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Legal Blog: Collections

Jul
07
2020

Execution

1842752 Ontario Inc v. Fortress Wismer 3-2011 Ltd. 2020 Ont CA

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.

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Jun
01
2020

PJI

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.

A hand holding out a credit card.

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Jun
01
2020

Didn’t Know

Posted in Collections

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.

An individual holding a pen and signing documents.

Guarantee

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.

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May
27
2020

Fraudulent Conveyance – Limitations

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.

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May
26
2020

Bankruptcy Misconduct

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.

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Apr
01
2020

Time to Pay

Posted in Collections

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.

An empty wallet held open.

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.

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Feb
27
2020

Fraudulent Conveyance and Limitations

Jasmur Holdings Ltd. v. Callaghan 2019 BCSC

A creditor arising out of a failed joint venture obtained a judgment against the debtor in 2016. The court found that the debtor had transferred his only real asset, a half interest in his house, to his wife in 2005. The creditor brought a fraudulent conveyance action. The judge had no problem in finding that the transfer was made to defeat or delay the debtor’s future creditors. The debtor admitted that he transferred the house to protect it against future creditors just before entering into a “speculative and risky business venture.” The judge also dismissed limitations defence; he held that the limitation period normally starts upon the transfer of the land, but that it was not reasonable to expect a plaintiff to commence such an action until after the creditor obtained a judgment on the merits of its claim.

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Feb
03
2020

Lose – Lose

Posted in Collections

We have continually maintained that, in many cases, judgment debtor examinations are of no real use because judgment debtors often lie about their assets during these examinations – assuming that the debtors even deign to attend the examinations. The debtor in Re Brennan, a 2019 Ontario Superior Court of Justice decision, provided one more example of a debtor not cooperating with the notice for a judgment debtor examination and, when finally examined, lying. In this case, however, all did not go well for the debtor.

A wooden puppet head with a large nose.

Lie

The creditor, who at one time was the debtor’s lawyer, obtained a Small Claims Court judgment against the debtor on March 21, 2018. We were not told the judgment amount, but it was somewhere between $13,000 and $25,000.

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Dec
21
2019

Allison Speigel Quoted on CTV News Article on the Difficulty of Collecting Judgment Debts

Allison Speigel, partner at Speigel Nichols Fox LLP, with experience in litigating civil fraud and collection-related claims, addresses some of the difficulties of collecting judgment debts. Allison highlights that legal problems do not end simply because a judgment creditor has won in court. One of the most uncomfortable truths is that many judgment debtors engage in fraud to avoid paying their debts.

Read the full article here.

Screenshot of CTV News website with article quoting Allison Speigel.

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Dec
21
2019

Allison Speigel – Guest Speaker on NewsTalk1010 on the Challenges Around Collecting Debt

On December 12, 2019, Allison Speigel, partner at Speigel Nichols Fox LLP, was invited as a guest speaker on NewsTalk1010 to discuss the difficulties of collecting a judgment debt.

You can find the podcast here.

Screenshot of the Newstalk1010 website with Allison Speigel's interview.

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