Creditors Remedies

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					                                                   Creditor’s Remedies
                                                     Condensed CAN
                                                   Sheppard, Spring ‘05

Intro to Debt Collection: .................................................................................................. 2
   Regulation of Debt Collection: ..................................................................................... 2
   CBA – Code of Prof Conduct and BC ............................................................................ 2
   Business Practices and Consumer Protection Act: See full CAN p. 4............................ 2
   Shortcuts to Judgments/ Remedies (CCC) ...................................................................... 2
Laws Relating to the Judgment: ...................................................................................... 3
   1. Default Judgment .................................................................................................... 3
   3. Interest..................................................................................................................... 3
   4. Limitation Periods ................................................................................................... 3
   6. Stays of Execution ................................................................................................... 3
III. INFO ACQUISITION – BASIC PROCEDURES AFTER JUDGMENT - ......... 4
       How enforce payment or decide how to enforce? Two ways ................................ 4
   2. Subpoena to Debtor: Examination by the crt: brought b/f judge, master, and D is
   subject to examination. Usually results in an installment order. ................................... 4
Remedies: ........................................................................................................................... 5
   Mareva Injunction ........................................................................................................ 5
     Requirements for Mareva: .......................................................................................... 5
   Methods of Enforcing Judgments: .................................................................................. 6
   Charging Order: (2 types) ............................................................................................... 6
   Pre-Judgment Garnishment ............................................................................................. 7
   Priorities .......................................................................................................................... 8
   Priorities: Execution Creditor v. 3rd Parties .................................................................... 8
   Sheriff: ............................................................................................................................ 8
   Procedural steps in executing writs of seizure and sale .................................................. 9
   Priority of Claims: ...................................................................................................... 10
   Execution against Shares: w/ writ of seizure/sale ......................................................... 11
   Statutory/Legal Charging Order: s. 69 COE Act .......................................................... 11
Missed Class – day before March 17th - Execution against Land .................................... 11
Execution against Land: .................................................................................................... 11
Builder’s Lien Act:.......................................................................................................... 12
   Leased Premises: ........................................................................................................... 13
   Lien: s. 2........................................................................................................................ 14
   HoldBacks: s. 4 ............................................................................................................. 14
   Trusts: s. 10 ................................................................................................................... 15
   THE LINE:.................................................................................................................... 15
   Time Limits and Phases: ............................................................................................... 15
   Completion:................................................................................................................... 15
   Time Limits:.................................................................................................................. 16
   Ranking of Claims: ....................................................................................................... 16
   How to Remove a Lien: ................................................................................................ 16
   What if you have a shitty worker: ................................................................................. 16
Questions to Shep: ............................................................................................................ 17



                                                                                                                                        1
Intro to Debt Collection:
   - try non-litigious 1st
   - then Legal – writ in small claims for a judgment – then enforce judgment
   - prior to judgment an unsecured creditor has no rights – only a personal claim
       against D

Debtor Assistance Act s. 8 – Director of Debtor assistance – can give proof of facts to
court of Debtor’s ability to pay

Regulation of Debt Collection:
CC – limits what can be said to D to collect $$
s. 346 – Crime of Extortion:
     trying to charge with fraud is extortion (e.g. using criminal courts to collect debt)
     to threaten w/ crim prosecution for obtaining debt
     NOT crime to threaten Civil Proceeding (Handwritten?)
s. 372 – false messages, indecent or harassing phone calls

CBA – Code of Prof Conduct and BC
   threatening or advising client to threaten, laying a charge or making a complaint
      to regulatory authority for the collateral purpose of enforcing payment of a civil
      claim

Business Practices and Consumer Protection Act: See full CAN p. 4
    Threatening
    Collectors – includes ppl outside BC
    Harrassment
    Written demands
    Communication (times and places allowed)
    Seizure
    Misrep of documents as criminal doc (connection w/ court)
    Limitation periods – keep them in mind

Shortcuts to Judgments/ Remedies (CCC)
    CCC – if crime by D caused loss – s. 738 recovery – see p. 5

Creditor’s Assistance Act:
  s. 3 – proceeds distributed rateably to execution creditors
  s. 6 – even if debt not due or payable – other creditors can claim if D has property
     seized and does not pay for 20 days or within 2 days of time of sale of seized
     property
  s. 7 -10 Claimant – must serve notice on Debtor, with district registrar, sheriff,
     (must give address of service?),




                                                                                           2
           o then can obtain a certificate IF not contested in 10 days – acts like an
                execution s. 11
     If money recovered on one writ – treated as recovered on all s. 30
     No priority among execution creditors s. 46


Laws Relating to the Judgment:
Short Cuts to Judgments:
   1. Default Judgment
       If D ignores court process – get default judgment
       Same as regular jdgmt but can be set aside for 2 reasons
           a. Denial of natural justice to D. As a matter of right
                   i. E.g. no notice given to lawyer
                  ii. Costs born by Creditor if set aside as matter of right
           b. Judicial discretion (cost often borne by D)
                   i. D did not willfully or deliberately fail to take procedural step
                  ii. D must apply as soon as reasonably poss. To set aside (or explain
                      why not)
                 iii. D must have a meritorious defence or at least worthy of
                      investigation
       C has duty to warn Ds lawyer before Default jdgmt (unless express instruction)

     3. Interest
       s. 1 – interest paid from date of incident
       s. 2 – some exemptions from interest – e.g. C in writing waives right
       s. 4 – if amt paid into crt by D, and not accepted by C, and order only for that
          amt or lower, then interest only to date paid into crt
       s. 7 – Rate = Prime lending rate
                 o 1st 6 mths of year – use rate as of jan 1st
                 o last 6 mths of year – use rate as of july 1st

     4.   Limitation Periods
         Various limitation periods on claims – see p. 7
         Action to collect previous judgment – does not extend deadline
         Once jgmt  s. 3(3) $$ jgmt – lasts 10 years – then expires s. 9(1), (2)
         You can bring jgmt on Jgmt Debt and get another 10 yrs. If cannot find D,
          advertise in paper Young v. Young

     6. Stays of Execution
      COE s. 48 – Jdgmt sum payable immediately unless court orders otherwise (stay)
      Why ask for Stay?
           a. If jgmt payl’ immediately – but if D pays and appeals and wins – no
               guarantee they get their money back (so get a stay)
      Process of Stay
           a. D pays money into court (jgmt, interest, costs)
           b. P can collect if 2 conditions met: Voth Bros v. National Bank of Cdn


                                                                                           3
                         If D is successful on appeal D is entitled to interest on funds paid
                          in
                       P must provide security sufficient for amt pd, D’s Costs, and
                          Interest (in case D successful on appeal)
        Two ways to get a Stay:
            a. Installment
            b. Apeall
                       BC CA then has jurisdiction to give a stay while the appeal is
                          proceeding
                       Suspends execution of jgmt while the case is under appeal.
                          Terminates if appeal is dismissed
        Stays: 3 Part Test: RJR MacDonald v. Cdn
        These are the same questions asked on all interlocutory injunction cases:
            a. Must be serious question to be tried – e.g. establish there is arguable case
            b. Determine if Applicant would suffer irreparable harm if application
                refused
            c. Which party would suffer greater harm from granting of stay?


   BC has established, in the Roboti case (Canucks, injured player w/ jgmt for being
    hurt) – D pays full amount into crt plus costs, and the P can then take the money out
    of crt. P has to give assurance (letter of credit) that P will repay the money into the
    crt if the appeal is successful. This is exactly what happened in Voth Bros.

III. INFO ACQUISITION – BASIC PROCEDURES AFTER JUDGMENT -

   How enforce payment or decide how to enforce? Two ways
    1. ‘Examination in aid of execution’: find out D’s assets, liabilities, transfers of prop etc. Enables
       D to explore all aspects of D finances.
           - BCSC Rules, R 42(23)-(46), 42A
           - this is done like the examination for discovery – in lawyers office w. crt reporter
           - can do a credit check, search in LTO etc.
           - Note that using mareva injunction – freezes D’s assets. It’s an interlocutory injunction.
           - Anton Piller order – often tied to mareva injunction. It allows you to go in and see
           - Mooney v. Orr – Asks for WW Mareva injunction disclosing assets of D all over the
                world.
           - Rule 42A – Examination in Aid of Execution D is under oath. Done w/ sanction of
                punishment. Ex, if D doesn’t show up then can get warrant for arrest. Transcript brought
                back to crt and can be used for further orders.
           - W/ permissions of crt can apply to examine others in connection w/ D – ex. His/her
                spouse and see if there are any hidden transactions etc

    2.   Subpoena to Debtor: Examination by the crt: brought b/f judge, master, and D is subject to
         examination. Usually results in an installment order.
             - other witnesses can be req’d to attend
             - following this, an order will be made under 42(23)(24) – ex. Installment order
             - This is also enforceable by imprisonment – if D has hidden assets or made fraudulent
                 conveyances, the crt can order committal – civil imprisonment for willfully not paying
                 jgmt. Found under Rule 42(25) the crt can order committal if satisfied that order has not




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                 been pd and D can’t show good reason for not paying. Max imprisonment 42(36) is 40
                 days.
             -   S. 51 COEA says that a person cannot be imprisoned for debt: so now what? Under
                 Rules of Crt you can in this case.
             -   Rule 42(44) imprisonment does not extinguish liability
             -   Rule 42(37) order of committal lasts for 1 year
             -   42(38) – costs of committal for JC – must pay $10/day for the imprisonment of the JD
             -   Doyle v. McHail – usual order in BC is for 10 days
             -   In small claims rule 12 – the same thing as Subpoena to D and there is the same
                 imprisonment option



Remedies:
Pre-judgment Remedies Two possible remedies: Pre-judgment garnishment (BC) (p. 2-1) and
Mareva Injunction (all provinces)

Mareva Injunction
   interlocutory jgmt – granted before trial in chambers, based on affidavits
   Full info p. 15
   freezes Ds assets
   need to get through BCSC (equity powers)
   effective against D, D’s agents, servants, trustees
   against persons not property
   applies to property anywhere in world as long as person in BC
   Civil or crim contempt if violated
   Ex parte application – only one party heard in chambers
   For liquidated or un-liquidated dmgs (e.g. general dmgs in K or tort = un-
      liquidated)
   Does not stop D from paying other Cs – no priority position
   D can pay legit claims/expenses
   Temporary
   Punishable by fine or imprisonment
   Mareva Injuntion in Aid of Execution – granted after jgmt to aid execution

Requirements for Mareva:
    see p. 16
    ex parte
    urgency
    full disclosure by P
    strong prima facie case
    exigible assets in BC
    real risk of flight
    balance of convenience
    Ps undertaking of dmgs if claim fails

     Test to grant Mareva: Morgaurd v. Davidson/ Mooney v. Orr
            o Strong prima facie case


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            o Irreparable harm to applicant if not granted – unless D restrained wrongful
               acts would be done by D which harm P irreparably
            o Balance of convenience – give favour to P – will the D arrange assets to
               defeat P if P eventually gets jgmt
                    overriding consideration is that the D threatens to arrange assets so
                        as to defeat his adversary, should that adversary ultimately prevail
                        and obtain jgmt
            o Fundamental question: is granting of the order just and equitable in the
               circumstances Mooney v. Orr
    Requirements of world wide Mareva Mooney v. Orr
            o Strong prima facie case
            o Real risk of removal or dissipation of assets to avoid jgmt
            o Existing assets ex juris the disposition or concealment of which would
               likely frustrate jgmt
            o The less the value of assets in jurisdiction the more likely crt to grant relief
               with extra-territorial effect
    Ex parte
            o C must give full and frank disclosure of facts (or D can come to crt with
               full facts and get rid of mareva)
            o C undertake to pay dmgs caused by mareva if claim unsuccessful
    Given before or After jgmt
    Freezes Ds property so available when P gets jgmt
    D is informed and can fight it later
    Anton Piller Order – allows C to enter Ds residence and search/remove financial
     records, property records etc – ex parte as well
    Applies to Un-liquidated claims or liquidated (note pre-judgment garnishment only
     for liquidated claims)
    Can be served on 3rd parties (for Ds assets)

    In a federal state, there is no obstruction to mobility of capital across provincial
     boundaries. Transfer was for legitimate purposes, not to defeat C – so no need for
     Mareva Aetna Financial Services v. Feigelman


Methods of Enforcing Judgments:
    writ of seizure and sale – issued to court bailiff to seize property
    cert. of jgmt registered on Land Title – get paid out of eventual sale, or order sale
          o lasts 2 years – renewable up to 10 yrs
          o if expires other jgmts rise above it even if renewed Butler Lafarge
Charging Order: (2 types)
    Legal Charging order – for corp shares, gov’t bonds
          o Little use in BC/Cdn as writ of seizure preffered
          o EXCEPT – good for seizure of CBCA corp shares
          o s. 69 COE Act
                   creates charge on Ds property (like a mortgage)
                   apply to BCSC ex parte


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                     order nisi
                     issue order on D
                     legal charge on Ds property
                     6 mths – then apply for order absolute to sell property
                     Very costly – Time consuming! But useful for Fed Co. Shares 
                      Consumer Imagenet v. Infinitron


      Equitable Charging order – scooping funds from another C
          o Order nisi, then wait 6 mths, then Order Absolute
          o No sharing with Other Cs
          o Not granted if Writ of seizure and sale will work
                   Equit Ch order needed for:
                           Items in crt registry (in custodia legis)
          o Mostly for Pre-judgment Garnishment
                   Where claim against D for money
                   Get jgmt against D
                   But often payment into crt ahead of jgmt through prejgmt
                      garnishment – then funds available when the jgmt happens
                   C with Equitable charging order can take the garnishment
                      paid into court!
          o Only applies to Pre-jgmt garnishment funds –as still belong to D, no good
              once jgmt and post jgmt garnishment
      items in custodia legis (custody of court) – can not seize or garnish court registry
       – Need equitable charging order
          o apply to crt for order nisi (ex parte)
          o serve the order on court registry and D
          o wait 6 mths
          o apply for crt order (order absolute)



Pre-Judgment Garnishment
     SEE p. 18 – COEA – requirements e.g. Forrm F & C or A ** meticulous
       observance –Knowles v. Peter
     Only avail. If claim is Liquidated
     For Monetary Obligations (only) owed to D – C collects them
          o Bank accts, Brokerage accts, RRSPs
          o NOT – wages, joint bank accts, inventory in business, cash, stock
     Two Issues:
          o Def’n of Debt s. 3(4)  specific sum of money that is due – mere matter
             of arithmetic
          o S. 3(2) especially (d)  court determines the debt not P
                  Must be actual Liquidated dmgs
                  The rest (un-liquidated) can still be fought for
     Nemo dat quod non habet Applies – no better right for C than D had


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          Release of Garnishment: s. 5(1), (2)
              o D or Garnishee can apply for release: Factors
                  - COEA ss. 5(1), (2)
                  - wide judicial discretion
                  - ―just in all the circumstances‖
                  - strength of claim/defence
                  - hardship
                  - is it necessary for to do this to ensure payment of judgme
          Watch out – for other C scooping funds with equitable charging order (post
           jgmt)
          Jgmts – no priority pre-jdmt – priorty post jgmt at time of service

Definition of ‖Attachable Debts‖
 must be a debt in existence, due or accruing due
 timing problem – when must it be in existence?
         debt due when affidavit in Form B is sworn - s.4(1)(e)
         debt due when garnishing order nisi (Form D) is issued - Dabrowski
         debt due when garnishing order nisi is served - McReady
 debt is in existence, due or accruing due if there are no conditions to payment other
  than the passage of time
 debt must be due or accruing due at time of swearing of affidavit, at time of issuance
  of order from court, and at time of serving of order
 prior claimants have priority

Priorities
1. Post-judgment Garnishment
  Court Order Enforcement Act
  s.11(1) service of order nisi ―binds‖ the debts, obligations or liabilities in the hands
     of the garnishee - creates an equitable charging order over the debt
  ―first in time, first in right‖ - the one who serves the order on the garnishee first gets
     priority
  no rateable sharing for garnishment orders

Priorities: Execution Creditor v. 3rd Parties
 Execution Creditor – gets a lien only when writ of seizure and sale is granted
 C – no rights to Ds property by Judgment alone
         Get jgmt
         Get writ of seizure and sale
         Deliver to bailiff (critical time for fraudulent/dishonest purchaser)
         Bailiff seizes (critical time for BOFPfvWON) includes constructive/waling
            seizure Lloyds and Scottish
 After Critical time – property is subject to rights of EC – can be taken from innocent
    3rd party

Sheriff:


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          Insurance – no duty on sheriff to insure property seized in walking seizure
           (maybe if possession taken) Silva
          Can drill locks in safety deposit box, enter homes (not B&E), break into annexed
           portion of home e.g. garage, 2ndary bldg, shed etc.
          Crown is immune from seizure

Writ of Seizure and Sale

Procedural steps in executing writs of seizure and sale
  Judgment
  Issue writ of seizure and sale, Form 45 [in Small Claims, Form 11, Order for
     Seizure and Sale]
  Deliver writ to sheriff
  Entry in sheriff’s book: Law & Equity Act, s. 31—priorities: execution creditor v.
     anyone other than the bona fide purchaser for value without notice
  Levy of execution
  Sheriff seizes property - removing and storing goods; posting notice; ―walking
     seizure/possession‖ (leaving goods in debtor’s safekeeping); ―constructive seizure‖
  Debtor may claim exemption - up to $2000 and must be done within 2 days of
     seizure or notice of seizure - COEA, ss. 65, 66
  Execution sale - authorized by Form 45 - sale by public auction / public tender -
     court directions as to conduct of sale may be sought if necessary, Rule 42(22), Rule
     43 - purchaser at execution sale has no claim against the sheriff - the maxims of
     caveat emptore and nemo dat quod non habet apply
  Distribution of proceeds after 1 month wait - creditors share rateably - new creditors
     can be added anytime before the end of the month - Creditors Assistance Act
  If balance owing, try again

        Writ is good for a year, and may be renewed for another year - lasts until writ is
         satisfied
        Pre-seizure bona fide purchasers for value are not protected - bf purchasers after
         execution are protected
        If sheriff fails to seize any property, nulla bona, he tries again, or an examination in
         aid of execution is carried out to try to find other ways of getting money
        You can register a judgment against land in joint tenancy ownership, but now by
         way of writ

Writ
          includes choses in action/intangible personally
          securities – sold by bailiff and proceeds to C
          promissory notes – but if you do not garnish must share with other Cs
          ―other securities for money‖ – broad def’n
              o includes Whole Life Insurance (cash surrender value)
              o But can be creditor proofed s. 54 Ins. Act – by designate beneficiary
              o Financial instruments in Bearer from


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            o RRSP – can be credit proofed too s. 54 ins. Act – indicate options at age
                69 when RRSP must be cashed, & designate beneficiary on death
       3rd Party who owes Money to D
            o payment to bailiff discharges debt
            o non-payment to bailiff – C can sue and get indemnity for costs s. 61
       items in custodia legis (custody of court) – can not seize or garnish court registry
        – Need equitable charging order
            o apply to crt for order nisi (ex parte)
            o serve the order on court registry and D
            o wait 6 mths
            o apply for crt order (order absolute)

Priority of Claims:
1. Crown priority - Crown has 2 options to gain priority:
a) super priority legislation may be enacted, Pacific Forest v. Twin Stags
b) certificate procedure - under Income Tax Act a certificate for back taxes may be
registered as a judgment in the Federal Court - issues a writ of fi. fa. and delivers to court
bailiff - only takes one day - become just another judgment creditor

Resolving Priorities
1. Are all liens and interests valid charges against the property?
     identify the liens and charges
     identify the nature of the property in which lien is claimed
     invalid or unenforceable claim has no priority even if created ahead of
        competitors
S. v. H. - seizure by notice under COEA, s. 59 was valid
     law firm taking shares as security for a retainer comes under the PPSA which
        gives them a security interest in them
2. What is the effective date of each lien or interest?
     ―first in time‖ - chronological system
     according to applicable law, when is the right effective against competing claims?
     execution creditors, date of serving registered office - COEA, s. 59
S. v. H. - Revenue Canada served on February 11, 1991 - others served on September 3,
1991
 PPSA security holder - date of perfection of security occurred on date of delivery of
    certificates, October 1990 - this gave McAfee priority over seizures made before the
    firm acquired knowledge of the seizure
3. Identify and apply the rules of ranking
 PPSA ranks only for advances made (work done) prior to knowledge of seizure
 S. v. H. - when did McAffey know about the seizure? What services were rendered
    after knowledge?
 execution creditors share net proceeds among themselves pari passu, Creditor
    Assistance Act
S. v. H. - [creditors had reached an agreement to share proceeds]




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Held: priority goes to McAfee for value of services performed and proper disbursements
to the date it acquired knowledge of the respective seizures; then judgment creditors have
priority over McAfee for work done/disbursements after knowledge
there is a complicating factor in this case as there was a cease trading order under the
Securities Act on the shares prior to their assignment to McCaffey - the firm could hold
the certificate as collateral for security but they were prohibited from transferring them
into their firm name in satisfaction of the debt - the court bailiff could not try to sell the
shares by execution sale while the order was in effect.


Execution against Shares: w/ writ of seizure/sale
    can not hide assets in corp – you still hold shares – which are seizable
    share transfer restrictionsnot applicable to execution sale Assoc. Finance v.
       Webber
    ROFR – Assoc Finance says YES, Peligren says NO – they can bid in the auction
       – Unclear as to current state of law  peligren seems most fair though as they
       still have the right to beat any other offer in the auction which is essentially a
       ROFR
    Bailiff can adjourn sale if not high enough bid – try to generate more interest
       (often problems selling shares in small business) Grimwood
    can seize shares themselves OR notify Co. in Writing – Co. must then freeze
       them (not transfers) then crt bailiff sells shares
           o co. needs office in BC – to serve notice of seizure of shares on Co. office
    Crt will not allow Charging order if Writ is useable
           o CBCA – can not seize stocks of Fed corp. need charging order
    Competing Creditors: see p. 26 Smith v. Hamlin
           o 1. Are each Cs claims valid?
           o Effective date of each claim?
           o Effective Rankings of the claims?
    EC – unsecured – share pro-rata based on their claim amts

Statutory/Legal Charging Order: s. 69 COE Act
     creates charge on Ds property (like a mortgage)
     apply to BCSC ex parte
     order nisi
     issue order on D
     legal charge on Ds property
     6 mths – then apply for order absolute to sell property
     Very costly – Time consuming! But useful for Fed Co. Shares  Consumer
        Imagenet v. Infinitron


Missed Class – day before March 17th - Execution against Land

Execution against Land:



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    s. 85 – can register jgmt against land title (LTO)
    s. 86(4) – Lien or Charge formed on the Title – as of time of application
    Priorities: If mortgages and jgmts on title
           o Any jgmt applies for sale: Hankin v. Gill
                     If execution sale - $12,000 to D before anything
                     Mortgages Before any jgmt – First in time still but they stay on
                        title to purchaser – no participation in proceeds
                     Jgmts – any and all share Pari Passu (pro rata)
                     Mortgages after any jgmt – first in time (if any left at this point)
                     Surplus to D
           o Mortgage Forecloses: Roadburg v. R
                     No Pari Passu – if initiated by mortgage
                     Jgmts – prior to Mortgage foreclosing – stay on title – do not
                        participate in proceeds
                     First in time first in rank (based on date of application) – for
                        everyone else on title – including all mortgages – not pari passu
                     Surplus to D
           o Jgmt – that gives written notice to mortgagee – will have priority over
                subsequent advances by that mortgagee (after the notice)
    Joint Tenancy:
           o Can register jgmt against joint tenancy interest – does not affect other
                party’s interest
           o C subj. to right of survivorship of joint tenants (one dies other gets free of
                dead’s jgmts)
           o JC can not apply for partition
           o Order for sale does not sever joint tenancy
           o ONLY Severed by:
                     Absolute sale – execution purchaser is co-owner (tenant in
                        common) that purchaser can then apply for partition


Builder’s Lien Act:

Step 1 – identify owner & Contractor
Step 2 – identify Sub-contractors

    Can not K out of this statute!
    Fed Crown is exempt from BLA
    Prov. Crown is not e.g. hospitals, schools, univ, crt houses
           o S. 31(6) crt will not order sale of crown property
           o But can give jgmt for liability
           o Can file liens against prov. crown
           o HB acct does not apply – but HB req’d
           o Trust does not apply to crown (as they are owner) s. 10
           o Roads, Highways, FSRs – exempt from BLA
           o Crown Never Liable as non-contracting owner


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Improvement – something that is consumed OR forms part of the building

Owner (BLA s. 1) – includes person who
  Has estate or interest in the land (except see mortgagee)
  by request, or for benefit, or with knowledge, or consent
  work is done on property
  Not just registered owner but anyone who requested the work, benefit, knowledge,
     consent
  REQUIRES all 3:
          o Estate or interest in land
          o Request, or prior knowledge of work
          o On their credit, behalf, with their knowledge, or for their direct benefit
Leased Premises:
  Tenant considered an owner – King owner
  Lien can be filed against Leasehold interest of Tenant
  Claim valid against OWNER (landlord – Non-King Owner) IF:
          o Improvement done
          o At request of landlord OR
          o At prior knowledge DEEMED request of landlord OR
          o For the benefit of landlord (must still have knowledge I think) OR
          o With Consent of landlord
  HOW to avoid this for Owner:
          o File a notice of no responsibility in the LTO
          o Notice of interest s. 3(2)
                  Not bound to Lien claim UNLESS at express request of owner
                  Must file BEFORE work starts (only protects you from work
                     started after you filed)
          o Also – Non-King Owner can rely on Proper HB by the King owner –
             makes them both safe (except for value of HB)


Mortgagee – excluded from def’n of Owner (Despite interest in property)
  Protects their mortgage interest from sale
  EXCEPT – if they take possession (not merely foreclosure)

Contractor (BLA def’n) – must have privity of K with owner
Head Contractor (BLA def’n) – only one – engaged to do substantially all of the work
Sub-Contractor (BLA def’n) – engaged by Contractor or Sub-C to do one of:
  Perform work, provide materials (does not include worker, or material supplier, or
     someone working for architect)
Materials Supplier
  Only supplies material to a project
  If MS rents equip. without operator they are still a MS – if operator then they are a
     sub-C (the operator has a lien right as labourer)



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    Material – moveable property, delivered to the land and intended to become part of
     the improvement, includes equip. rented without operator

Architect/Engineer – See Chaston v. Henderson case

Lien: s. 2
  page 6 of case book
  C or Sub-C has a lien for the price of work and material unpaid
  Lien is on Land, interest of owner, materials delivered, work itself
  Lien allowed by:
           o Worker, Sub-C, GC WHO
           o Supplies material, or does work, or a combination of
           o NOT – people who provide work/supplies to an architect, engineer, or
               material supplier e.g. the people under the architect.. material supplier
               can not file lien
  Applies ahead of any other claim on property e.g. Bonding K
  Can not be Ked out of
  Architect – can only file liens if improvement actually started
  General Lien s. 16 – if owner enters single K for improvements on more than one
     parcel of land e.g. townhomes
           o General lien against all parcels
  Steps:
           o File Lien – Form 5 in BLA
           o Lien Action – declaration of lien ss. 26, 31(1)
                    Start action in BCSC
                    File lis pendens in LTO
           o Court ordered sale s. 31(2)
  Purchaser – max liability of 10% of the price of improvement s. 35
           o s. 21(1)(h) – registration of purchaser does not stop liens (but still max
               liability)

HoldBacks: s. 4
  Must maintain – 10% of each payment made
  Req’d by each person liable under each K, and each sub-K e.g. Owner, Contractor,
    Sub-C etc.
  55 days after completion – holdback paid out UNLESS – Liens on title – the pay
    10% into court – that is the max liability (if you followed the rules)
  Need to check if Lien on property before making payments to Gen-C – If you pay
    with lien then it is bad faith payment – liable for this
  G-C liable for keeping property Lien free
  No holdbacks against
          o Labourers, MSs, Architect or engineer
  HoldBack account s. 5 – actual bank account for holdback funds – only required if
    K value $100k +, Crown is exempt




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Trusts: s. 10
  When funds received by Contractor – becomes trustee for those below them
  Trust beneficiaries
            o Privity of trust – need K privity with trustee to use trust remedies
            o Right to claim money in front of all secured parties
  Trustees:
            o Fiduciary duty – must put interest of beneficiaries ahead of their own
            o Breach of trust – to divert funds (holdbacks) to other projects, must be
               held in trust
  NOT trustees:
            o Owner, MS, labourer, architect, engineer
  s. 13 – Trust funds can be garnished but are still subj. to trust – so garnishee only
     gets surplus funds beyond trustee’s claim
  s. 11(7) commingling funds from trust is not itself a breach but later spending those
     funds is a breach
  Other parties can become liable – e.g. a sole SH, director of a corp that was a trustee
            o Can sometimes go after bank if they knowingly participated in breach of
               trust
  BLA – potential for quasi-criminal prosecution for breaches of trust by trustee, and
     directors of trustee


THE LINE:
  Labourers, architects, engineers, Material suppliers
        o Have lien rights up on the property
        o No Hold Back maintained against them – as no lien from below them
        o No trust obligation for people below either

Time Limits and Phases:
   1) Preconstruction
          a. No improvements
          b. Design Ks, approvals & permits, financing
   2) Construction
          a. Improvements on land
   3) Completion

Completion:
  Earlier of: Cert. issued (on entire project or just your own part) OR Work
   Substantially Completed (on entire project) OR Abandoned OR General K
   terminated
  critical time as this is when time starts to run for Liens, Holdbacks, and Trusts
  Lien claims must be filed within 45 days of completion
          o Time runs when Cert issued for whole work, or that part
          o 45 days to file lien, 55 days then pay out holdback
  Certificate of completion issued by payment certifier:
          o Might be: Architect/owner/engineer


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           o Issued to one party who has completed their part
           o S. 8 – once cert. issued to party – 55 days later holdbacks can be paid out
    Completion defined p. 2 s. 1(1) – a K that is substantially completed or performed
     not necessarily totally completed or performed
    Substantial completion – s. 1(2) Remaining work to be done is no more than
           o 3% of first $500,000
           o 2% of next $500,000
           o 1% of Balance of K
    an Improvement is completed if the improvement or a substantial part of it is ready
     for use or is being used for the purpose intended s. 1(3)
    Completion Point s. 20

Time Limits:
  Lien – 45 days (BUT – can join the action late if others have filed on time Shinco)
          o Owner should at 55 days check LTO & crt registry for late claims
  HB held for – 55 days
  Deadline for Litigation – 1 year from filing of Lien s. 33
  Deadline for Trust remedy – 1 year from filing of Lien s. 10
  If K abandoned can still get $$
  Abandoned – if work stopped for 30 days unless due to strike, weather, etc. s. 1(5)
  Personal Remedy – if privity of K – 6 year limitation


Ranking of Claims:
  Mortgage – priority over lien’s filed after mortgage – But advancements made after
    lien is filed lose priority s. 32(1) & (2)
  Lien – takes effect as of the date work first began or materials delivered s. 21
  and has priority over all jgmts, executions, attachments, made after the date the lien
    takes effect s. 21
           o e.g. If Work started, Then jgmt filed, then lien filed  Lien has priority!

How to Remove a Lien:
  Pay claimant OR
  If dispute (quality of work, amt owing etc.)
          o s. 23 & 24 – owner applies to crt to remove lien and pays amt into crt
             (either full lien amt, or holdback, or letter of security from bank)
          o s. 42(2) BLA can not be Ked out of

What if you have a shitty worker:
 claim in dmgs against C for defective work
 owner can Set-off – from the K price the amt to finish the job properly (CAN NOT
    take this from the HB s. 6)


Purchaser of Condominiums:



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        Strata property act s. 87-90  prevents filing of liens on all units after sold
        45 day limit from time of: Conveyance, or completion of project (whichever is
         sooner)
        s. 88(1) Purchaser pays only 55 days after completion/conveyance
               o buy unit, HB 7% of purchaser price for 55 days – then protected against
                   lien
               o 7% of gross purchase price


Questions to Shep:

     -     the 45 day period from completion starts to run when Either: you receive your
           own cert. of completion for your portion, OR when the entire project is complete
           (or cert issued for the whole project) – regardless of whether Gen. Contractor or
           not
     -     Director/sole shareholder – can be personally quasi-criminal liable under BLA for
           breaches of trust by their Corp.
     -     If you miss the 45 day window for a lien BUT someone else has filed a lien, you
           can join their action SO – as an owner this is why you wait until day 55 and then
           check the Crt registry – to see if any new claimants have joined the action Shinco
     -     You can garnish an RRSP
     -     The 7 day limit on a garnishing order applies to wages only
     -     To be considered a fraudulent/dishonest purchaser for the purposes of when the
           deadline for purchasing property from someone who is subject to a writ of seizure
            there must be some level of dishonesty beyond just knowing that you are
           getting a good deal – should be aware that there are creditors out there, but not
           necessary that you are aware of the writ




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