Legal Blog: Collections
We no longer have debtor’s prisons; they were abolished before confederation. We cannot imagine putting people in jail merely because they are unable to pay their debts. However, we can easily imagine some creditors who would love to see their debtors in jail. Can a creditor ever be instrumental in jailing a debtor? Yes, but only if the debtor is guilty of civil contempt, an issue that was front and centre in Greenberg v. Nowack and again in 2363523 Ontario Inc. (“Ontco“) v. Nowack, 2016 decisions of the Ontario Court of Appeal.
You will note that both cases involved the same defendant. He seems to be a nasty piece of work. The Greenbergs gave him their life savings to invest on their behalf, never to be returned. When they sued, they and the defendant entered into an agreement for repayment. The defendant defaulted and the Greenbergs obtained a judgment for $3.5 million.Continue Reading >
Gerger Mechanical Ltd. v. Salvarinas 2012 Ont SCJ
On a motion, usually made without notice, for a certificate of pending litigation (CPL) arising out of an alleged fraudulent conveyance, the plaintiff need only demonstrate that it has put forward a reasonable claim to set aside a transfer based on fraud and that it already has a judgment against the transferor or would successfully recover judgment if there was just an action outstanding. The plaintiff does not have to demonstrate that the transfer was made with an intent to defeat or delay creditors or that the balance of convenience favours issuing a CPL. That may be the case on a motion to set aside a CPL, but not the original motion to obtain a CPL.Continue Reading >
The Ontario Municipal Act (the “Act“) establishes a procedure by which a municipality can sell property if the owner fails to pay arrears of property tax. A municipality has to wait a significant amount of time before it sells the property and some municipalities wait even longer than the minimum time. Even after the property is sold, any surplus (after payment of all arrears, interest, and costs) must be paid into court and any person who has a claim to the surplus funds may, within one year, apply to the court for payment of all or part of the funds. If no one makes application for the surplus, the Act deems the funds to be forfeited to the municipality.
What happens when a person (be it an owner, mortgagee, lien claimant, execution creditor, etc.), otherwise entitled to some or all of the funds, misses the deadline and applies too late? This question was answered in a 2016 decision of the Ontario Court of Appeal in Poplar Point First Nation Development Corp. v. Thunder Bay (City).Continue Reading >
In our newsletter of June 2015, we discussed Walchuk Estate v. Houghton, a 2015 decision of the Ontario Superior Court of Justice. In that case, the debtor failed to attend an examination in aid of execution and the creditor obtained a court order pursuant to which the debtor was ordered to attend the examination on a specified date and to bring specified documents. The debtor assigned himself into bankruptcy. He then attended the examination, but brought no documents. Instead, he brought a notice of stay of proceedings that his trustee in bankruptcy issued for him.
The creditor moved for a contempt order and the motions judge held that the intervening bankruptcy did not affect a determination as to whether the debtor was in contempt of a previous order. The debtor appealed that decision.Continue Reading >
Greenberg v. Nowack 2016 Ont CA
2363523 Ontario Inc. v. Nowack 2016 Ont CA
These cases involve the same judgment debtor, with different judgment creditors. In each case, the debtor was supposed to invest the creditors’ money and, somehow, the money disappeared. Each judgment was in the millions of dollars. In each case, the debtor was ordered to produce all financial transactions, bank statements, cheques etc so that money given to him could be traced. In each case, the debtor ignored the various orders, stalled, and prevaricated. In each case, the creditors brought civil contempt proceedings. In Greenberg, the motions judge thought it necessary for a creditor to prove that the debtor wilfully and deliberately disobeyed the relevant order. The Court of Appeal held that all that was required was an intentional act or omission that breached the order. The Court sent the matter back to another Superior Court judge for determination. In 2363523 Ont, the creditor was further along and had obtained not only a determination of contempt, but a 30 day jail sentence for the debtor. The debtor appealed. The Court dismissed the appeal and gave the debtor 45 days from his release to comply with the order. The Court indicated that the purpose of contempt proceedings is not to punish, but to force the contemnor to do what is ordered to be done.Continue Reading >
Tiziana‘s article was recently featured in Canadian Lawyer Magazine. Click here to read: Catch me if you can: The art of pursuing fraudulent debtors
Continue Reading >
We often write about attacking a transaction on grounds that it is a fraudulent conveyance. What does that mean; what is the remedy; and is that remedy relevant to anything outside of the action? These questions were answered in part in Guthrie v. Abakhan & Associates Inc., a 2017 decision of the British Columbia Court of Appeal. Although the language of the BC Fraudulent Conveyance Act has been updated as compared to the Ontario Fraudulent Conveyances Act, and the 1571 English Statute of Elizabeth on which both were based, the substance of the Ontario and BC statutes is still essentially the same.
Fraudulent conveyance statutes have but one purpose: to stop a debtor from successfully transferring away assets for no or inadequate consideration (i.e. payment or other value). The simplest example is a husband transferring assets to his wife to avoid having to pay his debts. With this simple transfer the family unit keeps and enjoys the asset and the husband’s creditors are left howling in frustration.
Continue Reading >
Trade Capital Finance Corp. v. Cook 2017 Ont SCJ
One unsecured creditor obtained a Mareva injunction, which included an order that the seized assets could not be attacked without further order of the court. A non-party, who was a judgment creditor of the defendant and had filed a writ of seizure and sale, moved to have the order vacated against it so that it could seize and sell specific assets to satisfy its judgment. The court granted the order, holding that a Mareva injunction was an injunction in general and not a proprietary injunction against specific property claimed to be owned by the unsecured creditor. Accordingly, the plaintiff, an unsecured creditor, could not hold a preferred position over the judgment creditor.Continue Reading >