Legal Blog: Collections
In a prior action, the defendant been held liable for substantial damages for committing a breach of confidence and misappropriating the plaintiff’s trade secrets. The defendant then assigned into bankruptcy. The plaintiff brought a motion seeking a declaration that, upon discharge from bankruptcy, the defendant was not released from the debt owed to the plaintiff because that debt arose from the defendant obtaining property by false pretences as set out in section 178(1)(e) of the Bankruptcy and Insolvency Act (BIA). The plaintiff also requested a declaration that the automatic stay under section 69(1) of the BIA be lifted. The judge gave a complete list of considerations and granted both requests. The judge found that the defendant was a deceitful wrongdoer who should be precluded from benefiting from his dishonesty. He found that, because s. 178(1)(e) applied, the plaintiff would be materially prejudiced if the stay continued to operate.Continue Reading >
RBC v. Kim 2020 Ont SCJ
s. 178(1)(e) of the BIA provides that a bankruptcy discharge does not release the bankrupt from debts resulting from obtaining property or services by false pretences or fraudulent misrepresentation. In this case, the bankrupt had provided a personal statement of affairs that set out incorrect facts. The court had to decide whether they were false representations and, if so, whether RBC relied on them. The judge found that the bankrupt, whom the judge disbelieved in every regard, knew that the representations were false and that the whole purpose of a statement of affairs was to be part of the loan approval process. The judge stated that the false representations were intentional and were the type of socially unacceptable conduct at which the section was aimed.Continue Reading >
Genworth Financial Mortgage v. Farooqi 2019 Ont SCJ
A writ of seizure and sale was filed in 2010 and expired in 2016. The creditor moved in 2019 for leave to renew the writ. The judge granted the motion, holding that the debtor had not done anything in reliance of the creditor having done nothing to enforce the writ (e.g. the debtor had not purchased any property in his name). Because the debtor had not been prejudiced, the judge exercised his discretion to grant leave to issue the writ; however, because the creditor had done almost nothing after the filing of the writ to collect the judgment debt, the judge limited the amount of the writ to the judgment amount plus interest for only three years.Continue Reading >
Di Trapani v. 9706151 Canada Ltd. 2019 Ont SCJ
A mortgagor commenced an action against the mortgagee and the transferee by way of a power of sale, alleging that the transfer was undervalued, non-arm’s length, and fraudulent. The judge went through a number of indicia relating to the actual “sale” and granted the CPL.Continue Reading >
Fernandes v. Khalid 2021 Ont SCJ
It was the usual fight over whether a CPL should be issued in a fraudulent conveyance action. The defendants had stated that the transfer between them was made as part of a marital separation. When reviewing badges of fraud, the judge took into account social media evidence, which indicated that the defendants were still cohabiting.Continue Reading >
Sometimes, legal actions turn into an odyssey, first in obtaining a judgment of the court and then in collecting the judgment. The case of Hermanns v. Ingle, a 2020 decision of the Ontario Superior Court of Justice, is not just a case in point, it is an odyssey poster child.
In 1986, the plaintiffs, who operated a horse farm, made a voluntary assignment into bankruptcy. The defendant, through his corporations, was appointed as the receiver-manager of the bankrupt estate. Ultimately, litigation ensued; and, in 1997, a judge found that the defendant had acted for his own benefit to maximize fees and displayed a total lack of comprehension of his duties as a receiver. The judge ordered that the plaintiffs be credited for over $1 million and ordered a reference for an accounting of the money that the defendant had received in his capacity as receiver.Continue Reading >
Hermanns v. Ingle 2020 Ont SCJ
A non-party may be examined in aid of execution of the debtor under Rule 60.18 (6), but an order to do so should not be made unless the judgment creditor has exhausted all means available before asking for an order authorising the examination. There is no time limit to attempt to satisfy a judgment if the judgment creditor has diligently been attempting to collect the judgment.Continue Reading >
BMO v. Cadogan 2020 Ont SCJ
A lawyer made a statement on the electronic registry of a transfer that the execution filed against the vendor/debtor had been released. Accordingly, the debtor was able to transfer the property to purchasers without an execution binding the transfer. In fact, the execution had not been released and the lawyer was held to have known this. The execution creditor obtained a judgment against the lawyer for the amount of the debt plus punitive costs of $20,000.Continue Reading >
Courts in British Columbia have consistently held that, to determine the start date for a limitation period, it is unreasonable to expect a claimant to commence a fraudulent conveyance action until the claimant has obtained judgment based on the underlying contract or tort action. Just because the fraudulent conveyance action is technically available before the claimant has obtained a judgment in the underlying action, does not make it a reasonable manner in which to proceed.
Jasmur Holdings Ltd. v. Callaghan, a 2019 decision of the British Columbia Supreme Court is the latest case in this line of decisions.Continue Reading >
No, we are not talking about some commercial document. We are talking about an order of the court and whether the order is to be effective on the date it is made or an earlier date. If effective as of an earlier date, it is said to be effective nunc pro tunc. This, of course, is a Latin phrase (one of the few times that Latin still rears its ugly head in legal parlance) and means “now for then.” The applicability of the use of this concept was the main issue in Thistle v. Schumilas, a 2020 decision of the Ontario Court of Appeal.
The ability to assign into bankruptcy is wonderful for unfortunate debtors who have no way to claw themselves out of debt. But it is a double-edged sword. All of the bankrupt’s property, whether owned as of the date of the bankruptcy or subsequently acquired before the bankrupt’s discharge, passes to and vests in the bankrupt’s trustee in bankruptcy. The Bankruptcy and Insolvency Act defines property very widely. On occasion, this passing of property has unintended consequences. The Thistle case illustrates one of them.Continue Reading >