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.
Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.