CONTENTS:


INTRODUCTION

Collections.

Now there's a dirty word. Of all the wonderful things one can do in law, this can rank low on the "feel-good" totem pole, as in the image below of a downcast debtor leaving a Court in ancient Rome, hanging on to his boots, having lost all other possessions.

It used to be, in law, that you could have a person arrested and thrown in jail for not honouring a debt or judgment of the Court.

Oh! - the humiliation of it all!

But how important this is to both the law and the economy.

Without the threat of collection, no one would feel obliged to honour their debts or contracts.

Thus, every once in a while, someone tries to run the gamut of collection remedies available. Few get through because, as we shall see, there is an arsenal of collection techniques available.

USING THE COURT RULES

Just as the best defence is a good offence, the first technique should be to fully utilize the relevant court rules to your advantage.

Primarily, this means moving fast towards default judgment if given the opportunity. In small claims, if a reply has not been forthcoming from the defendant within the prescribed time, the claimant should check and see if he or she can move swiftly for default judgment.

In British Columbia, that time limit, as of August 2008, is:

"... within 14 days after service if the defendant was served in British Columbia or within 30 days after service if the defendant was served outside British Columbia...."

In Ontario:

"A defendant who wishes to dispute a plaintiff’s claim shall file a defence ...within 20 days of being served with the claim."

Even in the superior-level court, such Court of Queen’s Bench or Supreme Court, the failure to file an appearance can lead to the same result.

§148(1) of the Alberta Rules of Court includes those ringing words many a creditor wants to hear:

"Where a statement of claim includes a claim for a debt or liquidated demand with or without interest, ... and any defendant fails to defend ... the plaintiff may enter judgment against the defendant for a sum not in excess of the amount in respect of which there is no defence or demand of notice and costs, together with such interest indebtedness as is justified by the statement of claim...."

Other assertive actions may include asking to strike out of a statement of defence if it discloses no reasonable defence or, to use the words of the Ontario Rules of Civil Procedure: "...no genuine issue for trial with respect to a ... defence."

This is done by way of an application for summary judgment. If successful, this clears the defence away and allows the Court to grant judgment for the plaintiff on the whole or part of the claim.

PREJUDGMENT TECHNIQUES

Debtor leaving courtPrejudgment collection is an oxymoron. You cannot enforce a judgment that you do not yet have.

However, the courts do allow you to ask for special permission to move in on threatened assets in certain circumstances.

The first is a legal technique called the Mareva injunction. This is a very exceptional remedy and requires, for example, evidence of a very strong risk that the assets could disappear if the court did not grant the Mareva injunction. This legal procedure is under constant development by the courts.

You will find that most Canadian jurisdictions have embedded within either the court order enforcement statute, or the rules of court, a complete code of your remedies available to tie up the debtor’s assets even before you have judgment against him/her. These are veritable little toolboxes you'd want to apprise yourself of.

Prejudgment garnishment (also referred to as "attachment") may also be possible where the plaintiff moves to have monies owed to the defendant paid into Court, where it stays until the litigation is concluded.

Pre-garnishment proceedings are very harsh on a debtor and if successful, gives the plaintiff a strategic advantage.

On the other hand, the debtor may be in the process of dissipating assets.

To quote a legal decision (Macfarlane):

"(Garnishment) is very frequently the cause of great hardship, and even injustice to a defendant and all the requirements of the rules in relation thereto must be rigidly carried defendant and all the requirements of the rules in relation thereto must be rigidly carried out."

POST JUDGMENT TECHNIQUES

In small claims, the first step in enforcing a money order is usually a payment hearing. The small claims court can, then establish a payment schedule. If the debtor does not respect the payment schedule, the Small Claims Rules allow for more drastic measures.

The court rules often allow for post-judgment of a judgment debtor, technically called an "examination in aid of execution" or "examination of debtor".

The process is very much like an examination for discovery. It can be used to interview other parties that may shed some information on the finances of the debtor, including a spouse or bank manager.

The Ontario small claim rules provide that:

"The examination shall be held in the absence of the public, unless the court orders otherwise, conducted under oath, and recorded."

This procedure is allowed even though the creditor is currently trying to enforce the judgement.

Another technique is called the "subpoena to debtor" in which the debtor is summoned to appear before an "examiner" which is usually a local magistrate of the court.

These processes allows the examiner to set a payment schedule which, for as long as it they are respected, the debtor may be shielded against execution or other garnishment procedures.

Garnishment and Execution

The attachment of "debts, obligations and liabilities owing, payable or accruing due" to the defendant after judgment is a powerful enforcement technique. It can give the creditor quick access to bank accounts or wages.

But it can also be very embarrassing to the debtor although the legislation typically includes a term such as this from British Columbia:

"An employer must not dismiss or demote an employee or terminate a contract of employment of an employee merely because of the service of a garnishing order on the employer...."

The primary requirement is the existence of an order for the payment of money, and proof that part of that amount remains unsatisfied.

It may be that as a judgment creditor, the law in your jurisdiction allows you to garnish bank accounts, welfare payments, insurance payments, legacies, pensions, rent and other debts due to the judgment debtor, while some jurisdictions exempt all or part of these sources.

In some jurisdictions, where a garnishing order has issued, the judgment debtor may be able to apply for a release of the garnishment payment of the judgment by installments.

If this happens in British Columbia, the court has discretion. If it considers it "just in all the circumstances", the court may make an order releasing all or part of the garnishment. If a judgment has been entered, the court then sets the amounts and terms of payment of the judgment by installments.

Once money is paid into court, the judgment creditor can apply to be paid off using that money.

Most goods, chattels and effects of a judgment debtor are liable to seizure and sale under a writ of execution, with some exceptions.
 
The biggest exception may be the right of a debtor to exclude up to a set limit (e.g. $2,000) of his or her property.

In most Canadian jurisdictions, the court is allowed to stay execution and provide for payments by installments.

Judgments against land can be registered against the title of the land in the appropriate land titles office. This registration may only lasts for a limited time, such as, for example, two years.

In British Columbia, it is the Court Order Enforcement Act that governs these procedures:

"... a judgment creditor may apply under the Land Title Act to register, against the title to specified land, a judgment or a renewal of the registration of a judgment, in the same manner as a charge is registered by delivering to the registrar a certificate of judgment or, if permitted by an enactment, a copy of an order, which is included in the words 'certificate of judgment'."

Between the registration and the judicial sale of the real property, the Act calls for notice to the owner of the land. The latter may request a hearing.

Once that is done, the show begins in earnest.

The judgment creditor then makes a motion in Supreme Court Chambers calling on the judgment debtor, and on any trustee or other person having the legal estate in the land in question, to show cause why any land in the land title district in which the judgment is registered, or the interest in it of the judgment debtor, or a competent part of the land, should not be sold to realize the amount payable under the judgment. If the interest of any judgment debtor in the land is found liable to be sold, an order must be made by the court declaring what land or what interest in it is liable to be sold, and directing the sale of it by the sheriff. If the land in question happens to be the home Of the debtor, the Act gives the Court the authority to defer the sale "subject to the performance by the judgment debtor of terms and conditions of payment or otherwise as the court imposes".

This remedy is not as appealing as it seems. If the land is the home of the debtor, the court may be reluctant to order the sale and might, instead, give the judgment debtor another break: further terms and conditions of payment.

That Old Equity Thing

A residual equity remedy still survives in some jurisdictions: the charging order. If it just so happens that money is sitting in court to the benefit of the judgment debtor as a result of separate legal action by that debtor, the judgment creditor can stake his claim to those funds.

ABOUT INTEREST

First, if there is an agreement about interest between the parties, the Court order interest statute or rules may not apply. Note also that Canada's Criminal Code makes it a crime to set an interest rate of over 60%.

Otherwise, the Court will generally add to a money judgment an amount of interest calculated on the amount ordered to be paid at a rate the court considers appropriate in the circumstances from the date on which the cause of action arose, to the date of the order.

Each Canadian jurisdiction has a court order enforcement statute or regulations or Court rule which sets out the accruing of interest on a Court judgment.

FINAL WORDS OF WISDOM

Once you start debt or damages litigation, move fast and move assertively.

This may be all new to you but the Court’s and the registry staff are habituated towards errant and truant debtors or persons who do not abide by the terms of their lawful contracts or judgments of the court. The rules of the court allow litigants to not only get an order but also to squeeze the other side for monies owed. Of course, many defendants are insolvent, in which case, enforcement may be pointless, or not worth the money it’d cost to undertake.

In any event, the above comments are general in nature and is only a primer designed to give the non-lawyer a sense of their options. The law may be very different in your province so retain a lawyer in your jurisdiction to advise you if you have any real judgment enforcement questions. Sometimes, the only way to get a rabbit out of the hole is to send in a ferret.

REFERENCES

  • Alberta Rules of Court, Alberta Regulation 390/1968, published at http://www.canlii.com/ab/laws/regu/1968r.390/index.html
  • Civil Enforcement Act, 2000 Revised Statute of Alberta, Chapter C-15, published at http://www.canlii.com/ab/laws/sta/c-15/index.html
  • Court Order Enforcement Act, Revised Statutes of British Columbia 1996 Chapter 78
  • Court Order Interest Act, Revised Statutes of British Columbia 1996 Chapter 79
  • Duhaime, Lloyd, Contract Law, Part 8: Time Limits, Breach & Remedies, published at www.duhaime.org/LegalResources/Contracts/LawArticle-93/Part-8-Time-Limits-Breach--Remedies.aspx
  • Public domain image of "Debtor and Creditor. Seizure of Goods for a Debt" by John Leech, 1850.
  • Macfarlane v. Owen 3 WWR 371 (1917)
  • Rules of Civil Procedure, 1990 Revised Regulations of Ontario Regulation 190
  • Rules of the Small Claims Court, Ontario Regulation 258/98
  • Supreme Court Rules, British Columbia Regulation 221/90
  • Small Claims Rules, British Columbia Regulation 261/93