Legal Blog

Extension

A writ  of seizure and sale (a “Writ”) is the main means by which a creditor can seize the assets of a debtor. After a judgment, a creditor may, as of right, request the court to issue a Writ. The creditor then files the Writ with the Sheriff of the geographical area in which the debtor then owns or may be assumed to own land. Once filed, the Writ binds the lands that the debtor owns and, if the debtor is stupid enough, binds any lands that the debtor subsequently acquires. A Writ is valid for 6 years from the date of its issue, but the creditor, upon paying a fee, may renew the Writ by requisition to the Sheriff before the Writ’s expiry.

What happens when a creditor fails to renew a Writ and the Writ expires? The easy answer to that question is that the Writ dies. Can the creditor subsequently obtain a new Writ? Yes; however, it needs leave of the court to do so. What does the court consider when it decides whether to grant leave? That question was answered in Adelaide Capital Corp. v. 412259 Ontario Ltd., a 2006 decision of an Ontario Master.

Expiry

Central Guaranty Trust (“CGT”) obtained a judgment (the “Judgment”) against a debtor on a mortgage debt and obtained and filed a Writ in 1992. After the sale of the mortgaged land, the debt was about $16,000. Then CGT went bust. Adelaide Capital took over thousands of CGT’s receivables, including the Judgment. In 1993, Adelaide notified the debtor of Adelaide’s involvement and the balance outstanding. In 1994, Adelaide sent two dunning letters. For unexplained reasons, Adelaide did nothing further for 12 years. The Writ expired in 1998.

In January 2006, Adelaide did a search and determined that, in 2005, the debtor had taken title to property jointly with his wife. Adelaide realised that it might have a pot of gold at the end of the rainbow. However, to access that gold, Adelaide had to obtain an order of the court authorising the issuance of a new Writ.

Not surprisingly, the debtor objected to Adelaide’s motion.

Law 

The Master summarised the rules. He noted that the court had discretion to grant leave to issue a new Writ, just as it had discretion to grant leave to allow a garnishment after 6 years had elapsed. The Master decided that since the provisions regarding the discretion were almost identical, the tests to determine whether his discretion should be exercised would be identical. The overriding goal was to exercise the discretion in the interests of justice.

As it happened, the Master had already set out the tests regarding garnishment in a 2006 decision in Royal Bank of Canada v. Correira. The tests follows:

a)   The creditor must adduce sufficient evidence explaining the delay so that the court can conclude that the creditor never waived its rights under the judgment or otherwise acquiesced in the non-payment of the judgment.

b)   Even if the creditor passes the first test, the debtor may raise grounds to convince the court that it would be inequitable to allow the creditor to enforce the claim. For example, the debtor might be able to show that he relied to his detriment or changed his financial position in reliance on reasonably perceived acquiescence resulting from the delay.

First Test 

A person, who described herself as Adelaide’s agent, swore the affidavit in support of Adelaide’s motion. The only explanation for the delay that the agent gave was that “she did not know why (the original person sending the letters on behalf of Adelaide in 1993 and 1994) did not renew the Writ”. Then she stated, “the Plaintiff did not ever intend to abandon this matter.”

The Master noted, “it would be a rare case when a plaintiff could not meet the first test.” After all, how difficult could it be to show that the plaintiff did not waive its rights or acquiesce to non-payment of the judgment?

The Master noted that the only explanation for the delay was the volume of files and reduction of Adelaide’s staff. He did not feel that this was an adequate explanation of the delay; rather, he felt that it was an explanation as to why Adelaide was unable to explain the delay. The agent asserted that, after discussions with an Adelaide officer, she could state that Adelaide never intended to abandon the matter. The Master noted that the agent did not explain what the officer’s relationship with the file was, the conversations that she had with the officer, or what evidence the officer had to support that conclusion. The agent did not even indicate that she believed this hearsay evidence to be true (contrary to Rule 39.01(4)). The best person to have sworn the affidavit was the officer, not the agent, and the affidavit should at least have set out some facts, other than just a bald assertion.

The Master stated, “I am not able to conclude on the meagre evidence before me that Adelaide has not waived its rights under the judgment or otherwise acquiesced in non-payment of the judgment.” On that basis alone, the Master refused leave for Adelaide to obtain the new Writ.

Second Test 

Just in case he got it wrong on the first test, the Master put his mind to the second test.

The debtor had put forward evidence that:

a)   The money to purchase the new property had come from his children.

b)   Before he had title put in his name, his real estate lawyer had done a search of Writs that had come up clean.

This information was sufficient for the Master to conclude that the debtor, hearing nothing from Adelaide for 12 years, reasonably relied, to his detriment, on Adelaide’s seeming acquiescence in his non-payment of the debt. The Master noted that had Adelaide still had a Writ filed with the Sheriff, the debtor either would not have taken title to the property or he would have taken steps to protect the loans that his children had made to him.

Accordingly, the debtor met the second test and the creditor failed on both grounds.

Remedy 

Adelaide is not totally out-of-luck. Since the limitation period has not passed regarding the enforcement of the Judgment, it still has the right to commence an action based on the Judgment (not the original mortgage debt) in order to obtain a new judgment, on which it can then obtain a new Writ as of right.

Unfortunately, Adelaide can be sure that the debtor will defend the new action and claim that Adelaide not be able to obtain the new judgment. The debtor will use the defence of laches, which is simply a fancy way of stating that Adelaide has sat on its rights too long and, in so doing, has prejudiced the debtor. The defence of laches is similar to, but not the same as, the defence that was raised regarding the issue of the new Writ.

Insult 

To add insult to injury, the Master indicated that even if he had given leave to issue a new Writ, he would have given it on two conditions. No interest would run from the date of the expiry of the old Writ to the date of the issuance of the new Writ and the post-judgment interest for the new Writ would have been the current interest rate, not the far higher rate that was in force in 1992.