Legal Blog: Collections
Plaintiff sued for fraud and breach of fiduciary duty. It obtained a Mareva injunction. The defendant breached the injunction and dealt with its assets. The defendants acknowledged its contempt and, on the sentencing hearing, the motion judge held, as a sanction, that the defendants were to pay the $8.7 million claimed amount to the plaintiff and directed the defendants to attend a judgment debtor exam, even if the defendants appealed the sentencing decision. The defendants appealed and the plaintiff moved for security for costs, both for the appeal and the motion itself. The Court held that, under Rule 61.06(1), there was “good reason” to order the costs. The Court also noted that, normally, after an appeal no JD exam may be conducted. However, in this case the examination being sought was not to support a monetary judgment being appealed, but rather under the terms of the motion judge’s order. This is not akin to an appellant being forced to drop its financial skirts when it may be ultimately exonerated on appeal; it is an examination that the defendants had to undergo because of the Mareva injunction issued against it.Continue Reading >
M.O.S. MortgageOne Solutions Ltd. v. Heidary 2021 Ont SCJ
Mortgagee sued not only for the debt owed; it also raised a claim of fraud and pleaded that any judgment should survive a future bankruptcy. The defendant served a notice of intent to defend but never defended the action. Ultimately, the parties entered into a consent judgment for a monetary payment, but made no reference to the allegations of fraud or bankruptcy. The defendant then went bankrupt. The issue was whether the debt survived bankruptcy pursuant to section 178(1)(d) of the Bankruptcy and Insolvency Act. The judge held that, although one could not raise issues that were not raised in the statement of claim, a consent judgment to an action based on fraud or fraudulent misrepresentation was sufficient to fall within the section. Accordingly, the debt survived the bankruptcy.Continue Reading >
We have previously written about fraudulent conveyance actions and how these actions have been affected by limitation statutes (see newsletters: February 2021, August 2018, October 2011, and February 2011). These issues are important to us because we often commence fraudulent conveyance actions on behalf of our creditor clients.
As a result of two recent Ontario cases and a relatively recent British Columbia case, we now have some definitive answers on a number of questions. We discussed the British Columbia case in our February 2021 newsletter. The Ontario cases are Anisman v. Drabinsky, a 2021 Ontario Court of Appeal decision and Midland Resources Holdings Ltd. v. Bokserman, a 2021 Ontario Superior Court of Justice decision.Continue Reading >
Achtem v. Boese 2021 Ont CA
Judgment creditor did not actively attempt to recover the debt after her lawyer informed her that the creditor owned two properties without equity and only had disability income that could not be garnished. The 6-year time to file a writ expired. Shortly after, the creditor moved under Rule 60.07 for leave to have a writ issued. The motion judge refused leave because (i) aside from the creditor’s explanation set out above, the creditor could give no reason for not moving to collect on the judgment and (ii) the debtor relied on the creditor’s inaction to his detriment. The Court of Appeal disagreed. The explanation that the creditor gave for doing nothing was a sufficient explanation to explain the delay. Further, the debtor did not rely on the creditor’s inaction. The creditor never gave any indication that she was giving up her rights under the judgment and the expenses that the debtor incurred on his properties were necessary to continue renting the property for income.Continue Reading >
1475182 Ontario Inc. o/a Edges Contracting v. Ghotbi 2021 Ont SCJ
Section 13 of the Limitations Act extends the limitation period if the debtor has acknowledged the debt in writing signed by the debtor or its agent and applies even if the debtor does not promise to pay the balance owing on a liquidated sum. The debtor acknowledged the debt by way of a text message, but indicated he may be setting off expenses he incurred. The judge held that a text message was a digital signature that, in this case, was authentic and that a traditional signature was not necessary. He also noted that it was sufficient for a debtor to acknowledge the debt, even though disputing the precise amount.
Same scenario as in Edges Contracting. The debtor acknowledged the debt by ordinary email, which was deemed sufficient to be an acknowledgment in writing signed by the debtor.Continue Reading >
6071376 Canada Inc. v. 3966305 Canada Inc. 2021 Ont SCJ
The judgment debtors did not properly answer undertakings and only waited until a day before the hearing to deliver further answers, which were inadequate or meaningless. The court ordered appropriate relief. The court also noted that the debtors had not complied with their duties as debtors and had frustrated the creditor’s attempt to execute its judgment. The judge ordered substantial indemnity costs.Continue Reading >
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 >
In our December 2014 newsletter, we discussed a British Columbia Supreme Court decision in Re Walker dealing with costs awarded before bankruptcy and the means by which an execution creditor can be transformed into a preferred creditor in the bankruptcy. That decision was reviewed in Re Kim, a 2020 Ontario Superior Court of Justice decision.
To give you an appreciation of these decisions, we will shamelessly reproduce parts of the December 2014 newsletter.
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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 >