Call us: (905) 366 9700

Legal Blog

Trust Garns, Revisited

Posted on April 4, 2016 | Posted in Civil Litigation, Collections

Garnishment cases keep coming. In our February 2016 newsletter (Garnishing a Lawyer’s Trust Account), we discussed an unsuccessful garnishment of a tax refund cheque that lawyers held in trust for a debtor, subject to a direction to pay other parties. We now have a variation on this theme in Building Solutions International Inc. v. Benazzi, a 2015 Ontario Superior Court decision.

file000998361455

Foiled

A creditor issued a notice of garnishment to lawyers, seeking to garnish money and mortgages that the lawyers held in trust for the debtor. Upon receiving the garnishment, the lawyers paid to the sheriff the money held in trust although, for reasons set out in our previous newsletter, we are not convinced that the lawyers ought to have done that. The lawyers, in their garnishment response regarding the mortgages, claimed that the mortgages held in trust were not debts.

 

Under the Rules of Civil Procedure, a creditor is allowed to garnish debts that other persons owe to the debtor. A debt has been defined as “a sum payable in respect of a liquidated money demand.” The judge referred to previous cases indicating that interests in property, held in trust, are non-monetary obligations that are not subject to garnishment until they are converted into money obligations at a future date. Accordingly, the judge held that, until the mortgage fell due and was paid, there was no debt to be garnished. The judge held only that, as payments were received from the mortgagors, these payments would be subject to garnishment, something that the lawyers had already conceded.

 

Fishing

The creditor also requested that the lawyers produce all of their books and records, banking records, mortgages, charges, investments, and monies concerning funds received from or held on behalf of the debtor. They also sought an order requiring the lawyers to disclose any disbursement, renewal, or payout of any investments that they held on behalf of the debtor.

 

The judge held that this request was overly broad and would breach solicitor-client privilege. She also held that there was no evidence that the creditors needed this remedy and were unable to seize assets without it. The judge declined to order the lawyers to provide the requested information.

 

Disposition

The judge dismissed the motion and ordered costs of $5,800 against the creditor.

 

Image courtesy of Gracey.
Jonathan Speigel

 

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

Share:

Download our free checklist:

“10 Questions to ask before hiring a law firm”

DOWNLOAD

Speigel Nichols Fox LLP