CREDITORS’ REMEDIES 443Rebane (2010) Robert Kiesman

CHAPTER 1: INTRODUCTION

CR: How you collect a debt. Every civil judgment that is monetary in nature creates a debt. This course is about collection of unsecured debts/judgments. Secured creditors win over unsecured. Don’t limit yourself – there are other ways to get the money! Underlying policies of CR: (1) We support payment of just debts; (2) There should be

some protection for innocent third parties; (3) There should be some equitable distribution when a debtor has multiple creditors.

REGULATION OF THE CREDIT SYSTEM AND EXTRA JUDICIAL DEBT COLLECTION

Combination of limit on creditors and rights of debtor. Trying to put some controls on abuses in credit system. How to control granting of credit and protect consumers from themselves? In BC, some legislation puts some restraints…

Regulation of Particular Transactions.

Regulating certain types of transactions from which debts arise: Business Practices and Consumer Protection Act.

o Part 2: Unfair Practices (deceptive acts and unconscionable acts). Applies almost exclusively to consumer transactions: “supply of goods or services or real property by a supplier to a consumer for purposes that primary are personal/family/household.”

Section 4 “deceptive act or practice”: oral, written, visual or other representation by supplier that has capability or tendency of deceiving or misleading a consumer. Examples: representation that goods have qualities they do not; prior usage they don’t have; that service is needed if it is not; if someone uses exaggeration/ambiguity about a material fact.

Section 4 “unconscionable acts”: Basically undefined, but examples: undue pressure to enter transaction; if supplier takes advantage of incapacity to reasonably protect interest; gross overcharge; no reasonable probability of full payment.

If allegation of deceptive/uncon act, burden of proof that it was not committed is supposed to switch to supplier.

Remedies : Courts have ability to set aside transaction Damages Penalty/Offense to supplier Complaint process

Control of the Credit Rating System.

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Part 5: Cost of Consumer Credit: Obligations on creditor to provide you with details of what total cost of credit is. (Provisions not all in force yet).

Today you need consent to collect and retain information. Accuracy concerns. Defamation concerns: If agency hands out wrong information and knows it is wrong. Old Credit Reporting Act: Repealed and largely put in to BPCPA, Part 6 – also

substantially updated. o Applies to you if you get credit reports and when you get them.o Tells what credit information is (basically anything about individual).o Section 107: A person must not obtain from agency a report respecting

individual without the consent of the individual – these often in credit K.o Section 108: Reporting agency cannot knowingly give report unless report

is given to certain circumstances – must believe person requesting will use to extend credit OR with respect to collecting a debt (also employment K; government; insurance; law enforcement; court order; written consent of individual).

o Section 109: Cannot have certain info in credit report: info must be accurate to best knowledge of agency; cannot have info about legal proceeding in which individual is nominal defendant or it is for something other than money; statute-barred; cannot have info on judgment if it was from more than 6 years ago unless part of it remains unpaid and that has been confirmed with creditor in that action; info about bankruptcy more than 6 years after discharged, unless bankrupt more than once; info about race, belief, color, ancestry, political affiliation.

o Section 110: Comes up when you are denied a loan – if you disagree, can write to agency that explains why info is incorrect or inaccurate – info must be included in any future report it gives to the individual.

Private collection agencies mostly help with debt counseling and mediation. They often act as “go between” to stop phone calls, etc.

Debtor’s Assistance Act has largely become irrelevant because it was brought in before consumer bankruptcies and Bankruptcy and Insolvency Act.

o BIA: Consumer Proposals – all creditors obligated to continue in program so long as payments keep coming in.

Debt Pooling : One payment to one creditor who divides it up among other creditors. Consolidation Order: Made under DAA – almost never used.

Regulation of Debt Collection. Identify whether the person is unable or unwilling to pay. If unwilling, take these steps:

(1) Demand Letter: Identify who you are; basis of debt owed; time demands; you are not providing legal advice.(2) If no response, make a phone call and ask why no response. (3) Check to ensure: You are not trying to collect from wrong person; debt has not been already paid; phone call is not abuse; no threatened harassments or embarrassment; don’t call others and let them know of problem.

Criminal Code: Sections appropriate for acts done by person engaging in self-help to collect debts:

o s.346: Do not threaten, accuse, or be violent = extortion.

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o s.372: If with intent to injure or alarm person, you convey call/letter information you know to be false = imprisonment.

BPCPA, Part 7: Enacted because BC felt CC was not going far enough. o Group of restrictions on anyone collecting debt in BC. o Section 114: General prohibition on harassment – manner and frequency.

Examples: Using threatening/profane/intimidating/coercive language; excessive pressure; threatening to publish failure to pay

o Section 115: Collector must not attempt to make payment until collector has notified debtor in writing of: name of creditor; amount of debt; identity and authority of collector; collector must not initiate verbal communication until 5 days after sending written notice.

o Section 116: You cannot communicate with debtor at their place of employment unless you failed to get them at home OR you do not have home address or telephone number – make only ONE attempt at place of employment.

o Section 117: You can only contact the debtor unless you are doing it to get contact info for the person because you do not have it.

o Section 118: Time restrictions: You cannot communicate with them on a statutory holiday, Sunday (except between 1-5), any other day (between 7am-9pm)

o Section 120: Cannot attempt to collect amount that exceeds debt. o If debtor says you must communicate with them in writing you

must! (c) If person tells you they are not the debtor, you cannot continue

to communicate with them. If you do not believe them sue.o Section 122: You cannot do any of these on your own behalf unless

there is court order to contrary: remove from inside of residence personal property in absence of debtor/spouse/adult resident; if you don’t have writ of seizure and sale and you think you will seize and don’t have security you can’t take it.

o Section 123: You cannot supply misleading info (“my client will sue”) if you don’t have instructions.

(b) You cannot misrepresent purpose of communication.o Remedies for debtors who are victims of improper debt collection found in

Part 10.

CBC v. Carlson: Example of damages for harassment/humiliation.Employee of CBC tried to collect $ from Carlson – Carlson owed debt and was on welfare – Carlson did not owe debt CBC he was trying to collect at time – threatened to sue and harassed him – court said it was breach of Act – awarded nominal damages to Carlson of $1000.

Kindle v. James: Example of damages for tort in collection.Seizure of car from property of debtor when nobody was home – car was not car of debtor, but car of third party – on way to impound lot, bailiff totals car – P got substantial damages in tort for conversion of vehicle and breach of Act.

Judgments Without Civil Actions. Can obtain judgment without ever having commenced civil action – in very limited

circumstances.

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Without a judgment, all you have is self-help! Exceptions: (1) Certain government agencies in limited circumstances, such as CRA, who can get certificate and register it in Federal Court; (2) CC, ss.738, 742: give criminal judge, after giving conviction, the ability to make compensation order to victim – can be registered in SCBC and then enforced you are now judgment creditor; (3) Creditor Assistance Act – an attempt to abolish priority among unsecured creditors – but limited to Writs of Seizure and Sale. When you have judgment debtor (JD) and judgment creditor (JC), there are several WSS from JD…judgment will be distributed pro rata. There is ability of creditor who has not obtained judgment to share in the proceeds.

o Certificate Process : Sections 6-8: Rules for serving application for a certificate on debtor; affidavit of claim get certificate granted to you. Once you get it, you can share in proceeds, get sheriff to seize more property, and take other enforcement steps, such as garnishment order.

You cannot apply for certificate at any time! The first time you can apply for a certificate (s.6), you have to have had WSS and goods are actually seized, and it is 20 days after seizure or 2 days before sale.

CHAPTER 2: PREJUDGMENT REMEDIES

What can P do to try to secure payment before judgment? Lister v. Stubbs : P not entitled to injunction to restrain person who was alleged

to be a debtor from parting with his property. Despite Lister, in BC, once a creditor has commenced an action (or is about to),

there are two remedies available: Pre-Judgment Garnishing Orders and Marevas.o Both require creditor to have commenced an action. o Both freeze assets until judgment can be obtained.o Neither gives P creditor a proprietary interest in affected assets.

PJGO and M are different because of type of property you can freeze. PJGO freezes only a debt, while M has little limitation on property court can render subject to it.

PRE-JUDGMENT GARNISHMENT

PJGO is more secure than Mareva because it takes $ and puts it into court. Most cases attempt to set aside PJGO D has right to try to have set aside. D’s challenge PJGO on two grounds: (a) Materials prepared in support of the PJGO

(affidavit) are not meticulously compliant; (b) Nature of claim of P against D is not one where you can get PJGO.

o NEVER, as counsel, swear affidavit – make client do it. To get PJGO, claim must be liquidated claim (capable of arithmetic calculation at

time cause of action arose) – eg: If P says he would provide D with 100 copiers at $1000 each, and he provided 50 but was not paid = arithmetic calculation…

o If someone admits they owe $x (even orally) court will accept! PJGOs are frequently used and are effective. There is obligation to serve D with your materials “forthwith”. Do not serve before. Court Order Enforcement Act, s.3(2): A judge or registrar, on application made

without notice; you must be P in an action; must swear an affidavit swearing certain facts (or their solicitor…Rebane – NEVER do this!).

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o Must say action is pendingo Must say when commencedo Describe nature of cause of action: amount of debt; say it is justly due

and owing after making all just discounts; say you believe garnishee is indebted or liable; address of garnishee; (see p.665 for precedent)

Practice Point : Clients often don’t tell you the “whole story” – be sure you know of all just discounts!

Businex v. Canadian Medical: A liquidated debt is an amount that is already ascertained or capable of being ascertained as a mere matter of arithmetic. If you have claim that is part liquidated and non-liquidated, you can issue claim for liquidated part. Share price based on book values, etc – in order to come to “fixed amounts” estimates were required. Claim must either be debt or liquidated demand to meet statutory test. LD in nature of debt, specific sum of money due or payable. If it requires

investigation beyond mere calculation, it is not a debt, but damages. Held : Estimates not capable of arithmetic calculation. Garnishing order set aside in part only! Part of non-refundable deposit was still to be

paid – court allowed GO to stand for liquidated amount – despite liquidated and non-liquidated claims being mixed.

What is Liquidated Claim ? Clear debt; Services based on hourly rates; Unit price contracts (100 tv’s at $1000 per tv); Outstanding rent Note : Try to get admission if you think it is un-liquidated! You can now try to get

amount they’ve admitted to. If you have GO set aside, apply again!

Knowles v. Peter: There must be meticulous observance of requirements of Court Order Enforcement Act.“Affidavit…is defective in that the cause of action must be sufficient set forth”. Examples : Mis-description of cause of action; failure describe either D or garnishee;

failure to sign GO or affidavit; using wrong address for garnishee; failure to say “all just discounts”; failure to say due and owing, etc.

Note : Meticulous observance does not go so far as to require technical perfection (Monday Publications); The document, taken as a whole, clearly must inform the reader of its true message (Winroc), and that there is no confusion or uncertainty – that is, the reader is not left to guess what is meant (Cooper).

Pybus v. National Credit: An imperfect PJGO is not void, but voidable, so a TJ has discretion to uphold it.P served D after 6.5 months – statute required service “at once”. Held : PJGO set aside – unreasonable delay in service. Rebane : A week or two would not be an issue. COEA, s.5(1): Allows D to make another type of application to have PJGO set aside,

and funds released to D. Basis is that it is just in all of the circumstances.o Rebane: To get to “just” is balancing act – hardship (to D) argument.o Note : If judgment granted, 5(1) also gives court authority to grant order to

pay in installments.

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Redekopp v. Canadian Timber: Some considerations under s.5 that a court will consider in deciding whether or not to set aside PJGO on basis of convenience: Strength of P’s case; hardship to D; necessity (is attachment necessary to secure recovery to P?); other considerations (unjust to deprive D of all capital?) etc.

MAREVA INJUNCTION

MI is court declaration that says D cannot part with certain assets. Usually arises in fraud-type cases of when someone trying to move assets from a

jurisdiction. You obtain MI pre-trial – right around time you are starting your action. Law and Equity Act, s.39 is the statutory source of discretion for granting MIs. Interlocutory (pre-trial); ex parte (without notice).

o With ex parte: Required to disclose to court full, frank disclosure of all material facts – whether they assist you or not.

Required to make full, frank disclosure of the law, whether it assists you or not.

Common procedure: At same time as filing SOC, file Mareva. You may have to book a judge first – some take time.

It freezes assets of D or places significant restrictions on his ability to alienate assets. Designed to prevent dispositions before trial.

o Note : MIs do not create a security interest! Debtor is still owner, and secured creditors have ability to get the assets.

Aetna v. Feigelman: The requirements for getting a MI are higher than for other injunctions, and unless there is a genuine risk of the removal of assets, the injunction will not be issued.Ex parte injunction trying to restrain transfer of assets from Manitoba to Ontario/Quebec.Is MI available?o Allowing injunctions: (a) To preserve assets that form basis of dispute; (b) To protect

court process before trials; (c) To prevent fraud on court or plaintiff; (d) Where there is real or impending threat to remove contested assets from court’s jurisdiction.

o Old English Cases : (1) P must have good arguable case; (2) There are assets of D within jurisdiction of the court; (3) D need not be out of jurisdiction itself; (4) There must be real risk that assets of D are about to be removed or disposed of somehow.

o Rebane : In Canada: (1) Good arguable case portion of test is prima facie case; other 3 parts have been squished down.

o Held : MI is not necessary – D acting in ordinary course of business. o Important fact to decision : Aetna was a federally incorporated company, and

under federalism, they should be free to move around assets anywhere in Canada for legitimate business reasons.

Mooney v. Orr #1: BC courts have jurisdiction to issue worldwide MIs as long as debtor is within jurisdiction.Ex parte application for MI during middle of complex trial – MI intends to restrain alienation of assets D had outside of BC.Can a MI apply outside a provincial jurisdiction?o Starting Point : Court does not have jurisdiction outside of BC.o Held : Yes, MI granted and worldwide assets must be disclosed.

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o Reasoning : Realities of modern banking – concept of worldwide injunction in UK and Australia should be recognized in Canada.o Jurisdiction exists as in personam remedy – as long as D properly before the

court, the BC court should have right to make orders with respect to alienation of assets of that D no matter where assets are located.

o Practice Point : Try to get orders for 3P holding assets as well.o Test for when court will consider granting MI: (1) Need party who is properly subject

to jurisdiction of the court; (2) Must show P has strong prima facie case; (3) Show there is real risk of removal or disposition of assets with intent to avoid judgment; (4) Where going for world-wide MI, you must show exist of assets beyond jurisdiction, and disposition or concealment would likely frustrate payment of the judgment.

o Rebane : Sometimes court requires P to give undertaking as to damages: P has to say he will undertake costs of damages that may flow as result of obtaining MI and not being successful at trial (eg: lost business opportunity).o Ensure undertaking as to damages is in affidavit.o If on for D, question whether P can give meaningful undertaking as to damages

(eg: if they are merely holding company with no assets…no security, etc). How to meet that? Show financial strength of P.

Mooney v. Orr #2: Whether or no a MI is granted depends on the strength of creditor’s case. Case modifies part 1 of test to “strong arguable case”.Application to set aside MI – two months later, still during trial – goes before trial judge – two arguments made: (1) Material non-disclosure on part of P; (2) Written argument on merits of application.o Held : Not material non-disclosure.o New Modified Test : (1) Strong prima facie case; (2) Real risk of disposal/dissipation

of assets; (3) Nature of transactions going on by D; (4) Risk inherent in transaction you are trying to stop [eg: enforcement rights in jurisdiction where being transferred];

o Other Factors to Consider : (a) Nature of transaction: local, international; (b) Risks inherent in the transaction; (c) Where does D reside?; (d) History of Ds conduct; (e) Enforcement rights of JCs in jurisdiction where assets located; (f) Amount of claim.o Rebane: Real question is again, is there a real risk of disposition?

o Reasoning : “The ultimate question becomes, is it fair and just that the applicant should have the right to monitor the movement or expenditure of capital assets by the respondent during the course of the proceedings between them?”

Reynolds v. Harmanis: Applicable test should be strong prima facie case rather than more liberal UK “good arguable” case. Must show real risk of disposition or concealment, not just possibility. You must balance convenience and consider impact MI may have on D or any 3Ps who would be impacted. Consider if unfair if effect of MI may be to put D out of business unless security is posted in a significant amount.

Silver Standard v. Joint Stock: In most cases it will not be just or convenient to tie up debtor’s assets or funds simply to give creditor security for a judgment he may never obtain, especially if debtor is not doing anything out of the ordinary to produce a dry judgment.Issue is adverse effect of MI on innocent 3P.

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o Rebane : Consider what affect MI will have on persons (eg: employees) not before court – court will not generally grant MI where it will prevent D from paying debts in the ordinary course.

Hickman v. Kaiser: Creditors may apply for a post-judgment MI to buy time if JC feels that the JD is going to dissipate the assets needed to satisfy the judgment.Someone obtained judgment in Texas – wanted to register judgment in BC – applied for MI until it could be registered.o Court : Allowed it for limited time.o Note on Tactics : US courts don't award MIs, so American litigants often go to

Canada. BC courts are willing to assist other courts to enforce judgments from other jurisdictions

Other Injunctions:o Some cases granted versions of Marevas recently:

o Anton Pillar Order : Get access to documents – allow you to walk in home with officer and take documents, computers, etc., to get info. Often see these in satellite piracy.

CHAPTER 3: LAWS RELATING TO THE JUDGMENT

Why get judgment, especially if debtor cannot pay? (1) Preserves your right as creditor – they may be able to pay in future – Preserves limitation period; (2) Once you have judgment, it is good for 10 years, Ds luck can change; (3) Entitles creditor to go beyond self-help – once you get judgment you have ability to use judicial collection methods; (4) Interest – if no contractual interest, obtaining judgment will get you pre and post-judgment interest; (5) Can make judgment creditor feel better.

DEFAULT JUDGMENT

D who realizes they owe debt, but cannot/will not pay it, and ignores court process. They are served with writ and SOC, and do not respond.

o Where claim is for debt or liquidated amount, a DJ can be entered for sum plus pre-judgment interest [Rules of Court 17(3), 25(4)].

Two types of default judgments: (1) DJ for liquidated amount; (2) Un-liquidated: have damages assessed.

When you go for DJ, file affidavit of service (they were served in accordance with rules), and requisition.

D can apply to set aside DJ on two grounds: o (1) As a right: You must establish there was procedural defect leading up

to judgment – usually of such a nature that rules of natural justice require to be set aside.Bache v. Charles et al: Right to have set aside usually procedure relating to natural justice and right to be heard.D owed $ to brokerage house – D received notice of claim and filed appearance – wrote defense on bottom of appearance – P moved for notice to strike defense – Notice of Motion given to D, but Charles does not appear – judge made order should be struck and ordered P judgment right there – Charles says he didn’t realize.

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Court: It was equivalent of judgment without notice – D deprived of right to be heard – contrary to rules of natural justice – they did not have discretion and DJ had to be set aside as a right.

o (2) In discretion of court: Miracle Feeds: Three conditions must be established by way of affidavit evidence for D to have DJ set aside in discretion of court: (a) Failure to appear or issue defense not willful; (b) Application must be brought as soon as possible after obtaining knowledge of default – or give explanation for delay; (c) There must be meritorious defense (worthy of investigation). This list is not exhaustive. These must be established by way of affidavit material.

Enforcement proceedings commenced before DJ set aside: If you get DJ set aside by right, no conditions can be attached. In discretion of court, court can attach terms and conditions to the setting aside: can allow $ to stay in court; can allow judgment to stay on title of property, etc.

SUMMARY JUDGMENT AND SUMMARY TRIAL

Very common in debt claims. They are judgments obtained by way of affidavit.

Supreme Court Rule R18: Done in chambers before judge before trial (interlocutory); applications where you

put name on list. You must meet test of SJ: affidavit sworn by client; may have information and belief;

must say affiant knows of no defense to claim; if there is triable issue, court will not give judgment on Rule 18.

American Buildings v. Surrey Iron : Unless it is manifestly clear a claim has no merit and does not deserve to be tried, no bona fide trial-able issue is raised.

Supreme Court Rule 18A: Trial on affidavit evidence – in chambers. Court can order X-exam; say it cannot make determination. Court will make decision as long as they can find facts necessary to make decision –

but cannot decide credibility issues.

MacMillan v. Kaiser: The mere fact there is conflict in evidence does not preclude judge from proceeding under 18A. ST almost invariably involves resolution of credibility issues for it is only in the rarest of cases that there will be a complete agreement on the evidence. The crucial issue is whether court can achieve just and fair result by proceeding summarily. Important Quote : “It is clear the judge was alive to the conflicts of the evidence. She

was able to resolve them by making reference to and relying on the extensive documentary evidence before her”.

INTEREST

Two types of court ordered interest.

Pre-Judgment: Court Order Interest Act , Part 1 :

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Arises from day cause of action arose (money was due; accident happened, etc) to the date of judgment.

o s.1: Court must add to judgment amount of interest at rate court considers appropriate from date cause of action rose to date of judgment.

o s.2: Court must not award interest on part of $ loss arising after date of order if there is K about interest between parties, or if creditor waives in writing right to receive interest.

o Cannot get interest on interest.

Post-Judgment: Court Order Interest Act , Part 2 : Interest from date you obtained judgment up to the date you are paid in full.

o s.7(1): Interest rate is annual simple interest rate = to prime lending rate of banker to the government.

o s.8: On application, court may vary rate of interest.o s.9: Interest deemed to be included in judgment.

LIMITATION PERIODS

Once cause of action begins, you must commence action by applicable limitation period and do something with it to protect your rights.

Limitation Act, s.3(3): Once you get judgment in BC, judgment is good for 10 years. Four ways to extend limitation period : (1) On expiration of 10 year period, if

enforcement process outstanding, you have the right to complete process [s.11(1)]; (2) If there is stay of proceedings, any time period stay is in place gets added to judgment [s.11(2)]; (3) Where there is confirmation of cause of action by judgment debtor (including payment), it re-triggers limitation period and adds 10 more years from confirmation [5(1)]; (4) Bringing action to extend judgment: Judgment about to expire, and you bring new action, on basis that you are suing on previous action.

Young v. Younge: If the judgment debtor has been trying to hide and defraud process, and you made reasonable efforts as judgment creditor, court may order extension (judgment on judgment) that you can enforce for another 10 years. The only qualification is that JC cannot have abused the process.Six days before expiration of 10-year limitation, JC started second action on the original judgment.

Young v. Verigin: In extending the life of a judgment, the only qualification with regards to a JC's right to bring a second action on the original judgment is an abuse of process. The burden of proof is on the JD to show that there was an abuse, and JC need not prove that there was no abuse of process Practice note : Record steps taken. Note : No indication of what abuse of process may be.

FOREIGN JUDGMENTS

Cannot come to BC with writ of seizure from QB in Alberta – you must make judgment a BC judgment.

Issue is two-sided: How to enforce foreign judgment here, and how to proceed if client is sued elsewhere but all their assets are in BC?

Multiple ways to make it BC judgment:

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o CL Rule: Commence an action where the foreign action is the cause of action – bring Summary Judgment application.

CL Test : BC court will recognize foreign judgment if judgment is final and conclusive (not interim); not capable of being varied; foreign court must have had jurisdiction in the interim sense.

How? (a) Presence of D in jurisdiction (physically served with process); (b) D submits to jurisdiction of court (filing SOD/letter/etc); (c) Time for appeal in FJ must be expired.

o Court Order Enforcement Act, Part 2: Simplified way of enforcing foreign judgments from certain jurisdictions.

s.29: If judgment given by reciprocating state, apply to have judgment registered in BCSC.

Don’t have to appear before judge; affidavits; serve debtor; debtor can apply to have registration set aside, but he has burden to show judgment should not have been registered in BC.

Defenses : COEA says court to consider whether no jurisdiction under our rules or the foreign court rules to have issued the judgment in the first place.

o Real and Substantial Test:

De Savoye v. Morguard: One Canadian court should recognize the judgment of any other Canadian court if the court properly and appropriately assumed jurisdiction. Proper assumption: Whenever there is “real and substantial connection” between the petitioner and the province that granted the judgment.P was mortgage holder – D was Alberta corporation and mortgage granter – property forecloses – property is sold – D only served in BC – D made no appearance in BC and did not submit to jurisdiction – P brings application under CL to have Alberta judgment recognized here in BC. Court : BC should recognize judgment. Factors for RSC test elaborated in Muscutt (2002 OCA):

the connection between the forum and the plaintiff's claim; the connection between the forum and the defendant; unfairness to the defendant in assuming jurisdiction; unfairness to the plaintiff in not assuming jurisdiction; the involvement of other parties to the suit; the court's willingness to recognize and enforce an extra-provincial

judgment rendered on same jurisdictional basis; whether the case is inter-provincial or international in nature; and comity and the standards of jurisdiction, recognition and enforcement

prevailing elsewhere.o Enforcement of Canadian Judgments and Decrees Act: Only applies

to Canadian judgment. Not every province (Alberta) has similar act! s.2: You can register Canadian judgment whether or not it is final. It may be enforced right away. You can make application as long as right to enforce judgment

has not expired in province granted, and it is not past 10 years. Almost no defenses to registration: Court not allowed to stay

enforcement on basis of international law, or our court would make jurisdiction, or even the court did not have jurisdiction.

Rebane : If dealing with Canadian judgment – go here!

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o [US Judgments]: If you can meet CL test, you can use that! Court Order Enforcement Act, if applicable. Sue again in jurisdiction! Beals: Real and substantial test should apply to judgments

from USA. Judgment in Florida – no jurisdiction in interim sense – Ds

were Ontarians – never submitted – never served there. Proswing: Even non-monetary US judgments can be enforced

in Canada.

STAYS OF EXECUTION

Stay of Execution is a debtor’s right. At CL a judgment is payable immediately whether there is an appeal or not – unless

someone obtains a stay. A stay of execution is an equitable remedy, so the granting of the application is at the

discretion of the court. Two types of Stays: (1) Stays pending appeal; (2) General stays of execution.

1. Stays Pending Appeal : D loses in court and is reluctant to pay full amount – they believe judgment is wrong.

o Morguard v. Davidson : When JD applies for stay, must prove: (1) A serious question to be tried; (2) Applicant to suffer irreparable harm if application were refused; (3) Assessment as to which party would suffer greater harm from granting/refusal of remedy.

2. General Stay : No appeal pending; usually appeal for payment by installments.o Small Claims: Apply for Payment Order: Examine debtor on assets.

When payment order made Stay of Execution. o Rules of Court: A few ways a Stay of Execution can occur:

Rule 42(21): Gives court a general right to order a stay to such time as it sees fit or provide that payments are made.

o AG v. Lau & Lau : There are seven factors a court will consider when deciding whether to grant a stay of execution to a JD: (a) Court has inherent jurisdiction to order a stay of execution "in special circumstances"; (b) Must consider the "balance of convenience" in determining appropriateness in granting stay; (c) Where the "justice of the parties" requires it, Court has inherent jurisdiction to exercise a stay and, while power ought not lightly to be exercised, can do so in a proper case in order to avoid unnecessary proceedings and expense, and where it is necessary to do justice between the parties; (d) Court should weight the relative prejudice to the parties; (e) A stay enables the Court to protect either litigant; (f) Court must consider whether there is an outstanding appeal; and (g) Stays must be used to allow sufficient time to a JD to prosecute a counterclaim against JC.

o Subpoena to Debtor Hearing : Debtor examined on assets. At conclusion of hearing, registrar/master/judge has jurisdiction to order payment by installments.

o COEA, s.6: When GO issued after judgment, JD can go before court and say it is causing hardship have GO lifted. Must meet hardship test.

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3. Offer “Voth Order”: To ease the burden on JD, counsel for JC may accept a "Voth order" where JD deposits the amount of the J into court and JC posts security or a letter of credit for its withdrawal. This process eliminates the worry that if JD is successful on appeal, JC won't be in a position to repay if the appeal is successful.

o Voth v. National Park : Courts have discretion to set terms and conditions on stays of execution under R.42(21)(a), and this includes making a "Voth Order" whereby JD pays full amount of J plus costs into court, and P can take out that amount upon filing an undertaking to pay interest on any amount owing following appeal and posting security.

4. Stays of Execution on Foreign Judgments : Relating to Rule 54(9).Litecubes v. Northern Light: Judgment debtors can get orders staying execution on foreign judgments being registered in BC until determination of the foreign appeal providing they show proof an appeal is pending, or the time for appeal has not expired.Ps seeking judgment at ST – cause of action is judgment obtained from Missouri – CL enforcement – judgment under appeal in Missouri – D applies for order staying action pending appeal.o Held : Court grants stay until appeal determined in Missouri.

CHAPTER 4: INFORMATION ACQUISITION – PROCEDURES AFTER JUDGEMENT

We have judgment, how to enforce? No automatic enforcement mechanisms: JC must trigger all enforcements! If JD does not pay, you must invoke procedures that allow to enforce judgment

against JDs assets. Two types of JDs: (a) Unable to pay; (b) Able but unwilling to pay.

o Step 1: Get info on JDs assets – then strategize on how to execute against them.

o Uncover scams and fraud of (b) – selling car to daughter, etc. Asset Searches : Land Title Search; with consent you can search credit bureaus;

personal property registry; private investigator.

Pre-Examination Procedure. Once you get judgment you have right to examine JD about his assets. Small Claims: Payment hearing – broad right to ask of assets of small claims JD.

EXAMINATION IN AID OF EXECUTION

Broadest right to do exams and ask questions of JD. Applies only to SC cases. Rules of Court, Rule 42A. No ability for payment order to be made. NOT limited to monetary judgments. JD served and must show up; JD can have lawyer present; court reporter present;

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42A(1): You can question any matter pertinent to enforcement of order; why payment not made; income and property; debts and debtors; recent disposals; intention, etc.

o Sub 3: Not more than one Exam in one year. You have right to come back in relation to questions you asked! Trick : Other side says adjourn after Exam “for now”. Respond:

“No. Complete your examination now”. o Sub 4: With court order, you can obtain right to do Exam of person other

than JD if you can show that person has knowledge about matters (accountant, etc).

Note : Find out about joint accounts – generally you cannot attach them – BUT if you can show all source of income is that of debtor possible exception.

Special Problems Arising Under Examination in Aid of Execution.

(a) Person Other Than Judgment Debtor: 42A(4) allows exam of person other than a party who may have knowledge relevant to enforcement of order. This rule helpful when fraud or suspicious conveyance is suspected.

(b) Examination of Spouse: Any person, including spouse, who has knowledge of matters relating to enforcement of order may be examined (BMO v. Dyck).

(c) Court Order in Event of Difficulty: When person refuses to answer, obey appointment, or is generally difficult in enforcement of order, JC can apply for specific order requiring JD’s attendance at exam and answer specific questions [42A(5)].

(d) Examination of a Mortgagor After an Order Nisi of Foreclosure: Most ONFs provide for judgment against mortgager on personal covenant contained in mortgage. While period of redemption is running, you can examine mortgagor about other assets that may lead to speedier satisfaction of order (London Investment).

Enforcement: If person refuses to appear after service of Appointment, the most effective remedy

is 42A(5) to obtain specific order requiring attendance. Stevenson : Failure to pay money ordered by the Court to be paid is contempt

but that party is not liable for punishment by simple failure to pay.

Post-Examination Considerations: 42A(7): The transcript of the Exam in Aid of Execution may be used in evidence in

the same or subsequent proceedings between the parties.

SUBPOENA TO DEBTOR

SDs less common – found in Rule 42. Only available if judgment is for payment of $. Risky to get payment order: Do at last resort when you know person has $ to pay

and you want to convince judge to force him to pay. Sub 23: Gives right to apply for subpoena if JC can show order not satisfied. Sub 26: Scope of Rule narrower than 42A: Income and property; debts; disposal;

means to pay.

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42(30): If debtor refuses to attend or refuses to be sworn or refuses to produce documents or gives answers not to satisfaction: if examiner registrar or master report and recommend to court the JD get dragged before judge; person brought on promise to appear; if they fail apply to have them put in jail.

o Very rare! Easier to get JD arrested in small claims than STD process.o Usually 3 or 4 court applications.

42(32): Committal may result if answers given at time of hearing lead examiner to conclude JD has dealt with property with intent to defraud JC, has unreasonably neglected or refused to pay debt, etc.

42(34): Committal may result if debtor fails to pay in accordance with order by Examiner – JC issues Notice of Motion and an affidavit showing default occurred.

Order for Committal : JD has to help pay costs per day in jail. Cannot have them in jail for > 40 days.

Blaxland v. Fuller: The SD process can be useful in obtaining orders to pay by installments, and non-compliance with these court orders can lead to imprisonment to contempt committal of the judgment debtor.Total loser owed $ - living off mother in law – no assets in his name – tried to use generosity of mother in law to shield him from JC – did not appear at SD hearing or pay.

CHAPTER 5: EXECUTION BY WRIT OF SEIZURE AND SALE; JUDGMENTS ACTS; CHARGING ORDER

Patchwork area – no one place you go: statutes, CL, Rules of Court. We now have judgment and some info about JD, now we are concerned with how to

enforce the judgment. Execution is, of course, a POST-judgment remedy. You need to know about JDs property because you match property to the process.

o Classify the Property : Real property; personal property; intangible? Understand nature of JDs interest in the property, how does it affect manner in which

you will execute? Know location of the property? Can’t get same way in Alberta as BC. Some assets can be attached by more than one procedure – get most cost effective. Some property immune.

WRIT OF SEIZURE AND SALE

Only one Writ that exists now Writ of Seizure and Sale. It is issued by court registry – stamped – delivered to sheriff who is then obligated to

go out and attempt to seize personal property. Once something is seized, the sheriff is required to sell it for best and fair price. When sheriff gets funds from sale (levy under CAA) – recorded in sheriff’s book – $$

held for 30 days – sheriff distributes on pro rata basis for anyone who obtained a certificate.

Sheriff can seize assets equal to amount of judgment(s) he has in hand. In residential premises, sheriff entitled to knock on door – but is not entitled to break

in. To go in, sheriff has to be “invited in” and have adult at home. Once he is in, he is in. Sometimes he knocks on door (plainclothes) – once he puts foot in door when door is opened, he is entitled to go in.

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In executing WSS, sheriff can: (a) Take something then and there; (b) Walk in possession agreement – “seize” – but leave JD in possession while getting JD to sign inventory. Why do it? Sometimes objects are not worth the storage costs. Ultimately it will be sold (public auction, get someone to sell).

(a) Goods, Chattels, and Effects.

What can a sheriff seize with WSS? COEA, s.55: All goods, chattels and effects of a JD are liable to seizure and sale on

writ of execution.o s.56: Land cannot be seized under WSS.

s.57: Exceptions: Can seize and sell mineral title (under MTA); license under Coal Act; Petroleum and Natural Gas Act permits.

A&W v. United Foods: Case said RRSP fell within s.55.JC attempted to attach RRSP

Bank of BC v. 225280 BC: Overruled A&W – RRSPs now exempt from s.55. Under s.55, it needs to be TANGIBLE property.

Mortil v. International Phasor: While a sheriff can't seize intellectual property like industrial designs under s.55, it can seize tangible personal property such as copyright computer software.Application by JD for order that its rights in software manuals – JD said s.55 did not get software manuals.Was software program seiz-able by WSS as good, tangible, or effect?o Para. 10: “It is tangible property…like any corporeal asset…but sale subject to

terms. Terms of sale requirement that purchaser enter trust K with JD concerning non-disclosure and prohibition of unauthorized use of the [system], similar to terms of license K…”

o Rebane : Skirting the issue!o Rebane : We are puzzled as to what is meant by goods, chattels, or effect.

In advising client, seize now and ask questions later.

Equity in Redemption, COEA , s.62 : EXAM: Something looks tangible, but may not be.o Car can be seized by WSS good, chattel, effect (s.55).o Most people who own cars don’t own it completely. Eg: Worth $50K, but

$15K owed. S. 55 allows seizure; s.62 says you have right to EIR seize and sell ($15K). You seize, pay out the amount owed (secured creditor), whatever is owed, you sell car and get EIR.

Can arise on financed or leased vehicle. Lease : After 3 years, likely to be allowed to buyout for lower price

– but often it is not worth doing!o You are seizing physical part and less tangible EIR (p.640).

Law and Equity Act , s.35 : WSS to bind goods is only good from the time of seizure! Important for corporate lawyers who still do writ searches…you won’t get title if assets are subject to WSS.

o WSS does not prejudice title to goods acquired by any person in good faith and for valuable consideration before the actual seizure.

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o If you buy as a purchaser an asset after it has been seized, you are in deep trouble.

o Under s.35(2), the JD can validly transfer the property to a BFPV, but the transfer of the title from the JD to any BFPV is subject to the sheriff's right to seize the property.

o While the sheriff doesn't have property rights/title in the property, they do have a right to seize the property if it's transferred to a third party.

o This section only protects you BEFORE it is seized: If at time person acquired title, purchaser had no notice (good faith) plus $$$, that a writ had been delivered to and remained in hands of sheriff.

If you fail on any one of these, you are toast – JC has better title than you – nemo dat.

o If you acquire and later the goods are seized, you must establish you acquired in good faith for valuable consideration, and had NO notice.

Lloyds v. Modern Cars: Any 3P acquiring property has a risk of having property seized by a sheriff under a WSS as long as the sheriff validly seized the property and never abandoned the seizure.Defendant (MC) sells caravan that it purchased from Wood – MC sells to third party – sheriff seizes caravan from 3P on basis they already seized from Wood. Did sheriff every seize caravan before sale by Wood to MC? It is not

necessary there should be any physical contact with goods seize….entry on premises…with intention….valid seizure…even where premises extensive ad property scattered…some ….seizure has been made.

Held : There was seizure by sheriff against JD. He did not merely demand payment of debt…he entered and told debtor…handed written intimation…proffered for signature…warned caravan must not be moved.

“It is said he should have done more…locked up, towed away unrealistic Woods’ refusal to sign indicated they would not have consented…”

Para. 32: Was seizure abandoned before D bought caravan from Wood? “Sheriff did not intend to abandon seizure” – 9 visits – reported claim to JD – action in taking summons no intention to abandon.

Rebane: If you do walk in seizure – need ongoing evidence of re-visiting and reminding, etc.

Re Boyce: WSS is sufficient authority for the sheriff to gain entry to debtor's property, and there is no need for a separate court order if property is located in a commercial building. WSS is sufficient to authorize sheriff to break into SDB, or anything else that is locked.Application for order directing bank to deliver sheriff contents of safety deposit box – application for “drilling order” to allow to drill SDB. Rebane: When bailiff carries out WSS and gets into building to carry out writ

(commercial or residential), the law generally is that sheriff or bailiff once inside can break locks to gain access to anything that is locked (door, safe, jewelery box).

Court: Not concerned if SDB is empty. “…a bank would be justified in insisting that it be indemnified for the

reasonable cost of drilling the SDB and restoring it to usable condition thereafter…”

Rebane : Don’t need drilling order – just remind of your authority to do so…

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Cybulski v. Bertrand: JC will be made to bear costs of execution proceedings if process to recover the balance owing on a JD was belligerent, overly aggressive, and unnecessary. If lawyer tells bailiff what to do, he runs risk of being wrong and liable.Attempt to do WSS – appeared to be statements by JD lawyer that you will be paid in a few days and don’t need to do anything – JC lawyer getting aggressive and provided WSS to bailiff, who seized trucks owned by JD and leased to Canada Post. Para. 47: “Accordingly what was put into motion for P was not only unnecessary but

unsupportable in law. The seizure of vehicles owned by N and leased to Canada Post could not stand – P was warned in letter – incumbent to find out what was and was not exempt from seizure before instructing bailiff…”

Anything owned by federal Crown is exempt from seizure. If you (lawyer) tell bailiff what to do – you run the risk of being wrong!

(b) Money and Securities for Money.

COEA, s.58: Sheriff can seize using WSS: money, bank notes, and any cheques, bills of exchange, promissory notes, bonds, specialties, or “other securities for money” may or must be paid to JC.

Sheriff holds them, and ultimately may sue in own name for recovery (bond, promissory note, etc).

S.59: Payment by party required to make payment validly discharges their obligation under WSS. If you pay under promissory note, pay amount under WSS, and the rest to JD.

Any surplus goes to JD. S.61: Sheriff does not have to sue on PN, bond, or other security, until JC

provides him with indemnity for the cost.

Most insurance $ is exempt from seizure (JD not beneficiary). Note : You may not get anything under s.58 for term life policies, but it is

possible to get some for dividend policies.

Canadian Mutual v. Nisbet: A fully paid-up life insurance policy is seiz-able as well as its dividends as a necessary step towards deciding that an equitable receiver should be appointed. A beneficiary's interests in an insurance policy wouldn't be seiz-able. Note : While there is no case law in BC on seiz-able of insurance policies,

insurance policies are often protected by statute.

COEA amended later and new sections brought in: s.71.3. s.71.3: Registered Plans:

o Sub 2: Despite any other enactment, all property in a registered plan is exempt from any enforcement process.

o Sub 3: Sub 2 does not apply to property contributed to a registered plan after or within 12 months before date on which the debt being enforced came due.

Sub b: …OR TO property that has been or is being paid out under registered plan.

Sub c: Enforcement process: NOT exempt to maintenance order!

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How Do You Execute Against Shares? Until 18 months ago, you could only seize shares of company incorporated in BC. Now you have to look at COEA and Securities Transfer Act to figure out how/what. COEA:

o Under STA, sheriff can seize Securities Entitlement (certificated or un-certificated certificates in company – including mutual funds).

o These are attachable by way of 63.1(2).o s.64.1: Sheriff may deal with seized interests in securities and

security entitlements – deemed appropriate person for dealing with and disposing of seized property.

Can do anything JD could have done (sell, collect dividends).o s.65.1: Restrictions on transfer of seized security. Vast majority of shares

on private companies (Practical Thought: Who are you going to sell it to?) 65.1(3): Subject to subsection 5, if transfer of seized security

restricted sheriff is bound by restriction (SH K, etc). 65.1(4): If person otherwise entitled to acquire or seize by

reference to pre-determined formula – some unanimous SH agreement will say if shares seized it is…x…of SHK and they have right to buy them.

65.1(5): On application by sheriff or interested person (JC), if Supreme Court considers restrictions, etc, were made with intent to defeat, delay, defraud or hinder creditors – court can make any order it considers appropriate: …other than sale. [Rebane: Can you hold it and get dividends? Not sure].

Note : No case law interpreting. Note : You have to prove intent!

65.1(8): Sheriff deemed to be party to any SH K...regarding management or affairs of issuer.

Securities Transfer Act: “Certificated Security”: Represented by a certificate. “Securities Intermediary”: Broker or trust company who manages transfer of

shares. “Mutual Fund Security”: a share, unit or similar equity interest issued by an open-

end mutual fund, but does not include an insurance policy, endowment policy or annuity contract issued by an insurance company.

“Interests in Limited Liability”: An interest in a partnership or limited liability company is not a security unless: (a) that interest is dealt in or traded on securities exchanges or in securities markets; (b) the terms of that interest expressly provide that interest is a security for purposes of this Act, or (c) that interest is a mutual fund security.

44(1): Other law may apply. o Sub 2: Law of issuer’s jurisdictions governs whether issuer owes any

duties to any adverse claimant. Division 9 deals with Seizure : Law governing civil enforcements and judgments… 48(1) Interest of JD in a certificated security may be seized only by actual

seizure of the security certificate (makes it harder).

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o Sub 2: Certificate security surrendered to issuer may be seized by sheriff serving a notice of seizure on the issuer at the issuer’s chief executive office.

49: Interest of JD in uncertificated security may be seized only by sheriff serving notice of seizure on issuer at chief executive office.

50: No certificate, you have entitlement (broker account) – broker holds all shares – shares always in broker’s name.

51: Interest of JD in any of the following may be seized by sheriff serving notice of seizure on security property: Secured party may keep certificate and you can seize that way!o If you can find certificate it doesn’t matter where issued, you can seize

it here! o If it doesn’t have certificate you can seize it at Chief Executive Office –

problem if not here.o If intermediary, you can seize it there.

JUDGMENTS ACTS 1838 AND 1840

Not sure how relevant these acts are, but might be (can’t find security). These acts create process for realization of 2 types of property. Never re-enacted in BC but is part of our inherited laws from England. They contain procedural and substantive rights. Procedure of form of charging order

that said to be available against (a) government stock, funds, or annuities; or (b) stock or shares of any public company in England.

WSS is a right; a Charging Order requires you to go to court to obtain court order. What is meant of (a)? Government stocks, something like Canada Savings Bond;

annuity held to be pensions (but government pensions largely exempt from seizure); (b) Question arose with respect to shares under WSS under old act. Does this allow JC to try to enforce judgment in BC against foreign shares? (You used to not be able to do). Could CO be used against foreign corporate shares?

Charging orders should still be in force because:(a) COEA- Nothing in the COEA or any other Act that lists procedures listed in Act as exhaustive(b) s.1 of the BC Law & Equity Act - s.3 states that "the Civil and Criminal Laws of England, as they existed on November 19, 1858, so far as they are not from local circumstances inapplicable, are in force in British Columbia"- Since Judgments Act have never been modified or replaced, should still be in force(c) s.61.1 of the COEA - While s.61.1 of the COEA says "if there is a conflict between section 58, 59 or 61 and a provision of the Securities Transfer Act, the provision of the Securities Transfer Act prevails", nothing is mentioned of the Judgments Act, so it probably continues(d) Law Reform- They considered excluding it and decided not to mention anything

Consumer Imaginet v. Infinitron: A federally-incorporated company with "sufficient presence" in BC (where shares can be dealt with effectively) will allow for the possibility of a JC getting a charging order against those shares, as long as the share register office is located in BC.Raises issue as to seiz-abilty of certain shares in federally incorporated company – WSS was out under old act – Plaintiff recovers judgment of $110K – JD only asset was all

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issued and outstanding shares of company incorporated under laws of Canada with head office in Vancouver – [under new Act you could go there and get shares] – JC brought ex parte application seeking CO with respect to shares.Could CO apply to federal company in BC? What does “in England” mean? Court orders that unless sufficient cause, Ds interest in shares shall stand charged

with payment of $110K. Para.15: It is not in dispute that sections were part of received law of BC. Contended: In looking at Act, must replace England with British Columbia and since

the company at issue was not incorporated in BC – you cannot charge shares anyway.

Court : Did not know where shares were located – are they in BC? (D refused to tell him). In BC shares could be dealt with because it is in BC where share registry is located. The company is “in BC”. Judgment Act did not require company to be incorporated in BC.

o Question now if company was “in BC”: Factors in favor: Head Office and Share Registry in BC.

Held : Shares were chargeable with the judgment. Rebane : What if Alberta company with head office there, but share registry here? Is

that enough? EXAM.o Procedure : Ex parte application; passage of time; other JDs comes

forward and says why shares should not be charged; court makes order for sale.

EXEMPTIONS

COEA, s.71: Personal property of debtor that has exemptions at any process at law and equity: necessary clothing; household furnishings and appliances not at value exceeding $4000; one motor vehicle not exceeding $5000; tools and other personal property owned by debtor needed to earn income that does not exceed $10K; medical and dental aids required by debtor and dependents.

s.71.1: Principle residence exemption of $12K if house located in GVRD, $9000 anywhere else in BC.

s.72: Works of art or other objects of cultural or historical significance brought into BC for temporary exhibit.

o Does not apply if art is offered for sale. s.73: Procedure for claiming exemptions: Almost every bailiff will advise JD of

exemption rights. Two days after seizure they must make selection.Re Lee and Rathsburg et al: JDs claiming an exemption under s.71(1) of the COEA must perfect it by informing the sheriff within 2 days, as JD loses the right to claim the exemption after this waiting period.Sheriff seizes car registered in name of JD – 8 days after sheriff gets notice from JD claiming car exempt – judge said it was.

o “Here there is no question of selection – chattel seized less than $2000 and so is exempt from seizure itself….time reasonable in circumstances”.

ss.74-78: If sheriff believes exemption being claimed exceeds value, there is process if there is a dispute between JD and sheriff to have valuation (Rebane never saw one) – appraisal process – or go to BCSC to have it determined.

RBC v. Nguyen: The exemption you can claim with respect to land, you can also claim on foreclosure proceeding.

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CHAPTER 6: EXECUTION AGAINST LAND

Very common; many judgments registered against land. Very few go for application to sell land.

Only get to this point when dealing with: (a) Oddball; (b) Fraudster. COEA, ss. 81-112: Reality is that practitioners do it much different than the Act says.

Practically, these sections to sale are very difficult.o At CL, you could not seize and sell land. Two English writs allowed

creditor to get some satisfaction from debtor land-owner (rents and profits), but could not force sale.

o BC Execution Act came along and allowed sheriff to seize and sell land. o 1911: BC came to registration system and allowed judgments to be

registered against title. COEA and equitable execution are now the only way to get satisfaction from land

from JD. COEA tells (1) what you can get; and (2) How you do it procedurally.o s.81: “Land”: Includes every estate, right, title and interest in land, and all

real property, both legal and equitable, and…(see p.649). NOTE: section 56, etc are NOT.

o CL principle is only land or property belonging to JD is exigible. o s.86: A judgment entered or obtained in BC may be registered against

title to specific land. (Sub 5) Keep in mind: (1) It is you that has to tell LTO what land it

is you are going to register against; (2) If JDs interest in land expands, your registration automatically expands – but it does not expand to other properties. If you have judgment against Mrs. K and she has title JT with her husband who dies, your judgment expands. If Mrs. K dies, you get nothing.

Procedure you have to go through to sell land:

(1) Register judgment in LTO against specific land owned by JD [86(2)] Should take no more than 2 days. Re Schiava : A JC has many means of execution available (sell goods,

chattels, etc; garnishee debts), but there is no requirement JC should exercise one mode of execution before another.

o You can register provincial, federal judgment. Notice: COEA, s.89: Every owner of property needs address – LTO mails copy

of registration to owner; if owner says he is not JD, they can apply to registrar swearing affidavit; registrar can make decision/ask for evidence.

Bank of Montreal v. Jacques: JD can't voluntarily sell his land to a third party without dealing first with the JC whose interest is registered against the land.JD owns land with 4 mortgages and judgment against title – sells interest in land – registrar makes order canceling judgment with BMO (who had both judgment and mortgage) – BMO objects to cancellation – purchasers argue at time of sale, JD had no equity in property and no beneficial interest to which BMO’s judgment could attach.

o “A JD cannot simply sell property without regards to judgments registered against it. JD is compelled to deal with JC if he wishes to dispose of

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property. If he fails to do so, and purchaser is aware…the purchaser will take property subject to the judgment. The purchaser may have a remedy against vendor if he contracted for clear title, but JD is not left dangling in the breeze as if he had not registered at all”.

o “It is not valid basis for canceling judgment simply because at time of sale, the JD had no equity”.

You cannot just register and sit there [s.91]: Registration only good for two years, but you can renew it as long as your judgment is alive. IF you miss the deadline, you can re-register after the 2 years – but the problem is you can lose priority.

Butler v. LaFarge: Any preservation of a lien or charge can only be preserved by renewal of the judgment within the expiry period; failure to renew the judgment before expiry results in a change of priority.When you start to enforce judgment against land – you file CPL against land because you are claiming interest – within 2 year period, JC filed CPL, but 2 years past judgment they did not file renewal – they said CPL saved them. Court said you cannot rely on fact you filed CPL.

Martin v. Virtanen: There are other qualifications to registration priority. The biggest are statutory Crown liens (a) Unpaid land tax; (b) CRA tax liens; (c) Other government statutory charges.

(2) Show cause hearing: o Before Master in chambers – opportunity for JD to how cause why land

ought not be sold – only way to lose is if JD comes forward and says you registered against wrong property/person, etc.o (s.92): No specific reasons listed, but possible to argue: (a) No more debt

– JD possibly paid off debt some other way and JC didn't remove charge; (b) No interest in land worth selling; (c) JC should go against other property first; (d) Offer to pay by installments; (e) Court should defer if property is JD's home.

(3) Registrar’s hearing: Go before registrar to find what interest of JD there is to be sold, and who else has an interest in property, and how sale of proceeds should be distributed (s.94).

o Registrar does report to BCSC: “This is interest in land of JD, and this is how proceeds should be distributed”.

o (Sub 3): Unless good reason is found to the contrary, the creditor first taking proceedings is entitled to his or her costs in priority to all claims under the judgment whether before or after his or her own".

(4) Obtaining Order for Sale (s.96): Court order. (Sub 1): Any land or interest in any interest in any JD is found liable to be sold,

an order MUST be made by court declaring what land or interest in it is liable to be sold, and directing the sale by the sheriff.

(Sub 2): If dealing with home of JD, court may defer sale, subject to performance of JD of terms and conditions of payment or otherwise as the court imposes.

o “Last chance” for JD to come up with payment plan.

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Sunglow Lumber: A judge may defer sale but it seems clear he may do so only if some arrangement is made with JD with respect to payment. The legislature has provided for situation where matrimonial home is involved and gives the court some discretion.

CIBC v. Muntain: Courts always retain supervisory jurisdictions over sale of land, and can exercise discretion in order.Primary JD who was son – elderly parents who became JDs as result of guaranteeing his indebtedness. Court : Used discretion and did not make order given the circumstances. Sale

not appropriate because son relied on parents’ property to satisfy debt, and since he was a bad son, it would not be fair to drag his father into it.

Rebane : It is not one shot deal – can make more than one application.

First Western Capital v. Wardle: COEA is not complete code – once order is made – court may change jurisdiction over sale and may require it to be subject to its approval. In addition to the COEA, the court has general supervisory jurisdiction over actual sale and execution of lands; JD can then use that jurisdiction to ask for a reserve price or a particular type of sale.JD made application – JC came forward and asked for judicial approval of sale.Can court require sale subject to approval? Court: COEA is not complete code – once order is made – court may change jurisdiction over sale and may require it to be subject to its approval.

(5) Selling Property (s.100-107): Get someone to buy it. Sheriff is one to sell; must not offer land for sale within less than one month from the day on which the order for sale is delivered to sheriff (give JD chance to refinance); s.101: Have to advertise in Gazette to give notice, among other things. (s.103): Plaintiff or mortgagee of the land offered for sale are at liberty to purchase at

any sale by the sheriff. (s.104): Sheriff may adjourn the sale if no bidders appear or if biddings are not

sufficient to justify a sale in opinion of sheriff. (s.105): Sheriff sells JD's interest as of the time the first J was registered. Applies

even if there are lots of judgments registered and a later judgment applied for sale and execution.

(s.106): All proceeds of sale must immediately (after deducting sheriff’s fees and incidental expenses), be delivered to registrar of court.

This process is tortured, many today try another process; Rebane uses combination: He says it is still sheriff sale but asks court to use discretion, and allow to list on MLS and use real estate agent to market and pay commission; then come back to court for approval of sale.

InstaFund: Court can require any sale to be subject to court approval because COEA is not complete code. Rebane: Best to supplement COEA – want to “maximize” equity (as opposed

to auction with sheriff).

(6) Distribution of Proceeds of Sale.

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As a result of this difficult procedure, many judgments are registered, but few go to sale process.

Reason it is still sale under COEA is because some sections come into play: (s.113): Must be sold by sheriff;

(s.110): Distribution of $ obtained under COEA sale under ss.110-111 – is treated as $ obtained through Creditors’ Assistance Act treated as levy by sheriff. Other creditors who have not registered judgments, may be able to share in the $ (p.661).

o s.110: Money realized by sale is money levied under execution within the meaning of the CAA, except that $ must be paid into court under this Part, subject to the right of costs, if any, of any JC whose judgment was registered against land.

(s.111): The money received by the registrar of the court must be distributed by the registrar to the persons to whom the sheriff would, under CAA, distribute $ levied under a writ of execution.

o Even though you did not have judgment registered, if you are JC with WSS or Certificate or judgment registered on title entitled to share on proceeds (like a levy).

Hankin Furniture v. Gill: EXAM: When dealing with (non-consensual) sale, it is sale as of first registered judgment and ALL judgments share as of that time, pro rata. Distribution of proceeds from land execution is to be shared among creditors.You have title to land – on title is mortgage, another mortgage, another mortgage, then judgment, mortgage, many more judgments – property worth $3-million – first three mortgages worth $2-million – first judgment worth $100K – 4th mortgage worth $900K – other judgments worth $5-million. [map out!] Court applied ss.110-111 and Creditor’s Assistance Act: If sheriff sale, property sells

property as of first registered judgment – because all judgments share pro rata, mortgages get paid out because of property; but CAA applies so ALL judgments share pro rata and lone mortgage gets nothing.

Rebane: This is why no bank will grant mortgage if judgment on title they cannot control which judgments will come on title.

Roadburg v. BC: If foreclosure sale, it is first in time, first in right. EXAM.SUMMARY: (1) Consensual sale – everyone has to agree to provide discharges; (2) If foreclosure, first in time, first in line; (3) COEA, or sheriff sale: You sell as of first registered judgment, all judgments however far down registered, share as of first registered judgment eliminates mortgages, possibly. Property Law Act, s.28: Deals with advances under

mortgage: (Sub 2): Deals with JC rights – further advances made by RO of mortgage contemplated by mortgage ranking ….judgments after mortgage…when advances are made, he who has not received notice in writing from registration from judgment at time subsequent Judgment has been registered or mortgage requires him to make further advances… (page 263).o Rebane : NO bank will make advances when

there is judgment on it!

Other Situations Involving Execution Against Land.

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(a) Joint Tenancies: If one person gets into $ trouble and gets judgment against him register judgment does not purport to get her interest. If she dies, all of his interest is at play; if he dies, JC gets nothing. So you have to ask how long to sit back and wait?

Registration of judgment creates lien in charge, but it does not sever the joint tenancy; however, the actual sale of property of joint tenant should not affect the interest of the innocent party. There is severance of JT when there is a sale – they become tenants in common.

Maroukis: JT can be sold, but brings practical problem JTs love each other. Court Rules, R43(1): “Where in a proceeding it appears

necessary or expedient that property be sold, the court may order the sale and may order a person in possession of the property or in receipt of the rents, profits or income from it to join in the sale and transfer of the property and deliver up the possession or receipt to the purchaser or person designated by the court”.

o Rebane got court to sell all the land, including interest of innocent party and distributed proceeds.

o R43 can be supplement because COEA not a complete code.

86(3)(c): A judgment registered against title, from the time of its registration, forms a lien and charge on the land of the JD: ...subject to rights of purchaser, who before the registration of the judgment, has acquired an interest in the land in good faith and for valuable consideration under an instrument not registered at the time of the registration of the judgment.

o Purchaser with binding purchase deal, at time entering, judgment registered, good faith and fairly…instrument not registered in time.

My interest can defeat that. EXAM.

(b) Matrimonial Property: Depending on when things happen – when interests in property can crystallize. You can have judgment you think is registered against title, but there could be vesting order that vests some in spouse. “Scary”.

Family Relations Act authorizes title to be vested in both spouses.

This can affect any registration of any judgment against title.

(c) Building: When you register against land, are you getting building that is on land? Depending on nature of what is on the land, it may not be a fixture and form part of the land (mobile home). You need to think about whether mobile home is good, chattel, or effect.

o Construction trailers on sites no go.

(d) Strata Titles and LicensesSection 166 of the Strata Property Act indicates that a judgment against the strata corporation is a judgment against all strata lot owners.

See the Seedtree case below, whereby strata lot owners can't get out of this by offering to pay their share of the liability

Strata Plan VIS 4534 v. Seedtree Water Utility Co. All owners of a strata are jointly liable for a judgment against the strata corporation, and the JC is entitled to payment in full before any charges will be released.

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A group of strata owners wanted to pay their 25% of a judgment, which was their share of the liability and to have the charge removed against their strata lot.Held: JC not required to grant partial releases upon partial payment.

CHAPTER 7: ATTACHMENT OF DEBTS

DEFINITIONS We are now talking about having a judgment, with JC and JD, but the judgment has

not been paid. Garnishment not known at common law – first came to BC in 1903 (Attachment of

Debts Act). In 1979 ADA became Part 1 of COEA still today. Garnishment is a debt collection remedy which allows a creditor to serve a third party

(“garnishee”) with an order of the court directing him not to pay a debt due or accruing due to the debtor, and either to pay it into the court for the benefit of the creditor or to dispute liability to do so.

Very important part of enforcement of judgments it is good for JC: (1) You get dollar-for-dollar return; (2) Rarely a requirement to share in garnishment. None of the Creditor Assistance Act provisions apply ! (3) Good for friendly JD – you are not selling all their assets – only affects cash flow.

Four steps : (1) Issue VALID Garnishing Order; (2) Serve GO on Garnishee, with debt existing at time of GO and service; (3) Hope there is payment of $ into court by garnishee – but he can put in $ and dispute, or illegally ignore [also file dispute and not pay under s.17]; (4) Application for payment of $ out of court. There are 4 methods of paying out to JC in the COEA , just use one most appropriate on the facts:

a) s.12: Formal orderb) s.13(1)(a): Without order, 10 days notice with no notice of intention to dispute.c) s.13(1)(b): If default J taken with 3 months silence/doing nothing by JD.d) s.15(4): Without order method where there is written consent of JD. However, s.9(2) has a common prerequisite for all 4 methods – service:

9(2) Debts bound from time of service of order"A copy of the GO must be served at once, or within time allowed by judge/registrar by memorandum endorsed on order, on D, JD or person liable to satisfy judgment or order".

GO is judicial order: Subject to judicial review and discretion to set it aside **. o In order to set aside, there must be a payment plan in place.

Sometimes garnishees ignore valid GOs, JCs often don’t know any better. You can object, as garnishee.

Obtain GO and serve it, see if anyone objects. COEA, s.3(2): A judge/registrar may, on an application made without notice…order

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

o (Sub e): Must say garnishee is indebted, and residence. What can you acquire? [3(1)]: Debt due or debts due. A debt due includes: debts,

obligations, and liabilities owing, payable, or accruing due. o Debts, obligations, and liabilities does NOT include an obligation or

liability not arising out of trust or K, unless judgment has been recovered on it against the garnishee (eg: cannot be ‘negligence’ claim).

o There must be property fitting description of d/o/l that is due or accruing due.

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o Must be in existence at time GO is sworn – same circumstance must be in existence at time of service of GO.

(s.9): Service of GO actually binds the debt. (s.21): Payment into court by garnishee extinguishes debt garnishee owes to JD.

General rule is that only a debt with no conditions can be garnisheed. To some extent, courts have broadened scope of rule of GOs. Basic test of unconditional debt: “At moment in time GO was issued and served, the JD could sue the garnishee on that debt”. It doesn’t have to be immediately payable: “payable or accruing due”. Eg: If you owed someone payable on July 10, the strict test

says it could not be subject to GO. But, if it is only “pure passage of time” not condition it can be garnisheed (eg: promissory note, etc).

Courts then looked at terms and conditions of debt that could be ignored as unimportant or irrelevant: If it is a matter of “pure technicality” no condition (eg:

filling in paperwork).

CIBC v. Dabrowski: There must be a debt in existence at the moment the garnishing order is issued in order for the garnishing order to be valid. Payment by garnishee into court discharges debt obligation.On March 3 at 10am, CIBC issued GO directed to auctioneer who was selling farm equipment of JD – CIBC wanted proceeds of sale – sale occurred at 11:30am that day – auctioneer got GO before paying $ to JD – paid $ - 3 days later after auctioneer paid proceeds, BMO issues another GO to auctioneer.Is first GO valid? Held : No. At time of issuance of GO, and at time of service,

there was nothing owing from garnishee to JD. It could not be cured by subsequent coming into existence (equipment actually selling). It was truly a conditional debt – not just passing of time – who could know it would be sold?

Is BMO GO valid? Held : No. $ was already paid into court. Garnishee no

longer had debt obligation. BMO would have been successful if served auctioneer

moved slower.

Vater v. Styles: GOs cannot attach to conditional obligations and debts.JC issues GO at MetLife – Styles had insurance policy with MetLife where he was receiving disability payments – normal time of payment was in November of each year – JC served GO in August – when time came for payment in Nov, $ was paid into court.What GO valid? Was there d/o/l in August? Here, there were two clear conditions of payment that were not fulfilled at time GO

was issued. In November, needed: (a) JD had to be alive – if JD died, policy said MetLife didn’t have to make payment; (b) Policy clear that JD still had to be disabled.

Held : GO invalid. Para.10: “An accruing debt is one not yet payable but still an existing obligation. That

cannot be said where conditions may arise which would either prevent payment or vest the amount in another”.

Bel-Fran v. Pantuity: Debt may be accruing even though there are conditions to be fulfilled, as the debt can come into existence if the conditions are mere matters of

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procedure and administration. Current accounts are garnishable. Term deposits are garnishable.Raises issues of ability to garnishee bank account – JD wanted to attach judgment to deposit account – dealing with $250K term deposit – more conditions to get $ than filling out withdraw form or put in bank card (forms signed, 7 days notice, etc).Was term deposit garnishable? Was debt due or accruing due? Held : Yes (para.16): All conditions of term deposit receipt concern only the bank, and

are mere matters of procedure and administration and are all satisfied by service of GO…while a third party might hold the term deposit receipt as security for a loan, I do not think that in the face of the clear terms of the deposit receipt a 3P could obtain any rights against the bank.

Current account is $ standing to credit of someone at bank – you make simple demand for payment when you withdraw funds – to some level until demand is made, there is no debt.

Ahaus Developments v. Savage: Garnishee paying JD directly creates possibility of liability. When in doubt, garnishee should pay $ into court and dispute. Debts subject to a condition to pay out and discharge a mortgage can be classified as a debt "accruing due" and be subject to garnishment.Notary Public was representing vendor on sale of real estate – notary received purchase $ - subject to conditions and undertakings to remove mortgages, etc – notary paid balance to JD (had been served GO) – did NOT dump it into court – JD brought application against garnishee for failure to comply with GO. Rebane : If you fail to observe GO, garnishee can have judgment registered against

himself. Options : Do NOT pay JD directly. Pay it into court; file dispute, etc. Are debts subject to condition of discharge of mortgage and debt owing or accruing due?

o Para.21: Rights and obligations of D and garnishee had crystallized at date of service of GO – conveyance of title complete. Amount required to discharge mortgage was agreed to, TD was bound to deliver its discharge. Thus upon payment of specific amount obligation to clear title.

It was “accruing due”.

Access Mortgage v. Stuart: Rent not garnishable in advance of day payment is due.JC issues GO for five consecutive months – debtor is landlord entitled to rent under lease – Aug 23 GO was designated to catch rent on September 1 – issue became whether it was valid GO. Court : No. Each order invalid because between time affidavit sworn and served, the

tenant could move out rent would not be due (damages might be, but not rent). Held : Conditional debt. Rebane : As practical solution, call tenant and say have GO sworn today; say we will

send you GO on 1st…getting tenant to help you out.

Wages and Salary. More about nuisance than getting money.o Rebane : Timing problem. If you have to issue GO when due, if employee is paid on

hourly basis good. Harder if you get salary have to work whole month to get $! 3(1): “…and wages that would in ordinary course of employment become owing, due,

or payable within 7 days of affidavit being sworn…”o Deals with monthly or bi-monthly employee.o Rebane : Never gets excited about it – not a lot of $ at stake.

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Further, there are exemptions for wages and salary: s.3(5): 70% of any wages due by employer to

employee is exempt. s.7(a): Separation or alimony: 50% of any wages are

exempt that do not exceed $600/month and 33% of wages in excess of $100/month

s.4: You can vary exemptions!o s.6: If dealing with provincial public servants, serve GO on deputy minister of

finance. If federal, there is another act dealing with these.

What do most people do with wages? Put them in bank account! BETTER to go for bank account not wages anymore.

If paid into joint account, most often cannot access co-mingled. But what if you can establish that all the $ coming into the account only came from JD?

o Make this argument. In protecting themselves, JD can: (a) Set up joint account with person who makes $;

(b) Set up account only for wages and salary – argue still salary (unlikely); (c) Turn the money into cash!

Former Exam Question: JD was jockey – jockey makes $ with mount fees and by winning races (10% of winning purse) – winning racer gets 60% (of which jockey gets 10%). Can you garnishee that money?

o Problems : (a) Who do you serve (racetrack owner, runners, etc)? Who is obligated? (b) When can you serve? It has to be after race, before track has paid the rider! Before the race is purely conditional; (c) Where does d/o/l rise out of? It is a statutory obligation that says this is what is required to be done (regulated), not a K!

JURISDICTION How do you locate debt? Where is debt located? Where is garnishee located? What if Bank of NS hit with two orders from two different courts? BC started to develop different test than other provinces.

Bank of NS v. Mitchell: More broad interpretation by BC courts for circumstances where debts can be garnisheed, even if not payable in province. You must serve branch where account is located to garnishee bank account. To garnish employee wages, service can take place anywhere the company carries on business in BC as long as the garnishee is in the province.Former wife of JD trying to enforce maintenance order – at time of m/o, all parties in BC – but husband JD is transferred by bank to office in West Indies – part of his salary paid in Ontario, and part overseas, none in BC – JC issued GO and served it on branch of BNS in Victoria, BC.Could JC have ability to issue GO on debt not payable in BC? COEA says nothing of debt being located here. It says that garnishee has to be

within jurisdiction of court. Court : In order to obtain GO for BC, the debt’s only connection required with BC is

that garnishee is here. BNS is here! Location of debt is irrelevant. Rebane : What if Ontario GO hit at same time? Who would win? Ontario JC would

say here. It can be a conflict issue. Bank Act, s.462: If you are serving writ of enforcement or GO on a bank to get a

bank account, you must serve it on actual branch where account is located. Court says in his case, they weren’t trying to garnishee account in Ontario, they

were trying to get wages and salary – and the employer could be found in BC!

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Recall : Case involves family dispute – court trying to find way to deal with it.

Univar v. PCL: Example where out of province bank account was garnishable. The Bank Act presents a merely procedural hurdle to JCs and can serve garnishing orders ex juris on out-of-province bank accounts with leave of the court.Circumstance dealing with bank account, not salary. Held : Court held that the garnishee was in the jurisdiction of the Court under s.3(2)

(e) where it had a presence in the province. TD Canada Trust was ordinary resident if it had a place of business in BC. Therefore, they were in the jurisdiction of BCSC because they had branches here. However, pursuant to the s.462(1) of the Bank Act, P was required to serve at the branch at which the funds were located. Therefore, P was required to obtain leave to serve garnishing orders ex juris, but once they did, they could garnish the bank account in Ontario.

Para 14: “It is my opinion that master placed too much emphasis on s.462(1) of the Bank Act which sets out requirements for serving court orders and other dox that affect bank accounts, and too little on s.3(2)(e) of COEA which requires a garnishee to be within the court’s jurisdiction…the bank was the garnishee, not the branch…where a garnishee has a presence in BC, nothwithstanding the situs of the debt may be in another jurisdiction, the debt is subject to garnishment in BC.”

Para.15: “TD Canada trust is a garnishee within jurisdiction of court (BC)…Where a party seeks to attach funds on deposit in a branch of the bank – it must serve the branch where those fund are located. Where the funds are located outside BC, it must obtain leave to serve the GO ex juris”.

o Rebane: You don’t have to serve ex juris if garnishee is bank, but because you have to serve bank at branch where located get order to serve ex juris.

Gives way to attach debt not payable here. What if served with BC GO before Ontario GO? Ontario courts say you can only located debt there, but BC courts say here too!

Garnishing Order Absolute Process: GO refuses to pay in. You can turn into judgment against garnishee. COEA, s.14: You can execute in enforcement proceedings. S.11: Getting order. When judge may order payment with garnishee with costs.

PRIORITIES

Secured creditors beat unsecured creditors. Garnishor is unsecured creditor, so they may be subject to other priorities (eg: wage claims under s.15 of ESA).

Garnishment is a good remedy for the execution of J (both pre-and-post J), but there are limitations:

(a) Priority – first in time, first in right- The first person to effect execution gets $ to exclusion of other creditors- This applies to garnishment but not writs of execution for seizure and sale, where the creditors share pro rata under the Creditors Assistance Act- If there isn't enough $ in GO, creditors can issue a WSS to get judgment.

(b) At what point does the Court determine priority?i) Post-Judgment Garnishment- Again, under s.9 of the COEA, "service…binds the debts, obligations or liabilities in garnishee's hands from the time of service or notice"

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- This is "first in time, first in right", so the creditor who serves the order on the garnishee first gets priority without having to share pro rata.

(ii) Pre-Judgment Garnishmento - s.9 doesn't have this effect, as these are simply orders by the court to the

garnishee to pay money into court and doesn't create any priority at the moment of service.

COEA, s.9: Service of GO binds the debts. Three possibilities: (a) Property is transferred absolutely to JC; (b) Service of GO could create some sort of equitable charge in favor of JC (proprietary interest); (c) Service of GO does not create proprietary interest but only personal right in favor of JC.

Evans v. Silicon: Under s.11 of the COEA, if a garnishee does not comply with a GO or dispute it, a JC can get an order absolute to go after the garnishee's assets; however, since this is still an ex parte application, JC has a duty to provide full and frank disclosure of all the circumstances. COEA, s.11: “When judge may order payment by garnishee with costs”. Para. 23 : “Order Absolute is like ordinary judgment, but differs in two ways: (a)

Ordinary judgment is primary in nature – GO is secondary to the cause. Garnishee is stranger to main dispute – only s.11 applies; (b) Has draconian effect of exposing garnishee to double liability.

o Therefore, judge must be apprised of any and all facts that may affect discretion – even ones that assist or hurt your case.

Rebane : Under GOA – give notice to everyone under the sun – including potentially affected creditors.

BC Millwork v. Overhead: Bind means one thing when dealing with pre-judge GO than post-judge GO. Service of a pre-judgment GO simply freezes the debt (money is tied up and stays in court); rather than create an equitable charge; service of a post-judgment GO creates an equitable charge in favor of the garnishing JCTwo creditors and one debtor – BC Millwork (C) issues pre-judgment GO – garnishee pays $ into court – Overhead (C) issues writ and obtains default judgment (becomes JC), and applies for equitable charging order on court. Only can get CO when property of JD. If pre-judge GO created proprietary interest in

favor of BCM, there was nothing for equitable CO to attach to. If only personal obligation, money in court is property of JD and you can attach with equitable CO.

What is effect of pre-judge GO? Does “bind on service” of pre-judge GO mean that proprietary interest is created? (Para.26): “…in BC an attaching order obtained after judgment forms and equitable

charge on a debt owing by the garnishee to the JD from the time of the service upon him of the attachment order, but that service before judgment does not form equitable charge on debt until such time as judgment be obtained [you have to get judgment, prior to that, P has no equitable/proprietary interest still property of D…just tied up in court]…Its effect before judgment seems limited to ordering the $ to be paid into court to await final disposition by the court and preventing the garnishee from paying the debt…”

Case stands for proposition that PJGO simply freezes, no interest arises, and no priorities created. Therefore, money in court can be made subject to an equitable charging order.

Held : For Overhead equitable CO is first in priority.

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Pacific Forest v. Twin Stag: Until a garnishor actually receives money from the court, they are still an unsecured creditor and can be dispossessed of the money by Crown super priorities.TS is debtor who owes $ to many creditors, one of which is PF – PF is JC, TS is JD – JD is owed $ by Crown Forest – PF obtains GO and tries to get CF to pay $ into court – TS had already assigned all accounts receivable to a bank.Who has priority to $ owed by CF to TS? The bank who has security, or TS who has issued GO? In BC, secured wins easily.

Procedure of GO:1. Issue GO on ex parte basis without notice (s.3).2. Serve GO on garnishee. In order to attach, it must be due or accrued at time sworn

and served. IF debt paid in interim no luck.3. Neither COEA or G Act gives clear instructions on what garnishee has to do.

o But if G says they know nothing in Dispute Note (I don’t owe $) – don’t pay JD $ a few days later! If unclear, either pay $ in and file dispute note, or hold it. NEVER pay the money directly to JD.

4. Grounds for disputing: I don’t know any $; I don’t owe any $ now.5. If everything fine and $ is paid into court, work to have $ paid out.

o Notice process (s.13): $ may be paid out to JC if notice given for intention to pay out and given to JD; JD does not within 10 days file a dispute note.

o If default judgment is obtained, wait 3 months and court will then pay it out.

CHAPTER 8: EQUITABLE EXECUTION

Equitable Execution is an independent remedy – depends on having a legal method of execution. Essentially it is the practice of granting an equitable substitute for execution at common law in respect of equitable property of the debtor by the appointment of an equitable receiver.

o Primary Q : Can a JC use equitable execution to reach assets of JD that would otherwise be free from execution or garnishment?

Equitable Relief : Name of equitable remedies created by courts of equity. Historically there were 3: (a) Equitable Receiver; (b) Equitable Charging Order; (c) Sequestration, which no longer exists.

Originally, these were used to enforce judgments made out of Court of Equity – but eventually used to assist CL plaintiff, where legal process was not sufficient to allow him to collect on a judgment.

EQUITABLE RECEIVERS

ER is a court ordered receiver. ER collects specific property of a JD and either: (a) Pays $ collected to JC; (b)

Collects assets, sells them, and pays proceeds to JC. There is no restriction on who can be ER (sheriff, JC, trust company, etc). BCSC is only court with power to appoint ER (Law and Equity Act). Later, equity follows CL became the principle.

When can you get ER appointed?

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(a) Traditional Approach. There are rules and there is a test – if you can meet them, you can ask if it is just

and convenient to appoint ER. Test :

o (1) Property must be legally exigible at CL or by statute; o (2) There must be an impediment to legal execution or a special

circumstance. If there is no legal impediment or special circumstance no ER just because it is convenient. Traditionally, an impediment was beneficial interest in land. Another example was money owed by Crown.

o (3) Is it just and convenient to appoint ER under all circumstances. Rebane : This approach produces inconsistent decisions.

Vancouver A&W v. United: Trying to execute against RRSP against JD – JD attempted to use WSS and GO – sheriff refused to serve WSS – JC applies for ER to be appointed.Should ER be appointed? Held : Yes. Asset defined as class of property. Para.31: “…the interest in fund is personal property and is not rendered immune from

claims of creditors, but that due to its nature, neither remedy to its attachment….equitable remedy is clearly indicated…in any event…JC must show there is substantial legal impediment…before he will be entitled to …”

Para.32: Test is met: JD has legal judgments for legal debts…personal property… normally subject to execution…but peculiar nature (foreign shares)…there is impediment.

Peterson Livestock: Exigibility of the asset depends on the scope of the question the court asks itself, but gratuitous payments not yet earned will probably not be exigible.JD was aboriginal – JC attempted to seize and sell property off reserve land – realized only a small sum – JC found that band members were to receive payment from government for sale of minerals on reserve land – applied for ER to collect. Court : No ER. Property was not legally exigible (no debt, liability, obligation).

(b) Modern Approach. Ultimately a matter of judicial discretion, but usually do what is just and convenient

in all the circumstances.

NEC v. Steintron: [Example of court not using traditional test]. Since appointment of ERs is an equitable remedy, it is possible to convince the court to break all of the well-established rules in favor of a plenary discretion to use the remedy where it is "just and convenient" to do so. Courts generally refuse to appoint ERs if ordinary attachment procedures can be used, unless SCs exist that make EE more convenient. SCs often involve fraud, asset-hiding, dishonesty, and trying to make oneself judgment proof.JD was distributor of electronic equipment applied to set aside order of ER – said no special circumstance and JC had legal means of execution on its judgment – prior to obtaining judgment there was Mareva Injunction.Could ER appointed afterwards be set aside? Held : No.

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Reasoning : There was special circumstance. There was element of fraud on part of JD: dissipating assets when MI in place.

Rebane : Court said special circumstance is what really matters. Rebane: Special circumstances often involve fraud – they try to make

themselves judgment-proof doesn’t work.

Interclaim v. Down: It is unlikely to get a receiver appointed for worldwide collection of JD property because a receiver must be recognized in that other jurisdiction as being properly appointed. Special circumstances established by JC may permit the court to disregard the second rule (impediment of legal process). Para.8: “Court will generally refuse to appoint ER if ordinary attachment

procedures can be used, unless SCs exist that make equitable execution more convenient”.

o Relative convenience is measured by considering: (a) Amount of judgment; (b) Costs of the receiver weighed against the likely return to the JC; (c) Capacity of JD to hinder legal execution.

Types of circumstances that will support finding that EE is more convenient: (a) Circumstances making it practically very difficult, if not impossible, to obtain any fruit of his judgment; (b) Where assets exigible, applicant could benefit by appointment and there is an impediment to applicant’s recovery by legal process so SCs exist that warrant the intervention of a receiver; (c) Likelihood receiver will be able to realize upon considerable assets that would otherwise remain sheltered.

Para.12: “…modernized…”

Factors to consider in determining whether remedy is “just and convenient”:1. Cost of application in appointing receiver;2. Value of assets to collect;3. Extent of JCs efforts to exhaust other legal execution procedures.

(c) Absolute Discretion?

Kline v. Young: [Unclear if it is good law]. Even if JD acts fraudulently, appointment of ER may be barred by statute. Pension benefits, disability payments, and other forms of social security benefits often exempt from execution processes by statute, and this includes EE.Whether an exemption from execution contained in BC Pension Standards Act precluded appointment of receiver who was being appointed to collect pension benefits?o Held: Appointment prohibited by statute.o Rules of Court, r.47: Order may be enforced by appointment of receiver.o Rebane : Appointment of receiver was asking for appointment of receiver

under r.47. This rule created different type of receiver than LEA. Rebane : If court is correct, can you not show up in court saying court

has no discretion – don’t have to prove any test, etc – same as getting WSS…only thing that would matter is “just and convenient”.

EQUITABLE CHARGING ORDER

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ECO is not same thing as Judgment Act CO. This is circumstance where you have JC and JD and $ in court. The JD has an

interest in the $. Old practice was to appoint ER to collect funds when payable. Courts decided it was redundant to appoint ER for something that was already in court’s control.

o Result : Created ECO. o Key is to establishing JD has an interest in funds in court – always in

different actions.

If JD's money is sitting in court, and JC knows of existence of other creditors, two options:(a) Apply for ECO

- See below…gives a 6-month waiting period to get the funds paid out(b) Use s.26 of the Creditor's Assistance Act

- Fund held in court may be paid over on application to the sheriff:"If there is in any court a fund to which an execution debtor is entitled, the money, or enough of it to meet claims in the sheriff's hands, may be paid over, on the application of the sheriff or any party interested, to the sheriff as money levied under execution within the meaning of this Act"o Which procedure to use depends on whether JC has knowledge of other creditors.

Chima v. Hayduk: In absence of other claims or JCs (that court knows about), there is no reason not to pay out immediately from the funds sitting in court, and there is no need to wait 6 months for payment.$ in court standing to credit of JD in another action – JC gets ECO over all funds.Should funds be paid to JC right away? Was it necessary to take an order nisi and wait 6 months? Options : (a) Pay $ immediately; (b) Wait 6 months for order absolute. Para.16: “Order can go in this form because there are no other equities that might be

attached to other funds. Were it otherwise, the precautions of a period of time for adverse claims would be appropriate”.

Rebane : You as lawyer should NOT say there are no other claims. Get the client to do so in affidavit – and make sure he does search first.

Rebane : Often make these applications without notice.

Rennison v. Sieg: If there are other creditors/claims to the money in court, there can be an order nisi, then wait 6 months, during which time anyone can come to court and establish a claim for the money. After 6 months, the court can make an order for payment.Application by JC for ECO against $ paid into court – dealt with MVA where JD was plaintiff – JC obtained ECO.When could funds be paid out? JD argued against payment out because he had other creditors. Para.7: “…proceedings for CO may be commenced ex parte (without notice), and an

order nisi is made. This order provides that the NO has to be served on JD and may be made absolute 6 months after granting of order. In intervening period, JD and presumably others having equities or priorities can show cause to vary or discharge the order nisi.”

Para.8: “…will give JDs and any person claiming authority to advance their claims (including secured creditors)…”

Held : Order nisi…6 months waiting period applies.

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Accredited Mortgage v. Grealy: ECO ought to be available against funds in the hands of a trustee where legal execution would otherwise be available.Funds in hands of trustee in bankruptcy.Could ECO be made against funds not paid into court? Para.12: Purpose of CO to allow creditor to execute on a judgment where legal

execution is impossible….funds in hands of trustee cannot be garnished just as funds in court cannot be garnished…EE ought to be available as against funds in hands of trustee where legal execution would otherwise be available…”

CHAPTER 9: EXEMPTIONS, IMMUNITIES, PRIORITIES

EXEMPTIONS AND IMMUNITIES FROM PROCESS DEBTORS

At CL there were few exemptions. BC has not Act with general exemptions, but there are various provisions in several

statutes that a JD can invoke.

(a) Provincial Legislation.

COEA: (page 618ff) 3(5): 70% of wages. 3(7): Different numbers for family law creditors, etc. (page 621) 4: You can apply to vary exemptions. 71: Necessary clothing; household furnishings up to $4K; one motor vehicle;

tools of trade; medical and dental aids. 71.1: Principal residence up to $12K. It means you get the $12K as first $ that

comes out. $9K anywhere else. 71.3: RRSPs; RRIFs. 72: Types of art – cultural and historical significance – on display. 73: How you select exemptions (household goods, etc). If a fight over value over

goods for exemption, there is process involving appraisers, etc. (page 646) 96: If dealing with sale of JDs home, court has discretion to stay the sale if

payment plan is agreed to.

Insurance Act: 54(1): If beneficiary is designated, life insurance $ from time of happening event in

which insurance $ becomes payable, is subject to claims of creditors of insured. o If you have $3-million life insurance policy, and you die – the payout does not

go to your estate – it goes directly to beneficiaries. You MUST have beneficiaries! If not, it goes to estate and then

creditors have right to make claims against it. Note : If the beneficiary is a JD, the JC can get that $ from them.

54(2): Exemption: You need designation in favor of spouse, parent, child, grandchild whose life is insurance: If they are beneficiary: payout is exempt from seizure.

o If one type of policy (annuity) exempt if designated to spouse, child, grandchild, or parent.

o Rebane : Be very careful with insurance – go slowly with examination for discovery.

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Re Sykes: RRSPs will be equivalent to a life insurance policy if the insurer undertakes to pay $ on the happening of a certain event, such as death.Sykes found out he owed Revenue Canada huge sums of money, so he transferred $90,000 from his RRSP to an annuity-type RRSP and designated his spouse as the beneficiary (fraudulent purpose) – insurance-style RRSPs with annuity tied in.Does the definition of “life insurance” in s.54(2) protect RRSP money in the hands of an insurer against execution? Held : Conveyance set aside because of fraudulent conveyance. Money

exigible. Intention is key! Note : Since RRSPs are now expressly protected by COEA, don't need to

worry about forcing a RRSP under the Insurance Act anymore. However, can still get at RRSPs if JC can establish JD fraudulently conveyed assets into RRSP to hide those assets from creditors.

Workers Compensation Act: 15: Cannot assign, charge, execute against benefits from WCB.

Crown Proceeding Act: 6: Cannot take execution against provincial Crown. Doesn’t mean Crown is immune from liability, just that JC cannot seize and sell

Crown assets.

(b) Federal Legislation.

Canada Pension Plan: 65(1.1): Exempt either at law or equity. Subs 2 and 3 have exceptions.

Old Age Security Act: 36(1): Exempt either at law or equity. Slight exception for payments you should

not have had or overpayments.

Indian Act: 89: Real and personal property of an Indian or a band situated on a reserve not

subject to charge, pledge, mortgage, seizure, attachment, levy, distress, or execution in favor of any person other than an Indian or a band.

o SCC: Commercial creditor – could it seize funds provided by feds to native band for essential service?

Court took narrow approach: Can seize funds belonging to band for debt owing to construction company – because funds held off reserve financial institution.

Crown Liability and Proceedings Act: 29: No execution on judgment against federal Crown.

CREDITORS WITH SPECIAL RIGHTS

Legislatures have decided that certain types of creditors deserve special treatment (processes of liens, charges, and trusts).

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o Element of compassion to debtor-creditor law by according certain debtors special protection through exemptions and deferrals of execution on certain types of assets.

Landlords (Rent Distress Act): Landlords for arrears of rent have ability to “distrain” against assets of tenant on the premises. They can sell assets for arrears of rent (super priority). This priority defeats secured creditor’s claim unless it is purchased $ security interest.

o If you distrain, you are confirming the lease.o You cannot distrain and terminate a lease at the same time. If you distrain

and try to terminate, it brings end to rent distress. If you sell good, you are liable for conversation and are liable to quadruple damages.

Four Categories : (a) Artisans; (b) Family creditors; (c) Employees with respect to unpaid wages; (d) The Crown.

(a) Artisans: “Repairers”, “Warehouse”: Lien: Right to retain possession of property until a debt owing to a person retaining

the property is paid. Statutes create a lien in favor of the artisan with the power to sell.

o The lien may have to be perfected, and the statute may give a special right of sale to the artisan.

Warehouse: (ASK) Woodworker Lien Act, s.2: [Not used often]. Blacksmiths, artisans, and all others

connected with labor or services…or person performing labor or services in connection with logs and timber has a lien on them for the amount due for the labor or services.

o Can sell timber for unpaid wages. Repairers Lien Act: [Not used often]. s.2: Mechanic or other person who bestows $,

skill, or materials on any chattel, and improves its property or increase its value. Become entitled to lien on chattel for the amount or value of the $, skill, or materials bestowed.

o You have to be unpaid for 90 days in order to sell.o Notice : 2 weeks, by ad in paper published in city where work was done.o After you sell, proceeds go to mechanic for amount unpaid, surplus goes to

person with items sold.

(b) Family Creditors:o Family creditors have super rights that no unsecured creditors have.o Generally, 3 types of family orders: (a) Custody; (b) Property; (c) Support and

maintenance.o Support/Maintenance has received the most attention legislatively.

o Family Maintenance Enforcement Act; Family Relations Act creates rights; Garnishment Attachment and Pension Diversion Act (federal).

o Results of statutory package: o (1) Government enforcement programs: Family creditors can give unpaid MS

orders to Director of Main/Enforcement. The director takes steps to enforce those orders (FMEA, s.4).

s.5 Once director takes order exclusive right to do enforcement. o (2) All enforcement methods are available to family law creditor.o (3) Creation of new and improved methods of enforcement for family

creditors.

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s.734: With respect to family order for MS, can issue continuing GO. So it gets debts and moment it was served, AND any debts coming up for next 12 months.

s.23: Segregated ability to have committal hearing (quicker). s.25.1: Gives way to attach lottery winnings. s.29: Appointment of receiver – ability to do so without equitable

execution step. s.29.1: Ability for director, where there is order for arrears of > $3K,

forward order to ICBC, who upon getting it must not issue new or renewed driver’s license to JD or must not issue new or renewed license plates for vehicle owned by JD.

o (4) Eased rules of reciprocal enforcements of judgments. Meant to catch those who flee jurisdiction (s.17).

Director can take order and deliver to director in another province who must automatically take steps to enforce it.

o s.28: General priority family law creditors have over civil creditors (equal degree).

(c) Employees with Respect to Wages. (Employment Standards Act)o Priority given to employees for amounts owing to wages and salary. o s.87: Unpaid wages constitute lien, charge, and secured debt in favor of director,

dating from the time wages are earned, against all real and personal property of the employer or other person named in a determination/agreement/order… o s.87(3): Amount of lien and charge is payable and enforceable in priority over

all liens, judgments, charges, and security interests, including any claim and right of government (WCB, contracts, insurance claim, PPSA interest, etc).

o s.87(5): Priority over mortgages: Only to extent of mortgage monies advanced after certificate of judgment was registered on titles.

o s.88: Requires interest to be paid.o s.89: Director can issue GO.

o s.89(5): Continuing GO until determinations canceled by director.o s.91: Determination/agreement/order may be filed at any time at BCSC, and then

becomes judgment (full enforcement rights).o s.92: Before registering judgment, director can seize assets of party against

which determination made.o s.96: Corporate officers are liable (if there at time wages earned or should have

been paid) – liable for up to 2 months unpaid wages for each employee.

(d) Crown: CL Rule of Crown Priority: If 2 unsecured claims over same asset Crown gets priority. Legislative Priority: Crown legislated super priority – generally relating to payment

of taxes.o eg: GST tax lien, although not registered anywhere, has priority even over

secured debts.o All Crown needs to do is establish a debt.o Becomes interesting in selling of businesses. o Only time CRA loses is if there is a bankruptcy (secured creditors beat CRA

in a bankruptcy).PARTIAL ABOLITION OF PRIORITY

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o CL Rule of creditors’ priorities: First in time, first in right. o Creditors Assistance Act tempered CL partially (p.689).

o ONLY applies to WSS.o No provision to include all debts in sharing (only those with writs).o All property is not distributed (only that seized and sold).o No expiration of debts at time of sharing.

o s.2: When a good, chattel, effect is seized and sold, there is a levy; the sheriff must enter promptly in a book, a notice stating the levy has been made, its amount, and date of entry.

o s.3: Sheriff has to hold $ for one month and has to distribute pro rata $ amongst those creditors who have WSS or certificates in the hands of sheriff at that time.o Sheriff obligated to distribute proceeds from JD's property pro rata among

creditors who delivered writs of execution to him within 30 days of the levy.o Within this 30-day waiting period, the sheriff has to keep levying and seizingo He looks at what is owed, looks to see how much is levied in the "big book", and

determines if there's enough to pay the debts…if not, must keep levying. 1. What is a Levy ?

o Levy is payment of $ by force; there is no levy until sheriff has $ in hand.o Rebane : Some cases say when no seizure, and voluntary payments made by JD

no levy. BUT if payment made with threat of seizure forced payment, and may be levy.

o In BC look to s.23: Levy must not be entered if without sale by sheriff, all executions and claims in hands are withdrawn or paid in full and no other claim been filed with registrar.

Sub 2: If debtor without a sale by sheriff pays part of the amount owing on an execution or claim in the sheriff’s hands, and at the time, no execution in sheriff’s hands sheriff must apply amount paid to execution or claim in sheriff’s hands.

Therefore, s.23 allows process to be aborted half way through.

Benjamin Moore v. Finnie: Levy must be actual receipt of dollars paid to the sheriff, compelled by seizure – not when summons is served. The sheriff cannot make entry into book until he knows how much to enter. Jan 20th Notice of [GO] to JD by 3rd party – May 7th 3rd party paid amount to sheriff – sheriff makes entry on book on May 7th – in meantime, 10 other creditors get judgments on debtor and deposit WSS – first JC contests distribution on basis that he was entitled to all $ because levy was completed on Jan 20th.When is there a levy?o Held : Levy took place May 7th when sheriff receives $, not when items seized. Had to

share.

2. What Processes Escape CAA ? There are massive gaps in coverage under CAA, so the only execution creditors that always must share pro rata are those that proceed by way of:

(a) JC proceeds by WSS in either Provincial or Supreme Court;(b) Sheriff actually seizes and sells JD's property.

However, there are 3 categories of levies that escape sharing with creditors under the CAA:

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(1) Garnishment: Usually, but one exception. Almost all the time, garnishment has no sharing.o s.34: Cases say to read s.34 as continuous, not as separate. A sheriff may attach

debts owing to debtor by any person resident in the sheriff’s jurisdiction in the same manner as creditor, if there are several executions and claims and there do not appear to be sufficient goods to pay them and the sheriff’s fees.

Sheriff can only garnish when there are several executions/claims and there are insufficient goods to satisfy the claims and pay the sheriff's fees.

Sub 2: Proceeds of debts to be attached must be distributed in same manner as if realized by levy under execution.

Sub 3: If sheriff does not proceed under sub 1, a person entitled to distribution may attach debts owing to debtor.

Sub 4: Attached debt must be paid to sheriff if preconditions are met… Sub 5: Any creditor who attaches a debt does so for the creditor and all

creditors entitled under this Act. Rebane : It’s only in odd scenario where sheriff could have done it,

but declined, and all these other things fell into place. This area is a mess.

Tan v. American Corporate: The proceeds of garnishment by a JC is shared with other JCs under CAA only when there are several writs of execution in the hands of the sheriff at the time JD is served by the JC, or when there are insufficient goods to cover all the debts and the sheriffs fees.Pre-judgment GO pays $250,000 paid into court, P gets J, and becomes JC for $600,000 which is greater than the amount sitting in court – At this time, there are no other WSS sitting in hands of sheriff – JC then wants payment out – However, defendant wants to use the $ to satisfy other creditors, and makes an application.If, at the time the GO funds were paid into court, the sheriff had no writs of execution in hand, then does the plaintiff who got the garnished funds have to share?o Held : No sharing required. o 2 possible situations for a JC:

(a) Many JCs who have all given writs of execution to the sheriffSheriff can garnish under s.34(1), JC can garnish under s.34(5), but must share.(b) JC alone and garnishes before sheriff has any writs

If JC gets in and serves JD before sheriff has writs, don't have to share.Therefore, garnishment is basically free from CAA, such as the case

here.

(2) Money Realized by Way of EE:MacClean v. Allen: Provisions in CAA form exception to general rule – not to extend to cases not provided for in Act – nowhere does Act discuss EE.o No sharing of installment order.o Payment made under subpoena to debtor escapes Act.o WSS always attracts Act.

(3) Court-Ordered Payments:o Eg: Under STD proceedings or payments under installment under R.42(5).o These payments do not pass through the sheriff – they go directly to JC – thus

escaping CAA.3. How Do You Distribute When There is Shortfall ?

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o Only rare occasions when sheriff levies enough to satisfy all creditors involved. Usually there are not enough funds to pay writs in hands of sheriffs. Then what?

o s.36, 37: Priority for 3 months wages for any employees. If amount is insufficient, look to distribute to all of the JCs who have writs or certs in hands of sheriff – distribution is pro rata.

eg: If total of $1-million to distribute among creditors with $10-million of writs, each creditor gets 10% of their claim.

Most usual problems : If sheriff omits JC who should be entitled to share; priority issues.

MacMillan Bloedel v. Kaskiks: JCs who have delivered writs to sheriff before the levy within 30 days of the levy, or claimants who are effectively secured creditors who have priority, can object to the sheriff's distribution plan.MacBlo issues WSS in June – seizures in July, Sept, Oct – in same time period JD fails to make wage payments to employees – employees complain to director – director issues determination – October 23, 30 sheriff sells some assets and enters notice of levy – between then and November many other WSS delivered – plan of distribution goes out and list does not include MacBlo – also does not include director (they want to be included even though not delivered writ to sheriff within timeframe required.What is status of the two creditors? Does director of Employment Standards take priority over other JCs?o Held : (a) Should have included MacBlo; (b) Director of Employment Standards

could have done lots of things (challenge who bought assets, etc; claim to funds in hands of sheriff).

o These should have priority over all those entitled to share because of employment super-priority.

4. Who is Entitled to Share?

Hankin Furniture v. Gill: If it is sale under COEA, sell as of the first judgment; but all judgments share as of first registered judgment. JCs may make objections to sheriff distribution plans if they are wrong or unjust.[Sections 110 and 111 of COEA say $ realized on sale of land under Act shall be treated as money levied under CAA; $ received by registrar or court shall be distributed to persons to whom the sheriff would, under CAA, distribute $ levied under a writ of execution (Sale of land is not only subject to sharing amongst creditors who have registered judgments against land, but also those who have not)]

CHAPTER 10: ENFORCEMENT OF FEDERAL COURT JUDGMENTS

o Deals with different court system. o Federal Court is a court of limited jurisdiction – most deal with trademarks, shipping,

admiralty, and taxes. o Has bearing on CAA sharing provisions with respect to s.3 and the sale of property.o At federal court judgment under CAA, s.81: Certificate/judgment can be registered

against land in BC. o CAA does not mention federal court judgments at all. Says nothing if it can obtain

certificate, if judgment can be handed writ, etc.o Federal system has own version of WSS – enforced through sheriff.

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o Could have federal WSS and provincial at same time. Do sharing provisions of CAA apply?

o Until 1989, federal court creditors with respect to land were registering judgments against land and were either sharing or they delivered WSS and shared in distributions under CAA – nobody questioned it.o Became a big deal with respect to federal government. Not only sharing pro rata,

but claiming priority and trying to take entire amount.o That went largely unquestioned until these cases.

HSBC v. Canada: If the Crown claims the benefit of the COEA, and there is a sale of land pursuant to that statute, the Crown must also accept the burden which is that money obtained pursuant to a sale of land must be shared pro rata with other JCs (within 30 days) under the CAA.JD with many debtors including federal Crown and HSBC – land of JD owned in joint tenancy with wife is sold and half of proceeds paid in court – federal government had judgment by certificate – government registered judgment on land under COEA, HSBC registered it has SC JD.Does federal government have priority over sale of property?o Paras. 19-21 : No doubt of general principle if creditors of = degree and Crown is

one, subject to contrary legislation, Crown entitled priority. Exceptions: (a) Excluded by necessary implication; (c) Crown engaged in commercial enterprise; (b) Benefit-Burden-Exception: If Crown has taken advantage of legislation in order to obtain status as a creditor over the same degree as other creditors over which it is asserting priority, it cannot have benefit of legislation without also being subject to its burdens.

o Rebane : Sorry feds, if you are going to register judgment against land as result of ability to do it under COEA, you cannot claim you have priority. You get benefit and burden – share pro rata as any JD.

BC Sheriff v. Canada: The CAA does not apply to sharing proceeds of the sale between federal court and BC court judgment creditors.Feds obtain judgment chooses federal court process – writ given to sheriff who obtains $196K – within 30 days of levy, RBC gives sheriff WSS – sheriff doesn’t know what to do – they interplead (pay into court).o Para.25: Deputy sheriff seized goods and chattels under two writs issued from

federal court at instance of CRA. He had sold goods and chattels before writ issued from BCSC.

o “When sheriff received RBC writ, no longer any goods, chattels, or funds which belonged to ICC against which the sheriff could levy under RBC’s writ”.o Rebane : This created a mess. If feds first, they get it first. If feds in middle, they

aren’t supposed to share but some sheriffs distribute to share despite case law.o Rebane : They cannot execute both writs at same time; and should not be

shared.o Para.29: “…[This] conclusion reveals whole new range of difficulty in priorities: But I

see no opening for federal Crown to accommodate itself to CAA of BC and to obtain benefits of its proportional recovery system, or to allow other creditors to do so, except by federal Crown starting its proceedings from the beginning in the Provincial system.

CHAPTER 11: REVIEWABLE TRANSACTIONS

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FRAUDULENT CONVEYANCE ACT

o Try to set aside these transactions.o Difficult because these two statutes overlap each other internally.o Difficult because two statutes can be used concurrently (plead both).o Difficult because cases leave you wondering what Act it is relying on in reaching its

decision.o FCA’s purpose is to prohibit disposition of property with intent to delay, hinder or

defeat creditors.o Hard to establish intent.

o s.1: If made to delay, hinder, or defraud creditors and others of their just and lawful remedies: (a) a disposition of property, by writing or otherwise; (b) a bond; (c) a proceeding, or (d) an order – is void and of no effect against a person or the person’s assignee…whose rights and obligations by collusion, guile, malice, or fraud are or might be disturbed, hindered, delayed, or defrauded, despite a pretence or other matter to the contrary.

Abakhan v. Braydon: The words “by collusion, guile, malice or fraud” in s.1 no longer perform a meaningful function, and they should be struck out. The only intent necessary to avoid transaction was intent to put assets out of reach of one’s creditors – no further dishonest or morally intent was required.o Rebane : When you create business structure to avoid creditors, only need intent to

hinder, defeat, delay creditors.o Note : You must prove intent (direct admission; circumstantial evidence).o Result : Asset has to be re-conveyed. Therefore, court will order disposition set

aside to the effect necessary to satisfy judgment.o If don't need whole transaction to satisfy judgment, some of it can still stand.

o Rebane: Defrauding may also be of creditors who must also come into being in the future.

McGuire v. Ottawa Wine: If the circumstances at the time of disposition reveal that the debtor conveyed property because he anticipated having creditors, the creditors may be able to invoke benefit of FCA. Burden of proof on intent is on party alleging fraud, unless disposition is between near relatives, where burden switches to D to establish he did not intend to avoid creditors when they made transaction.JD who disposes of property to wife – at time businesses not facing real difficulties and he had no creditors at time of transaction.Was JD left without sufficient means or reasonable expectation of being able to pay his obligations when coming due so a fraudulent intent could be inferred?o Majority/minority disagreed on intent. Majority said he knew of his problems, etc

intent.

Solomon v. Solomon: Most dispositions to a third party for FMV will not be void, as the only way to establish shared intent to delay, hinder, or defraud is to lead circumstantial evidence of collusion.JD husband had assets – sold for what is roughly FMV by husband – Crawley landlady for JD – P argues burden should be on husband because transaction near relatives?Who has burden?

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o Court : Some suspicion on relationship, but relationship between landlady and border not one of near relatives. P must establish fraudulent intent.

o Unable to prove C had knowledge or notice he was trying to avoid creditors.o In some circumstances, court may infer fraud:

o Court will look for “badges of fraud”: transfer done in unusual haste; cash payments; transaction done with secrecy; transaction where JD continues in possession of item transferred; over value being paid.

o Held : None of these found in case.

Section 2: This Act does not apply to disposition of property for good consideration and in good faith lawfully transferred to a person who, at the time of the transfer, has no notice or knowledge of collusion or fraud.

Solomon v. Solomon: Bona fide purchasers for value are protected; but transfers for value can be attacked if it can be established that the purchaser somehow colluded with the JD.What knowledge must transferee have so transaction can be set aside even if for bona fide FMV?o It has to be more than knowledge the transferor had creditors at time of transaction.o In Solomon, landlady knew, but she thought that by buying assets, it would help

Solomon pay his wife.o “Good consideration”: FMV doesn’t have to be best price available – could be

lower that FMV, but it must bear a relationship to FMV (reasonable relationship).

CIBC v. Boukalis: A conveyance can be set aside even if there were no creditors when it was made. Future creditors with standing to apply under the FCA include secured creditors at the time of disposition but subsequently become unsecured.JD conveys house to brother for $550K – at time of conveyance CIBC appeared to be fully secured with mortgage on title – by trial, security inadequate – CIBC tries to impeach transaction.Can creditor secured at time of disposition benefit from FCA at later date?o Held : Yes.

Rebane: If you can establish intent, either using badges of fraud or near relative, or evidence, disposition is set aside to extent to satisfy claim. You may also use provisions of FPA to assist (s.7 tracing remedy – trace $; s.9 makes it easier to sell land that is subject to fraudulent conveyance).

Chan v. Stanwood: Lesson for lawyers: Do not knowingly assist a client to make, receive, or participate in a fraudulent conveyance.Summer of 1998 Defendants facing bankruptcy – Chan obtained judgments against them, other creditors owed more also – Stanwoods own $ - Stanwoods anxious to continue living in family home – lawyer advocated family holding company to organize assets to make use of them available for only those who created them in first place and protect from others – Stanwoods transfer assets into created company.o Held : Transfer offended the Act. Conveyance of no force or effect.o Para.34: Lawyer cannot hide behind profession to commit illegal acts.o Para.39: In absence of pleading of fraud or conspiracy, lawyer dismissed (lucky).o Practical Advice : Fire client; write letter reminding them of your advice not to do it.

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o At this point in the class, Rebane went on a rant threatening us of his wrath if we are caught doing similar illegal acts. It was quite entertaining.

FRAUDULENT PREFERENCE ACT

o A little more difficult to get these compared to fraudulent conveyance.o Different intent of FPA: The former is to have transaction set aside; FPA designed

to ensure all creditors of same debtor get paid out of a disposition of property.o s.2: If a person in insolvent circumstances, unable to pay debts in full, or knowing

person is on eve of insolvency, voluntarily or by collusion with creditor, agrees to a judgment against the person, with out without time to pay…with intent to defeat or delay other creditors or to give preference over other creditors – judgment can be void against the creditors of the person.o Rebane: Almost never see these happen.

o s.3: A disposition of property by a person at a time when the person is in insolvent circumstances, is unable to pay debts in full, or knows he is on eve of insolvency, is void as against an injured creditor if made with intent to defeat, hinder, delay, or prejudice creditors, or with intent to prefer one creditor over another.o Key : Invokable only if debtor insolvent or unable to pay debts in full or knows

they are on eve of insolvency.o You must plead that person was in insolvent circumstances – often you cannot know.

Re CIBC: You have to show intent to give preference, not just fact of a preference.Creditor attacking conveyance of home between debtor and his wife.o Question to ask is: What was intent of the transfer?

TD v. Terrace Bavarian: Example of court finding no intent despite negligence of creditor in receiving payment.TD grants line of credit and takes mortgage security – multiple creditors – no evidence TD knew the debtor was on eve of insolvency – no evidence to show debtor doing it to defeat, delay, hinder – they argued bank manager ought to have known.Was this a preference?o Court : No reasonableness test exists. Party who obtained benefit didn’t have to act in

reasonable or prudent manner. They took mortgage in good faith without full knowledge. No evidence of intent to prefer.

o Important Quote : “…while the manager of the bank was negligent in carrying out his duties to the plaintiff, he did not have knowledge of any circumstances from which he could conclude that B would be unable to meet his liabilities”.

o Proper Test : “…if the creditor who receives payment has knowledge of circumstances from which ordinary men of business would conclude that the debtor is unable to meet his liabilities, he knows…that the debtor is insolvent”.

Exceptions:o s.4: Exception to Intent Rule: Subject to s.6, without intent, if the disposition gives

creditor preference over all or some other creditor, you can bring proceeding, and don’t have to prove intent – if you do so within 60 days of the disposition.

o s.5: A certain type of transaction deemed to be a preference: Disposition deemed to give creditor a preference over others if creditor is given, recovers, or is placed in a position to recover payment, satisfaction, or security for all or part of the debt, greater proportionately than could be recovered by unsecured creditors

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generally, or on the unsecured portion of the liabilities, out of assets of the debtor left available to judgment.o Rebane : No proof of intent necessary. If result is that one creditor gets larger

proportion of recovery deemed.

Defenses to FPA (s.6):o (Sub 1): If money paid or property disposed of bears fair and reasonable relative

value to consideration, to a sale in good faith, to payment made in ordinary course of business to innocent person, to a payment to a creditor, or to disposition in good faith of property of any kind in any of these circumstances:

o (a) If disposition made in consideration of present actual payment in good faith in $.o Disposing of something not for $, but other form of consideration, done in good

faith circumstances (eg: trading car for condo).o (b) Disposition made by way of security for present actual advance of $ in good faith.

o If you have some assets, but owe two people $100K – you want more cash. Go to friend and say I need $100K, and I’ll give you security for the loan NO preference.

o (3) Security given by debtor for present and previous advances of money…no diminished value of estate.o Multiple creditors : Owe $100K to four people; go to one and say lend me $10K;

creditor says OK but I need security for present advance and past advance hard proof to show intent of transaction was preference hard to establish fraud.

o Payments made in ordinary course of business to innocent creditors and disposition was payment of $.o Eg: Own B Co.; owe $ to 4 persons; borrow,repay from fifth person no fraud.

o Why FPA not used as much: (a) At time of transaction, debtor must be insolvent/eve; (b) All intent difficulties of FCA apply if it is more than 60 days since impugned transaction; (c) Protected transactions are very broad – loopholes in s.6 are massive, and very few dispositions/payments will be found to be fraudulent preferences; (d) In order to obtain protections of FPA, it is generally considered you had to have been creditor at time of disposition you are impugning.

CHAPTER 12: BUILDERS’ LIENS

o This area is statutory – don’t worry so much about cases – KNOW the BLA. o Act creates Two Remedies: (1) Ability of someone who provides labor or materials to

construction project to file a claim of builders’ lien on land in which project is situated, to which labor or materials is provided. Gets filed in LTO. Improvement is any construction of land; (2) Trust claim: The moment an owner pays $ to contractor, those funds are impressed with a trust to the benefit of anyone retained by that contactor to provide worker materials. The trust says contractor cannot use funds for any other purpose until debts are paid in relation to construction project.

o Why are construction creditors treated differently? (1) The way construction projects are financed: Through bank – only finances as project is getting completed: eg: at end of a month, someone will say project 20% complete – bank will then finance

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20% their security is improvement in land; (2) They don’t want to give incentive to bankrupt project part way through.

o Courts in BC interpret Act oddly: Taken strict view of who can file BL or who gets the trust – but once you are inside the Act, the court broadly interprets rights in the Act.

o Structure of Contracting #1 : Owner of land hires General Contractor to complete all or substantially of the work – most GCs do little site work – they hire specific trades to do the work (sub-contractors) … these provide work or materials – sub-contractors can hire sub-sub-contractor (just sub-contractor under Act) – material suppliers supply material … MS who supplies material to MS have no right to lien.

o Structure of Contracting #2 : Owner acts as developer – enters contracts with themselves (masonry, roofer, etc)…these are contractors – no general contractor – o As MS, argue MS above you is actually a sub-contractor – so you can get lien.

o In absence of builders’ lien, you still have rights as creditor on construction project (debt claim). Builders’ lien become of value in bankruptcy.

Ken Lawter Holdings v. Steen: Example of failed attempt of SC to argue unjust enrichment in wake of GCs bankruptcy.SC missed date for filing lien – GC went insolvent – SC says owner unjustly enriched.o Held : Against SC: Owner did not get benefit – they got unfinished job, etc. o Rebane: Good to plead when owner owed bunch of $ and has not paid.o Para.13: “…juristic reason for alleged enrichment was a debt owed by a 3P to the person said

to be unjustly enriched…”

THE CROWN

o Interpretation Act, s.12: Crown is bound by BC statutes unless expressly exempt or it deals with land (eg: BLA).

o Note : Cannot file lien against BC Hydro.o You can file lien against provincial governmento BLA, s.31(6): You cannot sell provincial government land, or land owned by

municipality, but creditor will be granted judgment.

Laurentian: Example of lien application being rejected on land outside Torrens System.Someone lying cable under Burrard Inlet – want to file claim on land against Burrard Inlet – someone brought application directing LTO to mark lien – court said no, not part of Torrens System.o Rebane : Cannot file against highways, roadways, aboriginal lands, federal government land

(Rebane said case may not be properly decided) – some airports not in land system. o BUT you can still get an order!

o Rebane : Argue if owned by federal Crown corporation, and enabling statute says bound by laws of province argue it can be filed!

O&O v. Bank of Nova Scotia: While lien rights may not apply to federal government land, the trust provisions of the BLA will still apply because those are in personam rights against individuals, not in rem rights against federal government. THE LIEN AND THE HOLDBACK PROVISIONS

(a) The Owner.

o BLA, s.1: Owner: “Includes a person who has, at the time of claim of lien is filed, an estate or interest, whether legal or equitable, in the land on which the improvement is

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located at whose request, and (a) on whose credit, (b) on whose behalf, (c) with whose knowledge or consent OR (d) for whose direct benefit work is done or material is supplied, and includes all persons claiming under the owner, but does not include a mortgagee unless the mortgagee is in possession of the land.o You have to get the right land – only the one where the improvement is located.

o s.1: “Improvement”: “Includes anything made, constructed, erected, built, altered, repaired or added to, in, on, or under land, and attached to it or intended to become a part of it, and also includes any clearing, excavating, digging, drilling, tunneling, filling, grading, or ditching of, in, on or under land”.o s.3: An improvement done with prior knowledge, but not at request of an

owner, is deemed to have been done at their request. Sub 2: Sub 1 does not apply to improvement if owner has filed a Notice of

Interest in the land at the LTO. Eg: In case of mall: Owner leased space in mall, tenant wants tenant

improvements. Tenant does not own land. If owner, who has not entered K for improvement not technically at owner’s request.

S.3: Land subject to lien even though owner did not request work. S.3(2): Owner can have protection if he did not request work to be

done. File Form 1 in LTO (Notice of Interest) – says I, as owner, am not responsible for work not done on my request – and I am not liable. You do not have to form these over and over.

o Lien is one page form (Form 5), p.579 this is form you complete to file BL.

Obligation of Owner: Starts with requirement to Hold Back. o HB is how owner protects himself from liens – $ that is amount of maximum liability.

o HB is 10% of amount owner pays to GC.o On monthly basis, owner gets progress claim from GC saying we are entitled to

$x, owner will holdback 10% as ultimate defense for builders’ liens. o Act says owner must put in account – in reality, only 50% of the time does it go

into segregated account.o Every month $ grows; at end of project, should be 10% of total project cost.o Owner retains for 55 days after the K of GC is complete or 55 days after project

is complete (depending on structure). If no liens filed, owner will pay HB to GC

Westburne v. Sentinel: If owner fails to file Notice of Interest, his liability is still capped at maximum liability (10% of value of work completed).

Strata Property Act:o Comes into play on sale of strata units from a developer (purchase and sale of new

strata unit). We are talking about protecting purchasers from BLs.o s.87: If phased strata property claim, a claim of lien may be filed against only the

strata lots in the phase in which materials were supplied or the work was done.o Note : Phased is different building in same strata.

o s.88: Liens after purchase from owner-developer, claim of BL filed against strata lot must be filed before the earlier of: (a) 45 days from completion; or (b) date by which is 45 days after strata lot conveyed to purchaser.o Rebane : No BLs can be filed on that unit after 45 days of transaction.

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o Sub 2: Despite any Act or K, a purchaser of a strata lot must retain HB in amount set in regulations, until date on which filing lien expires OR 55 days after conveyance.

Strata Property Regulation 5.2: HB 7% of gross purchase price. Rebane : After 55 days, do title search; if any liens there, do not release

the HB, but you take HB, apply to court, and say you want lien taken off in exchange for HB$ your maximum liability.

If you fail to HB, and someone files lien, you may be on hook for the $.

(b) Lien Claimaints: (see handout)

Definitions: (BLA, s.1)o “Class of Lien Claimants”: All liens claimants engaged by same person in

connection with an improvement.o “Contractor”: Person engaged by owner to do one or more in relation to an

improvement: Perform/provide work; supply material; but does not include a worker.o “GC” (Head Contractor): Contractor engaged to do substantially all of the work

respecting an improvement, whether others are engaged as SCs, workers, or MSs.o “Lien Claimant”: Person who files a claim of lien under this Act.o “Lien Holder”: Person entitled to a lien under this Act.o “Material”: Movable property delivered to land on which improvement is located, and

is intended to become part of improvement, either directly or in transformed state, or is consumed or used in making of improvement – including equipment rented without an operator.

o “MS”: Contractor or SC who supplies only material in relation to an improvement. o “Services”: Services as architect or engineer, whether provided before or after the

construction of an improvement has begun, and the rental of equipment, with an operator, for use in making an improvement.

o “SC”: Person engaged by Contractor or another SC to do one or more of the following in relation to an improvement: Perform/provide work, or supply material – but does not include a worker or a person engaged by an architect, engineer or MS.

o Lien for Work and Material : s.2: Contractor, SC, or worker who, in relation to an improvement, performs or provides work, supplies material, or any combination, has a lien for the price of the work and material to the extent the price remains unpaid on the following: Interest of owner on improvement; improvement itself; land where located; material delivered to or placed on land.o Sub 2: Sub 1 does not create lien in favor architect…or MS.o Note : Section 2 is source for lien arising by law.

o If person only provides cement, are they MS? If cement truck delivered on site, maybe there was labor involved SC! You could argue that.

o s.16: You can put lien on two lots, but owner can come back and say to divide between the two lots.

Recall Definition of “Improvement”, (above):

Deal v. Cherubini: Example of concrete moulds deemed improvements.Millennium Line – giant moulds for rails were put into shed in Tri-Cities area – when SkyTrain completed, it was always said moulds would be removed – someone who supplied work in relation to moulds filed BL.

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o Para 19: “Although law relating to fixtures is of some assistance, it cannot be applied directly to issue of improvement.”

o Para 23: “…the measure of attachment described is enough to establish the moulds became improvement in their own right…”

Northern Thunderbird v. Royal Oak: Air carrier providing transportation to a construction site cannot file a lien under the BLA.NT filed BL against land owned by RO – NT was in business of transporting by air, workers and equipment to mine site – (not physically present on site).Was NT providing work or material in relation to an improvement? Can an air carrier who provides transportation to a construction site claim a lien under BLA?o Para.56: “’In relation to’ and definition of ‘contractor’ to be read as ‘in direct

relation to’ or ‘in relation to an integral part of improvement’; ‘services’ is not to be read as limitless, despite inclusive nature – it is to be read as remedial, to include those specified services whose inclusion might previously have been in doubt”.

o Rebane : Read legislation down.o Court : We are dealing with property rights – and so we should read down – you

cannot have limitless class of potential people who could file liens.

Pedre: It is not necessary for SCs work be done on site, provided work was integral and necessary part of actual physical construction of the project.

o Ask: “Without work/materials, would the whole system be functional?”

Chaston v. Henderson: You need an improvement actually built in order to file a lien, and it must be work in relation to an actual improvement, not an intended improvement.Involves pub never built in mall and construction never started – some landlord work had been done on floor so pub could be built – no Notice of Interest filed – trying to enforce lien claim against owner’s interest in land.o Held : No lien.

Recall Definition of Material Suppliers, above:o s.29: If person to whom material is supplied signs acknowledgement of receipt,

stating it has been received for inclusion and improvement at named address, the acknowledgment is proof, in absence of evidence to contrary, that material was delivered to the land described by the address.

o Rebane : You have to show specific [lumber] was intended to be incorporated to the job, was delivered, and was incorporated into the project.

o Schnier: Development of 10 homes – all carpet supplier did was say it was for the development, not for specific units not granted lien.

Pacific West v. Rayman: In order to qualify as MS, claimant must: (1) Supply material for an improvement; (2) Material must be delivered to lands on which improvement situated; (3) Claimant must know at time of delivery the project for which material supplied is to be used and must have communicated that knowledge; [(4) Rebane: Must be incorporated into the project.]o Para.19: Some materials were picked up by D rather than be delivered by P

irrelevant. They do not have to be delivered by MS.

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JW Price v. Costco: Clayton case does not apply to BLA. Lien claimant receiving funds is obligated to make inquiries as to the source of funds, or risk having to give credit for the payment in enforcing its lien.[Clayton says: Where you have running account, eg: supplying drywall, at end of month, they get invoice for all materials, payable in 30 days. Drywall co has 15 jobs; all of the sudden, the supplier of drywall material gets check and does not know where $ comes from. Where you get general check not specifically paying invoices apply amount to the oldest invoices.]o Rebane : Sometimes check says it is paying particular invoices then you

pay to those invoices.o Para.7: If payment to MS was made with funds impressed with BL trust, credit

must be given for that payment in enforcing its rights under BLA. o Rebane : If supplier gets general check, and applies to oldest account and files

BL against project, you can come back and say when they received $, did they ask party who they got $ from which jobs were applicable? MS must investigate where payment is coming from and apply correctly to the right job. If they paid to different job, they have to give credit for those.

Time Limits:o s.20(1): If Certificate of Completion has been issued with respect to a K or sub-K,

the claims of lien of C or SC and any persons engaged by or under, may be filed no later than 45 days after the date on which the Certificate of Completion was issued.

o [Rebane: File lien immediately, ask questions later.]o Certificate of Completion deems everyone involved to be completed.

You have 45 days to file BL.o Certificate of Completion can also certify specifics being complete – and

therefore you could be a year away from the whole deal being complete.o Sub 2: Claim not governed by sub 1, may be filed no later than 45 days after

(a) Head K completed, abandoned, or terminated, if owner engaged GC, or (b) the improvement has been completed or abandoned.

No Certificate of Completion 45 days from time K is completed, abandoned, or terminated.

o s.1(2): HC or SC is substantially performed if work to be done under K is capable of completion or correction at a cost of not more than: (a) 3% of first $500K of K price; (b) 2% of next $500K; and (c) 1% of balance of K price.

Rebane : Timeline may have already started!o s.1(5): Contract or improvement deemed abandoned on expiry of 30 days

during which no work has been done in connection with K unless cause is strike, lock-up, weather conditions, holidays, or court order.

30 days no work = abandonment; then you get 45 days to file lien. o s.20(2)(b): Improvement completed or abandoned if no Head Contract (and

no Certificate of Completion), you look for completion of project. s.1(3): Improvement completed if improvement or substantial part of it

is used or being used for purpose intended.o s.20(3): Sub 1 does not operate to extend or renew the time

for filing of a claim of lien if that time would otherwise be determined with reference to the time an earlier certificate of completion was issued OR time started to run under Sub 2.

o If CC issued after there was completion under Sub 2, that does not re-trigger time limit.

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o s.27: Local Venue Rules: Once you file claim of BL, claim is good for one year – you must commence action to keep it alive – CPL. If you fail to do either, BL will cease to exist.

o Look to Law & Equity Act and rules surrounding foreclosures.o s.33: Limitation and Notice to Commence Action – While you have one year to

commence action, owner or another lien claimant who has commenced action already, to send 21 day notice to lien claimant requiring them to commence action within 21 days, or the lien is struck out.

o Rebane : Useful for (a) Small liens where the people who have filed them are unlikely to file SC action; (b) If you are claimant with big lien and you want to knock off some small claims; (c) Crazy people liens.

(c) Holdbacks.

o Tells you how much $ you may get out of lien claim.o Person primarily liable on each K and person primarily liable under each SC under

which lien may arise must retain a holdback…MULTI HB SCHEME.o Handout, 5.4: GC does not create HB account for SCs.

o Liability is greater of 10% or what payor owes payee above.o 4(1): HB must be equal to 10% of the greater of: (a) the value of the work or

material as are provided under the K or sub-K, and (b) amount of any payment made on account of the K or sub-K price.

HB must be at least = to 10% of the amount of ANY progress payments made under K or sub-K. If value of work or material provided is greater than K or sub-K price, 10% of that value must be retained.

o 4(5): A mortgagee who retains or agrees to retain a HB has same rights/oblgs in relation to HB as if it had been retained by the owner.

Mortgagee may retain as HB the amount required to be retained by owner as payor on K.

Sometimes arrangements between owner and lender who finances project will call for HB to be retained by lender.

o 4(6): HB should not be retained form worker, MS, architect, or engineer nobody below has lien rights – no further liens can arise under those persons.

o 8: How long must HB be retained? HB period expires 55 days after earliest of: (a) Issue of CC with respect to K or SC; (b) completion, abandonment, or termination of GC; (c) completion or abandonment of improvement.

HoldBacks by Owner:o s.5: Owner must have HB account at savings institution for each account.

o GC project only needs one account.o Where you have Owner-Developer Scenario, you should have multiple accounts

(Rebane: Rarely happens in practice/reality).o HB not required: when retained by financial institution [5(4)]; when BC government is

the owner (Chapter 6.6); where aggregate value of work and material <$100K.o s.5(7): If owner fails to establish HB account – the contractor may suspend

operations on 10 days notice rarely done!o s.5(2): When can $ be paid out of HB account? Need agreement of all administrators

(GC and owner); and must have 55 day expiry of limitation period.

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o Agreement may be held if owner wishes to HB to remedy deficiencies – can only be done if no liens.

HB and Limited Recovery/Liability Principle.o s.34(1): Maximum aggregate amount that may be recovered by all lien holders who

claim under same contractor or sub-contractor (class), is = to greater of: (a) amount owing to SC or K by person who engaged C or SC [owner], and (b) the amount of the required HB in relation to K between C and SC and the person who engaged them.

Rebane : Always calculate the maximum liability. o s.34(2): 3 things that do not operate to reduce amount owing: (a) amounts asserted

as a counterclaim; (b) payment made after filing of lien by person claiming under the person to whom payment is made [if you have notice that lien is filed, and knows it was filed]; (c) payment made in bad faith [payment made in circumstances where you as GC, knew or ought to have known $ was not going to make its way down to sub-trades].

o Liens against HB: The HB itself is charged with liens.

Shimco v. NV: S.4 allows that not only are there lien claims on interest of owner of land, but this also attaches to the HB. Court can allow lien claims against HB even though claimants didn't file lien claims in time.Lien filed – lawyer failed to file CPL when commencing action – after year lien ceased to exist – it was SC…had owner with HB account – HB money continued to exist before and after action commenced – SC said they had lien against HB money.o s.4(9): Subject to s.34, HB required to be retained is subject to lien – each HB is charged

with payment of all persons engaged, in connection with the improvement, by or under the person from whom the HB is retained.

o Rebane : Not a big deal. If no notice of action, most don’t worry about it. Only used by people who have missed limitation periods.

o Shimco Searches: Before releasing HB’s, owners check to see if HB had liens.

(d) Discharge of Liens.

o Happens on regular basis.o s.33: BL lasts for year; must file CPL and file action. Owner or another SC, C, who

has filed claim and commenced action can send 21 day notice – or lien dies.o s.25(2): [When dealing with wrongfully filed lien], owner, SC, C, can apply to cancel

claim of lien if court is satisfied on evidence, that the lien does not relate to land to which it is filed, lien is vexatious, frivolous, or abuse of process;

o s.24: Allows party to go to court (owner, GC, SC) and say they need to get lien off urgently, and to post in court face value of lien and fight about liability another day. o Lien is cancelled from title; $ is posted in court in lieu of the lands.o Case: If $ earns interest in court or in lawyers’ trust account, it does not flow to

lien claimant because lien claim is in rem claim. o Section 24 is not about determining your maximum liability.

o s.23: Going in to pay your max liability – what you will be on hook for at end of day.o Party making payment: You pay in and it is gone – you are done – let people

fight about entitlement between themselves.o If more liens filed, and you made s.23 payment, max liability does not change!o Rebane : Never happens during a job – most often at end of job or K.o See Figure 9, p.43.

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Westburne: No interest tracks on lien claim, even if $ has been paid into court.

FAP v. RMC: Section 23 does not require posting of security for costs.o Para.6: S.23 provides opportunity for owner to step out of claim and litigation on

paying into court either full amount of lien or HB.o Rebane: WRONG! Max liab and HB are not same concept. HB is 10%, ML

can be bigger than 10%.o Once payment made, lien to be removed.

DAMAGES FOR WRONGFUL FILING

o Rebane : File first, ask questions later.o Real cases are where you know for certain your liens are being filed out of time.

Also, if you have no clue if it is right land.o Biggest ones: Spirious liens (they did no work; improper purposes) liable for

damages (loss of sale on land; penalty damages); highly inflated amounts filed.o s.45: It is offense to knowingly file lien containing false statement (rarely successful).o Sudberg: Damages (can be) awarded in addition to compensation for loss.

TRUST PROVISIONS

o Lien and trust actions are separate – can proceed concurrently or consecutively.o BL claims are filed everyday in BC; trust claims are much more rare.o Beneficiaries of trust are all parties who may have claim of BL.

o Exception : Owners are NOT trustees of the money. o The funds become trust when in hands of GC. When they pay $ to SC below, the SC

is trustee of $ to benefit of SC below him – until you hit MS. o Trustee is to use funds received to pay parties they owe $ to in the project. o To win breach of trust claim, you would have to show that of $300K they received,

they only paid, for example $100K, and took the other $200K for themselves. If, on the other had, the GC received $300K, and he owes SCs $600K, there is NO breach of trust if he pays it all out to them, even though that is not enough to cover it all.

(a) Trustee, Corporate Directors, and the Trust Money

o Officer/director of corporate entity who knowingly acquiesces in breach of trust is personally liable.

o s.10(1): $ received by C or SC on account of price of K or sub-K constitutes trust fund for benefit of persons engaged in improvement; SC or C is a trustee of the fund.

o s.10(2): Until all beneficiaries of trust are paid, C or SC must not appropriate any part of fund for own use or to use not authorized by the trust.

o s.10(4): Sections 1 or 2 do not apply to architect, engineer, or MS.

Commercial Union v. Surrey: No trust is created so long as funds remain with owner (owner is not trustee; owner may be trustee of HB funds).

BC Building v. Arbour: $ paid into court impressed with trust under BLA cannot be paid to any creditor, secured or not until beneficiaries have been satisfied.

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Henry Electric v. Farwell: Example of liability for breach.Deals with traditional liability and how it would arise for breach of trust – Farwell was owner and sole director of electrical installation company – Henry were MS to Farwell – Farwell receives draw for job he is working on for $40K for GC – at time he receives draw, owes $10K to Henry – Farwell takes $40K and deposits into account – Farwell only has one account, and other jobs – co-mingles all project $ into account – Farwell had line of credit at bank – without knowledge of Farwell, bank reduces line of credit and took some $ back.[Under old Act], was this breach of trust? Was Farwell liable for breach?o Held : Farwell liable as operating mind of company.o Liable for breach on two grounds: [(a) By putting $ in general account and co-

mingling with money from other projects]; (b) By putting $ at risk – in account where he ought to have known bank had rights to take the $.o (a) New version of BLA tells us that purely co-mingling $ in an account

is no longer a breach of trust [s.11(7)]. o s.11(1): SC or C commits offense if: (a) appropriates/converts part of fund.o s.11(2): Fine and jail time possible (Rebane: Good luck!).

o You really want (and have) civil right of damages against director [s.11(3)].o s.11(4): Things that are not breaches of trust:

o (a) To extent of SC or C has paid for materials supplied under K or sub-K, retention of trust $ in amount = to amount paid.

o (b) Banking exception: If $ is loaned to person on whom trust is imposed and is used to pay for all or part of work, material, or supplies, trust $ may be applied to discharge loan to extent that the lender’s $ was so used by trustee.

Rebane : To repay $ that was used for purpose of paying OK. You are not required for purposes of breach of trust to proportionately share.

Mackenzie v. Miller: Mackenzie owed $100K by Procan – GC paid Procan everything to which it was entitled – GC had to pay someone to complete work – Mackenzie argued remaining funds were owing to it, and it should not be used to hire someone else.o Court : No, it was being used for proper purpose.

(b) Third Parties: Constructive Trustees

o Theory is if you participate in Breach of Trust, you may be sued as CTee.

Groves v. CIBC: Courts will impose CT on 3P rarely. Limits on who can be CT: (a) Get benefit; (b) Have knowledge that business the company was in related to construction industry and came from construction; (c) Have knowledge of financial difficulty and that trust claimaint was likely to not get paid if you took benefit; (d) Out of ordinary course transaction.Construction company (Groves) received cheque for $230K with respect to project their company was working on – Groves takes cheque to bank of NS, wanted to take $ to new CIBC – BNS says OK, but worried about company’s financial position (wanted to get back $50K company owed on line of credit) – Groves agrees and gets cheque for $180K, cashes and takes $ to Australia.Could either bank be sued as constructive trustees?o CIBC could not: No knowledge; did not get benefit of money.

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o BNS had long business relationship with company; knew Groves well; got $50K benefit; knew/ought to have known $ was coming from construction project… ought to have known if they took $50K, trust claimaints would not get paid.

o Rebane : Need odd facts; knowledge on party; benefit.

DISTRIBUTION AND PRIORITIES

o s.37: Priority for Claimants not Engaged by Owner: Concept of available HB fund: Maximum liability distribution: (1) Cost of lien claimant – filing and enforcing claim; (2) 6 weeks wages owed to workers; (3) SCs.o These persons get paid out of someone’s HB – everyone else shares on class

basis, pro rata. They do not share in one pool!o s.38: Priority Engaged by Owner: (a) Costs of lien claimants; (b) Up to 6 weeks

wages; (c) Money owed for more than 6 weeks wages; (d) Amount owed to contractor; (e) Owner.

o s.32: Priority of Secured Lender:o Sub 1: Amount secured in good faith by registered mortgage, has priority over

amount secured by claim of lien. Exception : (Sub 2): An advance made by mortgagee that results in

increase in direct or contingent liability or mortgagor, or both, under registered mortgage after claim of lien is filed ranks in priority after amount secured by claim of lien.

eg: If mortgage is for $12-million, and two liens later come on, and then the mortagee lends another $1-million, those liens have priority over that $1-million.

Fraser Valley v. Van Weston: When making advance of mortgage, be careful to watch out for liens.Relating to s.32(2) – owner of mortgaged lands grants FV mortgage which is accepted for registration at 2:25 on August 31st – CD files BL that was accepted for registration at 2:56 – FV obtains post-registration search which shows claim of BL – at 4:06, knowing of lien, FV makes first advance under mortgage for $60K – dispute between CD and FV: CD says advance happened after lien; FV says initial advance has priority over lien as it was initial advance and did not result in increased liability.o Held : For CD – there is increase in contingent liability – you did not have to

make advance once lien is there. First advance is still caught.

o s.32(5): Despite subs 1 and 2, if one or more claims of lien are filed in LTO, a mortgagor may apply to court for order that one or more further advances under mortgage are to have priority over claims of lien.o You can go to court and say if we make advance we have no priority normally,

but seek order that we have priority. Sub 6: Court must make order if satisfied that: (a) Advance will be applied

to complete improvement; and (b) Advances will result in increased value of the land and improvement at least = to amount of proposed advances.

Conder v. North Star: If there is sale of land and you are talking about HB, and you have pool of $ and want to attach as unsecured, you only get left over from trust creditors and lien claimants.

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Edwards v. Howe: With respect to $ that are trust claims – these defeat general unsecured claims.

Canada Revenue Agency

Generally, CRA priority will defeat any interest that either a trust or lien claimant will have in monies (HB, lien security, etc).

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