Creditors Remedies Exam Can – Michael Dew (5572)

Acronyms

b/c = because

BFPFVw/oN = bona fide purchaser for value without notice

BPCPA = Business Practice and Consumer Protection Act.

CAA = Creditors Assistance Act

COEA = Court Order Enforcement Act.

COIA = Court Order Interest Act.

COPL = certificate of pending litigation

CL = common law.

DAA = Debtors Assistance Act

DJ = default judgment

EIAOE = examination in aid of execution.

EqR = equitable receiver.

EqCO = equitable charging order.

FCA = Fraudulent Conveyance Act.

FC = fraudulent conveyance

FPA = Fraudulent Preference Act.

FP = fraudulent preference.

GE = garnishee

GO = garnishing order

JC = judgment creditor

JD = judgment debtor

JT = joint tenant

JITIS = Jurisdiction in the international sense

K = contract

LimA = Limitation Act

LimP = limitation period.

PreJGO = pre-judgment garnishing order

PostJGO = post-judgment garnishing order

R = Regina = Crown

w/o = without

w.r.t. = with respect to

WOE = writ of execution

WOSAS = writ of seizure and sale

BLA = Builders Lien Act

COC = certificate of completion.

GC = general contractor

HB = holdback

MS = material supplier

ODM = owner developer model = no single GC.

SC = subcontractor

SSC = sub-subcontractor

TE = trustee

Regulation of the credit system and extra-judicial debt collection

Regulation of trade practices

  • Part 2 of the Business Practices and Consumer Protection Act deals with unfair collection practices
  • “consumer transaction” [s.1(1)] and “deceptive act or practice” [s.4] are broadly defined and the burden of proof is on the supplier [s.5(2)].
  • Unconscionable acts [s.8] make the transaction non binding [s.10(1)]. Burden of proof on supplier [s.9(2)].

Regulation of credit rating

  • Generally require consent to get report [s.107], but not for government [s.107 N/A to s.108(1)(b)].
  • Information only for permitted uses [s.108(1)(a)].
  • Contents of the report are regulated [s.109], and can add in 100 word explanation [s.111].

Debtors Assistance Act:

  • Advice, counselling, debt pooling.
  • Court may ask Director of Debtor Assistance for report. Will be proof of the facts stated therein [s.9].

Regulation of debt collection

Criminal Code(p1003)

  • s. 346: extortion
  • Is extortion to threaten with criminal prosecution for obtaining debt.
  • NOT extortion to threaten Civil Proceeding (What about reporting to credit agency?)
  • s. 372: false messages with intent to injure [s.372(1)], indecent or harassing phone calls [s.372(2-3].

BPCPA Part 7

  • Collection practices regulated by BPCPA (pre and post judgment debts).
  • s. 113: collector definition = person trying to collect debt.
  • s. 114(1): harassment prohibited, defined
  • s. 115: Disclosure to Debtor – first give demand letter and then wait 5 days.
  • s. 116: Limits on communication, cannot call at work (are exceptions).
  • s. 116(4): D can demand all communication in writing or through lawyer
  • s. 117: Communication with persons other than the debtor prohibited
  • s. 118: Time of Communication, cannot call before 7 am or after 9pm; only 1-5 on Sundays
  • s. 119: No collect phone calls
  • s. 120: Cannot add collection charges to debt, cannot collect from incorrect person
  • s. 171: Claims for damages
  • s. 172: Director has sweeping powers to oversee collections practices
  • Law Society of BC Professional Conduct Handbook, Ch 4 Rule 2: lawyer must not threaten to initiate criminal proceedings or complain to regulatory authority for collateral purpose of enforcing payment.

Judgments without Civil Action

Criminal Code (p1004)

  • s. 738: Victim compensation (restitution) orders as part of sentencing
  • s. 739: Third party compensation order to innocent purchaser or lender as part of sentencing.
  • s. 741: Amount declared payable by criminal court can be registered as civil judgment.
  • Can still sue for deficit in civil action (London Life).
  • Provisions are constitutional (Zelensky).

Creditor’s Assistance Act Certificate process

  • s. 3: proceeds distributed rateably to execution creditors who serve the sheriff w/in 1 month of levy.
  • s. 6: even if debt not due or payable, other creditors can begin process to get certificate if D has property seized and does not pay for 20 days or within 2 days of planned sale.
  • Costs about $50 to search sheriffs office to find if seizure has occurred.
  • s.7 -10: to get cert: claimant must file district registrarserve notice on D. Then, after 10 days can get certificate (which is good for 3 years [s.13(1)]) which can then be handed to sheriff for execution.
  • If money recovered on one writ it is treated as recovered on all [s.30].
  • No priority among execution creditors [s.46].
  • s.14 – 16 deal with disputes by the D or other creditors to certificate applications.

PREJUDGMENT REMEDIES

  • At CL the D has the right to use his assets in the OCB until judgment (Lister v. Stubbs).
  • PreJGO MI both require action to have been started, neither give the P an interest in the property

Prejudgment Garnishment[COEA] (Liquidated sum, meticulous compliance, just)

  • Freezes chose in action belonging to the D, and the debt (due and owing) to the D is paid into court.
  • Available from registry using affidavit evidence w/o notice [s.3(2) COEA].
  • Can only get a PreJGO for monetary claim for a liquidated sum, must be a “matter of mere arithmetic” (Busnex).Can give GO for just the liquidated amount (Busnex).
  • Requirements in COEAs.3(2)(d)(i): State that action pending, when it started, nature of COA, amount of the debt / claim / demand, that it is due and owing after all just discounts.
  • Beware of JC scooping funds with equitable charging order.
  • Cannot garnish wages prejudgment [s.3(4)].

Setting aside

  • PreJGO require “meticulous observance” with the rules (Knowles v. Peter), but not technical perfection [cannot mislead, but can be momentarily puzzled] (Myron v. Rajan).
  • Will be set aside for mis-description of the D, the GE, wrong address, not properly executed etc.
  • D can apply for release of garnishing order if not “just in all the circumstances” [s.5(2)]. Onus is on D: consider (1) strength of claim/defence, (2) Hardship to D, (3) Necessity. Is entirely a question of equity and appeal to judicial discretion (Redekopp Mills).

Mareva Injunction

  • Broader scope than PJGO, but harder to obtain. In personum remedy. Qua timet interlocutory injunct.
  • Issued under the authority of s.39 of the Law and Equity Act: just and convenient.
  • Requirements for Mareva Injunction (Aetna Financial Services v. Feigelman) [Issue w/ conditions?]:
  1. Good arguable case / strong prima facie case (Reynolds) / indisputable case (increasingly burden).
  2. D must have assets in the J.
  3. Court must have J over the D.
  4. Real risk that the D will move the assets out of the J, or dispose of them. Aetna required that D was going to move his assets todefeat the claim of the P, but subsequent BC cases relaxed that requirement (Mooney), although Silver Standardsorta applied the Aetna test.
  5. Bal. of convenience: irreparable harm, effect on 3P (Reynolds, Silver Standard), public interest. Is it fair that the D be restrained in the use of his assets.Just and equitable in the circumstances?
  6. Worldwide Mareva injunction prohibits D from dealing with assets in any J (Mooney v. Orr). The less the value of assets in BC the more likely will give WW MI. Consider the RAEFJ rules in J of assets.
  7. Applicant must undertake to pay damages caused by Mareva Injunction if claim unsuccessful.
  8. Can apply for MI while waiting for foreign judgment to be recognised (Hickman v. Kaiser).
  9. Require full and frank disclosure on ex parte applications (Evans v. Silicon Valley).
  10. But to set aside the non-disclosure must be relevant to the exercise of discretion (Hickman v. Kaiser).

Anton Pillar Order

  • Ex parte “civil search warrant” allowing you to take custody of property in question.
  • The rights under the order are limited by the wording of the order (Grenzservice).
  • Can be served on 3rd parties (for Ds assets).

Norwich Pharmacal Order

  • Order requiring third parties to turn over financial information about the D, typically fraud cases.

Laws Relating to the Judgment:

Default Judgment

  • If D defaults in appearance (Rule 17) or fails to file a defence (Rule 25). [Small Claims Rule 6].
  • If the claim is for a liquidated sum, get default judgment for monetary sum including interest & costs [Rule 17(3) / 25(4)], else have to have a trial on damages.

Setting aside as of right for procedural error:

  • Set aside asof right if denial of natural justice. Judgment a nullity, all enforcement proceedings void.
  • Notice must inform of full jeopardy: applying to strike pleadings? Applying for DJ? (Bache Hasley).

Setting aside at the discretion of the court:

  • Affidavit evidence must establish (Miracle Feeds):
  1. Failure to defend was not willful.
  2. The application to set aside was brought promptly. This is a reasonableness test.
  3. There must be a meritorious defence worthy of investigation. This is not a very high standard.
  4. When set aside with discretion, execution process may not be entirely void.
  5. Lay litigant can get DJ w/o notice, but lawyers have ethical duty to warn D lawyer before taking DJ unless they have express instructions from their client to the contrary.

Summary judgment (Rule 18)

  • When no triable issue raised by the pleadings, say if is res judicata (American Building v. Surrey).

Summary trial (Rule 18A)

  • Court makes findings of fact and law on the pleadings.
  • Not suitable when credibility is a key issue, but conflicting evidence is OK (MacMillan v. Kaiser).

Interest (COIA)

  • Do not award interest on interest, on costs, on non pecuniary damages, on damages for future loss.

Prejudgement Interest

  • Interest paid from date of incident to the date of judgment at rate court considers appropriate [s.1(1)].
  • For special damage, itemize and calculate interest every 6 months [s.1(2)].
  • If paid income loss payments before judgment in the case of a claim for personal injury or death, then the final interest for income loss is calculated after subtracting those payments [s.1(4)].
  • No interest in certain cases, including if JC waived the right to interest (in writing) [s.2].
  • If money paid into court as settlement, and P does not accept it, and then P gets judgment for equal or less, only get interest from the day of payment into court [s.4].
  • Funds held in court earn 2% below prime, set and compounded semi annually BCSC Rule 58(6).

Post judgement Interest

  • Paid from date of judgment until the time of payment.
  • Prime rate.First 6 months of year use rate as of Jan 1st.Last 6 months of year use rate as of July 1st

Limitation Period for recovery of judgment

  • s. 3(f) LimA: Have 10 years from the day of the judgment to bring action for payment of judgment.
  • When LimP expires, the cause of action extinguished and cannot be revived (s.9 LimA.)
  • You can continue with outstanding process after LP expired [LimA s.11(1)]. So can get a new writ of execution which will give an extra year [Rule 42(15)(a)]. Or can register against land, that will give an extra two years. The charging process on money paid into court can also be continued.
  • The 10 year clock stops ticking when a stay of execution is in place.
  • A confirmation of the COA by the JD starts the clock again [LimA s.5].
  • New judgment can be obtained to extend the 10 year limit. Non payment is new cause of action, no res judicata and not an abuse of process (Young v. Young).

Conflicts(See conflicts CAN)

  • Can register some foreign judgments, 6 year limitation period [COEA s.29].
  • Federal court judgments enforceable across Canada.

Stays of Execution

Stay pending appeal (Under s.18 of the Court of Appeal Act).

  • Test for stay of execution (Morguard v. Davidson) (Similar to test for interlocutory order).
  1. Consider the merits of the case, is there a serious question to be tried? (low standard).
  2. Irreparable harm to applicant if stay not granted?
  3. Weigh balance of convenience – compare harm to the parties.
  4. In order for losing D to get stay he has to pay amount of judgment & costs into court; P can then take money out of court if they post security (letter of credit) while appeal process goes on. He who seeks equity (the D) must do equity (by paying in) (Voth Bros).
  5. P has better rights to the funds pending appeal by the D (Voth Bros).
  6. If D wins appeal and P already executed  conversion, trespass to chattels, wrongful seizure.

General stay

  • Can order stay under s.48(2) of the COEA for the time the court considers proper.
  • Order stay ororder judgment payable by instalments [Rule 42(21)].
  • In addition to R42(21), court has inherent J to order stay, there is no one test, consider (AG v. Lau):
  • Balance of convenience
  • Justice between the parties considering prejudice and need for protection.
  • Consider if D is in the process of bringing a counterclaim.

INFORMATION ACQUISITION – procedures after judgment

Examination in aid of execution [BCSC Rule 42A. R42A(6) incorporates parts of R27]

  • Not limited to money judgments [R42A(9)], don’t need leave [R42A(2)], but can get order [R42A(5)].
  • Broad scope [Rule 42A(1)], and rules from E4D apply [Rule 42A(6)], JD is under oath etc.
  • Witnesses can be called (e.g. spouses), but need leave [R42A(4)]. Counsel are allowed.
  • Unlike E4D [R27(16)],cannot serve solicitor of party. Be sure service refers to all capacities (EE, dtr).
  • Can only do one EIAOE per year [R42A(3)], but say you are adjourning [R27(23)].
  • Court reporter transcript can be used for subsequent proceedings, i.e. committal [R42A(7)].
  • Law society has a list of questions you can ask debtor (in materials).
  • Committal/fine for contempt of court. Give 7 days notice of contempt proceedings [R56(7)].
  • Costs payable by judgment debtor [R42A(8)].

Searches

  • Credit check (consent), search LTO, PPSA register, PI etc.

Subpoena to Debtor[BCSC R42(23)-42(46)].

  • Enquiry by a court official (judge, master, registrar) who controls proceedings [R42(26-27)].
  • Only for when moneyjudgment not satisfied and no writs of execution outstanding [R42(23)].
  • Issue subpoena in Form 51, noting debt, amount paid, dates of payment, interest, costs incurred, capacities you will examine in (EE, dtr). The sheriff must serve the JD with 7 days notice [R42(25)].
  • If debtor doesn’t show then a bench warrant can be issued for debtors arrest and debtor can be committed. Only a judge [“the court”, see Rule 42(27)] can order committal [Rule 42(35)].
  • Likely outcome is an order for payment on instalments or committal. Adjournment [R42(29)].
  • Committal (imprisonment) does not effect liability, does not extinguish debt [Rule 42(44)].
  • s. 51 COEA: “a person must not be taken in execution on a judgment”. But can be committed for non-payment of a debt.
  • Max imprisonment is 40 days [Rule 42(36)], usual order is 10 days: Dyle v. McHall.
  • Order for committal lasts one year [Rule 42(37)].
  • R42(38) costs to judgment creditor: $10/day, payable weekly at $70/week; this cost is added to the judgment debt for collection purpose.
  • Small Claims Rule 12 (p171 stat materials) is similar, and there is the same imprisonment option.
  • Under s.5 of COEA, the JD can apply for GO to be set aside for payment by instalments.

EXECUTION (AGAINST OTHER THAN LAND)

Writ of Seizure and Sale (COEA)[Consider type of asset, JD’s interest in it, and the location].

  • Authorizes court bailiff to seize and sell debtors property. Used to be called writ of fieri facias (fi.fa.)
  • JC must file the writ in the registry and then give a copy to the sheriff. Form 45 [Small Claims Form 11, Order for Seizure and Sale].
  • The sheriff must not seize unless there is an adult present (Kindle v. James).
  • Cannot break and enter, but can jam foot in door. Do not need contact w/ the goods for seizure.
  • Can drill locks in safety deposit box, enter homes (not B&E), break into annexed portion of home (Boyce), but bank is entitled to indemnification for cost of drilling and repair.
  • Walking seizure is valid, but seizure must not have been abandoned (Lloyds and Scottish Finance).
  • Sheriff has no duty to insure property seized in walking seizure (maybe if possession taken) (Silva).
  • Crown is immune from seizure, lawyer liable for wrongfully instructing bailiff (Cybulski).
  • Goods purchased by a BFPFVw/oN before the seizure are taken free [L&E Act, s.35(2)] (Lloyds and Scottish Finance v. Modern Cars).
  • Distribution under CAA[implied by COEA s.55 & “sheriff”]. Surplus back to the JD [COEA s.60].
  • Sales conducted under Rule 43. Sheriff entitled to fees even if stay ordered & not sold [s.113(3)].
  • You only share in the distribution under the CAA if you have notified the sheriff [CAA s.37].

Goods, Chattels and Effects

  • COEAallows seizure and sale of goods, chattels and effects [s.55].
  • Execution creditors are unsecured and share pro-rata based on their claim amounts [CAA s.46].
  • Cannot seize “land” [COEA s.56, 80], but can seize permits licences or leases [COEA s.57].
  • Can seize and sell the equity of redemption in goods [COEA s.62].
  • RRSP is an effect and can be seized, but shares (if any) must be of BC corp (Vancouver A&W), [bad law, is intangible, should be money and other securities for money, COEAs.58 allows WOSAS]. Bank of BC v. 2252280 said RRSP is intangible, not an effect, and so cannot use s.55, but use s.58.
  • Software is subject to WOSAS under s.55, but IP rights continue (Mortil v. Int’l Phasor Telecom).

Money and Securities for Money

  • Shares in “street form”can be seized under COEAs.58 (Re Patmore), so no need to rely on s.64.
  • RRSP is money & other security for moneyunder s.58 (Bank of BC v. 2252280 BC). Good law.
  • A paid up insurance annuity is a security for money (Canadian Mutual v. Nisbet), but exempt from “execution or seizure” by s.54(2) of the Insurance Act if named B is spouse, child, parent or grandparent. Exempt from creditors via estate under s.54(1) if name any B. See also IA s.107.
  • Cannot use writ to exercise on money in court, have to use equitable charging order(Re Patmore).
  • Sheriff can sue in his own name to enforce promissory notes etc [COEA s.58], but is not required to do so until the creditor agrees to pay the costs [COEA s.61]. Argument that no power to sell in s.58 given that s.55 and s.64 are so clear about being able to sell.

Shares

  • RRSP is not an asset, what is inside the RRSP is an asset. If is annuity policy with named B, then may be exempt from seizure, so must consider what the asset in the RRSP is.
  • Stocks, shares and dividends of “incorporated company in BC” may be attached, seized and sold [s.64]. Seize by taking physical possession of certificate.
  • Seize shares by serving company with notice of seizure [COEAs.65].So require office in BC.
  • Seizing shares also gives the sheriff the right to the dividends [s.65(3)].
  • Within 10 days of sale, sheriff must give notice, and company must modify register [s.68].
  • CBCAs.74 says cannot seize by serving company, have to have physical possession of certificate.
  • Can sell shares despite transfer restrictions (but should give ROFR), do not allow corporate tools to defeat creditors, so nemo dat doesn’t necessarily apply (Associates Finance v. Webber).
  • All share restrictions (incl. ROFR) invalid on execution sale, the members of the CHC can bid at the sale if they want to keep the corporation closed (Peligren v. Ajac Equipment).
  • Sheriff does not have to accept highest bid for shares in CHC, can have a second auction. Sheriff can ask court for directions [Rule 42(22)] (AARC Enterprises v. Grimwood).
  • Pledging shares as collateral security does not violate a cease trade order (Smith v. Hamelin).

Judgements Acts 1838 and 1840