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debtor-creditor-2009

VIEWS: 23 PAGES: 55

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									Debtor/Creditor                                                                           Fall, 2009



                        DEBTOR/CREDITOR SUMMARY

                                1. SELF-HELP COLLECTION

    -   The collection of debts through the judicial process is both time-consuming and
        expensive, so it is neither surprising nor improper for creditors to seek to recover debts
        through extra-judicial means
    -   Extra-judicial collection of debts serves the interest of creditors and society as
        particularly since the price charged by suppliers for their goods and services must
        inevitably include an allowance for the suppliers‟ costs of recovering bad debts and the
        losses which arise because certain debts cannot be recovered
    -   A collection agency normally acts as an agent for the creditor and it is apparently
        uncommon for creditors to assign their overdue debts to collection agencies or others for
        collection

Valley Credits Ltd. v. Key (1977) BC
The court held that a collection agency that took an assignment of a claim and sued on it in return
for a fee based on a percentage of the take was engaging in the practice of law and that such a
lawsuit amounted to an abuse of the court‟s process and should be dismissed.

    -   A distinction should be drawn between the assignment of an overdue book debt (which is
        uncommon) and the assignment of the original finance contract to a finance company or
        an acceptance company which in some businesses is the normal pattern
    -   In the case of a finance company the assignee will undertake any collection efforts –
        perhaps involving a collection agency or lawyer at some stage
    -   The work of the collector is result-oriented and high-tension
    -   A collector‟s future and his month-to-month income depends on his ability to persuade
        debtors to pay him after they have neglected to pay the creditor directly
    -   The techniques used to collect debts are limited only by the ingenuity of the creditor or
        collector but may be divided into two categories:
                 1. Those directed to the debtor personally
                           Telephone calls, letters and personal visits
                           Personal visits are more common in in-house collections by banks or
                              finance companies or where secured creditors are seeking quit claims
                              of chattels
                 2. Those which involve third parties
                           The usual reason for contacting someone other than the debtor is to
                              discover the debtor‟s whereabouts

HARASSMENT BY CREDITORS
  - For an unsecured creditor there are only three real avenues open for the recovery of a
     debt:
         o (i) Self-help collection
         o (ii) An ordinary civil action
         o (iii) By instituting bankruptcy proceedings (but in many cases the debtor will
             refuse to pay where he is not insolvent)
  - In a large number of cases there is a willful refusal to pay on the part of the debtor
  - Because civil actions are expensive and time-consuming the creditor will often seek to
     cajole or intimidate a delinquent debtor into payment


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Debtor/Creditor                                                                            Fall, 2009


    -   A creditor is entitled to use all lawful and reasonable measures to obtain payment before
        taking court proceedings to recover the debt
    -   Under the present law so long as no unlawful means are employed no restrictions are
        placed upon the creditor or his representatives resorting to any device to obtain payment
        of his debt even if the device is unfair, callous, or wicked there is no protection for the
        debtor nor sanction against the creditor=
    -   The earliest legislation in Canada was the Ontario Debt Collectors Act (1896) which
        penalized any person printing or publishing documents that looked like court documents
        to deceive the public
    -   In 1927 the Debt Collectors Act was broadened to cover the publication or use of
        imitations or colourable imitations of “other legal process”
    -   The Debt Collectors Act remains on the statute book
    -   Collection agency practices sometimes harass the poor and unsophisticated
    -   As the Payne Commission provided: the debtor class includes many who by misfortune
        or mischance have drifted into debt and they are peculiarly exposed and vulnerable

CRIMINAL CODE REMEDIES FOR HARASSMENT
     1. Criminal Code Section 373(3) provides for repeated phone calls with the intent to
         harass
     2. Criminal Code Section 264.1 provides for threats of bodily harm or damage to
         property made in any manner
     3. Criminal Code Section 346(1) provides for threats with the intent to gain or extort
         anything – Section 346(2) provides that a civil action is not a threat for the purposes
         of Section 346(1)
     4. Criminal Code Section 144 provides for offering to conceal an indictable offence for
         valuable consideration
     5. Criminal Code Section 375 provides using forged documents to demand or receive
         anything
     6. Criminal Code Section 322 provides for theft
     7. Criminal Code Section 361 provides for false pretences
     8. Criminal Code Section 366 provides for forgery
     9. Criminal Code Section 376 provides for the use of counterfeit or unauthorized marks
         or stamps
     10. Criminal Code Section 302 provides for extortion by libel

CIVIL REMEDIES FOR HARASSMENT
 Causes of action for damages relevant to the problem of harassment may include:
              1. Trespass
              2. Assault
              3. Defamation
              4. Intentional or negligent infliction of nervous shock
              5. Abuse of legal process
              6. An action under a provision of the Privacy Act

Payne Commitee
 a.k.a. Report of the Committee on the Enforcement of Judgment Debts
 A creditor is entitled to use all lawful and reasonable measures to obtain payment before
   taking court proceedings to recover the debt
 Under the present law so long as no unlawful means are employed no restrictions are placed
   upon the creditor or his representatives resorting to any device to obtain payment of his debt



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Debtor/Creditor                                                                             Fall, 2009


    – even if the device is unfair, callous, or wicked there is no protection for the debtor nor
    sanction against the creditor
   The Employment Standards Act prohibits an employer from firing an employee on the
    grounds that garnishment proceedings are about to take place

TORT LAW AND DEBTOR HARASSMENT

Yoder v. Smith (1962) Iowa
To an inform an employer of an employee‟s indebtedness may be an exception to one‟s absolute
right to privacy since an employer has a natural and proper interest in the facts relative to debts
owed by his employees and therefore is not in a category with the general public (which would
have no legitimate interest in a private matter between creditor and debtor).

R. v. Doucette (1960) ON CA
The court held that bailiffs licensed under the Bailiffs Act are not clothed with any official status
as peace officers and as agents for the creditor enjoy no greater rights in repossessing the
creditor‟s property than the creditor himself

   The rule does not apply to sheriffs or bailiffs acting pursuant to a writ of execution or other
    court order
   And most security agreements confer broad contractual rights to enter property and recover
    secured assets and generally such contracts are binding under the PPSA

Liens
 Common law liens confer only a right of possession
 Except as provided by statute or contract they confer no right to sell the property subject to
   the lien
 Nor do such liens confer any right or interest in the goods subject to the lien
 Since they are rights in the nature of a personal defence to a claim for the return of the
   property subject to the lien they are not assignable




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Debtor/Creditor                                                                            Fall, 2009


                                2. PREJUDGMENT REMEDIES

Historical Background
    - 1881: English C.A. was asked to rant a pre-judgment injunction to prevent D from
        disposing of assets in order to frustrate C‟s recovery (Lister v. Stubbs); there was no such
        thing as a pre-judgment injunction to prevent D from disposing of assets (Lister
        Principal)
    - 1969: Payne Commission issued a paper in England that dealt with a whole series of
        issues related to the enforcement of judgments. Significant recommendation: English law
        should abandon the Lister Rule and, in appropriate cases, allow for a pre-judgment
        injunction to prevent a defendant from dealing adversely with his assets
    - 1975: series of English cases in which the English C.A. changed the law and established
        that there should be pre-injunctive inventory relief. Revolution occured through three
        cases:
             o Mareva Compania Naviera SA v. International Bulk Carriers SA (1975) C.A. –
                 shipping case that led to the Mareva injunction: an ex parte (on behalf of one
                 party only) order resulting in the civil arrest of a person‟s property on a
                 worldwide basis
                      “Greatest piece of judicial law reform in his lifetime” – Lord Denning
                      Acknowledged the law was Lister and Stubbs and could not overturn a
                          previous ruling; distinguished case in front of him
             o Aetna (1981) first Canadian case to follow this precedent; soon recognized across
                 the country.
             o Nippon Yusen Kaisha v. Rasu Maritima

Injunctions
    - Order of the court
    - Negative: thou shall not do certain things, vs.
    - Positive/mandatory: thou shall do certain things
    - Breach of injunction = contempt of court; thus, injunctive relief generally works because
        it has teeth.
    - Risk of this remedy: obtained before judgment, meaning the court has not yet determined
        that the plaintiff has a successful claim/will be entitled to judgment; in Canadian case,
        concern that granting these kind of injunctions will put undue pressure on the defendant
        to settle
    - From the point of view of C, he is looking at a very expensive litigation process; wants to
        ensure that assets will be available at the end to satisfy a judgment.
    - Gertner argues that the English courts have more effectively balanced the situation of the
        debtor/creditor
    - Injunctions are used all the time, in various litigation

The Test to Obtain an Injunction
   - Established by the SCC, the general test to obtain an injunction:
            o (i) The plaintiff must show that his claim raises a serious issue to be tried
                     Plaintiff has to show that there is some merit to the claim.
                     Almost a non-test; easy to satisfy.
            o (ii) The plaintiff must show that if an injunction is not granted the plaintiff will
                suffer irreparable harm
            o (iii) The plaintiff must establish the balance of convenience is in the plaintiff‟s
                favor



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Debtor/Creditor                                                                            Fall, 2009


    -   If the court grants an injunction, will require plaintiff to give an undertaking for damages
        (Rules of Civil Procedure, r.40.03): promise to the court that if the plaintiff does not
        receive judgment, the plaintiff will pay any damages the defendant has suffered as a
        result of the injunction.

Process to Obtain Injunction
    - Plaintiff files motion material, supported by an affidavit, establishing:
            o (i) the nature of the claim,
            o (ii) why an injunction is warranted, and
            o (iii) why it meets the three necessary requirements.
    - Defendant responds the same way, refuting the points of the plaintiff.
    - Each of the parties will examine the deponent of the affidavit.
    - The side that loses is generally responsible for paying the other side‟s costs

MAREVA INJUNCTION
  - A remedy which may be utilized by a party on an interlocutory motion brought ex parte
    to prevent the opposing party from moving assets from the jurisdiction, or beyond the
    reach of the moving part
  - Is considered execution prior to judgment, and is only given under the most strict of
    terms and conditions
  - Theory behind this kind of relief: concern that the defendant is doing bad things with its
    assets, i.e. hiding them, transferring them, giving them away, etc.
  - Ordinarily, the plaintiff applies for a Mareva injunction without notice to the defendant in
    order to prevent the defendant from removing his goods/assets.
  - After the court grants injunction, plaintiff must give the defendant notice; breach of
    injunction leads to contempt.
  - Full hearing occurs days later with both parties present; usually a matter of a couple
    weeks due to affidavits, examinations.
  - Court will decide whether the injunction that was granted should be continued, or
    whether it should be now refused.
        o Again, the plaintiff may be liable for damages the defendant has suffered upon
              refusal of the continuation of the injunction order.

Test to Obtain Mareva Injunction
    - English courts recognized this wasn‟t an ordinary kind of injunction, and wanted to
        ensure interests of C and D were properly balanced.
    - In a series of cases, court established 5 conditions that the plaintiff had to satisfy before
        court granted a Mareva injunction (Chitel):
            o (i) plaintiff has to satisfy the courts that he has a good, arguable case;
            o (ii) plaintiff must make full and frank disclosure of all the relevant facts;
                      Not only those facts that are in favor of the plaintiff, but those favorable
                         to the defendant as well (applicable to all ex-parte injunction
                         applications, whether Mareva or ordinary)
            o (iii) must satisfy the courts using evidence that the plaintiff has grounds to belief
                that there are assets of the defendant‟s in the jurisdiction;
                      Specific to Mareva injunction: courts recognized this was an
                         extraordinary situation, and did not want to grant a useless order
            o (iv) the plaintiff must satisfy the court that it has grounds to believe that if the
                injunction is not granted there is a real risk that the assets will be transferred,
                removed or hidden so as to make enforcement difficult or impossible, and
                      Very specific to Mareva injunction


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Debtor/Creditor                                                                              Fall, 2009


            o  (v) requirement that the plaintiff give an undertaking for damages.
                     required in all injunctive cases
    -   The English courts subsequently added four other conditions:
           o (vi) balance of convenience test
           o (vii) requirement that the plaintiff satisfy the court that assets would be moved,
               and as a result of the defendant‟s actions there was a risk that the injunction
               could not be satisfied; risk of default
           o (viii) plaintiff must serve a bank to bind the accounts of the defendant
           o (ix) if the 3rd party suffers damages, plaintiff must take an undertaking to pay the
               3rd party.

Consequences of Mareva Injunction
   - When the plaintiff is successful in their Mareva application:
          o Assets are not taken away from the defendant, but D is restricted with what he
              can do with assets (not pre-judgment seizure)
          o Plaintiff does not get any SI in the assets, nor override any other SIs
          o Plaintiff does not enjoy an priority to assets it did not have before it applied for
              the Mareva injunction (only a preventative order upon the defendant)
          o No guarantee that the assets will be around at the end of the day – variable order
              to allow defendant to do with his assets what he would normally do on a day to
              day basis.

Chitel v. Rothbart (1982) Ont. CA [confirms availability of Mareva in Ontario]
Facts: Plaintiff alleged that D was a physician who was also looking after P‟s personal affairs,
and that D had fraudulently converted shares that belonged to P. P believed that D was planning
to leave Canada, and dissipate any assets in Ontario.

Issue: application to continue Mareva injunction.

Holding: Court imposed heavy onus on plaintiff when applying for Mareva injunction: this is
such a significant remedy, that courts require the plaintiff to convince the court at the ex-parte
stage and later on, that they have a strong prima facie case.

Although the general rule provides that no court has the jurisdiction to protect C before he gets
judgment (Lister), CA determined that Mareva injunction would be available upon satisfaction of
the following material:
    - (i) Plaintiff must make full and frank disclosure of all matters in his knowledge which are
         material for the judge to know,
    - (ii) Plaintiff should give particulars of his claim against the defendant, stating the ground
         of his claim and the amount thereof, and fairly stating the point made against it by the
         defendant,
    - (iii) Plaintiff should give some grounds for believing that the defendants have assets here.
    - (iv) Plaintiff should give some grounds for believing that there is risk of the assets being
         removed from jurisdiction
    - (v) Plaintiff must provide undertaking as to damages.

Note:
   -    The court‟s suggestion that a Mareva injunction was such a powerful tool was off base,
        because the defendant is still allowed to use its assets, as they are not frozen; the fear that
        the granting of the injunction would put insurmountable pressure on the defendant to
        settle was misplaced.


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Debtor/Creditor                                                                              Fall, 2009


    -   Later cases said that the plaintiff had to prove that the defendant was removing its assets
        to beat the plaintiff‟s injunction

The Canadian courts have significantly shifted the balance to favor defendants, proved by the fact
that whereas the Mareva injunctions are applied for everyday in the English courts, in Canada its
far more difficult. Serious downside risks that a plaintiff faces in Canada.

Aetna Financial Services v. Feigelman (1985)
Facts: To date, this is the only MI that has gone to the SCC. Feigelman took a loan from Aetna
for his new business. Lender has security over F‟s assets, and ultimately took steps to enforce
their security. F says lender failed to give reasonable notice that they would take such action and
commences an action against Aetna for wrongful seizure. Aetna closed their MB office, and
moved to Quebec. Upon learning of this, F successfully brought an application for a Mareva
injunction. Aetna appealed. C.A. says they may not have granted this injunction, but this is a
discretionary remedy, and unless the lower courts made a palpable and overriding error in law,
the C.A. cannot reverse judgment. Appeal made to the SCC.

Holding: SCC held that the lower courts were wrong. SCC recognized that an injunction is a
discretionary remedy and that it should not reverse unless it can find a palpable and overriding
error of law. Exceptional cases where you can get pre-judgment injunctive relief, i.e. Mareva
injunction, which is an exception to the rule. Palpable and overriding error: Canada is a single
jurisdiction, therefore F failed to prove that the defendant moved its assets out of the jurisdiction.
(Yet, for all other purposes, each province is regarded as a separate jurisdiction).

Ratio: In order to get a Mareva injunction today, must prove assets are being moved out of
Canada; inter-provincial transfer apparently does not matter. Constantly skewed in favor of
defendants. Level of proof is becoming increasingly difficult.

Any ex parte Mareva injunction which is granted, can only be continued if notice is given to the
other party and the motion is fully argued.

Note:
   -    Gertner reads this case as the court didn‟t like F defeating a business; had to find a way to
        overturn this fact. However, to prove that a defendant has assets in a different province is
        NOT considered to be within the same jurisdiction.

Extraterritorial or Worldwide Mareva Injunction
    - Up until this order, defendants were told not to dispose of their assets in a bad way in the
        jurisdiction where the injunction was made
    - English courts realized that in some cases it would be appropriate to grant broader relief,
        i.e. for the defendant not to deal with its assets anywhere in the world, except that which
        was mandated
    - Courts have recognized that this kind of relief is exceptional
    - So, how does an ON court grant an order that effectively ties up assets in another
        jurisdiction?
             o Court orders the defendant not to do certain things
             o No doubt that an ON court has the power to prevent the defendant from doing
                  certain things, whether they be in ON or elsewhere; not just limited to this
                  context

Republic of Haiti v. Duvalier (1990) UK CA


                                                                                                      7
Debtor/Creditor                                                                             Fall, 2009


Facts: legal proceedings brought against former dictator to recover 20M in goods that Duvalier
had robbed from his country. Plaintiff went to England and requested the English courts grant a
worldwide Mareva injunction to prevent Duvalier from hiding its assets anywhere in the world.

Holding: court granted worldwide Mareva injunction (may have successfully tied up some assets
that may have passed through England).

Note:
Subsequent cases have emphasized the importance of the court having jurisdiction over the
defendant. Court wants to know that it will be able to enforce its order should it be breached, i.e.
seizing the defendant‟s assets. Canadian courts have jumped on this bandwagon and have ordered
worldwide Mareva injunctions, however more difficult.

Mooney v. Orr (1994) BC
Facts: an application for a Mareva injunction was brought in the middle of a complex trial in BC,
to prevent plaintiff BC resident from dealing with any of his assets, including those situated
outside of the province. At the time the injunction was requested, defendant was in the course of
counterclaiming, and there were two unsatisfied foreign judgments registered against the plaintiff
in the sum of $1,750,000. In one of the foreign actions, the judgment creditor attacked a transfer
by the plaintiff to his wife for $1.00, alleging a fraudulent conveyance.

Holding: Court granted the MI, due to the two outstanding foreign judgments against the plaintiff,
which evidenced the plaintiff‟s predilection and experience in the use of offshore trusts to render
himself inaccessible (demonstrated real risk).

Ratio: Canadian courts have jurisdiction to restrain parties who transfer their assets, including
assets ex juris, for the purpose of frustrating an order or possible future order of the court.

Shenzhen City Luohu Industrial Development Co. v. Yao (1999) BC
Holding: BC court dismissed an application to alter an order to keep funds in trust during trial,
because the matter was too complicated for the judge to determine where the funds belonged at
that point.

Re Conflict of Laws
Pro Swing Inc. v. Elta Golf Inc. (2006) SCC
Facts: Pro Swing sued for trade-mark infringement in Ohio. A settlement was reached which
ordered Elta Golf to refrain from selling any products with the trident logo.

Holding: Overturned old rule that foreign judgment required a monetary amount. Court held that
foreign non-monetary judgments may be enforced in Canada where they have been rendered by a
court of competent jurisdiction, the rendering is final, and the nature of the judgment is such that
comity requires it to be enforced.

England courts demonstrated that Mareva injunctions were not limited to any type of cases; same
is true in Canada.

CIBC v. Credit Valley (2003)
Facts: Deals with a variation of a Mareva injunction.




                                                                                                    8
Debtor/Creditor                                                                                 Fall, 2009


Issue: whether the courts approach to varying a Mareva injunction should differ depending on
whether the assets are assets claimed by the defendant, or just assets that the defendant has in his
possession?

Holding: the test should be different when claiming the very assets that the defendant wants to
sell; courts should be far more reluctant, because if it turns out that the plaintiff is right, the asset
then belongs to the plaintiff.

POST-JUDGMENT
Whether plaintiff can get a Mareva injunction after post-judgment?
   - There are some circumstances where if the plaintiff isn‟t given a post-judgment Mareva
      injunction, the defendant will be able to deal with its assets in a way that defeats the
      plaintiff‟s claims, before the plaintiff can access other remedies. In such cases, a Mareva
      injunction should be available
   - What should be the test? Should be easier, due to post-judgment.

If full and frank disclosure not made, often enough to defeat the order, unless the order would
have been made anyways.

Hickman v. Kaiser (1996) BC
Facts: this was an application by the defendant for an order to set aside an ex parte order
restraining him from dealing with his assets wherever situated. The basis of the judgment was
that the defendant had, through theft, fraud, or misappropriation, during his tenure as trustee of a
pension fund, wrongfully removed substantial sums from the trust for his own benefit. The
defendant argued that the plaintiffs were not entitled to a Mareva injunction in circumstances
where they had a registered judgment within the jurisdiction.

Holding: the court held that the usual rule was that the plaintiffs would not be entitled to a
Mareva injunction when they had a registered judgment within the jurisdiction. However, that
was not always the case, and was not held in this case where there was a history of fraud,
concealment, and removal of assets from the jurisdiction. The judge granting the injunction was
aware of the appropriate legal test for grant of the injunction, and correctly applied it.

Stewart Chatering Ltd. v. C & O Management (1980) UK
Ratio: the Mareva injunction acts in personam on the defendant and does not give the plaintiff
any rights over the goods of the defendant or involve any attachment on them. Rather, the MI has
the effect of preserving the defendant‟s goods until execution can be levied on them. The
remedies of injunction and execution can take effect side by side.

Ketchum Int’l Plc. V. Group Public Relations Ltd. (1996) UK




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Debtor/Creditor                                                                             Fall, 2009


Facts: the court had jurisdiction to grant injunctive relief to restrain a defendant from disposing of
assets pending the unsuccessful plaintiff's substantive appeal. That jurisdiction was similar to the
jurisdiction exercised where an unsuccessful defendant sought a stay of execution pending an
appeal and it was based on the principle that justice required that the court should be able to take
steps to ensure that its judgments were not rendered valueless by an unjustifiable disposal of
assets. Further, there was no reason in principle why the considerations applicable to the grant of
a Mareva injunction should not be applied in favour of such a plaintiff; the test would be whether
he had a good arguable appeal, and where leave was not required to appeal from the substantive
judgment (as in the instant case) injunctive relief of the type sought should not be granted unless
leave to appeal would have been granted, had it been required.

Holding: In this case, since the plaintiff did not have a good arguable appeal the application was
dismissed.




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Debtor/Creditor                                                                          Fall, 2009


                    3. RIGHTS OF THE DEBTOR AFTER JUDGMENT

    -   The law is premised on the notion that the debtor is unwilling to pay the debt
    -   Law has not kept pace with what we know about Ds – most are willing to pay, however
        are unable. Also, law does not adequately address what Cs need.
            o Most Ds do not want to be in default; self-help measures rarely succeed
            o Bankruptcy recovers in pennies on the dollar
            o Cs very often abandon their attempt to collect money from D
    -   In Canada, very few instances where D can go to the court, and request to pay
        installments and force C‟s acceptance; by and large, following judgment, C is left to own
        devices re the enforcement of awarded monies.
    -   System of money enforcement is creditor initiated, and the state takes very little action;
        only does so at the behest of the creditor.
    -   Judgment Creditor must file a writ of seizure and sale in order to enforce an award;
        sheriff will only collect upon direction by C

Installment/Periodic Payment Plan
    - Where D has two or more judgments, an installment plan provides for the consolidation
        of debts, which can be paid in installments. This is to ensure D does not go bankrupt, and
        that Cs gets paid.
    - Can work in the instance of the single judgment creditor
    - The whole idea is to stop the creditor from using the traditional methods of enforcement,
        i.e. seizure and sale of personal property, land, equitable execution, garnishment
    - At common law, there is no inherent jurisdiction in the court to impose a periodic
        payment plan; however, some commentators believe inherent jurisdiction stems from the
        court‟s inherent jurisdiction to control its own processes.
    - The rules of civil procedure provide that when there is an appeal, there is a stay of
        execution pending appeal, therefore C is stopped from using traditional methods of
        execution against the debtor.
    - In superior courts, there are virtually no installment payment plans.
    - Small claims courts are different – can order periodic payment plans, consolidate two or
        more debts in default.
    - In family courts, can get lump sum payments; far rarer than periodic payment plans.

Information that Flows to C Re D‟s Property
    - If C doesn‟t know anything about D‟s property, difficult to do much because the sheriff
       needs to know more before acting; otherwise, ignorance re D‟s property could lead to
       wrongful seizure (actionable by D against sheriff, C)
    - C cannot use discovery to find out what property the D may have. Discovery has a
       narrow focus, which centers on matters relating to the main action; in no way is it
       focused to matters following judgment (i.e. enforcement).
    - Outside of legislation, C may be able to monitor D, personal contact between D and D,
       business deals between C and D, creditor reporting services
            o However, at the end of the day, C is usually not successful; left with the
                legislated rules of civil procedure.
    - Only in 7% of cases do Cs use judgment/debtor examination [JD]
            o (a) Preconceived notion that Ds are going to lie (University of Alberta)
            o (b) May have to do with the culture of enforcement debts: unless there is a lot of
                money, Cs usually end up abandoning the debt




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Debtor/Creditor                                                                             Fall, 2009


            o     (c) When C wants to access D‟s personal property, it must file a writ in sheriff‟s
                  office which binds personal property.
                       However, if D sells the property without notice, the BFP gets priority
                          over C.
                       But, if a writ is filed with respect to D, it not only binds personal
                          property, but also binds the realty of D. Thus, the land cannot be sold to a
                          BFP free and clear of the writ, which acts like a lien.
                       Anytime D wants to sell, or mortgage the land, D must deal with the lien
                          - C doesn‟t have to do anything but sit and wait.
                       As a result, Cs often go after land as opposed to personal property.

Examination of Debtor
   - Rule 60.18 of Rules of Civil Procedure lists that which can be examined
           o Reason behind non-payment or non-performance – difference between not
               wanting to pay and unable to pay. C may not wish to pursue enforcement if D has
               no money.
           o D‟s income and property.
           o Debts owed to and by D. C will want to redirect debts away from D to self
               (assignment) and will want to know if D is so encumbered that C will not likely
               recover much.
           o Disposal that D has made of any property – fraudulent conveyance.
           o D‟s present, past and future means to satisfy the order
           o When D intends to pay the order
           o Any matter pertinent to enforcement of the order
   - Superior Court – C can only examine D once a year, unless circumstances have changed
           o This right applies to every C attempting to collect on D
   - Court can order 3rd parties to be examined, if the court believes 3rd party has special
      knowledge regarding D‟s assets
   - Outside of the family courts, JD examination hit or miss

Seizure and Sale of Personal Property
    - Need to get a writ – Writ of Seizure and Sale
             o Writ of Execution – the enforcement of a monetary judgment
             o Difference in terminology is irrelevant
             o Chose in action – debts. At common law, this was not seizable under a writ.
    - At common law, the sheriff acting on behalf of C could obtain no better right to title or
        interest to the property than D held.
             o Co-ownership – D, and therefore sheriff, has partial, not full, interest in the asset
             o C needs to exercise due diligence re D‟s property (wrongful seizure is actionable)
    - At common law, writ applied to tangible goods. That law gradually changed in England
        in the late 19th century, so that there was an expansion of the law to cover book debts,
        which is reflected in s. 19(s) of the Execution Act.
             o Sheriff allowed to seize choses in action
    - C files the writ either physically or notionally in the sheriff‟s office
             o At common law, the goods were bound at the issuance of the writ – subject to
                 actual seizure by the sheriff
             o Court issues the writ, hands to C – however, as soon as issued, allowed sheriff to
                 seize goods. The problem was the nobody knew that the writ was issued, other
                 than the C. In the meantime, D might sell the property. However, sheriff could
                 seize the property – no Bona Fide Purchaser (BFP) exception. This was changed
                 in England so that the writ-bound-goods were not bound until recorded in the


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Debtor/Creditor                                                                              Fall, 2009


                 sheriff‟s book of writs. Still, BFPs were no better off – still ignorant as to the
                 issuance and filing of a writ. Legislature then enacted BFP exception.
             o Today, s.10.2 of the Execution Act provides BFPs, for value and without notice
                 of the writ filed with the sheriff, get the goods free and clear of the writ.
    -   The writ lasts for 6 yrs [small claims court is only 6 months]
             o No limitation period to enforce a court order, including a money judgment;
                 theoretically, could be renewed indefinitely
             o Practically, very short period of time that Cs actually care
    -   The writ binds property only in the region in which Cs file (not province-wide)
    -   S.10(1) of Execution Act provides that goods are bound from the time of delivery of the
        writ to the sheriff and recorded in the sheriff‟s books. The section also says that the writ
        must be filed with the intention of binding the property. The writ has to be received by
        the sheriff for execution [cannot go to the office and say, “don‟t do anything until I tell
        you”]
    -   Ministry of the Attorney General advised that sheriffs immediately record received writs
    -   In the small claims court, writs bind only upon seizure by the bailiff; writ does not act as
        an interim form of protection for Cs.
    -   Exigible property = that which is seizable

Seizure
    - Does not have to involve physical contact with the goods (i.e. walking seizure)
    - Courts are very strict about abandonment of seizure
    - The difference between binding and seizure are the rights afforded to the purchaser from
        D: after seizure, there is no BFP exception (Lloyds and Scottish Finance)
    - S. 10(2) – even though the writ binds the goods, if sold to BFP without value notice, BFP
        gets good and clear title
            o In order to get the advantage, there must be no notice of the writ, or property
                 seizure.

Lloyds and Scottish Finance v. Modern Cars and Caravans (1966) UK
Facts: the sheriff seized property and after the seizure debtor sold the property to a third party.

Issue: what title did the 3rd party receive upon the purchase of an encumbered asset?

Analysis:
   - The court looked at the equivalent of our s.10(2) of the Execution Act, which provides
       that no writ of execution against goods that might be seized prejudices the title of such
       goods purchased by a bona fide purchaser for value.
   - The court found that the proviso that protects a bona fide purchaser could have no effect
       after seizure because the legislation talks about the case under which goods for execution
       “might be seized”.
   - There is also the notion that the writ remains in the sheriff‟s hand unexecuted for the
       bona fide purchaser for value protection to arise.

Holding: for these reasons, the court held that after seizure there is no protection for the bona fide
purchaser. Consequently, the purchaser gets “good” title but not “clear” title, since title is
encumbered by the writ.


Continental Auto Inc. v. LeGassick (1980) NB



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Debtor/Creditor                                                                               Fall, 2009


It is long settled that a purchaser at as sheriff‟s sale under an execution stands in no better or
different position as to the property then the judgment debtor did.

Brittlebank v. Gray-Jones (1888) MB
After seizure, even a bona fide purchaser for value without notice that the goods are seized, may
have the goods seized from him by the sheriff. Thus, even an innocent purchaser from such
judgment debtors are not safe.

RBC v. Mohawk Moving & Storage (1985) Ontario
Facts: The sheriff seized a bank account, received a cheque from D‟s bank that was made out to
him, and then deposited the cheque into his own account.

Holding: The court held that the general rule is that until a completed execution sale, D retained
his property interest in the seized goods. But the court said in obiter that this was the property of
the sheriff held subject to a statutory obligation to pay the funds pursuant to the statute or
pursuant to an order.

Watson v. Murry & Co. (1955) UK
Facts: the sheriff held a sale in the judgment debtor‟s store and excluded the judgment debtor
from the property. When the sale was over the judgment debt was satisfied. The judgment
debtor sued the sheriff for excessive seizure, trespass to goods and land, and for the value of two
garments lost during the time of the sheriff‟s trespass.

Holding: The court found that while seizure of the entire stock was excessive, such an
arrangement causes no real damage to the debtor. However the sheriff was negligent in leaving
the plaintiff's goods unattended at times during the view and the judgment debtor was entitled to
recover the value of the missing goods. The sheriff had committed a trespass in taking exclusive
possession of the shop by locking it against the plaintiff and taking possession of the key. The
sheriff in the circumstances of the present case, committed trespass when he held a sale on the
judgment debtor‟s premises and was liable in damages for the consequential loss.

Re Bishop and Traders Finance Corp. (1966) ON CA
Facts: under a writ, the sheriff made two purported seizures of the judgment debtor‟s crops, but
relinquished possession to allow the crops to be sold by the Tobacco Growers' Marketing Board.
On each occasion he gave notice to the Board that he had seized the crops under execution and
requested that his name be put on any cheques representing the proceeds of sale of the crops.

Holding: CA held that with respect to the sheriff's execution, the seizure was ineffective.
Although the sheriff acquired a special property in the crops upon seizure, this was lost on
relinquishing possession to the Board.

R. v. Vroom (1975) Alta CA
The accused was charged with theft when he failed to produce chattels seized and left in trust
with him by the Sheriff. At the time of the seizure, the Sheriff did not see the goods nor was he
assured that the goods were in the house where he served the seizure papers; in fact, he
understood that some or all of the goods were in Holland. Accused claimed there was no lawful
seizure. He was acquitted and the Crown appealed. The appeal was dismissed because the Crown
failed to establish beyond reasonable doubt that the goods were on the accused's premises when
the purported seizure was made. It was not ascertained that any of the goods to be seized were on
the premises; in fact, the Sheriff was of the impression that they were not. The undertaking


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Debtor/Creditor                                                                             Fall, 2009


signed by the accused was not an admission that the goods were lawfully seized since no
evidence shows he read it. Further, the accused neither implied nor expressed that the goods were
on the premises. Also, the space in the undertaking where the goods were to be held, was left
blank, implying that the Sheriff did not know where the goods were.

-   The question whether goods have been seized involves three essential elements:
                 1. the intention of the sheriff to seize
                 2. communication of his intention
                 3. his presence in the vicinity of the goods – must close enough to lay hands on
                     the goods though he need not actually do so
-   While the goods must be on the premises, it appears that the sheriff need not actually see
    everything
-   With respect to walking possession agreements – if the agreement permits the sheriff to
    “retake possession” it will not constitute evidence of continuing possession, but instead it will
    be taken as evidence of abandonment. Thus the existence of a walking possession agreement
    is not conclusive of continuing possession.
    o A solution to this problem would be legislation that deemed that a valid seizure continued
        unless expressly abandoned

Lumsden v. Burnett (1898) UK
Stands for the proposition that the intention to seize need not be communicated to the debtor, or
an adult. Here the judgment debtor‟s 13-year-old daughter was told.

This would violate statute in BC and Alberta.

Pacific Finance Acceptance Co. v. Corbett
Facts: a sheriff‟s bailiff attended upon the judgment debtor‟s place of business and served her
with a notice of seizure. At that time the subject-matter of the seizure, the judgment debtor‟s car,
was undergoing repairs at a gas station. The sheriff‟s bailiff did not know where the car was and
was therefore unable to lay hands on it or exercise any control over it.

Holding: The court held that such service was ineffective to constitute valid seizure even though
the judgment debtor signed the bailee‟s undertaking. The improper service could not be cured
since the seizure itself was a condition precedent of any such undertaking.

Maple Leaf Lumber Co. v. Canada (1983) FCA
Facts: The judgment debtor gave a chattel mortgage on his assets to his wife, who then foreclosed
and sold the assets to a third party. With the knowledge of the third party the judgment debtor
continued in possession of the assets. The transfer of the assets was not registered as required.
The judgment debtor and the third party would not cooperate with the judgment creditor and the
judgment creditor instructed the sheriff to seize the assets since the judgment creditor determined
that the debtor was the owner of the assets. When the true ownership was discovered the assets
were released. The third party sued in trespass and conversion for unlawful seizure.

Holding: The court held that the seizure was illegal but it was the third party‟s fault in permitting
the judgment debtor to continue to appear to be the owner.


Kish Equipment Ltd. v. A.W. Logging Ltd. (1986) BC



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Debtor/Creditor                                                                          Fall, 2009


Facts: the judgment debtor‟s son transferred property into the name of the debtor to avoid an
action for specific performance in respect of that property.

Holding: The court held that the judgment creditor could not execute against the property since
the judgment debtor had no beneficial interest in it.

Re Lady Marquis (1985) NS
Facts: The judgment creditor seized a boat that had previously been sold by the judgment debtor
to a purchaser who failed to comply with the registration provisions of the Canada Shipping
Act.

Holding: The court held that the judgment creditor could not obtain priority over an innocent
purchaser where the judgment creditor had actual notice of that purchaser's interest.




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Debtor/Creditor                                                                              Fall, 2009


                    4. SEIZURE AND SALE OF PERSONAL PROPERTY

    -   For the most part, it is a C-oriented world, i.e. C-initiated process
    -   Can get a writ right after judgment, except where there is an appeal, or money judgment
        made for a future date
    -   Ordinarily, money judgment is made immediately. C can then get a writ of seizure and
        sale.
    -   The writ binds property, but is not issued against property; instead, is issued against the
        individual
    -   Walking possession – less secure for sheriff, C; can lead to the allegation that the seizure
        had been abandoned
            o If it appears that seizure has been abandoned and BFP has purchased something
                that was in „walking possession‟, court may sympathize with BFP
            o However, court sympathy is highly dependent on value of the property

THE USE OF FORCE
- There is no statute expressly regulating the methods that may be used by the sheriff to effect
  forcible seizure of exigible items in the possession of the judgment debtor
- The common law has filled the void to some extent though the principles are not clear
- Dwelling houses:
           o Sheriff must get court-order to use force (s.20(2))
                    Section 20(1) provides for the use of reasonable force
                    Section 20(2) provides for the judicially sanctioned use of force
           o The sheriff may not enter a house by force, though he may enter if the door is
               open or unlocked or otherwise unbarred
           o While the sheriff may enter through an open window or by opening further a
               partly opened window, he may not open a window that is shut even if unlocked
           o Once the sheriff is in the house he may break open the inner doors or rooms,
               cupboards and trunks
           o Rules apply only to dwelling houses – not to other buildings, even if occupied at
               the moment by the judgment debtor
           o The protection against forcible entry to seize goods extends only to the debtor-
               occupant and his goods – not to other person in the house or to the goods of
               person other than the judgment debtor
  - Non-dwelling – sheriff can use reasonable force
  - Sheriff cannot use force against the debtor
  - Sheriff can call upon a cop to help in the enforcement of a writ

Hudson v. Fletcher (1990) Sask.
Facts: The sheriff seized goods in a company store by breaking open the doors. The plaintiff
president of the company lived above the store. The plaintiff claimed that the seizure was illegal
because: (1) the goods seized had been assigned by the company to the plaintiff prior to the
issuing of the execution, and (2) the sheriff was liable for trespass on the grounds that the sheriff
had illegally forced entry by breaking open the outer door of a dwelling house.

Holding: The court rejected the first argument but accepted the second.




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Debtor/Creditor                                                                               Fall, 2009


Vaughn v. McKenzie (1969) UK
Facts: When the judgment debtor returned home two bailiffs were waiting for her. She was told
the reason for their visit but no warrant was shown or read to her. The judgment debtor went into
the house and immediately tried to shut the door but the bailiffs forced their way in.

Holding: The court held that the bailiffs had no right to force their way into the judgment debtor‟s
house for the purpose of gaining entry to enforce their warrant of execution.

BOOK DEBTS AND OTHER CHOSES IN ACTION
Copyright
   - Copyright, book debt = choses in action because not tangible
   - At common law, C could not seize the right of the debtor in copyright
   - Didn‟t become an issue until 1990 – Planet Earth Productions

Planet Earth Production v. Rowlands (1990) Ont.
Facts: The defendant was a professional photographer who photographed rock musicians. In
order to enforce the judgment against the defendant, the Sheriff seized the defendant's collection
of photographic negatives. The defendant claimed that the copyright in the negatives and the
negatives belonged to the record companies that had hired him to take the photographs.

Holding: The court held that the negatives and the copyright claimed by the record companies
were owned by the record companies. All remaining negatives and their copyright were owned
by the defendant. The court held that copyright was exigible under section 19(2) of the Execution
Act.

Ratio: The copyright interest alone is not collectable, but the right to royalties is a collectable
interest.

Section 17 Seizure of Patents
    - Wanting to seize trademarks, industrial concern – argue Planet Earth is analogous
    - Can include non-assignability clause in contract
            o If there is an assignment by the debtor, amounts to breach of contract
            o However, if it means that K will be terminated and D will retain no right, then
                sheriff should not seize = wrongful seizure
    - Sheriff gets the same right/title/interest, but no better, as the debtor

Section 19.2 Book Debts and Other Choses in Action
    - Sheriff may seize any book debts and other choses in action and sue in his own name for
        recovery of the money payable
    - Cannot physically seize a chose in action

Sheriff of Waterloo v. Mutual Life Assurance (1967) Ontario
Facts: the sheriff served on the insurer a notice of seizure purporting to seize all moneys due or
accruing due to the debtor from the insurer. The insurer ignored the notice of seizure and the
issue came before the court.

Holding: The court held that it was necessary to physically seize the documents representing the
debt obligation and that such seizure was permissible only if the documents were in the debtor‟s
possession.




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Debtor/Creditor                                                                           Fall, 2009


Attorney General for Ontario v. RBC (1971) ON CA
Issue: whether moneys on deposit to the credit of a customer in his bank account were subject to
seizure pursuant to a writ of execution.

Holding: Moneys on deposit to the credit of a customer could be seized in execution pursuant to
the Ontario Execution Act. The moneys were a debt owed by the bank to its customer and came
within the scope of the phrase "goods and chattels" as it appeared in the writ of fieri facias.

Mixed Funds
Westcoast Commodities v. Chen (1986) ON
Facts: This was a motion by a judgment creditor for an order directing that the sheriff was entitled
to seize certain funds held in a joint bank account in which the defendant was a co-holder.

Holding: The motion was dismissed because the weight of authority held that moneys in a joint
bank account could not be garnished.

Moneys Held in a Trust
Re Toronto Dominion Bank v. Cooper (1998) ON
Where a client is a judgment debtor, moneys held in his or her lawyer‟s trust account as a true
retainer for legal services are not subject to garnishment under Rule 60.08(1). The purpose of the
retainer is to secure the services of a lawyer on an on-going basis and service of the notice of
garnishment does not change the relationship from solicitor-client to debtor-creditor even with
respect to the unearned part of the retainer. So long as the moneys can be views as a true retainer
they do not belong to the client and are therefore not subject to execution.

Shares in a company
   - At common law, not seizable (Malouf v. Labad)
   - Prior to 2005/6 – Execution Act dealt with seizure of shares in a very convoluted way
   - Securities Transfers Act – modernized securities; uncomplicated the law of seizure and
        sales of shares to a huge degree
   - Certificated and uncertificated shares – sheriff must serve notice of seizure on the issuer
        of the share; binding effect whereby the share issuer can no longer deal with the investor




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Debtor/Creditor                                                                          Fall, 2009


                   5. SEIZURE AND SALE OF DEBTOR’S PROPERTY

Co-Ownership
   - Sheriff sells only D‟s interest
   - D‟s interest in the car is D‟s equity
   - SP wants to make sure it is fully protected
          o If secured interest registered, and perfected first, SP has priority over subsequent
               execution C
          o Sheriff can only seize and sell what D has; can only provide to C with collateral
               that D has right in
   - In most security agreements, SP not only wants priority, but also wants to make sure that
      no one sells the asset out from under it (do not want purchaser to step in D‟s shoes,
      despite D not having defaulted = assignment)
          o Virtually any well-drawn SA will provide clause that terminates upon assignment
               of D‟s interest, making D‟s outstanding debt immediately payable.
   - Re assignment: If D could sell interest, sheriff could seize and sell > Sheriff has right to
      step into D‟s shoes.
          o However, this may not always be determinative.
   - Where D‟s interest can‟t be assigned, D‟s interest may be collected under [s.19(2), via
      notice of seizure]
          o S.19(2) encompasses the right of the sheriff to step into D‟s shoes and collect
               debts owing to D.
          o Options: (i) collect and sue (due to statutorily reneged assignability), (ii) or seize
               and sell.
   - Courts have given 19(2) a very broad interpretation

Exemptions from Seizure
   - Not everything is saleable and seizeable
   - S.2 of Execution Act provides for list of exemptions.
   - Six categories – i.e. cars, household goods, etc.; selective types of personal property, and
       prescribe monetary limits
   - Idea is to ensure D is not deprived of the necessities of life – sufficient property to carry
       on his life, business.

The Value of Exempt Chattels
   - S.3 allows the sheriff to seize and sell property in excess of the value. Must know what
       D‟s equity is in the property. The value of D‟s equity and the nature of the other party‟s
       interest must be factored in.
   - S.4 – “the sum to which D is entitled under s.3, is exempt from a taxment or seizure at the
       instance of a C.”
             o What does entitled mean? Legislature left everyone confused.
   - So, sheriffs have been instructed to seize the money, even though s.4 says Cs can‟t get at
       it if D is entitled to it.
   - Suggestion from Ontario Law Reform Commission: where D gets money from the sale of
       an exempt chattel, D should be required to keep the money for x period of time. If, at that
       point in time, D has not bought another chattel subject to exemption, lose proceeds. In
       other words, LRC tried to deal with prejudice to Cs and give Ds the chance to purchase
       another exempt chattel. Cannot immunize monies forever, and thus must use proceeds to
       purchase another exempt asset.




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Debtor/Creditor                                                                              Fall, 2009


    -   If asset exempt, C who sold asset can access the property – exemption doesn‟t apply to
        the seller who sold the particular piece of property, upon which D has defaulted in
        payment.
    -   In effect, legislature providing C with SI/encumbrance over good. Access to an otherwise
        exempt chattel.

Re Ottaway (1980) BC CA
Facts: The appellant had made an assignment in bankruptcy and the trustee had applied for an
order to empower him to sell a vehicle valued at $4,100 with respect to which the appellant owed
$3,435 to a finance company under a conditional sale agreement. The bankrupt claimed that the
motor vehicle fell within the exemption in subsection 25(1) of the BC Execution Act and thus
was not the property of the bankrupt.

Issue: whether an automobile being purchased pursuant to a conditional sales agreement fell
within the term "the goods and chattels of any debtor" in subsection 25(1) of the BC Execution
Act.

Holding: The Court of Appeal held that the purpose of s.25 of the BC Execution Act was to
permit a debtor to retain some essentials. There was no reason consistent with this purpose to
differentiate between goods in which the debtor had title and goods which the debtor was buying
pursuant to a conditional sale agreement. If a debtor was to be entitled to retain goods to a certain
value, it was the goods and the value, not the type of interest held, that was significant. The
automobile purchased by the bankrupt in this case fell within the description of "goods and
chattels" as the words were used in s.25 and it followed that the vehicle could be excluded from
the property of the bankrupt.

BUSINESS EXEMPTION, S.2(3)
  - Deals with tools/chattels ordinarily used by D in his business – ordinarily used has a
     wider meaning than „necessary‟
  - Langdon – not modern case, but illustrates difference between terms
  - Courts have taken a very restrictive meaning of ordinary used; sounds very much like
     necessary in some cases (not intended by legislature)
  - i.e. a traveling sales person who uses a car, and only a car. The courts have held that this
     is not good enough for the exemption; good pretty much has to be necessary for D‟s
     business

Langdon v. Traders Finance Corp. (1966) ON CA
Holding: the court held that to bring himself within the exemptions provided by the Ontario
Execution Act a person claiming exemption must show not only that the tool is such a
convenience that his activities in his business, profession or calling would be restricted by its loss,
but that it is "necessary" in the sense of being something the absence of which would destroy the
physical capacity or ability of the man to perform some essential function or qualification of his
engagement in his calling. It is a question of fact in each case. With respect to the facts of this
case where it is not shown that a salesman's employment is conditional upon his operating his
own motor vehicle or carrying samples, used by him in the course of attempting to make sales, a
claim by him that it is exempt from seizure under the Ontario Execution Act as a tool "necessary
to and actually used in his profession, business or calling" is not made out




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Debtor/Creditor                                                                             Fall, 2009


Goldsmith v. Harris (1928) MB CA
With respect to the business use of an automobile, the exemption was denied to the manager of a
telephone company because the use of the car carrying out his duties as such manager was not
necessary to his occupation.

McLeod v. Girvin Central Telephone (1926) Sask.
With respect to the business use of an automobile, the exemption was defined for a telephone
repairman because the court doubted whether a car was a tool or implement within the meaning
of the exemption and because the judgment debtor was not currently working for a telephone
company.

Burns v. Christianson (1921) Alta.
With respect to the business use of an automobile, the exemption was defined for a chauffeur
because the words “tools and necessary implements” do not include a car.

T & M Hotels Ltd. v. Caramignoli (1982) Alta.
Where the judgment debtor is an employee, nothing less than an automobile being required as a
condition of employment will suffice. The judgment debtor must show that: (1) as condition of
his employment he is required to have an automobile and (2) as a condition of his employment he
is required to use the automobile in carrying out his duties.

RBC v. Smith (1982) Alta.
The court held that the mere use of a car to drive to work – without more – is not sufficient to
exempt the car from execution.

Armstrong v. Terry (1967) Ont.
The Court held that the automobile of a real estate agent who was required as a condition of
employment to have his own car was exempt.

Canada v. Smith (1983) Sask.
A sign salesman was required to provide his own car. Frequently he used a car owned by his
wife‟s corporation but when he did so he had to leave his own car for her to use. The court held
that his car was exempt as there was no reasonable alternative means of carrying out his
employment. This is much different than the rationale emphasizing the mandatory requirement
for a car as a condition of employment.

Re Seizures Act (1966) Alta
The court held that because of the very nature and structure of the corporate entity a corporation
cannot have a “trade or calling” in the context contemplated by the statute. But a corporation may
conduct a business employing individuals who possess a trade or calling.

   The Ontario Execution Act includes judgment debtor engaged in “business” as well as
    professions and callings so this problem does not arise
   The Ontario Execution Act was amended in 1967 to replace the words “necessary to and
    actually used” with “ordinarily used”

Wright v. Hollingshead Ont. CA
In order to gain the benefit of the exemption granted for tools and instruments used by the
judgment debtor in his business the debtor must still be active in the business prior to seizure or
he losses the exemption.


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Debtor/Creditor                                                                             Fall, 2009




Barkley v. Choma (1985) Alta.
Tudgment debtor was unemployed at the date of seizure but required his car for his employment
at the date of the court hearing for the order for removal and sale. The court held that the time for
determining exemption status was the time of seizure – since seizure of exempt property was void
ab initio (from the beginning).

Re Kreutzweiser (1967) ON CA
Facts: The debtor operated a pool hall.

Issue: whether pool and snooker tables, benches, cue racks, ball racks, score boards and display
cases were exempt from seizure pursuant to section 2 of the Ontario Execution Act.

Holding: The court held that the chattels were necessary if by their use they permitted a debtor in
a service trade to carry on his trade conveniently and in the usual manner. Pool and snooker tables
were necessary for carrying on of a pool hall business. Having regard to the evident purpose of
the exemption provisions of The Execution Act and to the wide range of debtors included therein,
there was no reason to limit the classes of exempt chattels to those that a debtor used personally;
no such restriction could be read into section 2 of the Ontario Execution Act.

Re Statham (1939) Ontario
The court held that a safe, filing cabinet, adding machine and other office equipment of a debtor
engaged in the retail clothing business were stock-in-trade falling outside of the exemption in
respect of “tools, implements, or chattels” used in his occupation. But the court held that his
sewing machine, pressing iron, and large scissors were the type of “tools and implements”
intended to be exempted.

Endrizzi v. Peto (1917) BC
The court held that a safe, cash register and counter used by a butcher in his business were stock-
in-trade outside the scope of the exemption.

S.7(2) DEBT FOR MAINTENANCE
    - The exemptions described in this Act do not apply to exempt any chattel from seizure to
        satisfy a debt for maintenance, except tools of the trade
    - Whereas all Cs share in the proceeds from the sale of non-exempt property, maintenance
        Cs can go after D‟s exempt property, except tools of the trade (additional right of
        maintenance/support C)

S.7(2) CHATTELS PURCHASED TO DEFEAT CS (EXCEPTION TO THE EXEMPTION)
    - Exemptions do not apply when chattels are purchased with the purpose of defeating the
        claims of Cs
    - This must be proven – at which point, Cs can go after D
    - No one ever uses this – virtually impossible
    - Also, chattel exemptions are worth so little, not worth it
    - S. 6 – where D dies, the Execution Act gives the family the right to select exempt
        chattels. This is the only case where there is a pure right of selection. From the stable of
        select exempt chattel, survivors can pick what they‟d like.
            o While alive, D can only select that which is exempt via s.2
    - Are these exemptions a right, or a privilege?
            o Privilege – if D does not take advantage of option, loses it.



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Debtor/Creditor                                                                               Fall, 2009


             o    Entirely up to D to claim/invoke exemptions, up to sheriff sale.
             o    Certain jurisdictions prohibit D from waiving exemption (i.e. MB).
             o    Court have held that Ds can voluntarily sell their exempt chattel; can voluntarily
                  waive their rights

Roy v. Fortin (1915) BC CA
The right to claim an exemption as against an assignee for creditors must be claimed at the time
of the delivery of possession to the assignee or within a reasonable time thereafter, else it will be
presumed to have been waived.

   Section 6 of the Ontario Execution Act gives the judgment debtor the right to select exempt
    goods where the value of the goods of an exempt class is more than the amount allowed by
    statute

Cloutier v. Georgeson (1900) MB CA
Where the judgment debtor refuses or neglects to make a selection the sheriff may do so for him
and seize the balance.

LIFE INSURANCE POLICIES
   - Whole life policy – has a cash surrender value. D has a right to surrender the policy, and
       get cash value.
   - Cs want at the value of the policy
   - S.19(1), (2) has made D‟s interest seizable under the write of seizure and sale
   - Two questions to ask regarding choses-in-action:
           o (i) is it assignable by D, and
           o (ii) is the money collectable by the sheriff?
   - At CL, assignable/transferable. However, Insurance Act prohibits the insured from
       assigning where there is a irrevocably designated beneficiary (cannot be changed without
       beneficiary‟s consent). Nor can insured assign where the beneficiary is a specified
       beneficiary (spouse, child, grandchild, parent). Otherwise, D can assign. Assignee steps
       into D‟s shoes, but D is still the insured party. Sheriff can sell the interest to the 3rd party.
       Very rare.
   - Rather, sheriff wants to stand in D‟s shoes and collect the money owing via surrendering
       the policy and getting the cash surrender value, which is then distributed among Cs.
   - Under Insurance Act, instances where the money is protected from seizure and sale:
           o Where beneficiary is designated irrevocably.
           o Where beneficiary is a specified beneficiary of spouse, child, grandchild, parent.
                Whether irrevocable or not, the interest of the insured is protected.
   - The beneficiary cannot assign the interest. Money is accessible by Cs once it has been
       paid.
   - Beneficiary‟s interest is contingent upon insured dying first.
   - If beneficiary is the debtor, there is no reason why upon insured‟s death, Cs cannot
       demand money goes to them – not allowed at CL.

Weekes v. Frawley
The court held that a life insurance policy on the life of the judgment debtor on which premiums
remained to be paid were not exigible as security for money within the meaning of the equivalent
to what is now subsection 19(1) of the Ontario Execution Act.




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Debtor/Creditor                                                                              Fall, 2009


Canadian Mutual Loan and Investment v. Nisbet
The court permitted the seizure of a paid up policy as security for money.

   Under subsection 19(2) of the Ontario Execution Act a sheriff may seize a chose in action
    and under subsection 19(3) may sell it
   Or the sheriff can act under the comprehensive provisions of Section 18

Re A.G. (Ontario) v. RBC
The sheriff does not sell the chose in action but instead the bank is required to pay the amount
seized directly to the sheriff for the benefit of creditors

   The principle respecting the exigibility of an insured‟s interest in a life insurance policy is not
    different where a beneficiary designation is in effect at the time of seizure
   But subsection 173(2) of the Insurance Act provides that where there is a designation in
    favour of a spouse, child, grandchild, or parent of the life insured the rights and interests of
    the insured in the insurance money and in the contract are exempt from seizure
   The beneficiary‟s interest is likely not exigible because only the insured can determine who is
    to be beneficiary therefore the beneficiary‟s interest is non-assignable

Re Whalley v. Harris Steel (1994) Ontario
Judgment debtor had purchased five annuity policies naming his wife the beneficiary for all of
them. Presumably the designations were revocable. The judgment debtor – rather than the
beneficiary – was in receipt of money payable under the policies. The issue was whether such
income was exempt from execution or seizure (in this case garnishment). The court held that the
income was exempt because the legislative intent was not just to protect the position of the
beneficiary; and the exemption was not limited to situations where the income stream actually
flowed to the beneficiary. Section 196(2) did not state the money payable on an annuity was
exempt only if payable to the designated beneficiary. It was the insured's, not the beneficiary's
interest that was made exempt.

RRSPs (chose in action)
   - Contract between debtor, and a trustee, which provides for a retirement income
   - May be locked in for a particular certain of time, may be able to terminate at any time,
       etc.
   - RRSP has income producing assets – forms the inner core of the RRSP, which generates
       income, and is protected from tax.
   - Interest is not assignable.
   - However, interest is collectable. Courts determined that there is no policy reason to
       refuse Cs access to the money.
   - Sheriff can step into D‟s shoes and collect. However, if D cannot do certain things, the
       sheriff (not entitled to any better right), sheriff cannot do those things.
   - Once the sheriff terminates the plan, sheriff is left with an income-producing asset.
   - Realarock – Facts: the asset was an annuity contract (life insurance K), and designation
       in favor of D‟s spouse. Issue: whether the RRSP was exempt from execution. Held:
       RRSP exempt from execution.
            o Whether the enforcing officer could terminate the RRSP and get at the income
                producing asset?
            o In this case, the asset was a life insurance policy where the spouse was the
                beneficiary.




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Debtor/Creditor                                                                             Fall, 2009


            o     Sheriff couldn‟t get at life insurance policy, not because RRSP was exempt, but
                  rather because life insurance was exempt because its designated beneficiary was
                  a spouse.

Vancouver A & W Drive-Ins v. United Food Services (1981) BC
This was an application for determination whether a Registered Retirement Savings Plan (RRSP)
of which a judgment debtor was beneficiary was exigible by way of garnishing order against the
trustee of the Plan, by way of a writ of seizure and sale or by other process pursuant to judgment
recovered against the beneficiary. The court held that a receiver of the interest of the annuitant in
the RRSP was appointed and an order for the sale by the receiver of the part of the RRSP that did
not consist of money was made. But garnishment was not possible because in the context of the
RRSP there was a trust relationship and accordingly there was no debt owed by the trustee to the
annuitant. In short, the RRSP was clearly property as defined in the Bankruptcy Act and was
subject to execution process.

Re Larocque (1982) Ontario
With respect to an RRSP there was a designation of a beneficiary as a spouse, child, grandchild,
or parent by which subsection 173(2) of the Bankruptcy Act became applicable. Thus the RRSP
contract and the interests of the insured in the insurance money were not property of the bankrupt
divisible amongst his creditors.

 the Insurance Act is Ontario legislation

   The decision in Re Larocque stands for the proposition that – where the assets of the RRSP
    are exempt from seizure – the RRSP does not form property that is available to satisfy the
    debts of the bankrupt‟s creditors
   Thus such an RRSP cannot be seized by a sheriff under a writ of execution
   However these cases leave little doubt that an RRSP is seizable subject to the exemption
    provision in the Ontario Execution Act and the Ontario Insurance Act
   The sheriff – standing in the shoes of the judgment debtor – would have the power (just as the
    judgment debtor has) to terminate or collapse the plan by virtue of subsection 19(3) of the
    Ontario Execution Act
   As a matter of practice the sheriff‟s duties appear to go beyond the collection of debts due
    and payable at the time of seizure

Robson v. Robson (1995) BC
The court made an order that a receiver be appointed to sell the defendant's RRSPs. The
defendant was not a person whose life was insured under the contract between him and the
insurance company. There was no payment to be made by the insurer contingent upon the death
of the defendant. Upon his death his spouse had the option to have the value of the RRSP given
to her or to continue the policy to its Retirement Date. The funds could be used to purchase an
annuity before the defendant's death but the RRSP as it stood was not a contract of life insurance.
The obligation of the insurance company was not triggered by the death of the defendant.

Morgan Trust Co. v. Dellelce (1985) Ontario
In respect of the exigibility of RRSP proceeds where the judgment debtor‟s spouse was
designated as beneficiary, the court held that as a matter of principle such proceeds could be
reached by means of a writ of execution. With respect to the spouse as beneficiary, since the plan
did not provide for a “firm undertaking” by the trust company to provide for an annuity the court




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Debtor/Creditor                                                                          Fall, 2009


distinguished Re Larocque in holding that the RRSP did not contain an “insurance element”
within the provisions of the Insurance Act.

Re Rice (1985) Ontario
Moneys in the RRSP were exempt where the source of these funds was an exempt pension.

Re Pawlowski (1985) Ontario
The court treated the annuity as a pension plan (exempt) because it would be totally disruptive of
the purposes of the legislation to limit it so as to exclude the accumulated pension fund and
protect only funds payable at maturity. Thus not only could the trustee not seize any payments
made to the policy holder but such protections should be afforded to the beneficiary as well.

Rules of Civil Procedure, r. 60: Procedural Matters Re Seizure and Sale
   - Provides D with inventory of seized property, notice of sale
   - Sales are by auction (“goods are on hand by want of buyers” – interpreted to mean first
        sale must be by auction)
             o Where there is no reasonable price, sheriff can abort auction, sell by other means
             o Other courts have held that any price offered at auction is an appropriate price
   - Rules are silent re time of sale. Caselaw says sheriff cannot hoard property; must sell as
        soon as reasonably possible.
             o Usually sales happen quickly.
   - Failure of sheriff to give notice does not invalidate sale
   - Sale usually occurs off D‟s property, however sometimes on.
   - Upon wrongful seizure, Cs and C‟s solicitors may leave themselves open to action by 3rd
        party
   - In order to get the sheriff to seize, must file a direction to enforce.
   - Cs are obligated to tell sheriff whether they‟ve received private payments in respect to the
        execution of debt (purpose is prevent excessive seizure: over and above that owing by D).
   - Cannot seize more than mandated by the writ
   - Where D‟s only seizable property is worth more than the execution debt, old caselaw
        suggests it is not actionable on the part of D: unfair to allow that property to be
        immunized from Cs. D would then get any surplus from sale.
   - S. 8(2) of the Execution Act allows for sheriff to matter to apply to the court for direction
        re s.2-6 (exemptions)
   - Under the RCP, the sheriff or any interested person can apply to the court for direction re
        questions of execution matters
   - Sheriff must use due diligence, is responsible for the safeguarding of the property,
        however is not a guarantor




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Debtor/Creditor                                                                          Fall, 2009


                                      6. GARNISHMENT

Garnishment: enforcement remedy amounts to an interception of payments owed to the judgment
debtor

The Need for Garnishment (i.e. why is the writ of seizure and sale not enough?)
   - Previous writ could only reach that which was recognized by the common law. Equitable
       property interests were not recognized at common law, thus a writ of seizure and sale
       could not be used to get at the judgment debtor.
   - Rationale: Debts owed to the debtor were an important asset, and therefore something
       that should not be immune from enforcement by a judgment C.
   - 1850s the English Law Committee recommended this remedy, and after its adoption in
       England, garnishment was adopted in Upper Canada.
            o Remained unchanged until the Reform of Civil Procedure in 1985
   - Up until the 1985 changes, garnishment was an underused remedy; enforced
       recommendations have made a significant difference.

The 1985 Revolution of Garnishment
   - Major changes addressed each of the deficiencies of the existing remedy up until this
       time (r. 60.08 - Garnishment)
   - Addressed limited scope of the remedy – garnishment can now be used to reach present,
       future and conditional debts (major expansion of remedy)
   - No longer a one-shot remedy – once notice of garnishment obtained, it remains in force
       for at minimum 6 years
   - These changes have led to a significant increase in garnishment usage

How Does Garnishment Work
   - C must apply for remedy
           o If the garnishee fails to respond, JC can obtain judgment against the garnishee.
           o If in conflict, garnishee required to file a dispute.
           o JD can dispute the notice of garnishment
   - R.60.08(7) – C must give notice to the garnishee that he has obtained a notice directing
      the monies to the sheriff
   - Effective, because once the notice is served on the garnishee, it binds the garnishee to pay
      the sheriff. Also, the provision mandates that if the garnishee fails to do so, the garnishee
      will still be liable for that amount to the judgment C
   - R.60.08(19) – if the garnishee pays in response to the notice of garnishment, any amount
      that was so paid will be considered to be a discharge of the garnishee‟s responsibility
   - Under Rule 60.08(1) A creditor under an order for the payment or recovery of money
      may enforce it by garnishment of debts payable to the debtor by other persons
   - Rule 60.08(11) provides that the garnishee is liable to pay to the sheriff any debt of the
      garnishee to the debtor, up to the amount shown in the notice of garnishment or
      supplementary notice of garnishment, less $10 for the cost of making each payment,
      within ten days after service on the garnishee or ten days after the debt becomes payable,
      whichever is later
   - Rule 60.08(13) provides that for the purposes of sub-rule (11), a debt of the garnishee to
      the debtor does not include:
           o If the garnishee is a bank, loan or trust corporation, credit union, caisse populaire
                or the Province of Ontario Savings Office, money in an account opened after the
                notice of garnishment is served;



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Debtor/Creditor                                                                              Fall, 2009


            o     If the garnishee is an employer, a debt arising out of employment that
                  commences after the notice is served; or
            o     If the garnishee is an insurer, a debt payable under an insurance policy that is
                  entered into after the notice is served

Central Trust Co. v. Merrithew (1982) NB
Facts: claim by C resulting in judgment in favor of JC. JC obtained a notice of garnishment,
which it served on JD.

Ratio: NOG is only active from the time it is SERVED upon the garnishee.

SPECIAL DEBTS
Crown Debts
   - Owed by the Crown (potential garnishee) to the JD
   - At common law, court orders did not bind the Crown and so service of a NOG was of no
      force or effect
   - That immunity has been abrogated to a lesser extent; immunity removed in ON by virtue
      of s.21 of the Proceedings Against the Crown Act
           o Allows garnishment of certain kinds of Crown debts, and their debts in respect of
               goods/services provided by the JD
           o Enough to capture wages, supply of goods, supply of services (fairly broad
               phrase)
   - Garnishment, Attachment and Pension Diversion Act – covers garnishment in respect of
      remuneration owed to the JD.
           o What is meant by „remuneration‟ – simply limited to wages, or does it extend to
               remuneration for services provided and does it include debts owed by service
               provided to the feds?
           o Best view of the legislation – not as broad as the provincial legislation, however
               does cover wages and probably services.

Re Bank of Montreal and Pafford (1984) NB
Facts: The plaintiff sought to garnish the salary of the defendant payable by the federal
government. Under the Garnishment, Attachment and Pension Diversion Act, salaries of federal
employees may be garnished. Section 5 of the Act stated that the Crown was bound by provincial
garnishment law. Section 17 provided that provincial garnishment law was overridden to the
extent of any inconsistency. Under provincial law in New Brunswick the wages of all individuals
were exempt.

Holding: The court held that wages and salaries of federal employees in New Brunswick were not
subject to garnishment because the inconsistency referred to in section 17 referred to procedural
matters only.

Proceedings Against the Crown Act
    - Subsection 21(1) provides that subject to subsections (2) and (3), no execution or
       attachment or process in the nature thereof shall be issued out of any court against the
       Crown.
    - Subsection 21(2) provides that a garnishment that is otherwise lawful may issue against
       the Crown for the payment of money owing or accruing as remuneration payable by the
       Crown for goods or services, subject to section 7 of the Wages Act.




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Debtor/Creditor                                                                           Fall, 2009


    -   Subsection 21(3) provides that a garnishment may issue against the Crown for an amount
        owing or accruing under an order for support or maintenance, subject to section 7 of the
        Wages Act.
    -   Subsection 21(4) provides that a garnishment is effective against the Crown only in
        respect of amounts payable on behalf of the administrative unit served with notice of
        garnishment to the person named in the notice of garnishment.

Garnishment, Attachment and Pension Diversion Act
   - An Act to provide for the garnishment or attachment of Her Majesty in right of Canada
       and for the diversion of pension benefits payable by Her Majesty in right of Canada
       under certain enactments.

Joint Debts
    - Where the garnishee owes JD, but instead of owing to the JD alone, garnishee owes
        money to the JD and another person
    - Joint bank account – bank is a joint debtor; bank is fully discharged of its obligation after
        paying one member of the joint account
    - Previously, where judgment was only against one member of a joint account, could not
        garnish the account.
            o Empire Fertilizers – case in 1920 held that a joint debt was judgment to
                garnishment, even if judgment was only against one of the account holders.
            o Remained unchallenged until the West Coast Commodities, which held that a
                joint debt was not subject to garnishment if only against one member.
    - The rules committee changed the law back to where it was: R.60.08-1.1 – joint debts are
        now garnishable, as in the case of any NOG
            o Either individual can dispute NOG
            o JC presumed to be able to get 50% of that joint debt, however can apply to the
                courts to get more than 50%.
            o Co-owner can apply to the courts to limit the amount of garnishment to less than
                50%
            o If money is co-mingled, difficult to determine monies belonging to JD and co-
                owner
            o However, if you know that the joint account is being used to avoid payment, may
                be able to prove that more should be garnished

                          EXEMPTIONS FROM GARNISHMENT

Wages Act Exemption
  - Wages Act exemption provides that where you are attempting to garnish one‟s wages, JC
      can get maximum 20% (80% is exempt)
          o Definition of wages: wages or salary paid in respect to employment, job, time or
              otherwise
          o If the monies are not defined as a wage, open to 100% garnishment
  - Position courts have adopted regarding doctors is equally applicable to most
      professionals being paid by a client
          o I.e. doctors who have a practice who submit their accounts to OHIP and are paid
              by such.
          o Courts have held that the relationship of a doctor and the service provided by a
              doctor is not considered to be a Contract of Service (wages), but a Contract for
              Services (non wages) and therefore the doctor/professional is not an employee,
              and does not receive wages.


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Debtor/Creditor                                                                           Fall, 2009


           o Thus, garnishment ordered can be up to 100%.
    -   Should the exemption be applied to gross wages or net wages?
           o S.7(1) – does not include an amount an employer is required by law to deduct
                from wages
           o In effect, the exemption is to be applied to the net, or take home amount, as
                opposed to the gross – employee walks away with more
           o Deductions required by statute: ITA, EI, CPP.
                     Union dues are to be deducted at source: is this a deduction to be made
                        by law? Enforced by statute.
                     How much is contributed to a Health Plan can be optional, however
                        workplaces may enforce payment, so is it by choice or by law?
                        Contractual.
                     Unclear area.
    -   The exception to the maximum wage deduction is the case of Support or Maintenance Cs,
        where JC is able to access 50% of D‟s wages
           o Support and Maintenance Cs are frequently given greater rights than other JCs
           o Back payments of over a million can be ordered paid

Di Benedetto v. Salunwhite (1993) NS
Facts: The judgment debtor-applicant applied for an order that the net wages of the judgment
debtor were insufficient to allow any money to be paid to the sheriff pursuant to a garnishee and
directing the sheriff to repay monies already collected. The sheriff deducted only those amounts
which were expressly required by legislation. The applicant contended a broader interpretation
was more appropriate as there were other mandatory deductions from his pay cheques which were
not considered by the sheriff.

Holding: The court allowed the application because "required by law" means more than required
by legislation and includes deductions made pursuant to other legal arrangements; for example,
certain types of compulsory deductions. The court recognized this and endeavoured to give effect
to the particular Rule's (Nova Scotia Rule 53.05(a)) purpose of ensuring families who owe debts
are left with subsistence level income.

Eddington v. Dorozvnski (1998) ON
Facts: This was a motion by Toronto Dominion Bank to determine what, if any, amount of
settlement monies it paid to one of the judgment debtors was subject to garnishment. This debtor
had been an employee of the Bank. He was fired, and money was offered to him as a settlement
in full satisfaction of any claim that he might have had against the Bank, including claims for
severance and pay in lieu of notice.

Holding: The court held that no part of the settlement money paid by the Bank was exempt from
garnishment by the creditors because the Bank believed that it had fired the judgment
debtor. Therefore the settlement money was not wages, but a payment to end the employment
relationship.

Baskind v. Lauzen (1998) ON
Facts: This was an application by the plaintiff to require the defendant-corporation to pay $4,000
per month in response to a notice of garnishment. Alternatively, the plaintiff sought to appoint a
receiver to collect monies due to the defendant-director (corporation considered to be an
extension of director) and to remit such funds to the plaintiff. The defendant-director did not owe
anything personally. The defendant-corporation claimed it did not have to honour the
garnishment notice. It did not owe defendant-director a salary or any other funds. It did not


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Debtor/Creditor                                                                                Fall, 2009


declare dividends and did not have the financial ability to do so. The defendant-corporation
admitted that it had paid the defendant-director $58,000. However it claimed that since these
funds were "wages" the plaintiff was only entitled to 20 per cent of that amount.

Holding: The court allowed the application in part and the defendant-corporation was required to
pay 20% of the wages until further court order. But the plaintiff was not entitled to appoint a
receiver since the plaintiff could not prove that it was practically very difficult to collect the fruits
of his judgment.

When does a debt arise?
  - Ex. Trust account where the debtor is able to remove monies at any time.
  - Ex. Trust where all the income earned by the trust over a year is to be paid out at a certain
      date.
  - Whether the relationship between a benefit and a trustee is a debtor/C relationship?
          o Most cases were decided prior to the amendment of the rules.
          o No. of cases which have said No – garnishment cannot be used to get at monies
               that might be owed.
  - Scenario 1: Employee has no choice about how to receive his/her wages.
  - Scenario 2: Employee can choose how to be paid, i.e. direct money into account, paid out
      in cash.
          o Case law that says that the money must be paid into an account, and the account
               can be used for no other purpose than paying the funds. Exemption continues
               until money withdrawn.
          o Other cases say once the money is in the account, no longer exempt.
          o Employer cannot take reprisal actions of any form, including termination,
               because employer is the subject of a NOG

Pensions Benefits Act Exemption
   - S.66.1 of the Pension Benefits Act provides that “money payable under a pension plan is
       exempt from execution, seizure or attachment.”
           o Important because we have a clear policy in favour of employers saving money
               after retirementnot on public purse
           o Very important to have the policy to protect the money which is put aside for
               retirement
   - S.66.2 provides that “money transferred from a pension fund to a prescribed retirement
       savings arrangement or for the purchase of a life annuity … is exempt from execution,
       seizure or attachment.”
           o If D takes money out of pension plan and transfers it to a prescribed retirement
               plan, the exemption will follow the money into the new plan (this is different to
               wages when put on another account)
   - S.66.3 provides that “money payable from a prescribed retirement savings
       arrangement or from a life annuity … is exempt from execution, seizure or
       attachment.”
   - S.66.4 provides that (with respect to support or maintenance) “despite subsection (1),
       payments under a pension or that result from a purchase or transfer … are subject to
       execution, seizure or attachment in satisfaction of an order for support enforceable in
       Ontario to a maximum of one-half the money payable.”
           o Special provision for support maintenance
           o 50% of money is exempt from garnishment, attachment, execution
   - S.66.6 provides that “the entitlement of a person, in his or her discretion, to
       withdraw money from a locked-in retirement account as defined in the


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Debtor/Creditor                                                                              Fall, 2009


        regulations shall not be considered when determining, for the purposes of any
        other Act, the income or assets available to the person.”

Miles Estate v. Miles (1997) Ontario
Facts: This was an application for the payment of pension proceeds of a deceased bankrupt. The
bankrupt and his wife made voluntary assignments in bankruptcy. The bankrupt subsequently
died intestate. His wife became the estate trustee. The estate was eligible to receive pension
benefits payable on account of excess contributions. The applicant trustee in bankruptcy
demanded the funds. The pension trust held that the pension funds were exempt from bankruptcy
proceedings. The trust paid the money to the wife as estate trustee. Certificates of discharge
were issued to the bankrupt and his wife. The trustee in bankruptcy argued that it had a prior
right to the pension funds. The trustee argued that the wife was personally liable as estate trustee
and sole beneficiary of the estate for any distribution of the money ahead of the creditors' claims.

Holding: The court disagreed and dismissed the application because the payment of pension
funds were protected from the bankruptcy proceedings. The trustee in bankruptcy did not have
jurisdiction to assert a claim to the money on behalf of creditors. This claim would have
undermined the protection given to pension funds from bankruptcy proceedings. The wife was
not liable to the estate for reimbursement of the funds.

Where A Self-Employed Individual Establishes an RRSP
  - Not exempted from garnishment
  - Only if the person files bankruptcy proceedings
  - While pensions are protected, no legislation to protect RRSP, RRIF

Re Bankruptcy
   - S.67(1)(b)(3) provides that when D files for bankruptcy, all property vests in the trustee
          o Bankruptcy Act incorporates all the exemptions which exist in province
          o Property in RRSP or RRIFF (except within 12 month) are exempt and are not
              part of bankruptcy estate
   - Ontario: Incentive for debtors to file for bankruptcy (not really good policy)

Insurance Act Exemption
    - S.191(1) provides that, with respect to life insurance,

                  an insured may in a contract, filed with the insurer at its head office in Canada
                  during the lifetime of the person whose life is insured, designate a beneficiary
                  irrevocably, and in that event the insured, while the beneficiary is living, may not
                  alter or revoke the designation without the consent of the beneficiary and the
                  insurance money is not subject to the control of the insured or of the insured's
                  creditors and does not form part of the insured's estate.

    -   S.191(2) provides that

                  where the insured purports to designate a beneficiary irrevocably in a
                  will or in a declaration that is not filed as provided in subsection (1), the
                  designation has the same effect as if the insured had not purported to
                  make it irrevocable.

    -   S.196(1) provides that, with respect to life insurance,



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Debtor/Creditor                                                                             Fall, 2009


                  where a beneficiary is designated, the insurance money, from the time of
                  the happening of the event upon which the insurance money becomes
                  payable, is not part of the estate of the insured and is not subject to the
                  claims of the creditors of the insured.

    -   S.196(2) provides that

                  while a designation in favour of a spouse, same-sex partner, child,
                  grandchild or parent of a person whose life is insured, or any of them, is
                  in effect, the rights and interests of the insured in the insurance money
                  and in the contract are exempt from execution or seizure

MNR V. Anthony (1995) NFL CA
Facts: The respondent was a dentist who had been practising dentistry for 34 years prior to his
assignment in bankruptcy. His major creditor was Revenue Canada for unpaid income taxes, the
vast proportion of which related to capital gains on realized real estate investments. At the date
of his declaration of bankruptcy, the respondent had approximately $265,000 in a RRSP. The
plan was maintained by the Canadian Dental Association with an insurance company under an
agreement, defined as a "variable annuity contract", by which the insurance company undertook
to pay individual annuities to members of the plan who elected to receive by that mode all or part
of their assets in it. The assets of the plan were all located in Ontario.

Holding: The Court of Appeal dismissed the appeal because the exemption in issue could apply
where the plan was situated in Ontario and the bankrupt was resident in Newfoundland. Also, the
contract governing the funds was either an annuity or an undertaking entered into by an insurer to
provide an annuity and, therefore the plan was exempt from execution or seizure under the
Newfoundland Insurance Act.

Whalley v. Hanis Steel Ltd. (1997) ON
Facts: The trial judge found that certain monies were life insurance monies and thus exempt from
execution. The appellant argued that the Insurance Act should be read to exempt only money
payable to the beneficiary and not to the annuitant and that the respondent was not a person
whose life was insured.

Holding: The Court of Appeal held that annuities were under the umbrella of life insurance and
Insurance money included annuity payments and the annuitant was thus a person whose life was
insured. But if the judgment debtor collapses the plan the exemption no longer applies.

Re Gruending (1990) Alta.
Application by the judgment debtor for the Court to give his common-law spouse the same
protection from bankruptcy creditors for certain investments that were given to legally married
women. The impugned legislation was struck down by the court as unconstitutional and the
Government of Alberta was given time to enact appropriate legislation.

The position of the crown as a C of the D applies to all of these exemptions (most common =
taxes)
    - General principle: the crown is not bound by legislation unless the crown is expressly
       stated to be bound
            o Not bound in Wages Act, Insurance Act
            o But bound by BIA, Pension Act



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Debtor/Creditor                                                                            Fall, 2009


    -   Pension Benefits Act provides statement that the crown is bound
           o Provincial statute
           o Constitutional principal in Canada – federal crown can not be bound by
                provincial legislation even though the it expressly states that the crown is bound
    -   BIA is a federal act
           o Parliament can bind provincial crowns
           o BIA incorporates exemptions are effective against federal and provincial crown


RESIDUAL METHODS OF ENFORCEMENT

Equitable Execution
   - Remedy only available to get property interest that could not be reached because of a
        legal impediment
   - C can have a receiver appointed to receive an equitable property; once it came in,
        distributed to the appropriate Cs
   - The possibility of equitable execution may be the most effective remedy available to Cs
        in specific cases
   - Bundle of cases have explored the limit of the remedy, and the ON CA has established
        that equitable execution cannot be used to override statutory exemptions

Mazzory Case
   - Para. 53 provides that equitable execution remedy is not proprietary
   - It operates as an injunction to prevent the judgement C from receiving the property in
      question
   - Can you have a receiver appointed in respect of future debts?
          o Why? No garnishment? England: no measures are taken to modernize
              garnishment

McCart v. McCart (1947) Ontario
Facts: case pre-dates the medical health insurance system. The respondent-wife recovered
judgment in 1936 dissolving her marriage with the appellant, and awarding a fixed amount as
maintenance. A receiver was appointed by way of equitable execution.

Holding: The court held that an order dismissing an application by a defendant to vary the amount
of alimony awarded in a divorce action is a final order appealable as of right and without leave.
But an order appointing a Receiver by way of equitable execution in a cause is interlocutory, and
an appeal therefrom lies only by leave under the Judicature Act. Pre-modernization garnishment
was very complicated.

Essentially, this case informs us that courts have created exceptions that allow courts to grant
remedy where special circumstances exist.

Gerry Finance Corp. v. Heizman (1939) MB CA
Facts: D ran a used-car lot. C could seize cars and sell. Situation was complicated, because all
cars were subject to a security.

Holding: Where it appeared that a forced sale under fi. fa. of an execution-debtor's goods would
not yield more than the amount of the encumbrances, a receiver by way of equitable execution
was appointed.



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Debtor/Creditor                                                                            Fall, 2009




Canadian Film Development v. Perlmutter (1986) ON
Facts: This was a motion for the appointment of an equitable receiver. The plaintiff judgment
creditor alleged that the individual defendant had structured his affairs by arranging payment for
his services to be made to the corporate defendant controlled by him and thereby hindered his
creditors. The plaintiff wanted a receiver to be appointed with power to investigate the
defendants' affairs and to collect any income payable to the individual defendant or to any other
person for his benefit.

Holding: The court allowed the motion because there was no prospect of recovery by the plaintiff
other than by the appointment of a receiver. The special circumstances of this case were sufficient
to entitle the plaintiff to the remedy sought by it. It was also just and convenient under section
114 of the Courts of Justice Act to appoint a receiver in this case. And of course, not subject to
statutory exemption.

Lavigne v. Robern (1986) Ontario
Facts: the judgment against the defendant was for breach of a fiduciary duty. The defendant made
himself "judgment proof" by conveying the matrimonial home to his wife and by taking a leave
of absence or resigning from his position with the federal government. The Public Service
Superannuation Act appeared to prevent access to pension benefits which were to be paid shortly.
The Garnishment, Attachment and Pension Diversion Act did not assist the creditor since he was
not seeking to enforce a support order.

Holding: The court appointed a receiver under equitable execution and rejected the proposition
that once a statute provided that certain personal property could not be assigned then the equitable
jurisdiction to appoint a receiver was taken away.

K.C.M. v. Young (1996) BC
Facts: A judgment creditor applied for the appointment of a receiver to receive the proceeds of
the pension to which the defendant was entitled. The applicant obtained a default judgment
against the defendant for damages for sexual assault.

Issue: whether the Court had jurisdiction to appoint a receiver as requested.

Holding: The court dismissed the application because the BC Pension Benefit Standards Act
prohibited the appointment of a receiver. The intention of the legislation seemed to have been
that a benefit should not be diverted either by the voluntary act of the pensioner or by the coercive
acts of his creditors. The appointment of a receiver was no longer a mode of equitable execution;
it was a statutory mode of execution. The appointment of a receiver was currently provided for
by BC Rule 42(5) and was a mode of execution and not a mode of equitable relief.

POST-JUDGEMENT ARREST
   o 150 years ago arrest was the remedy to deal with debt
   o Self-defeating remedy, as its pretty hard to pay debt when imprisoned
   o Large movement to get rid of debtor arrest
   o Section deals with contemptcannot arrest a person for the mere non-payment of a
      money judgement
   o Studies of US have established that:
         o Arrest is an extremely powerful remedy - if they have the money, Ds choose to
             pay rather than go to prison



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Debtor/Creditor                                                                            Fall, 2009


            o   In small communities, the effect is even more powerful, due to embarrassment
                factor
            o Less effective in large metropolitan areas
    o   Commissioners did not recommend it but to keep it in context of support and
        maintenance
            o Ds are still arrested in Ontario for the non-payment of maintenance
    o   Legislation tries to ensure that the only people who are arrested are the people who can
        pay (ability to pay) but who do not want to pay

Part IV of the Family Responsibility and Support Arrears Enforcement Act provides for
enforcement of support deduction orders
    - Subsection 49(1) provides that
                The Ontario Court (Provincial Division) or the Family Court may issue a warrant
                for a payor's arrest for the purpose of bringing him or her before the court if the
                court is satisfied that the payor is about to leave Ontario and that there are
                reasonable grounds for believing that the payor intends to evade his or her
                obligations under the support order.

    -   Section 31 provides that
            An agreement by the parties to a support order to vary enforcement of a support
            deduction order that is filed in the Director's office and any agreement or
            arrangement to avoid or prevent enforcement of a support deduction order that is
            filed in the Director's office are of no effect

    -   Section 32 provides that
                A support deduction order may be enforced despite any provision in any other
                Act protecting any payment owed by an income source to a payor from
                attachment or other process for the enforcement of a judgment debt.

   Post-judgment arrest is still available under family law legislation
   If the debtor is truly unable to pay – he will not go to jail
   But if D cannot prove that he is unable to pay and has refused to pay, then he is subject to
    arrest and imprisonment for up to 90 days
   The 90 days does not satisfy/extinguish the debt; debt remains once released from prison.




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Debtor/Creditor                                                                             Fall, 2009


                               7. EXECUTION AGAINST LAND

Land
   -    At common law, land was not bound by a writ, as land was regarded as far too important
        to make it subject to execution
    -   Notion that land was particularly important and not seized and sold in a writ under
        common law; there were a lot of restrictions re enforcement against land
    -   Only one restriction remains today: Under s.6.07 (17), (18) of the Rules of Civil
        Procedure mandates when sale can take place – cannot sell until l6 month have elapsed
        since judgement.
    -   First impulse of debtor is to mortgage the land to pay off the judgement debt: C gets title,
        which does not pass back to D (equity of redemption) until the payments are complete

Joint Tenancy Interest
    - Joint tenancy is a type of property ownership in which more than one person is entitled to
        enjoyment of the property
    - It is distinguished from a tenancy in common by – inter alia – the right of survivorship
    - When a joint tenant dies his interest in the property is extinguished and the interest of the
        surviving joint tenant is correspondingly enlarged
    - A joint tenancy may be destroyed by severance where the interest is converted into a
        tenancy in common
    - Severance may occur voluntarily or involuntarily
    - Section 9 of the Ontario Execution Act provides expressly for the exigibility of an
        interest in land held in joint tenancy
    - If the interest of a joint tenant is so seized and sold by the sheriff the joint tenancy will be
        converted into a tenancy in common between the sheriff‟s purchaser and the non-debtor
        joint tenant
    - But problems may arise with the right of survivorship incident to the joint tenancy
    - If the joint tenancy is severed by death before execution by the sheriff or perhaps before
        an advertisement for sale in the Ontario Gazette is published, then the survivor takes the
        estate by survivorship free of the execution against the deceased‟s interest.

Power v. Grace (1932) ON CA
The mere delivery of a writ of execution to the sheriff will not effect a severance of the joint
tenancy.

Re Young Estate (1968) BC CA
The registration of a judgment against one joint tenant under the BC Execution Act does not
effectively sever the joint tenancy.

Sirois v. Breton (1967) ON
A debtor cannot, by his own voluntary act, exempt his share of the joint tenancy from execution.
In this case the judgment debtor transferred his interest in the joint tenancy to his wife after the
writ was filed. The Ontario court affirmed that the mere filing of a writ of execution did not
constitute a severance.

R. v. Peters (1983) Sask.
This was an application under the Saskatchewan Execution Act by an execution creditor for leave
to sell the debtor's land which was held in joint tenancy. The court dismissed the application
because a person owning land under a joint tenancy in Saskatchewan was assured of the


                                                                                                    38
Debtor/Creditor                                                                              Fall, 2009


inseverability of his interest and the indestructibility of his right of survivorship without his
consent by the provisions of the Land Titles Act. It would be unjust to dispossess him of these
rights unless legislation provided a statutory foundation for the exercise of such a power.

   Since s.10 of the Ontario Execution Act provides that the delivery of the writ of execution
    binds the goods and lands of the judgment debtor, why should the surviving joint tenant take
    free of the claims of prior execution creditors?
   Why should the fortuitous death of one joint tenant exempt the survivor from the binding
    effect of the writ?
   Sales of join interests on execution fetch very low prices
   If a joint tenancy is involuntarily severed by enforcement proceedings only where – for
    example – a sale is advertised then an execution creditor whose debtor is a joint tenant is at
    risk of the judgment debtor dying for at least four months following the filing of the writ –
    Rule 60.07(17) – which provides that a creditor may not take any step to sell the land until
    four months after filing the writ (4 month waiting period)
   If severance is only effected upon completion of the sale the creditor is at risk for six months
    under Rule 60.07(17) (6 month waiting period)
   In all other cases land in which a judgment debtor has an interest at his death is available to
    his creditors after he dies
   If the non-debtor joint tenant dies while the creditor‟s writ subsists then the entire interest in
    land becomes vested in the debtor and subject to his creditor‟s claims

Contingent Interests
   - Section 29 of the Ontario Execution Act expressly permits execution against contingent
       interests in land

MORTGAGES OF LAND
  - Sections 23 to 26 of the Ontario Execution Act prescribe the procedure for seizing the
    interest of a mortgagee of land
  - At common law the interest of a mortgagee could not be seized under a writ of fi fa

McDonald v. RBC (1933) ON CA
Section 23 is not applicable where the judgment debtor no longer owns the mortgage at the time
of seizure. Therefore, where the judgment debtor assigns the mortgage prior to the issuance of
the writ, the mortgage cannot be seized notwithstanding the failure of the assignee to register the
assignment under the Registry Act.

Residence of Debtor
   - Neither the Ontario Execution Act nor the Rules provide for the debtor‟s residence as a
       separate class of property
   - But where the debtor lives in rental accommodation or in a mobile home the residence is
       classed as personalty (personal property/chattels) and may be sold almost immediately
       after seizure
   - Once the residence is sold by the sheriff – even if it is land – the whole of the debtor‟s
       interest may be lost
   - There are no exceptions of proceeds to permit the judgment debtor to seek alternative
       accommodation
   - There is a homestead exemption in western Canada

    -   Real issue has always been: if the non-title spouse is the debtor (no interest in
        matrimonial home), then what right does the C have?


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Debtor/Creditor                                                                               Fall, 2009




Marukus case
Until the court made his order, non-title spouse had no entitlement and Cs had no claim. Marukus
rule: only if the matrimonial property is separated and the non-title spouse gets an interest, does C
have a claim against the property

THE EFFECT OF LAND REGISTRATION STATUTES

 McDonald v. RBC (1933) ON CA
An assignee of a registered mortgage of land who claims under an unregistered assignment has
priority over the claim of a subsequent execution creditor of the assignor of the mortgage, even
where the sheriff has registered a notice of seizure of the mortgage under the Ontario Execution
Act without knowledge of the prior unregistered assignment of the mortgage. The Registry Act
does not improve the position of an execution creditor where the sheriff has registered a notice of
seizure because the notice of seizure is not an instrument within the meaning of the Registry Act
and because the Registry Act deals with the protection of rights of purchasers or mortgagees
under registered instruments as against claims under unregistered instruments and does not deal
with the rights of creditors.

Davidson v. Davidson (1946) SCC
The debtor disposed of his lands prior to the registration of judgments by his creditors under the
applicable BC legislation. The transferee did not apply for registration of the transfer. The
Supreme Court of Canada held that the statutory provisions retain the common law rule with
respect to the rights of judgment creditors: the judgment creditor can only attach that interest
which exists in the judgment debtor. Since the judgment debtor disposed of his entire interest
before the registration of the judgment the judgment cannot attach to the land in question.

   A sheriff can seize and sell only the precise interest of the judgment debtor – where the
    judgment debtor has sold his land prior to the filing of the writ but where the deed of sale has
    not been registered the judgment debtor has no interest in the land

Hamilton Kiwanis v. CHMC (1982) ON
The court held that a writ of execution received by the sheriff‟s office is an instrument and
therefore falls within the Registry Act.

Writ of Execution must be registered to be enforced.

Young v. LeMon (1985)
Debtor and a third party purchased land as joint tenants but subject to a trust with the debtor as
trustee and the third party as beneficiary. Subsequently the creditor filed a writ against the debtor
after which the debtor transferred his interest to the third party alone. The third party disputed the
sheriff‟s right to sell the land under the writ. The court held that it could not equate the filing of a
writ of fi fa with the sheriff as the equivalent to registration in the registry office. Therefore if
there is an unregistered interest outstanding against the land at the time that execution is lodged
with the sheriff then the unregistered interest is entitled to priority over the execution. The
execution creditor stands in no better position than his debtor.


Kimniak v. Anderson (1929) ON




                                                                                                      40
Debtor/Creditor                                                                               Fall, 2009


There are interests in land that are not seizable, i.e. in Ontario, interest of a purchaser under an
uncompleted agreement for purchase and sale of land is not seizable under a writ.

Commentary:
   - But rule does not make sense since the purchaser under an agreement for purchase and
     sale in equity is regarded as the owner of the land in equity
   - No reason why the interest of the owner in the land is seizable but not the interest of the
     purchaser

Russell v. Russell (1881)
Supports the proposition that subsection 70(1) of the Registry act does apply to execution
creditors to protect them from unregistered equities even when there is no actual notice to the
execution creditor of the equity

Hiscock v. Stafford (1984) NFL
The defendant conveyed land to “G”. The plaintiff obtained judgment against the defendant,
caused an execution to be issued. The sheriff was instructed to sell the land to “G”. The sheriff
placed an ad in the newspaper. A bid was placed by “W” and accepted and the deed was
delivered to him. Then “G” registered the conveyance. The court held that the deed to “W” was
valid but the sheriff was liable to “G” for the value of the property.

   Section 9 of the Registry of Deeds Act (Newfoundland) provides that all unregistered
    instruments are deemed to be fraudulent and void against a creditor who has actually seized
    or levied under attachment or execution provided that the attachment and a description of the
    property is entered by the sheriff in his books immediately after the attachment and the
    execution and return of the writ
   The section requires actual seizure – some physical act – by the sheriff
   There was no such seizure nor an entry of attachment and description of the land in the
    sheriff‟s book and therefore the deed to “G” was not fraudulent and void against the judgment
    creditor
   The conveyance to “W” was valid since he was a bona fide purchaser for value without
    notice

THE EFFECT ON A PURCHASER AT A SHERIFF’S SALE OF INSTRUMENTS
REGISTERED AFTER DELIVERY OF THE WRIT

Re Littner and Feldman (1983) ON
The purchaser applied for the discharge or vacating of documents registered after execution and
before sale. The court held that the lien claimants and mortgagee have rights under the Creditors’
Relief Act but their claims do not affect the sheriff‟s purchaser.

RESTRICTIONS ON ENFORCEMENT AGAINST LAND
 Subject to a stay of execution ordinarily there is no statutory or regulatory limitation affecting
  the seizure of personal property
 And there is only a 10 day notice requirement and a newspaper publication requirement
  respecting sale – Rule 60.07(16)
 But in respect of land there is a 4 month delay period after filing, before sale proceedings
  may be commenced and a 6 months delay period before a sale may be held – Rule 60.07(17)
  and (18)




                                                                                                       41
Debtor/Creditor                                                                             Fall, 2009




THE SEIZURE OF LAND

Merchants Bank v. Campbell (1881)
A sale of land without an advertisement being made before the writ is returnable is utterly void.

THE SALE OF LAND
 Execution sales are by public auction – at least initially
 Where there is no reasonable bid the land remains unsold for want of buyers (R.60.07(23))
 Where the sheriff does not simply adjourn the auction (per Rule 60.07(21)) the creditors may
  instruct the sheriff in writing to sell the land in such manner as the sheriff considers will
  realize the best price that can be obtained (Rule 60.07(24))
 Creditors are generally content to wait until their debtors attempt to sell or mortgage their
  lands at which point the outstanding writs normally will be paid in order for the transaction to
  be completed
 Normally the bidder at an auction whose bid was successful would sign an agreement of
  purchaser, pay a deposit, and then pay the balance within ten business days

Zingone v. Zingone (1986) ON
The outstanding writs of execution were paid after the auction sale but prior to payment of the
full purchase price and the transfer of title. The creditor had instructed the sheriff to withdraw the
writs and cancelled the directions to enforce them. The Court determined that the sheriff was not
bound to complete the sale and declared that all matters flowing from the auction were cancelled.
The judgment debtor was ordered to pay any costs incurred by the purchaser as a result of the
acceptance of his bid.

ENFORCEMENT AGAINST LAND AND CONVEYANCING
 For land under the Registry Act the writ binds the land from the time it has been received for
  execution and recorded by the sheriff
 For land under the Land Titles Act the land is bound when a copy of a writ delivered to the
  sheriff is sent to the land registrar, received by the registrar, and a notation duly made in the
  appropriate index of writs
 Purchasers want to assure themselves that the vendors can create in them the ownership
  bargained for
 Purchasers conduct a series of searches of various public records in order to discover all
  relevant interests in the land
 The initial search of writs is conducted against all persons who have owned the land in
  question over the last 20 years prior to the closing date of the transaction
 If a writ has been lodged against such a former owner when he owned the land the writ – if
  properly renewed and still effective – will continue to bind the land
 Each time land is conveyed a new historical search for writs must be undertaken
 Sheriff‟s certificates respecting writs can be relied upon only by the person requesting the
  certificate
 A final search against the owner must be done just prior to closing

Logan v. Stein (1958) ON
A court will not compel a purchaser to accept a title where there is a reasonable possibility that a
third party has an interest adverse to that of the purchaser.




                                                                                                    42
Debtor/Creditor                                                                            Fall, 2009


   Ostensibly always – an agreement for purchase and sale will have a clause that permit the
    vendor to rescind the contract (and be liable only for the deposit) where he is unable or
    unwilling to provide sufficient title guarantees

Mason v. Freedman (1958) SCC
The vendor must attempt to fulfill his obligations in good faith.

Silva v. Atkins (1978) ON
A search of writs was conducted by the defendant against the vendor company name suffixed
with “limited”. The sheriff‟s reply indicated that there were no executions filed for a company of
that name. The vendor company name was actually suffixed with “incorporated” for which there
were outstanding writs of execution. The defendant was held liable for the mistake because he
held himself out to the plaintiffs as being able to do what they required to have done on their
behalf and he undertook to do it for a fee. He failed them in not correctly requisitioning for writs
of execution and was therefore held liable. The sheriff was not liable because the defendant
sheriff could not be expected to have known or ought to have known that the plaintiffs were
intending to rely upon the fact that in giving a clear certificate for one name he was also giving a
clear certificate for a similar name, nor were there statutory requirements for him to indicate
similar names. Common sense might have dictated that the sheriff's clerks should have
commented upon the fact that there was an execution lodged against a similar name but the
failure to do so did not give rise to any liability in law.

Bayham Investments v. Gulf Oil Canada (1979) ON
The issue was whether the judgment creditor execution was valid in using the name “Lawrence”.
As "Lawrence", used by judgment creditor, is not a correct given name of execution debtor
(Lorenzo), respondent's execution did not bind the lands of execution debtor because of failure to
comply with paragraph 11(1)(a) of the Ontario Execution Act.

   Under a notice to the sheriff‟s profession:
         o Only executions filed against corporations or partnerships with identical names to
             those against which searches are requisitioned will be reported
         o When a search is requested against the name of an individual only writs of execution
             filed against judgment debtors with an identical surname and at least one identical
             given name against which the search was requested will be reported
   Thus, in accordance with Bayham it appears that a writ will not bind a particular parcel of
    land unless – at the very least – the last name and one given name on the writ exactly matches
    the last name and one given name on the deed conveying the land in question
   Rule 60.07(11) permits the sheriff to amend the writ where the debtor‟s name has been
    changed

Koffman v. Fischtein (1984) ON
The defendant was trying to get out of a real estate deal. They tried to use the fact that there was
an execution filed against someone with a similar name to the vendor-plaintiff but was not in fact
binding on the plaintiff. The court allowed the plaintiff‟s claim for damages because:
    - Under the land titles system a writ of execution binds the lands of the judgment debtor in
        the land titles division involved, but in no way binds the lands of an owner other than the
        judgment debtor – an execution against a person with a name similar to that of an owner
        of lands does not, therefore, constitute an encumbrance against those lands




                                                                                                  43
Debtor/Creditor                                                                            Fall, 2009


    -   An execution against a vendor of land should be within the vendor's knowledge and
        within his power to remove – it is thus a matter of conveyance only, and can be
        requisitioned at any time up until closing
    -   An execution against a judgment debtor with a name similar to that of a vendor of land
        would only be in the knowledge of the vendor if he searched for executions against
        himself and it is not within his power to remove the execution – if such an execution is
        anything, it is a cloud against title and, as such, would be a matter of title which must be
        requisitioned within the time limited in the agreement of purchase and sale
    -   To be in registrable form, a transfer need not be stamped either subject to, or free of
        executions – transfer is in registrable form if it complies with all legal requirements for
        registration (the stamping of a transfer with respect to executions is an administrative
        procedure that is not required or sanctioned by the legislature and is therefore immaterial
        to the question of whether the transfer is in registrable form)

With respect to land under the Land Titles Act purchasers need only concern themselves
with executions filed against the current owner

Summary:
   - In terms of the sale of land under execution, it is quite rare
   - You can always mortgage and sale land subject to the writ, but writ continues to bind the
      land
   - Rules of Civil Procedure deal with most of the procedural implications of the sale of land
      (60.07 sub 17-24)
   - The sale of land is by public auction (implicit from the nature of the notice and the
      advertisement requirements)
   - Sheriff is under common law duty to obtain a fair price just as in case of personal
      property with regard to all circumstances (note:forced sales tend to produce a lower
      price)
   - If the land is on hand for buyers, sheriff can sell the land by other ways
          o On hand for buyers: some case law interprets this to mean if there are no buyers
          o Majority case law: if there is no fair/reasonable bid having regard to all the
              circumstances (having regard that it is a forced sale), sheriff can stop the sale and
              claim that it is on hand for buyers and sell it by other means
   - Section 21 of the rules: sheriff can adjourn the sale and re-invoke auction at other time




                                                                                                  44
Debtor/Creditor                                                                         Fall, 2009


       8. FRAUDULENT CONVEYANCES AND FRAUDULENT PREFERENCES

Debtor attempts to remove himself from assets that would otherwise be garnishable, with
fraudulent intent.

Proposed Bill 96
   - Protects RRSPs from Cs
   - As long as an RRSP is intact, a sheriff cannot collapse the RRSP to get at the property
       inside the RRSP, whether it is a GIC, pension plan, etc.
   - S.4(1) however says a payment out of an RRSP is not exempt
   - Nothing in Bill 96 affect the operation of the Fraudulent Conveyances Act

Fraudulent Conveyances
    - If conveyance is to C, where the intent is to give that C and unjust preference over other
       Cs, amounts to preferential conveyance/fraudulent preference
    - Fraudulent Conveyances Act has its origins in 16th C. Statute of Elizabeth – nearly
       identical provision in effect today

Optical Recording Laboratories CA
Whereas traditionally there was a distinction between the two, the courts suggested that the same
transaction could conceivably be both a fraudulent conveyance and a fraudulent preference.

Assignment and Preferences Act
   - Mid 19th C. legislation
   - S.4(1) of the Assignment and Preferences (APA) did not effectively repeal the Fraudulent
       Conveyances Act (FCA), and therefore the two pieces of legislation coexist in Ontario
   - Both are used to go after D who has made a fraudulent transaction

Conveyance
   - APA s.4(1) – no def. provided
   - FCA provides def, not exhaustive, but inclusive
   - Statutes dealing with fraud are to be read liberally – broad interpretation
   - Def. of conveyance given rise to liberal jurisprudence – it doesn‟t matter what form, can
      still amount to a conveyance.
   - There are exceptions:
            o I.e. to disclaim property in order to allow descendant to take possession of
               inheritance. Disclaimer does not amount to a conveyance, because you‟re not
               moving title from yourself to someone else, but rather disclaiming the title
               altogether.

C Can Impeach an Allegedly Fraudulent Conveyance
   - S.4(1) of APA and FCA provide that if conveyance is fraudulent, it is void as against Cs
          o Void = as if title had never passed. However, courts say that it void means
              voidable.
          o Difference:
                   If void, no one could claim under it.
                   If voidable, transaction recognized. All transactions are good until the
                      transaction is impeached, which the FCA deals with subsequently.
                           If X (transferee) wasn‟t an innocent party, the solution is NOT to
                               return the property to the D; rather, void as against Cs. At this



                                                                                               45
Debtor/Creditor                                                                            Fall, 2009


                                 point, C must use Writ of Seizure and Sale. The transaction
                                 never existed as against the Cs. C has every right to go after the
                                 property.
                                If transaction to T is good (however, not clear) as between D and
                                 T, T has title and therefore retains anything left over.

Delay
   - Cs may go after a particular conveyance, even if there is enough remaining, because that
      conveyance may be the most liquid asset. The remaining money of the solvent debtor
      may be tied up, so even though present, cannot be accessed and therefore the Cs will go
      after the conveyance.
   - In most FCA actions, the D is insolvent
          o Nothing said about the financial status of the debtor
          o However, unlikely to launch successful FCA action if the D is solvent
   - In order to launch an APA action, D must be insolvent, on the eve of insolvency

Caulfied v. Kitchen (1956) ON
Before the plaintiffs can succeed under s. 4(1) or (2) of the APA they must show that debtor was
in insolvent circumstances or was unable to pay his debts in full, or knew that he was as on the
eve of insolvency, and even where the transaction is attacked within 60 days they must prove this
state of affairs before they can rely on the prima facie presumption of an unjust preference under
subsection (3). Furthermore, the authorities require knowledge of the insolvency by both parties
and concurrent intention to prefer to render such an assignment void. Proof of financial
embarrassment is not proof of insolvency, but it is an important factor to be considered.

Insolvency
    - Legal insolvency defined as having insufficient property to pay debts in full; value does
        not cover liabilities
    - Commercial insolvency – inability to pay debts as they become due
    - Courts have said that its unfair to rely on just one or the other
    - When assets exceed liabilities, no longer insolvent.
    - Regarding future liabilities, where the contingency of the liability could render D
        insolvent, some courts have said that they should be included

Fraud
    -   Intent of fraud does not have to be the only thing in the mind of the Debtor.
    -   Courts look to the actions of the parties and the affect of the conveyance.
    -   The courts use inferences of fact and presumptions of law to get at the D‟s intent.
    -   “Badges of fraud” are inferences of fact
            o 25 inferences of fraud, i.e. the D conveys property away, but remains in
                 possession; D conveys most exigible assets, just before an action is launched;
                 conveyance is secret; writ is pending and known by the D.
    -   Typical situation – gift for no or nominal consideration, by a D who is insolvent, or
        rendered insolvent by the conveyance. The natural effect is to defeat the conveyance.
        Gives rise to the presumption of intent (rebuttable).

Freeman v. Pope (1870) UK
Involved an insolvent D who conveyed property away for no consideration. Lord Chancellor said,
“if the necessary effect of the instrument was to defeat, hinder, delay the Cs, that necessary effect
was to be considered as evidencing an intention to do so”



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Debtor/Creditor                                                                                 Fall, 2009


    -   Idea is to avoid speculating what was in the mind of the D [subjective] – actions lead to
        object fact

If actual intent is irrelevant, later courts said that the only thing to look at is the necessary effect
of the conveyance (objective test). The necessary effect was turned into something more than
what was intended – an irrebuttable assumption of law.

                                 Reaction occurred 16 years later in…

Ex Party Mercer (1886) UK
If the necessary effect is to defeat Cs this is just one piece of the puzzle, and therefore NOT an
irrebuttable presumption.

    -   Any jurisprudence that says that as a matter of law a conveyance made with fraudulent
        intent is made only upon necessary effect, is monstrous
    -   If the necessary effect is to defeat Cs, it raises a rebuttable statement
    -   Currently, the case and jurisprudence of choice. Modern cases don‟t mention this
        tussel/dispute.

Transfers Between Relatives
   - Inference of fraud arises, particularly spouses
   - Other cases have said that this shouldn‟t give rise to an inference of fraud: adequacy of
        consideration is not critical, because spouses often transfer property – shouldn‟t look to
        inadequacy as an indicia of fraud [FCA]
   - APA – must be fair and reasonable relative value; consideration given.
   - Coop v. Smith – corroboration is wise, however is not a rule of law.
   - Corroboration plays a greater role in transfers between relatives

Not All Conveyances Made with Intent are Impeachable
    - S.3 of the FCA – protecting provision.
           o S.2 asset is exempt if: (i) conveyed upon good consideration, (ii) conveyed in
               good faith, and (iii) conveyed without knowledge of the D‟s fraudulent intent.

Re Panfab Corp. v. Last (1971) ON
The transaction not void as a result of s.2 of the FCA as the transaction was made in good faith
and was therefore protected by s. 3 of the Fraudulent Conveyances Act since the bankrupt had
made an outright conveyance and had not retained any benefit for itself under the conveyance.

Case informs us that conveyance has to be a genuine transaction.
   - If the transaction was a sham (i.e. no title transfer), do we need the FCA or APA?
           o Purpose of the FCA and APA is to get at transactions where title has passed.
           o S.4 of the FCA – inserted in response to a particular case, which involved a
               situation where the conveyance actually transferred title to the transferee and the
               court said that the FCA didn‟t apply. S.4 says that even though the intention of
               the parties was to transfer the interest, s.2 could still apply. Of course – s.2
               always applies. S.4 is bizarre.
           o Therefore, Panfab doesn‟t make any real sense – it has encouraged fraudulent
               transactions. The most obvious kind of fraudulent transaction can‟t be
               impeached on the basis of good faith. Immunized from Cs.




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Debtor/Creditor                                                                           Fall, 2009


            o     The whole idea of the FCA is to get at those transactions where genuine transfer
                  of title has occurred. If genuineness is all you need, this would save all
                  transactions, because they‟re all genuine.

Consideration
   - Consideration is the real difference between the FCA and APA
   - S.3 of the FCA mandates that good consideration must be provided in exchange for the
       asset (leftover from Elizabethan Statute)
   - What does good consideration actually mean?
            o Under FCA, “good consideration” doesn‟t mean full consideration. Seems clear
                that it doesn‟t even mean adequate consideration. It just can‟t be nominal, or
                grossly inadequate. Fair and reasonable value.
            o Spectrum, but no definition provided.
            o Natural love and affection won‟t cut it – must be some sort of valuable
                consideration

Transferee‟s Notice or Knowledge of D‟s Intent
   - Transferee can‟t have any knowledge of D‟s intent to save transaction
   - Can‟t have participated in D‟s fraudulent scheme

Latent and Murure
Insolvent D conveyed property to D‟s sister, who agreed to assume the existing mortgage on the
property. C pleaded the Statute of Elizabeth. C was unsuccessful in the FCA part of the
transaction – everything turned on consideration, and so the transfer was considered adequate. C
was successful under NS equivalent of the APA, because the protective provision couldn‟t save
the transaction – not fair and reasonable value.

This case illustrates why you plead both the FCA and APA.

Standing to Impeach a Fraudulent Conveyance
    - Significant differences between FCA and APA
    - FCA – considerably broader than the APA
            o S.3 of the FCA refers to the defrauding of Cs or others: includes anyone who has
               a legal or equitable claim against D.
            o May arise from a tort, contract or other legal obligation.
    - APA – available only to Cs: excludes persons with unliquidated claims, but seems to
       include liquidated claimants

Ferguson v. Lastweka (1946) ON
The Court may, as against a purchaser for valuable consideration, set aside a conveyance of land
as one made with intent to defeat or defraud creditors, although the conveyance is made before
the creditor has instituted action, where the purchaser, knowing of the likely action, has
purchased the property with a view to defeating the expected execution against his vendor.
A heavy onus lies upon the creditor to show such intent, and the factors relevant to that issue may
include:
    - (i) knowledge of the intended action,
    - (ii) undue haste by the parties to the conveyance to give a preference or assure a priority
         over creditors or prospective creditors of the vendor,
    - (iii) the fact that there is no immediate or early change of possession following the
         conveyance, and
    - (iv) the relationship between the parties to the conveyance.


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Debtor/Creditor                                                                               Fall, 2009




Sembaliuk (1983) Alta.
The husband's father died leaving 16 per cent of his estate to the husband. The husband's share
had a value of approximately $450,000. As the husband did not want his wife to receive any part
of his inheritance he executed a disclaimer. The wife sought to set aside the disclaimer as
fraudulent. The court invalidated the disclaimer under the Statute of Elizabeth (which was still
law in Alberta) because the wife fell within the definition of creditors and others and the word
conveyance included disclaimer, though the disclaimer could not be set aside under the provisions
of the Fraudulent Preferences Act.

Secured Creditors
   - Two separate actions: right to sue, and right to judgment
   - Secured party looks to collect debt in the collateral of the security
           o Traditionally, courts have held that if the SC has security over sufficient property
               then it has no standing

CIBC v. Boukalis (1987) BC CA
The Court of Appeal stated that the old law was too rigid and the law ought to take into account
depreciation of the security interest. Thus it held that the judgment debtor could have a
fraudulent intent to defeat the secured party by making a conveyance of property other than the
subject-matter of the security agreement. The secured party would be classified as a “subsequent
creditor” whose claim arises only after the alleged fraudulent conveyance (because this is when
the deficiency – if any – would present itself)

Subsequent Creditors
   - Subsequent creditors become creditors only after the fraudulent conveyance has been
       made
   - Are precluded from launching suits under the APA (s.4)

Gauthier v. Wollatt (1940) Ontario
So long as a creditor's security remains sufficient he has no status to bring action to set aside a
conveyance of the debtor's property as in fraud of creditors, but if his security afterwards
becomes insufficient owing to a shrinkage in value he acquires the necessary status to sue as a
subsequent creditor, providing (i) there then remains another unpaid creditor whose claim existed
at the date of the impeached conveyance, or (ii) the impeached conveyance was made in fraud of
all the debtor's creditors, present and future, or (iii) if the intent to defraud is clear a subsequent
creditor can get standing to sue

These three situations only apply to the Fraudulent Conveyances Act

Subsequent creditors (and those with unliquidated claims, i.e. torts) can‟t sue under the
Assignments and Preferences Act.

Originally formulated in
    - McKay and Douglas – court said entering into jute speculation business was dangerous.
        D had given most property away in case business failed. Denuding property gives
        subsequent Cs the right to sue.
    - Newlands Saw Mills – BCCA discussed McKay. Any trade in which there might be
        debts would be sufficient to give future Cs standing, not just risky or hazardous business.




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Debtor/Creditor                                                                                Fall, 2009


        If a person is planning on going into a business where there are likely to be debts and
        conveys property away beforehand, future Cs have standing.
             o APA doesn‟t allow standing for subsequent Cs

Tracing the Proceeds
    - TI left with proceeds of sale to T2
    - Issue: can you get at the proceeds in the hands of T1
    - S.12 of the APA deals with this (not in the FCA)
    - Until 1975, could only trace proceeds by pleading s.4(1) of the APA

Westinghouse Canada v. Bouchard (1975) ON CA
Facts: The male defendant was a debtor of the plaintiff. He had fraudulently conveyed his interest
in a piece of property to his wife, the female defendant, with the intent of defeating creditors. His
wife had then sold the property to an innocent third party.

Holding: The Court of Appeal held that s.12 under the APA applies in FCA actions, so as the s.12
APA provisions could be used. Felt that statutes should be read liberally. Legislature did not
mean to suggest that one legislature was preclusive of another. CA Didn‟t like that T1 could hold
onto the proceeds and be immunized under an FCA action.

   Thus section 12 of the Assignments and Preferences Act is married to the Fraudulent
    Conveyances Act
   Section 12 applies where the judgment debtor has disposed of the property to „X‟ and „X‟
    disposes of the property to „Y‟ thereby giving proceeds to „X‟
   Subsection 12(4) says that the section does not apply to “innocent purchasers”

Bellhouse v. Wong (1941) BC CA
The creditor was not allowed to get at insurance proceeds because X has not “disposed,
conveyed, realized, etc.” on the property.

There is some case law to suggest that if the conveyance was set aside before the property was
destroyed the creditor may be able to get at the insurance proceeds.

    -   Under Creditors’ Relief Act, Cs are paid pro rata (each C ranks according to status)
    -   Even today, courts regard fraudulent preferences differently than fraudulent conveyances;
        little bit more forgiving, lenient (one still is still being paid, even if at the disadvantage of
        another)
    -   Courts have imported Notice of Fraudulent Preference

Doctrine of Pressure
   - If D preferred one C over other Cs because the preferred C pressured D to give the
       preference, then D‟s preference was involuntary (Molsons Bank v. Halter)
   - To be fraudulent, preferences must be voluntary, with intent to defeat, hinder Cs (can‟t
       have this intent if only responding to Cs pressure) ( Johnson v. Hope)

Stephens v. McArthur (1891) SCC
A mere demand by the creditor without even a threat of – must less a resort to – legal proceedings
is sufficient to rebut the presumption of preference.




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Debtor/Creditor                                                                            Fall, 2009


Re Carson (1924) ON CA
Pressure must involve the threat or the belief that legal proceedings are about to be taken.
Pressure must be something which induces the debtor to satisfy the pressuring creditor.

    -   The OLRC recommends we look at the effect of the transaction rather than the intent
    -   Subsection 4(3) provides that a fraudulent intent – subject to section 5 – on the part of the
        debtor is presumed prima facie if the transaction gives the transferee creditor a preference
        and if an action to impeach a fraudulent preference under the Assignments and
        Preferences Act is launched within 60 days of the transaction

Dana v. McLean (1901) ON CA
This prima facie presumption may be rebutted by evidence that there was no fraudulent intent.

Brocklesby v. Freedman-Ellis Co. (1932) ON CA
In order that a transaction may be set aside as an unjust preference under s. 4(2) of the APA, it
must be shown that:
    - (i) D was in insolvent circumstances, or unable to pay his debts in full, or on the eve of
        insolvency;
    -    (ii) D intended to give to the favoured creditor an unjust preference;
    - (iii) that the effect of the transaction was to give the favoured creditor such a preference
    - (iv) that the creditor knew that the debtor's financial situation was as described in (1)
        supra;
    - (v) that there was an intention on the part of the favoured creditor to gain a preference
    - (vi) that the preference was not only an unjust but a fraudulent preference and (by way of
        rebuttal) that it was the voluntary act of the debtor.

Bone Fide belief in the honesty of the transaction = exception




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Debtor/Creditor                                                                             Fall, 2009


9. PROCEEDS FROM ENFORCEMENT, GARNISHMENT, EQUITABLE EXECUTION

Bankruptcy
   - All assets vest in the trustee.
   - All Cs, whether judgment or not, are entitled to share in the assets of D
   - 1875 – first Canadian Bankruptcy Act. Repealed in 1880 due to too many problems with
       the Act. Not replaced, and until 1919, Canada did not have a bankruptcy act.
   - In the absence of a BA, Cs would rush to judgment, b/c first to issue writ of execution
       was the only one entitled to share in the assets of D
   - 1880s – Creditors‟ Relief Act. Not like the BA. Doesn‟t encompass all of D‟s assets at
       one time. Unlike common law, as it provides for a sharing of proceeds.

Creditors’ Relief Act (CRA)
   - S.5(1) provides that
                Where a sheriff levies money under an execution against the property of a debtor
                or receives money in respect of a debt that has been attached or sold under
                section 15 of the Absconding Debtors Act, the sheriff shall forthwith make an
                entry in a book to be kept in his or her office, and such book shall be open to the
                public for inspection without charge.

    -   S.5(2) provides that
                The money shall thereafter be distributed rateably among all execution creditors
                and other creditors whose executions or certificates given under this Act were in
                the sheriff‟s hands at the time of the levy or receipt of the money or who deliver
                their executions or certificates to the sheriff within one month from the entry,
                subject to the provisions hereinafter contained as to the retention of dividends in
                the case of contested claims, and to the payment of the costs of the creditor under
                whose execution the amount was made, and subject also to subsection 3 (6), and,
                as respects money recovered by garnishment, subject to the payment thereout to
                the creditor who obtained the attaching order of costs of such proceedings.

        Commentary:
             The money shall be distributed ratably among all Cs who have filed with the
             sheriff prior to execution and a month afterwards.
                  Why aren‟t garnishment Cs included? If a judgment C, file, take out a
                      writ of seizure with the sheriff. Cs will have filed with the sheriff, putting
                      an execution in the hands of the sheriff at the relevant time. Any C that
                      resorts to equitable execution would have also filed with sheriff upon
                      judgment.
                  When you file the writ with the sheriff, bind D‟s land – first thing C
                      should do upon judgment

    -   S.2(1) provides that (rateable distribution)
                Subject to this Act, there is no priority among creditors by execution or
                garnishment issued by the Ontario Court (General Division), the Unified Family
                Court and the Ontario Court (Provincial Division).

    -   S.2(2) provides that
                Subsection (1) does not affect the priority of a creditor by execution or
                garnishment issued by the Small Claims Court.



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Debtor/Creditor                                                                              Fall, 2009




    -   S.3(1) provides that
                A creditor who attaches a debt shall be deemed to do so for the benefit of all
                creditors of the debtor as well as for the creditor‟s own benefit.

    -   S.3(6) provides that
                An attaching creditor is entitled to share in respect of that creditor‟s claim against
                the debtor in any distribution made under this Act, but that creditor‟s share shall
                not exceed the amount recovered by that creditor‟s garnishment proceedings
                unless that creditor has in due time placed an execution or a certificate given
                under this Act in the sheriff‟s hands.

    -   S.4(1) provides that
                (1) A support or maintenance order has priority over other judgment
                debts regardless of when an enforcement process is issued or served,
                        (a) if the order is for periodic payments, in the amount of the
                        arrears owing under the order at the time of seizure or
                        attachment;
                        (b) if the order is for a lump sum payment, in the amount of the
                        lump sum.

    -   S.4(2) provides that
                Support or maintenance orders rank equally with one another.

    -   S.26 provides that:
                Where the amount levied by the sheriff is not sufficient to pay the executions and
                certificates with costs in full, the money shall be applied to the payment rateably
                of such debts and costs of the creditors, after retaining the sheriff‟s fees including
                poundage, and after payment in full of the taxed costs and the costs of the
                execution to the creditor at whose instance and under whose execution the
                seizure and levy were made where the creditor is entitled to priority therefor
                under this Act.

The scheme in this act is effective upon a county and judicial district basis. If C hasn‟t filed a writ
in particular counties, cannot share in the proceeds derived from the particular area [province
wide filing system not accepted].

The proceeds from garnishment are to paid to the sheriff where D resides

Priorities within the Scope of the CPA
Support and Maintenance Cs
    - S.4 – priority enjoyed by support or maintenance Cs. Support or maintenance claims will
         be paid in priority, and in full. Only then will other Cs get something. Most important
         priority.
    - S.4(a) If the order is for period payments, order is for amount owing at the time of seizure
         or attachment.
    - S.4(2) – support or maintenance Cs rank equally with one another
Poundage
    - A fee for the sheriff‟s troubles
Costs of Enforcement



                                                                                                    53
Debtor/Creditor                                                                               Fall, 2009


    -  S.5(2) – if C is responsible for execution, and that C has incurred costs to effect
       execution, those costs should come off the top before any amounts are distributed among
       the Cs.
   - Policy behind priority – encouragement, incentive to come forward.
Taxed Costs
   - S. 26 – proceeds insufficient to deal with costs in full, money shall be applied to the
       payment of such debts ratably after payment of the taxed costs
   - The losing party is responsible for litigation costs. The C who was responsible for getting
       proceeds of enforcements, is entitled to receive, in priority, the tax costs of the litigation
       which gave rise to the judgment.
   - S. 23, 24 – sheriff can get money that is in court by way of equitable distribution so that
       the sheriff can distribute
   - S.5(1) – sets out what is covered by proceeds of enforcement of execution; where the
       sheriff levies money under an execution.
           o Sheriff seizures distribution, holds auction, gets proceeds – monies levied under
                an execution
           o C gets judgment, D voluntarily pays sheriff – not considered monies levied under
                an execution. At a minimum, sheriff must have threatened to seize. If seized
                threatened, monies levied.
   - Garnishment gets paid to the sheriff to get distributed within the county. Provisions allow
       sheriff to get the monies in the small claims court. No way the sheriff is informed – never
       happens. Only distributes proceeds of judgment that occurred in superior court, and is
       paid directly to the sheriff.

Example
   - Ex Cr – 1000 = 333
   - Ex Cr2 – 500 = 167
   - Ex Cr3 – 1500 = 500
             = $3000 owed, only $1000 to be distributed
   - Everyone entitled to a proportion of the proceeds in respect to their claim

Example 2
   - Ex Cr – 1000 – gets everything, because the other two Cs filed too late.
   - Ex Cr2 – 500
   - Ex Cr 3 – 1500
   - On Dec.31, enforcement. Cr 1 already filed execution with the sheriff. Cr 2 files on Feb.
        10, Cr 3 files on Feb.11
Sheriff must wait for a month after he receives proceeds.

S. 5(7) – where the sheriff levies a further amount, it shall be dealt with as if it had been levied, or
received before the entry. All Ds eligible must fall within the month of the first seizure of
proceeds. Second receiving of proceeds/entry must fall within the first month stipulated by the
date first proceeds were received.

Priority: support C, fed Crown, provincial Crown, enforcement costs, wage
    - However, this is not crystal clear
    - Besides legislation, there is judicial discretion which focuses on policy underpinnings

Priorities Outsides of the Scope of the CPA
The Crown



                                                                                                     54
Debtor/Creditor                                                                            Fall, 2009


    - The Crown is not bound by the scheme set up by the CPA. These claims hover over this
      whole scheme, and they may in fact enjoy super-priority.
   - S.4(4) – sub.1 binds the Crown in right in Ontario. Insofar as the priority of support Cs,
      where there is competition between Crown and support C, support C will win. No
      reference to Crown in right of Canada and nor could there be due to interjurisdictional
      immunity. Federal Crown would have to elect legislation. In a federal case, feds will take
      priority over support C.
          o Priorities in practice: feds, support C, provincial Crown
The Wages Act
   - Section 3 provides that:
               All persons who, at the time of the seizure by the sheriff or who within one
               month prior thereto, were in the employment of the execution debtor, and who
               become entitled to share in the distribution of money levied out of the property of
               a debtor within the meaning of the Creditors’ Relief Act are entitled to be paid
               out of such money the wages due to them by the execution debtor, not exceeding
               three months wages, in priority to the claims of the other creditors of the
               execution debtor, and are entitled to share proportionately with such other
               creditors as to the residue, if any, of their claims.

    -   Section 4 provides that
            o All persons in the employment of an absconding debtor at the time of a seizure
                by the sheriff under the Absconding Debtors Act, or within one month prior
                thereto, are entitled to be paid by the sheriff, out of any money realized out of the
                property of the debtor, the wages due to them by the debtor, not exceeding three
                months wages, in priority to the claims of the other creditors of the debtor, and
                are entitled to share proportionately with such other creditors as to the residue, if
                any, of their claims

Employment Standards Act
  - S.14(1) provides that
             Despite any other Act, wages shall have priority over and be paid before the
             claims and rights of all other unsecured creditors of an employer, to the extent of
             $10,000 per employee.
  - S.14(2) provides that
             Subsection (1) does not apply with respect to a distribution made under the
             Bankruptcy and Insolvency Act or other legislation enacted by the Parliament
             of Canada respecting bankruptcy or insolvency

Benjamin Moore v. Finnie (1954) ON
"Levy" under s. 5(1) of the Creditors' Relief Act means collection or exaction
(compelling to pay or yield) as a result of seizure and is not synonymous with seizure.
Thus, where an execution was filed by a judgment creditor against a judgment debtor and
shortly afterwards notice of seizure of money owing to the debtor and in the hands of
another was served on the latter, and several months later the money was paid to the
Sheriff who made the entry required by s. 5(1), the court held, subsequent execution
creditors who filed executions within a month from the entry were entitled to share pro
rata with the judgment creditor under s. 5(2). The fact that they filed more than a month
after the note of seizure did not disqualify them.




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