Docstoc

Creditor's Remedies

Document Sample
Creditor's Remedies Powered By Docstoc
					                                                     Creditor‘s Remedies
                                                     Professor Sheppard
                                                         Spring ‗05


Intro to Law of Debt Collection ....................................................................................... 3
Laws Relating to the Judgement ................................................................................... 11
      Young v. Young ........................................................................................................ 12
  Ways of enforcing judgments ....................................................................................... 12
      Butler Lafarge v. Moe p. 6-2.................................................................................. 12
  1) Legal Charging Order ........................................................................................... 13
  2) Equitable Charging Order ..................................................................................... 13
      BC No Work v. Overhead doors p. 7-39 .................................................................. 13
      Young v. Young ........................................................................................................ 14
      Morguard v. DeSavoye (optional reading) ............................................................... 14
  Stays of Execution ........................................................................................................ 14
  Monetary claim – Writ issued – monetary judgment – appeal ..................................... 15
  Mareva Injunction  The particular Interlocutory Judgment of interest to Creditors
  ....................................................................................................................................... 15
      Busnex Business Exchange v. Canadian Medical Legacy Corp. .......................... 16
      Aetna Financial Services v. Feigelman .................................................................. 16
      Mooney v. Ore p. 234 ............................................................................................... 17
      Hickman v. Kaiser .................................................................................................... 17
  Pre- Judgment Garnishment .......................................................................................... 17
      Knowles v. Peter ....................................................................................................... 18
      Busnex v. Can Med Legacy ..................................................................................... 18
      Redekopp Mills v. Canadian Timber ....................................................................... 19
  1. Attachment of Debts ............................................................................................. 19
      A. Prejudgment Garnishment ................................................................................ 20
          a) Court Order Enforcement Act ....................................................................... 20
      B. Post Judgment Garnishment ............................................................................. 21
      C. Definition of ‖Attachable Debts‖...................................................................... 21
          a) Court Order Enforcement Act ....................................................................... 22
      D. Jurisdiction ........................................................................................................ 25
          b) Bank Act, s.462* ........................................................................................... 25
      E. Priorities ............................................................................................................ 25
          a) Court Order Enforcement Act ....................................................................... 25
          b) Equitable Charging Order ............................................................................. 26
  2. Execution by Writ of Seizure and Sale, Judgment Acts Charging Order ............. 27
      A. Writ of Seizure and Sale ................................................................................... 27
          a) Goods, chattels, and effects .......................................................................... 27
  Priorities: Execution Creditor v. Third Parties ............................................................. 30
      Lloyds and Scottish v. Modern Cars ........................................................................ 31
      Silva v. British Columbia ......................................................................................... 31
      Re Boyce ................................................................................................................... 32
      Cybulski v. Bertrand ................................................................................................ 32



                                                                                                                                          1
     Nisbit ......................................................................................................................... 33
     Re Trustee Act, Re Patmore.................................................................................... 33
     Bank of BC v. 2252280 BC? .................................................................................... 34
     Smith v Hamlin ........................................................................................................ 35
     Associates Finance Co. Ltd. v. Webber and Dixon ................................................ 35
     Peligren v. Ajac’s Equipment .................................................................................. 36
     Arc Enterprises v. Grimwood................................................................................... 36
     Smith v. Hamlin ....................................................................................................... 36
     Peligren v. Ajac’s Equipment .................................................................................. 37
  Judgment Acts 1838 & 1840 – more remedies ............................................................. 38
     Consumer Imagenet v. Infinitron International..................................................... 38
  MISSED CLASS .......................................................................................................... 38
   plan to finish Execution against Land today – then skip to Builder‘s Liens ........... 38
  Joint Tenancy: ............................................................................................................... 40
     CIBC v. Muntain ...................................................................................................... 40
     First Western Capital v. Wardle .............................................................................. 40
     Hankin v. Gill ........................................................................................................... 40
     Roadburg v. R in right of BC ................................................................................... 41
  Foreclosure sale: ........................................................................................................... 41
Builder‘s Liens: ................................................................................................................. 41
  3 Remedies: - the 3 key parts in BLA! ......................................................................... 42
  3 Components to the BLA: ........................................................................................... 43
  Time Limits and Phases in the BLA for a construction project:................................... 44
  Time Limits: s. 20 ......................................................................................................... 45
  When no Head Contractor: (e.g. owner is the developer)............................................. 46
  Leased Premises: ........................................................................................................... 46
  Ranking of Claims: s. 21 ............................................................................................... 46
  Hold Back: s. 4 & 5....................................................................................................... 47
  Trusts: ........................................................................................................................... 48
     Shinco case 2003 BCCA .......................................................................................... 48
  Trust: ............................................................................................................................. 48
     Ken Lawter Holdings v. Henmar............................................................................. 49
  NOW: There is an upper limit for liability of a purchaser from Builder‘s Liens ......... 49
     DeFasio Case: .......................................................................................................... 50
  DeFazio Case: ............................................................................................................... 50
  What happens when you have a DeFazio? (a shitty worker who is fired and you bring
  in someone else to finish the work) .............................................................................. 51
     O & O Contractors v. Bank of N.S. ......................................................................... 51
  The Lien and Holdback Provisions: .............................................................................. 52
     Westburne Supply .................................................................................................... 52
     Ram Construction .................................................................................................... 53
  Vendor-Purchaser (like in Ken Lawter case) ............................................................. 53
  Purchaser of Condominiums:........................................................................................ 54
     Deal Srl v. Cherubini ............................................................................................... 54
  Architects & Engineers............................................................................................... 54
     Chaston v. Henderson Land .................................................................................... 54



                                                                                                                                       2
Intro to Law of Debt Collection

Jan. 6, 2005
 We are talking about a Creditor owed money by a Debtor. Any claim in tort, K etc gives rise to a
    monetary claim.

I - Introduction to the Law of Debt Collection
   Always try non-litigious collection first. If fails, then go for a legal remedy (writ in small claims court
    for a jdgmt. Then enforce jgmt.
   Prior to obtaining a jgmt, an unsecured creditor has no rights. They only have a personal claim against
    the D.

1. Regulation of Particular Transactions (not examinable, just for background to understand)
Business Practices and Consumer Protection Act
 Statute passed summer 2004. Consolidates with some weakening the Consumer Protection Act passed
    in the 1970s.
 Admin by the ‗admin authority‘ (Act s .1).
 If involved in a consumer transaction (defined in s. 1(1)) add in… then you can have a claim a/g the
    supplier if the supplier commits
              o S. 4(1) a ―deceptive act or practice‘ (incl, oral, written, visual rep or conduct of S that can
                   or did mislead consumer or guarantor).
              o ‗rep‘ can relate to rights, remedies, or obligations
              o S. 4(2) Can be made before, during or after consumer trans
              o Remedies: ss. 171-173 – damages!
 S. 8 If S is guilty of ‗unconscionable act or practice‘ ‗before, during or after trans‘ then s. 10(1) tells us
    that the trans is not binding
 Pacific Finance v. Turgeon 1977 – unconscionable act means that you do not have to pay back loan at
    all. K is not binding on consumer if creditor or supplier is guilty of unconscionable act or product

2. Control of the Credit Rating System (not examinable)
 How do you get a credit rating?
 BP and CPA
             o S. 107 must consent to credit check
             o S. 108 privacy/confidentiality – for what purposes can you get a credit report? Lawyer
                  can if there is possibility of suing; prospective e‘er; law enforcement agencies,
                  underwriting etc. Or with the consent of the subject of the credit report.
             o S. 109 correct and current info – this is what the credit report will say. Limits to personal
                  nature of what can be in file. Only financial info.
 If person is denied credit etc…Person can ask why. Entitled to know which company gave this report
    and find out the info in their credit file (s. 110) and can submit an explanation to the credit bureau (s.
    111) and add to file. But can‘t be false of misleading (s. 112)
 Bahner v. Marwest Hotel 1970 BCCA – Didn‘t pay for meal at the hotel. Wasn‘t allowed out of
    restaurant. Successful claim for false imprisonment. Just shows that other torts can arise.

3. Provision for D controlling and Mediation (not examinable except s. 8)
D Assistance Act BC
 S. 5 Debt counselling and mediation. Can work out arrangement to give D more time to pay or reduce
    debt etc.
 S. 6 examination on oath. Crt can refer to (WHO?) for D can be examined on oath and reference can
    be conducted to determine their money owed, salary etc. There are other procedures (look at later – a
    subpoena to D Procedure. It‘s in small claims court…crt can do own inquiry or court can
 S. 8* court reference – Ref to D assistance Branch. crt can have reference and determine how much D
    has to pay. KNOW THIS SECTION



                                                                                                              3
4. Regulation of Debt Collection
Crim Code
   Limits on what can be said to a D by someone who is trying to collect money.

S. 346 - Crime of extortion
 Trying to charge w/ fraud is extortion. Don‘t want crim courts to be used as a civil remedy (ie. as a
    means to collect debt)
 It‘s a crime to threaten w/ crim prosecution for the purpose of obtaining debt payment.
 HW a threat to institute a civil proceeding is not extortion for the purpose of s. 346

s. 372 – false messages, indecent or harassing phone calls
 Crim offence

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 coll purpose of enforcing payment of a civil claim

BP and CPA
   Also contains rules about how to collect extra-judicially

S. 113 ―collector‘ definition – includes ppl outside BC.        Still subject to this Act (Debt collection
provisions). Applies to anyone trying the collect debt

S. 114(1) ―harassment‖ prohibited. [businesses benefit here – raised the bar of what they can do]
 114(2)(a) can‘t threaten, profane, intimidate, coercive language
 114(2)(b) exerting undue, excessive or unreasonable pressure;
 114(2)(c) publishing or threatening to publish a D‘s failure to pay [incls posting a sign in window etc]

s. 115 can‘t attempt to collect payment until written demand that ID debt, who the C is, and indicate a
payment plan. Must wait at least 5 days before initiating personal contact w/ D after written notice

s. 116 – limits on communication w/ D
 (1) Can‘t communicate or attempt to comm. w/ D at D‘s place of e‘ment unless…
 (3) Disclosure req‘d of C to D
 (4) written comm. Only if D has said that that C can comm. in writing only

s. 117
 Can‘t go to D family, neighbour‘s etc except for purpose of obtaining home address or Telephone #
     and unless it is a guarantor or the D has authorized that it be discussed w/ that person.

s. 118
 Timing of communication – can‘t communicate w/ D on stat holiday, on Sunday expect 1-5pm and at
     no time between 9pm and 7am
s. 119 - No collect calls
s. 120 – can‘t add collection costs to the debt
s. 121 – notice of assignment req‘d
s. 122 – deals w/ taking chattels (seizure etc) –
          (a) can‘t repo w/out court order without D/spouse or adult resident in the dwelling.
          (b) can‘t seize unless specifically charged or M or unless they have the legal right under statute,
          court order, or crt jdgmt [think UBC towing - can‘t seize unless have the legal right under statue]
          (c)




                                                                                                             4
    Trail and Yellow Line Towing 1980 BC – Hotel had car towed by YLT. Trail recovered damages
     under equivalent of s. 122 for unauthorized towing of the car. MUST have a statutory power to tow
     vehicles.


s. 123 prohibits misrep
(d) prohibits misrep of a docu that suggests or implies a connection w/ any court inside or outside of Cda.
[ex. Can‘t make it look a crim docu if it‘s not]

Limitation Period
 Must always bear this in mind. From date of alleged accident, non-payment time starts to run.
 Varies across prov; generally 2, 6 or 10 years must start litigation depending on the claim. Run from
    time claim arises.
 If don‘t start within time limit, the claim is extinguished.

January 11, 2005

5. Jgmts W/out Civil Action

Shortcuts to Judgments/Remedies
 Lots of creditors don‘t want to pay for the civil action (even though this will come under costs that the
   D will have to pay).
 How can we avoid problem of having to get a jgmt? I.e. get t oD‘s assets promptly. 2 options:
   1. CCC
   2. Creditors Assistance Act
 If D has committed crime and the loss of money is part of crime then D can return payment via s. 738

1. CCC s. 738, 741, 742 –
 S. 738 - Person committed a crim offence can as part of sentencing a compensation/restitution order as
    part of sentencing. This is the result of victim impact statement etc. Application for restitution order
    is brought by victim during sentencing. [victims in these cases are often companies].
              o Note that the amount has to be readily attainable. If Crim court can‘t determine value,
                  then it must go to civil suit.
              o S. 738(1)(a) Restitution order for damage to property
              o (1)(b) compensation for bodily harm – recovery for loss of wages, medical costs etc due
                  to bodily harm (think Bertuzi case)
 S. 739 – compensation order to innocent purchaser or lender as part of sentencing, Innocent
    P/Lender uses this for rest order
 S. 741 – Accused required to pay and if they don‘t the victim can enter the order as a judgment in the
    civil courts. Restitution order can become a civil debt! Don‘t have to issue writ, get jgmt etc. You
    just take crim sentencing order for restitution and file in civil court.
              o S. 741.2 – obtaining this judgment does not affect any other judgment that you can claim.
                  I,e, if want non-pecuniary losses than you can still go after this in civil crt.
 This is a remedy that is widely used. Cheaper and much faster.
 Any non-pecinary damages must be dealt w/ under civil suit. CCC will only grant restitution order for
    pecuniary losses.

2.   Creditors Assistance Act – Not examinable
    Speedy remedy
    Rarely used.
    Get a Certificate of Claim and can then piggy back on another judgment creditor who has gotten a
     judgment.
    Writ of seizure and sale lasts for 2 years. Certificate of claim lasts for 3 years. This means that in
     order to satisfy all that is owed the sheriff will be able to seize for up to 2 years.




                                                                                                          5
   Share ratebaly/pari passu/equal – Means that creditors share by getting an equal amount per dollar
    they were owed. This is an important concept. We will come back to this. This is how you share
    under CAA. Doesn‘t matter who is first, second, third etc. It depends on the amount of your claim –
    you get a proportionate share.
   Can‘t use for garnishment, for land etc. Can only use a/g those things that available under the Writ of
    seizure and sale (personal assets, shares etc)


II. LAWS RELATING TO THE JUDGMENT
   Issue a writ and serve
   C is P; once gets jgmt = jdgmt creditor (v. JD)
   Once get jgmt you can start enforcement
   What are the short cuts to a jgmt (so that can get writ of S and S; or garnishment; or execution a/g land
    etc)?
    1. default jgmt


1. Default Judgment
   Default jgmt (Rules of Crt 17 and 25) is often used by C or debt collector. D often chooses to ignore
    the process of the crt. In such cases, where the claim is for debt or liquidated damages a default jgmt
    may be entered for the sum claimed plus pre-jgmt interest.
   A default jgmt confers all the rights and remedies concomitant w/ a regularly obtained jgmt, but is
    subject to being set aside on one of two grounds (discussed further down)
   C issues and serves writ (says that D must file docu in court called an appearance)
   If doesn‘t file in time, D has defaulted. P can ask for jgmt at this point (and will get)
   If does file in time, there is another lapse of time for D to file statement of defence.
   2 types of claims –
              o monetary or liquidated demand– if in specific amount owing then C will get full jgmt
                   and will be enforced. Ex. Owed $1000. ex. 1000 widgets. Crt registry enters judgment
                   by default. In either case the claim is easily quantified.
              o Un-liquidated claim – judge req‘d to receive evidence and establish amount of damages
                   (ex. Damages for personal injury). Crt registry will give default judgment but judge
                   needs to est amount. Trial on issue of amount of liability.
   Ethical duty on creditor to warn D‘s lawyer before entering default jgmt unless express instruction.
    [and if no lawyer don‘t have to].
   When crt Bailiff comes to D houseon default judgment, D has options –
    - go back to court and ask to set aside (not an appeal, go back to same court that issued default
         judgment)

2 bases for a default jgmt to be set aside:
    1. denial of natural justice to D. As a matter of right.
    2. judicial discretion

a. Default judgment set aside a matter of right:

Basche Halsey v. Charles – D got it set aside. (note that this can be appealed)
F: BH was a brokerage house in Van. D was client of brokerage house. D est a ‗margin account‘ which
allows client to borrow $ from brokerage house to increase the amount of their investment. When market
goes down, the BH says that you have to maintain margin. If stocks fall they call upon client to cover the
fall in the value of the stock. If falls far enough, the portfolio won‘t be sufficient to cover. That‘s what
happened in this case. Had to pay brokerage house for their margin account. Brokerage House sued them
in debt for money owing on their margin. Started action. D filed an appearance. P filed statement of
claim. D filed statement of defense. P applied to have statement of defense struck out and gave lawyer
notice stating it wasn‘t a valid defense. D did not appear at hearing when it was struck out. In effect, there



                                                                                                            6
was no defense filed (since struck). BH then entered a default jdmt for failure to file defense. Obtained
jgmt and began execution proceedings. D asked for as a matter of right for the default jgmt to be set
aside on basis of no notice (only notice of application)
H: D won. Denial of natural justice. Default jgmt struck out as a matter of right.
 It was a jgmt given w/out notice to the D and therefore under circ where he was deprived of his right to
    be heard. Such jgmt is contrary to the rules of natural justice and is capable of being declared a nullity
    for that reason.
 BH has to bear its own costs of execution up to this point (since done in wrongful execution)
 Execution and judgment was a nullity
 Note that many creditors don‘t like default jgmt b/c this type of situation can occur.

b. Default judgment set aside as matter of Judicial Discretion:
 Grounds to get set aside on this (from Miracle Feeds):
    1. D did not willfully or deliberately fail to take procedural step
    2. D must apply as soon as reasonably possible to set jgmt aside (or have explanation for not), and
    3. D must have a meritorious defence, or at least worthy of investigation
    4. All this is done in chambers as proven by affidavits
    If this option is used, note that certain conditions may be imposed on debtor. [ex. Might award costs
    of execution to be paid by D] This is to keep it fair to both sides and justice is done to both parties.
    [where it‘s set aside by right, the costs are borne by creditor! This is the difference]. If D doesn‘t
    satisfy the conditions imposed, the default judgment will not be set aside.
    - this decision is appealable

January 13, 2005
Missed this class – ask Mark for notes

Reading notes for jan 13 –

(Laws Relating to Jgmt) 4. Limitation Periods

Limitation Act
s. 3 – After 10 yrs from date of right to do so, a person can‘t bring an action for
          (f) on a jgmt for the payment of money or the return of personal property

s. 9 cause of action extinguished
- After expiration date, right a/g the person to whom the cause of action formerly lay is extinguished.

s. 11 completion of enforcement process
11(1) despite ss. 3,9, if, on expiration of limitation period, wrt actions on jgmt, there is an enforcement
process outstanding, the JC may:
         (a) continue proceedings on an unexpired writ of execution, but can‘t renew the writ
         (b) commence or continue proceedings a/g land on a jgmt registered but the regi can‘t be renewed
              unless those proceedings have been commenced
         (c) continue proceedings in which a charging order is claimed
11(2) If crt makes an order staying execution on jgmt, the running of time wrt limitations for actions on
that jgmt is postponed or suspended for so long as that order is in force.

Young v. Young 1985 BCCA
Facts: Action is for a debt based upon an earlier jgmt which pronounced in favour of the P. Some
evidence of attempts at execution and attempts to locate the D. D says that he was there for an examination
in aid of execution that he attended but then he heard nothing further a/b P‘s claims a/g him until this action
was commenced. The date was within 6 days of the expiration of the limitation period. Hw, the action is
about the jgmt itself which is a different cause of action then the original one. So there is no question of it
being past the limitation date.




                                                                                                             7
(Laws relating to jgmts) 6. Stays of Execution

Court Order Enforcement Act s. 48 –

Morguard Real Estate Investment Trust v. Davidson 2001 BCCA
Facts: Default judgment against the D‘s partner who went bankrupt. Morguard then registered its
judgment here, took garnishing proceedings and attempted to examine D in aid of execution. Davidson
applied to have default judgment set aside. Lost. This application is for an order staying the execution of
the TJ‘s order.
Test for a stay:
 Three part test from RJR MacDonald v. Cda –
     1. Must be a serious question to be tried – i.e. must establish that there is an arguable case
     2. must determine whether the applicant would suffer irreparable harm if the application were
         refused
     3. must assess which of the parties would suffer greater harm, from the granting or refusal of the
         remedy pending a decision on the merits
 In this case the applicant did not provide sufficient evid for 2. The application for a stay is dismissed

Voth Bros Construction Ltd. v. National Bank of Cda BCCA
Facts: Voth brought 2 actions a/g the Bank. Both were successful and judgments were awarded. Bank
appealed and applies under s. 18 of CA Act for a stay of execution until the appeal is decided. Bank is
willing to provide a letter of credit as full security for the payment of any jgmt a/g it at the conclusion of
the appeal. Both parties are prepared to do this.
Issue: which of the parties has the better right to the funds in issue in the meantime?
Held: So long as P is prepared to provide sound and ample security, the money is to be paid out to the P.
If conditions are met by D and P the execution is stayed pending the outcome of the appeal.
Reasoning:
 Why ask for a stay: In no order for a stay of execution, a successful P will be able to compel
     satisfaction of its jgmt. If the D is then successful in the appeal, it will have no assurance that the
     amount of the jgmt will be repaid, or if it is repaid, that it will carry interest.
 To avoid this problem, order a stay – order payment of the amount of jgmt into the court by the D and
     allow the P to use this money if it meets 2 conditions:
     1. If D is successful on appeal it will be entitled to interest on the funds repaid to it and
     2. P must provide security sufficient to secure the repayment of the amount pd out, plus D‘s costs
          and interest if the D is successful on appeal
 Advantage of this order – P‘s gets fruits of the jgmt he is entitled to but it protects the interest of the D
     a/g risk that he will not be repaid

January 20, 2005

Stays of Execution Cont’d
 There are two ways to get a stay: ask for installment or go by way of appeal
 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



Morguard v. Davidson
D applied to have default jgmt set aside. BCSC refused. D raised procedural issues but TJ didn‘t think it
had merit. CA felt that it was borderline whether the D would succeed.
Held: No stay granted.
R: Establishes basic principles of stay of execution – These are the same questions asked on all
interlocutory injunction cases:
Test for the granting of a stay:



                                                                                                             8
    1.   Serious question to be tried?
               Looks at whether there is merit in the appeal. Does the D have a chance?
               In this case
    2. would the applicant suffer ‗irreparable harm‘ if stay refused?
               cannot be repaired or compensated for by monetary reward
    1. weighing the balance of convenience
               look at consequence of allowing execution or conseq to C
               which of the parties would suffer a greater harm from granting or not granting stay…
   In this case, M got jgmt. Originally default but then upheld. M has established a right to the judgment
    – should not be deprived of the fruits of their jgmt.
   D trying to preserve subject-matter, prevent irremediable damage to D, and any existing circumstances
   Crt will also look at the position of the parties – any innocent 3rd parties if execution granted etc. Here,
    M said they would not execute of D would put security into crt – a voth order. This was a reasonable
    solution…but D said no. [M trying the to seek equity you must do equity]. So crt would not give 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.

Voth Bros Const v. National Bank
Facts: P had jgmt a/g national bank. Bank was
 Terms or conditions of stay pending appeal
 D had to put money into crt and P can take out if puts in a letter of credit to show that can pay back
    money. Gives the Voth Bros immediate access to the fruits of their jgmt
 Appellant: stay granted. Conditions: pay full amount of jgmt + costs
 Respondent: at liberty to take $ out of crt. Conditions: undertaking to pay back money and post
    security
 This Voth Order is used often as a means of being fair to both parties. Especially in cases where you
    don‘t know what the outcome will be.

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 – 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


                                                                                                              9
                  jgmt. Found under Rule 42(25) the crt can order committal if satisfied that order has not
                  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 smalle claims rule 12 – the same thing as Subpoena to D and there is the same
                  imprisonment option

IV. Remedies

Pre-judgment Remedies

   CL did not permit a C to interfere w/ the property of a D before jgmt. Lister
   In BC, the CL position has been qualified. Once a C has commenced an action, or at least, is about to
    commence an action, there are two remedies available. Each, however, is hedged about w/ conditions.
   Two possible remedies: Pre-judgment garnishment (BC) (p. 2-1) and Mareva Injunction (all
    provinces)

1. The Mareva Injunction

   Law and Equity Act s. 39 – (1) injunction may be granted, or receiver or RMgr may be appointed for
    interlocutory order. Given before or after jgmt. Purpose: Freeze D‘s property so that it‘s available
    when P gets jgmt
   Want to preserve the status quo of property/money/assets etc. Application is made in chambers ex
    parte [without notice to other party]
   Order is injunction a/g D about how D cannot dispose of/transfer property. Then D is informed and
    can go back to crt about it. Called a Quia Timet – a preventative order.
   Mareva injunction can be complimented by an Anton Piller Order – entitles C to enter D;s resident
    and search for and remove financial records, property records etc. Apply ex parte – do this because if
    the D knows the application is pending then they can transfer property before given the order. No
    assets will be left for C
   Full and Frank disclosure is req‘d by the Creditor. If not the D will come a/f notice is given and tell
    more facts…order may be revoked
   Applicant must undertake (promise to crt) to pay the crt or D if there are any damages that D suffers as
    a result of the injunction if it turns out that the monetary claim of the applicant is not justified. This is
    to make the Creditor think twice.
   Allows applies to unliquidated claim – note that pre-judgment garnishment only applies to liquidated
    claims.

Aetna Financial Services v. Feigelman 1985 SCC
Facts: A was a federally incorporated company transferring its main office from MB to ON or QU. F got a
Mareva injunction against their assets in MB. In a federal state, there is no obstruction to mobility of
capital across provincial boundaries. Transfer was for legitimate purposes, not to defeat F. Court discussed
the enforceability of judgment in other provinces. Case recognized Mareva injunction as a remedy in
Canada, but suggested a cautious approach to granting it. Court found there had been a misuse of the
remedy here and injunction was set aside. F was ordered to pay costs throughout the case.




                                                                                                             10
Mooney v. Orr 1994 BCCA
Facts: Orr family owns stores in Vancouver. Wanted to get rid of some assets. Mr. Mooney seemed to
have credentials that Orr wanted as an agent. Looking for buyer. Mooney worked on commission. First
case of world-wide Mareva injunction in Canada. M sought compensation from O. O counter-claimed it
was a sham. O got a world-wide Mareva injunction against M for disclosure of assets and he got a receiver
appointed. Requirements of injunction laid out as follows: must show strong prima facie case; real risk of
removal or dissipation of assets to avoid judgment; that there exist assets ex juris the disposition or
concealment of which would be likely to frustrate any judgment obtained; + the less the value of assets in
the jurisdiction, the more likely the Court is to grant relief with extra-territorial effect. Injunction granted.
 Missed. Action in crt. Orr got Mareva order a/g Mooney:
Order:
1. WW mareva injunction a/g Mooney until final disposition of order. Everything he owned, wherever situ,
was frozen
2. Had to disclose all assets – where, how they were held etc.
3. Receiver appointed and w/in 21 days his assets had to be handed over
 Can be served on third parties – they can‘t do anything w/ his property either – trustees etc can be
     served. Also, once they have notice of M‘s order and they try to help the 3 rd party that helps can be in
     contempt
 Used the questions from Morguard v. Davidson
     1. Is there a strong, prima facie case
     2. ‗irreparable harm‘ to applicant – probable that unless the D was restrained, wrongful acts would be
     done which do the P irreparable harm
     3. weighing the balance of convenience – to give order the balance of convenience must weigh in P‘s
          favour – overriding consideration is that the D threatens to arrange assets so as to defeat his
          adversary, should that adversary ultimately prevail and obtain jgmt
 Short of this should not give mareva injunction!!
 Ultimately question really rests on whether it‘s fair and just to grant order

Hickman v. Kaiser 1996 BCSC
Facts: Hickman applies to set aside an ex parte worldwide Mareva injunction. A jgmt was rendered a/g
him and registered in Idaho. This is a reciprocal state which was then registered in BC. Issued a Writ of
Seizure and Sale in respect of Hickman‘s assets and a WW Mareva injunction was granted.
Held: Kept the order but made it 90 days.
Reasoning:
 Crt found that the P had a strong prima facie case for the order, that there was evid of some assets w/in
    this juri and that there was substantial evid of H disposing of substantial quantities of assets in recent
    weeks or months.
 Generally, not entitled to MI in circ where they have registered a jgmt w/in the juri. However,
    Hickman has demonstrated a history of moving assests.
 Agrees w/ Mooney that the fundamental question in each case is whether granting an injunction is just
    and equitable in the circ,
 Nature of WW MI, post-jgmt, is extraordinary remedy. Although use here is justified in all the now
    known circ it ought to be an interim order for defined time – this is not a matter where there is yet to be
    atrual. The execution is all that remains.
 Expires 90 days following completion of an Examination in Aid of Execution of Hickman.




Jan 18th, 2005

Laws Relating to the Judgement

Judgment Creditor


                                                                                                             11
   -   once the judgment is awarded s. 48 of Court Order Enforcement Act is payable
       immediately
   -   However the JC may need to take further Steps to enforce payment
   -   There are time limits on the enforcement of a judgment
          o S. 3(3)(1) In BC  $$ judgment lasts for 10 Years  s. 9(1), (2) Then
              Judgment expires/ is extinguished

Young v. Young
JC can bring an action on judgment debt, and get a second judgment which continues for
another 10 years. Need to advertise in paper for debtor if you can not find them.

Ways of enforcing judgments

   -   Writ of seizure and sale
   -   Extension of writ of seizure and sale s. 58 Court order enforcement act  allows
       seizure RRSP or Cheques payable to debtor
   -   Seize stock
   -   BCSC Rules R 42(15) 1 year renewable (the writ)
   -   Writ is issued to Court Bailiff – who goes out and seizes debtor‘s property, then
       sold by public auction – proceeds to the creditors
   -   Writ of seizure and sale only lasts for one year

If the Debtor has an interest in Land
     - JC can get a certificate of judgment Registered on the title to Land s. 11(1)(b)
        limitation act
     - Court order enforcement Act s. 91(1)
     - This remains on title for 2 years
     - They can put on CPL and apply to court for order of sale
     - Or they can leave Certificate on title and then wait for a sale and get paid from
        proceeds
     - The Certificate is renewable every 2 years up to the 10 year limit
     - If it is allowed to expire then other charges rise above it, even if it is refilled
     - If you have initiated execution proceeds (obtaining an order for sale) then the 10
        years will not expire while this is in motion

Up Coming sales are published in the BC Gazette  often at sacrifice prices

Butler Lafarge v. Moe p. 6-2
   - If certificate is allowed to expire then other charges rise above it, even if it is
       refilled
   - So you need to renew before lapse of 2 years, and before lapse of 10 years

Charging Order:

Limitation Act s. 11(1)(c)




                                                                                           12
2 types of charging orders

   1) Legal Charging Order
         a. Statutory remedies which are not specifically enacted but are brought into
             law by S. 2 of law and equity act
         b. Provide a remedy against corporate shares and government bonds or
             corporate bonds
         c. Little use in Cdn, and BC, as the writ of seizure and sale is preferred by
             the courts

Consumer Imagine S p. 5-105
   - a use for legal charging order
   - Shares in a Federally incorporated Co. exempt from writ of seizure and sale
   - Must use the Judgments act procedure
   - JC gets an Order Nisi (order until) in chambers
   - Then serve it on the Federal Co.‘s registered office, which effects a seizure on the
      shares (6 mth period of redemption for the debtor or interested 3rd parties)
   - If no payment of debt then order absolute is given by the court and the creditor
      can sell the shares
   - The 10 year limitation period continues during the 6 mth period s. 11(1)(c)
      Limitation Act

   2) Equitable Charging Order
         a. Court of Chancery creation
         b. Order nisi – wait 6 mths – order absolute
         c. Mostly seen in BC in the context of Prejudgment Garnishment
                  i. Where you have a claim against Debtor for money
                 ii. Get judgment against the D
                iii. But often there is payment into court ahead of Judgment through
                     prejudgment garnishment – then the funds are available when the
                     judgment happens
                iv. A creditor with Equitable Charging order can take the garnishment
                     paid into court

BC No Work v. Overhead doors p. 7-39

Creditor X gets prejudgment garnishing order and another creditor who already had a
judgment comes in with equitable charging order (order nisi) and scoops the funds. Puts
an equitable charge on those funds for 6 mths, then comes back in 6 mths and collects the
funds with an order absolute.

This technique of scooping the funds only applies to Prejudgment garnishment funds, as
the funds still belong to the Debtor. Once there is a judgment and post-judgment
garnishment there is a claim to the garnishment so the equitable charging order does not
work to scoop the garnishment from the other creditor.




                                                                                       13
Young v. Young

Judgment in favour of plaintiff. D goes into hiding, and emerges 6 days before the 10yrs
elapses. JC gets an action on the judgment and so has another 10 years with the second
Judgment. Even if the D did not reappear you could place adds in newspaper for D and
get 2nd judgment.

Non-payment of judgment is a new cause of action – judgment debt


Not on Exam: Conflicts of law

Judgment in BC court – only enforceable in BC
   - personal property can only be seized if in BC

Recognition:
   - how do you get foreign courts to recognize BC judgment to enforce it
          o either start again and get judgment in the foreign court
          o take a BC judgment to another court and sue on that judgment and get a
             new judgment on the old
          o Register your judgment to the reciprocal enforcement of judgment
             provisions  if there is reciprocal enforcement between BC and that
             Prov./State

Morguard v. DeSavoye (optional reading)

Morguard has mortgage on house owned by DeSavoye in AB. DeSavoye could not make
the payments and skips town to BC. Morguard sells the property but there is a deficiency.
They commence action against DeSavoye in AB, then serve order on DeSavoye in BC.
DeSavoye will not be subject to AB court order unless in AB, or if he submits.

Morguard gets default judgment in AB, then sues on the debt in BC.
DeSavoye says to BC court, you can not recognize this judgment because I did not live in
AB, and was not there for the trial etc.

BCSC – changes the rules and says as long as there is a real and substantial connection
between the damage/loss and AB they will enforce it.

Upheld in BCCA, and SCC.

   -   has been applied in other cases even when the 1st court was in Florida

Back to Examinable Material:

Stays of Execution
   - stay is a temporary stop



                                                                                       14
   -   Stay of Proceedings
   -   s. 8(2) Law and Equity Act – creates the stay of proceedings – where the court
       orders a party to not take any further steps
   -   s. 48 Court order enforcement act – judgment payable immediately – even if an
       appeal is launched

Monetary claim – Writ issued – monetary judgment – appeal

   -   even though an appeal is launched the debt is still owing
   -   BUT the appellant can ask for a stay of proceedings to prevent execution during
       the appeal (the appeal itself does not accomplish this)
   -   Or the court can allow for payment by installments – which creates a stay of
       proceedings (stops execution) as long as payments are being made

Jan 25th

Creditor with Monetary Claim --- Writ ---- monetary judgment --- execution remedies


The old common law was get your judgment and then you can start your remedies.

But Equity says – there is a wrong if the time between the claim and the judgment allows
the Debtor to hide away assets. SO we need a remedy to freeze Debtor assets and hold
them pending execution of the judgment.

Equity  interlocutory judgment – granted before trial in chambers, based on affidavits
etc.

Mareva Injunction  The particular Interlocutory Judgment of interest to Creditors
  prohibits debtor from disposing of or hiding assets until there is a judgment
  obtain an order from the BCSC in chambers (not small claims) as you need powers
    of court of equity
  is effective against the defendant and against the D‘s agents, servants or trustees
    (must give them notice)
  is an order in personam (operates against persons and not property)
  can be against property anywhere in the world as long as the person is in BC
  Civil or Criminal contempt if violated
  3rd persons with notice – who help violate are ―aiders and abetters‖ and are in
    Criminal Contempt
          o if they violate on own then are in criminal contempt on their own
  Notice need not be given before the chambers application
          o Ex Parte application – only one party is heard from (the Plaintiff) in
              chambers
          o No chance for D to defend
  Mareva injunction can be obtained with a liquidated or un-liquidated monetary
    claim (general dmgs in tort or K  un-liquidated)


                                                                                         15
    Law and Equity Act s. 39 ―just or convenient‖
    ―equity acts in personam‖
    p. 225 ―unsecured creditors who hold a mareva injunction can not…‖ It does not
     stop the Debtor from paying other Creditors who have legitimate rights (does not
     create a priority position over other creditors)
    Also the Debtor can pay legitimate claims and expenses
    a temporary injunction granted before judgment to freeze assets until judgment is
     obtained
    Punishable by a Fine or Imprisonment
    Mareva Injunction in Aid of Execution  for freezing assets after judgment to
     allow execution
           o Granted in Hickman v. Kaiser p. 278?
    Requirements for Mareva Injunction:
           o Application is made Ex Parte
           o Extra-ordinary Urgency -- Because the D is likely a Rogue, who might
               hide assets within moments of receiving notice that mareva has been
               applied for, so no notice required until the P has the injunction
           o Full and Frank disclosure  is required because it is ex parte – not just
               your best case but the full fair disclosure, of it all
           o Strong prima facie case
           o Debtor must have exigible assets in BC
           o Real risk that debtor‘s assets in BC may disappear (irreparable harm) quia
               timet ―because he fears‖
           o Weighing the balance of convenience (Etna financial and Federal Co. Free
               to move assets around within Canada – as the creditor can easily get new
               judgment in another province)
           o P‘s undertaking as to damages (see the end of etna and fiegleman) – there
               could be a hearing for The P to owe damages for the Mareva injunction

Busnex Business Exchange v. Canadian Medical Legacy Corp.

Un-liquidated claim – for general damages that must be assessed by the court (until we
have judgment we do not know the amount of the claim)

Aetna Financial Services v. Feigelman

Etna was going to close down and move assets out of the province.
P (feigleman) gets Mareva injunction, that said Etna had to leave assets in the province.
Then appealed to the judge and he agreed to set a limit on assets.
Initial limit $500,000, then lowered to $250,000 by the Manitoba C.A.
Later when Feigleman lost the case – he had to pay damages for the Mareva injunction.

SCC  as it was a federal Co. and were only moving between provinces there was no
real risk that P would not get $$ from judgment – so there should never have been a
mareva injunction granted



                                                                                         16
Mooney v. Ore p. 234

World Wide Mareva - No limit on assets – all those in the world owned by Mr. Mooney
Disclosure order - ancillary to the mareva to make D swear out an affidavit setting out all
his world wide assets
Appointment of Receiver -

What if the D leaves BC, or if the assets are outside of BC? E.g. a bank account in Peru.
How do you enforce on the Peruvian Bank?

p. 235 Badanat case Mentioned
Bottom of p. 234 - the order is not enforceable in foreign jurisdiction unless it is
registered or enforced by a foreign court
Or if that person/bank etc. has an office here in BC and are served notice here in BC

D can request discharge or change of Mareva  p. 250 – Material Non-disclosure –
Mooney tries to have Mareva removed based on non-disclosure – judge denies this
request (there was full disclosure)

Mareva - the goal of it is to maintain the status quo (prevent the D from harming the C
from the date of the application) – stops future transfers of assets but does not undo past
transactions

Hickman v. Kaiser

Inter-jurisdictional enforcement of Mareva
Judgment in Texas, then registered in Idaho. Hickman had moved to BC, and there is
reciprocal enforcement between Idaho and BC. So they got a mareva injunction and
executed in BC.



Pre-judgment Garnishment
  Only available if claim is Liquidated
 


Next class Hickman v. Kaiser, & pre-judgment

Jan 31st

Pre- Judgment Garnishment
  Garnishment applies to debts owed to the Debtor, that the Creditor
      Collects/garnishes
  Only applies to a monetary obligation to the debtor (a debt) e.g. bank account
  bank accounts, brokerage accounts, RRSPs


                                                                                          17
        BUT NOT – wages, and NOT joint bank account, and NOT: inventory in business,
         Cash, stock
        Two issues with the prejudgment garnishment:
               o The definition of Debt – s. 3(4)
               o Also s. 3(2) esp. (d)
        ―garnir‖ = to warn
        ―attache‖ = to take or touch
 

Nemo Dat Quod Non Habet – Key concept here – the Creditor will not get a better right
to the money than the debtor
e.g. if you garnish RRSPs – the taxes on them must be paid first before the creditor
(garnishor)
- The obligation to pay these items is on the Garnishee (e.g. the RRSP Bank)

COEA – Schedule 1 – contains proper forms:

     -    if no writ issued then use Form A affidavit
     -    if writ issued then use Form C affidavit
     -    Either way you need Form F – served on Garnishee as well as the Defendant
          (debtor)
     -    S. 5 – the Defendant can seek a release from the order, if it is not necessary

Knowles v. Peter

Knowles is P (creditor)
Peter is D (Debtor)
Knowles signed affidavit in Form C – stating action on Chattel Mortgage (should have
described that payments were missed on a secured loan and so he was collecting the loan)
 need to state what was due, date due, etc. details
*- probably best to attach a copy of the Loan to the affidavit
Peter – says affidavit is defective as it does not meet the requirements of the court by not
fully stating the nature of the cause of action

Requires:
   - meticulous observance


Busnex v. Can Med Legacy

F: Busnex had brokerage agreement to sell assets of Can. Medical Legacy, in exchange
for a commission. They did not get paid their commission.

$272,500  was an attempt by Busnex to create liquidated damages – based on their
own estimate
s. 3(2)(d)(iv), (v)


                                                                                           18
Unliquidated claims for damages or restitution

Not qualified by agreement

Commission calculated on disputable estimates

p. 2-4 – def‘n - specific sum of money that is due and payable,… ascertained as a mere
matter of arithmetic

You can not just fill in your estimate of the damages and expect the court to accept this. It
must actually be liquidated damages.

     -   discussion of the $50K deposit, of which only $20K was ever paid
     -   also there was still an old bill for $32K still owing

So what is Liquidated is:
$30K unpaid on the Deposit, and the $32K still owing = total $62K granted in Garnishing
order – the rest can still be fought for


Redekopp Mills v. Canadian Timber

Cdn Timber drew on it‘s line of credit, transferring funds to another account with the
bank, to meet cheques that were coming due.

The amount owing was $61K
Garnishee (bank) pd $61K into court registry  Bank should have said Nemo Dat – this
money is owed to us based on the transfer from the Line of credit, and so should have
filed notice of dispute to the garnishing order.

     -   unconditional release pre-judgment
     -   COEA ss. 5(1), (2)
            o wide judicial discretion
            o ―just in all the circumstances‖
            o strength of claim/defence
            o hardship
            o is it necessary for to do this to ensure payment of judgment
     -   The factors balanced out so the returned half the amount paid into court $30K

1.           Attachment of Debts
    ―garnir‖ = to warn
    ―attacher‖ = to take or touch
    Governed by Court Order Enforcement Act
    Forms in Part 1, Schedule 1 of COEA
    You can garnish a bank account, a trust, an employer


                                                                                          19
 GARNISHMENT is only available for a monetary claim

A.                 Prejudgment Garnishment
*if money is paid into court for prejudgment garnishment, those creditors who have
judgments already may be able to take the $ by getting an equitable charging order

     a)Court Order Enforcement Act
      s.4(1)(a) ex parte application of plaintiff in an action on affidavit
      s.4(1)(d) affidavit must state:
              (i) action is pending
              (ii) time of its commencement
              (iii) ―nature of cause of action‖ must be spelled out clearly - has to be a
              claim in debt or a liquidated claim
              (iv) actual amount of debt, claim or demand; and
              (v) that it is justly due and owing
      s.4(1)(e) affidavit must state that the garnishee, is indebted or liable to the
      defendant and is in the jurisdiction of the court, and
      s.4(1)(f) with reasonable certainty, the place of residence of garnishee
      s.4(3) prejudgment you cannot garnishee wages
      s.6 defendant may apply for release of garnishment
 defendant may attack an affidavit

Procedure for Prejudgment Garnishment
swear an affidavit  register it in court  register order at bank, place of employment,
etc.  $ is paid into court by garnishee
 Plaintiff  affidavit - Form A or C by Plaintiff, his lawyer, or his employee, etc.
         Form C is used if writ has already been issued and you want to proceed against
        a third party
         s.10 affidavit may be on information and belief - no need for personal
        knowledge of facts (BC only)
 Court Registry  ex parte application
                  garnishing order nisi - Form F - provisional order; not final
 Garnishee  served with Form F - s.11(1) ―shall bind‖ the debts, obligations or
   liabilities in the garnishee‘s hands
          from the time of service or notice - creates a lien when the garnishing creditor
        obtains a judgment
          against the debtor [B.C. Millwork v. Overhead Door]
           pay to court registry or file dispute notice
           attachment of debt takes place upon notice to garnishee
 if the Garnishee pays in: s.22 - garnishee is entitled to costs
                                 s.23 - payment into court by garnishee is a valid discharge
against debtor
 if Garnishee does not pay in or files a dispute notice:
                 s.13 - personal liability
                 Form E - Garnishing Order Absolute - order for payment by garnishee
                 s.16 - execution against garnishee


                                                                                            20
                    -if the Garnishee files a dispute note:
                      s. 18 - judge may order that any issue or question necessary for
                          determining liability of
                      garnishee be tried or determined
                      s.21 - expedited hearing in chambers
                      Form E - Garnishing Order Absolute - garnishee‘s defences:
     -    ―nemo dat quod non habet‖ - you cannot give a better title than that which you
          have
     -    already paid
     -    contingent / conditional - not owing yet [CIBC v. Dabrowski et al.]
     -    set-off
     -    not yet due [s.17 allows for order to be made for payment at maturity]
     -    another creditor has priority, ss. 19-20

wages by direct deposit  though subject to debate, it would seem that if someone is
paid by his employer by way of direct deposit, it is available as monies in a bank account
for pre-judgment garnishment

pre-judgment garnishment is better than a Mareva injunction, as it takes the $ out of the
debtor‘s hand, and garnishment may be gotten as of right, whereas Mareva is a
discretionary remedy



                                         (i)        Knowles v. Peter (1954) (BCSC)
The attachment of debts before judgment is an extraordinary process. Meticulous observance / strict
construction of statutory requirements is required. Affidavit in Form A or C must properly describe the claim
against the Debtor, but does not need to identify the debt owing by the Garnishee. Here, affidavit was
defective. Debtor can set aside order nisi (Form F) as a nullity. Money paid in by Garnishee paid out to
Debtor with costs.

*attachment of statement of claim to affidavit as an exhibit may be helpful to avoid the problems in Knowles



B.                        Post Judgment Garnishment
judgment creditor -----------[s.4(1)(b)]----------------judgment debtor

                                                       garnishee



                    C. 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


                                                                                                           21
 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


   a)   Court Order Enforcement Act

        Form B - affidavit
        Form D - garnishing order nisi
        Form R - garnishing order absolute

       s.1 ―debt or money accruing due‖ – includes wages or salary that would become
due or payable within 7
            days after the day on which an affidavit has been sworn under s.4(1)
            ―judge‖; ―registrar‖; ―wages‖ also defined
       s.4(1)(b) application by judgment creditor or person entitled to enforce a
       judgment or order for payment of money
       s.4(1)(c) affidavit stating, a judgment has been recovered or made or the amount
       unsatisfied
       s.4(1)(e) affidavit stating garnishee is ―indebted or liable to the defendant‖
       s.4(1)(f) place of residence of garnishee
       order that all ―debts due‖ from garnishee to judgment debtor shall be attached to
       extent necessary to answer judgment recovered
       s.4(4) 70% of wages due by an employer are exempt from garnishment, with
       amount of exemption not less than: (a) $100 per month for person without
       dependents
                (b) $200 per month for person with 1+ dependents
       s.4(5) subsection 4(a) does not apply where debt is contracted for board or
       lodging; 4(b) does not apply where debt is for board or lodging and in opinion of
       judge or registrar exemption is not necessary for support and maintenance of
       debtor‘s dependants
       s.4(6) lower exemption where garnishment for family support
       s.5 variation of exemptions
       s.6 application by debtor for payment of judgment by installments
       s.7 ―debts, obligations and liabilities‖ - expands scope of garnishment - includes
       all claims and demands of the defendant, judgment debtor or person liable under
       the order for payment of money against the garnishee arising out of trust or
       contract where the claims and demands could be made available under equitable
       execution
       s.8 how to garnish provincial civil servants
       s.9 form of affidavits and orders in forms in Schedule 1
       s.10 affidavit may be on information or belief
       s.11 creditors are paid in order in which garnishing orders are served
       s.12 amount attached limited to amount due and reasonable costs
       s.16 execution may be taken to enforce order




                                                                                        22
         s.17 if debt not due at time of attachment, order may be made for payment at
         maturity
         s.18 if garnishee disputes debt, issue may be tried
         s.19-21 third party claims [Dabrowski, A & M Painting]
         s.22 garnishee on complying with order is entitled to deduct costs
         s.23 payment into court is a valid discharge as against defendant debtor to amount
paid
         s.24 debt attachment must be kept by registrar
         s.26-27 attaching partnership debts
         s.28 different debts may be included in one order
         s.29 garnishment is not to affect employment

 when garnishing bank accounts, you must garnish the branch where the debtor banks
 you cannot garnish a joint account
 if you are garnishing wages post-judgment, you may have to give several garnishing
  orders, depending on how much you can get off each cheque


                                     (i)      Canadian Bank of Commerce
                                                                     rd
C monitors D’s affiars, sees that H is holding an auction on March 3 . C was judgment creditor of D. C
swore an affidavit on the day of auction and got an order nisi at 10 am. Auction began at 11:30. H sells D’s
items. Order nisi was served on H - debt bound from this time, s.11(1). Liability of auctioneer to principal in
contingent on a successful sale being made - auctioneer owes no debt to principal until final sale is made.
Court said there was no debt when the order was issued - H owed nothing to C at time order was issued.
Essential time is when the garnishee order was issued, not the time it was served, when determining if a
debt was “due or accruing due”.
                                                           rd
*Bank of Montreal (secured creditor) and Plankoln were 3 parties claiming priority on this money - they lost
out also.

                                     (ii)   Vater v. Styles and Metropolitan Life Ins. Co.
                                     (1930) (BCCA)
V, judgment creditor, was owed $189 for groceries from S. Garnishing order nisi was served on M, who was
                                               th                                              rd
providing disability benefits to S, on August 7 . Disability pension payment was due November 3 . Debt
                                       th                                                          rd
was not accruing due. On August 7 , 2 conditions precedent existed: S must be living on November 3 ,
and he must still be disabled. Conditional obligations are not attachable.



             (i)           Pension Benefit Standards Act, RSBC 1979, c.316, s. 63 –
   exempts pensions from attachment
         but see Lavigne v. Roberne  R a civil servant who defrauded various persons
          - Court made an exception and allowed attachment of pension - denied
          statutory exemption

   agreements for purchase and sale  purchaser‘s obligation to complete sale is
    conditional on marketable title being given at the time of transfer; also, ―cash proceeds
    of sale‖ are not the same as the amount paid by the purchaser, as there are other
    expenses involved, i.e. payment to real estate agent




                                                                                                            23
                                    (iii)  Bel-Fran Investments Ltd. v. Pantuity Holdings
                                    Ltd. and Bank of Montreal (1975)(BCSC)
B had $250,000 liquidated claim against P. P had $750,000 Term Deposit Certificate due April 19, 1975.
February 19 B served garnishing order on Bank of Montreal. The TD could be withdrawn before maturity
with 7 days notice and surrender/endorsement of deposit and receipt. Were these conditions precedent to
existence of the debt OR were they minor conditions precedent to payment (for financial institution’s
benefit)? Court held conditions were a mere matter of procedure and administration satisfied by service of
garnishment order. Conditions do not affect existence of the debt.
COEA, s. 7 - contract can be garnished without appointment of a Receiver.
Garnishment is allowed of savings accounts, GICs, and Term Deposits.
 “Locked-in” Term Deposits or GICs are “debts accruing due”, s.4(7). An order may be made for payment
    at maturity, s.17.

                                    (iv)  Vancouver A & W Drive-Ins Ltd. v. United Food
                                    Services (1981)(BCSC)
A&W was awarded judgments totalling $45,000 against U. A&W tried to execute upon K’s self-administered
RRSP, worth $49,000. K’s wife is the designated beneficiary in the event of his death before maturity. K
may order trustee to change investments, may change trustees, or appoint a different beneficiary. Court
holds funds in RRSP are not subject to attachment by garnishing order. Self-directed RRSP is a trust, not a
debt. [COEA, s.7 is not referred to by the court. The decision is contrary to this section - Bel-Fran.
Sheppard does not like this decision!!]
Court also held a writ of seizure and sale was not applicable as it could only apply to stock in BC companies.
[This is a complete misinterpretation of the Act, which no one follows anymore! COEA, s.58 only requires an
address for service in BC - does not matter where it is incorporated.]
Decision not followed in Bank of BC v. 2252280, where court held under COEA, s.52, that an RRSP falls
into category of “other securities for money”.
Equitable execution was considered by the court. Applicants entitled to appointment of receiver - s.36 - due
to inadequacy of legal remedies.

                                    (v)       Access Mortgage Group v. Stuart (1984)(BCCA)
                                                                                                       st
A was a garnishing creditor of S, the debtor. S was a landlord, whose tenants owed him rent on the 1 of
                                                                            rd
every month. A issued garnishing orders to each tenant on September 23 . Rent in advance of date due is
                                                                                                         st
a conditional payment, as the tenant is not liable for the rent payment unless they are a tenant on the 1 of
the month. Future rent is not attachable, nor is appointment of a receiver by way of equitable execution to
receive a conditional debt available.
 what A might have been able to do is to send a letter to each tenant, asking them not to pay their rent
                                                st
late, after receipt of garnishing order on the 1 . Rent would be attachable as “due”. One order nisi could be
issued for multiple garnishees, COEA, s.28.

                                    (vi)   Ahaus Developments Ltd. v. Savage
                                    [1994](BCCA)
A attempted to garnishee after closing of sale. May 1 garnishing order nisi was issued after closing of sale
by S. S’s notary, who was to receive the monies for the sale, was served with the garnishing order.
Purchaser’s solicitor sent S’s notary $119,000. Notary paid out $88,000 in discharge of mortgage and other
small charges. Notary ignored the garnishing order and paid out the balance of $29,000 to her client, S. A
sued notary. Court held the sum of $29,000 was a sum accruing due to S - no uncertainty about amount
involved. Post-closing cash proceeds of sale, i.e. the amount the vendor takes off the table at the end of the
day, are garnishable.
note: Gervais (Guardian ad litem of) v. Yewdale  a true retainer, security for lawyer in rendering future
services, is not garnishable

   garnishing provincial civil servants wages – COEA, s.8 - salary or wages attachable; place of service is
    indicated
   garnishing federal civil servants wages – Garnishment, Attachment & Pension Diversion Act, RSC 1985




                                                                                                            24
D.                    Jurisdiction

                                    (i)    Bank of Nova Scotia v. Mitchell and Mitchell
                                    (1981)(BCCA)
Mrs. M was a resident of BC and a garnishing creditor. She was attempting to collect maintenance arrears
from her husband, Mr. M. Mr. M is a resident of St. Lucia in the employ of the Bank of Nova Scotia. Part of
his salary is paid to a branch in Toronto, and some in St. Lucia. Her lawyer got a garnishing order against
                                                                                                th
Mr. M and it was served on the main Victoria branch of the Bank to garnish his wages on the 6 of June. A
  nd                               th
2 order was served on June 19 . The Bank has not denied that it was indebted to Mr. M at the time the
garnishing orders were served - they did not file a dispute notice under s.18, COEA. Court held it was the
Bank of Nova Scotia, not the Victoria branch which was served. Service can take place anywhere the
company carries on business - the branch in Victoria serves as a place of service in B.C. Under s.13,
COEA, court made an order that the amount in the garnishing order, the costs of the garnishing
proceedings, including the cost of the appeal, be paid to Mrs. M.


 for garnishing wages purposes, the bank is considered to be one entity


  b) Bank Act, s.462*
 if garnishing accounts, you must serve the location at which the debtor banks, not just
  any branch

Trust & Loan Companies Act, SC 1991, c. 45, s. 448(1) - regulates federal trust
companies

Financial Institutions Act, SBC 1989, c. 47, ss.5,6 - service on a company
 for garnishment of deposit accounts, etc. at a Credit Union, Provincial Trust Company,
   Extra-Provincial Trust Company  you need only serve one garnishment order - the
   Union, Trust Company must figure how much the debtor has at the various branches -
   much easier than with federally regulated institutions


E.                    Priorities
1. Post-judgment Garnishment

  a) 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

2. Prejudgment Garnishment

                                    (i)    BC Millwork Products Ltd. v. Overhead Door
                                    Sales (Vancouver) Ltd. (1961) (BCSC)
Two parties, BCM and Overhead Door Co. of Canada Ltd., are going after the same debtor, ODS, and begin
actions on the same day. Both parties issued a specially endorsed writ, but BCM also issued a garnishing
order. There was a payment made into the court registry by the garnishee. ODC got default judgment on
              th
December 19 . ODC got equitable charging order nisi on December 20 - an equitable charge. BCM got


                                                                                                         25
                                  nd                                                nd
default judgment on December 22 . BCM got an equitable charge on December 22 . ODS scooped the
fund, but agreed to share rateably with BCM though it did not have to.

note: The 6 month waiting period before issuance of order absolute may apply before payment out may be
made, but it is not necessary.

Between service of the garnishing order nisi, and the judgment, the money in the custody
of the court is susceptible to creditors who already have judgment against the debtor.
Judgment creditors may apply for an equitable charging order to grab the money while it
is ―in custodia legis‖ (= in the custody of the court). Equitable charges are affective
against third parties.


Note: (BC Mill work v. Overhead Doors)
   - even if funds are garnished and paid into court – another Creditor – with a
       Judgment order can come in and scoop the funds out of the court registry - They
       just get judgment and then apply for - equitable charging order
   - this is allowed by: p. 739 BC Mill Work v. Overhead Garage Door Sales
   - While the money is in the Registry – it still belongs in law – to the debtor
   - The debtor has no priority over the funds until they get the court judgment
   - However – with Post-judgment – priority takes place at moment of service


Next class: what types of financial claims can be subject to garnishing order (d)


   b)    Equitable Charging Order

 equity intervenes where legal execution remedies are inadequate
 to get an equitable charging order you must be a judgment creditor who is entitled to
  money or corporate stock in custodia legis
 Brereton v. Edwards (1888) - equitable charging order is analogous to charging order
  under the Judgments Act, 1838 & 1840

judgment ex parte chambers application to get order nisi serve order nisi on court
registry and judgment debtor [after 6 months (not necessary)] apply for order
absolute payment out to judgment creditor

                                       (i)    Pacific Forest Industries v. Twin Stag Timber
                                       (1985) (BCCA)
           th
On May 19 , 1983 TS gave a general assignment of receivables to its Bank. By Nov. 7, 1983 TS had a
receivable from Crown Forest Industries, the fund of $7460.25. TS owed Pacific about 3x the worth of the
fund. Pacific sued TS and sought to garnishee before judgment the fund. Crown paid the fund into court.
As of January 17, 1984 an order pursuant to s.12 Employment Standards Act, 1980 held TS’s employees
                                                    th
entitled to wages 2x amount of fund. February 20 , 1984 a certificate was issued setting out wages owing
to employees and was filed in Nanaimo Registry of County Court of Vancouver Island on February 23. On
Feb. 22 the conflicting claims of the Bank and Pacific had come before the court and it was ordered the fund
in court was not subject to Pacific’s garnishing order, as Bank’s assignment took precedence and Bank was
entitled to payment out of court of the fund. March 20 Director of Employment Standards file a notice of
motion claiming priority over the fund in court. Application was dismissed, but appeal was successful. It



                                                                                                         26
was held that the Director had a statutory lien which attached to the fund in priority of the Bank’s
assignment.

 see now s. 87, Employment Standards Act - ―unpaid wages constitute a lien, charge
  and secured debt in favour of the director, dating from the time the wages were earned,
  against all the real and personal property of the employer,… including money due or
  accruing due to the employer or other person from any source.‖
 s.87(3) gives the lien, charge and secured debt priority over all liens, judgments,
  charges, and security interests or any other claims or rights

2.            Execution by Writ of Seizure and Sale, Judgment Acts Charging Order

A.                     Writ of Seizure and Sale

a)        Goods, chattels, and effects

 writ of fieri facias de bonis = writ of fi.fa.
        abolished in B.C.
        replaced by writ of seizure and sale, governed by COEA, ss. 48-72



                                 (i)      Rules of Court
            R.1(8) – ―writ of execution‖ includes a writ of seizure and sale
            R.42(1) – an order for the payment of money to a person may be enforced by
             writ of seizure and sale in Form 45
            R.42(14) – issue writ of execution ―at any time during the lifetime of the order
             sought to be enforced‖
            R.42(15) – writ remains valid for one year and renewals
            R.42(16) – costs of execution add to the judgment debt
            R.42(17) – either one writ or separate writs for amount of judgment debt and
             for amount of costs at election of person entitled

          Form 45  addressed to sheriff who enforces it; authorizes sheriff to find
           judgment debtor‘s property and to seize it, then to sell it by public auction or
           by tender in order to realize sufficient proceeds to pay judgment debt, costs,
           fees & expenses [Small Claims, Form 11, Order for 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



                                                                                                       27
 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


                               (ii)    Sheriffs Act, RSBC 1979, c. 386

        s. 2 Director of Sheriff‘s Services - sheriffs and deputy sheriffs are civil servants
        s. 2.1 Court Bailiffs are appointed by the A-G – contracted out to private
companies, but have same powers
        and duties as sheriffs
        s. 4 jurisdiction of sheriffs throughout BC
        s. 5 officer in all BC courts
        s. 6 sheriffs / court bailiffs have sole authority to serve or execute: subpoena to
debtor; writ of execution;
        and order of committal
        s. 6.1 sheriff may obtain information from the Superintendent of Motor Vehicles
        s. 7 sheriff‘s fees are recoverable from execution creditor‘s solicitor or agent
        s. 8 sheriff can require payment in advance of costs or undertaking by execution
creditor to pay them


           (i)         Execution against debtor’s personal property


                             (iii) Court Order Enforcement Act
        s.49 - except as exempted by ss. 64-72 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


                                                                                           28
                      including: - equitable interests, s. 59 - Ruschiensky
                              - tangible personality - Bank of BC v. 2252280 BC Ltd.
                              - intangible rights that can be seized - Mortil, intellectual
                             property
                      excluding: - land, s.50 - no property which for this Part is included
                       under the term ―land‖, as
                                    hereafter defined [in s.74], shall be seized and sold under a
                     writ of execution against
                                    goods and chattels
                                   - RRSP‘s - Vancouver A&W - not tangible [but note Bank of
BC case]
                              - items selected by debtor within $2000 exemption, ss. 65-66
          s.56 - under writ of execution against goods, sheriff 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

            s. 65(1) exemption for goods and chattels to a maximum value of $2000 at
             option of debtor
          no exemption for:
*        s. 65(2) goods or chattels purchased on credit - unpaid vendor
*        s. 65(3) stock-in trade of a business
*        s. 72 taxes or distress for rent - only applies to commercial tenancies
*          s. 66(1) debtor‘s privilege of selection
*          s. 66(2) selection within 2 days of seizure or notice of it, whichever is the longer
time
*            ss. 66-71 resolution of disputes over valuation
                s. 65.1 exemption for art works on exhibition tour


              (i)           Vancouver A&W Drive-Ins Ltd. v. United Food Services
The interest in the RRSP was held to be included within the s. 49 definition of “goods, chattels & effects”
under “effects”. However, court held a writ of seizure and sale was not applicable as it could only apply to
stock in BC companies. [This is a complete misinterpretation of the Act, which no one follows anymore!
COEA, s.58 only requires an address for service in BC - does not matter where it is incorporated.]
Equitable execution was considered by the court. Applicants entitled to appointment of receiver - s.36 - due
to inadequacy of legal remedies.


              (ii)          Bank of BC v. 2252280 BC Ltd. (1985)(BCSC)
Judgment debtor has an RRSP in the form of a cash deposit with Bank of BC. Plaintiff applied for a
declaration that the proceeds of the RRSP are subject to seizure and sale, attempting to rely on Vancouver
A&W which said you could collapse an RRSP. This RRSP is not in stock. Court stated that at common law
intangible property was not subject to seizure or sale under s. 49, and that RRSPs are intangible. Court
suggested RRSPs might be subject to execution by other remedies, i.e. under s. 52 as “other securities for
money”.

              (iii)         Mortil v. International Phasor Telecom Ltd. (1988) (BCSC)
Application by IPT, judgment debtor, [under Rule 42(22)] for a declaration that its rights in the Phasor Code
1000 Computer Software and instruction manual are not liable to seizure and sale under a writ of execution



                                                                                                           29
under s.49, COEA. IPT has a trade mark in “Phasor Code”, and owns the copyright in the software system.
S. 49 has been restrictively interpreted by the court to disallow writs of fi. fa. to reach trademarks, patents, or
industrial designs because under common law intangible property was not subject to seizure and sale.
Section 52, however, extended the common law by permitting seizure of specified categories of intangible
property, which does not include intellectual property rights. Court held the software is tangible property and
is exigible, but to protect the secret process its sale was subject to terms [under R. 43(4)(f)] that the
purchaser enter into a trust agreement concerning non-disclosure and prohibiting unauthorized use of the
System.



                       Priorities: Execution Creditor v. Third Parties

                               (iv)      Law and Equity Act, s.31
 no writ of execution against the goods of a debtor shall prejudice the title to the goods
  acquired by a bona fide purchaser for value before the actual seizure or attachment
  under the writ if the person, at the time they acquired the title, had no notice that the
  writ had been delivered to and remained unexecuted in the hands of the Sheriff
 for third persons other than bona fide purchasers for value the relevant date is the date
  of delivery of the writ of fi. fa. to the sheriff.

Law and Equity Act, s. 31  definition of ―actual seizure‖
 an act by sheriff/court bailiff indicating seizure:
       removal of the goods
       posting notice
 walking possession (signed agreement not required)

March 1st, 2005

Priorities: Execution Creditor v. Third Parties

Execution Creditor                              Execution Debtor --------- Innocent 3rd party

                                                  Goods, Chattels &
                                                  Effects
EC has a Lien (because of the Writ of seizure and Sale)


     If you have a judgment against a debtor – that alone gives you no right against the
      Debtors property.
     Issuance of the Writ - you get a writ of seizure and sale from the court
     Then you deliver the write to the court bailiff (S. 35 of Law and Equity Act)
            o S. 35 Delivery of the writ is the critical date for determining if a
                purchaser/volunteer is fraudulent and can not keep the property
     Then the bailiff will go out and seize the property
     A volunteer, or fraudulent/dishonest purchaser of the property of the debtor is
      subject to the property being seized



                                                                                                                30
           o The key time is when the writ is delivered to the bailiff – to determine if
              you can keep the property – if you received it before the writ is delivered
              to the bailiff then you are okay
    BOFPfvWON – Can keep the property if it was purchased before Actual seizure of
     the property
    Actual Seizure – includes a walking/constructive seizure where goods are left in
     possession of the Debtor
           o Illustrated by Lloyds and Scottish v. Modern Cars

Lloyds and Scottish v. Modern Cars

Mercantile credit was owed money by a fraudster Wood. Wood lived in a mobile home.
The court bailiff came for the final time on April 14th (first few visits the bailiff was told
the home was owned by his wife so he could not seize it)
He seizes the mobile but leaves it with them. Bailiff asks Wood to sign a walk in seizure
document. Wood refuses, and Bailiff leaves the mobile home anyway.
Wood sells the home to Modern cars for cash. May 2nd
Modern cars resells the mobile home to Lloyds and Scottish. May 24th
SGA – implied warranty of good title
Lloyds and Scottish leases the Mobile out to Worsfold.
Bailiff shows up to claim the mobile home on June 7th
Worsfold sues Lloyds, who sues Modern Cars

The critical fact – did these BFPfvWON acquire the Mobile home before or after Actual
Seizure?
Walking seizure was considered a valid Actual Seizure – so all the purchasers were after
the actual seizure.

Modern cars bought only a right of ownership subject to seizure, and that title was then
passed on to Lloyds, and then Worsfold.
   - Wood is criminally prosecuted for obtaining money for false pretenses
   - Mercantile gets the Mobile home
   - Worsfold wins against Lloyds, who wins against Modern Cars, who can sue
       Wood but he‘s in Jail and broke


Silva v. British Columbia


Mr. Silva owed revenue Canada some back taxes. He owned a $220,000 boat. Rev. Cdn
gets judgment from Federal court for taxes. They get an execution writ from the federal
court (writ of fieri fasius is what they got .. equivalent to writ of execution)
Bailiff is given the writ and sent out to collect on the $30,000 debt.
Sheriff seizes the Boat, in a Walking seizure.
    - there is no duty on the creditor/bailiff to insure seized goods for the debtor




                                                                                             31
   -   Sheriff instructed to insure the boat, insurance Co. advises that they put some
       pumps on the boat. Sheriff gets insurance on the Boat
   -   A snowstorm and the boat gets weighed down and sinks – the pumps would have
       prevented it
   -   Silva sues the Province of BC for Negligence – court is sympathetic
   -   BCCA – reverses the decision and Mr. Silva takes the loss of the boat and still
       owes Revenue Canada $30,000 plus the Insurance premiums
   -   There is no duty for the sheriff to insure the seized property for the benefit of the
       execution debtor
   -   In absence of undertaking and reasonable reliance
   -   There could be liability on the sheriff if he took actual possession of the property

Re Boyce

Rev Canada – writ of execution for taxes given to bailiff
   - Sheriff – to get bank account would need to use garnishment (not seizure)
   - But with Writ of execution could seize contents of Safety deposit box
   - The bank tells bailiff that he has order to seize but not to drill out the lock on the
      safety deposit box – bailiff returns to court for this order to drill
   - Court says – you do not need this – the order to seize is sufficient
   - Bailiff can enter homes (though not break in) but can break in to garage, and
      secondary buildings eg. Shed

Cybulski v. Bertrand

Cubulski was run over by a Canada post truck driven by Bertrand
MVA Judgment against Bertrand and also NewPort credit who owned the truck, and
Canada Post as the employer.
   - long drawn out case, Defence screws around a lot – but Cybulski wins
   - Judgment for $140,000
   - Canada Post says they will take their time in paying the judgment
   - Lawyer for Cybulski asked the Bailiff to seize the trucks owned by Newport
      credit, and also Mr. Bertrand‘s own vehicle – based on a writ of execution
   - Canada Post gets a stay of execution to temporarily suspend it
   - It was an Unnecessary Execution because they were far to impatient – trying to
      punish Defence for screwing around in the trial
   - The execution was also unlawful – the instruction to the bailiff was to seize assets
      that were exempt from execution as they were leased to the crown – the crown is
      exempt from seizure

   -   unnecessary execution and so stay of execution granted

   -   crown has execution immunity (instructions to bailiff to seize crown assets were
       wrong - should have been suggestions)




                                                                                          32
     -     Execution creditor and lawyer are penalized in costs of the execution which are
           normally added to liability of execution debtor

March 3, 2005

Writ of Seizure and Sale cont‘d
―seize‖ and ―take‖ ―hold‖ s. 58

Write of Seizure and Sale extended to: Choses in action/intangible Personalty (not
physical, but are rights enforceable by court action)

Various kinds of securities can be taken by the court bailiff  securities to be cashed in
and proceeds passed on to the creditor

Promissory notes – if you do not garnish then you will have to share with other creditors

―other securities for money‖ – broadly interpreted for judgment creditors to recover
monies owed to them

        If a 3rd party owes money to the debtor, Payment to the court bailiff discharges the
         debt
        If the 3rd party does not pay to bailiff, the creditor can sue and get indemnity against
         costs s. 61

Nisbit
Nisbit had a whole life/universal insurance policy – all premiums were paid up on the
policy.
He got into financial trouble and creditor came after him
Whole life insurance – has a cash surrender value

Whole life insurance was considered ―other securities for money‖ – and the creditor
could take the cash surrender portion of the insurance policy

     -     today you can creditor proof your life insurance policy – s. 54 of Insurance Act
     -     by designating a beneficiary


Re Trustee Act, Re Patmore

Dr. Patmore went bankrupt and had a number of creditors
Dr. Patmore had stock in International African American Corp. (Delaware)
Bank of Montreal takes the share certificates, and holds them as security for a debt. Dr.
Patmore also had signed off on the share certificates so that they become like cash and
ownership passes by possession – so the bank could sell them at anytime.
The loan is paid off by Dr. Patmore.




                                                                                               33
Court bailiff comes to MBanx to collect the shares for Troup Rowlett and Thompson –
who is judgment creditor.
Also Revenue Canada wanted them, and Dr. Patmore said I paid your loan give the
shares back to me.

MBanx – become Inter-pleader and pays the shares into court registry

Court Held – financial instruments like shares, in bearer or street form qualify as ―other
securities for money‖ – so the court bailiff could seize them for the judgment creditor

The shares were ―in custodia legis‖ in the custody of the court. This means you can not
enforce seizure against it, or garnishee the court registry. You need an Equitable
Charging Order.
Apply to the court for an order nisi – applied for ex parte
Serve the order on the court registry, and on Dr. Patmore
Wait six months
Then apply for another court order (order absolute)


Bank of BC v. 2252280 BC?

Bank of BC was owed money by Torkko
Torkko had an RRSP
RRSP considered by s. 58 to be ―other securities for money‖

Torkko – could have used s. 54 of the Insurance Act – to creditor proof RRSP – indicate
what your options are at age 69 when the RRSP must be cashed.
   - specify an annuity issued by an insurance company, with payment to you
   - RRSP paid to beneficiary if you die
   - This makes it exempt from creditors

Execution against Shares: - using a writ of seizure to go after shares
   - hiding your assets in a corporation does not protect you from execution creditors,
       as you still hold the shares and they can be seized
   - debtors have tried to put share transfer restrictions e.g. not without consent of
       other shareholders/directors etc., or pre-emptive right of first refusal
           o This worked until 1972 when Associate Finance v. Webber case was
               decided
                     These transfer restrictions did not apply on an execution sale  a
                       departure from Nemo dat
   - How do you execute on Shares?
           o Share certificate is registered to execution debtor
           o Company goes by company Share register – for dividends, votes, rights to
               the shares – so a holder of a bearer certificate needs to become registered
           o Should the court bailiff go to the Share Register? Or collect the share
               certificate? Or both? P. 591 Smith v. Hamlin



                                                                                          34
Smith v Hamlin

Hamlin signed off on the shares and gave them to his law firm as collateral security for a
loan.
    - BCSC said if the certificates can be seized that is okay under s. 64 Court order
      enforcement act  all stocks, shares etc. can be seized whether they are
      transferable or not. Stock must be …
    - can also take the writ of seizure to the Company and give them notice in writing
      that the shares of the execution debtor are hereby seized – company must freeze
      the shares on the share register (can not be transferred to anyone)
          o then court bailiff sells the shares

writ of seizure and sale applies to most corporate stock: However

s. 69 Court order enforcement act –
    - charging order is a statutory or legal judgment order – set out in the case book and
       discussed in Associate Finance v. Webber
    - this is a burdensome procedure – similar to equitable charging order process
       including 6 mth wait period and 2 court applications
    - the writ of seizure and sale is less costly and easier – but then you have to share
       with other creditors
    - court will not allow Charging order if the Writ of Seizure and Sale is useable
    - Cdn Business Corp Act – you can not use the Writ of Seizure and Sale on Cdn
       Business Corporate Stock – if it is incorporated under the CBCA
    - then you must use a charging order to take the stock
    - case decided in 2001


March 8, 2005

Writ of seizure and sale – includes seizing money and other securities for money, and
corporate stock
COE Act s. 64 – all stock, shares, dividends etc. can be sold under writs of execution in a
similar manner as other personal property – actually seize the certificates
   - no share certificates these days (all computerized so…)

COE Act s. 65 – provide writ to company register and they are required to freeze the
shares (no transfers) – the sheriff can then sell the shares without the certificate (nemo dat
applies so purchaser gets only the debtor‘s interest in the shares)
    - share transfer restrictions do not apply (associate finance case & Peligren case)
    - the co. needs to have an office in the province

Associates Finance Co. Ltd. v. Webber and Dixon




                                                                                           35
Webber had family business – two small private co.s – he holds 50% shares in each of
Grenada & Webber. There were restrictions on the transfer of shares including: consent
of directors, consent of other shareholders, and right of first refusal to existing
shareholders.
Sheriff was hung up over s. 64 of COE Act – which said shares had to be transferable.
But are they still transferable due to the share transfer restrictions.

Judge said you should use the writ of seizure and sale and that we will ignore transfer
restrictions on an execution sale. (departure from nemo dat)
    - but there will still be a right of first refusal on the execution sale

Peligren v. Ajac’s Equipment
    - even the pre-emptive right was nullified here
           o if the continuing shareholders are that keen, then they can bid in the
               auction
    - no need for a charging order – writ of seizure and sale is fine
    - s. 69 of court order enforcement act does preserve the charging order, but there is
       no need for it here


Current state of the Law – not clear if pre-emptive right is valid (Associate  yes,
Peligren  No)

Arc Enterprises v. Grimwood

Court bailiff seizes shares of a small retail store. Sheriff did not advertise the sale of
shares by auction. Only two bids on the shares. One by the creditor‘s wife Mrs. Redmond
$2,000 for both certificates. Grimwood‘s brother bid $1,000 for one of the certificates.
Bailiff says screw you both, you are just low balling me. Mrs. Redmond says you have to
accept the best bid.
Court allows bailiff to adjourn the sale and try to generate more interest in the bidding.
    - it is very hard to sell shares in a small business private company

When selling assets in a case like this the debtor/bailiff? can go to court for instruction on
how to better realize on the shares.
BCSC rules 42-22? Rule 43?


Smith v. Hamlin

Hamlin had shares in 7 Mile High Corp.
BC Sec. Commission had frozen his shares.
Hamlin goes to MacAfee & Carter LLP – the ask for pledge of shares in 7 Mile High as
security for the legal work. Hamlin Endorses his shares over to MacAffee & Charter LLP
Smith gets a judgment against Mr. Hamlin, and a writ of seizure and sale.
Writ given to court bailiff and he serves notice of seizure to the transfer agent.



                                                                                           36
Transfer agent had received: 1) freeze order 2) writ of seizure and sale from Smith/bailiff
3) Revenue Canada writ equivalent

MacAffee – Secured creditor as they have possession

Competing creditors:
1) Are each of the creditors claims valid?
2) What is the effective date of the respective claims?
3) What are the effective rankings of the claims?

1) Are they valid?
    - argued that smith should have seized under s. 64 and not s. 65 and so was not
        valid
    - Court says NO – either method is okay p. 5-91
    - Smith argues that MacAfee & Carter‘s security is invalid as there was a freeze on
        trading of the shares
    - Court says NO – they had a valid method of taking security
    - Look to the PPSA – valid PPSA security must be Perfected
            o MacAfee had perfected through possession

2) What are the dates?
   - Oct 1990 – MacAfee & Carter
   - Exection creditors get their claim when they served their notice on the transfer agent
   - February 1991 Rev Cdn
   - Sept 1991 Smith

3) Effective rankings?
- p. 5-94 – PPSA ranking system
- PPSA v. Execution creditor
- SI – ranks only for advances prior to knowledge of Execution
- so MacAfee & Carter only had priority for work done before February 1991
- Execution Creditors Rev Cdn & Smith – then shared Pro-Rata – the remainder based on
their claims
- if there was still money left over then MacAfee & Carter could get paid for services
after February 1991

BUT – the cease trading order means that no one can sell the shares to realize anything!!


Peligren v. Ajac’s Equipment

Ajac‘s owed money to creditor. Creditor go judgment, writ, given to bailiff, bailiff seizes
equipment from Ajac‘s.
Peligren was the purchaser at the execution sale. Peligren had purchases Helsal‘s interest
in the shares. Helsal‘s son was a director of the CO. and refused to register the transfer,
based on pre-emptive right of first refusal, and a requirement for directors consent.



                                                                                         37
Court – neither of these restrictions are valid in an execution sale – Peligren gets to keep
the shares.
    - conflicts with Associate Finance which says Pre-emptive rights do affect
        execution sale.


Judgment Acts 1838 & 1840 – more remedies
   - create a statutory/legal charging order (as opposed to equitable)
   - to create a charge on the debtor‘s property (like a mortgage)
   - apply to the BCSC ex parte (no notice to the judgment debtor)
   - get order nisi from the judge
   - issue the order on the debtor
   - get a legal charge on the debtor‘s property
   - 6 mths later the creditor can apply for order absolute and sell the property
   - preserved in s. 69 of the COE Act
   - Very costly and time consuming so never used UNTIL…
   - 2001 Consumer Imagenet v. Infinitron

Consumer Imagenet v. Infinitron International

Consumer Imagenet was JC of Infinitron JD
Infinitron was holding co. which just held shares in Infinitron research which was
incorporated Federally. CBCA
    - court bailiff asks can we seize the share certificates in Infinitron Research. Under
        s. 64
    - they couldn‘t find the shares so they tried to serve IR register under s. 65
    - However, the CBCA s. 74 says that is an invalid method of seizure against stock
        in a Federally incorp co.  no seizure takes place unless you have possession of
        the share certificate (to prevent fraudulent sales of certificates in bearer form)
    - SO  Consumer Imagenet gets a charging order under Judgment Act 1838 &
        1840


MISSED CLASS

March 17, 2005

 plan to finish Execution against Land today – then skip to Builder‘s Liens

COEA
s. 86(3) creates a lien and charge from the time of registration
s. 86(4) contradicts (3) and says it is created from the time of application
        - Apparently (4) takes priority

   -   forms a lien and charge on land in the land title system
   -   creates the right for creditor to ask court for order to sale



                                                                                           38
To enforce – the creditor has a lot of work to do (not exam question)
   - Step 1 – apply for order nisi s. 92(1)
   - Application served on debtor
   - Court makes order nisi (temporary order)
   - Creditor files lis pendens on title in LTO
   - Etc.
   - Order absolute given by court
   - Order given to bailiff to sell the property
   - Execution sale
   - Can possibly get a further order to pass good title
   - s. 96(2) order of sale of home can be refused by court
   - COEA s. 3 – Must be a minimum 1 month redemption period prior to sale
   - Advertising of the sale – ads in Gazette & legal notices in the paper
   - Conveyance to the purchaser (whatever interest the Debtor had in the property)


COEA s. 105(2)

e.g. If on title you have
Mortgage, judgment, judgment, mortgage, mortgage, judgment (in that order)
    - it does not matter which judgment applies for sale – all charges after and
         including the first judgment registered are wiped off title – and that is what is
         being sold to the Purchaser in the execution sale.
    - So purchaser in above example gets title with just the first mortgage on it
    - Proceeds are distributed pari pasu (pro rata) to all the judgments
    - And the Mortgages get first in time, first in right – but come after all judgments if
         any judgments are before the mortgage
    - Hankin v. Gill (pari pasu)

Different if the Mortgagee forecloses (as opposed to a judgment creditor)
    - foreclosure sale
    - First in Time first in rank – for everyone – all charges
    - Surplus to the debtor
    - Roadburg v. R in right of BC (first in time first in right)

Mortgages – prior to the 1st judgment or the mortgage being executed will stay on title,
do not participate in the proceeds of sale – but the purchaser takes subject to them

Judgments – prior to the mortgage being foreclosed stay on title, do not participate in
proceeds

If execution sale – of debtor‘s home then $12,000 goes to the debtor before anything
(does not apply in a mortgage foreclosure)




                                                                                           39
Joint Tenancy:

s. 81(c) the definition of land includes joint tenancy interest – so you can register a
judgment against the interest of one party in a joint tenancy (does not affect the interest of
the other party)
- creditor is subject to principal of right of survivorship that applies to joint tenants
- Judgment creditor can not apply for partition
- order for sale – does not sever the joint tenancy
Only severed by:
Absolute sale – the execution purchaser is co-owner (tenant in common) – that purchaser
can then apply for partition

CIBC v. Muntain

Mr. Muntain guarantees son‘s debts. CIBC pursues him for son‘s defaults.
CIBC registers judgment against Mr. Muntain‘s joint tenancy in property with his wife.
CIBC applies for sale of the property. Court gives order Nisi. CIBC made ex parte
application without Muntain‘s knowledge, to sell the property – court refused this. Court
refused later to give Order Absolute.
Mr. Muntain dies – and title passes through right of survivorship to Mrs. Muntain – she
gets title free and clear of CIBC‘s interest.

First Western Capital v. Wardle

Can be another step after the execution sale takes place. Once there is a purchaser the
court can assure good title is passed. Could possibly increase the purchase price.

Hankin v. Gill

F: a number of JC‘s against Mr. Gill. Hankin was the first JC.
(the other JC‘s should have proceeded with builder‘s liens)
In order:
3 judgments against D
Then a Mortgage
Then more judgments
(does not matter which judgment creditor causes sale)

 all judgments share pari pasu before the mortgage
 mortgagee took subject to all the judgments

SO NOW – no one will register a mortgage after a judgment on title


Property Law Act s. 28
- if judgment creditor gives written notice to the mortgagee, then they have priority over
advances after the notice



                                                                                           40
e.g. Mortgage – face amount of $500,000 but will be paid out in 10 payments of $50,000
over a period of years
Then you have a judgment registered before all advances are made.
JC gives written notice to Mortgagee.
Any further advances take subsequent to the JC

Roadburg v. R in right of BC

Mortgage (forecloses) (1st)
Judgment (2nd)
Mortgage (3rd)

Foreclosure sale:
   - no pari pasu if sale is initiated by a mortgage
   - Mortgages and Judgments take first in time first in right
   - Rankings are based on application date!
   - Note – statute says Gov‘t Taxes jump right in as a JC at the date they were
       supposed to be paid, as if they were registered

March 22, 2005

Builder‘s Liens:

   -   no rights against 3rd parties in Ks (privity of K)
   -   SO ... builder‘s lien‘s to protect these 3rd parties
   -   In the Construction K pyramid – the various trades below the owner are generally
       working on credit (not paid in advance)
   -   The General Contractor makes a fee for themselves for coordinating the entire
       project and hiring trades people
   -   Builder‘s Lien Act – applies to all jobs, big or small
   -   BLA s. 1 – Defines Owner – includes a person who has an estate or interest in the
       land, on whose request, benefit, with knowledge or consent etc. work is done on
       the property. Owner not just the registered owner but anyone who requested the
       work, or is done with knowledge or consent, or for their benefit.
           o makes it so that the concept of privity does not apply to people doing
               work somewhere for the owner.
   -   Various trades people can file Liens against the owner‘s property
   -   BLA def‘n of Contractor  Must have privity of K with the owner. ―person
       engaged by the owner to do one or more of the following… does not include a
       worker‖ p. 2 of statute
   -   BLA def‘n of Head Contractor  basically doing the whole project, if there are
       several of them then they are not head contractors but are just contractors. Head
       contractor – engaged to do substantially all of the work
   -   Step 1  identify the owner and contractor
   -   Step 2  Sub contractors



                                                                                      41
   -   BLA p. 4 Def‘n of subcontractor – engaged by contractor or subcontractor to do
       one of the following – perform work, provide material (does not include worker,
       or material supplier, or someone working for an architect) essentially anyone
       hired by a contractor
           o Material supplier, or worker can not claim under the BLA
   -   Under s. 2 – Builder‘s Lien – a contractor, sub-contractor, has a lien for the price
       of work and material to the extent that it is unpaid. The lien is on the land, interest
       of the owner, materials delivered, and work itself
   -   Hold Backs – must maintain a hold back equal to 10% of materials…
           o Required of each person liable under each contract, and on each
               subcontract
           o So the owner must maintain a hold back account – 10% of each payment
               made to the general contractor.
           o If you maintain the hold back you have a defence against builder‘s liens
           o The general contractor must then hold back 10% on each payment down to
               subcontractors, and then each subcontractor holds back 10% on payments
               down
           o 55 days after the project is completed the Holdback is paid out by the
               owner
           o If there are liens claims on the title – then the owner pays the 10% into
               court, and if the owner has followed the rules then that is the max that the
               lien claimants can get
   -   Owner needs to check if there is a Lien no the property before making payments
       to the General Contractor – if they pay GC when there is a Lien then it is a bad
       faith payment
           o The GC is responsible for keeping the property Lien free
   -   Funds from the Owner to the GC – when the $$ is received by the GC the GC
       becomes a trustee of the funds. The subcontractors (engaged by directly by the
       GC) are trust beneficiaries and have all the remedies of a trust beneficiary
           o Privity of trust – you need contractual privity with the trustee
           o The trust gives you the right to claim the money in front of all secured
               creditors!!


3 Remedies: - the 3 key parts in BLA!
- Lien
- Hold Back (defence to lien)
- Trust

   -   Why does the material supplier not get a lien? You need some cut off point at
       which the liens/holdbacks/trusts cease to apply
   -   The BLA draws the line at Materials Suppliers, or Labourers, or Architects
   -   The architects – can file a lien but do not have holdback rights, trust etc.
   -   Subcontractor – had lien rights, must maintain holdbacks (on payments to
       supplier, and labour)




                                                                                           42
           o BUT – the labourers for the subcontractor have lien rights on the
               subcontractor/owner
   -   NEED – to check on where the line is actually drawn?
   -   Labourers, architects, suppliers – get lien rights up, but do not have trustee
       requirements, or hold back requirements (and so people below them do not have
       lien rights)
   -   Material Supplier – only supplies materials to a project
           o Material – moveable property that is delivered to the land and intended to
               become part of the improvement, includes equipment rented without an
               operator.
                     E.g. Paint provided by a paint store – paint store can claim a lien
           o Material supplier has lien rights (need to deliver material to the land to get
               that right)
           o If the material supplier rents equipment without an operator they are still a
               material supplier, if they rent equipment with an operator then the provider
               is considered a subcontractor!
                     The operator has a lien too as a labourer


March 24, 2005

Builder‘s Lien Act Continued:

3 Components to the BLA:
   1) Builder‘s Lien s.2 – to overcome the problem of privity for people who are
      working on the property, if they are not getting paid after the work is done (e.g.
      owner not paying, or some middle man goes bankrupt)
          a. Lien applies regardless of any other security on the project e.g. bonding K
          b. You can not contract out of this statute!
   2) Hold Back s.4 – created to prevent owners from paying out in full, and then later
      being sued because someone down the line did not get paid
          a. Hold backs at each stage (owner, contractor, each subcontractor)
          b. No hold backs in some cases as hold backs protect the next person down
              the chain and in these cases there is no one below that person who can
              claim a lien: No hold Backs against:
                   i. Labourers
                  ii. Material supplier
                 iii. Architect or Engineer
   3) Trust s.10 – creates trustees of contractors and subcontractors with trust
      beneficiaries being the people below
          a. The owner, materials supplier, labour, architect are not trustees
          b. The trustees have a fiduciary duty and must put the beneficiaries ahead of
              them
          c. It is a breach of trust to divert funds (holdbacks) to other projects, it must
              be held in trust for the beneficiaries




                                                                                         43
Time Limits and Phases in the BLA for a construction project:

   1) Preconstruction
         a. No improvements
         b. Design and contracts
         c. Approvals and permits
         d. Financing
   2) Construction
         a. Improvements on the land
         b.
   3) Completion
         a. Certificate of completion – issued by payment certifier (e.g.
             architect/owner/engineer) issued to one party who has completed their part
                   i. s.8 – once certificate issued to one party for their part of the project
                      the holdbacks can be issued 55days after certificate issued
         b. Substantial competion – COMPLETION is defined term on p. 2 s.1(1) – a
             contract that is substantially completed or performed not necessarily
             totally completed or performed!
         c. Substantial completion – s.1(2)
                   i. If up to $500,000 – 97% complete
                  ii. 2% (left undone) of the next $500,000 of the K price, and
                 iii. 1% of the balance of the K price
         d. Then see s. 1(3) For the purposes of this act, an improvement is completed
             in the improvement or a substantial part of it is ready for use or is being
             used for the purpose intended
         e. Completion is a critically important time as this is when the time starts to
             run for the liens, holdbacks, and trusts. Lien Claims must have been filed
             within 45 days from the date of completion
         f. Completion point – s.20 –
                   i. s.21 – If there is a certificate of completion issued then the time
                      period starts to run (this can be for an individual subcontract
                      certification, or certification for the whole project)  the deadline
                      then for filing a lien is 45 days after certificate issued
                  ii. Hold backs are held for 55 days after certificate – then paid out
                      (unless lien filed, then pay into court)
         g. s.33 – if a Lien claim is filed under BLA – the lien action must begin
             within one year of the lien filing? Completion?
         h. s.10 – Trust Remedy – must begin within 1 year from completion
         i. If the K has been abandoned you can still get money s. 30(2)
         j. s.1(5) 30 days in which no work has been done…



Architects can file liens – BUT they can not do this unless an improvement is actually
started




                                                                                           44
s.1 Material Supplier – a contractor or subcontractor who supplies only material in
relation to an improvement
        - Form 5 – file it on title at LTO – need legal desc. of land, the amount owing, and
general desc. of work done.


General Lien s.16 – if owner enters a single K for improvements on more than one parcel
of land e.g. multiple units
    - becomes too complicated to prove to which unit each material went
    - Lien claimant can claim a general lien – against each parcel of land for work
        provided to all parcels of land
    - The claimant then need not file lien against each parcel


March 29, 2005

    Lien Form – Form 5 in back of BLA
    Lien Action – Declaration of Lien ss. 26, 31(1)
           o Start action in BCSC
           o File lis pendens in LTO

    Court Ordered Sale s. 31(2)
    Lien Cut offs – NO one below them can file a lien: Architect, Engineer, Labourer,
     Materials Supplier
    Mortgagee – involving construction financing to the owner
          o Mortgagee – explicitly excluded from def‘n of owner (despite them having
              an interest in property)
                   This protects their mortgage interest from sale
          o EXCEPTION – if the Mortgagee is in possession of the land (e.g. owner
              goes bankrupt, Bank takes possession and completes the property to get
              money back)

Time Limits: s. 20
   - s. 20 BLA  Time (45 days) runs from various events:  Go with the earlier of
      either Cert. issued, or improvement completed, or other event in s.20 !!!
          o Form 3: Certificate of Completion - issued wrt the K, or subK
                    issued by payment certifier
                    Form 2: Notice posted that completion has occurred
                    See % completion req‘mts above
          o Substantial Completion – even if certificate is not issued
          o Project abandoned (30 days no work)
          o K terminated
          o If in situation with no General Kor
                    If improvement completed
                    Cert. of completion for your branch
                    Your branch completed


                                                                                         45
   -   Trust Remedy – 1 year from the cert. of completion
   -   Side note: personal remedy against the person you have privity of K with – 6 yrs

When no Head Contractor: (e.g. owner is the developer)
  - each branch under the owner with a subcontractor/contractor and workers under
      them is their own part
  - Need a certificate of completion for each individual branch
         o Could still have one final cert. of completion for the whole improvement
             but harder to tell when the threshold of substantial completion is met
  - The entire project is considered the improvement
  - (3) – substantial completion (ready for use, or being used for purpose intended)
         o EVEN WITHOUT – cert. of completion – if it is subst. complete then
             your time limit starts to run

Leased Premises:

The tenant – is considered an owner (the contracting owner)
   - If tenant defaults the Contractors etc. can file claim against Tenant‘s Leasehold
       interest
   - Claim is valid: Against Actual Owner (landlord  Non-contracting owner) if
       improvement done:
           o At request of landlord
           o At the prior knowledge of owner deemed at request of owner s. 3(1)
           o Or for the benefit of the landlord
           o Consent of landlord
   - How do you avoid this liability to the Owner (non-contracting Owner)
           o File a notice of no responsibility in the LTO
           o Notice of Interest s. 3(2)
                    Then not bound to lien claim UNLESS – work done at express
                       request of the owner

Ranking of Claims: s. 21

   -   claim filed on title in LTO
   -   registered as claim on owner‘s property
   -   takes effect/Ranks from the day they began work on that project s. 21
   -   Claim takes effect from time work began, or materials were first supplied under
       that contract
   -   E.g. if judgment is filed after work started, and then later a lien is filed – the lien
       take priority!
   -   s. 32 (1)
   -   s. 32(2)

32 (1) Subject to subsection (2), the amount secured in good faith by a registered
mortgage as either a direct or contingent liability of the mortgagor has priority over the
amount secured by a claim of lien.



                                                                                             46
(2) Despite subsection (1), an advance by a mortgagee that results in an increase in the
direct or contingent liability of a mortgagor, or both, under a registered mortgage
occurring after the time a claim of lien is filed ranks in priority after the amount secured
by that claim of lien.

   -   When a lien is filed on the property – it ties up the flow of funds
           o Mortgagee will not advance funds to the owner
           o Owner will not make payments on K
   -   How do you get the Lien claim off the title?
           o Pay $$ to the lien claimant
           o OR…
   -   If dispute about quality of work, or amount owing… There are other techniques to
       remove the Lien from the Title to another form of security:
           o s. 23 & s. 24
                    Owner can apply to court for court order to remove Lien by: –
                      either paying the full amt. of lien, or holdback into court, or post
                      letter of security from a bank (agree to pay into court any amount
                      arising from Lien action)
   -   S. 42(2) BLA – can not be Ked out of (exceptions… crown does not have to
       holdback, streets are not subj. to Lien etc.)

Hold Back: s. 4 & 5
   - The person primarily liable under each K/ subK – must maintain holdback of 10%
   - S. 4(4), (5) Mortgagee
   - No holdback against workers/ architects/ engineers/ materials suppliers – as no
      one below them can claim against them
   - S. 4(6) – s. 2(2) no lien/no holdback
   - 45 days after completion – owner checks for liens and if none then pays out the
      hold back. If there are liens then pay the 10% into court
   - If no general Kor – Owner maintains holdback against each individual Kor
   - Hold back – simply requires owner to retain $$
   - Hold back account (s. 5) requires owner actually maintain a separate bank account
      for holdbacks – ONLY REQ‘D if the K total value is over $100K
          o Most gov‘t and public bodies are exempt from the Hold back Account
               req‘mt


March 31, 2005

BLA continued again, and again, and again

   -   remember as an owner if you make payments while there is a lien you may not get
       credit for those payments – may need to make those bad faith payments again
   -   smart thing to do is hold back closer to 50%




                                                                                           47
Trusts:
   - The owner is only a trustee if there is a holdback account – otherwise no trustee
        obligations


Shinco case 2003 BCCA

F: Construction of a tennis court
Maintained HB acct while making payments on improvement. Two lien claims filed
within 45 days of completion. Some ppl. Didn‘t file within appropriate time – they were
unable to proceed with their lien claims.

s.4(9) – creates independent right of lien against holdback acct.
- if one claimant makes a claim against the HB then all other possible claimants can make
claims – even if they are late
- now there is the inconvenience for the owner of not only checking the LTO, but also the
Court registry for late filings of claims


Note – owner‘s should wait the full 55 days, then visit not only the LTO but also the
Court registry before paying out the holdback

Trust:
   -     the owner can never be a trustee? This stuff does not affect the owner
   -     Trustee holds for the benefit of the beneficiary
   -     Trustee owes fiduciary duties to the beneficiary
   -     S. 10 – creates a statutory trust
   -     The money received under the contract is the property in trust
   -     The trust obligation is to pay out the beneficiaries ahead of the trustee
              o E.g. subcontractors have priority over contractor
   -     If the trustee has problems with creditors, the beneficiaries have priority over
         other creditors as it is a trust
   -     Basic term of trust  pay the beneficiaries first
              o Any other use of the funds is a breach of trust
   -     There are multiple trusts down the chain
   -     s. 13 – these funds can be garnished but are still subject to the trust – so the
         garnishee only gets surplus funds beyond trustee‘s claim
   -     s. 11(7) commingling funds from the trust is not itself a breach, but later spending
         those commingled funds is a breach
   -     Consequence of Trust:
              o Beneficiaries paid first
              o Money protected from creditors including SPs
              o Other parties can be liable and become trustee‘s e.g. a sole
                  director/shareholder of a corp. which was a trustee
                       Can sometimes go after the bank if they knowingly participated in
                          breach of trust



                                                                                           48
     -     Under BLA – potential for quasi-criminal prosecution for breaches of trust by
           trustee, and also by director‘s of trustee

April 5, 2005

Ken Lawter Holdings v. Henmar

F:
        This case demonstrates how typical CL or Equitable remedies are not sufficient –
         you need the BLA
        Ken Lawter – one man roofing operation
        Made K with Henmar holdings to put a roof on their building for $32K
        Henmar sells the building to a purchaser Steen Panduro
        Even getting indefeasible title still makes you liable for builder‘s liens from the
         BLA
               o Advise purchaser to make the closing date more than 45 days beyond the
                   completion of the work
        Steen Panduro paid the purchase price less 10% holdback ($50K) (as a purchaser?)
        Ken completed the work on July 23rd (after Steen Panduro had become the owner)
        Henmar had gone insolvent
        Ken had assurance from Steen – that he should go ahead and do the work as they
         had a $50K holdback
        Ken filed his lien 1 day late  he filed at day 31 (now it is changed to 45 days)
        Ken tried a restitution argument (CL) – Steen gets a nice new roof, no one has paid
               o Benefit (yes)
               o To my detriment (yes)
               o Absence of a juristic reason to stop the claim (no)
                        Court says there was no K with Steen, and the guy who said that
                           Steen would pay had no authority to say that on Steen‘s behalf – so
                           no binding agreement
               o Claim fails – (Steph) don‘t worry about the above 7 lines  the point is
                   just that you need the Builder‘s lien and BLA because Common law
                   remedies often don‘t work, but the Lien is guaranteed
        Ken does not get paid! – would have if he filed his lien on time!

Shinco Case: (if applied to Ken case)
   - even if he missed out on filing the lien, he could seek 10% out of the amount held
       back so he could get $3200  because 100% of $32K was held back and unpaid
   - s. 4(9) There is a lien on 10% of the amount held back and so Ken would become
       a secured creditor for that 10%


NOW: There is an upper limit for liability of a purchaser from Builder‘s Liens
  - purchaser in good faith, liability is limited to 10% of the Price of the
     Improvement
        o that would be 10% of the $32K above – if the lien was filed in time


                                                                                           49
The Crown:
   - the Federal crown is exempt from BLA
   - the Provincial crown is NOT e.g.
         o hospitals, schools, university campus work, court houses (as long as they
            meet the definition of improvement)
         o the broad concept of an owner applies to the Provincial Gov‘t

DeFasio Case:
   - feeble argument that s. 14 says BC crown is bound by enactments, but it also says
       it is not bound by enactments wrt development of land or construction or its
       improvements
   - the purpose of that exemption though is to protect the crown from zoning bylaws,
       building codes etc.  not to protect them from Financial arrangements around the
       building like Liens in the BLA
   R: s. 14 does not protect the Prov. Crown from Liens


Provincial Crown exemptions:
   - court will not order the sale of crown property s. 31 (6)
           o but the court may give judgment for the amount of maximum liability
   - Can file Liens against prov. Crown
   - Hold Back account does NOT apply BUT Crown required to maintain a hold back
       (just not HB account)
   - Trust – remedy not available against Crown because they are considered the
       owner and so trust remedy does not apply s. 10
   - Roads, highways, forest service roads  Completely exempt from the BLA
   - Crown can never be held liable as a Non-contracting owner

DeFazio Case:

F:
     -   construction of the Sky train
     -   DeFazio (Subcontractor) and his merry men (8 truckers) were doing shitty work
         and were fired
     -   DeFazio filed liens on all the Sky train lines in which they had done work
     -   Due to liens – further payments to the GC (Metro-Canada) would be bad faith
         liens
     -   Metro-Canada – is in breach of it‘s K to keep the properties Lien Free
     -   Metro – calls up WA Stevenson - Subcontractor above DeFazio and says get
         those liens of
     -   WA Stevenson – is not happy with DeFazio‘s Work and so files with court and
         deposits fund for battle with DeFazio (they put in a bank security with the court)
             o This bonding (the security) costs a lot of money – Big fees
     -   $183K was the total Liens filed




                                                                                          50
     -   They put up security of $215K – the extra $$ was for the estimated cost of the lien
         legal action
             o You must put this extra cost up as security
     -   The crown land was incapable of sale as it was Prov. Crown land – so WA
         Stevenson argues that it should have the Bonded $ back
     -   BCCA – this BLA is in effect to protect the little guy, and the fact that their claim
         may be a crock of shit, and that the land will never be sold to pay off the liens,
         They still have the right to file a lien and seek $$ compensation

R: the fact that the provincial gov‘t will not be required to sell the land does NOT absolve
them from maintaining a hold back, and the contractors and subcontractors are still
subject to all the remedies under the BLA (hold backs, trusts, liens) and fighting for the
money paid into court


What happens when you have a DeFazio? (a shitty worker who is fired and you bring in
someone else to finish the work)
   - this is an extra cost for the owner – the new workers will end up costing more
      than you anticipated the original work would cost
   - This gives rise to a claim in damages against the Contractor for the Defective
      work
   - The owner can Set-off (not pay) from the K price the amount that is necessary to
      finish this project properly
   - BUT you can not cut into the 10% required hold back s. 6
          o s. 6 – if a contractor/ subcontractor defaults – you can not use this HB to
              compensate for damages for that default, or to complete the work
          o that 10% HB must be reserved for potential Lien claims – until they are
              not possible to be filed (past deadline)

O & O Contractors v. Bank of N.S.

In order to file a Lien you need to visit the LTO and see a title there BUT – many parts of
BC are not subject the Land Title Registry.
e.g. Logging roads throughout the province

F:
     -   BC gov‘t holds crown land and gives logging rights to Beaufort (the GC)
     -   Beaufort subcontracts its logging rights and need to build road to Tsimpsean
     -   Tsimpsean subcontracts rights to Tidewater who subcontracts rights to O & O
     -   Tidewater becomes insolvent and does not pay O & O
     -   Tidewater had assigned book of accounts – to Bank of Nova Scotia (PPSA –
         Secured creditor)

Remedies for O & O?
   - No lien against gov‘t as the title is outside the LTO system
   - It did have Holdback rights against people above AND



                                                                                           51
   -    Trust rights
   -    O & O garnishes Tsimpsean for monies owed to Tidewater ($ paid into court)
   -    Bank of NS claims $ as Secured Creditor
   -    O & O claims those $$ paid into court as trust funds as being paid to Tidewater
        (even though they were paid into court) s. 10
R: Trust rights (beneficial ownership of funds) comes before Secured Parties
s. 42(4) The BLA – prevails over Security agreements (like that made the bank of N.S.)

s. 13 – garnishment by other parties outside the construction project does not defeat
claims under the BLA


The Lien and Holdback Provisions:
  Owner:
          o (def‘n) Requires all 3 below: – can be more than one owner
                   Must have estate or interest in land
                   Must request the work or have prior knowledge of it
                   Must be on their credit, on their behalf, with their knowledge, or
                      for their direct benefit
          o Def‘n – expressly excludes a mortgagee unless they are in possession of
              the land (e.g. if mortgagor defaults)
          o Contracting Owner – has privity of K with the Contractor
          o Non-Contracting Owner – no K with Contractor

Landlord (non-contracting owner) (the tenant is the contracting owner)
   - s. 3(2) can protect landlord by filing a notice of interest – file Form 1 in the LTO
           o need to file this before the work starts – you can only protect yourself
              from liens done after it is filed
           o this protects them as the lien claimants can only go against the tenant
           o then liens against the tenant are only against the leasehold interest held by
              the tenant
           o Remember – if you did not request the work, or have prior knowledge of it
              then you are protected as a non-contracting owner anyway – no need for
              filing this form 1

Exam – only responsible for what was covered in class

April 7, 2005

Westburne Supply

Lien Claim
VGH owned the land
UBC leased the land
UBC hired Key as GC ($5Million K)
Key hired Sentinel as Electrical Subcontractor



                                                                                         52
Sentinel hired Westburne Supply as a Materials Supplier

UBC kept the 10% hold back  actually held back $700K (greater than the required
$500K)
Between Westburne and other Claimants  $1.58 Million in Lien claims
UBC says – here‘s the $700K fight amongst your selves (deficiency of funds for claims)

The Lien claimants try to get extra $$ out of VGH as an owner – who did not comply
with a Notice of Interest – Argued: therefore they should be liable for 100% of lien
claims

Court says – Non-contracting Owner can rely upon the defence of a properly
maintained holdback by the tenant. So that if the Contracting owner complies with
the BLA in terms of a Hold Back that defence applies to the Non-contracting owner
as well.


Maximum exposure for the owners: K price ($5Million) + Bad faith payments +
payments made after liens filed on title


Ram Construction

Owner – does not include mortgagee unless in possession of land

Caron-Five – (mortgagor) real estate developer (contracting owner) becomes insolvent
Standard Trust – Mortgagee – (foreclosed and got order for sale of land – wipes the
mortgage off title and all interests below the mortgage)
- as long as the mortgage is before the lien claims then it ranks Ahead of the Liens in $
from foreclosure sale
Ram Construction – Contractor – tries to argue that the proceeds of sale of the land
should be subject to a required hold back – which should be paid back to the lien
claimants

Court says – No holdback against mortgagee’s proceeds of sale– mortgagee can keep
the proceeds of the sale against the lien claimants

The mortgagee could maintain a hold back BLA s. 4(4) & (5) but they do not do this as
they do not want liens against proceeds of sale.
 they might do this if they do not trust the mortgagor to make good faith payments and
maintain a holdback

If the mortgagee takes possession instead of just selling the land – they become
responsible as if a full owner – hold back etc.

Vendor-Purchaser (like in Ken Lawter case)



                                                                                            53
Vendor with GC and SubCs on the job
Purchaser is a potential owner  vulnerable to builder‘s liens

s. 23(1)(h) Registration of purchaser does not protect against liens – e.g. register and then
within the 45 days of completion people can still file liens on your title

s. 35 BLA – Purchasers only liable for 10% of the improvement
Vendor still liable for actual holdback, or if none then for Contract value

Purchaser of Condominiums:
   - if you are buying a unit before other units are finished (potential for liens filed on
       work done on other units to affect title of the entire property) SO to prevent this
   - Strata Property Act ss. 87 -90 s. 88(1)
   - 45 days from conveyance or completion of project whichever is sooner
   - s. 88(1) statutory holdback protection
           o pay 55 days after completion
           o If you buy a unit you holdback 7% of purchaser price for 55 days and then
              you are protected against liens – if filed pay the money into court
   - 7% of gross purchase price


Deal Srl v. Cherubini

Deal Srl (property owner) hires Cherubini to create a mould to build the trestles.
Deal Srl stiffs Cherubini on the $$, and Cherubini files a lien – claiming that the moulds
are included in improvement definition s. 1 BLA

Court – considered the pilings driven into the ground and bolting of the moulds to the
land to mean that the mould become part of the land and so was an improvement
Lien was allowed (basically was a fixture) even though it was there for only a temporary
purpose

Can not file builders lien for something that is not Consumed OR forms part of the
building.

Architects & Engineers




Chaston v. Henderson Land

Henderson – landlord (owner of property)
Manna – leasing the land (tenant)
Chaston (project manager – GC) hired (by Manna) to build a brew-pub in the
international village down town



                                                                                          54
Forster – architect who designed the brew pub

   -   Manna runs out of $$ - project does not happen
   -   Chaston & Forster – left unpaid
           o personal judgment against Manna was useless as Manna was broke
           o lien on leasehold interest of manna was not great
           o SO they went after Henderson
   -   Court – The wording of services  anarchitect or engineer can lien for services
       even before the work is begun. Court says NO – Construction must have begun
   -   In this case the construction had begun (re-enforcement of floor) (trial judge made
       a factual error)
   -   BCCA – reversed on the point that the construction had begun – They were
       capable of enforcing a Lien for the Pro-rata amount of Contract for the amount of
       work done
   -   Henderson – should have filed a notice of interest in the LTO!!!!
           o Would still have been stuck with the minor pro-rata claim
           o BUT would not have had to have litigated over the full fees claimed by the
                claimants

Exam – 2 hours – only resp. for what done in class




                                                                                       55

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:42
posted:7/30/2011
language:English
pages:55