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Posted on February 1, 2013 | Posted in Collections

Let’s talk garnishment again. Debtors do not like it. Surprise! They do not like it because it is a means by which creditors can intercept money owed to the debtor by a third party, before the debtor can spend or otherwise spirit the money away. Debtors sometimes make elaborate plans to eliminate the possibility of garnishment or concoct arguments to attempt to reduce its scope. The following 2012 Ontario Superior Court of Justice cases illustrate the lengths to which debtors will go: Wolf v. Anstett and Mundulai v. Wilson.


A creditor obtained a $415,000 judgment against husband. Before the judgment, husband worked as an independent sales agent for a produce company. Husband had no assets other than his income capacity. Undaunted, the creditor garnished the produce company (the “garnishee”) seeking to intercept payment of the monies due to husband. The garnishee responded to the garnishment stating that it owed no money to husband because, instead of paying husband for his services, it paid a numbered company.

It seems that husband, realising that his income might be attacked, incorporated a corporation (“Ontco”) and arranged for wife to be its sole shareholder, director, and officer. Husband then worked for Ontco for the grand sum of $405 per week. Ontco (read wife) pocketed the difference between what Ontco paid to husband and what Ontco received from the garnishee.

Wife testified that husband owed money to her – although she produced no evidence of it or even of the amount – and that the scheme was a means by which husband could repay the debt to her in preference to husband’s other creditors.

The creditor moved to attack the entire scheme. It claimed that the incorporation of Ontco was a fraudulent preference that ought to be set aside. It requested that the garnishee be ordered to pay directly to the creditor all funds that the garnishee was paying to Ontco for husband’s services .


The judge was not persuaded that husband owed a debt to wife. However, even if husband did, it still did not help wife.

The Assignment and Preferences Act stipulates that every gift or conveyance made by an insolvent person with intent to defeat creditors is void. Further, every gift or conveyance so made to or for a creditor with intent to give the creditor a preference over other creditors is also void.

Rule 60.18 gives a judge the authority to determine the rights and liabilities of a garnishee, debtor, and any assignee. In making that determination, the judge is to “look at the realities of the relationship between the judgment debtor and corporations of the judgment debtor.”

The judge held that, by conducting his affairs as he did, husband made a gift or an assignment of his income capacity to Ontco. He was unable to pay the judgment debt at the time and the purpose of the scheme was to make certain that wife received money in preference to the creditor. Accordingly, the scheme was a fraudulent preference contrary to the Act.

Pursuant to Rule 60.18, the judge ordered that the garnishee pay to the creditor all future sums, whether owed to husband or Ontco. The judge had the power to order the garnishee to pay to the creditor all past payments to Ontco made in the face of the garnishment. However, the judge only dealt with future payments because that is all that the creditor requested.


“Oh what a tangled web we weave when first we practice to deceive” (Walter Scott, not Shakespeare). Normally, a garnishment of salary or wages is limited to 20% of the net amount after statutory deductions. Although husband was an independent contractor in name, we suspect that he was really an employee. Accordingly, because of husband’s shenanigans, he loses 100% of his remuneration rather than just 20%.

We suspect that, in future, Ontco will be mothballed and husband will attempt to sign on as an employee of the garnishee.


Given his finding of fraud, the judge awarded the creditor its substantial indemnity costs of the motion against both husband and wife. He fixed those costs at $25,000. He made no mention of costs against the garnishee. We would have requested costs against the garnishee also.


A creditor garnished the money that was owed by the Ontario Legal Aid Plan to a “former lawyer.” We assume that this is a nice way to say that the lawyer had been disbarred.

Although not fully set out in the reasons, it seems that the Plan had already remitted to the creditor, pursuant to the garnishment, all of the money it felt it owed to the debtor. How much, the reasons did not say. The lawyer then brought a motion: (i) to have the money already paid reduced to 20% of the amount paid and to have the Plan pay the balance to him; (ii) on a go forward basis, to have any further money owed to him be garnished to a maximum of 20%; and (iii) for an accounting as between the Plan and him.


To reduce the percentage from 100% to 20%, the debtor had to demonstrate that the monies that the Plan owed to him were wages arising out of employment. Given that the debtor had been an independent lawyer who was being paid funds for representing qualified clients, pursuant to the Ontario legal aid system, he was hard pressed to demonstrate that he was an employee of the Plan. His relationship had none of the attributes of an employer-employee relationship.

The judge held that the debtor, receiving payments from the Plan for services rendered to clients, was in the same position as a doctor billing OHIP for services rendered to patients. Accordingly, the judge did not allow a reimbursement of monies already paid and would not reduce any go forward payments to 20% of the monies due.

Further, although the debtor could have brought a motion pursuant to Rule 60.18(16) to reduce the percentage to be remitted, regardless of the initial percentage, the debtor did not bring that motion – probably because he did not know what he was doing. He was acting for himself.


The lawyer claimed that the Plan owed him more money that it had paid; he wanted an accounting. The Plan claimed that it had given the accounting and that not only did it not owe the debtor any money, it had overpaid him by over $20,000.

The judge held that the Plan had provided all required information and noted that the debtor had a right to appeal an assessment under the Legal Aid Act and had not availed himself of the opportunity.

Accordingly, the second part of the motion was, in essence, moot. The Plan was not going to be paying any further sums under the garnishment.

Worse yet for the debtor, the judge awarded costs of the motion to the Plan ($4,000) and to the creditor ($3,000).


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