Part 5III&IV Unsecured Creditors Post-Judgment Remedies Specific Enforcement Procedures

1. Part 5III&IVUnsecured CreditorsPost-Judgment RemediesSpecific Enforcement Procedures

2. Taxonomy of Remedies • Against the person of the debtor • Imprisonment for failure to pay debt • Imprisonment in aid of examination • Remedies against personal & real property • Passive enforcement: filing notice of judgment/memorial of execution – already discussed • Order for Seizure and Sale – M&E Act • Remedies against debts owing to debtor • Attachment of debts or garnishment – Garnishee Act • Equitable execution – fills in the cracks • Retroactive Remedies • Assignments And Preferences Act

3. Against the Person of the Debtor

4. Post-Judgment Arrest & Imprisonment • Failure to pay judgment as ordered by court is contempt of court • But in all jurisdictions Rules of Court provide that imprisonment is not available for contempt for failure to pay a judgment debt • Some jurisdictions retain specific statutory authority to imprison debtor for non-payment • Nfld, NB, NS, BC, Yukon • Rarely used

5. Post-Judgment Arrest & Imprisonment • NB Arrest & Examinations s.36 • No person shall be arrested or imprisoned after judgment in any civil suit, or for making default in the payment of a sum of money. . . • Abolition of common law imprisonment for failure to pay • . . .except as provided and allowed by this or any other Act at the time in force. • Statutory imprisonment retained • Term of up to one year (s.38) if the debtor has the means to pay and refuses to do so (s.40(a)).

6. Arrest in Aid of Examination • Can get an order for examination to discover assets which may satisfy the judgment. • Persons other than the debtor may be examined • Enforceable by contempt proceedings, which can include imprisonment • Arrest and Examinations Act, ss. 30-34

7. Against Real and Personal Property of the Debtor

8. Order for Seizure & Sale • Distinguish • “Exigible property” • “Exempt property” • Exigible property is not subject to seizure under a writ • e.g. chose in action (subject to garnishment) • RRSP? • Stock in a company? Liquor licence? • Exempt property is exigible, but is statutorily exempt from execution

9. Seizure • Sheriff conducts seizure and sale • Not JC • Instructing creditor must pay sheriff’s costs before seizure: Sheriff’s Act s.13 • Liable to third parties for seizing their goods • Problem when ownership is in dispute • Sheriff can ask for indemnification from instructing creditor • Is liable to D for excessive seizure • more than is reasonably needed to satisfy debt

10. Seizure • Sheriff cannot force entry to effect seizure • “the house of every one is to him as his castle and fortress, as well for his defence against injury and violence, as for his repose.”1604 decision • Sheriff liable in damages for illegal entry • Ultimately, a sheriff is a peace officer (Criminal Code s.2 definitions) with the right to possession of the property in question, and it is a criminal offence to hinder a peace officer

11. Seizure • In practice, as a matter of convenience the sheriff does not want to take physical possession of the property • Most of the issues surrounding seizure concern the type of symbolic possession which is necessary to give sufficient notice to third parties that a seizure has been effected. • Once goods have been seized, sheriff has a “special kind of property” and can bring an action for recovery of the goods against a third person who carries them away.

12. Sale • Sale is very rare since it will often result in an undervalue • D is inclined to buy out if at all possible • The Act does not even provide minimal specification of how sale is to be conducted in case of personalty.

13. Sale • Case-law requirements • Sheriff selling assets must conduct the sale so as to ensure that a fair price is received. • The sheriff will be liable to the debtor who might have received any surplus • Or to the creditor whose judgment should have been but was not satisfied. • Where the sale does not result in a reasonable bid, the sheriff may not simply sell to the highest bidder. • The sheriff may either adjourn to a named day or prepare a return that the goods remain in his or her hands for want of a buyer.

14. Sale • Compare secured creditor’s duty which is only to take reasonable steps to secure a fair price • Reason for the difference is that the sheriff has the option of a return venditioniexponas – application to court that the goods be sold for the best price obtainable. • Note that in practice there may be little difference btw SP duty and that of a sheriff as an unreasonably low price is good evidence that reasonable steps were not taken

15. Title of Purchaser • Purchaser is protected if judgment is later reversed: M&E s.9 • In which case creditor is liable to debtor • Other than that, purchaser from sheriff gets very tenuous title • Recall priorities Jellett v Wilkie • “...the sale shall convey whatever interest the party had in the goods and chattels at the time of the seizure.” • M&E s.23 (similarly in the case of land, s.15) • The sheriff offers no warranties as to title

16. Title of Purchaser • Sale may be challenged if • The goods were not exigible or were owned by a third person at the time of seizure (Jellett) • Court issuing the writ had no jurisdiction to do so • Writ was not regular on its face or had expired • Proceedings leading to issue of the writ were seriously flawed (how flawed?) • There was fraud or wilful misconduct on the sheriff’s part • The sale was collusive • Result – price at a sheriff’s sale is usually very low

17. Remedies Against Debts Owing to Debtor: Garnishment

18. Garnishment • D is owed money by third party “account debtor” • Account debtor called “garnishee” in the Garnishee Act • JC applies ex parte for “attaching order” • Order may be challenged by D or AD within 20 days of service • Attaching order is served on account debtor • Not on D • Once attaching order is served, debt is “attached” (bound)

19. Garnishment • Once debt is bound, payment into court by AD discharges debt • AD may pay JD only on order of court • Cf PPSA right to collect on intangibles, where AD pays SP after notice is given • Payment by AD to D is void & does not discharge debt • AD will be liable to pay the same amount to JD

20. Garnishment • AD can raise against JD any defenses which would have been available against D • There is a special process if AD disputes debt owing to D

21. Garnishable Debts • “Debts due or accruing due” • Usual formulation • “Debt” • Must be specific sum – damages claim cannot be garnished • Ie when debtor is herself a JC vis-a-vis a third party, the judgment debt owing to the debtor cannot be garnished until judgment.

22. Garnishable Debts • Problem: What debts can be garnished before they are actually due? • “Accruing due” • Debts which are “accruing” are debts which will become payable with certainty only with the passage of time: e.g. a loan • Such debts are said to be “present debts payable in the future” • Distinguish amount owing those which are contingent on some uncertain future action

23. Garnishable Debts • Examples of controversial types of debts • Unliquidated damages – cannot be attached until judgment is entered • Fire insurance – fire insurance policy cannot be garnished until insurer admits liability and agrees to pay rather than replace asset • But, some policies may be garnishable immediately, depending on particular clause e.g. auto insurance policy creating a debt owing to insured once judgment recovered • Life insurance garnishable on death of deceased, even where succession duty releases have not yet been filed

24. Garnishable Debts • Examples of controversial types of debts • Legacies – where the j.d. is entitled to a specific bequest, and the executors have agreed to pay, it can be attached • But where bequest is a distributed share, not garnishable until quantified • Rent which is not yet due – was at one time garnishable as debt accruing due, but is now generally not garnishable • Successive orders are necessary to garnish rent as it becomes due. • Mortgages (e.g. where debtor is mortgagee), in contrast, can be garnished prospectively • RRSP – generally not garnishable

25. Garnishable Debts • Why are debts not yet accruing due not garnishable?

26. Wage Garnishment • Wages are often not yet accrued • Several orders must be issued in order to catch sequential pay periods. • Some jurisdictions have specific continuting garnishment orders for wages • Wages typically cannot be garnished entirely • N.B. has abolished wage garnishment • All provinces (incl. NB) have ongoing garnishment orders for family orders e.g. maintenance and alimony

27. Equitable Execution • There are various forms of equitable execution • The most important is appointment of a receiver • One important reason for appointment of a receiver is to reach assets which cannot be reached because of gaps in other processes • E.g. RRSP cannot be seized, nor can it be garnished • It is now clear in NB that a receiver can be appointed to collapse and RRSP

28. Part 5.IV: Exemptions

29. Exemptions • Exempt goods – M&E s.33(1): • (a) the furniture, household furnishings and appliances reasonably necessary for the debtor and his family; • (b) the necessary and ordinary wearing apparel of the debtor and his family; • (c) all necessary food and fuel for the debtor and his family for three months; • (d) two horses and sets of harness, two cows, ten sheep, two hogs and twenty fowl, and food therefor for six months;

30. Exemptions (e) any tools, implements and necessities used by the debtor in the practice of his trade, profession or occupation having a cumulative market value of not more than six thousand five hundred dollars, and one motor vehicle having a market value of not more than three thousand dollars, if required by the debtor in the course of or to retain employment or in the course of and necessary to his trade, profession or occupation, but the exemptions provided in this paragraph do not apply to a corporate debtor;

31. Exemptions • Exempt goods – M&E s.33(1): • (f) seed grain and potatoes required for seeding and planting purposes to the following quantities: forty bushels of oats, ten bushels of barley, ten bushels of buckwheat, ten bushels of wheat and thirty-five barrels of potatoes; • (g) dogs, cats, and other domestic animals belonging to the debtor; • (h) medical or health aids reasonably necessary to enable the debtor or any member of his family to work or to sustain health.

32. Exemptions • Note: Traditionally and still in most jurisdictions, there are no exemptions in the case of secured transactions • Atlantic PPSAs have exemptions (NB s.58) • Exemptions do not apply to pmsi • (a) furniture, household furnishings and appliances used by the debtor or a dependent to a realizable value of five thousand dollars or to any greater amount that may be prescribed; • Cf M&E – no limit on the value of the furniture

33. Exemptions • NB PPSA • (b) one motor vehicle having a realizable value of not more than six thousand five hundred dollars at the time the claim for exemption is made, or not more than any greater amount that may be prescribed, if the motor vehicle is required by the debtor in the course of or to retain employment or in the course of and necessary to the debtor's trade, profession or occupation or for transportation to a place of employment where public transportation facilities are not reasonably available; • Cf M&E – $3000 limit on value of vehicle

34. Exemptions • NB PPSA • (c) medical or health aids necessary to enable the debtor or a dependent to work or to sustain health; and • CF M&E • (h) medical or health aids reasonably necessary to enable the debtor or any member of his family to work or to sustain health.

35. Exemptions • NB PPSA • (d) consumer goods in the possession and use of the debtor or a dependent if, on application, the Court determines that • (i) the loss of the consumer goods would cause serious hardship to the debtor or dependent, or

36. Exemptions • NB PPSA • (ii) the costs of seizing and selling the goods would be disproportionate to the value that would be realized.