An interesting Ontario Court of Appeal decision was released on December 9, 2014 that impacts the costs of anyone trying to enforce a Judgment in the Province of Ontario by selling property owned by a debtor.
If there is a mortgage on a property, before the Sheriff will start the process of selling property so that the proceeds can be shared between all Judgment Creditors of a debtor, the Sheriff requires that the creditor, who is asking the property be sold, provide the Sheriff with a current Mortgage Discharge Statement.
The decision in Royal Bank requires that the creditor first try to obtain that information from the debtor, through an examination in aid of execution, before it bring a motion asking the Mortgagee (usually the mortgage company) to provide the information.
Usually, debtors do not attend examinations in aid of execution the first time. The process is generally one of serving a notice of examination (which must be served personally) then sending a lawyer to wait 15 minutes on the day of the examination for the debtor not to attend. Next a motion to obtain a Court Order to compel attendance must be brought. Then a second attendance occurs, which usually has a better chance of success. However, it is not unusual to bring a motion for Contempt of Court (which must be served personally) to require the debtor to actually attend at the examination.
If the debtor refuses to provide a Mortgage Discharge statement at the examination a further Court Order is required to compel that answer.
The average cost of the above process can quickly rise to $ 3000.00 if not more.
The Honourable Justice Hoy, in her dissent of the decision which found the above process to be required, noted:
“Many creditors are not as sophisticated as RBC, and can ill-afford the expense of being in and out
of court to enforce a valid judgment for a relatively modest amount.”
As this is the second time this issue has been considered by the Court of Appeal in Ontario, this is likely to remain the state of the law (unless it is appealed to the Supreme Court of Canada) for at least the next five to ten years.
Thankfully, the Court did provide a suggestion as to how to obtain the information without going through all of the legal hoops detailed here. The Court suggested if the litigation involves a contract, the contract can include a consent to release mortgage information in the event of a default.
Of course, I’m not sure how many parties will be willing to say, purchase a set of tires on credit and agree to the release of mortgage information to the company selling those tires.
As a law firm that acts for business creditors, this decision is frustrating for our clients as it leads to increased enforcement costs. However, if there is sufficient equity in the property, selling a debtor’s property to satisfy the Judgment can still make the client “whole” it will just take patience and money to get there.
1 Royal Bank of Canada v. Trang, 2014 ONCA 883 (CanLII)
2 Royal Bank v. Trang, supra