I was recently interviewed by a prominent legal community newspaper, The Law Times, with respect to my thoughts on a July 2015 Court Decision that permitted Judgment Creditors to use a Court Supervised Sale of property to enforce a Judgment, rather than having to go through the Sheriff’s Sale procedures set out in the Rules of Civil Procedure.
If you’re not a lawyer, that paragraph you just read is boring and maybe meaningless, so let me put it in plain English.
The Rules of Civil Procedure set out how civil law suits in Ontario take place. These Rules also set out how Judgments can be enforced.
If you have a Judgment against a debtor that owns property, the Rules say you can have the Sheriff sell the property. That sounds pretty straight forward, right? Wrong. Before the Sheriff will sell the property, they need a payout statement from anyone (usually a bank) that has a mortgage on the property. Due to Canadian Privacy Laws, you need to try to get the debtor to agree to give that information to you before you can get a Court Order requiring the information to be provided.
This usually means the following process has to be followed to get the information:
1. Pay a process server to try to serve the debtor with a document (Notice of Examination in Aid of Execution) that tells them when and where they have to attend to give information about their assets, including mortgage balances.
2. If the debtor is served (they usually evade service) then you send a lawyer to wait 15 minutes for the debtor not to show up. You have to pay the office you are waiting at and of course, lawyers don’t work for free.
3. The Judgment creditor now must obtain a Court Order that the debtor will attend the Examination in Aid of Execution. A good lawyer will ensure that Order allows you to serve the notice by mail, but many lawyers will skip that step. Lawyer, Court & Process Server fees are again incurred.
4. Repeat step 2, incurring the costs all over again.
5. The lawyer will draft a motion for Contempt of Court. This type of motion must be served personally on the Judgment Debtor. Expect to incur a lot of process server fees.
6. If the Judgment Debtor finally attends, they will refuse to give the mortgage payout information.
7. The lawyer must now bring another motion to have the mortgage company provide the information based on the Judgment Debtor’s refusal.
This is not cheap. Once you get the information, you have to pay at least $ 7,000.00 to the Sheriff for the sale.
If your Judgment is for an amount less than $ 100,000.00 this likely is not worth it. Even if your Judgment is for that amount, you must spend a lot of money to find out how much is owed on the property. If the mortgage debt is large, then you’re not going to proceed with the sale and you spent a lot of money to find out that you should not have spent a lot of money.
The Judge in the case I commented on allowed a Court Supervised sale and streamlined the process to obtain the mortgage payout information. It allowed people with Judgments under $ 25,000.00 to sell property (or motivate the debtor to re-finance to pay their Judgments) without incurring an ridiculous amount of legal and Court fees.
Unfortunately, that case is likely to be overturned if appealed.
Ontario: what a great place to be a Judgment Debtor.