Legal Blog: Collections

Corporate Attribution

The common law doctrine of corporate attribution provides guiding principles for when the actions, knowledge, state of mind, or intent of the directing mind of a corporation may be attributed or imputed to a corporation. Attribution is generally inappropriate if the directing mind acted to defraud the corporation or those actions were not designed to benefit the corporation.

The Supreme Court of Canada has ruled in both civil and criminal cases that it would give effect to the exceptions and would not apply the corporate attribution doctrine in the contexts of those cases.

The court has now discussed the corporate attribution doctrine in bankruptcy and insolvency contexts:  Aquino v. Bondfield Construction Co. 2024 SCC 31 and Scott v. Golden Oaks Enterprises Inc. 2024 SCC 32.

No Claims Over – Release

A creditor commences an action against, seemingly, the only entity liable for the debt. It enters into minutes of settlement with that debtor and, as part of the minutes, it is to give a full and final release. The debtor wants a “no claims over” clause, but the creditor does not want to give up its rights to claim against someone else – just in case. The creditor and debtor disagree as to the form of the release. Will the release contain that clause and, if it does, what then? Those questions were answered in Haider v. Rizvi, a 2023 decision of the Ontario Court of Appeal.

Clause Meaning

A “no claims over” clause stipulates that not only will the releasor (creditor) release all its claims against the releasee (debtor), but it will also not commence any action against anyone else who might claim contribution and indemnity against the releasee relating to the same issues.

Advocacy

Advocacy is an art, not a science – but it still has rules. Break a rule and you are probably not a very good advocate. Good advocacy, whether written or oral, helps clients win cases. Bad advocacy helps clients lose cases.  That said, depending upon the facts, good advocates can still lose cases and bad advocates can still win cases.

First Rule

Cases are usually won or lost on the facts. The law is normally established; the facts are whatever evidence counsel adduce to the court and then are found as part of the decision to be the facts. We talk about lawsuits, but they should really be known as factsuits. The job of a good advocate is to present all of the admissible facts necessary to support the client’s case.

Personal Liability

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.

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.

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.

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.

Attacks on Fraud

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.

Joint Ownership

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.

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.

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.

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.