Legal Blog

Honour

Let’s discuss writs of seizure and sale aka writs of execution, formerly known – if you have been around far too long – as writs of fi fa (short for fieri facias – translated from Latin as “cause to be done”). A creditor may enforce a monetary court order by requesting the court to issue a writ of seizure and sale. Once the court has done so and the creditor files the writ with a sheriff of any jurisdiction in Ontario, that writ binds the debtor’s lands in that jurisdiction. For example, a writ filed with the Sheriff of Peel binds the lands in Peel, but does not bind lands in Toronto. In essence, the debtor is not able to sell or mortgage lands that a writ binds until the court order is fully paid.

We now have an electronic land registration system. Writs are filed with a sheriff and subsequent purchasers or mortgagees need only rely upon specified statements – depending on the circumstances and, particularly, the writ amount. One of these statements is a “a law statement” of a lawyer. That statement attests that, if a writ has been filed that would otherwise bind the land, the debtor has obtained a complete, unconditional, and unqualified release from the judgment creditor for the writ. “It is an honour system largely dependant (sic) on lawyers’ honesty.”

Of course, before making this statement, the lawyer has to be satisfied that it is true. What happens if the lawyer makes the statement either negligently or fraudulently? With that statement, the transaction can be completed; the subsequent purchaser or mortgagee takes its interest in the lands free and clear of the writ and the execution creditor has (i) a writ that no longer binds the lands and, possibly, (ii) an unenforceable judgment. However, the execution creditor also has a cause of action against the lawyer for fraud or negligence for the loss of money that it should have received had the law statement not been improperly given. An execution creditor commenced such an action in Bank of Montreal v. Cadogan 2021 ONCA 405, a 2021 decision of the Ontario Court of Appeal.

Writ & Sale

BMO had a judgment against a debtor for $40,300 plus interest and, in July 2011, filed a writ with the Sheriff of Durham. Based on an agreement between BMO’S lawyers and the judgment debtor, the judgment debtor had paid the grand sum of $6,200 towards the judgment debt between August 2011 and January 2015.

On March 4, 2015, the judgment debtor transferred her property in Durham free of the writ for a total consideration of $680,000. After payment of the mortgages on the property, the debtor walked away with $168,000, more than enough to have fully paid the judgment debt. How did she do this? Her lawyer gave the law statement in the transfer attesting to the writ having been released. In September 2015, BMO discovered what had taken place. It was not amused and ultimately commenced an action against the lawyer.

Evidence

The lawyer defended the action and went so far as to counterclaim against BMO for its temerity in actually bringing the action. BMO was obviously not impressed with the defence and brought a motion for a summary judgment.

The law clerk for BMO’s lawyers, who had been involved all along, gave evidence on the motion. She stated:

• The judgment debtor had called her in February 2015, offering to pay $29,000 to settle the writ. This was obviously far less than the outstanding judgment debt; BMO did not accept the offer.
• On March 4, 2015, (the day of the transfer), the lawyer called her requesting a writ payout statement.
• On March 11, 2015, after she faxed that writ payout statement, the lawyer called her and informed her that the judgment debtor was $5,000 short of funds.
• On March 20, 2015, the lawyer wrote to her, asking for a breakdown of the payout amount. She faxed the breakdown letter soon afterwards.
• On April 23, 2015, the lawyer called her again, indicating that he had instructions to pay most of the judgment debt, but that a portion of the debt was a mistake and that there was no judgment regarding it. When she disagreed with this statement, the lawyer requested a fax dealing with the portion that was allegedly not owed. She sent the fax as requested.
• In September 2015, BMO discovered the property had been transferred.

The lawyer filed an affidavit from the judgment debtor, upstanding and honest citizen that she was. The debtor stated:

• BMO’s claimed amount for the writ was inaccurate.
• The debtor had settled the debt with BMO in 2011 for the amount of $29,000 to be paid in instalments.
• The debtor instructed the lawyer to discharge the writ because BMO had settled the debt with her in 2011 for $29,000.
• The debtor spoke to BMO’s lawyers in September 2019 (one year before the summary judgment motion was heard) and they offered to settle for $22,000.

Merits

On a summary judgment motion, a judge has the power to weigh credibility to determine whether there is a genuine issue for trial. The motion judge reviewed the two diametrically opposed evidentiary versions of the judgment debtor and the law clerk, compared them with facts that were not in issue and with the  documentary evidence, and concluded that “the unchallenged documentation in the record is definitive in resolving the credibility contest.” The lawyer’s “course of conduct itself contradicts the debtor’s position that the matter was settled.” The judge noted:

• The debtor’s affidavit was served the night before the hearing of the summary judgment motion, which itself had been adjourned for eight months. Consequently, the affidavit was highly suspicious.
• The lawyer’s defence and counterclaim made no mention of a settlement that had allegedly been made between the debtor and BMO.
• The lawyer had sent the March 2015 letters, dealing with payment of the judgment debt, after the transfer had already been made.
• These letters never asserted that there had been a settled debt; rather, they asked for an accounting to substantiate the amount that the law clerk had said was still owing.
• The debtor referred to settling a debt in 2011. It made no sense that she had made payments for 3½ years for a debt that had already been settled. Regardless, payments totalling $6,200 would not have paid the alleged settlement amount.

Decision

The motion judge dismissed the silly counterclaim and granted judgment for $63,500, the amount still due on the writ after accounting for payments made, interest, and post-judgment collection costs.

In addition, the judge awarded $20,000 for punitive damages. The judge agreed that the electronic registration honour system had to be protected and that a punitive award was necessary to assist in achieving that objective, denounce the lawyer’s misconduct, and deter others similarly inclined.

Appeal

The lawyer appealed the decision. Most of the arguments on the appeal had to do with the motion judge’s refusal to grant an adjournment. The Court of Appeal noted that the motion judge took into account all relevant considerations in exercising his discretion and made a decision in keeping with the interests of justice. The Court also held that the evidence fully supported judge’s conclusion that the law statement on the electronic registry was false and that the lawyer must have been known it to be false. The Court dismissed the appeal.

The Law Society of Ontario has suspended, on an interim basis, the lawyer’s licence to practice law pending further disciplinary proceedings.

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