stages: (1) delivery of the writ to the sheriff; (2) seizure; (3) the possible payment of
the money after the seizure; and (4) if no payment, sale: see Mortimore v. Cragg and Watson v.
Murray & Co. Until either payment or sale, the writ remains "unexecuted." (D) The defendants
                                                                                                  190

having bought the caravan from Wood in May and the sheriff's sale not taking place until August,
the writ (of which they had no notice) "remained unexecuted" when they bought. (E) As against
the sheriff, they were accordingly protected by the proviso to section 26, and this protection
enured to the plaintiffs when they in due course purchased the caravan from the defendants.

40 I propose to deal with this submission briefly. The proviso must of necessity be limited in its
operation to the ambit of the section which it qualifies. When, by the opening words of the
section, it is provided that "A writ of fieri facias … shall bind "the property in the goods of the
execution debtor …," this simply means that on delivery of the writ the sheriff acquires a legal
right to seize sufficient of the debtor's goods to satisfy the amount specified in the writ (Samuel v.
Duke. The proviso, accordingly, does no more than protect a purchaser of the goods against that
right of seizure if the stated conditions are fulfilled. But it has no scope for operation where of
actual seizure of the debtor's goods has already been effected; and where this has occurred, it is
immaterial whether or not the purchaser from the debtor had notice of the seizure, or even of
the writ. Furthermore, by its wording the proviso relates only to a writ "by virtue of which the
goods of the execution debtor might be seized," and where such an essential step in execution as
actual seizure has already been effected, it is, I hold, impossible to regard the writ as one which
still "remained unexecuted in the hands of the sheriff." In my judgment, accordingly, the
defendants are not saved by the proviso.

41 The result of these findings is that, although the defendants transferred a good title in the
caravan to the plaintiffs, they did so in breach of the express warranty in their dealer's invoice
that it was unencumbered, and also in breach of the warranties as to quiet possession and
freedom from encumbrance implied by section 12 of the Sale of Goods Act, 1893... .

48 In the result, I hold the plaintiffs entitled to recover the entire £821 5s. claimed, and there
must be judgment accordingly.



Editor’s Note: Execution against partnership property is governed by the Partnership Act R.S.B.C.
1996, c. 348, S. 26. See Duncan v. Anderson (1979) 13 B.C.L.R. 7 (B.C.S.C.).




                                          Boyce (Re) (T.D.)
                               [1992] F.C.J. No. 1064, [1993] F.C. 280

APPLICATION for an order directing a Bank to deliver up to the sheriff the contents of judgment
debtor’s safety deposit box. Application allowed.

The following are the reasons for order rendered in English by

1 ROTHSTEIN J:— This is a motion by the Attorney General of Canada on behalf of the Minister
of National Revenue for an order directing the Canadian Imperial Bank of Commerce to deliver up
to the sheriff of the Winnipeg Judicial District the contents of the safety deposit box. These
reasons apply to both this action and to the action in respect of Sharon Asselin in Court file ITA-
1256-92.

2 On September 30, 1991, a certificate was registered in the Federal Court certifying as payable
by Murray Michael Bruce Boyce to Her Majesty the Queen the sum of $174,842.27 plus interest.
                                                                                                   191

On February 13, 1992, a similar certificate was registered in the Federal Court in respect of
Sharon Asselin certifying that she was indebted to Her Majesty for the sum of $17,077.36 plus
interest. These certificates are deemed to be judgments of the Federal Court. The indebtedness
appears to arise under the Income Tax Act [S.C. 1970-71-72, c. 63], Canada Pension Plan [R.S.C.,
1985, c. C-8] and the Unemployment Insurance Act, 1971 [S.C. 1970-71-72, c. 48].

3 On February 13, 1992 writs of fieri facias were issued by the Federal Court with respect to
Boyce and Asselin. The writs were served on the Manager, Canadian Imperial Bank of Commerce,
1075 Autumnwood Drive branch, Winnipeg, on February 14, 1992.

4 When the sheriff attended at the branch on February 24, 1992 to access the contents of the
safety deposit box under contract to Boyce and Asselin, the sheriff was advised by the bank
manager that she [page282] would not allow access to the safety deposit box by the sheriff unless
a "drilling order" was obtained.

5 Counsel for the bank asserted that in the case of access to a safety deposit box a writ of fieri
facias is insufficient. A specific "drilling order" is necessary. No authority was cited in support of
this proposition, although counsel produced certain correspondence with the sheriff which
indicated that the practice, at least in Winnipeg, is for the sheriff to obtain a "drilling order" when
a bank refuses access to a safety deposit box.

6 Counsel for the bank further argued that based upon the authority in Eccles v. Bourque et al.,
[1975] 2 S.C.R. 739 that if the safety deposit box is empty, the sheriff will be guilty of trespass.
Counsel asserted that the law in this area derives from a balancing of rights between debtors and
creditors and that the balance requires a specific "drilling order" in the case of a safety deposit
box.

7 Counsel for the Attorney General makes the following argument which I take from the
written statement of fact and law submitted:

       6. The eminent jurist, G.V. La Forest, now with the Supreme Court of Canada, published, as
       a member of the Faculty of Law at the University of New Brunswick, the following with
       respect to the Writ of Fieri Facias:

               The writ of fieri facias (or fi fa) is the maid of all work in the law of execution. So
               much is this so that in ordinary parlance when we speak of issuing execution we
               mean the fieri facias. It commands the sheriff to cause to be made (fieri facias) out
               of the lands and chattels of the judgment debtor an amount sufficient to pay the
               judgment creditor with costs. The writ has been the most usual mode of execution
               for a long time, it is of great antiquity, dating to the earliest days of the common
               law.
                       Some Aspects of the Writ of Fieri Facias, G.V. La Forest, 1959, U.N.B. Law
                       Journal, p. 38.

       7. In Halsbury’s Laws of England, 4th Edition, Volume 17, at paragraph 468, the text reads
       as follows:

               The writ is said to "bind" the property in the goods of the judgment debtor in the
               bailiwick. When it is said that the goods, or the property in them, are "bound",
               what is meant is that the sheriff acquires a legal right to seize the goods.
                                                                                          192

8. It is the submission of Her Majesty the Queen that it is the Sheriff's duty under a Writ of
Fieri Facias to ascertain where the judgment debtor's goods are and to seize them. For this
purpose, the Sheriff can legally enter the dwelling house and [page283] premises of the
judgment debtor, or of any stranger to whose premises the debtor's property has been
removed, but the law dealing with the Sheriff's right of entry under civil process is subject
to the overriding rule that he must not gain entry by force against the will of the judgment
debtor or such stranger.
                Halsbury’s, supra, at para. 465.

9. In regard to the last phrase of the previous paragraph, the Halsbury’s text goes on to
state the following:

       The privilege is confined to dwelling houses. The outer door premises occupied by
       the debtor, but not being his dwelling house, nor within the curtilage of his
       dwelling house, may lawfully be broken open.
              Halsbury’s, supra, para. 466.

10. Once an entry has been made, the doors of particular rooms, cupboards or trunks may
be broken open, in order to complete the execution. It is not necessary to demand that
inner doors, cupboards or trunks be opened but for the breaking.
               Halsbury’s, supra, para. 467.

11. The Canadian Imperial Bank of Commerce is not objecting to the drilling of the safety
deposit box because it is not leased to the judgment debtors. It is clear from the Affidavit
of Francine Hollingworth, sworn November 2, 1992, that she is, in fact, satisfied that the
safety deposit box is leased to the judgment debtors.
               Affidavit of Francine Hollingworth, para. 3.

12. There does not appear on the face of the Affidavit material, nor, indeed, does it
appear to be the contention of the Canadian Imperial Bank of Commerce that the bank
premises located at 1075 Autumnwood Drive, Winnipeg, Manitoba, is a dwelling. As
indicated in the text from Halsbury’s, the privilege only extends to dwelling houses.
               Hodder v. Williams, [1895] 2 Q.B. 663 (C.A.).

13. Although there appears to be no case exactly on point, the learned authors of Debtor-
Creditor Law: Practice and Doctrine, Springman and Gertner, 1985, Butterworth & Co.
(Canada) Ltd., state the following at page 152 of the text:

       Property owned by the debtor but secreted in the hands of third parties is seizable
       by the sheriff. Even the dwelling house of such a stranger could be broken into by
       the sheriff if the debtor had hidden himself or his goods there and commercial
       premises have no such protection at common law. The legality of the entry is
       determined by an actual finding of the debtor's property. Applying these
       principles, there is no reason in law to prevent the sheriff from breaking a safety
       deposit box. Practically, however, depositing a certificate in a safety deposit box
       guarantees virtual immunity, because even if the sheriff happens to learn of the
       box and its contents, the costs of executing must be balanced against possible
       returns from seizure and sale. Even the most co-operative bank has no choice but
       to drill the box if the debtor does not disgorge the key, and debtors are not known
       [page284] for their co-operation. The best the bank can do is seal the box.
                                                                                                   193

       14. This excerpt from the Springman and Gertner text is apposite here, as well. If the
       Canadian Imperial Bank of Commerce's position is accepted, then the execution creditor
       must, in addition to paying the costs of the drilling of the safety deposit box, pay for a
       solicitor to make an application to the Court to obtain a further Order. Neither the present
       state of the law, nor public policy, should dictate such a result.

8 While I cannot fault counsel for the bank for wishing to proceed cautiously in view of the fact
that this precise issue has not been specifically decided (at least neither counsel were unable to
refer me to any authorities directly on point) I am unable to accede to his position.

9 There does not seem to be any special reason why in addition to a writ of fieri facias a
judgment creditor must also obtain a "drilling order". There is nothing new that must be
addressed by a Court when the sheriff is instructed to obtain the contents of a safety deposit box.
Counsel mentioned that to obtain a "drilling order" it would be necessary to establish that a
judgment had been obtained, and that the specific location of the safety deposit box be
ascertained. However, the writ of fieri facias could not be obtained without a preceding
judgment. Nor has any cogent reason been advanced for requiring the Court to have specific
evidence of the location of a safety deposit box before it could be accessed. Under the
circumstances, I see no purpose nor necessity for obtaining a further "drilling order" in addition to
a writ of fieri facias.

10 Nor am I of the view that the sheriff would be trespassing if the safety deposit box was
empty. There is no dispute in this case that the judgment debtors did have a safety deposit box at
the branch of the bank in question. The judgment debtors have the right to the use of the safety
deposit box. That right is itself an asset which is present at the branch in question. In my opinion,
this is not a circumstance analogous to that referred to by Dickson J. (as he then was) in Eccles v.
Bourque et al. (supra).

11 I am therefore of the opinion that the writs of fieri facias were sufficient to authorize the
sheriff to gain entry to the safety deposit box in this case. Having said this, it must recognize that
the bank is a third [page285] party as between the judgment creditor and the judgment debtors.
It should be kept "whole" by the judgment creditor where it co-operates to allow the sheriff to
execute the writ of fieri facias In these circumstances, a bank would be justified in insisting that it
be indemnified for the reasonable cost of drilling the safety deposit box and restoring it to usable
condition thereafter. Since drilling must be a fairly common practice, e.g., where customers lose
their keys, the cost involved should be readily ascertainable.

12 Counsel for the Attorney General argued that the bank would incur the cost of drilling and
restoration in any event because the judgment debtors were not co-operating and eventually the
bank would have to drill the box to secure its return to its own use. On the material before me, I
have no basis for making these assumptions, and I am of the view that the bank should not be
"out-of-pocket" when it co-operates to allow access by a sheriff to the safety deposit box.

13   The application of the Attorney General is granted.

14 Considerable argument took place with respect to the matter of costs. While the Attorney
General was successful in this case, and there was little to support the bank's position, the bank is
an innocent third party. In the absence of precedents and the apparent practice of obtaining
"drilling orders" in Winnipeg in some circumstances, it was not unreasonable, in my opinion, for
the bank to be uncertain of its position in this case. Accordingly, I will make no order as to costs.
                                                                                                  194



                                       Cybulski v. Bertrand
                               [2000] B.C.J. No. 760, 2000 BCSC 623

1 BURNYEAT J.:— After a ten day trial in February, 2000, the plaintiff obtained a judgment,
[2000] B.C.J. No. 470, against all of the defendants for $140,128.54, pre-judgment interest at the
Registrar's rates, and costs on a Party and Party (Scale 3) basis. On the morning of March 15,
2000, the plaintiff provided a Writ of Seizure and Sale to Active Bailiff Service Ltd. (the "Bailiff")
and the Bailiff that day seized certain vehicles owned by Newcourt Credit Group Inc. ("Newcourt")
which Newcourt had leased to Canada Post Corporation ("Canada Post").

2 The defendants now apply for an Order that the defendants be entitled to Special Costs
relating to these execution proceedings of the plaintiff, that the plaintiff be required to bear any
costs associated with the March 15, 2000 seizure by the Bailiff and that there be an Order setting
aside the Writ of Seizure and Sale. The defendants submit that the vehicles owned by Newcourt
but leased to Canada Post were exempt from seizure and that, in any event, the execution
proceedings of the plaintiff were unnecessary in the circumstances.

BACKGROUND

3 The plaintiff was injured in a motor vehicle accident on January 15, 1996. This action was
commenced on February 20, 1996 naming Mr. Bertrand as the driver, Newcourt as the owner of
the vehicle driven by Mr. Bertrand and Canada Post as the employer of Mr. Bertrand. The trial
was originally set to begin on March 12, 1997 but that trial date was adjourned generally by
consent.

4 On application by the defendants, Master Patterson made an Order on April 16, 1998 that
certain documents be produced by various third parties. Master Patterson also ordered that the
plaintiff would have the costs of the application as he was satisfied that the application was
unnecessary as counsel for the plaintiff had previously agreed to consent to an Order for the
production of documents in the "Halliday" form of Order. Those costs were set at $750 and were
payable by April 23, 1998.

5 Discoveries were not scheduled until November 29, 1999. Counsel for the defendants made a
number of objections to questions being asked of Mr. Bertrand and counsel for the plaintiff made
requests for a number of documents and for information that had not been previously produced.
The plaintiff was also examined. Counsel for the plaintiff objected to certain questions posed by
counsel for the defendants and counsel for the defendants requested the production of
documents and answers arising out of certain questions not objected to but for which no
response was provided.

6 Counsel for the defendants filed a motion to compel the plaintiff to answer the questions
objected to and to provide answers to requests during the examination for discoveries which
were not objected to but for which no response had been provided. The Notice of Hearing for
that motion indicated that counsel for the plaintiff had not provided her advice whether she
objected to having the motion heard prior to trial or whether she proposed a time estimate for
the hearing of the motion.

7 Counsel for the plaintiff then made application for an order that the questions not answered
be answered, for production of the responses to questions outstanding and for production of
                                                                                                   195

documents relating to the injuries alleged to have been suffered by Mr. Bertrand in the accident.

8 On January 21, 2000, Master Patterson ordered that Mr. Bertrand was to answer all questions
asked of him, that all records relating to his injuries be produced, that certain information relating
to accidents at "uncontrolled intersections" and the use of "hazard lights" for the years 1994
through 1997 be produced by Canada Post, and that the defendants produce the entire file of
Human Resources Development Canada and from Canada Post relating to the accident. Master
Patterson also ordered that the defendants were to pay to the plaintiff the costs of the
applications in any event at a scale to be determined by the trial judge.

9 The matter then went to trial. After a ten day trial, Catliff J. concluded that the plaintiff was
entitled to judgment. The Reasons for Judgment were available on March 7, 2000.

10 A March 7, 2000 letter from counsel for the plaintiff to counsel for the defendants provided
in part:

       I trust that you are in receipt of the reasons for judgment of the Court. I have delivered to
       you under separate cover, a copy of our draft order. Please return the same with any
       proposed amendments by 4 p.m. tomorrow. After waiting for 4 years, not surprisingly, my
       client is anxious to receive her funds.

       In that regard, in the event that there is any delay whatsoever, in your response to our
       correspondence, approval of the Order or your providing us with your convenient dates
       for the taxation of the Bill of Costs (which was requested today), I have instructions to
       proceed with dispatch.

       In the event that there is any delay relating to your client's payment of the judgment
       and/or costs, I have instructions to take steps immediately in execution including if
       necessary, involving the Bailiff in a seizure and sale. I trust that this will not be necessary,
       however, given the history of this matter I foresee that distinct possibility.

       Govern yourself accordingly.

11   The March 9, 2000 letter in response from counsel for the defendants stated:

       I confirm our conversation in the hallway at the Courthouse on March 8, 2000, in which I
       told you my client would do its best to have the judgment monies available as soon as
       possible and confirm that we expect your client to be reasonable, like any other Plaintiff,
       in waiting for her judgment monies. I confirm your request to have the judgment monies
       available by next week, failing which the Plaintiff will consider herself in a position to take
       steps on her judgment, including a writ of seizure – which would be totally unnecessary
       and uncalled for in the circumstances.

       Before our client can order up the settlement funds, we require the Plaintiff's calculation
       of court order interest payable on the pre-judgment special damages and pre-trial loss of
       income. If there are other heads of damage on which the Plaintiff thinks herself entitled to
       interest, please advise. We also would prefer to pay the Plaintiff's costs and interest along
       with the damages portion of the judgment. To that end, would you please forward your
       Bill of Costs as soon as possible.
                                                                                                196

12   In her March 10, 2000 letter to counsel for the defendants, counsel for the plaintiff stated:

       We have calculated the interest owing on the income loss as $652.47 and on the Special
       damages $218.94. The name of our bailiff is Tino D'Antonio.

13 In reply, the March 13, 2000 letter from counsel for the defendants to counsel for the
plaintiff stated:

       We have your letter of March 9, 2000 demanding payment of judgment funds by Tuesday
       (March 14) and your letter of March 10, 2000, advising that the name of your bailiff is Tino
       D'Antonio.

       Section 29 of the Crown Liability and Proceedings Act forbids execution against the Crown.
       Canada Post Corporation is an agent of the Crown by virtue of section 23 of the Canada
       Post Corporation Act. Ms Beaumont has no right of execution against Canada Post
       Corporation.

       As I confirmed on March 8 and again on March 9, 2000, our client is making every effort to
       have judgment monies available as soon as possible. If you [sic] client does take execution
       steps against Canada Post Corporation it will be a wrongful seizure, and you can expect
       that the response from the Corporation will be swift and vigorous.

14 There was a March 15, 2000 appointment before the Registrar to settle the terms of the
Order. The entered Order included a provision for pre-judgment interest in the sum of $871.41 in
addition to the amounts set out in the Reasons for Judgment of Catliff J.

15 Counsel for the plaintiff delivered a letter to the Bailiff on March 15, 2000. The letter was
obviously sent in the morning on the 15th. The letter provided:

       We would like for you to execute after 1 p.m. on the Writ picked up by Mr. Milton today.
       We have given the Defendants up to 1 p.m. to confirm payment today failing which, we
       would ask you to take the following steps:

              You are seizing the assets of 2 of the 3 Defendants who have been held to be
              jointly and severally liable for the monies owing in judgment to the Plaintiff, Angela
              Beaumont. You are not executing against the assets of Canada Post Corp. but
              rather against assets owned by another company (Newcourt) and leased by
              Canada Post.

                  1. JOHN BERTRAND – We believe that the personal Defendant, John Bertrand ...
                  has a vehicle which we are presently searching and are awaiting results on. We
                  will fax to you when received (i.e. title and PPSA).

                  2. The Defendant Newcourt Credit Group Inc. is the registered owner of
                  vehicles leased to Canada Post Corp. Inc. including a 1995 Chevrolet 2 door van
                  plate #9615YR. I enclose a copy of the recent insurance on that vehicle, a PPSA
                  search and confirmation of ownership will be available and will be faxed to you
                  in a matter of minutes.

                  This vehicle is likely to be found at the Richmond Canada Post yard the address
                  for the same is: 7680 River Road Richmond (at Cambie).
                                                                                                197


                 I also enclose photos of the vehicle.

                 3. The Defendant Newcourt Credit Group Inc. as far as I am aware has offices in
                 Vancouver at 900-925 West Georgia Street. I would ask that you attend today
                 at their offices and provide them with a copy of the Writ with a view to taking
                 an inventory of any assets owned by them and located at their offices.

16 The March 15, 2000 letter from counsel for the defendants to counsel for the plaintiff
stated:

      We confirm that our client has advised that it has already ordered settlement monies in
      the amount of $140,128.54. We are further advised by our client that it will take several
      days for the cheque to arrive in Vancouver as it is being prepared elsewhere in the
      country. We trust that this makes it unnecessary to take any further steps on the
      judgment, but if you receive instructions to, we would be grateful for the courtesy of
      some advance notice in writing.

17 The "advance notice" requested was contained in the March 15, 2000 same-day letter from
counsel for the plaintiff to counsel for the defendants:

      Thank you for your letter which was received today at 10:00 a.m. by me while in
      attendance at the Registrar' hearing. Clearly, it appears that your client is engaged in delay
      tactics in respect of payment of this judgment. Given the manner in which the defence
      was conducted by your clients (i.e. alleging without foundation during the trial that my
      client had defrauded her LTD. insurer) together with obvious attempts to obstruct our
      proceeding in an expeditious manner prior to trial (i.e. failing to respond to numerous
      correspondence for example, about our interviewing Mr. Vepperts – an employee of
      Canada Post Corporation – and your intended witness) my client has no basis to believe
      that she will see her judgment funds anytime soon.

      No explanation has been given for the delay to date, proof of the date of request of funds
      or explanation as to why delivery would take any longer than overnight (as claimed by
      Priority post it is capable of doing) for the cheque to reach our hands. In the alternative,
      the funds could be wired directly into my trust account today by your client. You or your
      secretary could request our account information from Melinda should this manner of
      payment today be preferred.

      As I told you in the Registrar's office, my instructions have not changed. We now have an
      entered Writ of Seizure and Sale and the Bailiffs will commence execution proceedings
      today, unless I have confirmation in writing by 1 p.m. today that the funds will be in my
      hands no later than 4 p.m. today. [Emphasis in the original.]

18 The further March 15, 2000 letter from counsel for the plaintiff to counsel for the
defendants stated:

      As it is 1:45 p.m. and we have not had any response to our correspondence delivered this
      morning requiring confirmation that we will be in receipt of the funds satisfying the
      judgment today, we have, therefore, authorized the Court Bailiffs to commence their
      seizure.
                                                                                             198

       I continue to be agreeable to withdraw them from their duties should I hear from you this
       afternoon in accordance with the terms of the letter and on payment of the costs of
       execution which should have been unnecessary.

19 Knowing that the funds would not be available from his client that day, counsel for the
defendants applied on an ex parte basis for an order staying the execution of the judgment.
Pursuant to that motion heard on March 15, 2000 at approximately 4:00 p.m., I made an Order
staying execution on the judgment. In support of that application was the affidavit of Rosanne
Ternes, a legal secretary employed by counsel for the defendants. That affidavit attached various
correspondence between counsel. When the application was heard by me, I was advised by
counsel for the defendants that the Bailiff was already at the premises of Canada Post and had
already seized certain vehicles owned by Newcourt but leased to Canada Post.

20   The March 15, 2000 Order provided in part:

       AND THIS COURT ORDERS that the Order of Mr. Justice Catliff pronounced March 7, 2000,
       granting judgment to the Plaintiff in the amount of $140,128.54, plus court order interest
       of $871.41 and costs, is stayed, and that the stay shall remain in effect until March 24,
       2000 at 2:00 p.m.;

       AND THIS COURT ORDERS that the bailiffs will not remove the vehicles seized on March
       15, 2000, and that the seized vehicles shall be left in the possession of the Defendants,
       and that the seizure remains in place;

       AND THIS COURT ORDERS that the parties shall have liberty to apply to set aside or extend
       this Order.

Counsel for the defendants had requested a stay of execution of longer duration. The March 24,
2000 stay of execution was included in order to provide a very short time span for the defendants
to tender the money owing under the judgment of Catliff J. While the stay of execution was in
effect, the seizure of the Bailiff would remain in place although the defendants would remain in
possession of the seized vehicles.

21 Counsel for the defendants advised counsel for the plaintiff that the ex parte Order had
been granted. In a further March 15, 2000 letter to counsel for the defendants, counsel for the
plaintiff stated:

       I understand that your Motion seeks a stay of proceedings prohibiting execution against
       Canada Post Corporation. As I stated in my letter to you previously – these vehicles are
       owned by Newcourt Credit Group Inc. not Canada Post. We are not executing against
       Canada Post Corporation and any representation suggesting the same to the Court by you
       is misleading.

22 The plaintiff applied on March 16, 2000 to set aside the Order granted the previous day.
That application was refused. In support of the application to set aside the Order, Melina Murray
who describes herself as a "Legaol [sic] Secretary" stated in her March 16, 2000 affidavit.

       4. THAT at no time was an Ex parte Notice of Motion served upon us nor was any Notice of
       Hearing served upon us in support of the application evidencing Mr. Steinman's intention
       to proceed yesterday with his application.
                                                                                                 199

       5. THAT Mr Steinman called our offices well after 4 p.m. yesterday and certainly after the
       Court Registry had closed.

       6. To the best of my knowledge, despite repeated demands for the same, at no time has
       counsel for the Defendants provided any explanation for the delay in delivering the
       judgment funds to us on Ms. Beaumont's behalf.

       7. THAT I am advised by Ms. Boles and verily believe that it is her view that throughout
       these proceedings the Defendants have engaged in protracted delay including but not
       limited to: taking approximately 1 year to bring a Halliday application before the Court
       resulting in Costs payable by the Defendants forthwith in the amount of $750; and in
       making numerous objections on [sic] Examination for Discovery of the Defendant
       Bertrand, almost all of which were found to be improper; In failing to comply with the
       terms (as to time for response) of the Court Order to respond to those questions such that
       certain of the responses were only received in the week before the trial commenced and
       only after Ms. Boles advised that she would bring on an application to strike the
       Statement of Defence for their failure to comply with an Order of this Court.

23 The Bill of Costs of the plaintiff was assessed before the Registrar on March 20, 2000 at
$35,032.88. The sum of $140,128.54 was provided by the defendants to the plaintiff on March 20,
2000.

24 In a March 22, 2000 letter to the solicitor for the defendants, the Bailiff advised that it was
looking to the defendant, Newcourt, for "... payment of our costs, fees and expenses." The fee
schedule which was in effect relating to the fees available to the Bailiff provides for a "Statutory
Fee" of $100 for the Writ of Seizure and Sale, an "Attendance Fee" of $45, "Poundage" of $3,250
plus 1% on any amounts in excess of $100,000, and "Mileage" of $.40/km. The notation relating
to "Poundage" indicates that poundage is based on the sum "realized or settled for."

25 By an Order made by me on March 27, 2000, all sums owing for pre-judgment interest, for
post-judgment interest, and the assessed costs of the plaintiff were to be provided to the plaintiff
no later than April 7, 2000. If all of those amounts were paid, the Writ of Seizure and Sale was to
be set aside. If all of those amounts were not paid, then the plaintiff would be in a position to
continue with execution proceedings. The balance owing to the Bailiff for its fees including
Poundage was to be in the trust account of the solicitor for the defendants subject to further
court order. These Reasons for Judgment will deal with that amount held by counsel for the
defendants.

APPLICABLE STATUTORY PROVISIONS

26   The applicable provisions of the Sheriff Act, R.S.B.C., c. 425 are:

       3(2) A court bailiff ... is deemed to be a sheriff for the purposes of any provision in an
       enactment that confers on a sheriff any powers, rights or duties in respect of civil
       execution proceedings ....

               9. A solicitor or other agent whose name appears on any process served by a
               sheriff is responsible to the sheriff for the fees and expenses of service or
               execution.

27   The applicable provisions of the Crown Liability and Proceedings Act, R.S.C., 1985, c. -50 are:
                                                                                                 200


       "Crown" means Her Majesty in Right of Canada;

              29. No execution shall issue on a judgment against the Crown.

28   The applicable provision of the Canada Post Corporation Act, R.S.C., c. C-10 is:

       23. The Corporation is, for the purposes of this Act, an agent of Her Majesty in Right of
       Canada.

29 The applicable Rules of the Supreme Court Rules are Rule 19(24) and Rule 42(21)(a)(i) which
provide:

       19 (24) At any stage of a proceeding the court may order to be struck out or amended the
       whole or any part of an endorsement, pleading, petition or other document on the ground
       that ...

              (b) It is unnecessary, scandalous, frivolous or vexatious, ...

              (d) It is otherwise an abuse of the process of the court,

       and the court may grant judgment or order the proceeding to stayed or dismissed and
       may order costs of the application to be paid as special cost....

       42 (21) (a) The court, may at or after the time of making an order,

              (i) stay the execution of the order until such time as it thinks it, ...

30   Section 113(3) of the Court Order Enforcement Act states:

       If a sheriff has seized personal property of a debtor under a writ of execution, and the
       personal property is not sold and no money is levied on the execution of the writ, the
       sheriff is entitled to receive fees, expenses and poundage based on the smaller of the
       amount of the judgment or the amount settled for, at the same rate as allows under the
       Rules of Court, or if a court directs a smaller rate, at that rate.

DISCUSSION AND AUTHORITIES

31 The defendants rely upon the following statement in Dunlop, Creditor-Debtor Law in
Canada, 2nd Edition, Carswell:

       However, the majority of Canadian decisions express the contrary view that, where the
       legislation has not expressly codified the law, the courts retain their inherent jurisdiction
       to direct a stay in a proper case. The majority position appears sensible, particularly if the
       courts exercise the jurisdiction sparingly "in order to avoid unnecessary proceedings and
       expense, and where it is necessary in order to do justice between the parties." (at p. 212)

32 The court does have the inherent jurisdiction to stay execution on a judgment and this is the
case even though the B.C. Legislature has created the Supreme Court Rules and the Court of
Appeal Act which both make provision for a stay of execution: Morrison v. Mulry, [1935] 1 W.W.R.
423 (B.C.S.C.); Morrison-Knudsen Co. v. British Columbia Hydro & Power Authority (1976), 112
                                                                                                    201

D.L.R. (3d) 397 (B.C.C.A.); B.C. Place Ltd. v. Sweeney Cooperage Ltd. (1981), 20 C.P.C. 217
(B.C.S.C.); Mattrick v. Rowna (1982), 40 B.C.L.R. 157 (B.C.S.C.); and Bank of Montreal v. Yow
(1986), 6 B.C.L.R. (2d) 28 (B.C.C.A).

33 However, the case at bar deals, not with whether it was appropriate to make the March 15,
2000 order staying execution of the judgment of the plaintiff, but whether the plaintiff should be
disentitled to its costs and disbursements for having instituted execution proceedings where it
can be shown that those execution proceedings were "unnecessary proceedings and expense." In
addition to relying on the statement above from Dunlop, the defendants rely on the decision in
M & P Enterprises Ltd. v. London & Lancashire Guarantee & Accident Co. of Canada et al, (1965)
54 D.L.R. (2d) 284 (Man.Q.B.) where the court was required to review the question of whether
the court retained an inherent jurisdiction when there was a statutory provision giving the court
the ability to stay execution on a judgment obtained. Regarding when the inherent jurisdiction
should be exercised, Wilson J. stated:

       Apart altogether from the jurisdiction conferred upon it by the Queen's Bench Act, R.S.M.
       1954, c. 52, s. 62(9), the Court has an inherent jurisdiction to direct a stay, in a proper
       case, and the fact that special power is given to the Court under a number of individual
       rules does not limit the exercise of its jurisdiction to order a stay merely to the situation
       provided for under the rules in question: Re Wickham, Marony v. Taylor (1887), 35
       Ch.D.272, per Cotton, L.J., p. 280. Granted the power to order a stay ought not lightly to
       be exercised, still in a proper case, in order to avoid unnecessary proceedings and
       expense, and where it is necessary in order to do justice between the parties, a stay will
       be ordered. (at pp. 287-288)

34 The defendants submit that, in a case where the court would order a stay of execution
because what was contemplated would be an unnecessary proceeding and expense, the court
should also disentitle the plaintiff to accessible costs and any expenses associated with
"unnecessary proceedings" actually taken.

35 I am satisfied that the court does have the ability to order that a judgment creditor will not
be entitled to costs and disbursements where it is clear that the execution proceedings taken and
the expenses incurred by a judgment creditor are unnecessary. I am also satisfied that this is an
appropriate sanction in this case.

36 On the same day that the Reasons for Judgment were delivered, counsel for the plaintiff
commenced a belligerent and overly aggressive course of action in order to recover the balance
owing to her client. The tone of the letter forwarded by counsel for the plaintiff to counsel for the
defendants was not justified. The justification given that "the history of this matter" and the fact
that the plaintiff had been "waiting for 4 years" is not supportable. There was nothing in the
history of the matter between counsel or between the clients which would justify the tone of the
correspondence which followed. The plaintiff had been waiting for payment for four years either
because counsel for the plaintiff had consented to an adjournment of the original trial date which
was set to be heard less than 14 months after the accident which caused the plaintiff injury or
because it was not in the interests of the plaintiff to proceed to trial in view of the serious injuries
which resulted from the accident. The defendants or counsel for the defendants could hardly be
blamed solely for that delay.

37 Counsel for the plaintiff was advised one day after the Reasons for Judgment were received
that the judgment monies would be "available as soon as possible" and that a Writ of Seizure
would be "totally unnecessary and uncalled for in the circumstances." As early as March 13, 2000,
                                                                                                 202

counsel for the plaintiff was advised that execution proceedings against Canada Post would be a
"wrongful seizure" and, as early as March 15, 2000, that "settlement monies in the amount of
$140,128.54" were "already ordered." With those assurances received, it was unnecessary for
counsel for the plaintiff to proceed as she did by setting a 1:00 p.m. deadline on March 15, 2000.

38 The sum requisitioned was received and paid to counsel for the plaintiff on March 20, 2000.
Thirteen days is an acceptable period for a judgment creditor to receive the full balance under a
fairly large judgment. The appeal period from the judgment of Catliff J. had not even expired. It is
also reasonable to expect some delay where the party paying the judgment is a large organization
that does not have its headquarters in British Columbia and is subject to the inevitable "red tape"
of a Crown corporation.

39 Because counsel for the plaintiff was not prepared to wait the five days for payment of
virtually all of the judgment debt owing, counsel for the plaintiff set into motion a process which,
if carried through to completion, would have resulted in her client having to wait for about 40
days for any proceeds from the sale of the assets seized. In those circumstances, I have no
hesitation in concluding that the execution proceedings instituted by counsel for the plaintiff
were wholly unnecessary.

40 In view of the assurances received from counsel for the defendants, an order striking out the
Writ of Seizure and Sale pursuant to the inherent jurisdiction of the court or to the provisions of
Rule 19(24) of the Rules of Court is justified. I am satisfied the provisions of Rule 19(24) are
applicable to allow the court to strike out a Writ of Seizure and Sale where it is appropriate to do
so. The Writ of Seizure and Sale is a "document" and it is clear that an order can be made under
Rule 19(24) "At any stage of the proceeding." The provisions of that Rule apply even though
judgment has been granted. In the context of this case, the Writ of Seizure and Sale was not only
"unnecessary" but also "frivolous" and "vexatious."

41 It is also the case that the execution proceedings instituted by counsel for the plaintiff were
proceedings which could not be successful as against Canada Post or as against those assets of
Newcourt which were leased to Canada Post.

42 The defendants submit that the principles set out in the decision in Cantieri Riuniti
Dell'Adriatico Di Monfalcone v. Gdynia Ameryka Linje Zeglugower Spolka Akcyjana [1939] D.L.R.
[1940] 102 (N.S.C.A.) are binding on this court. I agree with that submission. In that case, the
plaintiffs brought an action to foreclose a mortgage charge on a Polish ship and for an interim
injunction restraining the defendants from removing the ship from the Halifax harbour until the
trial of the action. The ship had been chartered by the British Admiralty and the question which
arose was whether the rights available to the plaintiffs included the ability to obtain an injunction
relating to property leased to the Crown.

43   In his dissenting judgment, Graham J. stated at p. 104:

       Property of the Government, while in its possession and employed in or devoted to the
       public service, is exempt from judicial process; and the exemption extends not only to
       property owned by, but also to property such as a ship under charter to, or employed by,
       the Crown. The Jupiter, [1924] P. 236. The exemption is the same whether she is under
       charter to the Crown or requisitioned by the Crown; and, is the same whether the charter
       is to, or the employment by, the British Government or our own or any ally, (The
       Messicano (1916), 32 T.L.R. 519), and it is effective as long as she remains in such service.
       The Broadmayne (1916), 32 T.L.R. 304; The Parlement Belge (1880), 5 P.D.197.
                                                                                                 203


44 Graham J. then concluded that an injunction should be granted restraining removal of the
ship on private business but in a way which would not interfere with the control of the ship by the
Admiralty. The majority judgment was that of Archibald J. who concluded that Graham J. had
correctly stated the "... law relating to the exemption of ships under charter to the Crown from
judicial process ..." but disagreed that an injunction should have been granted as he could not
conclude that the Admiralty was already in possession of the ship at the time when the plaintiffs
applied for an interlocutory injunction.

45 At common law, the Crown was immune from execution and was not amenable to remedies
such as distress, liens, garnishment or attachment. The common law immunity in Canada was
replaced by the statutory immunity set out in s. 29 of the Crown Liability and Proceedings Act. The
Cantieri, supra, decision and the decision in Secretary of State for War v. Wynne, [1905] 2 K.B.
845 extend the immunity from execution to include not only execution against property leased to
or in the possession of the Crown but also to execution against the assets of the Crown which
may be leased to another. In the Wynne, supra, decision, Alverstone L.C.J. stated:

       But there is, in my opinion, a much broader principle involved, namely, that Crown
       property never was, according to the law of England, subject to distress. The deduction
       drawn in the passage in Woodfall's Landlord and Tenant, 17th ed. p. 496, seems to me a
       logical conclusion. The passage is: "There is no modern decision as to Crown property; but
       it is laid down in the old books that a man cannot distrain during the possession of the
       Crown; and it would seem to follow that Crown property, even though the Crown be not
       tenant, is privileged on premises demised to a subject." If, even when the Crown is tenant
       and owes the rent, Crown property cannot be taken in distress, it would seem a strange
       thing that such property could be taken for somebody else's rent. (at p. 849)

46 The principles set out in the Cantieri and Wynne decisions are not limited in scope to the
context of wartime when they were decided. When the Crown is in possession of property as
owner or as tenant or as lessee, that property cannot be seized. This is the case notwithstanding
that the Crown does not own the property. The seizure of property that is essential to the
organization and operation of a public service could cause intolerable interruptions in that public
service. It is clear that vehicles that are in the possession of Canada Post are essential to the
operations of that corporation. Those vehicles are immune from seizure. Modern business trends
away from ownership and towards leasing of equipment including vehicles makes the principle of
Crown immunity from seizure of leased equipment including vehicles more important.

47 Accordingly, what was put into motion by counsel for the plaintiff was not only unnecessary
in the circumstances but also unsupportable at law. The seizure of vehicles owned by Newcourt
and leased to Canada Post could not stand. Counsel for the plaintiff was warned about this
problem in the March 13, 2000 letter she received from counsel for the defendants. While that
letter did not specify that property leased to the Crown was also exempt from execution
proceedings, it was incumbent upon the counsel for the plaintiff to fully explore what was and
was not exempt from seizure before instructing the Bailiff on the morning of March 15, 2000. If
she had reviewed that question, she would have come to the conclusion that, while assets of
Newcourt not leased to Canada Post and assets of Mr. Bertrand were not exempt from execution
proceedings, the assets that she specifically requested the Bailiff to seize were exempt.

48 In the circumstances, the defendants should not be responsible to the Bailiff or to the
plaintiff for any costs, fees, mileage, and poundage associated with the March 15, 2000 Writ of
Seizure and Sale. Anything owing to the Bailiff will be paid by counsel for the plaintiff pursuant to
                                                                                                204

s. 9 of the Sheriff Act. Any funds being held by counsel for the defendants so as to be available to
satisfy the balance owing to the Bailiff can be released to the defendants. In any assessment of
any account rendered to the plaintiff, the plaintiff will be at liberty to take the position that
anything owing to the Bailiff should be for the personal account of the solicitor for the plaintiff
and not for the account of the plaintiff herself.

49 While I am satisfied that Special Costs could be awarded in similar circumstances, I am
satisfied that it is more appropriate that the defendants will be entitled to their Party and Party
(Scale 3) costs associated with the March 15, March 17 and March 27, 2000 applications.
Accordingly, those costs are ordered. To avoid the necessity of an assessment of those costs
before the Registrar, I will order that the costs of the three applications inclusive of fees,
disbursements and government taxes will be $1,800. That amount is payable forthwith by the
plaintiff to the defendants. Any funds held by counsel for the plaintiff stand charged for that
amount payable to the defendants.

BURNYEAT J.




(ii) Money and Securities for Money



                        Canadian Mutual Loan & Investment Co. v. Nisbet
                          [1900] O.J. No. 175, 31 O.R. 562 (Ont. Div. Ct.)

1 THE Canadian Mutual Loan and Investment Company were judgment creditors of the
defendant Thomas W. Nisbet, under a judgment of April 1st, 1897, for $7,094.76, recovered in
respect of a mortgage. They also held as collateral security to the mortgage a fully paid up policy
for $5,000 upon the life of the said Thomas W. Nisbet in the Canada Life Assurance Company. This
assignment while it assigned the insurance money, specially excepted the bonus additions which
might be from time to time payable in respect of the policy; and upon application to the company
[31 OR Page562] as to when such dividends would be declared the secretary of the Life Insurance
Company on March 12th, 1898, wrote as follows:

       "I am in receipt of yours of the 11th inst., referring to policy 24684, Nisbet, and may
       inform you that the next dividend will be declared by this company December 31st, 1899,
       of which intimation will be given after the annual meeting of the company held in 1900.
       The last dividend was declared in 1895; this company declares but once in five years."

2 On or about November 22nd, 1899, the plaintiffs applied ex parte to ROBERTSON, J., for, and
obtained an interim order appointing them receivers to the extent of their claim of any bonus or
dividend which might then be or might thereafter become due or accruing due from the Canada
Life Assurance Company to Nisbet in respect to the policy which order was on December 19th,
1899, made permanent by FALCONBRIDGE, J.

3 The defendant Nisbet appealed, and the motion was argued on February 7th, 1900, before
MEREDITH, C.J., ROSE, and MacMAHON, JJ.
                                                                                                    205

4 J. H. Moss, for the defendant, contended that there was nothing to receive, and cited: Holmes
v. Millage, [1893] 1 Q. B. 551; Central Bank v. Ellis (1896), 27 O.R. 533; Bain v. Aetna Life Ins. Co.
(1890), 20 O.R. 6; Pritchett v. English and Colonial Syndicate, [1899] 2 Q.B. 429.

5 A. McLean Macdonell, for the plaintiffs, referred to Beamish v. Stephenson (1886), 18 L.R. Ir.
319; Webb v. Stanton (1883), 11 Q.B.D., at p. 526; Tyrrell v. Painton, [1895] 1 Q.B. 202; Weekes v.
Frawley (1893), 23 O.R., at p. 238; Kirk v. Burgess (1888), 15 O.R., at p. 610; McLean v. Bruce
(1891), 14 P.R., at p. 202; Bryant v. Bull (1878), 10 Ch. D. 153.

6 The judgment of the Court was delivered on February 15th, 1900, by [31 OR Page563]
MEREDITH C.J.: – The order appealed from may, I think, be supported without contravening
anything which was decided in Central Bank v. Ellis, 27 O.R. 583, and the English authorities,
which were followed in that case upon the short ground that the policy of insurance in respect of
which the respondents desire the appointment of a receiver, would have been exigible in
execution, as a "security for money" belonging to the defendant, under sec. 18 of the Execution
Act, R.S.O. ch. 77, but for the assignment of it to the respondents as security for a debt due to
them and the provision of the assignment entitling the defendant to receive from time to time
the cash surrender value of the bonus additions to the policy, which if not so surrendered,
according to its terms become payable when the policy "becomes a claim" by the death of the
assured, and that these circumstances give the respondents the right to invoke the aid of the
Court to enable them to reach the defendant's interest in the policy.

7 In Weekes v. Frawley, 23 O.R. 235, the Chancellor adopting the view of the Irish Courts in the
cases of Alleyne v. Darcy (1855), 5 Ir. Ch. 56, and in In re Sargent's Trusts (1879), 7 L.R. (Ir.) 66, in
preference to what is reported to have been decided by the Master of the Rolls in Stokoe v.
Cowan (1861), 29 Beav. 637, came to the conclusion that a policy of insurance on the life of the
judgment debtor on which premiums had yet to be paid for several years, was not exigible in
execution under sec. 18 of the Execution Act.

8 It is unnecessary to consider whether that conclusion was a correct one, for, assuming it to
have been, I am of opinion as I have said that the policy in question in this case would have been
exigible in execution but for the circumstances to which I have referred. It is what is termed a "life
ten payments policy," the assured paying ten annual payments; and the policy has become a paid
up one, the ten payments stipulated for having been made. [31 OR Page564]

9 The main, and indeed I think, the only reason, why such policies as were in question in
Weekes v. Frawley and the two Irish cases were held not to be "securities for money" within the
meaning of the Acts applicable, was that the machinery provided by them for realizing the
securities dealt with by the Acts, was inapplicable to a policy on the life of the debtor on which
premiums had yet to be paid. "How," it was said by the Lord Chancellor in Alleyne v. Darcy, 5 Ir.
Ch., at p. 62, "is the sheriff to pay the premiums, or (not being entitled to sell), how can he in any
way make it available;" but he added, "the provisions of the statute might perhaps be applicable
to a policy due and payable at once; as to that case I shall say nothing; but this is one not to be
payable for a considerable time, and I cannot think it to be within the meaning of the Act."

10 The reason which suggested to the Lord Chancellor's mind this qualification, though not
applying in terms to a paid up policy, seems to me to be equally applicable to such a policy, as to
the one he had in mind, and I see nothing in the provisions of the Act which should lead to the
conclusion that a paid up policy is not a "security for money," within the meaning of the Act. The
sheriff is to retain the security for money which he seizes as security for the amount directed to
be levied, and is authorized to sue in his own name for the sums secured by it when the time for
                                                                                                 206

payment has arrived.

11 Such a policy has become an unconditional obligation of the insured for the payment of the
sum insured on the death of the insurer, and I can see no substantial difference between such an
obligation and one by which another has become bound for the payment of a sum of money to
the personal representatives of the judgment debtor on his death happening, or indeed at any
other time not in any way dependent upon his death.

12 Upon the question as to whether apart from the contest a policy of life insurance falls within
the description "securities for money": Lawrance v. Galsworthy (1857), [31 OR Page565] 3 Jur. N.
S. 1049; Bank of Montreal v. McTavish (1867), 13 Gr. 395 (a fire policy), may be referred to.

13 If I am right in this view, the respondents' case is brought within the rule stated by Lord
Redesdale, at p. 148 of his work on Pleading (Mitford on Pleading, 5th ed.), which is referred to
with approval in Neate v. The Duke of Marlborough (1838), 3 M. & Cr. 407, and Harris v.
Beauchamp, [1894] 1 Q.B., at pp. 807, 808, and the respondents' right to obtain the benefit of the
defendant's interest in the policy under ordinary process being defeated by a prior title – that of
his assignee – not extending to the whole interest of the defendant in the property upon which
the judgment is proposed to be executed, they are entitled to the aid of the Court to enable them
to reach it.

14 The appeal must, therefore, be dismissed, but the costs of the motions and of the appeal
ought not, I think, as a matter of course to be given to the respondents. It may be that nothing
will be realized by the proceeding which has been taken because a reversionary dividend may not
be declared or become payable, the insurance company, if it has the option to do it or not, may
not be willing to accept a surrender of the reversionary dividend if one is declared, or the
defendant may not elect to surrender it for a cash payment. The costs will therefore be reserved
to be dealt with by a Judge in Chambers after it has been ascertained whether anything, and if so,
what, has been realized as a result of these proceedings. If the result be that nothing, or but a
trifling sum is realized, the respondents ought certainly not to get their costs, if, indeed, they
ought not to pay the costs of the defendant.



                                    Re Trustee Act: Re Patmore
                                  (1962) 39 W.W.R. 460 (B.C.S.C.)

1 SULLIVAN J.:— At commencement of hearing on March 19, 1962, of numerous interrelated
and conflicting petitions and motions involving the complicated financial affairs of Dr. Patmore, it
was agreed by counsel that I should first proceed to determination of the contention advanced by
counsel for the minister of national revenue that interim charging orders (nisi) made ex parte by
my brother Hutcheson, J. in actions Nos. 2295/60 and 2296/60 on October 18, 1961, and by me in
action No. 3123/60 on December 8, 1961, were beyond the jurisdiction of a judge of this court to
make and should be set aside upon return of the show cause proceedings to make them absolute,
presently before me. For all purposes of ensuing presentation of argument upon that issue, Mr.
C.M. Jeffery acted (by consent) for the petitioners and judgment creditors Troup, Rowlett and
Thompson. Other counsel were excused, leaving Dr. Patmore to represent himself and Mr. James
A. MacAulay to represent the minister of national revenue. Also by consent, and in commendable
effort to curtail costs in this protracted and entangled mess of litigation, it was agreed by counsel
that the issue with which I now deal (whether it be called a motion to set aside the charging
orders nisi above mentioned, or resistance to judgment creditors' motion to make them absolute)
                                                                                                   207

should proceed without prior formal entry of appearance on behalf of the minister, service of
notice of motion and material in support thereof and that sort of thing.

2 The validity of the respective orders nisi charging the interest of Dr. Patmore in certain shares
of the capital stock of International African American Corpn. is questioned by the minister upon
the principal ground that such shares in a foreign corporation are not subject to execution
process in this jurisdiction, and reliance is had by his counsel upon the decision of the Manitoba
court of appeal in Goodbun v. Mitchell [1929] 3 W.W.R. 622, 38 Man. R. 395, reversing [1929] 2
W.W.R. 90, 38 Man. R. 298, wherein it was held that shares in an extra-provincial company which
had no place in Manitoba, whereat service of process could be legally made upon it, were not
subject to legal execution in that province of Canada. In Goodbun v. Mitchell, just referred to, the
judgment debtor had assigned the shares in question to his bank, and they were registered in the
name of the bank as collateral security for a loan to him. The facts of the instant case differ from
those of Goodbun v. Mitchell, supra, in that Dr. Patmore did not assign his shares to the Bank of
Montreal. He endorsed them as "street certificates" and then hypothecated them virtually as
cash or bearer Canada Savings bonds by way of collateral security for his then indebtedness to
the bank. Patmore's indebtedness to the bank was subsequently paid off and he demanded
return of his shares, whereupon the bank having no further claim upon them but being aware of
other outstanding claims against Patmore (of which there were many) rightly or wrongly
construed its position to be that of a trustee and invoked the protection of the Trustee Act, RSBC,
1948, ch. 345, now RSBC, 1960, ch. 390, in delivery of Patmore's cash and shares to the registrar
of this court. Such deposit included certificates for shares issued by International African
American Corpn. by way of interim share dividends to the bank's nominee, Grant and Co., and
these latter were also converted into "street certificates" by endorsement.

3 Having regard to the points of distinction between the facts of this case and those of
Goodbun v. Mitchell, supra, it is my opinion that the shares in question, or the equity of Dr.
Patmore in them, are exigible under execution in this province and might have been seized by the
sheriff in execution of a writ of fieri facias had he found them in Patmore's home or office or
bank, or elsewhere than in the possession of this court. In the circumstance that the Bank of
Montreal had deposited them in court in purported authorization of the Trustee Act, I feel that
the judgment creditors were correctly advised to apply for charging orders and that the orders
nisi here under attack were properly made in line with the principle of Brereton v. Edwards (1888)
21 QBD 488, 60 LT 5 (C.A.), that the court ought to assist the creditor to obtain the fruits of his
judgment. In support of my opinion that in this jurisdiction, so-called "street certificates" for
shares in either domestic or foreign public corporations are quite as exigible as money itself, I
refer with deference to the dicta of Rinfret, J. (later C.J.) in Solloway v. Blumberger [1933] S.C.R.
163, reversing, [1932] B.C.J. No. 84, 46 B.C.R. 241, who said at p. 167:

       "The meaning and effect of the evidence is that the universal practice of brokers – and the
       prevailing practice in Vancouver – is to treat 'street certificates' as dollar bills, that is to
       say, as money ..."

4 In the course of excellent and exhaustive arguments presented by both Mr. MacAuley and
Mr. Jeffery, I was invited to review the history and development of the law of British Columbia
applicable to execution of judgments, with particular reference to the question of execution by
seizure of a judgment debtor's shares in incorporated companies.

5 Such a review commences with the observation that all of our laws derive from the laws of
England, and that reference should be had to our English Law Act, now RSBC, 1960, ch. 129, sec.
2, which provides as follows:
                                                                                                    208


       "2. The Civil and Criminal Laws of England, as the same existed on the nineteenth day of
       November, 1858, and so far as the same are not from local circumstances inapplicable, are
       in force in all parts of the Province; but the said laws shall be held to be modified and
       altered by all legislation having the force of law in the Province, or in any former Colony
       comprised within the geographical limits thereof."

6 From such commencement the discussion leads one to consideration of the Judgments Act of
England, 1838, 1 & 2 Vict., ch. 110, and its amendment in 1840, the provisions of both of which
became the law of this jurisdiction and remained so until the British Columbia enactment of the
Execution Act, RSBC, 1897, ch. 72. It is interesting thus to trace the history of manner in which
transferable stock or shares in corporate undertakings first became subject to execution under
process of fieri facias in England and here. It is interesting to opine that the provisions of the
Execution Act of 1897 (expressed today by RSBC, 1960, ch. 135, secs. 17 to 23) relating to seizure,
in execution, of shares in incorporated companies, were intended to be an adaptation (with
necessary modification to meet local conditions) of the provisions of secs. 14 and 15 of said
Judgments Act of England of 1838. Otherwise I do not feel that such an exercise is of practical
assistance to resolution of my present problem, because the authority of a judge of this court to
make charging orders in proper cases has not been questioned in these proceedings.

7 Under sec. 12 of our present Execution Act (which derives in part from the Judgments Act of
England, of 1838, and continues the provisions of sec. 13 of the Execution Act of 1897) there can
be no doubt of the sheriff's power to seize and take money or bank-notes in execution of a writ of
ferri facias [sic].

8 As previously indicated, and without attempt at exhaustive analysis of the many authorities
cited to me by counsel, I hold that the "street certificates" for shares in International African
American Corpn. now in court (or the equity of Dr. Patmore in them) should be considered as
money subject to seizure in execution, notwithstanding that they represent shares in the capital
stock of a corporation which moved its base of operations from British Columbia to the state of
Delaware, U.S.A., some years ago.

9 In the particular circumstances of this case hereinbefore briefly outlined, I must hold that the
application of the minister to set aside the charging orders nisi herein, is without merit and is
refused.

10 The unreported judgment of Macfarlane, J. in Annett v. Randall (July, 1952) is of no practical
assistance to me here. In that case his lordship was dealing with a charging order nisi made in
respect of shares in a British Columbia company, which shares were registered to the judgment
debtor and wherein he possessed a certain equity. The learned judge found (correctly in my
respectful opinion) that such shares or the equity of the judgment debtor in them were available
to seizure by the sheriff in ordinary execution of a writ of fieri facial [sic] under the Execution Act,
and that proceedings for execution by way of charging order therefore were not necessary. He
applied the principle stated (or restated) by Davie, C.J. in Spiers v. Reg. and Corbould (1896) 4 BCR
388, at 395, that the method of exercising execution as laid down by statute was the method to
be adopted and no other, and so set aside the order nisi. Here, as previously stated, I make the
finding that the "street certificates" for shares of International African American Corpn. with
which I am concerned (or the equity of Dr. Patmore in them) would ordinarily have been
attachable under sec. 12 of the Execution Act, but that the circumstance of their having been,
properly or improperly, delivered into the custody of the court by the Bank of Montreal, thereby
placing them beyond the power of the sheriff to seize, made necessary and proper the
                                                                    209

applications for charging orders nisi herein, which were granted.

11   Order accordingly.
                                                                                                      210

                              Bank of British Columbia v. 225280 B.C. Ltd.
                              [1985] B.C.J. No. 3066, 65 B.C.L.R. 23 (BCSC)

1 MACKINNON L.J.S.C.:— This motion was originally heard on 20th March 1985. In written reasons I
held that R.R.S.P.s were not subject to seizure and sale pursuant to s. 49 of the Court Order
Enforcement Act. Counsel were granted leave to make further submissions as to the applicability of s.
52.

       S.52. Any sheriff or other officer to whom any writ of execution is directed shall seize and take
       any money or bank notes, and any cheques, bills of exchange, promissory notes, bonds,
       specialties or other securities for money, belonging to the execution debtor, and may and shall
       pay and deliver to the execution creditor any money or bank notes which are seized, or a
       sufficient part of it; and shall hold any cheques, bills of exchange, promissory notes, bonds,
       specialties or other securities for money as security for the amount by the writ of execution
       directed to be levied, or as much of it as has not been otherwise levied and raised; and the
       sheriff or other officer may sue in his own name for the recovery of the sums secured by it, if
       and when the time of payment of it has arrived.

2 An R.R.S.P. is intangible property. Under common law it would therefore not be subject to seizure.
Section 52 is a statutory extension of the common law allowing the seizure of certain incorporeal
property.

3   The issue is whether this section is meant to include an R.R.S.P.

4 Counsel for the Sheriffs' Services submits it does not. There is specific statutory power to do so in
some other provinces but he says our enactment does not do so. Other methods of execution are
available, such as attachment. However, he maintains the British Columbia provision is for money and
that an R.R.S.P. is more analogous to a trust. There is more to it than a simple creditor-debtor
relationship. I was referred to Jobin-Marrin Co. v. Betts (1905), 1 W.L.R. 369 (N.W.T.), that book debts
are not "other securities".

5 It is agreed that a simple demand from the owner of the R.R.S.P. would leave the bank no
alternative but to comply. I do not consider the bank to be a trustee but much closer to the holder of a
term deposit.

6   I find the wording of s. 52 to be wide enough to include an R.R.S.P.

7 If support is needed, it is to be found in several bankruptcy cases which I found useful in
interpreting how the courts consider an R.R.S.P.

8   R.R.S.P.s are subject to seizure and sale pursuant to s. 52 of the Court Order Enforcement Act.

9 On the original application, counsel for the plaintiff limited his argument to s. 49. This made the
second application necessary. There will be no costs to either party.

       Order accordingly.




                                2. Judgments Acts 1838 and 1840
                                                                                                       211


Arguably always in force in B.C. ex proprio vigore, the provisions of these early English statutes creating
a statutory charging order for specific classes of property were, until 2007, expressly continued by s.69
of the Court Order Enforcement Act. Section 69 has now been repealed. Availability in B.C. is
problematic both for that reason and as a result of a line of B.C.S.C. cases culminating in Associates
Finance Co. Ltd. v. Webber and Dixon, [1972] 4 W.W.R. 131, reproduced above.


                                   Judgments Act 1838, 1 & 2 Victoria
                                         c. 110, ss. 14 and 15

                                                C A P. CX.

An Act for abolishing Arrest on Mesne Process in Civil Actions, except in certain Cases; for extending
the Remedies of Creditors against the Property of Debtors; and for amending the Laws for the Relief of
Insolvent Debtors in England.                           [16th August 1838]

WHEREAS the present Power of Arrest upon Mesne Process is unnecessarily extensive and severe, and
ought to be relaxed: Be it therefore enacted by the Queen’s most Excellent Majesty, by and with the
Advice and Consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament
assembled, and by the Authority of the same, That from after the Time appointed for the
Commencement of this Act no Person shall be arrested upon Mesne Process in any Civil Action in any
Inferior Court whatsoever, or (except in the Cases and in the Manner herein-after provided for) in any
Superior Court.

XIV. And be it enacted, That if any Person against whom any Judgment shall have been entered up in
any of Her Majesty’s Superior Courts at Westminster shall have any Government Stock, Funds, or
Annuities, or any Stock or Shares of or in any Public Company in England (whether incorporated or
not), standing in his Name in his own Right, or in the Name of any Person in Trust for him, it shall be
lawful for a Judge of one of the Superior Courts, on the Application of any Judgment Creditor, to order
that such Stock, Funds, Annuities, or Shares, or such of them or such Part thereof respectively as he
shall think fit, shall stand charged with the Payment of the Amount for which Judgment shall have been
so recovered, and Interest thereon, and such Order shall entitle the Judgment Creditor to all such
Remedies as he would have been entitled to if such Charge had been made in his Favour by the
Judgment Debtor; provided that no Proceedings shall be taken to have the Benefit of such Charge until
after the Expiration of Six Calendar Months from the Date of such Order.

XV. And in order to prevent any Person against whom Judgment shall have been obtained from
transferring, receiving, or disposing of any Stock, Funds, Annuities, or Shares hereby authorized to be
charged for the Benefit of the Judgment Creditor under an Order of a Judge, be it further enacted, That
every Order of a Judge charging any Government Stock, Funds, or Annuities, or any Stock or Shares in
any Public Company, under this Act, shall be made in the first instance ex parte, and without any Notice
to the Judgment Debtor, and shall be an Order to show Cause only; and such Order, if any Government
Stock, Funds, or Annuities standing in the Name of the Judgment Debtor in his own Right, or in the
Name of any Person in Trust for him, is to be affected by such Order, shall restrain the Governor and
Company of the Bank of England from permitting a Transfer of such Stock in the meantime and until
such Order shall be made absolute or discharged; and if any Stock or Shares of or in any Public
Company, standing in the Name of the Judgment Debtor in his own Right, or in the Name of any Person
in Trust for him, is or are to be affected by any such Order, shall in like Manner restrain such Public
Company from permitting a Transfer thereof; and that if, after Notice of such Order to the Person or
Persons to be restrained thereby, or in case of Corporations to any authorized Agent of such
Corporation, and before the same Order shall be discharged or made absolute, such Corporation or
Person or Persons shall permit any such Transfer to be made, then and in such Case the Corporation or
                                                                                                       212

Person or Persons so permitting such Transfer shall be liable to the Judgment Creditor for the Value or
Amount of the Property so charged and so transferred, or such Part thereof as may be sufficient to
satisfy his Judgment; and that no Disposition of the Judgment Debtor in the meantime shall be valid or
effectual as against the Judgment Creditor; and further, that unless the Judgment Debtor shall within a
Time to be mentioned in such Order show to a Judge of one of the said Superior Courts sufficient Cause
to the contrary, the said Order shall, after Proof of Notice thereof to the Judgment Debtor, his Attorney
or Agent, be made absolute: Provided that any such Judge shall, upon the Application of the Judgment
Debtor, or any Person interested, have full Power to discharge or vary such Order, and to award such
Costs upon such Application as he may think fit.


                                   Judgments Act 1840, 3 & 4 Victoria
                                                 c. 82

An Act for further amending the Act for abolishing Arrest on Mesne Process in Civil Actions.
                                                                                      [7th August 1840.]

WHEREAS by an Act passed in the Second Year of the Reign of Her Majesty, intituled An Act for
abolishing Arrest on Mesne Process in Civil Actions, except in certain Cases; for extending the Remedies
of Creditors against the Property of Debtors; and for amending the Laws for the Relief of Insolvent
Debtors in England, it was amongst other things enacted, that if any Person against whom any
Judgment should have been entered up in any of Her Majesty’s Superior Courts at Westminster should
have any Government Stock, Funds, or Annuities, or any Stock or Shares of or in any public Company in
England (whether incorporated or not), standing in his Name in his own Right, or in the Name of any
Person in Trust for him, it should be lawful for a Judge of One of the Superior Courts, on the Application
of any Judgment Creditor, to order that such Stock, Funds, Annuities, or Shares, or such of them, or
such Part thereof respectively, as he should think fit, should stand charged with the Payment of the
Amount for which Judgment should have been so recovered, and Interest thereon, and such Order
should entitle the Judgment Creditor to all such Remedies as he would have been entitled to if such
Charge had been made in his Favour by the Judgment Debtor; provided that no Proceedings should be
taken to have the Benefit or such Charge until after the Expiration of Six Calendar Months from the
Date of such Order: And whereas Doubts have been entertained whether the said Provisions extend to
the Cases hereinafter mentioned: Now therefore be it declared and enacted by the Queen’s most
Excellent Majesty, by and with the Advice and Consent of the Lords Spiritual and Temporal, and
Commons, in this present Parliament assembled, and by the Authority of the same, That the aforesaid
Provisions of the said Act shall be deemed and taken to extend to the Interest of any Judgment Debtor,
whether in Possession, Remainder, or Reversion, and whether vested or contingent as well in any such
Stocks, Funds, Annuities, or Shares as aforesaid as also in the Dividends, Interest, or annual Produce of
any such Stock, Funds, Annuities, or Shares; and whenever any such Judgment Debtor shall have any
Estate, Right, Title, or Interest, vested or contingent, in Possession, Remainder, or Reversion, in, to, or
out of any such Stocks, Funds, Annuities, or Shares as aforesaid which now are or shall hereafter be
standing in the Name of the Accountant General of the Court of Chancery or the Accountant General of
the Court of Exchequer, or in, to, or out of the Dividends, Interest, or annual Produce thereof, it shall
be lawful for such Judge to make any Order as to such Stock, Funds, Annuities, or Shares, or the
Interest, Dividends, or annual Produce thereof, in the same Way as if the same had been standing in
the Name of a Trustee of such Judgment Debtor: Provided always, that no Order of any Judge as to any
Stock, Fund, Annuities, or Shares standing in the Name of the Accountant General of the Court of
Chancery or the Accountant General of the Court of Exchequer, or as to the Interest, Dividends, or
annual Produce thereof, shall prevent the Governor and Company of the Bank of England, or any public
Company, from permitting any Transfer of such Stocks, Funds, Annuities, or Shares, or Payment of the
Interest, Dividends, or annual Produce thereof, in such Manner as the Court of Chancery or the Court of
Exchequer respectively may direct, or shall have any greater Effect than if such Debtor had charged
such Stock, Funds, Annuities, or Shares, or the Interest, Dividends, or annual Produce thereof, in favour
                                                                                                         213

of the Judgment Creditor, with the Amount of the Sum to be mentioned in any such Order.



                         Consumer Imagenet Inc. v. Infinitron International Inc.
                               [2001] B.C.J. No. 443, 2001 BCSC 372

1 SCARTH J.:— The applications before the Court raise issues as to the exigibility of certain shares in a
federally incorporated company, Infinitron Research International, Inc., owned by the defendant
(judgment debtor) Infinitron International, Inc.

2   It will be convenient first of all to set out the factual background to the applications.

3 On June 4, 1998 the plaintiff Consumer Imagenet Inc. recovered judgment in this action against the
defendant Infinitron International, Inc. in the amount of $107,790.97, plus interest under the Court
Order Interest Act in the sum of $4,087.91, plus costs which, on June 26, 1998, were assessed at
$2,418.22. The total amount thus owing by the judgment debtor, Infinitron International, Inc., to the
judgment creditor, Consumer Imagenet Inc., pursuant to the order of this Court was $114,297.10. That
amount, together with post-judgment interest, remains unpaid.

4 Although the material before me is not entirely consistent, it appears from the affidavit of Mr.
Robert D. Holmes, a principal in the firm of solicitors acting for the plaintiff in this proceeding, that the
judgment debtor, Infinitron International, Inc., is a company incorporated under the laws of British
Columbia and has a registered records office located at 218 – 470 Granville Street, Vancouver, British
Columbia.

5 So far as the judgment creditor is aware, the judgment debtor's only exigible asset consists of all
issued and outstanding shares (653,350 common shares without par value) in Infinitron Research
International, Inc., a company incorporated under the laws of Canada or, perhaps more correctly, a
"corporation continued under the Canada Business Corporations Act, R.S.C. 1985, c. C-44", with its
head office and share register also located at 218 – 470 Granville Street in Vancouver.

6 On May 19, 1999 the judgment creditor's solicitors caused a writ of execution concerning the
shares to be delivered, amongst other places, to the registered records office of the judgment debtor,
Infinitron International, Inc., and to the head office of Infinitron Research International, Inc., in
Vancouver. The writ of execution was not successful. No certificates evidencing the shares have been
delivered to the judgment creditor.

7 On June 29, 1999 the judgment creditor brought an application, on notice to the judgment debtor,
seeking an order under Rule 43 of the Rules of Court for the delivery and sale of all share certificates
evidencing the judgment debtor's ownership of Infinitron Research International, Inc. Mr. Justice Tysoe
declined to grant the relief sought unless counsel provided "some authority that says that Rule 43 can
be used as an instrument of execution". His Lordship stated:

       Just so the record is clear, I am going to adjourn the application and I'm going to do it on the
       basis that it may be re-set if the plaintiff has authority that Rule 43 can be utilized in execution
       proceedings where the property was not the subject matter of the proceedings or that the
       matter may be re-set by the plaintiff with an Amended Notice of Motion.

8   The application under Rule 43 was never re-set.

9 On July 5, 1999 the judgment creditor brought an ex parte application before Mr. Justice Lowry of
this Court seeking a charging order nisi with respect to the judgment debtor's shares in Infinitron
                                                                                                     214

Research International, Inc. pursuant to sections 14 and 15 of the Judgments Act, 1838 (1 & 2 Vict. c.
110) (U.K.), as amended by 3 & 4 Vict. c. 82.

10   The order made by Mr. Justice Lowry on July 5, 1999 reads as follows:

       THE APPLICATION of the Plaintiff coming on for hearing this day at Vancouver, British Columbia,
       and upon hearing Thomas E. Mills, counsel for the Plaintiff, and no one appearing for the
       Defendant, AND UPON READING the material filed herein July 5, 1999, whereby it appears that
       by a Judgment made on June 2, 1998 in the Supreme Court of British Columbia the Defendant
       was ordered to pay to the Plaintiff the sum of $114,297.10, of which $114,297.10 remains due
       and unpaid, and that the Defendant has a beneficial interest in the shares of INFINITRON
       RESEARCH INTERNATIONAL INC.:

       THIS COURT ORDERS that unless sufficient cause to the contrary be shown before This Court
       before the expiry of 6 months from the date of This Order, the Defendant's interest in the said
       shares of INFINITRON RESEARCH INTERNATIONAL INC. shall, and it is ordered that in the
       meantime does, stand charged with the payment of $114,297.10 due on the said Judgment, and
       postjudgment interest pursuant to the Court Order Interest Act, together with the costs of this
       application.

11 This order was served on the judgment debtor on July 8, 1999 and upon the head office of
Infinitron Research International, Inc. on July 9. 1999.

12   The text of section 14 of the Judgments Act, 1838 (1 & 2 Vict. c. 110) is as follows:

       XIV. And be it enacted, That if any Person against whom any Judgment shall have been entered
       up in any of Her Majesty's Superior Courts at Westminster shall have any Government Stock,
       Funds, or Annuities, or any Stock or Shares of or in any Public Company in England (whether
       incorporated or not), standing in his Name in his own Right, or in the Name of any Person in
       Trust for him, it shall be lawful for a Judge of one of the Superior Courts, on the Application of
       any Judgment Creditor, to order that such Stock, Funds, Annuities, or Shares or such of them or
       such Part thereof respectively as he shall think fit, shall stand charged with the Payment of the
       Amount for which Judgment shall have been so recovered, and Interest thereon, and such
       Order shall entitle the Judgment Creditor to all such Remedies as he would have been entitled
       to if such Charge had been made in his Favour by the Judgment Debtor; provided that no
       Proceedings shall be taken to have the Benefit of such Charge until after the Expiration of Six
       Calendar Months from the Date of such Order.

13   By 3 & 4 Vict. c. 82 section 14 was extended:

       ... to the Interest of any Judgment Debtor, whether in Possession, Remainder, or Reversion, and
       whether vested or contingent, as well in any such Stocks, Funds, Annuities, or Shares as
       aforesaid as also in the Dividends, Interest, or annual Produce of any such Stock, Funds,
       Annuities, or Shares; ... .

14   Section 15 of 1 & 2 Vict. c. 110 is as follows:

       XV. And in order to prevent any Person against whom Judgment shall have been obtained from
       transferring, receiving, or disposing of any Stock, Funds, Annuities, or Shares hereby authorized
       to be charged for the Benefit of the Judgment Creditor under an Order of a Judge, be it further
       enacted, That every Order of a Judge charging any Government Stock, Funds, or Annuities, or
       any Stock or Shares in any Public Company, under this Act, shall be made in the first instance ex
       parte, and without any Notice to the Judgment Debtor, and shall be an Order to show Cause
       only; and such Order, if any Government Stock, Funds, or Annuities standing in the Name of the
                                                                                                     215

       Judgment Debtor in his own Right, or in the Name of any Person in Trust for him, is to be
       affected by such Order, shall restrain the Governor and Company of the Bank of England from
       permitting a Transfer of such Stock in the meantime and until such Order shall be made
       absolute or discharged; and if any Stock or Shares of or in any Public Company, standing in the
       Name of the Judgment Debtor in his own Right, or in the Name of any Person in Trust for him, is
       or are to be affected by any such Order, shall in like Manner restrain such Public Company from
       permitting a Transfer thereof; and that if, after Notice of such Order to the Person or Persons to
       be restrained thereby, or in case of Corporations to any authorized Agent of such Corporation,
       and before the same Order shall be discharged or made absolute, such Corporation or Person or
       Persons shall permit any such Transfer to be made, then and in such Case the Corporation or
       Person or Persons so permitting such Transfer shall be liable to the Judgment Creditor for the
       Value or Amount of the Property so charged and so transferred, or such Part thereof as may be
       sufficient to satisfy his Judgment; and that no Disposition of the Judgment Debtor in the
       meantime shall be valid or effectual as against the Judgment Creditor; and further, that, unless
       the Judgment Debtor shall within a Time to be mentioned in such Order show to a Judge of one
       of the said Superior Courts sufficient Cause to the contrary, the said Order shall, after Proof of
       Notice thereof to the Judgment Debtor, his Attorney or Agent, be made absolute: Provided that
       any such Judge shall, upon the Application of the Judgment Debtor, or any Person interested,
       have full Power to discharge or vary such Order, and to award such Costs upon such Application
       as he may think fit.

15 It is not in dispute that ss. 14 and 15 of the Judgments Act, 1838 are a part of the received law of
British Columbia by virtue of s. 2 of the Law and Equity Act, R.S.B.C. 1996, c. 253: Annett v. Randall
(unreported, July 21, 1952, S.C.B.C.); Gould, Thorpe and Easton et al v. Ablitt (1958), 26 W.W.R. 274
(B.C.S.C.), at p. 275.

16 By notice of motion dated December 21, 1999 and filed December 31, 1999, approximately five
days before the expiry of the six months show cause period set out in the order nisi made on July 5,
1999, the defendant Infinitron International, Inc. applies to set aside the order of Mr. Justice Lowry
dated July 5, 1999, and for a declaration that the defendant's interest in the shares of Infinitron
Research International Inc. is not chargeable pursuant to the Judgments Act, 1838 with payment of
$111,878.88 due on the judgment of this Court pronounced June 4, 1998, and for special costs of the
application against either the plaintiff or its solicitor.

17 By notice of motion dated March 2, 2000 the plaintiff, on notice to Infinitron International, Inc.
and Infinitron Research International Inc., applies for an order that:

       1. the interest of the Defendant in the shares of INFINITRON RESEARCH INTERNATIONAL INC.
       stand charged with the payment of $111,878.88 being the amount due from the Defendant to
       the Plaintiff on a Judgement of this Court dated June 4, 1998, and post-judgment interest
       thereon pursuant to the Court Order Interest Act R.S.B.C. 1996, c. 79;

       2. in the alternative, unless sufficient cause to the contrary be shown before this Court before
       the expiration of six months from the date of this Order or such period as this Court deems
       meet and just, the interest of the Defendant in the shares of INFINITRON RESEARCH
       INTERNATIONAL INC. shall, and it be ordered that in the meantime it does, stand charged with
       the payment of $111,878.88 due on a Judgment of this Court pronounced June 4, 1998, and
       post-judgment interest thereon pursuant to the Court Order Interest Act, R.S.B.C. 1996, c. 79;

       3. in the further alternative, that the Defendant and Infinitron Research International Inc. by
       themselves, their servants, agents or otherwise be restrained and an injunction is hereby
       granted restraining the Defendant and Infinitron Research International Inc. from selling or
       otherwise disposing, charging or transferring any shares evidencing the Defendant's interest in
                                                                                                        216

       INFINITRON RESEARCH INTERNATIONAL INC. or any part thereof (the "Shares"); AND THAT the
       Defendant and Infinitron Research International Inc. shall forthwith cause to be delivered to
       McRae Holmes & King at 1300-1111 West Georgia Street in Vancouver, British Columbia or such
       persons as this court deems appropriate, a duly issued share certificate representing the
       Defendant's interest in INFINITRON RESEARCH INTERNATIONAL INC.

       4. Costs.

18 The threshold question is whether ss. 14 and 15 of the Judgments Act, 1838 apply to the shares of
Infinitron Research International, Inc.

19   The debate focuses on the words in s. 14 of the Judgments Act, 1838:

       ...Shares of or in any Public Company in England (whether incorporated or not)...

20 Mr. Niemela, on behalf of the defendant, submits that in order to make the Judgments Act, 1838
applicable to British Columbia "England" should be replaced by "the province" or by "British Columbia".
If this is done, it is said, the wording in the Judgments Act, 1838 and in s. 64 of the Court Order
Enforcement Act, R.S.B.C. 1996, c. 78 is almost identical. Section 64 reads as follows:

       64. All stock, shares and dividends of shareholders in an incorporated company in British
       Columbia that has transferable joint stock or shares must be held to be personal property, and
       are liable to genuine creditors for debts, and may be attached, seized and sold under writs of
       execution in a similar manner as other personal property.

The significant words in s. 64 are:

       64. All...shares...in an incorporated company in British Columbia...

21 Referring to Vancouver A & W Drive-Ins Ltd. v. United Food Services Ltd. (1981), 38 B.C.L.R. 30
(S.C.B.C.), Mr. Niemela submits that the Court in that case held that a writ of seizure and sale pursuant
to the Court Order Enforcement Act was not able to be used to seize shares in a federal company. Mr.
Niemela further submits that if the wording in the Court Order Enforcement Act precludes seizure of
shares pursuant to a writ of seizure and sale then the identical wording should preclude charging of
federal shares pursuant to a Judgments Act, 1838 charging order.

22 In the Vancouver A & W Drive-Ins Ltd. case the plaintiff recovered judgment against one
Komarnisky who was the beneficiary of a self-directed Registered Retirement Savings Plan. The
investments comprising the R.R.S.P. fund consisted of "publicly traded shares of Canadian companies"
plus some cash. In pursuance of its judgment the plaintiff served a garnishing order on the trustee of
the R.R.S.P. The trustee declined to act on the garnishing order because it felt that the R.R.S.P. and the
securities comprising the same were not exigible pursuant to the order. A writ of seizure and sale was
then issued directing the sheriff to seize and sell the securities held in or under the R.R.S.P. The sheriff
refused to seize the funds under the writ until the matter was settled. The plaintiff applied to the Court
for a declaration that the funds were exigible by garnishment or seizure, an order for the appointment
of a receiver, and an order for the sale of the proceeds of the fund. The question for determination by
the Court was whether or not the R.R.S.P. was "exigible under the Court Order Enforcement Act,
R.S.B.C. 1979, c. 75, by way of garnishing order against the trustee thereof, by way of a writ of seizure
and sale thereof, or by other process pursuant to judgments recovered against the beneficiary by the
plaintiffs ...".

23 Mr. Justice Fulton, in giving judgment in the Vancouver A & W Drive-Ins Ltd. case, held that under
the Court Order Enforcement Act only shares of companies incorporated in British Columbia were
                                                                                                        217

exigible by way of seizure and sale under a writ of execution. This is what Fulton J. wrote at pp. 39-40
of the report:

       ... On the face of it, then, the interest of the judgment debtor in the shares forming part of the
       fund is property and the shares should be subject to seizure and sale under a writ of execution.

       However, a problem arises in that, although the Court Order Enforcement Act indeed specifically
       provides (s. 58) that stock and shares in an incorporated company shall be held to be personal
       property and may be seized and sold under a writ of execution in the same way as "other
       personal property", the reference is to

               58. ... shares ... in an incorporated company in the Province ...

       Again, I would have endeavored to see if some interpretation of these words could be found
       which does not have the effect of providing that it is only the shares of provincially-
       incorporated companies which are so subject to seizure and sale. For it seems entirely
       anomalous that a person who has confined his investments to shares in companies
       incorporated outside the province – even though they are publicly traded so that sale and
       transfer poses no problem – should be able to shield those assets from seizure and sale at the
       instance of judgment creditors under the Court Order Enforcement Act, whereas shares in
       provincially-incorporated companies are not so shielded. However, when s. 58 is considered
       together with ss. 59 to 62 which immediately follow it, the conclusion is inescapable that the
       legislation is confined, so far as seizure and sale of shares under a writ of execution is
       concerned, to shares of companies incorporated in this province.

       Insofar as this fund may consist of shares in companies which are incorporated elsewhere, then,
       I must conclude that the remedy of seizure and sale by writ of execution is not available to the
       judgment creditors here with respect thereto.

24 Mr. Justice Fulton went on to conclude that although the shares could not be seized under s. 58 of
the Court Order Enforcement Act, as it then read, the shares were exigible by other means, namely, by
way of equitable execution. Fulton J. appointed a receiver of Komarnisky's interest in the fund and in
the investments and monies comprising the fund and directed the sale by the receiver of the
investments.

25 Mr. Mills, on behalf of the plaintiff, submits that the Vancouver A & W Drive-Ins Ltd. case was
either wrongly decided with respect to the interpretation of s. 58 of the Court Order Enforcement Act
or is distinguishable from the situation at bar. The words "in the Province" in s. 58 could refer to
"corporate presence sufficient for service of process", it is said: E. Edinger, "Execution Against Shares in
British Columbia" in M.A. Springman and E. Gertner, eds., Debtor-Creditor Law: Practice and Doctrine
(Butterworth & Co. (Canada), 1985. It is argued that Mr. Justice Fulton's interpretation of s. 58, that
shares subject to execution by writ are limited to those of companies incorporated in the Province, is
much narrower than is necessary: The Law Reform Commission of British Columbia, Report on
Execution Against Securities (LRC 116) March 1991, and is inconsistent with decisions of other courts
relating to virtually identical legislation in other jurisdictions.

26 Mr. Mills submits that the Vancouver A & W Drive-Ins Ltd. case is distinguishable because it does
not involve any consideration of the Judgments Act, 1838, or of statutory charging orders. That case, it
is said, must be confined to the application of s. 64 of the Court Order Enforcement Act and the
remedies therein considered, that is, writs of execution and the appointment of an equitable receiver.
The case does not preclude the operation of a statutory charging order under the Judgments Act, 1838
against shares in a Canada Business Corporation Act company having its head office or register of
members in British Columbia, it is argued.
                                                                                                         218

27 The issue under consideration on the application before me is fairly narrow. On July 5, 1999 Mr.
Justice Lowry, on an ex parte application, granted the plaintiff an order nisi pursuant to the Judgments
Act, 1838 charging the defendant's interest in certain shares of Infinitron Research International, Inc.
with payment of $114,297.10 plus post judgment interest thereon and costs. The defendant, within the
six month period set out in the order, has applied to show cause why the order nisi ought not to be
made absolute. The plaintiff, on the other hand, seeks to have the order made absolute. A question
which is fundamental to the determination of the matter is whether a charging order made under the
Judgments Act, 1838 applies to the shares of a federally incorporated company.

28 I pause to note that because of the way the case was argued before me the question is essentially
one of interpreting the statute. Constitutional issues relating to the division of powers were not raised,
although, in interpreting provisions of the Judgments Act, 1838, it is necessary to bear in mind that the
Act was passed by the Imperial Parliament in the context of a unitary state.

29 I would also note that it is clear from a reading of the decision in the Vancouver A & W Drive-Ins
Ltd. case that the Court there did not address the applicability of the Judgments Act, 1838. The
question before Mr. Justice Fulton in that case related to the exigibility under the Court Order
Enforcement Act by way of a writ of seizure of the investments comprising an R.R.S.P. fund and
consisting of publicly traded shares of Canadian companies. In the case at bar the question is whether a
charging order may be made under the Judgments Act, 1838 with respect to the shares of a federally
incorporated company which has its head office and share register located in British Columbia.

30 In reaching his decision that a writ of seizure issued under the Court Order Enforcement Act was
confined to shares of companies incorporated in British Columbia Mr. Justice Fulton based his decision
on his interpretation of s. 58 of the Act which then read in part:

       58. ... shares ... in an incorporated company in the Province ... .

31   The wording of s. 14 of the Judgments Act, 1838, under consideration here is:

       ... shares of or in any Public Company in England (whether incorporated or not) ...

32   The two provisions are markedly similar.

33 They are also somewhat vague. To borrow observations made by the Law Reform Commission
(B.C.) in its Report, above, the phrase "in England" or "in the Province" could refer to the company or to
the shares or both.

34   In my judgment the order nisi charges the defendant's interest in the shares in question here.

35 I do not know where the defendant's certificates evidencing his shares in Infinitron Research
International, Inc. are located, that is, whether they are physically situate in British Columbia. That is so
because the defendant has refused to tell the plaintiff where the certificates for those shares are.
Nonetheless, it is in British Columbia that the shares can be effectively dealt with because it is here that
the share registry is located: Brassard v. Smith [1925] A.C. 371 (P.C.), at p. 276; Baelz v. Public Trustee
[1926] 1 Ch. 863, at p. 869. The shares, in my opinion, are "in British Columbia".

36 Moreover, I do know from the evidence that the head office and share register of Infinitron
Research International, Inc. are located in British Columbia. The company, then, is "in British
Columbia". I do not read s. 14 of the Judgments Act (1838) as requiring that the company be
incorporated in the Province in order to fall within that provision.

37 These conclusions, in my view, are consistent with the decisions of the Manitoba Court of Appeal
in Goodbun v. Mitchell [1929] 3 W.W.R. 622; of this Court in Re Patmore (Cestui Que Trust) (1962), 39
                                                                                                        219

W.W.R. 460 (S.C.B.C.); and of the Ontario High Court in Morayniss v. McArthur (1980), 116 D.L.R. (3d)
158 (O.H.C.)

38 Referring to the Manitoba equivalent of s. 64 of the British Columbia Court Order Enforcement Act
Mr. Justice Fullerton, in the Goodbun case, wrote at p. 624:

       Now while it is by no means clear what the Legislature intended by the words "other company
       in Manitoba" in the above section, this much at least is clear from reading secs. 15 and 16, that
       it is only the shares of a company which has a place within Manitoba where service of process
       may be legally made upon it that can be seized by the sheriff. The company in the present case
       is incorporated under the Dominion Companies Act [now R.S.C., 1927, ch. 27] with its head
       office at the city of Toronto. There is nothing in the material to show that it has any place for
       service in Manitoba.

39 In the case of Re Patmore (Cestui Que Trust) the late Mr. Justice Sullivan of this Court held that
"street certificates" for shares in a foreign company "now in court" were exigible in British Columbia
notwithstanding the corporation had moved its base of operations to the United States some years
before.

40 In Morayniss v. McArthur Mr. Justice Hollingworth held that under the Ontario equivalent of ss.
14 and 15 of the Judgments Act, 1838, shares in a corporation with a head office outside Ontario were
subject to a charging order.

41 The defendant further opposes an order making the order nisi absolute on the ground that an
order absolute charging order cannot be made in the original action in which the order nisi absolute
has been made. Mr. Niemela refers to Leggott v. Western (1984), 12 Q.B.D. 287; Kolchmann v. Meurice,
[1903] 1 K.B. 534 (C.A.); Herold v. Budding (1916), 37 O.L.R. 605.

42 Whilst those cases may support the proposition that an order absolute cannot be enforced by an
order made in the original action, a point I need not decide, I am satisfied that the order nisi made in
this proceeding may be made absolute in this proceeding.

43 The defendant refers to s. 74 of the Canada Business Corporations Act, R.S.C. 1985, Chap. c-44
which provides:

       74. No seizure of a security or other interest evidenced thereby is effective until the person
       making the seizure obtains possession of the security.

44 This section, the defendant says, precludes a statutory charging order being made under the
Judgments Act, 1838 as against shares under the Canada Business Corporations Act.

45 The short answer, in my judgment, is that a charging order is not an order for the seizure of
property and thus s. 74 has no application at this present stage.

46 The defendant also applies to have the order nisi set aside on the ground the plaintiff, in seeking
that order on an ex parte application, failed to disclose to Mr. Justice Lowry that the parties had been
before Mr. Justice Tysoe one week earlier on an application for an order for the delivery and sale of the
shares in question, that the plaintiff was at liberty to re-set that application, and that Mr. Justice Tysoe
had referred to the plaintiff's "lack of vigour" in executing on its judgment thus obviating the urgency
or need for an ex parte application before Mr. Justice Lowry.

47 I have read the transcripts of the proceedings before Mr. Justice Tysoe on June 29, 1999 and
before Mr. Justice Lowry on July 5, 1999. I conclude there was no material non-disclosure by the
                                                                                                      220

plaintiff which would have affected the outcome of the application before Mr. Justice Lowry.

48 The relief sought before Mr. Justice Tysoe was not relevant to the application for a charging order.
Moreover, Mr. Justice Tysoe did not grant or refuse the relief being sought; he adjourned the
application so that the plaintiff could re-set the application if counsel found legal authority to support
his position. With respect to appearing without notice to the defendant on the application before Mr.
Justice Lowry, this is what the Judgments Act, 1838 prescribes. Section 15 of the Act states:

        That every Order of a Judge charging ... any Stock or Shares in any Public Company, under this
        Act, shall be made in the first instance ex parte ... .

49 In the result the defendant's applications are dismissed. The plaintiff is entitled to an order
making absolute the order made by Mr. Justice Lowry on July 5, 1999, charging the interest of the
defendant in the shares of Infinitron Research International, Inc. with payment of $111,878.88, being
the amount due from the defendant to the plaintiff on the judgment of this Court dated June 4, 1998,
and post-judgment interest thereon pursuant to the Court Order Interest Act.

50    The plaintiff is entitled to its costs of this application.

SCARTH J.




                                               (3) Exemptions



                                          Re Lee and Rathsburg et al.
                                   86 D.L.R. (3d) 691, [1978] B.C.J. No. 1225

The judgment of the Court was delivered by

1 CRAIG, J.A.: – This is an appeal from an order of a Judge in Chambers directing the appellant to
deliver up possession of a 1966 Cadillac automobile to the judgment debtor.

2 At the opening of the appeal, D. Morris announced that he was appearing as counsel for the
Director of Debtor Assistance, pursuant to the provisions of the Debtors Assistance Act, 1974 (B.C.), c.
25. After hearing submissions from Mr. Morris, we decided for the reasons given by Seaton, J.A., that
the Director did not have any status to appear on this appeal.

3 In 1977, Derek Tahmasebi obtained a judgment against the judgment debtor in the sum of $4,010
and on November 14, 1977, his solicitor obtained a writ of seizure and sale. On November 16, 1977, the
Sheriff, acting on the authority of the writ, seized an automobile registered in the name of the
judgment debtor. On November 23rd, the Sheriff received notice in writing from the judgment debtor
stating that he claimed the automobile as exempt from seizure pursuant to s. 25 [am. 1974, c. 87, s. 13]
of the Execution Act, R.S.B.C. 1960, c. 135, because it had a value of only "approximately $500". On
November 28th, the other two judgment creditors obtained a warrant of execution with regard to a
judgment which they had obtained against the judgment debtor.

4    The Sheriff applied for relief by way of interpleader.

5    The Chambers Judge held that the automobile was exempt from seizure and directed the Sheriff to
                                                                                                         221

return the automobile to the judgment debtor. In his reasons for judgment, he said as follows:

       By s. 26 of this statute, a debtor whose goods have been seized by the Sheriff under a writ of
       execution may select such of the seized goods as he wishes to retain up to the value of the
       statutory exemption, which is $2,000: and the Sheriff is required to allow him to do so. The
       debtor is obliged to make his selection within two days of the seizure.

       The judgment creditor takes the position that the debtor must claim his exemption within the
       two days limited for making his selection. Mr. Morris (whose standing in this matter is
       somewhat ill-defined, but I shall regard him as amicus curiae) says that this limitation applies
       only to selection and that exemption may be claimed within any reasonable time.

       The point seems to be a novel one; that it arises at all is the novelty of it. The statute is entirely
       silent as to any time from the seizure within which exemption is to be claimed: it is specific only
       as to the time within which selection must be made. Exemption and selection are different
       things entirely.

       Here there is no question of selection, the chattel seized being of less value than $2,000; and so
       it is exempt from seizure by itself. In the absence of any specific time limit, the debtor may
       claim it as exempt within any time that is reasonable in the circumstances: see the observations
       of Martin, J.A., in Fletcher v. Pendray (1916), 27 D.L.R. 637, 10 W.W.R. 444, 22 B.C.R. 566.

       Here the exemption was claimed within eight days of seizure; a perfectly reasonable time within
       which a debtor should act where his goods are not perishable. The Sheriff ought, then, to
       withdraw from possession forthwith. No order as to costs.

6   Section 25 (1) of the Execution Act provides:

       25(1)Subject to subsections (2) and (3), the goods and chattels of any debtor, at the option of
       such debtor, or, if dead, of his personal representatives, are exempt from forced seizure or sale
       by any process at law or in equity to the value of two thousand dollars.

7   Section 26(2) [am. idem] of the Act provides:

       26(2) Every debtor whose personal property has been seized as aforesaid may, within two days
       after the seizure or notice thereof, whichever is the longer time, select goods and chattels to
       the value of two thousand dollars from the personal property so seized, and thereupon, if a list
       of the selected articles has not been delivered to the Sheriff or other officer by the debtor, the
       Sheriff or other officer shall make a written list thereof, a copy of which he shall give to the
       debtor.

8 Counsel for the appellant submits that (1) the Act does not distinguish between "exemption" and
"selection"; (2) s. 25(1) and s. 26(2) must be read together and that, therefore, a judgment debtor must
claim an exemption "within two days after the seizure or notice thereof, whichever is the longer time"
notwithstanding the fact that the value of the chattel or chattels seized is less than $2,000.
Notwithstanding this contention, counsel for the appellant says that he prefers to rest his appeal on a
narrower basis and that even if the Act distinguishes between the "exemption" referred to in s. 25 and
the "selection" referred to in s. 26 and that if, therefore, a judgment debtor need not make a
"selection" in the case of seized goods which have a total value of less than $2,000 he must, at least,
exercise his option within a reasonable time, and certainly no later than the time of an interpleader
application by the Sheriff, and that in exercising his option he must establish that the goods do not
have a total value exceeding $2,000. He has referred to several decisions dealing with somewhat
similar legislation, including two previous decisions of this Court: Roy v. Fortin (1915), 25 D.L.R. 18, 9
W.W.R. 407, 22 B.C.R. 282: Fletcher v. Pendray (1916), 27 D.L.R. 637, 10 W.W.R. 444, 22 B.C.R. 566,
                                                                                                      222

particularly the judgment of Martin, J.A., at p. 638 D.L.R., p. 445 W.W.R. (upon which the learned
Chambers Judge relied).

9    Counsel for the appellant pointed out that these two judgments may appear to conflict.

10 They dealt with ss. 17 and 18 of the Homestead Act, R.S.B.C. 1911, c. 100. Section 17 of that Act
provided in part:

        17. The following personal property shall be exempt from forced seizure of sale by any process
        at law or in equity; that is to say, the goods and chattels of any debtor at the option of such
        debtor, or, if dead, of his personal representative, to the value of five hundred dollars ...

11 Section 18 of the Act was similar to s. 26(2) of the Execution Act in that it provided that within two
days of the seizure of goods and chattels a judgment debtor could select goods and chattels to a value
up to $500 and that the Sheriff should give up possession of these selected goods and chattels if he was
of the opinion that they did not exceed a value of $500.

12 In Roy v. Fortin, MacDonald, C.J.A., pointed out that the right to exemption under s. 17 was a
"special privilege" which the judgment debtor "might insist upon or not at his option". He said that s.
18 provided a procedure "to be followed in the selection of the goods". In Fletcher v. Pendray, the
Sheriff seized goods of a total value of less than $500 and sold them, although the judgment debtor
claimed that they were exempt from seizure. The Court held that the sale was illegal. At p. 638 D.L.R.,
p. 445 W.W.R., Martin, J.A., referred to s. 17 and said that "No question of selection under s. 18" arose.

13 A careful reading of the judgments in that case does not justify the conclusion that there is a
distinction between "exemption" and "selection". The judgment in Fletcher v. Pendray, proceeds on
the premise that the exemption was "rightly claimed", per MacDonald, C.J.A., at p. 637 D.L.R., p. 444
W.W.R. This suggests that the judgment debtor made his claim for exemption in compliance with the
Act.

14    In Roy v. Fortin, MacDonald, C.J.A., said at p. 19 D.L.R., p. 409 W.W.R.:

        The intention is clear that the debtor is to make his claim at once, and any dispute is to be
        summarily decided, so that the sheriff may proceed to execute his writ without uncertainty.

        The suggestion that it is made the duty of the sheriff in default of a claim by the debtor to set
        aside $500 worth of goods as an exemption in favour of the debtor finds no sanction in any part
        of the Act and is against the whole tenor of it.

15    I, with respect, agree with this view.

16 In my opinion, ss. 25(1) and 26(2) should be read together. If a Sheriff seizes the goods and
chattels of a judgment debtor pursuant to a writ of execution the judgment debtor may claim
exemption from seizure of goods and chattels to the value of $2,000 providing he makes his claim
within two days of the seizure, or notice of the seizure, regardless of whether the value of the goods
seized is less, or more, than $2,000, otherwise the Sheriff would be unable to "execute his writ without
uncertainty".

17 Accordingly, I would allow the appeal and set aside the order directing the Sheriff to return the
automobile to the judgment creditor.
                                                                                                      223

                                    Royal Bank of Canada v. Nguyen
                                 [2004] B.C.J. No. 1391, 2004 BCSC 895

MASUHARA J.:—

Introduction

1 The respondents appeal a Master's decision ordering payment of $24,000 plus interest to the
petitioner from proceeds of the foreclosure of the principal residence of the respondents.

2 The critical question on this appeal is whether the respondents, having themselves sold the
property in the context of foreclosure proceedings initiated by the petitioner, are entitled to the
principal residence exemption pursuant to ss. 71.1 and 71.2 of the Court Order Enforcement Act,
R.S.B.C. 1996, c. 78 (the "Act").

Background

3 This matter originates out of credit facilities extended by the petitioner, Royal Bank of Canada (the
"Bank"), to KY Seritech Ltd. (the "Company"). The Company is controlled by the first respondent, Mr.
Khanh Phi Nguyen. As security for the credit facilities, Mr. Nguyen provided two personal guarantees to
the Bank, totalling a limit of $458,500. A third guarantee was granted to the Bank, with a limit of
$150,000, by Mr. Nguyen and his wife, the second respondent, Ms. Yen Kim Nguyen, on a joint and
several basis. Prior to signing this third guarantee, Ms. Nguyen received independent legal advice.

4 As security for the three guarantees, Mr. and Ms. Nguyen granted the Bank a $100,000 mortgage
against their principal residence (the "Property"), which they held as joint tenants. The Bank at the time
already held two other mortgages against the Property. The three mortgages together totalled
$281,000.

5 In June 2003, the Company defaulted in its obligations to the Bank under the terms of the credit
facilities. The Bank formally demanded payment from the Company on June 30, 2003, for the
outstanding amount of $440,143.22.

6 On July 9, 2003, the Company filed a Notice of Intention to Make a Proposal under the terms of the
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. Due to the failure of the Company to file a proposal,
on August 9, 2003, it was deemed to have made an assignment into bankruptcy. A receiver was
appointed. During the course of the receivership, the receiver discovered that the Company had
transferred monies and assets to a related company doing business in Vietnam. As a result of these
transfers, the Company had insufficient realizable assets to satisfy the monies owing to the Bank.

7 The Nguyens were then pursued and foreclosure proceedings were commenced against the
Property.

8 On August 11, 2003, the Bank was granted an Order Nisi in respect of the Property, with a
redemption period of six months, to expire on February 11, 2004. Judgment against Mr. Nguyen was
granted in the amount of $444,259.04, and judgment against Ms. Nguyen was granted in the amount
of $151,074.82. The judgments were registered against the title of the Property.

9 During the redemption period, Mr. and Ms. Nguyen, knowing that the Bank intended to obtain an
order for immediate conduct of sale on the basis that it believed there was no equity in the Property,
arranged a sale of the Property on their own to minimize their indebtedness to the Bank, subject to the
approval of the Bank, for the sum of $448,000. The Bank agreed to cooperate with the sale of the
Property.
                                                                                                      224

10 Out of the proceeds of sale, Mr. and Ms. Nguyen claimed and deducted the statutory principal
residence exemption amount of $24,000 pursuant to s. 71.1 of the Act. This amount was paid into the
trust account of the solicitors for the Nguyens. The balance of the proceeds, amounting to
$408,053.47, was paid to the Bank.

11 Mr. and Ms. Nguyen remain indebted to the Bank in the principal amounts of $150,985.48 and
$150,000 respectively.

12 The Bank sought payment of the $24,000 held in trust, and the parties appeared before a Master
on April 1, 2004. The Nguyens argued that they were entitled to the statutory exemption of $12,000
each. The learned Master ruled that the subject funds with accrued interest be paid to the Bank on
account of the indebtedness of Mr. and Ms. Nguyen, on the basis that proceedings in respect of a
mortgage are precluded from the principal residence exemption scheme, and that in any event the
property was sold "voluntarily" and not by seizure and sale.

13   The Nguyens now appeal that decision.

Issues

14 The parties have agreed that the scope of review for this appeal is a re-hearing on the merits:
Abermin Corporation v. Granges Exploration Ltd. (1990), 45 B.C.L.R. (2d) 188, 42 C.P.C. (2d) 25 (S.C.);
Toronto-Dominion Bank v. Mackenzie Apartments Inc., 2002 BCSC 636, [2002] B.C.J. No. 1405; and
Stoneman v. Desjardins, 2004 BCSC 57, [2004] B.C.J. No. 85.

15   The issues in this appeal are:

         1. Does section 71.1(2)(b) preclude the respondents from claiming their principal residence
         exemption under the Act?

         2. What is meant by "the principal residence of a debtor is exempt from forced seizure or sale
         by any process at law or in equity ..." in section 71.1 of the Act?

         3. Does the distribution scheme set out in section 71.2(2) of the Act preclude the respondents
         from claiming their principal residence exemption under section 71.1 of the Act?

Analysis:

16   Section 71.1 of the Act provides as follows:

         (1) Subject to section 71.2, the principal residence of a debtor is exempt from forced seizure or
         sale by any process at law or in equity if the value of the debtor's equity in the principal
         residence does not exceed a prescribed amount.

         (2) This section does not apply to

                (a) a corporate debtor, or

                (b) a debtor who is party to a proceeding in respect of a mortgage.

17   Section 71.2 provides:

         (1) If the value of the property referred to in section ... 71.1(1) exceeds the prescribed amount
         of the exemption for the property, that property is subject to seizure and sale under this Act.
                                                                                                       225

       (2) If property to which subsection (1) applies is sold under this Act, a sheriff or other officer
       must, unless otherwise provided by law or by the agreement of all interested parties, distribute
       any of the proceeds of the sale as follows:

               (a) pay firstly to a secured creditor the amount owed by the debtor to the secured
               creditor if the secured creditor

                      (i) has, at the time of seizure, a financing statement registered under the
                      Personal Property Security Act, or

                      (ii) has a charge registered under the Land Title Act;

               (b) pay secondly to the debtor an amount not exceeding the prescribed amount of the
               exemption.

       (3) The sum received by the debtor under subsection (2) (b) is exempt from attachment.

       (4) This section must not be construed as affecting the priority of a maintenance order under
       the Family Maintenance Enforcement Act.

       (5) The priority of the claim of any person referred to in subsection (2) is not prejudiced by a
       payment to anyone made in accordance with that subsection.

18 The parties agree that the respondents' equity in the Property exceeds the "prescribed amount"
in s. 71.1. They both state that the "value of the debtor's equity" in s. 71.1 refers to the net amount
remaining after deducting the claims of secured creditors with a registered charge against the Property
from the net amount that the Property would be expected to realize through sale. In this case, the
secured creditor is the Bank, which holds three mortgages over the Property, totaling [sic] a registered
charge of $281,000. Deducting that amount from the net proceeds of the Property, $432,053.47, leaves
debtors' equity of $151,053.47 in the Property. That exceeds the "prescribed amount" in s. 71.1.

19 The exemption amount of $24,000 as set out in the Court Order Enforcement Exemption
Regulation, B.C. Reg. 28/98, s. 3, is also not in dispute; the question is the Nguyens' entitlement to that
amount.

20   I will examine the issues in turn.

       1. Does section 71.1(2)(b) preclude the respondents from claiming their principal residence
       exemption under the Act?

21 The Bank submits that the respondents are precluded from claiming their principal residence
exemption due to s. 71.1(2)(b) which, it says, bars "a debtor who is party to a proceeding in respect of a
mortgage" from claiming the exemption. The issue is whether s. 71.1(2)(b) should be interpreted such
that a debtor who is party to "a proceeding in respect of a mortgage", in the broad sense of the phrase,
is precluded from claiming the exemption.

22   The approach to statutory interpretation is that:

       Today there is only one principle or approach, namely, the words of an Act are to be read in
       their entire context, in their grammatical and ordinary sense harmoniously with the scheme of
       the Act, the object of the Act, and the intention of Parliament.

See Sullivan and Driedger on the Construction of Statutes, 4th ed. (Markham, Ont.: Butterworths, 2002)
at 1.
                                                                                                       226


23   Section 8 of the Interpretation Act, R.S.B.C. 1996, c. 238, also provides:

       Every enactment must be construed as being remedial, and must be given such fair, large and
       liberal construction and interpretation as best ensures the attainment of its objects.

24 The modern principle also accords with the "ordinary meaning rule", which is the starting point of
statutory interpretation. That rule starts with a presumption that the ordinary meaning of a legislative
text is the meaning intended by the legislature, but that a court may adopt an interpretation that
departs from the ordinary meaning after considering the purpose and scheme of the legislation, and
relevant legal norms: Driedger, supra at 20.

25 At first blush, s. 71.1(2)(b) seems simple enough: the limitation to the exemption includes any
debtor who is involved in any mortgage-related proceedings. However, I turn to the purpose of the Act
and the intention of the legislature.

26 The Act itself does not contain any explicitly-stated purpose. However, the law of exemptions
dates back to 1845 England, and has long had at its heart the object that debtors should keep a portion
of their assets free from execution, allowing them to retain some essentials to maintain and have a
basis on which to re-establish themselves. [See the history outlined in Ottaway v. Ottaway (Trustee of)
(1980), 20 B.C.L.R. 313, 110 D.L.R. (3d) 231 (C.A.).] Prior to 1997 in British Columbia, the Act had
provided that debtors could keep $2,000 worth of assets in the face of execution creditors, an
exemption amount that had not been updated since 1974. When the amendments were debated at
the second reading stage in the Legislature in 1997, a brief description of the amendments and their
purpose was provided by the then Attorney General:

       The first amendments update the provisions of the Court Order Enforcement Act relating to the
       amount of a debtor's personal and family property exempt from seizure and sale. Currently,
       debtors may keep only $2,000 in personal property, a much outdated provision and far below
       the levels provided in other provinces. The provisions establish categories of exemptions which
       reflect basic needs, including household effects, clothing, equity in a motor vehicle, tools of the
       trade and limited equity in a home. The amount of these exemptions will be set by regulation in
       order to ensure that they do not become obsolete.

       These amendments are made in the spirit of justice reform and of ensuring that all British
       Columbians are treated fairly. They will level the playing field between debtors and creditors
       and, most importantly, will allow debtors to re-establish themselves and begin contributing to
       the community again. [Emphasis added.]

              [See: British Columbia, Legislative Assembly, Official Reports of Debates (Hansard), 5:14
              (5 June 1997) at 3938 (Ujjal Dosanjh)].

27 I also note a further debate on the amendments in which an opposition member made the
following statements [see British Columbia, Legislative Assembly, Official Reports of Debates (Hansard)
6:20 (11 July 1997) at 5627 (Geoff Plant)]:

       My concern really just ... I mean, I understand that the author of the amendment wanted to
       give effect to its purpose in the plainest possible language. I should be clear that the purpose as
       I stated it earlier is a purpose that I support. That is, I don't believe the government ought to be
       interfering with the rights of mortgagees for principal residences in this context. So I'm glad that
       the amendment is there....

       The second example I'll give, which I'm still troubled by, is the situation where you may have a
       debtor who is a party to a proceeding in respect of a mortgage over some property which is not
                                                                                                     227

       his principal residence and then, in those circumstances, might lose the protection for his
       principal residence, which I don't think is the intention. ...

28   The then Attorney General responded:

       ... It is my view – and I have been advised – that under the usual rules of interpretation this
       section would be read as a whole, and, of course, the mortgage would refer back to the
       principal residence. I don't believe that there is any way that a court would regard it otherwise.
       Having said so here, the intention is clear. Sometimes courts do pay some attention to what is
       said at the time the legislation is being debated in the House.

29 Finally, I note that the scheme of the Act should also be understood in the context of its
interrelationship with other statutes which affect creditors and debtors: for instance, the Personal
Property Security Act, R.S.B.C. 1996, c. 359, the Supreme Court Rules, B.C. Reg. 221/90, the Creditor
Assistance Act, R.S.B.C. 1996, c. 83, and the federal Bankruptcy and Insolvency Act, supra, s. 67.

30 Applying these principles to s. 71.1(2(b), if the words are interpreted in the manner suggested by
the Bank, it would lead to results that do not accord with the overall statutory purpose. As counsel for
the respondents submitted, creditors could circumvent the intention of the principal residence
exemption in a number of ways which could not have been intended by the Legislature. Two examples
are: judgment creditors could purchase a mortgage on title in order to preclude the debtor from
claiming its principal residence exemption; and a trustee in bankruptcy could bargain with secured
parties to ensure a foreclosure proceeding was initiated against a debtor to make certain that monies
otherwise protected would be available for distribution to creditors.

31 In my view, in enacting s. 71.1(2)(b), the Legislature did not intend to preclude all persons
involved in mortgage-related proceedings from claiming the principal residence exemption. That is an
overly broad interpretation as it would bar the bulk of debtors from claiming the exemption, in stark
contrast to the statutory purpose, which is to provide debtors with a means of re-establishing
themselves in society. That purpose has sound economic and social policy grounds. To interpret s.
71.1(2)(b) as the Bank suggests would be to make the principal residence exemption virtually
meaningless.

32 The appropriate interpretation of s. 71.1(2)(b) in my opinion is that it precludes a debtor from
claiming his or her exemption as against a mortgagee with respect to monies owed pursuant to the
mortgage. That interpretation is consistent with the statutory scheme and purpose. In this case, the
debt at issue is not monies owed pursuant to a mortgage, but rather amounts related to guarantees on
which the Bank has obtained judgments and registered against the Property.

33 I find that s. 71.1(2)(b) does not preclude the respondents from asserting their principal residence
exemption in the case at bar.

       2. What is meant by "the principal residence of a debtor is exempt from forced seizure or sale
       by any process at law or in equity ..." in respect of section 71.1 of the Act?

34 The Bank argues that s. 71.1 does not apply here because (a) the sale of the Property was a
voluntary sale arranged by the respondents; and (b) the sale took place in the context of foreclosure
proceedings and not execution proceedings under the Act.

35   The Master accepted the latter argument in her reasons, at [paragraph] 7-8:

       Section 71.1 of the Court Order Enforcement Act, when read with s. 71.2, in my opinion,
       suggests that if the value of the debtors' equity in the residence does not exceed $24,000, then
       the principal residence is exempt from seizure.
                                                                                                          228


       In the case before me, the equity is the value less the hundred thousand dollar mortgage.
       Section 71.2 refers to a principal residence whose equity exceeds the exemption set out in s.
       71.1. Like s. 71.1, s. 71.2 specifically refers to seizure and sale; and further, in s. 71.2, s-s. 2,
       specifically refers to being sold under this Act; and that a sheriff or other officer must distribute
       the proceeds in a designated manner under that section. [Emphasis added; error in section
       numbers corrected for clarity.]

36 The Nguyens submit that the sale of the Property was a "forced sale" within the meaning of s.
71.1 of the Act and as such they are entitled to assert their principal residence exemption.

       (a) Is the exemption available for a voluntary sale of the property?

37 Section 71.1(1) stipulates that the exemption applies only to principal residences sold by "forced
seizure or sale". Thus, if a debtor voluntarily sells his or her principal residence, ss. 71.1 and 71.2 do not
apply.

38 The key issue in this case is the characterization of what circumstances amount to a "forced" or a
"voluntary" sale. This question has been considered in other Canadian jurisdictions but not, to my
knowledge, in British Columbia. The amendments to the Act are relatively new and have received little
judicial attention. Counsel have referred to authorities arising out of Alberta and Saskatchewan to cast
light on the B.C. statutory regime.

Saskatchewan

39 The Nguyens rely on a line of Saskatchewan cases: McNabb (Trustee of) v. McNabb (1979), 2
Sask.R. 119, 33 C.B.R. (N.S.) 243 (C.A.); Canada (Attorney General) v. Schmidtz (1983), 28 Sask.R. 205,
49 C.B.R. (N.S.) 155 (Q.B.); and Re Balkwill (1999), 181 Sask.R. 48, 9 C.B.R. (4th) 204 (Q.B.).

40 The statutory provision considered in most of the cases cited is the Saskatchewan Exemptions Act,
R.S.S. 1978, c. E-14, s. 2(1)(11):

       The following real and personal property of an execution debtor and his family is declared free
       from seizure by virtue of writs of execution, namely: ...

               (11) the house and buildings occupied by the execution debtor and also the lot or lots on
               which they are situated according to the registered plan thereof to the extent of
               $32,000; ...

While the Saskatchewan statute does not use the language of "forced seizure or sale", the issue of
voluntary vs. forced sale has often arisen because of the principle established in Saskatchewan that a
debtor should not receive the exemption if he or she voluntarily converts the property to non-exempt
property. That is, the sale of exempt property (a principal residence) converts that property into non-
exempt property (cash on hand).

41     In McNabb, supra, the bankrupts defaulted in mortgage payments and the mortgagee
commenced foreclosure proceedings. The bankrupts then sold the homestead property, deposing that
they would never have consented to sell the property but for the bankruptcy proceedings and the
inability to make payments. The Saskatchewan Court of Appeal considered the distinction between a
voluntary sale and a forced sale of the property, at [paragraph] 21:

       It is clear from the authorities I have canvassed that if McNabb had allowed the foreclosure
       proceedings to continue, resulting in a forced sale of his home, he would be entitled to his
       exemption out of the proceeds. I am not satisfied on the evidence that he agreed to a
                                                                                                         229

          "voluntary" sale of his homestead ....

42 Likewise, in Schmidtz, supra, foreclosure proceedings were commenced on the bankrupts' home.
The bankrupts sold the home in an attempt to obtain a higher price than would be realized at a judicial
sale. They intended to use their exemptions to purchase another home. The Court ordered that the net
proceeds of the sale of the home were exempt. The Court followed McNabb, supra, and stated the
rationale for its decision at [paragraph] 6-7:

          If the property of a bankrupt is exempt, the proceeds from a sale of that property are also
          exempt, provided the bankrupt was forced to sell it. In [McNabb, supra], the Saskatchewan
          Court of Appeal defined a "forced" sale. They said a sale could not be considered a voluntary
          one if the bankrupt was under pressure to sell his property – as a result of foreclosure
          proceedings – and he agreed to the sale on the assumption he would receive his exemption,
          and he did not waive or abandon his right to claim his exemption.

          On the authority of [McNabb], supra, the bankrupts are entitled to claim the proceeds of the
          sale of their home as exemptions in the bankruptcy proceedings. They were under pressure to
          sell their home, as a result of foreclosure proceedings. They sold on the assumption they would
          not lose their exemptions, and there was no waiver or abandonment of their right to claim their
          exemptions. [Emphasis added.]

43 The Court in Re Balkwill, supra, reached the same conclusion where, prior to assignment into
bankruptcy, the bankrupt sold his principal residence to facilitate a matrimonial settlement. The
trustee challenged the bankrupt's right to an exemption in the proceeds of sale, arguing that the funds
were not exempt because they were cash on hand at the date of the bankruptcy. The Court considered
the Alberta cases to the contrary (see below), but concluded at [paragraph] 26:

          Even though in this situation the sale of the house occurred prior to bankruptcy, I do not find
          that the sale was voluntary based upon the evidence.

The crucial consideration there was that the bankrupt had sold the home under court order in the
divorce matter, and it was thus "forced".

Alberta

44 A line of Alberta cases has construed the concept of "forced" sale more strictly than in
Saskatchewan. The Bank referred me to: Regal Distributors Ltd. v. Freele, [1931] 1 D.L.R. 943 (Alta.
C.A.); Re McAteer (1981), 32 A.R. 248, 38 C.B.R. (N.S.) 217 (Q.B.); Alberta (Treasury Branches) v. Wilson
(Trustee of) (1996), 37 Alta. L.R. (3d) 260, 38 C.B.R. (3d) 245 (C.A.); Re Sawatsky (2001), 94 Alta. L.R.
(3d) 378, 28 C.B.R. (4th) 116 (Q.B.); and Vysek v. Nova Gas International Ltd., 2002 ABQB 389, 4 Alta.
L.R. (4th) 269. I note that the Alberta law in this area has historically been fraught with contradictions
and apparently conflicting cases.

45 Most of the cases considered the Alberta Exemptions Act, R.S.A. 1980, c. E-15, s. 1(1)(k), which
provided:

          (1) The following real and personal property of an execution debtor is exempt from seizure
          under a writ of execution: ...

                 (k) the house actually occupied by the execution debtor and buildings used in
                 connection with it, and the lot or lots on which the house and buildings are situated
                 according to the registered plan thereof, if the value of the house, building and the lot or
                 lots does not exceed $40,000, but if the value does exceed $40,000, the house, building
                 and lot or lots may be offered for sale and if the amount bid at the sale after deducting
                                                                                                        230

               all costs and expenses exceeds $40,000 the property shall be sold and the amount
               received from the sale to the extent of the exemption shall be paid at once to the
               execution debtor and is until then exempt from seizure under any legal process, but the
               sale shall not be carried out or possession given to any person until the execution debtor
               has received $40,000.

46 Regal Distributors, supra, was the starting point for this line of cases. In that case, the plaintiff was
an execution creditor of the defendant, who sold his house which was exempt from execution. The
Court stated:

       The section expressly extends the exemption to the portion of the purchase-money to which
       the debtor is entitled until it reaches his hands in the case of a forced sale of it under execution
       which confirms the view that no such extension was intended in the case of a voluntary sale.

47 Regal Distributors was followed in McAteer, supra. The debtor found himself in arrears of
mortgage payments and subject to a builders' lien on his principal residence. He decided that his best
option was to sell the home because a forced sale was likely imminent. A few days after the sale, he
made an assignment into bankruptcy and claimed his principal residence exemption. The question for
the Court was whether the proceeds of sale of exempt property remain exempt when the sale occurs
before the assignment into bankruptcy. It was in that context that the Court found that if the debtor
converts exempt property into non-exempt property, the exemption is lost. At [paragraph] 49-52, the
Court considered but rejected the Saskatchewan approach taken in McNabb, supra:

       In my view, Re McNabb is not sound law in this province. A "voluntary sale" as used in the cases
       is used in contradiction to a "forced sale". A forced sale is, in my view, a sale of the property as
       the result of the actions of a third party, such as a mortgagee, a builders [sic] lien claimant, an
       execution creditor ..., a co-owner through partition or sale, or a trustee in bankruptcy. A forced
       sale is one where the property is, as it were, sold out from under the debtor.

       A voluntary sale is, on the other hand, a sale by the debtor himself. ...

       ... When the debtor himself sells the property it necessarily follows he intended to abandon the
       property as homestead property.

       In my view, the reason why the debtor sells the property is irrelevant to intention. The debtor
       may sell the property because of financial difficulties. The debtor may sell the property because
       of matrimonial difficulties. The debtor may sell the property because his employer has
       transferred him to another city. The debtor may sell the property because he must move to
       warmer climates for health reasons. The debtor may sell the property because he must move to
       another city for family reasons. There may be any number of reasons why the debtor sells. The
       reasons are irrelevant. The issue is, did the debtor intend to abandon the property as
       homestead property. The answer has to be yes, where the debtor himself sells.

In other words, the Court's view was that a forced sale is one made by a third party, while a voluntary
sale is one made by the debtor, whose motives are irrelevant. In that case, however, the Court was
concerned with the abandonment of the property, because the sale resulted in the debtor voluntarily
vacating the property.

48 This conclusion was re-stated by Bielby J. in Starko v. Starko (1992), 134 A.R. 48, 16 C.B.R. (3d) 236
(Q.B.). In matrimonial proceedings, a court order had been made directing the sale of the matrimonial
home. The wife made an assignment in bankruptcy immediately before the sale of the home and
claimed her exemption. Bielby J. held that even though the sale had been "forced" by court order, it
was still "voluntary" for the purposes of the statute:
                                                                                                       231

       Notwithstanding the somewhat casual use of the word "forced" by some authorities to describe
       the sort of sale giving rise to a continued exemption, I find that the exemption does not follow
       sale proceeds for every forced sale, i.e. for every sale ordered by a Court. Rather, it follows only
       those sales contemplated expressly by the Exemptions Act, supra., i.e. sales pursuant to seizure
       under writ of execution or, possibly, other sales under legislation designed to protect the
       vendor's creditors.

49 I also note that the respondents suggested that Alberta will no longer be taking a narrow
approach to principal residence exemptions, on the authority of recent amendments to the Alberta
Civil Enforcement Act, R.S.A. 2000, c. C-15, and Civil Enforcement Regulation, Alta. Reg. 276/95, and
Alberta Treasury Branches v. Samco Holdings Ltd., 2003 ABQB 963, [2003] A.J. No. 1506 at [paragraph]
86-87. It is not necessary for me to consider the merits of that argument. I would leave it for another
case where the Alberta statutes and case law are more properly analyzed.

Application to the Case at Bar

50 Counsel suggested that if the Saskatchewan cases were applied here, the sale would be a "forced"
sale because it was made in the context of the Bank commencing foreclosure proceedings and seeking
an order for conduct of the sale of the Property. If the Alberta cases are applied, the conclusion would
be the opposite.

51 I note that many of the cases cited arose in a bankruptcy situation, which is not the case here.
Although the Company has made assignment into bankruptcy, the individual respondents have not.
Therefore, the cases cited are not relevant to the extent that their conclusions depend on the
proposition that an exemption crystallizes at the moment of assignment into bankruptcy. Many of the
cases also dealt with the question of abandonment, which is not at issue here. However, the cases are
useful insofar as they speak to the definition of "forced" vs. "voluntary" sales.

52   I find that the Saskatchewan line of cases are persuasive, for three main reasons.

53 First, although Regal Distributors, supra, has been the seminal case in Alberta on other points of
law, I do not find it particularly illuminating on this particular question. There the plaintiff was an
execution creditor rather than a mortgage-holder, and there was no suggestion that there was any
immediate legal pressure on the defendant to sell the property.

54 Second, the Alberta cases are molded [sic] by the particular language of the Alberta statute at the
time, which differed from the British Columbia Act. The Alberta statute required that sales be forced
under a "writ of execution". As noted in Starko, supra, the rationale for the McAteer finding, supra, was
that the exemption applied only to sales forced under a writ of execution and not to those forced by
other legal processes, such as foreclosure. (That same statutory language was not important for the
Saskatchewan courts but it was central to the Alberta courts' analysis.)

55 The Act differs from both the Saskatchewan and Alberta exemption statutes considered in the
authorities. Both stipulated an "execution debtor" and a "writ of execution". In contrast, the Act
provides that the exemption is available to a "debtor" facing forced seizure or sale "by any process at
law or in equity". My view is that the British Columbia legislature intended to extend the principal
residence exemption broadly to a wide range of debtors. I also note that the word "debtor" is defined
for the purposes of the exemption provisions (ss. 71-78) in s. 70, as follows:

       "debtor" includes the personal representative of the debtor if the debtor is dead, and in case of
       the absence of the debtor, includes any member of the debtor's household;

In contrast, s. 47 of the Act provides more specific definitions of "judgment debtor" and "execution
debtor" for the purposes of Part 5 of the Act, which deals generally with the enforcement of court
                                                                                                        232

orders.

56 Third, in my view, it would not be in keeping with the spirit and purpose of the Act if a restrictive
or technical interpretation were applied to ss. 71.1-71.2. When faced with an impending "forced" sale,
it would be unduly technical to preclude debtors who are able to retain conduct of the sale (and
thereby mitigate their losses) from claiming the principal residence exemption. I think a fair and liberal
interpretation gives better effect to the Act's goal of allowing debtors to retain some funds upon which
they can maintain and re-establish themselves, which has positive effects not only on individual
debtors but also on British Columbian society and economy as a whole.

57 I do not wish to be taken as setting out a hard and fast rule that "forced seizure or sale" must
always include sales arranged by debtors who face impending foreclosure proceedings. The question of
whether the sale was "forced" may vary from debtor to debtor, and will depend on the evidence
adduced. In some rare cases, despite impending foreclosure proceedings, the evidence may establish
that a sale was in essence voluntary. In this case, I find that the sale cannot be said to have been truly
voluntary. The sale of the Property was in the realm of certainty and the only question was by which
party. The respondents took the initiative to take conduct of sale in order to mitigate their losses.

          (b) Is the exemption available for property sold in foreclosure proceedings?

58 I have already noted that s. 71.1 of the Act refers to "forced seizure or sale by any process at law
in equity". In my view, that is sufficient to extend the exemption to a "forced" sale in the context of
foreclosure proceedings. Therefore, s. 71.1(1) of the Act applies, as does s. 71.2(1).

59 Section 71.2(2) then provides that the proceeds of sale must be distributed by "a sheriff or other
officer" if the property is sold "under this Act". The point raised by the Bank is whether voluntary sales
can be said to be property sold "under this Act". The Bank suggests that property sold "under this Act"
is property sold pursuant to the statutory procedure in ss. 92-112 of the Act.

60 In my view, such a narrow interpretation is neither in line with the statutory purpose, nor is it
practical. In s. 71.2(2), the Act sets out the procedure that applies when property is sold pursuant to ss.
92-112. However, it cannot be that an exemption to which a debtor is otherwise entitled is lost solely
because a certain process of sale was not followed. The kernel of the Act is to provide the exemption to
debtors. It creates a process for obtaining an order for sale, but that process is incidental rather than
critical to the entitlement to the exemption.

61 The fact that the sale was conducted by the debtor and the proceeds not distributed by a sheriff
or other officer does not bar the debtor's entitlement to the principal residence exemption.

          3. Does the distribution scheme set out in section 71.2(2) of the Act preclude the respondents
          from claiming their principal residence exemption under section 71.1 of the Act?

62   The final ground of appeal is that the learned Master erred in concluding at [paragraph] 9:

          Section 71.2(2) does recognize the exemption but subject to priorities, such as a charge
          registered under the Land Title Act. A charge by definition in the Land Title Act, includes a
          mortgage and an encumbrance. The latter, by definition in the Land Title Act, includes a
          judgment. [Error in section number corrected for clarity.]

63   The distribution scheme is set out in s. 71.2(2) as follows:

          (2) If property to which subsection (1) applies is sold under this Act, a sheriff or other officer
          must, unless otherwise provided by law or by the agreement of all interested parties, distribute
          any of the proceeds of the sale as follows:
                                                                                                        233


       (a) pay firstly to a secured creditor the amount owed by the debtor to the secured creditor if
       the secured creditor ...

               (ii) has a charge registered under the Land Title Act;

       (b) pay secondly to the debtor an amount not exceeding the prescribed amount of the
       exemption.

64 In the case at bar, the Bank had two types of charges "registered under the Land Title Act":
mortgages and judgments.

65 The preliminary question, however, is whether the Bank is a "secured creditor" within the
meaning of paragraph (a), and therefore entitled to payment of the full debt prior to the Nguyens'
entitlement to the exemption.

66   The Act does not define "secured creditor".

67   "Secured creditor" is defined by Bennett as:

       [A] creditor who holds a lien, mortgage or charge against the debtor's assets or collateral as
       security for the repayment of the debt.

68   The learned author also writes:

       In general terms, a secured creditor is someone who advances money, goods or services to the
       debtor and, as security for the payment of the debt, the secured creditor holds some asset or
       assets of the debtor.

69   In contrast, "ordinary creditor" is defined as:

       [A] creditor who has supplied credit to the debtor and may be referred to as a trade creditor, an
       unsecured creditor or judgment creditor. [See Bennett on Creditors' and Debtors' Right and
       Remedies, 4th ed. (Carswell: Scarborough, Ont., 1994) at 206, 746-747.]

70 There can be no dispute under any definition of the term that a mortgage-holder is a secured
creditor. The Bank was a secured creditor vis-à-vis its three mortgages on the Property, totalling
$281,000. However, the Bank qua judgment creditor was not a secured creditor within the meaning of
s. 71.2. In my opinion, judgment holders are the very parties the exemption is to apply against.

71 This interpretation is supported by the fact that the Act defines "judgment creditor" and
"execution creditor" and makes various references to "judgment creditor" and "execution creditor"
throughout, which is distinct from the use of the term "secured creditor" in s. 71.2.

72 I also found the discussion in Laurentian Bank of Canada v. Woo (1994), 25 Alta. L.R. (3d) 345, 29
C.B.R. (3d) 280 helpful in considering this issue where Mr. Justice Dea noted at [paragraph] 27 the
following passage from Re: Lamarre (Trustee of) v. University of Calgary (1978), 8 A.R. 533, 27 C.B.R.
(N.S.) 41 (C.A.):

       In my view the above cases support the conclusion that attachment proceedings do not give
       rise to a lien or privilege so as to make the attaching creditor the holder of as security "on or
       against the property of the debtor". The do give rise to rights in relation to the property of the
       debtor such as the right to give a discharge for the debt or liability but such rights as are granted
       are not "on or against the property" of the debtor.
                                                                                                            234


73 In sum, I find that the Bank in the case at bar is not a "secured creditor" with respect to the
judgments registered against the Property, for the purposes of s. 71.2(2) of the Act.

74 I conclude that the distribution scheme under the Act, in this case, does not preclude the
respondents from claiming their principal residence exemption. The scheme established by s. 71.2(2)
requires that the proceeds of sale should be distributed in the following order: first, to the Bank the
amounts secured by its three mortgages ($281,000); second, to the respondents the principal residence
exemption ($24,000); and third, to the Bank the amounts owing pursuant to the judgments against the
respondents.
Conclusion:

75   The appeal is allowed with the following order and declaration:

        (a) Pursuant to ss. 71.1 and 71.2 of the Court Order Enforcement Act, the respondents are each
        entitled to an exemption in the prescribed amount of $12,000 with respect to the proceeds of
        the sale of their principal residence;

        (b) The petitioner pay to the respondents the sum of $24,000;

        (c) The petitioner pay interest to the respondents on the sum of $24,000 at the prejudgment
        interest rate pursuant to the Court Order Interest Act, R.S.B.C. 1996, c. 79, from April 8, 2004, to
        the date of payment; and

        (d) The respondents have their costs of the appeal and the application before the Master.

MASUHARA J.




                           CHAPTER 6. EXECUTION AGAINST LAND



Execution against land has been adapted to the land title system in B.C. by eliminating the use of writs
and substituting a process of registration of the judgment on title. Although no conditions attach to the right
of the judgment creditor to proceed against the real property of the judgment debtor, as Execution Act. Re
Schiava’s Judgment (1960) 32 W.W.R. 239 (B.C.S.C.), reproduced below, makes clear, very few execution sales of
land had occurred until the last few years. Thus there are a number of unresolved issues in this area of creditor
debtor law.



                                       Schiava (Re), Re Execution Act
                                     [1960] B.C.J. No. 5, 32 W.W.R. 239

1 WILSON J.:— I am impressed by the very thorough and able argument submitted by counsel for the
judgment creditor. I have seldom seen so much intelligent diligence devoted to a question of practice.

2 The question seems to me to narrow itself down to this: The judgment creditor has two means of
execution available to him, sale of goods and sale of lands. There is no statutory provision requiring a
judgment creditor to exercise one mode of execution before the other. And counsel is perfectly correct
                                                                                                            235

in stating that a provision in the Execution Act, RSBC, 1897, ch. 72, sec. 76, which read thus:

        "Goods and chattels and lands shall not be included in the same writ of execution, nor shall any
        execution issue against lands until a bona fide return of an execution against the goods and
        chattels in the same suit shall have been made ...;"

has now been deleted.

3 It is not possible here, as it is in Ontario, to issue one execution against both goods and lands, but
Ontario requires that the lands may not be sold until there is a return of nulla bona in respect of the
goods.

4 It is quite true that the execution of a writ of fieri facias may result in a return, after considerable
delay, to the judgment creditor of only a very small part of the amount of his judgment. Therefore, if
his judgment is for $2,000 it is a hardship to compel him to go through a process of execution which
will realize only $200 and leave him still forced to resort to sale of lands, with consequent delay.

5 The initial order in regard to sale of lands is in the nature of an order nisi: It is not an order for sale,
it is an order for an inquiry.

6 Notice of the application for such an order must be served on the judgment debtor personally. If he
objects to the sale of his lands, he can, if he has personal assets sufficient to satisfy a writ of fieri facias,
sell them, pay the judgment and arrest the process of sale of his land.

7   The preference for sale of goods rather than of land is, I think, based on two things:

        (1) The judgment debtor has certain exemptions in regard to the sale of goods. He has none in
        respect of the sale of lands. But this is illusory for if the goods, after exemptions, realize enough
        to pay the judgment, well and good. If they do not, then a resort must still be had to the sale of
        lands.

        (2) The process for the sale of lands costs more. This is correct but, if the judgment debtor has
        goods to satisfy the claim, he can arrest the sale of his lands by selling his goods.

8 I think that, in so far as I previously expressed a contrary opinion, Miss Sanjean has vanquished me
and that her order should go.


                                        Butler-Lafarge Ltd. v. Lowe
                             [1973] B.C.J. No. 494, 36 D.L.R. (3d) 104 (B.C.S.C.)

1 VERCHERE J.:— There are two motions here, heard together by consent. In one, the plaintiff seeks
an order nisi foreclosing the separate respective interests of both defendants in certain lands in the
Victoria Land Registration District on the ground that the defendant Lowe has made default in payment
of the money due under a mortgage of his right to purchase those lands. In the other, the defendant
Ellen Lowe, now Mrs. Nielson and herein so referred to, seeks a order that she be struck from this
action on the ground that a judgment recovered by her against Lowe and duly registered in the Victoria
Land Registry office pursuant to section 35 of the Execution Act before the plaintiff's mortgage was
registered, had and still has priority over that mortgage despite her failure to renew such registration
prior to the expiration of two years thereafter. She contends that that priority exists because she had,
before the date of the expiration of the registration of her judgment, commenced proceedings under
section 38 of the Execution Act to enforce her charge and also because the mortgage by its terms had
given her a priority which the plaintiff is estopped from denying because it had, through its solicitors,
                                                                                                    236

negotiated for and agreed with her solicitors for a sale of the premises when the vendors under Lowe's
agreement for sale had in turn commenced foreclosure proceedings.

2   The facts are not in dispute. Briefly stated, they are as follows:

       1. By agreement for sale dated October 16, 1968 and duly registered on October 30, 1968, Lowe
       became owner of a right to purchase the lands and premises in question here.

       2. On November 20, 1969, Mrs. Nielson recovered judgment against Lowe in the County Court
       in Nanaimo and on November 17, 1970 caused her judgment to be duly registered in the Land
       Registry Office in Victoria.

       3. On March 29, 1972, Lowe mortgaged to the plaintiff all his purchaser's interests in the said
       lands and on April 11, 1972, that mortgage was duly registered in the said Land Registry Office.
       It contained, inter alia, the following clause:

               "14. Whereas this mortgage is to be registered subject ... to a judgment in favour of
               Ellen Lowe registered under No. 14869, the mortgagor hereby covenants and agrees
               with the mortgagee that ... in the event that the said Ellen Lowe commences execution
               proceedings in respect of her said judgment then ... the full balance of all monies due
               under this mortgage shall at the option of the mortgagee forthwith become due and
               payable ..."

       4. On June 7, 1972, Mrs. Nielson commenced proceedings under the Execution Act for the sale
       of those lands and on August 15, 1972 caused a certificate of lis pendens issued pursuant to
       section 44 of that Act to be duly registered in the said Land Registry Office.

       5. Mrs. Nielson's solicitors thereupon informed the plaintiff of the proceedings taken by her and
       in due course were informed by the plaintiff's solicitors that "our client is prepared to co-
       operate with you."

       6. On or about October 3rd, 1972, the vendor under Lowe's agreement for sale commenced
       foreclosure proceedings.

       7. Correspondence between the plaintiff's solicitors and Mrs. Nielson's solicitors regarding the
       sale of the premises then ensued until on November 17, 1972, the former wrote to the latter
       informing them that they too had instructions to commence foreclosure proceedings and
       stating that if the registration of Mrs. Nielson's judgment was not renewed before it expired,
       her interest in the land would cease to exist and that there would then seem to be no need to
       join her as a party defendant in the proposed action.

       8. On November 27, 1972, Mrs. Nielson caused her judgment to be reregistered and on
       December 4 following this action was commenced with Mrs. Nielson as a party defendant.

3 In his able submission, counsel for Mrs. Nielson first contended that the above-quoted reference in
the plaintiff's mortgage to Mrs. Nielson's judgment made the mortgage subject to it at all times. With
respect, however, I cannot agree; it does not seem to me that the words of the clause are capable, in
their plain meaning, of supporting such a conclusion and it seems illogical to suggest that because
execution proceedings by Mrs. Nielson, ipso facto, constituted default in the mortgage, the latter was
and would therefore continue to be subject to that judgment. In my view, the intent and meaning of
the clause is clear and there is no basis for concluding from it that the plaintiff's mortgage should
henceforth be and remain subject to the judgment.

4   Likewise, on turning to the submission that an estoppel arose from the solicitors' correspondence, I
                                                                                                      237

cannot avoid the conclusion that it cannot be sustained. The priority of the judgment over the
mortgage was, of course, a basic fact when co-operation between the plaintiff and Mrs. Nielson was
agreed upon by their respective solicitors. But that agreement does not support the conclusion that
Mrs. Nielson's solicitors were thereby persuaded to let the registration of the judgment lapse, nor that
they were lulled into a false feeling of security so they thought they could allow the registration to
lapse without fear of a subsequent assertion of priority. Further, I find nothing in the correspondence
that would impose a duty on the plaintiff's solicitors to warn Mrs. Nielson's solicitors that they should,
despite the correspondence, take steps to renew the judgment before it expired, nor to take on
themselves any responsibility for the omission to take that step in time. Accordingly, in my view, the
allegation of estoppel must fail.

5 The real issue here, it seems to me, is whether the taking of proceedings under section 38(1) of the
Execution Act and the consequent registration against the lands in question of a lis pendens pursuant to
section 44 can and does suspend the operation of section 36 of that Act. Accordingly, it seems
convenient to set out the relevant sections and they therefore follow:

       "35. Immediately upon a judgment being entered or recovered in this Province, the judgment
       may be registered in any or all of the Land Registry Offices in the Province, and from the time of
       registering the same the judgment forms a lien and charge on all the lands of the judgment
       debtor in the several land registration districts in which the judgment is registered, in the same
       manner as if charged in writing by the judgment debtor under his hand and seal; and after the
       registering of the judgment the judgment creditor may, if he wishes to do so, forthwith proceed
       upon the lien and charge thereby created.

       36. (1) Every judgment registered under this Act, at the expiration of two years after the
       registration or last renewal of registration thereof, ceases to form a lien or charge upon the land
       of the judgment debtor, or anyone claiming under him, unless before the expiration of said two
       years the registration of the judgment is renewed.

         (2) The registration of a judgment may be renewed at any time before the expiration of two
       years after the registration or last renewal of registration thereof."

       "38.(1) Where a judgment creditor in an action has registered a judgment as aforesaid, and
       alleges that the judgment debtor is entitled to or has an interest in any land, or that any land is
       held subject to the lien created by registration of judgment under section 35, a motion may be
       made to the Supreme Court, or to a Judge thereof in Chambers, by the judgment creditor calling
       upon the judgment debtor, and upon any trustee or other person having the legal estate in the
       land in question, to show cause why any land in the land registration district in which the
       judgment is registered, or the interest therein of the judgment debtor, or a competent part of
       the land, should not be sold to realize the amount payable under the judgment."

       "44. A notice of motion for an order under section 38 may contain a description of the land in
       question, and upon filing the same with the proper officer, signed by the solicitor of the
       applicant, a certificate of lis pendens may be issued for registration; and in case the motion is
       refused in whole or in part, a certificate of the order may be issued for registration."

6 It seems to me that the plain and emphatic wording of section 36(1) makes clear what result must
follow from the failure to renew the registration of a judgment before the expiration of two years after
its registration. In such a case, the lien and charge on the lands of the judgment debtor in the land
registration district in which the judgment was registered thereupon ceases to exist, and as nothing
suggests that it is revived by any subsequent re-registration, it must follow that such a step has no
power to create a charge that has priority over a previously registered encumbrance; see Execution Act,
section 35, and as the charge therein referred to is "as if charged in writing by the judgment debtor
under his hand and seal", see also Land Registry Act, sections 35 and 42.
                                                                                                        238


7 But it is the effect of the issue and registration of a certificate of lis pendens containing a
description of the lands in question that is at issue here. The question that arises is this: does the
registration of such a lis pendens, despite the words of section 36.(1) of the Execution Act, crystallize
the lien and charge created by section 35 of that Act so as to keep it alive and in being for so long as the
action to which the certificate refers is pending?

8 In Re Land Registry Act; Granby Consolidated Mining, Smelting and Power Company, Limited's Case
[1918] 2 W.W.R. 626; rvsd. [1919] 2 W.W.R. 321; affd. [1919] 3 W.W.R. 331, the nature and effect of a
lis pendens registered pursuant to the Land Registry Act was considered. There the contest lay between
the Granby company and Esquimalt-Nanaimo Railway Company over the refusal of the Registrar
General of Titles to register the mining company's title under a Crown grant and subsequent
assignments thereof whose validity the railway company was disputing in an action in which it had
obtained a lis pendens which it had caused to be registered "in like manner as the charge is registered",
to quote the words of section 181 of the Land Registry Act.

9 The judge of first instance refused to direct the requested registration of title, holding that he
should not, by directing the issue of a certificate of indefeasible title, be called upon where an action
had been brought in apparent good faith, to pre-determine the result of it, and at p. 628 he said:

       "The certificate of lis pendens does not create an estate or interest but is simply a notice that
       some estate or interest is claimed by the party bringing the action."

On appeal, a different view was taken and it was held that because of the wording of the relevant
section of the Land Registry Act under which the document was registered, that for the purposes of the
Land Registry Act, a lis pendens was a charge and not, in effect, an injunction restraining the issue of a
certificate of title. On further appeal, however, that conclusion was not agreed with and at p. 339 of
the report of the judgment of the Privy Council, supra, Lord Atkinson said:

       "... a lis pendens of the nature of the appellant company's action is not a charge within the
       meaning of the Land Registry Act ..."

10 The nature of a certificate of lis pendens issued under the Execution Act has never been defined as
far as I know, but its registration is governed by section 181 of the Land Registry Act as witness the
reference in the closing words of that section to the Execution Act. Hence, in my respectful opinion, the
nature of the certificate of lis pendens issued under the Execution Act is also governed by the
conclusions recited in the Granby case, supra. That being so, it seems to me to follow that although the
plaintiffs clearly had explicit warning at all material times, as well after as before the expiration of two
years after the registration of Mrs. Nielson's judgment, it cannot be said that any lien and charge
flowed from the lis pendens per se. Accordingly, in my view, it cannot be said that the lis pendens
registered here operated in the face of the explicit wording of section 36(1) of the Execution Act to
freeze and maintain in being the lien and charge which had previously existed prior to the expiration of
two years after the registration of Mrs. Nielson's judgment.

11 For these reasons, then, I find myself unable to avoid the conclusion that when November 17th,
1972 had gone by without any renewal of the registration of Mrs. Nielson's judgment having been
effected, it thereupon ceased to form a lien or charge on the lands of the judgment debtor in the
registration district in which it was registered and that despite the previous registration of a certificate
of lis pendens evidencing her claim against the lands in question here, the priority of her charge over
the plaintiff's mortgage was lost to her when that charge disappeared. There will, accordingly, be an
order that Mrs. Nielson's application to be struck out as a party defendant be dismissed and that the
plaintiff have the order nisi of foreclosure against both defendants which it seeks. Costs will be in the
cause to abide the result of the action.
                                                                                                    239

       Orders accordingly.



                                      Bank of Montreal v. Jacques
                                [1988] B.C.J. No. 500, 25 B.C.L.R. (2d) 130

1 PROWSE L.J.S.C.:— This is an appeal by the Bank of Montreal pursuant to Section 291 of the Land
Title Act, RSBC 1979, Chapter 219 ("L.T.A.") from a decision made by the Registrar of Land Titles. That
decision was to cancel the Bank of Montreal's Judgment against a certain leasehold interest in property
unless the Bank of Montreal took proceedings to prevent that action on the Registrar's part. I have not
been provided with the Reasons of the Registrar for his decision, but I am told by Counsel that the
application before the Registrar was pro forma such that Reasons would not normally be expected. I
also note that I have not been provided with any authorities which consider Sections 288 to 291 of the
L.T.A., which are the sections dealing with appeals from the Registrar.

2 There are many facts in dispute relating to this appeal, but I have been invited by Counsel to deal
with the appeal on the basis of those facts which are not in dispute. Depending on my analysis of those
facts, it may or may not be necessary for a further hearing.

3   The following facts are not in dispute:

       (1) As of May 4, 1976, David and Hannah Mayes (the "Mayes") were the registered owners of a
       leasehold interest in the property legally known and described as:

               Municipality of North Vancouver,
               Lot 69,
               Block C,
               District Lot 230,
               Plan 16045
               (the "property")

       That leasehold interest was for 99 years with the registered owner of the property being the
       Corporation of the District of North Vancouver.

       (2) On December 12, 1986, the Bank of Montreal (Homer Street, Vancouver Branch) obtained
       Judgment against the Mayes in the amount of $21,128.44, which Judgment was registered on
       December 31, 1986 against the Mayes' leasehold interest in the property.

       (3) At the time the Judgment was registered, there were the following prior encumbrances
       against the Mayes' leasehold interest:

               (a) A first mortgage of lease in favour of Kinross Mortgage Corporation by virtue of a
               priority agreement;

               (b) A second mortgage of lease in favour of the Canadian Imperial Bank of Commerce

               (c) A third mortgage of lease in favour of Her Majesty the Queen;

               (d) A fourth mortgage of lease in favour of the Bank of Montreal (Marine Drive, North
               Vancouver Branch);

               (e) A lis pendens in foreclosure proceedings commenced by the Bank of Montreal
               pursuant to its fourth mortgage.
                                                                                                     240


       (4) In June, 1987 Morris and Janice Mennell (the "Mennells") purchased the Mayes' leasehold
       interest in the property for $168,000.00. It was part of the agreement of purchase and sale that
       the Mennells would have the right to convert the leasehold interest to a freehold interest by
       payment of a specific sum to the Corporation of the District of North Vancouver.

       (5) The Bank of Montreal (Marine Drive, North Vancouver Branch) received a cheque in the
       amount of $49,509.79 as a result of the sale to the Mennells.

              There is a major dispute on the affidavit material as to whether this amount was in
              satisfaction of both the Bank of Montreal Mortgage and Judgment. It is not possible for
              me to resolve that dispute on the basis of the material before me given its contradictory
              nature, and I do not propose to do so.

       (6) On June 22, 1987, a Release was filed by the Mayes purporting to release "any right, title and
       interest" which the Mayes had in the property and consenting to the transfer of the lease to the
       Menners.

       (7) The Mayes personally received no proceeds from the sale of their interest in the property.

       (8) On November 6, 1987, the Registrar of Land Titles made an Order that the lease and the
       Judgment in favour of the Bank of Montreal be cancelled unless the Bank of Montreal took
       steps to prevent such cancellation. It is that Order of the Registrar that is appealed in this
       proceeding.

4 Counsel for the Bank of Montreal submits that the Order of the Registrar must be set aside on the
basis that the application by the Mennells to surrender their lease and have the Judgment against it
cancelled is not bona fides and is being done to defeat the interest of the Bank of Montreal in the
property. The Bank of Montreal takes the position that since its Judgment was not released from the
property at the time of the sale, it remains a valid encumbrance against the property. Counsel submits
that a Judgment can be released only by satisfaction, consent of the Judgment Creditor, operation of
law or by Court Order. An example of the latter would be an Order Absolute of Foreclosure where all
encumbrances against property are extinguished by virtue of the Order.



5 Counsel for the Bank of Montreal points to Section 79(2) of the Court Order Enforcement Act,
R.S.B.C. 1979, Chapter 75 which states as follows:

       79.(2) From the time of its registration the judgment forms a lien and charge on the land of the
       judgment debtor specified in the application referred to in section 80 in the same manner as if
       charged in writing by the judgment debtor under his hand and seal,

              (a) to the extent of his beneficial interest in the land;

              (b) where an owner is registered as a personal representative or trustee, to the extent of
              the interest of a beneficiary who is a judgment debtor; and

              (c) subject to the rights of a purchaser who, prior to the registration of the judgment,
              has acquired an interest in the land in good faith and for valuable consideration under
              an instrument not registered at the time of the registration of the judgment.

Counsel submits that unless some accommodation is made to release the Judgment at the time of sale,
                                                                                                        241

then the purchasers take the property subject to the Judgment.

6 Counsel for the Mennells has referred to a number of cases which stand for the principle that an
execution creditor can only attach the interest which exists in the execution debtor at the time of
execution. That principle is not disputed, but does not really deal with the issue in this case. It may well
be the case that if the Bank of Montreal had moved to execute on its Judgment prior to the sale,
thereby becoming an "execution creditor" and not merely a "judgment creditor" that it would have
failed to realize any money on its Judgment. But the Bank of Montreal did not and was not obliged to
execute at that time. It was entitled to sit there and wait until some accommodation was made with
respect to its Judgment.

7 Counsel for the Mennells submits, however, that it was obvious at the time of sale in June, 1987
that there was no equity in the property and that the Mayes therefore had no beneficial interest to
which the Judgment could attach. In other words, he submits that if the judgment debtor's beneficial
interest in property is worth nothing, that the Judgment is effectively registered against nothing. He
therefore says that the Bank of Montreal cannot be said to have been prejudiced by the Order of the
Registrar since its Judgment had no value.

8 I am in agreement with Counsel for the Bank of Montreal who submits that a judgment debtor
cannot simply sell his property without regard to the Judgments registered against it, say there is no
equity, and, in so doing, deprive the registered judgment holder of any remedy. The judgment debtor is
compelled by the fact of the registration of the Judgment to deal with the judgment creditor if he
wishes to dispose of the property. If he fails to do so, and if the purchaser is aware of the status of the
title, including Judgments, then the purchaser takes the property subject to the Judgments. The
purchaser may have a remedy against the vendor if he contracted for clear title, but the judgment
holder is not left dangling in the breeze as if he had not registered his Judgment at all.

9 I also agree with the submission of Counsel for the Bank of Montreal that it is not a valid basis for
cancelling a Judgment, simply because the judgment debtor, at the time he sells to a third party, has no
equity in the property. The judgment debtor's equity in the property will fluctuate from time to time
depending on a variety of factors. The judgment creditor is entitled to the benefit of his registered
charge and the security which that provides him until he is paid. It is true that he can lose his security
by virtue of a Court Order such as an Order Absolute. But I do not accept that a judgment debtor has a
right to simply sell his property out from under the judgment creditor and that he and/or the purchaser
can then have the Judgment released because the judgment debtor had no equity in the property at
the time of the sale. Cancellation cannot be permitted in these circumstances, because to do so would
be to permit a third party, the Mennells, to defeat the interest of the judgment creditor when they had
full notice of the existence of the Judgment.

10 Assuming, as I have been asked to do, that the Judgment was not satisfied by agreement or
otherwise, I conclude that the Mennells took the leasehold interest subject to the Judgment and that
they are not entitled to a release of the Judgment in these circumstances.

11 Although I have decided this argument in favour of the Bank of Montreal, the Mennells are
entitled to proceed with their alternative argument that the Bank of Montreal agreed to release of the
Judgment at the time of the sale. It is not possible for me to deal with that argument at this time, since
many of the relevant facts are in dispute.

12 Section 289(1) of the L.T.A. permits the Court to make such Orders as the circumstances of the
case require with respect to hearings such as this. I therefore direct that Counsel obtain a mutually
convenient date with the Registry for the continuation of the appeal before me, with viva voce
evidence to be called as to those issues in dispute. I have found certain facts at this first stage of the
appeal and Counsel are directed to prepare an agreed statement of facts including those facts found by
me and any other relevant facts which are not in dispute. Counsel will also agree upon the issue or
                                                                                                        242

issues to be proceeded with on the continuation of the appeal and those shall be stated at the end of
the agreed statement of facts. Counsel shall be entitled to refer to those documents attached as
exhibits to the affidavits on file and such other documents which may be relevant to the appeal.
Counsel will also exchange their lists of authorities, if any, at least seven days prior to the date set for
continuation of the appeal, with a copy of the authorities to be directed to me through the Registry at
least two clear days prior to the hearing.

13 Given the fact that Mr. Fischer will doubtless be a witness on appeal it would, in my view, be
inappropriate for him to continue to act as Counsel for the Mennells. There is a good reason for
Counsel not appearing as witnesses in cases in which they are Counsel, not the least of which is their
inability to be objective concerning the issues in dispute.

14   I will deal with the matter of costs at the conclusion of the appeal.

PROWSE L.J.S.C.



                               Martin Commercial Fueling Inc. v. Virtanen
                           [1997] B.C.J. No. 581, 144 D.L.R. (4th) 290 (B.C.C.A.)

Reason for judgment were delivered by Newbury J.A.

1 NEWBURY J.A.:— The issue raised by this appeal is one discussed, although by no means
conclusively, in a host of venerable Chancery cases dating back more than 150 years: what is the nature
of the interest, if any, acquired by a person who has contracted to purchase land, but who has not yet
completed that purchase? More specifically, is such a purchaser vulnerable to the interest of a creditor
who obtains and files a judgment against the registered owner of land prior to the date of transfer of
title?

2 The question arose in this case as follows: on October 25, 1991, the appellant Martin Commercial
Fueling, Inc. ("Martin") registered a judgment in the amount of some $140,000 in the New Westminster
Land Title Office against certain real property (the "Lands") of which the judgment debtor Mr. Virtanen
was a one-third owner. The Lands were already subject to two prior mortgages and a tax sale notice.
Unbeknownst to Martin, however, Mr. Virtanen and his co-owners had also signed an agreement on
October 10, 1991 to sell the Lands to the "Gill" respondents for $275,000, free and clear of all financial
charges and encumbrances. The Gills had paid an initial deposit of $1,000 and an additional $4,000 in
trust to a real estate agent. Under an addendum to the agreement dated November 5, 1991, the
purchasers were authorized to pay the net proceeds to the vendors' lawyer or notary in trust, on
undertakings to "pay and discharge the financial charges" therefrom, and to remit any balance to the
vendors.

3 The sale and purchase of the Lands closed on November 6, 1991. The previous encumbrances were
discharged from the purchase proceeds and a new mortgage granted by the purchasers was filed in the
Land Title Office. Thus, following closing, the Gills appeared as the registered owners of the Lands,
subject to Martin's judgment as a first registered charge, followed by the new mortgage.

4 It appears, however, that the notary acting for the purchasers did not carry out the appropriate
pre- and post-index searches in the Land Title Office that would have disclosed the existence of
Martin's judgment. In fact the judgment may not have come to the new owners' attention until June of
1992 when Martin petitioned in Supreme Court for an order that a one-third interest in the Lands (the
proportion previously owned by Mr. Virtanen) be sold in realization of the judgment. The Gills resisted
the application and eventually, a Master of the Supreme Court ordered that $150,000 be placed in
trust to stand in place of the Lands and as security for Martin's costs in the proceeding. (No question
                                                                                                       243

was raised before us as to the Master's jurisdiction to so order.) The issue of the extent to which the
Lands were liable to satisfy Martin's judgment was ordered to be heard pursuant to R. 18A. In the
meantime, Martin was to have all the rights and remedies available to a judgment creditor, including
those available under the Court Order Enforcement Act, R.S.B.C. 1979, c. 75, notwithstanding the
removal of its judgment from title. That occurred on April 2, 1993.

5 The question of law before the Chambers judge, then, was whether the registration of the
judgment in Martin's favour was effective as against the purchasers, whose transfer was registered
subsequent to the registration of the judgment. After an extensive review of the English and Canadian
case-law and various texts, Mr. Justice Coultas held that the judgment attached only to Mr. Virtanen's
"interest in the proceeds of sale of Lands to the respondents, but not to the Lands itself". In so holding,
he adopted the view that the vendors had held the Lands on a constructive trust for the purchasers,
which trust "related back" to the date the agreement was executed. On this analysis, at the time
Martin registered its judgment, Mr. Virtanen had only an interest in the net proceeds of sale after
payment of the prior charges. He and his co-owners held the Lands in trust for the purchasers, and the
creditor could attach only what the debtor had.

6 The "relation back" theory is attributed to James, L.J., who in his dissenting judgment in Rayner v.
Preston (1881) 18 Ch.D. 1, said this:

       I am of opinion that the relation between the parties was truly and strictly that of trustee and
       cestui que trust. I agree that it is not accurate to call the relation between the vendor and
       purchaser of an estate under a contract while the contract is in fieri the relation of trustee and
       cestui que trust. But that is because it is uncertain whether the contract will or will not be
       performed, and the character in which the parties stand to one another remains in suspense as
       long as the contract is in fieri. But when the contract is performed by actual conveyance, or
       performed in everything but the mere formal act of sealing the engrossed deeds, then that
       completion relates back to the contract, and it is thereby ascertained that the relation was
       throughout that of trustee and cestui que trust. That is to say, it is ascertained that while the
       legal estate was in the vendor, the beneficial or equitable interest was wholly in the purchaser.
       [at 13; emphasis added]

7 The theory was not universally accepted by the Courts of Equity in the 19th century; nor were the
Chancery judges unanimous in describing as a constructive trust the relationship between the vendor
and purchaser in the interim between their execution of a binding contract and the date of completion.
In Rayner v. Preston itself, the majority was strongly critical of the trustee/beneficiary analogy. Brett,
L.J. said this:

       What is the relation between [vendor and purchaser], and what is the result of the contract?
       Whether there shall ever be a conveyance depends on two conditions; first of all, whether the
       title is made out, and secondly, whether the money is ready; and unless those two things
       coincide at the time when the contract ought to be completed, then the contract never will be
       completed and the property never will be conveyed. But suppose at the time when the contract
       should be completed, the title should be made out and the money is ready, then the
       conveyance takes place. Now it has been suggested that when that takes place, or when a Court
       of Equity decrees specific performance of the contract, and the conveyance is made in
       pursuance of that decree, then by relation back the vendor has been trustee for the vendee
       from the time of the making of the contract. But, again, with deference, it appears to me that if
       that were so, then the vendor would in all cases be trustee for the vendee of all the rents which
       have accrued due and which have been received by the vendor between the time of the making
       of the contract and the time of completion; but it seems to me that that is not the law.
       Therefore, I venture to say that I doubt whether it is a true description of the relation between
       the parties to say that from the time of the making of the contract, or at any time, one is ever
       trustee for the other. [supra at 11; emphasis added]
                                                                                                        244


8 From the vantage point of the 20th century, at least three different theories can be seen at work in
the Courts of Equity as to the nature of a would-be purchaser's interest. Keeton and Sheridan in The
Law of Trusts (10th ed., 1974) summarize them as follows:

       Waters points out that Lord Hardwicke would not accept the existence of a constructive trust
       until title had been accepted, and the money paid into court. During Lord Eldon's
       Chancellorship, however, there was a return to the earlier view that the trust arose at the
       moment of the execution of contract, and the purchaser was therefore to be regarded as the
       equitable owner.

               A further problem was discussed by Plumer, V.-C. in Ackland v. Gaisford [sic; Acland v.
               Cuming (1816) 56 E.R. 245]. Until the purchase-money was paid, the vendor was entitled
               to retain possession. It might be that he was never under a duty to convey at all.
               Accordingly, in his view in Wall v. Bright [(1820) 1 Jac. & W. 494], a constructive trust
               would only arise when the uncertainties had been resolved and the duty to convey
               unqualifiedly existed. Before that date, the vendor was merely a trustee sub modo, a
               term which apparently was intended to mean that the vendor, though not yet a trustee,
               was on his way to becoming one. Dowson v. Solomon [(1859) 1 Dr. & Sm. 1] advanced
               yet a third view, i.e. that the vendor only became a trustee for the purchaser at the date
               fixed for completion. Whether, in these circumstances, Plumer, M.R., and Kindersley, V.-
               C. would have agreed that conversion operated from the moment of the contract,
               having regard to the shadowy nature of the trusteeship until the resolution of
               uncertainties in the one case, or of the date fixed for completion in the other, does not
               appear. [at 195-6]

Given this apparent uncertainty, Mr. Hobbs on behalf of the judgment creditor argued before us that
even if one accepts that a trust of some kind arises between a vendor and purchaser between the
signing of a contract for the sale of land and the completion of the transaction, that trust is subject to
many qualifications. The vendor remains entitled, for example, to receive the rents and other income
of the property during the interim period; he must continue to pay property taxes thereon; and, Mr.
Hobbs says, would be entitled even to mortgage the property as long as the mortgage was discharged
on or before the date fixed for transfer. Mr. Hobbs also emphasizes that the constructive trust remedy
in this context was always tied to the availability of specific performance to the person seeking to
enforce the contract of sale: as was said by the Privy Council in Howard v. Miller [1915] A.C. 318, a case
on appeal from British Columbia, the constructive trust description is "only true if and so far as a Court
of Equity would under all the circumstances of the case grant specific performance of the contract". [at
326] (See also Holroyd v. Marshall (1862) 10 H.L.C. 191, at 209; Keeton and Sheridan, The Law of Trusts,
supra, at 195; Cornwall v. Henson [1899] 2 Ch. 710 at 714; Buchanan and James v. Oliver Plumbing &
Heating (1959) 18 D.L.R. (2d) 575 (Ont. C.A.) at 579.) In Mr. Hobbs' submission, specific performance
would not have been available to the purchasers in this case because of the existence of Martin's
charge indeed, the Gills' contract of purchase has not yet been performed, in that they received
something far less than title free and clear of all financial charges. The Lands are subject to a registered
judgment for $147,000. On this basis, the foundation for the existence of a constructive trust, whether
arising by virtue of contract or strictly as a remedial mechanism, arguably falls away.

9 As Mr. Chaster notes, however, had the Gills been informed of the existence of the judgment
before completion, they would have been entitled in an action for specific performance to accept what
title was "made out" by the vendors, encumbered by the judgment. In the words of Jessel, M.R. in
Lysaght v. Edwards [1876] 2 Ch.D. 499, ". . . however bad the title may be the purchaser has a right to
accept it, and the moment he has accepted the title, the contract is fully binding upon the vendor." [at
507]

10    As for the larger issue of the interest of a would-be purchaser of land in this context, it is
                                                                                                         245

obviously too late in the day to doubt that at Equity, such a person is entitled to many rights, as against
his vendor and as against third parties, that closely resemble the rights of a beneficial owner. Once the
contract has been performed, those rights become less vulnerable to attack, on any of the theories
posited by the old English cases. The more relevant question, however, is how those rights or the
constructive trust, if such it be comport in a modern-day Torrens jurisdiction such as British Columbia.
If the register is intended to govern, should not a judgment creditor who takes all reasonably prudent
steps to give notice of his charge prevail over persons such as the purchasers in this case, who (through
their notary) neglected to check the register but who are deemed to have had notice of the judgment?
Certainly one would not expect the holder of an unregistered transfer to prevail over the holder of a
registered mortgage on the basis of constructive trust.

11 In approaching this issue, Canadian courts have generally declined to enter the debate described
above concerning constructive trust. Indeed, none of the leading cases cited to us referred to that
debate. They have focussed instead on the provincial land titles and execution legislation, and on the
nature of a judgment as a charge that is distinct from other types of charges most notably, a mortgage.
Except for one period when the statutes dictated the contrary (see Bk. Hamilton v. Hartery (1919) 45
D.L.R. 638 (S.C.C.), discussed in Gregg v. Palmer [1932] 3 D.L.R. 640 (B.C.C.A.)), courts in these
jurisdictions have held consistently that a judgment creditor takes "subject to the equities" arising
between a registered owner and a third party. (Arguably, the "equities" closely resemble the
constructive trust discussed in the English authorities.)

12 The seminal case on this point is Jellett v. Wilkie (1896) 26 S.C.R. 282, which involved plaintiffs
who had purchased certain land in Saskatchewan in 1891 but had never registered their transfers
under the Territories Real Property Act, R.S.C. 1886, c. 51. In 1893, a writ of execution was filed by
Jellett against the lands with the Registrar of the appropriate registration district. The plaintiffs later
sought to register their transfers, but the Registrar refused to issue certificates of title unless they were
marked as being subject to Jellett's writ of execution. The plaintiffs sought a declaration that the
execution was a cloud on their titles, and cancellation of the execution from the register. They
succeeded in their action. The Court ruled that it was an undoubted proposition of law that "an
execution creditor can only sell the property of his debtor subject to all such charges, liens and equities
as the same was subject to in the hands of his debtor" a principle the Court found had not been
displaced by the Territories Real Property Act. The rationale for this result was described as follows:

       According to the ordinary rules of courts of equity the appellant could have made his execution
       a charge on, and have sold for the satisfaction of his judgment, just what beneficial interest the
       execution debtor had in these lands and nothing more. And this, which is said to be a "broad
       rule of justice" and to depend . . . upon the obvious distinction between a purchaser who pays
       his money relying on getting the specific land he buys and a creditor who is in no such position,
       was from early times enforced by courts of equity in order to protect the title of equitable
       owners and chargees. And it must have been the obvious right of the respondents to have the
       benefit of this protection in the way in which the judgment now impugned afforded it to them,
       unless the statute has abrogated the principle. . . .

       The construction of it seems to me to be obviously plain. The effect to be given to the entry on
       the register of the memorandum of the writ of execution is clearly and precisely stated in the
       section itself to be to operate as a caveat or warning to persons who might subsequently
       purchase or be about to purchase from the execution debtor, that he could only sell or transfer
       an interest subject to the lien of the writ. This in so many words is what Parliament has declared
       to be the effect and consequence of the registering of an execution. Surely there is nothing in
       this abrogating or pointing to the abrogation of prior interests. It follows therefore that the
       rights of prior parties remain as they were before the execution was registered, and these
       entitled the respondents to have their transfers registered without any reference being made in
       the certificate to the execution, and to have the sheriff's sale restrained. [at 290-1; emphasis
       added]
                                                                                                        246


13 This reasoning was restored and applied by this Court after certain amendments were made in
1924 to the Execution Act and the Land Registry Act of British Columbia. In particular, s. 34 of the latter
statute, R.S.B.C. 1924, c. 127, regarding the non-effectiveness of unregistered instruments, was made
subject to the well-known exception ("Except as against the person making the same . . . .") that now
appears in the opening words of s. 20 of the Land Title Act, R.S.B.C. 1979, c. 219, ("Except as against the
person making it. . . ."). In Gregg v. Palmer, supra, this exception, and the particular procedures that
must be followed by a creditor in executing on a judgment, were found to support the application of an
unregistered mortgagee for the registration of his charge in priority to a judgment already registered.
Macdonald, J.A. reasoned as follows:

       What alteration, if any, was effected by the addition of the words in 1921, after the decision
       referred to, "except as against the person making the same" in s. 34 of c. 26? It means that
       against the maker, i.e., the judgment debtor, some estate right or interest at law or in equity in
       the land passes to the holder of an unregistered instrument. The latter acquired the beneficial
       right to the fee with a statutory right to apply to register it. That the debtor under his hand and
       seal parted with some interest is I think indisputable. It is equally clear that whatever interest
       passed to the appellant by grant from the debtor cannot also pass to someone else except by
       the act of appellant. The judgment creditor can only sell the property of his debtor as he finds it.
       He cannot "take A's land to pay B's debt". (Entwisle v. Lenz (1908) 14 B.C.R. 51, at 56). [at 655]

14 In Davidson v. Davidson [1946] 2 D.L.R. 289, the Supreme Court of Canada applied this reasoning
to hold that an unregistered transfer of land executed prior to the date on which a judgment creditor
obtained judgment, was entitled to priority. The Court again emphasized the mechanics of execution
set forth in ss. 174-177 of the then Execution Act, R.S.B.C. 1936, c. 91, and the opening words of s. 34 of
the Land Registry Act, R.S.B.C. 1936, c. 140, as intended to retain the common law rule with respect to
the rights of judgment creditors. In the words of Estey, J.:

       . . . in s. 177 it is provided that where the instrument is entitled "to priority over the registered
       judgment" that the Court may nevertheless allow costs to the judgment creditor "if in the
       opinion of the Court the judgment creditor was justified under the circumstances . . . in
       requiring the applicant to have judicially established the bona fides and validity of the execution
       of the instrument under which the applicant claims". These sections indicate that upon such
       applications the question of priority shall be determined, a matter which, prior to the
       amendments of 1921, was settled by the provisions of the sections corresponding to ss. 34, 36
       and 37. Indeed, the implication appears to be that if the instrument is found to be bona fide and
       validly executed that it is entitled to priority over the judgment creditor under circumstances
       such as obtain in this case.

       These statutory provisions, read as they must be in association with s. 34, retain the common
       law rule with respect to rights of judgment creditors. Under that rule the execution creditor can
       only attach that interest which exists in the execution debtor. The respondent, having disposed
       of his entire interest before the registration of the judgment, this judgment cannot attach the
       land in question as certified by the Registrar. [at 299-300]

15 These decisions leave little doubt that at least under the Execution Act formerly in force in this
province, the claim of a judgment creditor, although registered, was nevertheless subject to the
"equities" in favour of an unregistered instrument granted by the owner prior to the obtaining and
registration of the judgment. But Mr. Hobbs has yet another argument, this one based on s. 79 of the
Court Order Enforcement Act, R.S.B.C. 1979, c. 75, which replaced the Execution Act some years ago.
Section 79 was not referred to by the Chambers judge in his reasons. The relevant portions read as
follows:

       79. (1) After October 30, 1979, a judgment entered or obtained in the Province may be
                                                                                                        247

       registered against the title to specified land in any or all of the land title offices in the manner
       provided in section 80.

               (2) From the time of its registration the judgment forms a lien and charge on the land of
               the judgment debtor specified in the application referred to in section 80 in the same
               manner as if charged in writing by the judgment debtor under his hand and seal,

                       (a) to the extent of his beneficial interest in the land;

                       (b) whether an owner is registered as a personal representative or trustee, to the
                       extent of the interest of a beneficiary who is judgment debtor; and

                       (c) subject to the rights of a purchaser who, prior to the registration of the
                       judgment, has acquired an interest in the land in good faith and for valuable
                       consideration under an instrument not registered at the time of the registration
                       of the judgment.

            (3) The time of registration or the renewal of registration of a judgment is the day and hour
            when the application under section 80 to register the judgment or the renewal of it is
            received by the registrar.

            (4) Where a judgment is registered under this section against a particular interest in land of
            the judgment debtor, and he subsequently acquires a further registered estate or interest
            in the same land, the registration of the judgment, if subsisting on the register, without any
            further application or other act on the part of the judgment creditor, shall be deemed to be
            enlarged so as to include the beneficial interest of the judgment debtor in that further
            registered estate or interest.

            (5) After registration under this section, the judgment creditor may proceed at once on the
            lien and charge created by subsection (2). [Emphasis added]

Under s. 27 of the Land Title Act, the registration of a charge is deemed to give notice of the charge to
any person dealing with the land.

16 Obviously, s. 79 gives to a creditor who registers his judgment against title to specified land, a
specific lien and charge against that land. (Previously, the holder of a judgment was simply listed in a
"judgment book" maintained in the Land Title Office, although the judgment was said by s. 35 of the
Execution Act, R.S.B.C. 1960, c. 135, to form a lien and charge on all the debtor's land in the registration
district: see ss. 174-180 of the Land Registry Act, R.S.B.C. 1960, c. 208.) At least on its face, the
conclusion of the Chambers judge that Martin had only an interest in Mr. Virtanen's net proceeds of
sale runs contrary to this principle.

17 Bringing together the strengthened wording of the statute and the qualifications that surround
the constructive trust theory, Mr. Hobbs contends on behalf of Martin that the purchasers here did not
"acquire an interest in the land" within the meaning of s. 79(2)(c) merely because the vendors had
signed an interim agreement. He suggests that many of the cases discussed above are distinguishable
because, he says, they involved agreements for sale rather than contracts or agreement of sale.
Further, no consideration was actually paid to the vendors in this case prior to registration of the
judgment because the purchasers' deposit was required to be held by an agent or "stakeholder"
pursuant to s. 48(1) of the Real Estate Act, R.S.B.C. 1979, c. 356.

18 With respect, I do not find these arguments persuasive. I have reviewed the many cases to which
we were referred and I see no basis for inferring that the constructive trust was restricted to cases
involving agreements for sale. To the contrary, the remedy appears to be available whenever there is a
                                                                                                           248

"valid contract" that Equity would enforce against the conscience of the person who signed the
document: see in particular Lysaght v. Edwards, supra, at 506, per Jessel, M.R. If, and only if, Equity
would grant specific performance, the trust will be imposed or, in the language of James, L.J. in Rayner
v. Preston, supra, "ascertained". No reason has been suggested to us why the agreement at issue in the
case at bar would not have been open to specific performance, although that remedy would not be
granted prior to the agreed closing date. The fact that the deposit was required to be held by a
stakeholder in the meantime surely does not change the fact that consideration had passed from the
purchasers to the vendors for their promise to convey the Lands on the closing date.

19 Even apart from any argument based on constructive trust, the specific exception made by s.
79(2)(c) of the Court Order Enforcement Act for persons in the very position of the purchasers in this
case precludes the creditor's argument. Subparagraph 79(2)(c) states that the lien and charge of a
judgment creditor are "subject to the rights of a purchaser who, prior to the registration of the
judgment, has acquired an interest in the land in good faith and for valuable consideration". (Mr.
DiCastri notes in Registration of Title to Land, vol. 2, para. 9310, n. 49, that this provision is a legislative
restatement of the rule in Davidson, supra.) It is clear that the purchasers in this case acquired an
interest in the Lands for valuable consideration, and it has not been contended that the "contract of
sale" was not entered into bona fide by any of the parties or was otherwise invalid.

20 It follows, in my opinion, that Coultas, J. was correct in his conclusion that Martin's judgment
attached "subject to the equities" in favour of the purchasers, notwithstanding that their interest was
not (and could not be) registered prior to closing. The creditor could attach only what remained in the
debtor's hands after the conveyance in this case some $5,000 of net proceeds.

21 I reach this conclusion with some reluctance, given the larger policy considerations that were
argued on the creditor's behalf. As Mr. Hobbs notes, in a Torrens jurisdiction persons dealing with the
registered owner of land are generally expected to take note of charges on the register. The result of
the dismissal of this appeal is that the purchasers in this case will retain their title free of the charge
which Martin prudently registered against the Lands. Mr. Hobbs contends that the decision may lead to
mischief that an owner who anticipates a judgment being registered against him, may quickly sell to a
friendly third party and that the two may then conspire not to register the transfer unless and until the
creditor attempts to realize on its judgment. I suppose this is a possible mischief, but one hopes that
the law relating to bona fide purchasers or fraudulent transfers would be applied so as to invalidate any
such scheme and protect the creditor's position. In any event, if this is a mischief that could arise, it has
been one that could arise for many decades and which the Legislature has not seen fit to address.
Indeed, persons in the position of the purchasers in this case have been consistently protected in this
province, formerly by the Execution Acts and now by the Court Order Enforcement Act, against the
claims of persons in Martin's position.

22   I would dismiss the appeal, with thanks to both counsel for their helpful submissions.

NEWBURY J.A.
CUMMING J.A.:— I agree.
RYAN J.A.:— I agree.

       [Appeal dismissed]
                                                                                                         249

Canadian Imperial Bank of Commerce v. Muntain and Muntain (Muntain Painting and Decorating) and
                                              Muntain
                           [1985] B.C.J. No. 3075, 4 W.W.R. 90 (B.C.S.C.)

1 CASHMAN L.J.S.C.:—The plaintiff obtained a judgment against the defendant Michael Muntain and
two others following a trial before Wallace J. in May 1980.

2 The plaintiff applied for an order pursuant to s. 88 of the Court Order Enforcement Act, R.S.B.C.
1979, c. 75, that the interest of the defendant Michael Muntain, in property held in joint tenancy with
his wife, Violet Muntain, be sold and an order was made requiring the registrar to hold an inquiry and
issue a certificate in accordance with the statutory provisions. That was done.

3 The matter then came on before Melvin L.J.S.C. on 19th June 1981. In reasons for judgment
delivered 23rd June 1981, the learned judge noted that the judgment was in the amount of $32,758.40
together with prejudgment interest and costs as set out in the judgment.

4 The learned judge then went on to note that this defendant was one of three judgment debtors
pursuant to the judgment of Wallace J. pronounced 7th May 1980, and that it appeared from a perusal
of those reasons for judgment that this defendant found himself indebted to the plaintiff as a result of
the activities of his son. Melvin L.J.S.C. went on to note that Michael Muntain had no income other than
pensions and no resources to pay the judgment in question, other than the matrimonial property
referred to. The property on which the judgment was sought to be enforced was the matrimonial home
of Michael Muntain and his wife, Violet Muntain, held in joint tenancy.

5 The learned judge then decided that pursuant to s. 88(1) of the Court Order Enforcement Act he
would defer the sale because he thought it appropriate to exercise the discretion given to the court in
that section and in concluding his reasons for judgment the learned judge said:

        "I will not specify the length of time which that sale is to be postponed, nor will I specify any
        terms and conditions other than the fact that the sale is deferred until further order of the
        court."

6    The formal order, in the final paragraph, reads this way:

        "AND THIS COURT FURTHER ORDERS that as the subject property is the matrimonial home of
        the Defendant, Michael Muntain, and his Wife, Violet Muntain, the said sale of the subject lands
        and premises is deferred, without terms and conditions, until further Order of this Court."

7 On 22nd May 1984 the plaintiff applied ex parte for an order pursuant to RR. 43 and 44(8) of the
Rules of Court and s. 84 of the Court Order Enforcement Act that the same property be sold to satisfy
the claims of the judgment creditor. That application came on before Meredith J. who dismissed the
application by order dated 22nd May 1984.

8    At or about that time I am told that the plaintiff filed a lis pendens in the land titles office.

9 Mr. Muntain died 2nd June 1984. The Registrar of Titles transmitted the property to Mrs. Muntain
as the surviving joint tenant and discharged the lis pendens, I am told, on the authority of Re Young
(1968), 66 W.W.R. 193, 70 D.L.R. (2d) 594, a decision of the British Columbia Court of Appeal, which
held that the registration of a judgment did not sever a joint tenancy.

10    It is submitted that the registration of the lis pendens here alters that situation. I am not at all
                                                                                                        250

persuaded that that is so. In Re Young the court was concerned with a judgment registered in the land
registry office (as it was then called). At that time the statute was the Execution Act and the section was
s. 35 of that Act, now s. 75 of the Court Order Enforcement Act.

11 Maclean J.A. in Re Young referred to Power v. Grace, [1932] O.R. 357, [1932] 2 D.L.R. 793,
affirming [1932] 1 D.L.R. 801 (C.A.), and reverted to the words of the trial judge in that case at p. 201 as
follows:

       "'The trend of the authorities is that a mere lien or charge on the land, either by a co-tenant or
       by operation of law, is not sufficient to sever the joint tenancy; there must be something that
       amounts to an alienation of title.'"

12 Also at p. 201 Maclean J.A. referred to Re Brooklands Lumber & Hardware Ltd. and Simcoe (1956),
64 Man. R. 1, 18 W.W.R. 328. Counsel have referred me to the same case in 3 D.L.R. (2d) 762 and I note
that Williams C.J.Q.B. (Manitoba) in that case made a similar finding. At p. 766 he had this to say:

       "The joint tenancy of the judgment debtor is an interest in the land in question and is 'land' as
       defined in s. 2 of the Judgments Act.

       "Although it has been held, in Ontario, that the mere delivery of a writ of Fi, fa. to the Sheriff is
       not execution which severs a joint tenancy (see supra) it seems that once the Sheriff proceeds
       to execute' the writ the joint tenancy is severed: see Power v. Grace, supra.

       "If the same analogy may be applied the commencement of proceedings for sale under the
       Judgments Act would have the same effect. If the joint tenancy is so severed then the interest of
       the judgment debtor in the land is that of a tenant in common, and that interest being 'land' as
       defined in s. 2(e) may be sold. In my opinion that is the situation."

13   No steps have been taken here to execute the judgment.

14 Counsel also referred to a judgment of Hinkson L.J.S.C. (as he then was) in Re McDonald (1969), 71
W.W.R. 444,8 D.L.R. (3d) 666 (sub nom. Re McDonald and R.) (B.C.S.C.), where he considered a writ of
extent registered in the land registry office. In that case counsel referred to s. 171 of the Land Registry
Act. The learned trial judge there held there was nothing in that section which would lead him to
conclude that the registration of the writ of extent might operate as a severance in equity of the
interest of the judgment debtor. At p. 449 the learned judge had this to say:

       "The effect of registration of the writ of extent is only, in my view, to bind the lands in the sense
       described in Power v. Grace, supra. Registration is a preliminary step to execution. Without
       more the unity of possession, interest, title and time, essential to a joint tenancy of land, is not
       severed. Further, the jus accrescendi is not so modified or abrogated as to result in the surviving
       joint tenants taking subject to the claim of the crown, hence while the crown could execute
       against the interest of the joint tenant during his lifetime and any purchaser from the joint
       tenant would take subject to the rights of the crown, yet when the interest passes by operation
       of law to the surviving joint tenants, it does so free and clear of the claim of the crown."

15 Counsel for the plaintiff submits that ss. 79 and 101 of the Court Order Enforcement Act contained
in Pt. 3 of the statute have changed the law since Re Young.

16 I commence by looking firstly at the definition of an "execution debtor" in s. 42, which reads as
follows:
                                                                                                       251


       "execution debtor includes a person against whom or against whose property other than land a
       writ of execution is issued on any judgment, or against whose land an order for sale has been
       made under this Part''.

17   In my respectful view that definition does not apply to the deceased defendant in this case.

18 Section 75, which replaced s. 35, appears to be substantially to the same effect and reads as
follows:

       "75. Immediately on a judgment being entered or recovered in this Province, the judgment may
       be registered in any or all of the land title offices in the Province, and from the time of
       registering it the judgment forms a lien and charge on all the land of the judgment debtor in the
       land title districts in which the judgment is registered, in the same manner as if charged in
       writing by the judgment debtor under his hand and seal; and after the registering of the
       judgment the judgment creditor may, if he wishes to do so, proceed at once on the lien and
       charge created by it."

19   That section does not appear to me to change the law set out in Re Young.

20 Section 79 contains 10 subsections, not all of which are applicable here. I set out (1) – (7) as
follows:

       "79.(1) After October 30, 1979, a judgment entered or obtained in the Province may be
       registered against the title to specified land in any or all of the land title offices in the manner
       provided in section 80.

              "(2) From the time of its registration the judgment forms a lien and charge on the land of
              the judgment debtor specified in the application referred to in section 80 in the same
              manner as if charged in writing by the judgment debtor under his hand and seal,

                      "(a) to the extent of his beneficial interest in the land;

                      "(b) where an owner is registered as a personal representative or trustee, to the
                      extent of the interest of a beneficiary who is a judgment debtor; and

                      "(c) subject to the rights of a purchaser who, prior to registration of the
                      judgment, has acquired an interest in the land in good faith and for valuable
                      consideration under an instrument not registered at the time of the registration
                      of the judgment.

              "(3) The time of registration or the renewal of registration of a judgment is the day and
              hour when the application under section 80 to register the judgment or the renewal of it
              is received by the registrar.

              "(4) Where a judgment is registered under this section against a particular interest in
              land of the judgment debtor, and he subsequently acquires a further registered estate or
              interest in the same land, the registration of the judgment, if subsisting on the register,
              without any further application or other act on the part of the judgment creditor, shall
              be deemed to be enlarged so as to include the beneficial interest of the judgment debtor
              in that further registered estate or interest.
                                                                                                        252


               "(5) After registration under this section, the judgment creditor may proceed at once on
               the lien and charge created by subsection (2).

               "(6) In this section purchaser' includes lessee or mortgagee.

               "(7) A judgment creditor is not a bona fide purchaser for value."

21 I have included subss. (6)and (7) because of an argument advanced with respect to s. 101. That
section reads as follows:

       "101. For this Part, a proceeding shall not be deemed to have abated, nor shall any order for the
       sale of land nor any sale under it be in any way affected, by reason of the marriage, death or
       bankruptcy of any of the persons named in the judgment, the intent and object of this Part
       being to pass to a purchaser at a sale, under an order for the sale of land, an absolute title to
       the estate and interest of the execution debtor in the land purchased at the sale; but nothing in
       this Part shall affect the right of the execution debtor to receive rent or interest which is due for
       the land previous to the day of the sale of it."

22 I have arrived at the conclusion that this section has not changed the law and the law is still the
same as that set out in Re Young insofar as joint tenancies are concerned. In my respectful view all that
s. 101 does is to make clear the position of a "purchaser at a sale, under an order for the sale of land".
No order for the sale of land has ever been made in this case. In fact, the court on two occasions has
refused to make an order for sale. Melvin L.J.S.C. deferred that order, and Meredith J. dismissed an
application for an order for sale.

23 In these circumstances I conclude that the joint tenancy has not been severed by any proceedings
taken by the plaintiff and I dismiss the plaintiff's application with costs to Mrs. Muntain.

24 Mrs. Muntain's counsel referred me to the British Columbia Law Reform Commission Working
Paper No. 22 and particularly that part of the commission's report which looked into the Execution Act,
s. 47 (now s. 93 of the Court Order Enforcement Act) which provides in effect a one-month redemption
period to a debtor.

25 He also referred me to an enlightening article in the March 1979 Canadian Bar Review on
severance of joint tenancies by Dean A.J. McLean of the University of British Columbia Faculty of Law.
That learned author as well referred to the British Columbia Law Reform Commission Working Paper,
1976, at footnote 44, p. 11 of the article, where he comments as follows:

       "As a matter of general principle it may be argued that there is no severance until the land is
       sold. Until that date the judgment debtor could arrest the execution process ..."

26 It is interesting to note that the legislature of this province has not seen fit to amend any statute
that has the effect of overruling the decision in Re Young.

27 While I have decided that the plaintiff cannot proceed against the deceased defendant's interest
in the land here held in joint tenancy, it may well be that the plaintiff is not without remedy; however, I
make no finding in that regard.
                                                                                                          253

       Application dismissed.
                                     First Western Capital v. Wardle
                             [1984] B.C.J. No. 2059, 59 B.C.L.R. 309 (B.C.C.A.)

The judgment of the Court was delivered by

1    HUTCHEON J.A.:— The appellant, Ronald John Hancock, is a judgment debtor and these
proceedings concern the order obtained by the judgment creditor, First Western Capital Ltd., to sell his
interest in his matrimonial home and in two leaseholds. The issue is whether the Court has jurisdiction
to require the sales to be subject to the approval of the Court. In the view of the chambers judge, the
Court Order Enforcement Act (the Act) was a complete code for the administering of the sale of land
under execution, and consequently there was no discretion under s. 88 of that Act to impose conditions
on the sale of the property. I have concluded that the Act is not a complete code, and that the Court
retains jurisdiction over the conduct of the sale.

2 For a full understanding of the issue, I must set out the pertinent sections of the Act that apply
after the report of the Registrar setting out the land to be sold has been confirmed by the Supreme
Court pursuant to an application under s. 86(5):

       88.(1) Where in a summary way or on the trial of an issue, or as the result of inquiries under
       sections 84 to 87, inclusive, or otherwise, any land or the interest of any judgment debtor in it is
       found liable to be sold, an order shall be made by the court declaring what land or what interest
       in it is liable to be sold, and directing the sale of it by the sheriff of the county or jurisdiction in
       which the land is situated, but where a premises situated on the land or interest in it of a
       judgment debtor is the matrimonial home of the debtor and his spouse, the court may defer the
       sale, subject to the performance by the judgment debtor of terms and conditions of payment or
       otherwise as the court imposes.

       (2) Not relevant.

       92.(1) All proceedings which may be taken before the Supreme Court under this Part, and all the
       powers which may be exercised by the Supreme Court in those proceedings, where the
       judgment has been recovered in a County Court, may be taken before and be exercised by the
       County Court in which the judgment was recovered, and where the judgment has been
       recovered in a Provincial Court, may be taken before and be exercised by the County Court in
       the territorial limits of which the judgment was recovered, and all of the foregoing provisions of
       this Part apply, with the necessary changes, and as far as applicable, to the proceedings.

       (2) Not applicable.

       93. The sheriff shall not offer the land for sale within a period less than one month from the day
       on which the order for the sale of it is delivered to him.

       94.(1) Before land is offered for sale under any order, the sheriff shall advertise in the Gazette,
       specifying

              (a) the particular property to be sold; (b) the name or names, if more than one, of the
              plaintiffs and defendants in every proceeding; (c) the charges, if any, appearing on the
              register against the land; (d) the date of the registration of encumbrances or charges; (e)
              the time and place of the intended sale; and (f) the amount of the judgment.
                                                                                                  254

(2) For 7 days next preceding the sale, unless otherwise ordered by the court, the sheriff shall
similarly advertise in a newspaper of general circulation published or circulating in the county in
which the land is situated, and shall, before or immediately after the first publication of the
advertisement, post a printed or written copy of the notice of sale, in a suitable frame to be
provided by him for the purpose, in his own office.

(3) The court in which the order for sale is made may dispense with any of the requirements of
this section, except as to advertising in the Gazette, or may modify or make other provisions as
to advertising.

97. If at the time appointed for the sale under an order no bidders appear, or if in the opinion of
the sheriff the biddings are not sufficient to justify a sale, he may adjourn the sale.

98.(1) On a sale of land under this Part, the sheriff shall execute to the purchaser a conveyance,
under his hand and seal, of the land sold, in Form C of Schedule 3, or to similar effect, and shall
in the conveyance fully, distinctly and sufficiently describe the land and interest in it which has
been sold; and the conveyance, when delivered to the purchaser, and registered in the land title
office for the land title district in which the land is situated, vests in him, according to the nature
of the property sold, all the legal and equitable estate and interest of the execution debtor in it
at the time of the registration against the land of the first judgment, as well as at the time of the
sale, or at any intermediate time, discharged from the first judgment and from all judgments
and other charges against the execution debtor and his land, subsequent to the first judgment.

(2) Not relevant.

(3) Not relevant.

100. The purchaser at a sale is not bound to ascertain whether the requirements of this Part
have been performed, and notwithstanding a breach of this Part or any impropriety or
irregularity in the sale or otherwise of which the purchaser may or may not have notice, if he is
not a party to it, and notwithstanding any informality in the conveyance of the property sold,
the conveyance, when executed by the sheriff and delivered to the purchaser, shall be deemed
to be valid.

101. For this Part, a proceeding shall not be deemed to have abated, nor shall any order for the
sale of land nor any sale under it be in any way affected, by reason of the marriage, death or
bankruptcy of any of the persons named in the judgment, the intent and object of this Part
being to pass to a purchaser at a sale, under an order for the sale of land, an absolute title to
the estate and interest of the execution debtor in the land purchased at the sale; but nothing in
this Part shall affect the right of the execution debtor to receive rent or interest which is due for
the land previous to the day of the sale of it.

106.(1) Every sale of land under an order made under this Part shall be conducted by the sheriff
or his deputy in person, and for his services he is entitled to receive the same fees, expenses
and poundage as are allowed the sheriff for the sale of land by execution under the Supreme
Court Act and Rules.

(2) Where the land of the execution debtor is advertised under an order for sale of it, but is not
sold by reason of satisfaction having been otherwise obtained, or for some other cause, and no
money is actually levied on the execution, the sheriff is entitled to receive fees, expenses and
poundage based on the assessed value of the land at the same rate as is allowed for fees,
                                                                                                          255

       expenses and poundage under the Supreme Court Rules.

       (3) Not relevant.

       (4) Not relevant.

       107. The sheriff of each district shall enter in a register, to be kept by him especially for the
       purpose, particulars of each sale effected by him.

3 In the present case, the application of the debtor to defer the sale in exercise of the power to do so
in Section 88 was dismissed prior to the making of the order for sale. The position of the creditor is
that, so far as the sale is concerned, the power to defer the sale of a matrimonial home is the only
discretionary power the Court has on the application; Section 88 provides that "an order shall be made
by the court declaring what land or what interest in it is liable to be sold, and directing the sale of it ..."
It follows from this argument that, for example, the judge could not fix a reserve price.

4 In a 1983 study paper prepared for the Law Reform Commission of British Columbia entitled "The
Office of the Sheriff" the authors, Gordon Turriff and Elizabeth Edinger, suggest at p. 173

       Though (the Court Order Enforcement Act) directs sale by public auction personally conducted
       by the sheriff in the usual case, there is no reason for the sheriff not to apply for directions
       under R. 42(26) if, for example, in his opinion a private sale might be preferable.

       Rule 42(26) reads

               (26) A sheriff, judgment creditor or judgment debtor may apply to the court for
               directions under Rule 43 concerning the sale of any property taken in execution.

Under Rule 43(4) the Court is given the power to give such direction as it thinks fit for the purpose of
effecting a sale, including making the sale "conditional on the approval of the court".

5 The authors do not cite any authority for their suggestion. With respect, I think the language of
Rule 42(26) and the history of execution proceedings for the sale of land require a contrary conclusion.

6 First, the words "concerning the sale of any property taken in execution" in the context of rules
dealing with writs of execution, are not readily extended to describe land that is the subject of an order
for sale under s. 88. They are more appropriate to describe goods and chattels that have been seized
("taken in execution") under a writ of execution.

7 Secondly, and more importantly, the history of execution proceedings against land shows that
those proceedings have taken place outside of the Rules of Court. In the rules that were in force before
1 February 1977 we find the following:

       Order XLIII
              (See Execution Act, R.S.B.C. 1948, Chapter 114, as to execution against lands).

There was a separate order (Order 51) that made provision for sale of land in cases such as a partition
action or a debenture holder's action. Among those provisions was found the rough equivalent of Rule
43 including sale with the approbation of a judge and power to fix a reserve bid.

8    My conclusion is that Rule 42(26) and Rule 43 are not part of the procedure in execution
                                                                                                      256

proceedings against land.

9 The comment in the study that the statute directs sale by public auction is consistent with the
inference that one could draw from Section 97 in its use of the word "bidders" and "biddings" and with
the form of the conveyance to be executed by the sheriff. Form "C" recites:

       FORM C

       Form of Conveyance

              I,                                                                           , Sheriff for
              state:

              That, under an order for the sale of land issued on a judgment of the Court, in a
              proceeding by                         against                       , all the estate, right,
              title and interest of the defendant in the land hereafter described were sold by me at
              public auction on (month, day) , 19 , to                           (he being the highest
              bidder), for $                      .

10 Although the Act does not direct sale by public auction that is the only method contemplated by
its provisions.

11 Those provisions were changed in the revision of the statute in 1979. The present Section 97 now
reads:

       97. If at the time appointed for the sale under an order no bidders appear, or if in the opinion of
       the sheriff the biddings are not sufficient to justify a sale, he may adjourn the sale.

Prior to the 1979 revision consolidation the section of the Execution Act, R.S.B.C. 1960, c. 135, read in
this way:

       51.(1) If at the time appointed for the sale under an order no bidders appear, or if in the opinion
       of the Sheriff the biddings are not sufficient to justify a sale, he may adjourn the sale from time
       to time.

       (2) In case of any adjournment a writ of venditioni exponas may be issued, and on the delivery
       thereof to the Sheriff he shall sell the lands referred to therein for the highest bidding made the
       next time they are offered for sale; but such lands shall not be offered for sale under a writ of
       venditioni exponas until after they shall have been advertised for sale, and the notices of sale
       posted as aforesaid, unless otherwise ordered by a Judge of the Court in which the order for
       sale is made.

12 The issue of a writ of venditioni exponas (you expose to sale) was mentioned in the Supreme Court
Rules in this way:

       MR.617 5. Writs of venditioni exponas, and all other writs in aid of fieri facias, against goods,
       may be issued and executed in like cases as heretofore (Forms 4 and 9, App. H.).

13 Form 4 directs that the necessary variations throughout the form be made in the case of lands and
tenements.
                                                                                                          257

14 According to the note in Atkin's Encyclopedia of Court Forms in Civil Proceedings (2nd ed., 1972)
Vol. 19, at p. 46 a writ of venditioni exponas, as is the case of all other writs in aid, cannot issue without
the leave of the Court. This was one example, then, of the Court retaining jurisdiction over the sale. The
fact that the provision has been removed from the Act in the course of a revision is another reason to
support the view that Sections 88 to 106 of the Act are not a complete code.

15 There are other reasons. Suppose the sale made by the sheriff be one that is collusive. Would the
Court be powerless to set such a sale aside? In McGill v. McGlashan (1857) 6 Grant 324 Vice Chancellor
Esten said at p. 329:

       That a court of equity has jurisdiction to interfere and declare void a sale of this description, I
       apprehend cannot be disputed.

16 What if the purchaser fails to complete? This "as the question in Reyes v. Saranic (1979) 94 D.L.R.
(3d) 387 (N.S.C.A.). The sheriff, as an officer of the court, sought and obtained directions as to the
decisions he was entitled to make.

17 In the case of Kingsmill v. Bank of Upper Canada (1864), 13 U.C.C.P. 600 the Court rejected the
proposition that the purchaser could reduce the purchase price by the amount owed by the sheriff to
the purchaser.

18 These are illustrations, then, of the proposition that Sections 88 to 106 are not a complete code
once an order has been made for the sale of land in execution proceeding. In my view, the Court, in
making an order directing a sale of land, retains jurisdiction over that sale and in particular may require
that the sale be subject to the approval of the Court.

19 There are good reasons to invoke that jurisdiction in this case. Firstly, the interest that is to be
sold is an undivided one-half interest in a matrimonial home. That represents a special circumstance.

20   Secondly, the order in this case provides as follows:

       THIS COURT FURTHER ORDERS THAT THE Petitioner be at liberty to deliver a certified copy of
       this Order to the Sheriff of the County of Vancouver and upon such delivery the Sheriff shall
       offer for sale the lands and premises herein described in accordance with this Order and the
       provisions of the Court Order Enforcement Act.

21 That provision of the order reflects accurately the language of s. 88 "and directing the sale of it by
the sheriff of the county ... in which the land is situated".

22   Prior to 1976, the Sheriffs Act, R.S.B.C. 1960, c. 355 provided in Sections 3 and 9:

       3. The Lieutenant-Governor in Council may appoint a Sheriff for each county, or for any less or
       greater jurisdiction.

       9. In the event of the office of Sheriff of any county or jurisdiction being for the time being
       vacant, or in the case of the absence or illness of any Sheriff, it is lawful for any Judge of the
       Supreme or County Court, for the purpose of the due service, carrying out, or execution of any
       order, writ, or process of such Court in any cause or matter, to empower, by appointment in
       writing inituled [sic] in the cause or matter and given under the hand of the Judge, any person
       to perform the duties of a Sheriff in the cause or matter; and the appointment shall be filed in
       the district registry of the Court, and the person appointed shall furnish, to the satisfaction of
                                                                                                       258

       the Registrar of the Court, such security as the Judge directs.

23 In 1976, the Sheriffs Act, R.S.B.C. 1960, c. 355 was repealed and the Sheriff Act, S.B.C. 1976, c. 50
was enacted (now R.S.B.C. 1979, c. 386). The new Sheriff Act contains eleven sections in contrast to the
sixty sections in the repealed statute. The only sections relevant to this matter are:

       1. In this Act "director" means the director of sheriff services;

       3.(3) The director is a sheriff.

       4. The director and each sheriff has jurisdiction throughout the Province to exercise all the
       powers and perform all the duties imposed on him under this or any other enactment.

       5. A sheriff is an officer of all of the courts in the Province.

24 According to the authors of "The Office of the Sheriff" (cited above) there is now only one sheriff
in British Columbia, the director of sheriff services (s. 3(3)). There is no "Sheriff of the County of
Vancouver". If there is a sale, who is to execute the conveyance (Section 98(1)) "under his hand and
seal" to vest in the purchaser the interest of the debtor "discharged from the first judgment and from
all judgments and other charges against the execution debtor and his land, subsequent to the first
judgment"?

25 In the interest of the purchaser as well as the debtor, the better approach in this case is to make
all of the proposed sales subject to the approval of the Court. When the application is made to approve
a sale, the question of the execution of the conveyance can be settled in a way to achieve the objective
of the Act, namely, to vest in the purchaser a safe, marketable title.

26 I would allow the appeal and vary the order to require that any sale of land be subject to the
approval of the Supreme Court.

HUTCHEON J.A.
CARROTHERS J.A.:— I agree.
ANDERSON J.A.:— I agree.

       Appeal allowed.



                                   Hankin Furniture Industries Ltd. v. Gill
                                     (1980) 16 E.C.L.R. 311 (B.C.S.C.)

1 HYDE L.J.S.C.:— On April 4, 1979, in pursuance of the terms of the Execution Act R.S.B.C. 1960, c.
135, Hinds L.J.S.C. directed the district registrar of this Court to determine what lands were liable to be
sold under the judgment herein, the nature and particulars of the interest of the judgment debtor in
the lands and his title thereto, what judgments formed a lien and charge against the lands and the
priorities that exist between those judgments; and how the proceeds of this sale should be distributed.

2   On June 8, 1979, the district registrar held a hearing and reported to the Court as follows:

       "1. There is a fee simple interest registered in the name of Hakim Singh Gill, on that parcel of
       land known and addressed as 2703 Espladade, Port Moody, B.C., and more particularly known
                                                                                             259

and described as that certain parcel or tract of land and premises situate in the City of Port
Moody, Lot 6, Block 1 of Lot 201, Group 1, Plan 72, New Westminster District

2. That the land and premises referred to in paragraph 1 hereto is liable to be sold under the
Judgment of the Judgment Creditor.

3. That the following form a Lien and charge upon the said lands:

       (1) Judgment in favour of Hankin Furniture Industries Ltd. in the amount of $7,828.92,
       registered on the 4th day of November, 1977 at 12:58 p.m.

       (2) Judgment in favour of Canadian Admiral Corporation Ltd. in the amount of $7,808.52,
       registered on the 22nd dayof February, 1978, at 1:44 p.m.

       (3) Judgment in favour of Shawnigan Floor Coverings Ltd. in the amount of $1,894.18,
       registered on the 27th day of February, 1978, at 9:01 a.m.

       (4) Mortgage in favour of the Royal Bank of Canada in the amount of $35,000.00,
       registered on the 28thday of February, 1978, at 1:44 p.m.

       (5) Judgment in favour of Major Appliances Ltd. In the amount of $7,338.40, registered
       on the 21st day of March, 1978, at 1:18 p.m.

       (6) Judgment in favour of Malkit Brar in the amount of $10,928.36, registered on the
       29th day of March, 1978, at 2:38 p.m.

       (7) Judgment in favour of Danby Corporation in the amount of $4,127.00, registered jon
       the 6th day of April, 1978, at 2:59 p.m.

       (8) Judgment in favour of Westmills Carpets Limited, registered on the 3rd day of August,
       1978, at 10:39 a.m. in the amount of $15,525.49.

       (9) Judgment in favour of Vancouver Sign-X-Sign Sales Ltd., registered on the 25th day of
       October, 1978, at 1:32 p.m.

       (10) Judgment in favour of Decor Wood Specialists Ltd. in the amount of $2,264.97,
       registered on the 22nd day of January 1979, at 1:02 p.m.

       (11) Judgment in favour of CKWX Radio Ltd. in the amount of $4,878.97, registered on
       the 23rd day of March, 1979, at 8:16 a.m.

       (12) Judgment in favour of Chipman Agencies Ltd. in the amount of $2,348.36, registered
       on the 26th day of March, 1979, 1:31 p.m.

4. THAT I am of the opinion that the sale proceeds should be distributed in the following
manner:

       (1) Firstly, to the Judgment Creditors, Hankin Furniture Industries Ltd., Canadian Admiral
       Corporation Ltd. and Shawnigan Floor Coverings Ltd.

       (2) Secondly, to the Royal Bank of Canada.
                                                                                                        260


               (3) Thirdly, the balance, if any, to the remaining Judgment Creditors."

3   The judgment creditor now applies to this Court for the following relief:

       "1. A declaration pursuant to Section 42, Subsection 2, of the Execution Act, R.S.B.C. 1960, c. 35
       and the amendments thereto, that:

               (a) The Judgment Debtor is the registered owner of those lands and premises situate in
               the City of Port Moody, in the Province of British Columbia, more particularly known and
               described as, Lot 6, Block 1, of Lot 201, Group 1, Plan 72, New Westminster District and;

               (b) The said lands and premises are liable to be sold to satisfy the Judgment of the
               Judgment Creditor herein.

       2. For an order pursuant to Section 42, Subsection 2 of the Execution Act, R.S.B.C. 1960, C. 35
       and the amendments thereto, that the sheriff of the County of Westminster sell the said lands
       and premises to satisfy the Judgment of the Judgment Creditor.

       3. For an Order pursuant to Section 40, Subsection 3 of the Execution Act, R.S.B.C. 1960, C. 35
       and the amendments thereto, that the Judgment Creditor herein is entitled to its taxed costs of
       these proceedings on a party/party scale.

       4. For an Order that the said sheriff pay the proceeds of the said sale in the following priorities:

               (i) Firstly, to the solicitors for the Judgment Creditor, Messrs. Williamson, Thorne,
               Goldsmith & Hartshorne, its taxed costs of these proceedings;

               (ii) Secondly, to the solicitor for the Judgment Creditor, Messrs. Williamson, Thorne,
               Goldsmith & Hartshorne, the amount owed it on the day of completion of the said sale;

               (iii) Thirdly, to the solicitors for Canada Admiral Corporation Ltd., Messrs. Farris &
               Company, the amount owed to it on the day of completion of the said sale;

               (iv) Fourthly, to Shawnigan Floor Coverings Ltd., the amount owed to it on the day of
               completion of the said sale;

               (v) Fifthly, to the Royal Bank of Canada, the amount owed to it on the day of completion
               of the said sale;

               (vi) Sixthly, the balance, if any, to be paid to the solicitors for Major Appliances Ltd.,
               Malkit Brar, Danby Corporation, Westmills Carpets Limited, Vancouver Sign-X-Sign Ltd.,
               Decor Wood Specialists Ltd., CKWX Radio Ltd. and Chapman Agencies Ltd., in equal
               shares."

4 The application is opposed by counsel for Westmills Carpets Limited, on the ground that all
judgment holders are execution creditors and should share in the proceeds of the sale pari passu. He
advances the proposition that the first judgment holder Hankin Furniture Industries Ltd. is entitled to
sell the property free and clear of encumbrances.

5   He cites in support of this position the provisions of the Execution Act, as follows:
                                                                                                       261


       "38.(1) Where a judgment creditor in a proceeding has registered a judgment as aforesaid, and
       alleges that the judgment debtor is entitled to or has an interest in any land, or that any land is
       held subject to the lien created by registration of judgment under section 35, a motion may be
       made to the Supreme Court, or to a Judge thereof in Chambers, by the judgment creditor calling
       upon the judgment debtor, and upon any trustee or other person having the legal estate in the
       land in question, to show cause why any land in the land registration district in which the
       judgment is registered, or the interest therein of the judgment debtor, or a competent part of
       the land, should not be sold to realise the amount payable under the judgment.

       40.(3) Unless good reason is found to the contrary, the creditor first taking proceedings is
       entitled to his costs in priority to all claims under judgment whether prior or subsequent to his
       own.

       52.(1) Upon any sale of lands made under this Act, the Sheriff shall execute to the purchaser a
       conveyance under his hand and seal, of the lands sold, in Form C, or to the like effect, and shall
       in such conveyance fully, distinctly, and sufficiently describe the lands and interest therein
       which have been sold; and the conveyance, when delivered to the purchaser, and registered in
       the Land Registry Office for the registration district in which the lands are situate, vests in him,
       according to the nature of the property sold, all the legal and equitable estate and interest of
       the execution debtor therein at the time of the registration against the said lands of the first
       judgment, as well as at the time of the sale, or at any intermediate time, discharged from the
       first judgment and from all judgments and other charges against the execution debtor and his
       lands, subsequent to the first judgment.

       57. Money realised by the sale of land under the provisions of this Act shall be deemed to be
       money levied under execution within the meaning of the Creditors' Relief Act, except that the
       money shall be paid into Court under the preceding provisions of this Act, subject to the right to
       costs (if any) of any judgment creditor whose judgment was registered against the land.

       58. The moneys received by the Registrar of the Court shall be distributed by him to the persons
       to whom the Sheriff would, under the Creditors' Relief Act, distribute moneys levied under a
       writ of execution."

and the Creditors' Relief Act, R.S.B.C. 1960, c. 85:

       "3. Subject to the provisions hereinafter contained, there shall be no priority among creditors by
       execution from the Supreme Court or County Courts.

       4.(1) When a Sheriff levies money upon an execution against the property of a debtor, he shall
       forthwith enter in a book, to be kept in his office open to public inspection without charge, a
       notice stating that the levy has been made, and the amount thereof;

       and the money shall thereafter be distributed rateably amongst all execution creditors and
       other creditors whose writs or certificates, given under this Act, were in the Sheriff's hands at
       the time of the levy, or who deliver their writs or certificates to the Sheriff within one month
       from the entry of notice; subject, however, to the provisions hereinafter contained as to the
       retention of dividends in the case of contested claims, and to the payment of the costs of the
       creditor under whose writ the amount was made."

6    He argues that Hankin's judgment takes priority over the Royal Bank mortgage, and that in
                                                                                                        262

consequence Hankin is entitled to execute against a clear title, because "at the time of the registration
against the lands of the first judgment" the legal and equitable estate and interest of the execution
debtor was free and clear of encumbrances, subject only to the rights of other judgment creditors
under the Creditors' Relief Act.

7 In fact, the mortgage is stated in its terms to be subject to the first three judgments recited above
and registered prior to the mortgage.

8 Counsel advised the Court that there are no reported or unreported authorities or precedents in
relation to this point.

9 I agree that a reading of the above statutory provisions together has the effect of making the clear
title to the property available for sale by Hankin, the first judgment creditor; and that by virtue of s. 57
of the Execution Act, and s. 4(1) of the Creditors' Relief Act, read together, the proceeds of sale are to
be distributed rateably amongst all execution creditors, being judgment creditors whose judgments
were registered against the land at the time of this application.

10 I therefore decline to confirm the distribution recommended by the district registrar in para. 4 of
his report to the Court; and I order the sale by the sheriff of the lands set out in para. 1 of the district
registrar's report and payment out:

       (a) of the costs of this application to Counsel for Westmills Carpets Limited;

       (b) to the judgment holders listed in para. 3 of the district registrar's report, the amounts of
       their respective costs, pari passu;

       (c) to the Royal Bank of Canada of the balance owing on its mortgage, and costs; and

       (d) of the balance, if any, to the judgment debtor, Hakim Singh Gill.

HYDE L.J.S.C.

       Order accordingly.



                                             Property Law Act
                                        R.S.B.C. 1996, c. 377, s. 28

Further advances by mortgagee

28     (1) In this section, "further advance" includes a first advance.

       (2) Despite the Land Title Act, after October 30, 1979, further advances made by a registered
       owner of a mortgage contemplated by and in accordance with the mortgage rank in priority to
       mortgages and judgments registered after his or her mortgage was registered if

                (a) the subsequent registered mortgagees or judgment holders agree in writing to the
                priority of the further advances,

                (b) at the time the further advances are made, he or she has not received notice in
                                                                                                       263

              writing of the registration of the subsequent mortgage or judgment, from its owner or
              holder,

              (c) at the time the further advances are made, the subsequent mortgage or judgment
              has not been registered, or

              (d) the mortgage requires him or her to make the further advances.

       (3) If a mortgage is expressed to be made to secure a current or running account, it is not
       deemed to have been redeemed merely because

              (a) advances made under it are repaid, or

              (b) the account of the mortgagor with the mortgagee ceases to be in debit,

       and the mortgage remains effective as security for further advances and retains the priority
       given by this section until the mortgagee has delivered a registrable discharge of the mortgage
       to the mortgagor but, if the mortgagor is not indebted or in default under the mortgage, the
       mortgagee must, on the mortgagor's request and at the mortgagor's expense, execute and
       deliver to the mortgagor a registrable discharge of the mortgage.

       (4) Except as provided in this section, a right to tack in respect of mortgages of land is abolished
       but priority acquired before October 31, 1979 for further advances under a mortgage is not
       affected.

       (5) This section applies to mortgages of land made after October 30, 1979.



                                     Roadburg v. British Columbia
                            [1980] B.C.J. No. 4, 110 D.L.R. (3d) 433 (B.C.C.A.)

Separate reasons for judgment were delivered by Craig and Macdonald JJ.A [but were omitted].

                                                     I

1 LAMBERT J.A.:– This appeal raises a preliminary question about the position of judgment creditors
in foreclosure proceedings. It also raises two questions about Crown liens under the Corporation
Capital Tax Act, S.B.C. 1973, Chap. 24, namely, when does the lien arise and attach, and what is its
priority after it attaches. Finally, it raises a fourth question about the priorities between judgment
creditors.

2 Those questions arise and must be determined under the real property and execution legislation in
effect in 1977 and 1978 and not under the legislation enacted in 1978, which came into effect on 31
October 1979.

                                                    II

3 Cedarhurst Properties Ltd. (Cedarhurst) was the registered owner in fee simple of land in
Vancouver. On 30 August 1977 there were five mortgages endorsed as charges on the Certificate of
Indefeasible Title to that land. On that day the respondent, Roadburg, the fifth mortgagee, started a
                                                                                                     264

foreclosure action and filed a lis pendens. On 24 May 1978, on the application of Cedarhurst in the
foreclosure proceedings, Fulton, J., approved and ordered a sale of the land for $370,000.00. A part of
the purchase price was to be paid by assumption of the first mortgage. Part of the funds available from
the purchase price was to be applied in payment of real estate commission, taxes, legal fees and the
discharge of the second, third, fourth and fifth mortgages. With respect to the remainder of the
purchase price, it was ordered that

       i) The balance of $106,901.68 be paid into Court for the credit of this proceeding forthwith
       following the completion of the sale and any party be at liberty to make application to this Court
       for purposes of determining the priorities as between parties and the priorities with respect to
       the payment of monies out of this Court.

A few days later the conveyance was completed. The charges against the land immediately before the
conveyance may be set out as follows:

                               ENCUMBRANCES

MORTGAGES
Name of Mortgagee                             Date of Registration
  1. Yorkshire Trust Company                  17 May 1971
  2. W. L. Karp and K. A. Karp                20 March 1974
      *(Cedarhurst fiscal year end)           (29 February 1976)
  3. Canadian      Imperial      Bank      of 16 March 1976
      Commerce
  4. East Whalley Holdings Corp.               2 September 1976
  5. George Roadburg                           8 October 1976

LIS PENDENS

Holder                                         Date of Registration
   1. George Roadburg                          30 August 1977

JUDGMENTS

Holder                                   Date of Registration
   1. Four Star Construction Ltd.        11 January 1977
   2. A.E. LePage Western Ltd.           15 February 1977
   3. W. L. Karp and K. A. Karp          17 February 1977
    * (Cedarhurst fiscal year end)       (28 February 1977)
   4. Craftsmen Floor (B.C.) Ltd.        1 March 1977
   5. Tanite Electric Ltd.               3 March 1977
   6. E. J. Clendenning and K. P. 25 March 1977
       Clendenning
   7. Her Majesty the Queen (B.C.)       1 April 1977
   8. W. L. Karp and K. A. Karp          26 August 1977
   9. Her Majesty the Queen (B.C.)       20 October 1977
    * (Cedarhurst fiscal year end)       28 February 1978
   10. Dick’s Lumber & Building Supplies 23 May 1978
   11. Her Majesty the Queen (B.C.)      29 May 1978
                                                                                                         265

4 The mortgages, numbered from 1 to 5, were endorsed on the Certificate of Indefeasible Title, as
was the lis pendens. The judgments, numbered from 1 to 11, were shown on the Register of Judgments.
The three asterisks represent the dates of the fiscal year ends of Cedarhurst for 1976, 1977 and 1978.
There was no endorsement on any register with respect to those fiscal year ends or with respect to any
lien or charge in favour of the Crown. However, the amounts of corporation capital tax for each of
those three fiscal years were made the subject of three separate certificates under s. 40 of the
Corporation Capital Tax Act. In accordance with that section, the certificates had the force and effect of
judgments of the Supreme Court and, in the course of events, they were registered in the Judgment
Register in the Vancouver Land Registry office and appear as judgments numbered 7, 9 and 11, in the
list of judgments set out above.

5 The Crown claims that liens for the corporation capital tax payable with respect to the 1976, 1977
and 1978 fiscal years of Cedarhurst came into effect immediately at the conclusion of those fiscal years
and that those liens rank in priority from those three dates as shown by asterisks on the above list. If
that is so then the corporation capital tax for the 1976 fiscal year would have ranked ahead of the third,
fourth and fifth mortgages. That aspect of the Crown's claim was not pressed when the order for sale
was made but it may be that so long as the priority, if it is such, over all the registered judgment
creditors could still be asserted then there were ample funds to discharge the first two Crown liens. In
that case the Crown could permit the sale to take place as proposed by Cedarhurst as long as its
priority, if it is such, was protected.

6 Cedarhurst had proposed in its motion for the order for sale that the registered judgment creditors
should rank equally and that each should be paid 57.57 cents on the dollar. We are informed by
counsel for two of the judgment creditors, A.E. LePage Western Ltd. and Four Star Construction Ltd.,
that they proposed to assert on the return of the motion that judgment creditors should rank in
accordance with the dates of registration of their judgments.

7 There were, therefore, important points of priority in the minds of Crown counsel and counsel for
some of the judgment creditors, with respect to the principal issues in this appeal, when the order of
Fulton, J., was made.

8 On 7 September 1978, the Crown made an application to determine the priorities to the funds in
Court and for payment out in accordance with those priorities. That application was heard by van der
Hoop, L.J.S.C.. He gave written reasons for his decision on 11 October 1978. He decided that the Crown
liens ranked subsequent in priority to all registered mortgages and judgments and that the registered
judgments, including the Crown judgments, ranked in priority in accordance with the dates of their
registration. This appeal is brought by the Crown from that decision. The original Notice of Appeal
related only to the second part of the decision. However, encouraged by the decision of MacDonald,
L.J.S.C., in Gatsby Enterprises (Kelowna) Ltd. v. Gatsby Kelowna (1976) Ltd. and Canadian Imperial Bank
of Commerce (S.C.B.C. No. 78/0069, Kelowna Registry), the Crown obtained leave to amend its Notice
of Appeal so as to raise also the priority of the Crown liens.

9 In this part I propose to consider the preliminary question raised by the Crown to the effect that
none of the judgment creditors has any interest in the funds comprising the balance of the proceeds of
sale of the land after payment of the mortgagees.

10 If that argument were to prevail the Crown would rank ahead of judgment creditors, either
because it was the only lien holder, or, if its liens disappeared on alienation, as it alleges the charges of
registered judgment creditors disappeared, then because it asserts a Crown prerogative to rank ahead
of all judgment creditors in its claims on the fund on the basis that the Crown and all the other
judgment creditors are creditors of equal degree.
                                                                                                       266


11 The Crown says that whatever interest a judgment creditor may have in the land through
registration of his judgment, that interest does not survive the alienation of the land of the judgment
debtor nor does it suffer a transfer to any proceeds arising from the alienation of the land.

12 It is conceded that section 35 of the Execution Act, R.S.B.C. 1960, Chap. 135, provides that from
the time of registering a judgment it forms a lien and charge on the lands of the judgment debtor. But it
is argued that on registration of a judgment no estate or interest in land is vested in the judgment
creditor and that no part of the judgment debtor's interest is alienated in the judgement creditor's
favour. It is suggested that the lien or charge created by the registration of a judgment is a type of lien
or charge that attaches to the interest of the judgement debtor in the land but not to the land itself and
that the lien or charge does not survive the termination of the interest of the judgment debtor in the
land when it is alienated. Those propositions and their result are contrary to long-standing
conveyancing and foreclosure practices in British Columbia.

13 Counsel for the Crown relies on Re Brooklands Lumber and Hardware Ltd. and Simcoe (1956) 18
W.W.R. 328; Re Judgments Act; Regina v. Hamilton (1962) 39 W.W.R. 545; and Re Young (1968) 70
D.L.R. (2d) 594. I do not propose to analyze those cases to determine to what extent, if at all, they may
be said to support the propositions advanced by the Crown in this case. It is not necessary for me to do
so because, in my opinion, this preliminary point is resolved against the Crown's contention by the
decision of the Supreme Court of Canada in MacCulloch & Co. v. A.G. of Canada (1979) 29 N.R. 174.

14 In that case the reasons of Ritchie, J., were concurred in by all the other members of the Court
who sat on the appeal, namely, Martland, Pigeon, Beetz, Estey, Pratte and McIntyre, JJ. The issue in the
case was whether a Crown judgment had priority in the distribution of a foreclosure sale surplus over
judgments and second or collateral mortgages which were registered prior to the Crown judgement.
That issue was being determined under the laws of Nova Scotia. It was decided that the claims on the
surplus funds in the hands of the Sheriff and, subsequently, in the hands of the Accountant General of
the Supreme Court of Nova Scotia, were subject to the same priorities as those existing before the sale.
The priorities against the fund were to be treated as if they were priorities against the land that the
fund replaced. There are some differences between the Nova Scotia legislation and rules of practice, on
the one hand, and the British Columbia legislation and rules of practice, on the other, but, in my
opinion, those differences are not such as to make the reasoning of Mr. Justice Ritchie inapplicable in
British Columbia.

15 In short, by s. 35 of the Execution Act a registered judgment forms a lien and charge on the lands
of the judgment debtor in any land registration district in which the judgment is registered. That charge
is the same as if the land had been charged in writing by the judgment debtor under his hand and seal.
The judgment debtor cannot alienate the land free of the charge. If a court order does so, pursuant to
s. 13(c) of the Laws Declaratory Act, R.S.B.C. 1960, Chap. 213, and Rule 50(9) of the Supreme Court
Rules, then the priorities in relation to the fund must be the same as the priorities in relation to the
land which it replaced unless, for some specific reason, the court expressly orders otherwise. Any other
view would be inconsistent with the concept of sale in foreclosure proceedings and would create an
incentive for judgment creditors to initiate sale proceedings rather than maintaining the registration of
their judgments as security.

16 In my opinion it was contemplated by the order of Fulton, J., that the priorities against the surplus
funds after the mortgages were discharged would be determined on the same basis as they would have
been determined if the priorities had continued in existence against the land; that no other form of
order would have been appropriate; and that the priorities must be established and the claims
discharged on that basis.
                                                                                                        267


                                                    IV

17 The two questions about Crown liens under the Corporation Capital Tax Act turn on the meaning
of s. 37 of the Act. That section must be interpreted in its setting in the legislative scheme of which it
forms a part. Before addressing those two questions directly I propose to outline the legislative
scheme.

18 The Act imposes a tax on corporations that have a permanent establishment in British ColumbIa.
The tax is imposed for every fiscal year of the corporation. It is calculated as a percentage of the taxable
paid-up capital of the corporation, or, if the corporation is a non-resident corporation, as a percentage
of its taxable paid-up capital employed in Canada. That determination of taxable paid-up capital is
made as of the close of the fiscal year for which the tax is imposed. No tax is imposed for a fiscal year if
the taxable paid-up capital is less than $1,000,000.00.

19 The first step in determining the tax payable is to calculate the paid-up capital. The second step is
to make some permitted deductions to arrive at taxable paid-up capital. In both of these steps there
are references in the calculation to amounts determined under the Income Tax Act of Canada.

20 The Act, like many Canadian tax statutes, contemplates that the taxpayer will maintain his
records, complete his return, calculate his tax and make his payment, all by voluntary compliance. The
commissioner is not required to make an assessment. He may accept the return and the payment of
the estimated tax as correct.

21 The Act contemplates, then, that the tax will be paid in two separate sets of circumstances. The
first is where the taxpayer correctly completes his return, calculates his tax and pays his tax when he
submits his return. In that case the commissioner may accept that the return, calculation and payment
are correct and need not make an assessment. The second is where the taxpayer fails to complete his
return correctly or to calculate his tax correctly. In that case the commissioner makes an assessment
and issues a notice of assessment.

                                                     V


22   The crucial section for the purposes of this appeal is section 37.

       37.(1) The tax imposed or assessed under this Act forms a lien and charge in favour of the
       Crown on the entire assets of the corporation, or the entire assets of the corporation in the
       hands of a trustee, and has priority over all other claims of