Legal Blog: Collections
Litigants sometimes forget that facts must be proven by evidence and that, more importantly, the introduction of evidence is subject to rules, both under the common law and pursuant to the Evidence Act of Ontario. This is not a new problem (see June 2008 newsletter). Litigants also sometimes forget that (i) a summary judgment motion is merely another means, rather than a formal trial, by which a decision is to be made, based on the facts and the law; and (ii) facts are still subject to the rules of evidence. It seems that the bank’s lawyer in Toronto-Dominion Bank v. PMJ Holdings Limited, a 2019 Ontario Superior Court of Justice decision, did not fully consider the rules of evidence and, at the same time, ran up against a rather formalistic judge. It did not lead to a good result for the bank.
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Michel v. Spirit Financial Inc. 2020 Ont CA
When a limitation period expires, it cannot be revived by an acknowledgement of the debt. The acknowledgement must be made before expiry of the limitation period.Continue Reading >
Two men enter into a contract. The first does what was required under the contract; the second does not. He claims that he entered into the contract under economic duress. Can the first enforce that contract? As with many legal concepts, it all depends. The defence of economic duress certainly exists; the question, as in almost all actions, is whether the facts meet the criteria necessary to sustain the defence. These criteria and the defence were discussed in Elias v. Van Zanten, a 2019 decision of the Ontario Superior Court of Justice.
The defendant was the operating mind of a corporation, which itself was a member of a joint venture that invested in a corporation trading in oil. He and his buddies had already sunk significant amounts of money into the venture; his investment alone was $750,000. Unfortunately, the investment was a bit of sinkhole and, by 2015, his corporation needed more funds to meet its obligations to the joint venture. None of these funds was forthcoming from the defendant or his buddies.
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Royal Bank of Canada v. Bedard 2020 Ont SCJ
The defendant obtained financing secured by a conditional sales contract on a boat by misrepresenting its ownership of the boat. The court awarded judgment for the amount owed plus the costs that the bank incurred in attempting to realise on its security against another claimant before it finally realised that it had no claim to the boat because of the misrepresentation.Continue Reading >
An execution creditor of debtor, who was the beneficial owner of 35% of an 18-story condominium development, brought an application for a declaration that its writ of seizure and sale against the debtor (i) bound the property of the legal owner, a bare trustee of the development, (ii) could be executed against the trustee, and (iii) ranked in priority to a mortgagee of the development over funds that been advanced after its writ had been given to the sheriff. The Court of Appeal upheld the application judge in dismissing the application. The court noted that the Execution Act is only a procedural statute and does not purport to grant substantive rights to judgment creditors. It does not give authorisation to add the trustee of the property to a writ of seizure and sale. Although a sheriff has authority under section 9(1) of the Act to sell lands held in trust for the execution debtor, the trustee in this case did not hold 100% of the property in trust for the execution debtor. The execution creditor therefore had a right only to sell the 35% interest of the execution debtor in the property. Similarly, there is no authority to acquire priority over subsequent advances by a prior mortgagee any more than the execution debtor had a right to do so. Although section 14 of the Creditors’ Relief Act gives an execution creditor priority over a charge registered after the execution, it does not give priority over subsequent advances made under a charge registered before the execution.Continue Reading >
Prejudgment and post-judgment interest are set in accordance with the Courts of Justice Act. These interest rates are relatively low. Often, in loan agreements and other contracts, the parties set an interest rate that is higher than the rates set under the Act. These are referred to as contractual rates. The Act gives a judge discretion to allow a rate higher or lower than that provided in the Act – but there has to be good reason to do so.
In Capital One Bank v. Carroll, a 2019 decision of the Ontario Divisional Court, a deputy judge of the Small Claims Court, without giving any reasons, refused to award interest at 19.8% as set out in the contract for a MasterCard credit card.
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We always enjoy reading collection action decisions in which the defence is somewhat unique or, in some cases, utterly ridiculous. These decisions have usually been decided on a summary judgment basis. In this regard, we report on Business Development Bank of Canada v. VDF Wine Importers, a 2019 decision of the Ontario Superior Court of Justice.
The initial facts were not at all unusual. The bank loaned $100,000 to a corporation and the sole shareholder of the corporation guaranteed the loan. The corporation defaulted and the bank sued the guarantor for payment. By the time of the motion for summary judgment, the amount outstanding was only $25,000.Continue Reading >
Anisman v. Drabinsky 2020 Ont SCJ
The fraudulent conveyance took place in 2015. The plaintiff did not obtain his judgment until 2018 and did not learn of the fraudulent conveyance until 2019, when he was preparing for a judgment debtor examination. The judge decided the following: (i) there is only a duty to investigate when there is something that leads one to investigate. It makes no sense to require multiple title searches on an ongoing basis when there is nothing to trigger the search. The plaintiff did not discover, nor ought he to have discovered, the fraudulent conveyance until that preparation commenced. (ii) Regardless, the 10 year limitation period in the Real Property Limitations Act applied, not the 2 year limitation period under the Limitations Act, 2002. The judge cited Conde v. Ripley as authority for this proposition.Continue Reading >
CBM Ready Mix Division v. 8377278 Canada Inc. 2019 Ont CA
Supplier obtained a default judgment against the contractor for a monetary award only. After the contractor assigned into bankruptcy, the supplier brought a motion seeking a declaration that the default judgment survived the bankruptcy under sections 178 (1)(d) & (h) of the Bankruptcy and Insolvency Act, relying on a breach of the deemed trust. The motion was dismissed and the dismissal was upheld by the Ontario Court of Appeal. The Court referenced its 2018 decision in LPIC v. Rodriguez, noting that it was not the job of a motion judge to go beyond the pleadings and the judgment to make fresh findings of fact.Continue Reading >
A creditor and debtor hammer out a deal as to how much the debtor is going to pay. This could be done through negotiation or at mediation or pre-trial. The debtor and creditor paper that deal, but do not discuss what happens if the debtor then defaults. Big mistake. As in every agreement, the party who is getting a benefit from another’s actions in the future should always consider what happens in the event of a default.
For example, assume that the claim is $50,000. The creditor agrees to accept $20,000. If the agreement is silent as to default, then, if the debtor does not pay all or part of the $20,000, what are the creditor’s remedies? The creditor can certainly bring a motion for judgment based on the settlement and probably obtain a judgment for $20,000. However, a judgment is not payment and when the creditor made the deal to accept less than the amount originally claimed, no doubt the creditor probably wanted to be paid the reduced amount, not just receive a judgment for it. Depending on the wording of the agreement, the creditor might be able to ignore the deal and bring or continue an action based on the original claim – but that outcome is not guaranteed.Continue Reading >