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Legal Blog: Collections

Jun
01
2024

Personal Liability

Posted in Collections

A corporate tenant shuts down, but the business pops up elsewhere. Can the disappointed landlord successfully claim its losses against the corporate tenant’s principal? The two most likely attacks to establish personal liability were discussed in FNF Enterprises Inc. v. Wag and Train Inc., a 2023 decision of the Ontario Court of Appeal.

A closed sign in a store window.

Allegations

The landlord alleged in its action that the corporate tenant abandoned the leased premises with rent owing and that the sole director, officer, and shareholder then moved the business to a different location under a different name. The landlord alleged that the principal had treated the corporation’s assets as her own and benefitted personally by the move. This, the landlord alleged, was fraud.

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Apr
18
2024

Consumer Proposal Annulled

Re Singh 2024 Ont SCJ (AJ)

A consumer proposal may be annulled under s. 66.31(1) of the BIA – even after the trustee has been discharged and the debtor has paid everything he promised to pay – if the debtor were not eligible to file a consumer proposal in the first place or the court’s approval were obtained by fraud. In this case, the debtor did not notify the trustee of the creditor’s judgment and the amount of that judgment meant that the debtor owed more than $250,000, the limit for a consumer proposal. The associate judge annulled the proposal.

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Apr
16
2024

Bankruptcy Survival

Brinkman Bankruptcy 2023 Ont SCJ

By way of a motion in the bankruptcy action, brought almost immediately after the trustee’s discharge, a creditor sought a declaration that that her judgment survived bankruptcy. The creditor had given the bankrupt funds to invest in a specific corporation; he did not do so and pocketed the money. The judge granted the declaration pursuant to s. 178(1)(d) of the BIA.

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Apr
01
2024

Attacks on Fraud

Posted in Collections

When a defrauded creditor realizes it has been defrauded and that the fraudster has seemingly moved the proceeds of the fraud to his spouse, what actions can the creditor take, in what form should it take them, and what evidence does it need to prove where its funds went? These questions were discussed in Sase Aggregate Ltd. v. Langdon, a 2023 decision of the Ontario Court of Appeal.

Two piggy banks, one red and one yellow.

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Feb
01
2024

Joint Ownership

Posted in Collections

Can a judgment creditor seize the interest of a non-debtor joint tenant? This question was answered – again – by the Ontario Court of Appeal in a 2023 decision in Senthillmohan v. Senthillmohan. We say “again” because, to our way of thinking, the answer to this question was obvious and had been applied many times in the past.

Facts With a Twist

This case arose out of a family law dispute between separated spouses. Incidental to their dispute, a court granted an order directing a sale of their matrimonial home. Nine months later, in September 2021, a third-party creditor obtained a judgment against the husband in a civil action and filed a writ of seizure and sale. In October 2021, the spouses entered into an agreement of purchase and sale to sell the home. In November 2021, the wife obtained an order severing the joint tenancy of the matrimonial home. That order was silent as to when it took effect (i.e., was it retroactive?) and did not address the creditor’s claim. The creditor agreed to temporarily lift its writ to facilitate the sale, subject to the net proceeds of $925,818 being held in trust pending the disposition of the creditor’s claim against them.

Scrabble tiles spelling out the word share.

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Dec
19
2023

Limitation Refreshed

Anderson Sheet Metal Ltd. v. Comtract Compressors Inc. 2023 Ont SCJ

Under s. 13(1) of the Limitations Act, the start date of a limitations period can be “refreshed” by way of an acknowledgment of liability from the debtor. The acknowledgment may be made by way of email, but must be made before the original limitation period expires. In this case, the creditor sent a statement of account, referencing a number of invoices, and asked when more payments would be forthcoming; the debtor responded, “we have obviously been having some difficulties in paying off this account. I will see what I can send you in the next week or so.” That was enough for the judge to conclude that the limitation period re-started from the date of that response and that any invoices that had not expired at that date had a new two-year limitation period.

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Dec
01
2023

Overturned

Subject to a decision of the Supreme Court of Canada, a decision of the Ontario Court of Appeal is binding on that court and any lower court – until it is not. Before the Ontario Court of Appeal will overturn a prior decision of a three-person panel of that court, it will deal with the appeal by way of a five-person panel. This is what happened in Bank of Montreal v. Iskenderov 2023 ONCA 528.

A group of referees on a football field.

Fraudulent Conveyance

In this case, husband and wife were defendants in a fraudulent conveyance action and sought, by way of a summary judgment motion, to dismiss the action on grounds that the limitation period had passed. If the applicable limitation period were the 10-year limitation pursuant to the Real Property Limitations Act (RPLA), the defendants were out of luck; if it were the two-year limitation period pursuant to the Limitations Act, 2002 (New Act), the defendants had a chance.

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Nov
20
2023

Limitations and Assigned Action

AssessNet Inc.  v. Taylor Leibow Inc., bankruptcy trustee 2023 Ont CA

Creditor sued debtors’ former bankruptcy trustee. It first needed to obtain a s. 38 order and an order granting leave to do so under s. 215 of the BIA. The trustee claimed that the action was statute barred. Section 12 of the Limitations Act deals with an assigned action (including an action under s. 38 which was assigned from the current trustee in bankruptcy) has to be brought within 2 years from earlier of the dates that the predecessor and the claimant first knew or ought to have known of the matters in issue. In this case, the fact that the creditor’s representative was an inspector of the bankrupt estate was irrelevant because an inspector owes a duty to act in the best interests of the estate, not in its own best interests and suing the then trustee was not in the best interests of the estate. Further, the claimant was not able to sue the trustee until it obtained the s. 38 and s. 215 orders and the action was commenced within two years of obtaining them.

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Nov
20
2023

Unjust Enrichment

Sase Aggregate Ltd. v. Langdon 2023 Ont CA

Husband stole money from his employer. The employer sued wife claiming that the stolen money went into the renovations of wife’s house. The court found that the wife demonstrated that she used money from legitimate sources to fund the renovations and that there was therefore no unjust enrichment – other than about $177,000 for which wife could not account.  The court held that wife did not knowingly receive the fraudulent funds or knowingly assist husband in his fraudulent conduct. Although stolen money went into their joint account, it was immediately moved to third parties and wife knew nothing about the deposits or the transfers. For whatever reason, the employer was not able to trace where the funds ultimately went.

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Oct
11
2023

Real Property Limitations Act

Bank of Montreal v. Iskenderov et al 2023 Ont CA

A 5-judge panel of the court overruled Anisman v. Drabinsky 2021 Ont CA and decided that an action for a fraudulent conveyance is governed by the 2-year limitation period of the Limitations Act, 2002 rather than the 10-year limitation period of the RPLA. The court also noted that the relief available under the FCA was not the return of title to the name of the fraudulent transferor; rather, it was a declaration that the creditor could treat the transferred property as exigible for the debts that the transferor debtor owed to the creditor.

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