Difference between revisions of "Creditors' Remedies against Debtors (10:III)"

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Creditors' Remedies against Debtors (10:III) (view source)

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→‎4. Garnishment of Bank Accounts and other Accounts Receivable
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Once the execution process has begun, the debtor usually has one final opportunity to pay. In the case of land, the sheriff may not sell until one month after receiving the order for sale (COEA s 100). The debtor should be advised to pay if possible because the amount recovered on a forced sale may not be as high as otherwise obtained on a normal sale of property.
Once the execution process has begun, the debtor usually has one final opportunity to pay. In the case of land, the sheriff may not sell until one month after receiving the order for sale (COEA s 100). The debtor should be advised to pay if possible because the amount recovered on a forced sale may not be as high as otherwise obtained on a normal sale of property.


=== 4. Garnishment of Bank Accounts and other Accounts Receivable ===
=== 4. Garnishment ===


==== a) Garnishment Before or After Judgment ====
Garnishment is a judicial proceeding in which a creditor asks the court to order a third party who is indebted to the debtor to turn over to  the creditor any of the debtor’s property. The creditor is the garnishor. The third party is the garnishee. The ''COEA'' provides that a garnishing order may be obtained before or after judgment.


Garnishment is a judicial proceeding in which a creditor asks the court to order a third party who is indebted to the debtor to turn over to  the creditor any of the debtor’s property. The creditor is the garnishor. The third party is the garnishee. The ''COEA'' provides that a garnishing order may be obtained before or after judgment.
=== 5. Garnishment of Bank Accounts and other Account Receivable ===
 
==== a) Garnishment Before and After Judgement ====


A pre-judgment garnishing order is paid into court pending the outcome of the proceedings, and may be used in circumstances where the debtors ability to pay may be compromised before judgment. A pre-judgment garnishing order is not available against wages. The creditor’s action against the debtor must be for a liquidated (i.e. explicitly specified) or ascertained sum. E.g. damages for a breach of contract must be quantified as a term of that contract (see ''Gibbons v Specialty Cars'' (27 January 1989), F.5885590 (BC County Ct.)). A definition of liquidated sum is found in ''Hydro Fuels v Wilder'', [1968] 1 OR 169 at 276 (HCJ). The accompanying affidavit must disclose the nature of the cause of action and the specified amount claimed. Note that recourse to a pre-judgment garnishing order is extraordinary and therefore the provisions of the ''COEA'' must be strictly complied with or it may be overturned. The creditor will generally swear an affidavit in support of a pre-judgment garnishing order by himself or herself.  
A pre-judgment garnishing order is paid into court pending the outcome of the proceedings, and may be used in circumstances where the debtors ability to pay may be compromised before judgment. A pre-judgment garnishing order is not available against wages. The creditor’s action against the debtor must be for a liquidated (i.e. explicitly specified) or ascertained sum. - damages for a breach of contract must be quantified as a term of that contract (see ''Ocean Floors Ltd v Crocan Construction Ltd'' (2010), 2010 BCSC 409). A definition of liquidated sum is found in ''Steele v Riverside Forest Products Ltd'' (2005), 2005 BCSC 920. The accompanying affidavit to a pre-judgment garnishing order must disclose the nature of the cause of action and the specified amount claimed. Note that recourse to a pre-judgment garnishing order is extraordinary and therefore the provisions of the COEA must be strictly complied with or it may be overturned. The creditor will generally swear an affidavit in support of a pre-judgment garnishing order by himself or herself.


A creditor who begins an action for a liquidated sum may seek to garnish a debt owed to the debtor to have the money paid into court to “ensure” payment if the creditor is successful in court. However, remember other judgment creditors may also be trying to ensure payment.  
A creditor who begins an action for a liquidated sum may seek to garnish a debt owed to the debtor to have the money paid into court to “ensure” payment if the creditor is successful in court. However, remember other judgment creditors may also be trying to ensure payment.  
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Any debt that is “due or accruing due” to a judgment debtor may be garnished by a judgment creditor. This requires that the debt be an existing or perfected debt even though payment is not yet due. Bank accounts can be garnished as long as it is not a joint bank account, except where the debt is owed jointly by the same parties or the  creditor is exercising its right of offset. For example, a creditor bank may garnish a debtor’s personal account, including a joint account, to offset the debtor’s debts to that bank. Term deposits may be garnished as long as any  conditions on withdrawal are mere matters of procedure and administration, though there may be complications where the account is transferable.   
Any debt that is “due or accruing due” to a judgment debtor may be garnished by a judgment creditor. This requires that the debt be an existing or perfected debt even though payment is not yet due. Bank accounts can be garnished as long as it is not a joint bank account, except where the debt is owed jointly by the same parties or the  creditor is exercising its right of offset. For example, a creditor bank may garnish a debtor’s personal account, including a joint account, to offset the debtor’s debts to that bank. Term deposits may be garnished as long as any  conditions on withdrawal are mere matters of procedure and administration, though there may be complications where the account is transferable.   


'''Registered plans such as RRSPs and RRIFs are exempt from enforcement processes under section 71.3 of the ''COEA''. However, the debtor may  lose any contributions made within the previous 12 months.''' Also, many pension plan payments are exempt pursuant to s 63 of the ''Pension  Benefits Standards Act''. Section 15 of the ''COEA'' provides that a creditor may seek a garnishing order that will attach a debt maturing in  the future. This form of garnishing order may be useful in attaching monthly payments, since all future monthly payments can be attached by one order rather than issuing a garnishing order for each payment.   
'''Registered plans such as RRSPs and RRIFs are exempt from enforcement processes under s 71.3 of the ''COEA''.''' However, contributions made in the 12 months preceding the date of judgment may be enforced on. Also, many pension plan payments are exempt pursuant to s 63 of the ''Pension  Benefits Standards Act''. Section 15 of the ''COEA'' provides that a creditor may seek a garnishing order that will attach a debt maturing in  the future. This form of garnishing order may be useful in attaching monthly payments, since all future monthly payments can be attached by one order rather than issuing a garnishing order for each payment.   


==== c) Procedure for Pre-Judgment Garnishing Order ====
==== c) Procedure for Pre-Judgment Garnishing Order ====


The creditor must swear in an affidavit that an action is pending, provide the date of its commencement, the nature of the cause of action,  and the actual amount (i.e. liquidated or ascertained sum) of the debt, claim or demand, and that the same is justly due and owing. The  affidavit may be sworn before or after the action is commenced (although the form of the affidavit will differ). The affidavit must also state  that another person, the garnishee, is indebted to the debtor, and provide the garnishee’s residential address (''COEA'', ss 3(2)(e) and (f)).  
In order to obtain a pre-judgment garnishing order, a civil action must first be commenced by a creditor for the amount of the debt.
 
The creditor must swear in an affidavit that an action on the debt is pending, provide the date of its commencement, the nature of the cause of action,  and the actual amount (i.e. liquidated or ascertained sum) of the debt, claim or demand, and that the same is justly due and owing. The  affidavit may be sworn before or after the action is commenced (although the form of the affidavit will differ). The affidavit must also state  that another person, the garnishee, is indebted to the debtor, and provide the garnishee’s address (''COEA'', ss 3(2)(e) and (f)).  


The garnishing order may be set aside if the procedural requirements are not strictly complied with because it is considered an extraordinary remedy. For example, a pre-judgment garnishing order will be set aside where the affidavit in support sets out an amount including interest  and the affidavit does not allege the existence of an agreement on the part of the debtor to pay interest: see ''Nevin Sadler-Brown Goodbrand Ltd. v Adola Mining Corp. and Prophecy Developments Ltd.'' (1988), 24 BCLR (2d) 341. '''Never''' claim court ordered interest in the affidavit.  
The garnishing order may be set aside if the procedural requirements are not strictly complied with because it is considered an extraordinary remedy. For example, a pre-judgment garnishing order will be set aside where the affidavit in support sets out an amount including interest  and the affidavit does not allege the existence of an agreement on the part of the debtor to pay interest: see ''Nevin Sadler-Brown Goodbrand Ltd. v Adola Mining Corp. and Prophecy Developments Ltd.'' (1988), 24 BCLR (2d) 341. '''Never''' claim court ordered interest in the affidavit.  


The court has discretion to set aside a pre-judgment garnishing order, but the applicant must submit a meritorious set-off claim or show  extraordinary hardship arising out of the garnishment. While there is some conflicting law regarding whether the plaintiff’s solicitor may swear in an affidavit as to what is the amount owing (see ''Caribou Construction v Cementation Co (Canada)'' (1987), 11 BCLR (2d) 122 (SC); ''Trade Fortune Inc v Amalgamated Mill Supplies'' (1994), 89 BCLR (2d) 132 (SC)), most practitioners prefer never to swear an affidavit to support a pre-judgment garnishing order. Whenever possible, the plaintiff should swear the affidavit: see ''Samuel and Sons Travel v Right on  Travel'' (1987), 19 BCLR (2d) 199. The remaining procedure is the same as for post-judgment garnishing orders (below) except that the court retains the money pending the action’s outcome.  
The court has discretion to set aside a pre-judgment garnishing order, but the applicant must submit a meritorious set-off claim or show  extraordinary hardship arising out of the garnishment. While the plaintiff’s solicitor may swear in an affidavit as to what is the amount owing (see ''Caribou Construction v Cementation Co (Canada)'' (1987), 11 BCLR (2d) 122 (SC); ''Trade Fortune Inc v Amalgamated Mill Supplies'' (1994), 89 BCLR (2d) 132 (SC)), most practitioners prefer never to swear an affidavit to support a pre-judgment garnishing order. Whenever possible, the plaintiff should swear the affidavit: see ''Samuel and Sons Travel v Right on  Travel'' (1987), 19 BCLR (2d) 199. The remaining procedure is the same as for post-judgment garnishing orders (below) except that the court retains the money pending the action’s outcome.  


==== d) Procedure for Post-Judgment Garnishing Order ====
==== d) Procedure for Post-Judgment Garnishing Order ====


A judgment creditor or their solicitor must swear an affidavit stating:  
Post-judgment garnishing orders are not held to the same level of scrutiny as pre-judgment garnishing orders.
 
In order to obtain a post-judgement garnishing order, a judgment creditor or their solicitor must swear an affidavit stating:  
*a) that a judgment has been recovered;  
*a) that a judgment has been recovered;  
*b) the amount that is unsatisfied;  
*b) the amount that is unsatisfied;  
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*d) the address of the garnishee’s residence in the jurisdiction (s 3(2)).  
*d) the address of the garnishee’s residence in the jurisdiction (s 3(2)).  


The affidavit is filed in the court registry along with the form of order requested. Barring any technical problem resulting in the registry declining to issue the order, the garnishing order will usually be issued on the same day. The garnishee is then served with a copy of the order, which commands him or her to pay the money into court. A copy of the order is then served on the debtor as soon as possible after service on the garnishee. The garnishee may dispute indebtedness to the judgment debtor (see [[Introduction to Debtors%27 Options (10:III)#B. Legal Advice for Debtors Who are Garnished | Section III.B: Legal Advice for Debtors Who are Garnished]]). Where the garnishee pays money, the court keeps the money until it is paid out to the judgment creditor under ss 11, 12, and 13.  
The affidavit is filed in the court registry along with the form of order requested.   The garnishee is then to be served with a copy of the order, which commands them to pay the money into court. A copy of the order must be served on the debtor at once, or within a time allowed by the judge or registrar by memorandum endorsed on the order . Failure to serve a garnishing order on a debtor “at once” may result in the garnishing order being set aside. Whether delayed service is fatal to a garnishing order depends on the circumstances of each case. See ''Skybound Developments Ltd. v. Hughes Properties Ltd.'' (1985), 1985 CarswellBC 219, 65 BCLR 79 (CA) for a discussion on this topic. The garnishee may dispute indebtedness to the judgment debtor (see '''Section II.B: Legal Advice for Debtors Who are Garnished''', below). Where the garnishee pays money, the court keeps the money until it is paid out to the judgment creditor under ss 11, 12, and 13.


Funds held jointly to the credit of the defendant and another person, who is not a party to the action, cannot be garnished, except where a creditor bank exercises its right of offset: see ''238344 BC Ltd. v Patriquin et al'' (1984), 57 BCLR 224.  
Funds held jointly to the credit of the defendant and another person, who is not a party to the action, cannot be garnished, except where a creditor bank exercises its right of offset: see ''238344 BC Ltd. v Patriquin et al'' (1984), 57 BCLR 224.  
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==== e) Payment by Instalments ====
==== e) Payment by Instalments ====


A debtor against whom a garnishing order has been made may apply for a release of the garnishing order, and for an order for the payment of the debt by instalments on the basis of hardship (see ''Bank of Montreal v Monsell'' (1994), 58 BCLR 11 (SC)). This order, if granted (it is rare), will bind the debtor’s creditors, but will only continue for as long as the debtor is not in default on any payment for more than five days, and so long as no other garnishing order is issued against him or her for any other debt (s 5). The creditor may apply to have the order  varied if new evidence of the debtor’s finances comes to light.  
A debtor against whom a garnishing order has been made may apply for a release of the garnishing order, and for an order for the payment of the debt by instalments on the basis of hardship (see ''Bank of Montreal v Monsell'' (1994), 58 BCLR 11 (SC)). This order, if granted (it is rare), will bind the debtor’s creditors, but will only continue for as long as the debtor is not in default on any payment for more than five days, and so long as no other garnishing order is issued against him or her for any other debt (s 5). The creditor may apply to have the order  varied if new evidence of the debtor’s finances comes to light.


=== 5. Garnishment of Wages ===
=== 5. Garnishment of Wages ===
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