Enforcement of a Small Claims Judgment (20:XVII)

A judgment is valid for 10 years299. During that time, a judgment creditor may use whatever means permitted by law to enforce the order300. First, the successful party must fill out a payment order form301 and file it in the registry. Interest and expenses need to be included, and a plain piece of paper showing those calculations should be attached. Although it is called a “payment order”, the form is used even if no payment of money is ordered. There is space at the bottom of the form for a description of a non-monetary order. The registry will compare it with the court record for accuracy and it will then be signed and ready for pick-up or mailed within a day or two.

The judgment creditor should send a copy of the payment order with a demand letter to the debtor. If the court did not give the debtor a deadline, the judgment debt is due immediately302. The demand letter should warn that, if payment is not received by a certain date (e.g., 10 days later), other enforcement proceedings will be pursued.

The Small Claims Court has an excellent procedural guide entitled “Getting Results”303. Once an enforcement strategy has been decided upon, a judgment creditor should consult the booklet for detailed instructions on how to commence enforcement proceedings.

To enforce payment, a creditor may use any of the following methods304:

A. Prohibition on Enforcement

While a debtor is in compliance with a payment schedule, the judgment creditor cannot take any additional steps to collect the debt305. If a payment hearing is ordered because the creditor did notagree with the debtor’ s proposed payment schedule, the creditor may not take any steps to collect the debt before the hearing306. If a summons to a payment hearing is otherwise filed, the creditor may not attempt to collect the judgment debt until after the hearing is over or the summons is either withdrawn or cancelled307.

If the debtor defaults on the payment schedule, the balance becomes due immediately and the creditor may then take other steps to collect the balance308.

The Small Claims Court may be unable to enforce a mediation agreement if doing so would exceed its jurisdiction. Other mediation agreements and the decisions of adjudicators in simplified trials can be enforced309.

It may not be possible to enforce a judgment against a debtor who has discharged the judgment debt in bankruptcy. A judgment creditor who learns that a judgment debtor plans to file for bankruptcy should review s 178 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 and obtain independent advice.

B. Order for Seizure and Sale

An order for seizure and sale allows for personal property belonging to the debtor to be seized by a bailiff and sold at public auction. Examples of personal property that can be seized include vehicles, furniture, and electronics. A personal judgment debtor (i.e., not a corporation) is entitled to retain certain personal property up to a certain value set by regulation310.

The net proceeds (after deduction of the bailiff’s fees and expenses) are given to the judgment creditor. One a judgment creditor has filed Form 11, the registrar can grant an order for seizure and sale if there is no payment schedule or if the debtor has not complied with a payment schedule311.

The debtor is not notified of the order prior to seizure. A seizure and sale is not carried out by the creditor and must be done by private bailiffs. Before an order is issued, the creditor must deposit the estimated fees and expenses of the bailiffs. An order for seizure and sale is valid for one year.

C. Garnishment After Judgment

Garnishment requires a third party, often the debtor’s employer or bank, to pay money owing to the debtor into court instead of to the debtor. The creditor must file an affidavit that describes the amount of the payment order, the amount still owing and the name and address of the garnishee. The affidavit must be sworn before a notary, a lawyer, or a justice of the peace at the registry. Certain assets such as social assistance payments (welfare, disability) and joint accounts may not be garnished. With some exceptions, only 30 per cent of the debtor’s salary can be garnished312.

The creditor must also fill out a garnishing order identifying the garnishee (the bank or the employer) with its full legal name and address. In the case of a bank, the specific branch must be identified and must be located in British Columbia.The garnishee will pay the entire amount it owes the debtor (i.e., the positive balance in a bank account). The garnishing order does not freeze the account; the claimant may re-garnish the bank at any time.

Once the creditor receives a garnishing order, he or she must serve both the garnishee and the debtor either personally, or by registered mail.

Once an order for garnished wages is served on the garnishee, the order is only valid for wages due and owing within seven days313– it is therefore critical to have some knowledge relating to the debtor’ s pay schedule. If the garnishee owes money to the debtor, he or she must pay the amount owed into court. All money paid into court is held until further order of the court.

A creditor may apply for the garnishment of a debtor’s bank account and accounts receivable before a judgment is reached. This is called a pre-judgment garnishing order. For more information, refer to the chapter of the LSLAP manual entitled “Creditors’ Remedies and Debtors’ Assistance” and, specifically, the section entitled “Garnishment of Bank Accounts and Other Accounts Receivable”.

D. Payment Hearing

A payment hearing may be scheduled before a judge or justice of the peace314. It will determine the debtor’s ability to pay and whether a payment schedule should be ordered315. Such a hearing may be requested by a creditor or debtor or ordered by a judge316. However, if a creditor has an order for seizure and sale, he or she must get the permission of a judge to also have a payment hearing. The debtor must bring records and evidence of income and assets, debts owed to and by the debtor, any assets the debtor has disposed of since the claim arose, and the means that the debtor has, or may have in the future, of paying the judgment317. Costs to the applicant in such a proceeding are added onto the sum of the judgment.

A creditor who requests a hearing must file Form 12: Summons to a Payment Hearing. The registry will set a date on the form and the person named in the summons must be served personally at least seven days before the date of the hearing318; service by mail is not permitted.

If the debtor is having difficulty paying, he or she can request a hearing by filing Form 13: Notice of Payment Hearing which must be served on the creditor at least seven days before the date of the hearing, but may be served by regular mail as long as it is mailed at least 21 days in advance of the hearing date319.

If a person who was properly summoned or ordered by the court to attend a payment hearing does not attend, the creditor may ask that the judge or justice of the peace issue a warrant (Form 9) to arrest that person320.

If a creditor does not appear, the hearing may be held, cancelled, or postponed321.

E. Driver’s Licence Suspension

If damages are a result of a motor vehicle accident involving property damage exceeding $400, bodily injury, or death322, the creditor may apply to the Superintendent of Motor Vehicles within 30 days of the judgment to have the debtor’s driver’s licence suspended. The Superintendent may suspend the licence upon receiving the judgment.

F. Default Hearing

If the debtor does not comply with a payment schedule, the creditor may request a default hearing by filing Form 14: Summons to a Default Hearing. The creditor should request from the debtor the same documents as would be requested for a Payment Hearing. The summons must be served personally byeither a court bailiff or a sheriff (i.e., not the creditor) at least seven days before the hearing 323. The judge at the hearing may confirm or vary the terms of the payment schedule324 or imprison the debtor if the defendant does not appear or if the reason for failing to comply with the payment schedule amounts to contempt of court325.

The Registrar’s authority to waive fees extends only to registry services and not court bailiff or sheriff’s services. If a creditor cannot afford a court bailiff’s or the sheriff's services, the claimant can complete an Application to a Judge seeking, pursuant to Rule 13(8), to hold the debtor in contempt and obtain a Warrant of Imprisonment to imprison the debtor for up to 20 days. This application can be served personally by the applicant to avoid the court bailiff’s or sheriff’s fees. If the creditor will testify at the hearing as to the debtor’s failure to comply with the payment schedule, an affidavit is not required.

G. Execution Against Land

If the debtor owns land in British Columbia, the creditor can register the judgment against the land326. If you do not know whether the debtor owns land, you can do a name search at the land title office, for a fee. If the property is sold or transferred after registration of certificate of judgement, some or allof the judgment may be paid. Registering a certificate of judgment prevents the Debtor from selling or mortgaging the land unless the debt owed to the Creditor is paid off. Even if the Debtor owns land jointly with another person, it may be useful to register a certificate of judgment against the land. A certificate of judgment is subject to a prior registered mortgage and the rights of a bona fide purchaser who, before registration of the certificate of judgement, has acquired an interest in land in good faith and for valuable consideration under an instrument not registered at the time of the registration of the judgment327.

Once the judgment is registered, the creditor may apply for an order to sell the property, but only through the Supreme Court of BC. It is outside the jurisdiction of the Provincial Court to order a lien to be place or removed against property. The process of having a Debtor’s land sold to pay off a debt owed to a creditor is very complicated, costly and time-consuming. For example, if the land is used by the Debtor as principal residence in the Capital Regional District or the Greater Vancouver Regional District, and the Debtor’s equity in the land is less than $12000 the land is exempt from being taken and sold. If the land is located elsewhere in BC and is used by the Debtor as a principal residence and the Debtor’s equity is less than $9000 the land is exempt from being taken and sold.328 Because of this complicated process, legal advice should be obtained to determine whether it would be financially worthwhile to apply for an order to sell.

A certificate of judgment can be obtained at the Small Claims Court Registry from the Registrar. The cost is $30.00. The certificate of judgment can then be registered at the Land Title Office where the land is registered. The cost of filing the certificate of judgment at the Land Title Office is $25.00. The certificate is effective for two years. After the two years expires, a new certificate of judgment must be obtained and filed again.

H. Bankruptcy

If a person files a consumer proposal or becomes bankrupt, the law automatically puts in place a “stay of proceedings”. With a few exceptions, a stay prevents any legal action from being commenced or continued against bankrupt. The person’ s trustee will send legal notice of the stay to any person or business currently engaged in legal action against the person declaring bankruptcy. The stay is also sent to the Court that is handling the person’s legal action and if a creditor has already obtained a judgment against the person, a copy is sent to debtor’s employer as well to stop the garnishee.

The Stay of Proceedings is only effective against debts that are dischargeable (i.e., can be eliminated) by bankruptcy law. Things like child support, spousal support, restitution orders, repayment of debts based on fraud or misrepresentation and some others are not stopped by a stay. A complete list of the debts can be found under s. 178 of the Bankruptcy and Insolvency Act of Canada.

There are ways for creditors to circumvent a Stay of Proceedings. However, clients with a judgment awarded in Small Claims Court are advised to speak with a trustee and discuss the mechanism of submitting a proof of claim. This form must be filled out to share in the dividends and vote at the first meeting of creditors (if one is held). The form contains the name of the creditor and the bankrupt and the nature and amount of the claim, as well as other information. A list of instructions is usually included. You must attach a Statement of Account providing the details of the claim along with supporting documents or other evidence that establishes the validity of your claim.

I. Debt collection

Part 7 of the Business Practices and Consumer Protection Act (BPCPA)deals with debt collection practices and applies to all transactions, including consumer to consumer, business to consumer, and consumer to business. A collector is defined as “any person, whether in British Columbia or not, who is collecting or attempting to collect a debt”. Collectors should be aware of the proscriptions in this BPCPA because there are penalties and fines associated with violating the provisions. For example, Part 10 s. 171 of the Actgives rise to a statutory cause of action in Provincial Court to recover damages caused by contraventions of the Act and also gives the Provincial Court jurisdiction for defamation and malicious prosecution.