Legal Blog

Garnishment on Indemnity

Alharayeri v. Wilson 2018 Ont SCJ

A director had an indemnification from a corporation for damages that the director might suffer while acting as a director as long as the director was not negligent or dishonest and had not committed a fraudulent act. The director was held liable to another shareholder for the director’s machinations in diluting the shareholder’s stake in the corporation. The director was judgment proof. The plaintiff then garnished the corporation, even though the plaintiff had not obtained a judgment against the corporation in his first action against the director and others. The judge allowed the garnishment and held the corporation liable to pay the judgment amount. The judge noted that the debt owing by the corporation to the director did not have to be a judgment debt, just a debt, and, based on the indemnification, the judge held that there was such a debt.

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