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PRE..JUDGMENT PRESERVATION OF ASSETS

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TABLE OF CONTENTS

A. INTRODUCTION 2

B. DEVELOPMENT OF PRE-JUDGMENT REMEDIES 2

C. MAREVA INJUNCTIONSI. The History of the Mareva Injunction 3II. The Jurisdiction for a Mareva Injunction 4III. The Test for a Mareva Injunction 6IV. Relief Ancillary to a Mareva Injunction 9V. Practical Tips and the Content of Orders 11VI. Priority ofFunds Preserved 16

D. PRE-JUDGMENT GARNISHMENTI. The Attachment of Debts Act 16

(a) Debt or Liquidated Demand 17(b) Affidavit 18(c) What debts can I cannot be attached 20(d) Default by Garnishee 21(e) Payment in and out of Court 21

E. WHEN THE COURT MAY REFUST TO EXERCISE ITSDISCRETION TO GRANT PRE-JUDGMENT RELIEF 22

F. THE ABSCONDING DEBTORS ACT 24

G. OTHER REMEDIESI. Interim Preservation of Property Orders 25II. Receivers 26III. Lis Pendens 27IV. Setting Aside a Default Judgment on Terms 27

H. UMPACTOFBANKRUPTCY 29

I. ALL IS NOT LOST 30

J. CONCLUSION 31

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PRE-JUDGMENT PRESERVATION OF ASSETS

A. INTRODUCTION

The goal of the majority of civil cases is to secure a monetary judgment for the plaintiff.

Prudent counsel will want to ensure that their hard-won judgment can be realized upon

through attachment of or execution against the defendant's assets. In some instances, that

requires the plaintiffs taking preservative steps, at the outset of the litigation, in order to

prevent the defendant from rendering himselfjudgment-proofthrough the course of the

litigation, and in order to "secure" assets of the defendant from which the plaintiff's

. judgment can be satisfied. There are a number ofpre-judgment applications that can be

brought by a plaintiff to effect this result.

B. DEVELOPMENT OF PRE-JUDGMENT REMEDIES

I know ofno case where, because it is highly probable if the action werebrought the plaintiff could establish that there was a debt due to him by thedefendant, the defendant has been ordered to give a security till the debt hasbeen established by the judgment or decree.1

These words, written by the English Court ofAppeal in 1890 were the basis of the

principle that, as a general rule, an unsecured creditor could not obtain execution or any

other enforcement proceeding prior to securing judgment against the defendant.

This principle, however, often resulted in a significant hardship to plaintiffs who found that

by the time they obtained judgment, the defendant had hidden, dissipated or transferred his

assets outside of the jurisdiction, so as to render himselfjudgment proof, and the plaintiffs

judgment worthless.

1 Lister & Co. v. Stubbs, [1890] All E.R. 797, at 799.

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The courts and the legislatures recognized this danger, and developed a number of

prejudgment remedies to protect plaintiffs from absconding defendants. However, it was

also recognized that giving the plaintiff a right to attach assets of the defendant prior to the

merits of the plaintiff's case being adjudicated upon gave the plaintiff enormous leverage

against the defendant, and had potential for abuse. As will be discussed below, the courts

have attempted to strike a balance between these two competing facets in fashioning pre­

judgment relief.

Counsel should be aware that the overriding principle ofpre-judgment remedies is that

they are proceedings strictissimijuris, and the courts require exacting adherence to the

procedural and evidentiary requirements before pre-judgment attachment will be granted.

The following discussion should assist plaintiffs' counsel in navigating the minefield of

procedural hurdles in the quest for pre-judgment relief.

C. MAREVA INJUNCTIONS

I. The History of the Mareva Injunction

Historically, creditors did not have a right to obtain pre-judgment reliefpreventing a debtor

from dissipating assets or removing them from the jurisdiction. That changed in the mid­

1970's when the English Court ofAppeal overturned the rule in Lister & Co. v. Stubbs,

supra, creating an innovative pre-judgment injunctive remedy which is now commonly

referred to as a Mareva injunction, named after one of the trilogy of cases establishing this

form of relieF.

In Mareva, supra, the court granted interlocutory injunctive relief restraining the defendant

from removing assets from the jurisdiction, pending the trial of the action. Lord Denning

described the rationale of the court as follows:

In my opinion ... a creditor ... has a right to be paid the debt owing to him,even before he has established his right by getting judgment for it. If it

2 Mareva Compania Naviera S.A. v. Int. Bulk Carriers S.A., [1975] 2 Lloyd's Rep. 509 (e.A.)

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appears that the debt is due and owing, and there is a danger that the debtormay dispose ofhis assets so as to defeat it before judgment, the court hasjurisdiction in a proper case to grant an interlocutory judgment so as toprevent him disposing ofthose assets.3

Lord Denning has quite modestly described the Mareva injunction as "the greatest piece of

judicial law reform in my time".4

The underlying principle of a Mareva injunction is to protect the plaintiff from having his

or her right to collect judgment destroyed, and this is accomplished by freezing exigible

assets ofthe defendant within the jurisdiction, pending the trial of the action. Mareva

injunctions are granted where there is a combination two circumstances: firstly, when it

appears likely that the plaintiffwill recover judgment against the defendant for a certain or .

approximate sum, and secondly, when there are reasons to believe that the defendant has

assets within the jurisdiction to meet the judgment, in whole or in part, but that the

defendant may well take steps designed to ensure that these are no longer available or

traceable when judgment is given against him.5

The aims ofa Mareva injunction are essentially two-fold, namely:

(a) obtaining something akin to security, at least in the sense of ensuring thatthere is a fund available to meet any judgment; and

(b) putting pressure on the defendant to provide proper security for the claim6•

II. The Jurisdiction for a Mareva Injunction

The jurisdiction ofthe Court to grant injunctive relief is found at section 45, Rule 8 of The

Queen's Bench Act, which states:

A mandamus or an injunction may be granted or a receiver appointed by aninterlocutory order ofthe court in all cases in which it shall appear to the

3 Mareva, supra, p. 5104 Denning, The Due Process ofLaw (1980), p. 134.S Z. Ltd. v. A [1982] 1All E.R. 556.6 Farrar, "The Effect ofa Mareva Injunction", [1979] J.B.L. 278, at 279.

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court to be just or convenient that such order should be made; and suchorder may be made either unconditionally or upon such terms andconditions as the court shall think just; and ifan injunction is asked, eitherbefore or at or after the hearing of any cause or matter, to prevent anythreatened or apprehended waste or trespass, such injunction may begranted as the court shall think fit whether the person against whom suchinjunction is sought is or is not in possession under any claim of title orotherwise, or ifout ofpossession, does or does not claim a right to do theact sought to be restrained under any colour of title, and whether the estatesclaimed by both or by either of the parties are legal or equitable.

Pursuant to Rule 387A of The Queen's Bench Rules, injunctive relief, including Mareva

injunctions, may be granted exparte. Rule 387A states:

Subject to the provisions of The Queen's Bench Act, interim orders formandamus or an injunction or the appointment ofa receiver or for theinterim preservation ofproperty may be made by the court on an ex parteapplication or upon notice as the court may direct.

Mareva injunctions have been granted in Saskatchewan since the Court of Queen's Bench

decision in Sask-Workwear Inc. v. Ollinif. The Supreme Court of Canada confirmed the

use ofMareva injunctions in Aetna Financial Services Limited v. Fiegelman et ar.

In order to obtain injunctive relief an action must have been commenced. Typically, the

Statement of Claim and the ex parte Memorandum (and affidavit materials) for the l\1areva

injunction are filed with the court concurrently. The prayer for relief in the Statement of

Claim should specifically request injunctive relief, including a Mareva injunction.

Courts in England have held that a claim for a Mareva injunction cannot form the basis for

jurisdiction9: the claim must be for relief in addition to the injunction. Nor will a court

grant a Mareva injunction where no substantive claim has been asserted against the

7 [1983],1 W.W.R. 631 (Sask.Q.B.)8 [1985] 1 S.C.R 2.9 Siskina v. Distos Compania Naviera S.A., [1979] A.C. 210 (H.L.)

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defendant, except in the case of an emergency, and presumably where the applicant

undertakes to commence a claimlO•

While most ofthe cases in which a Mareva injunction has been granted may be

characterized as commercial in nature, courts in both England and Canada have granted

this relief in non-commercial cases, including claims under Fatal Accidents legislationll,

claims for wrongful dismissal12, and claims for employee benefits under a collective

agreement13•

III. The Test for a Mareva Injunction

A Mareva injunction is an extremely powerful and extraordinary remedy in the nature of a

quia timet order, and the courts have evidenced an inclination to be cautious in granting

such injunctions, and will only do so in appropriate circumstances based on appropriate

legal principles14•

The principles to be followed when a court is deciding whether to grant a Mareva

injunction have been most recently set out by Baynton, 1. in First Choice Capital Fund

Ltd. v. First Canadian Capital Corp.I5, as follows:

1. The plaintiff should make full and frank disclosure of all matters in hisknowledge which are material for the judge to know.

2. The plaintiff should give particulars ofhis claim against the defendant,stating the ground ofhis claim and the amount thereof, and fairly stating thepoints made against it by the defendant.

3. The plaintiff should give some grounds for believing that the defendant hasassets here.

10 Steamship Mutual Underwriting Assn. (Bermuda) Ltd v. Thakur Shipping Co. [1986] 2 Lloyd's Rep. 4390(C.A.)11 Allen v. Jambo Holdings Ltd [1980] 1 W.L.R 1252 (C.A.)12 Quinn v. Marsta Cession Services Ltd (1981) 34 O.R (2d) 659 (H.C.)13 Starr v. Whiteca/fCollegiate Inc., supra. .14 First Choice Capital FundLtd v. First Canadian Capital Corp. [1997],9 W.W.R 177 (Q.B.).IS Ibid.

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4. The plaintiff should give some grounds for believing that there is a risk ofthe assets being removed before the judgment or award is satisfied.

5. The plaintiff must give an undertaking in damages in case he fails in hisclaim or the injunction turns out to be unjustified.

Each of these principles has been expanded upon in a number of cases, as discussed below.

(1) Full and Frank Disclosure

. As injunctive relief is equitable relief, it follows that the party seeking equity must come

before the court with "clean hands". One ofthe elements of this is to provide the court will

full and frank disclosure ofall material matters. The information provided should also be

of such extent as to persuade the court that the plaintiffhas a strong primafacie case.

(2) Particulars of the Plaintiffs claim together with any known defence

The purpose of this requirement is to ensure a strong primafacie case for the plaintiff (one

of the requirements of injunctive relief), and to guard against the likelihood of a valid legal

defence which could negate the plaintiffs case. In Starr v. WhitecalfCollegiate Inc. 16,

Krueger J. interpreted this principle as follows:

I am ofthe view that the duty of the applicant is to raise, for theconsideration of the Court, all possible defences. Ajudge hearing a Marevaapplication must decide whether a strong prima facie case has been madeout. It is not the function of the Court at this stage to decide all of the issuesraised in the pleadings. The Statement of Defence will not normally befiled by the time an application of this nature is heard, and the Court mustbe alerted only to anticipated defences.

16 [1998] S.J. No. 750 (Q.B.)

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(3) Grounds for believing that the defendant has assets within the jurisdiction

The material provided to the court under this item should establish the defendant's assets

with as much precision as possible, so that, if a Mareva injunction is warranted, it can be

directed towards specific assets or bank. accounts.17

"Within the jurisdiction" has been defined in Aetna, supra, as the "federal state".

(4) Reasonable grounds for believing that there is a risk that the assets will bedisposed ofprior to judgment

In Aetna, supra, the court described the risk ofdisappearance ofassets thusly:

There must be a real risk that the remaining significant assets of thedefendant within the jurisdiction are about to be removed or so disposed ofby the defendant as to render nugatory any judgment to be obtained aftertrial. Mareva injunctions are therefore available not just to prevent theremoval ofassets from the jurisdiction, but also disposal within thejurisdiction.18

In Chitel v. Rothbarr9 the court interpreted this principle as meaning that a Mareva

injunction could be granted if the defendant was "dissipating or disposing ofhis assets, in a

manner clearly distinct from his usual or ordinary course of business or living, so as to

render the possibility of future tracing of the assets remote, if not impossible in fact or in

law".

In Marine Atlantic Inc. v. Blyth20 the court noted:

Simply stated, evidence of fmanciaI difficulties is not sufficient to grant theextraordinary remedy being sought ... . It is well-accepted that the"overriding consideration" is whether the defendant "threatens to so arrangehis assets as to defeat his adversary, should that adversary ultimately prevail

17 Chite/ v. Rothbart, (1982), 141 D.L.R. (3d) 268 (Ont. C.A.)18 Aetna, supra, page 116.19 (1982), 141 D.L.R. (3d) 268 (Ont. C.A.), at page 289.20 (1993) 113 D.L. R. (4th

) 501 (F.CA.)

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and obtain judgment, in an attempt to recover from the defendant": perEstey 1., Aetna Financial Services v. Feigelman, supra, at p. 176.21

(5) Undertaking as to Damages

The courts have noted that in suitable cases, the undertaking as to damages should be

supported by a bond or security.22 Additionally, the Court may require that the

undertaking be not only in respect of damages suffered by the Defendant, but the Court

may require that there be an undertaking to a bank or other innocent third party to pay any

expenses reasonably incurred by them in carrying,out the terms of the Order.

IV. Relief Ancillary to a Mareva Injunction

In order to make a Mareva injunction fully effective, it is often necessary that the Court

grant collateral relief in the nature of an order either requiring third parties to disclose

information regarding the defendant's assets, or permitting the plaintiff to obtain discovery

of the defendant for the purpose of identifying and locating assets. The Courts have

described this as being required to "breathe some life into the injunction,,23

In A.J. Bekhor & Co. Ltd v. Bilton24, Griffiths L.J. stated:

... from time to time cases will arise when, although it seems highlyprobable that the defendant has assets within the jurisdiction, their preciseform and whereabouts are in doubt, or in the case of a number of defendants .they may collectively have sufficient assets but there may be doubt aboutthe distribution among themselves. In such cases in order that the Marevainjunction should be effective both the court and the plaintiff require toknow the particular assets upon which the order should bite. It must beremembered that the underlying reason for making the order is the fear thatthe defendant may remove his assets and this is most effectively preventedby the plaintiff serving a copy ofthe injunction on whoever is holding thedefendant's assets for the time being. Very often this will be the defendant'sbankers, but assets can take many forms and be in the hands ofmanydifferent persons to whom it is desirable to give notice of the court's order.

21 Ibid., page 504.22 Sask-Workwear Inc. v. Ollinik, supra.23 Sekisui House Co. v. Nagashima (1982) 33 C.P.C. 42 (B.C.C.A.)24 [1981] 2 W.L.R 601 (C.A.)

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To my mind the desirability of the power to order discovery is obvious andit is particularly needed in the case of a defendant who has demonstratedhimself to be untrustworthy and evasive ...

. .. If the court has the power to make a Mareva injunction it must havepower to make an effective Mareva injunction. If the injunction will not beeffective it ought not to be made.

For the reasons I have already given it may be necessary to order discoveryto make the injunction effective and I would hold that the court has thepower to make such ancillary orders as are necessary to secure that theinjunctive relief given to the plaintiff is effective. I therefore agree that ajudge does have power to order discovery in aid ofa Mareva injunction if itis necessary for the effective operation ofthe injunction.

The Saskatchewan Courts have accepted this rationale. In First Choice Capital Fund Ltd.

v. First Canadian Capital Corp.25 Baynton, J. considered the authorities (including

Bekhor) and stated:

There is now ample legal precedent which establishes that a court, inappropriate circumstances, may order a respondent to make discovery ofassets in aid of injunctive relief. Such an order is usually made as collateralrelief to a Mareva type of injunction. The purpose of such an order is toprovide a mechanism to ensure that the injunctive relief that has beenordered will achieve its objective. Discovery of assets is a tool to monitorthe effectiveness of the injunction and to ensure compliance with it. It isnot to be used to punish the respondent but to determine the presentwhereabouts of its property for the purpose of enforcing the injunction.

In some cases the Court has limited the right of discovery to requiring the defendant to

disclose its assets and the particulars ofany disposition ofproperty by affidavit.26 In other

cases, the Court has ordered that the plaintiff may examine the defendant under oath (akin

to an examination fu aid ofexecution)??

2S Ibid., note. 1426 Ibid., note 1427 Royal Bank ofCanada v. JFR Farms Ltd and Kary Kirk Kreiger (unreported, Q.B. No. 356 of 1999)

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v. Practical Tips and the Content of Orders

(a) Content of Orders

To ensure that the Mareva injunction has maximum effectiveness, the parties enjoined

under the Order should be broadly described. For example:

The Defendants, their officers, directors, employees, servants, agents orpersons under their instruction or acting on their behalf, or any other personhaving knowledge of this Order, shall be and are hereby restrained andenjoined from dealing with, disposing ofor removing from the Province ofSaskatchewan any and all assets of the Defendants.

The financial institutions, or other entities to whom the Mareva injunction is directed

(being the entities which the plaintiffknows or believes are in possession of funds of the

defendant, or are or may be indebted to the defendant) should be described with precision,

where possible. Counsel should consider whether the Order should be directed to credit

unions, trust companies, life insurance companies, investment firms, brokerage houses and

. law ftrms, as well as banks.

The Order should also provide that the Plaintiffs are granted leave to serve a copy of the

Order on any other entity which the Plaintiff believes to be in possession or control of any

funds or assets of the Defendant, and that the Order shall bind those other (presently

unnamed) entities.

The Order should describe the funds or assets to be preserved, including safety deposit

boxes, accounts, term certiftcates, RSP's, life insurance policies, annuities, securities, and

the like.

The Order should provide that the plaintiff is authorized to take possession of specified, or

in some cases, any and all assets of the defendant.

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Ifthe action is in respect of funds of the plaintiff that were allegedly obtained from the

plaintiff, a useful provision to include is a requirement that the defendant deliver to the

plaintiff all records relating to the use and disposition of such monies, or relating to the

deposit, withdrawal or expenditure of such monies, including all documents, bank

statements, deposit and withdrawal slips, debit and credit memos, transaction instructions,

account names and numbers, receipts, statements of account, and the like. The same

documentation should be requested with respect to any monies which the defendant owns

or controls, directly or indirectly. The Order should specify that the documents or records

may be in writing, in the nature of computer records, or in electronic form.

The Order should provide that, additionally, or in the alternative (if the defendant fails to

comply with the requirement to deliver up documentation), the entities to which it is

directed shall deliver the delineated documentation and records to the plaintiff. Such a

provision is required as fmancial institutions have a duty ofconfidentiality to their clients,

and cannot disclose documentation or information regarding their clients, except in limited

circumstances, one ofwhich is ifordered to make disclosure by a Court.

While arguably the common law and equitable right to collateral relief in respect of a

Mareva injunction is sufficient jurisdiction for the Court to order disclosure from a third

party, reference should also be made to Rule 236 which provides:

When a document is in possession of a third party not a party to the actionand it is alleged that any party has reason to believe that such documentrelates to the matters in issue, and the person in whose possession it is mightbe compelled to produce the same at the trial, the court may on theapplication ofany party direct the production of such document at such timeand place as the court may direct and give directions respecting thepreparation of a certified copy thereof which may be used for all purposesin lieu of the original, saving all just exceptions.

Therefore, ifdisclosure from a third party is to be sought, the Notice ofMotion (or ex parte

Memorandum) should refer to seeking reliefpursuant to Rule 236 as well.

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Ifit is anticipated that the Defendant may have assets in safety deposit boxes, the Order

should include a provision allowing the Plaintiff access to any safety deposit boxes for the

purpose of inspection and to verify assets.

The Order should enjoin and restrain the Defendant from transferring, mortgaging,

encumbering or granting any security interest, mortgage, lien, charge or other interest in

any real or personal property owned by the Defendant, or in which the Defendant has an

interest (directly or indirectly). In the case of real property, the Order should also provide

the Plaintiffwith leave to file a certificate of lis pendens (and a copy ofthe Order) against

the title to any such real property.

Ifancillary relief is being sought, the Order should provide that the Defendant make

discovery ofhis assets, either by sworn affidavit filed with the Court, or by examination

under oath.

Ifpossible, it may be desirable to limit the effect of the Order to a specified dollar limit,

which would permit the Defendant to deal with assets over and above the potential

judgment. Some courts have held that the Mareva injunction should extend to sufficient

assets to cover the plaintiffs claim, interest and the costs that the plaintiffwould likely be

awarded against the defendant.28

The Court may require the Order to provide that the Defendant may have the use of sums

for "normal living expenses", or the like. If so, the Order should specify the sums as

figures and a special account should be opened and designated for such sums.

Because a Mareva injunction is often sought ex parte it is usual for the Order to contain a

provision that the Order will continue in force until further order of the Court, and that the

Plaintiff is required to serve the Defendant with a Notice ofMotion, such that the

Defendant has an ability to be heard on the Mareva injunction application.

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It is generally not necessary to serve the Notice ofMotion upon the parties to whom the

Order will be directed (other than the defendant). However, it is useful to provide that any

party affected by the Order may apply to the Court for directions, or to vary the Order upon

"x" days notice to all parties to the action. This allows a bank, for example, to seek

directions from the Court as to specifically what is required by it to comply with the Order,

or for the Defendant to have the Order suspended in respect of any specified transaction

which is essential to the Defendant's business.

(b) Practical Tips

A Mareva injunction is only effective, in a practical sense, if it results in assets being

preserved. To assist in that regard, a solicitor should ensure that when the Order is served

on a bank, or other innocent third party, that party is told with as much certainty as

possible, what he is to do or not to do. Ifpossible, the solicitor should identify the bank

account by specifying the branch and heading ofthe account and any other asset of the

defendant with as much precision as is reasonably practicable.

If the Plaintiff cannot identify the bank account or other asset with precision, he may

request that the bank or other innocent third party conduct a search to see whether it holds

any assets of the defendant (and to preserve them). In such a case, the Plaintiff may have

to undertake to pay the costs of the search.

It is important to identify the branch that the bank account of the defendant is situate.

Section 462 of the BankAct (Canada) provides, in part, as follows:

462. (1) Effect ofwrit, etc. - ... [An] order or injunction made by acourt ... affects and binds only property in the possession ofa bankbelonging to a person at the branch where the ... order [or] injunction ... , ornotice thereof is served and, in the case ofa deposit account in a bank,affects only money owing to a person by reason of the deposit account if thebranch on which the ... order [or] injunction ... or notice thereof is servedis the branch ofaccount in respect of the deposit account.

28 Liberty National Bank & Trust Co. v. Atkin (1981),31 O.R. (2d) 75 (Ont H.C.).

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(2) Notices. - Any notification sent to a bank with respect to acustomer of the bank, other than a document referred to in subsection (1),constitutes notice to the bank and fixes the bank with knowledge of thecontents thereof only if sent to and received at the branch of the bank that isthe branch of account of an account held by the bank in the name ofthat .customer.

The Plaintiffs solicitor would be well advised to follow-up by telephone with the various

institutions served with the Mareva Order to confirm that they have received it, to answer

any questions in respect thereof, and to ensure that the Order has been complied with

(including to determine what assets have been preserved, and in what manner).

A Mareva injunction is extraordinary reliefwhich has the potential for significantly

impacting the Defendant's day-to-day life or business. Counsel for the Plaintiff should be

prepared to accede to reasonable requests from the Defendant, or directions from the court,

to "fast-track" the litigation such that a determination on the merits is made in short order,

thereby limiting the time that the Defendant's assets are tied up. For instance, in at least

one case the Saskatchewan Court of Queen's Bench utilized the discretion granted by Rule

389 to order an early trial, and expedited matters by:

(a) exempting the parties from the mediation provisions of The Queen's BenchAct;

(b) requiring the pleadings to be concluded, statements as to documentsexchanged and examinations for discovery be completed, each by aspecified date (October 16, October 26 and December 1, respectively);

(c) directing the Local Registrar to schedule a pre-trial conference on theimmediately following the date for completion of the examinations fordiscovery (on the first available date after December 15) ; and

(d) directing the Local Registrar to schedule a trial following completion of thepre-trial conference (on the first available date after January 15).29

29 Starr, supra

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VI. Priority of Funds Preserved

Although a Mareva injunction will enjoin a defendant from removing his or her assets

from the jurisdiction and from disposing ofhis or her assets to the detriment of th~

plaintiff, such an injunction does not give the plaintiff any priority over other creditors of

the defendant. The assets preserved by the Order may still be subject to the rights of

secured creditors of the defendant, and the plaintiff has no better or enhanced right to the

funds than does any other unsecured creditor. A Mareva injunction does not effect a

seizure of any asset: it merely restrains the owner from dealing with the asset in prescribed

ways.30

D. PRE-JUDGMENT GARNISHMENT

I. The Attachment of Debts Act

The ability ofa plaintiff in an action to garnishee funds of the defendant in the possession

of third parties, and to have those funds paid into court such that they are preserved until

the action is decided on its merits, is derived from The Attachment ofDebts Act. The

relevant provisions are found in section 3, which state, in part, as follows:

3 (1) Subject to section 8 and 9, ... a plaintiff in an action for debt or liquidated demandmay issue a garnishee summons (form A) with such variations as circumstancesmay require, directed to one or more persons alleged to be indebted, either jointlyor severally, to the defendant ... .

(2) The summons shall be issued by the local registrar upon the plaintiff ... , hissolicitor or agent, filing an affidavit:

(a) showing the nature and amount of the claim against the defendant ... andswearing positively to the indebtedness of the defendant ... to the plaintiff... ,

(b) stating, that, to the best of the deponent's information and belief, theproposed garnishee, naming him, is indebted to the defendant ...

30 Cretanor Maritime Co. v. Irish Marine Management Ltd [1978] 1 W.L.R. 966 (CA.)

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The procedure for obtaining a pre-judgment garnishee summons is apparently simple.

There are two major requirements. Firstly, the plaintiffs action must be for paYment of a

"debt or liquidated demand". Secondly, the plaintiffmust file with the court an affidavit

which complies with the evidentiary requirements of subsection 3(2) ofthe Act. However,

as this is a pre-judgment remedy, the courts require strict adherence to the provisions of the

statute, and any flaw or non-compliance with the requirements of the Act is an irregularity

that goes to jurisdiction and will render the garnishee summons a nullity.

(a) Debt or Liquidated Demand

Pre-judgment garnishment is only available to a plaintiff, thus a creditor seeking this

remedy must have filed a Statement of Claim which discloses, in sufficient detail, that the

action is brought (at least in part) for a debt or liquidated demand.

The older decisions evidence the courts' taking a very restrictive view ofwhat constitutes a

debt or liquidated demand. Recently, the decisions have been more expansive. For

instance, in Royal Bank o/Canada v. Tarasotl l the court stated that:

... where the primary claim is for a money judgment in an ascertainedamount the action will usually be characterized as one for debt or liquidateddemand regardless of any additional or alternative claims.

The causes of action in Tarasoff, supra, included a claim that certain monies were subject

to a trust in favour of the plaintiff, and also an allegation of the tort of conversion.

The Saskatchewan Court ofAppeal appears to have adopted the following definition of

"debt or liquidated demand" from Professor Dunlop's text, Creditor-Debtor Law in

Canada (2nd ed.):

One can say that the most common use of the word "debt" is to describe anobligation to pay a sum certain or a sum readily reducible to a certainty.The obligation mayor may not depend on an express or implied contract,depending on the context in which the word is used, but to this writer theessence ofthe term is that, if there is an obligation to pay a certain orascertainable sum, the courts should tend not to concern themselves with

31 (1991), 84 Sask. R. 239 (Q.B.)

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the precise nature of the cause ofaction. Claims for unliquidated damageswill generally not be describable as debts unless the context suggests or astatute provides otherwise.32

The Court of Queen's Bench has applied the defInition of"debt or liquidated demand"

appearing in Black's Law Dictionary (6th ed), as follows:

A demand the amount of which has been ascertained or settled byagreement of the parties or otherwise ... Amount claimed is a "liquidateddemand" if it is susceptible of being made certain in amount bymathematical calculations from factors which are or ought to be inpossession or knowledge of the party to be charged.33

The words "debt or liquidated demand" include a debt for goods sold and delivered, goods

bargained and sold, work done (although not if the claim is on a quantum meruit basis),

services rendered (although the services must be described with sufficient particularity),

money lent, money paid, money had and received, and interest (where there is an express

or implied contract to pay interest at a fixed rate).34

(b) Affidavit

The affidavit materials fIled in support of the pre-judgment garnishee summons must show

the nature and the amount of the claim against the defendant and the deponent must swear

positively as to that indebtedness. Additionally, the affidavit must also state that the

proposed garnishee is indebted to the defendant.

S~ction 10 of The Attachment ofDebts Act allows a defendant, a garnishee, or a person

claiming to be interested in the moneys attached, to apply to a judge in chambers to set

aside a garnishee summons that has been issued. There is a cafeteria of cases where

garnishee summons are challenged under this section.

32 Canadian Imperial Bank o/Commerce v. Grotsky (1994), 120 Sask. R. 305; Ross v. HVLD Systems (1997)Ltd [1999] S.J. No. 6833 Rolls-Royce Canada Ltd V. La Ronge Aviation Services Ltd. (1996), 143 Sask. R. 296 (Q.B.); Kuznitsoffv.Hilltop Ford Equipment Sales Ltd [1998] S.J. No. 846 (Q.B.)34 Canadian Encyclopedic Digest - Execution, paragraphs 546-549

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In Beauregard v. Ross35 Mr. Justice Zarzeczny held that the plaintiffdid not meet the

requirements of clause 3(2)(a) of the Act where the plaintiff alleged that the indebtedness

of the defendant arose by virtue of a contract in writing, but did not exhibit a copy of the

contract (the "fundamental instrument needed to support the garnishee claim of debt or

liquidated demand") to his affidavit.

In Royal Bank ofCanada v. G.L.B. Holdings Ltd.36 the Court set aside a garnishee

summons in an action on a guarantee where the affidavit material filed failed to

demonstrate that the bank had declared the principal debtor to be in default, failed to set

forth the terms ofthe guarantee, and failed to state that the demand for payment was made

in accordance with the terms of the guarantee.

So long as the plaintiff's affidavit for the garnishee summons complies strictly with

subsection 3(2) of the Act then in most circumstances the court will not concern itself with

the merits ofthe claim, or the merits of the defence as might be deposed to in the affidavit

ofa defendant seeking to set aside the garnishee summons.37 As Klebuc, J. described:

Where the affidavit and statement of claim comply strictly with therequirement of s.3, that is the end ofthe matter. It is not the function of thejudge to look at the merits of the claim or defence and determine whetherthere is a triable issue on an application to set aside a garnishee summons.38

The Chambers judge is limited to determining the issues on the materials filed by the

plaintiff in the first instance. The judge may not look at the statement of claim for the

purpose of bolstering deficient affidavit material (in the sense that the nature of the claim

has not been sufficiently described).39 Furthermore, an affidavit which simply refers to the

blanket allegations made in the statement of claim will be found to be deficient.

35 [1998] S.l No. 889 (Q.B.)36 [1998] SJ. No. 665 (Q.B.)37 Billette v. Montgrand (1994), 119 Sask. R. 283 (Q.B.)38 Kuznitso.fJv. Hilltop Ford Equipment Sales Ltd, supra39 Kirby V,. Townsend (1986), 72 Sask. R. 16 (Q.B.)

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In addition to serving the garnishee, a copy ofthe garnishee summons must be served on

the defendant (or his solicitor) within 20 days after service on the garnishee (or within such

further time as a court may order ex parte).

(c) What debts can / cannot be attached?

A pre-judgment garnishee summons can only attach a debt due or accruing due from the

garnishee to the defendant,

(i) Bank Accounts

Bank accounts are the most popular target ofpre-judgment garnishee summons, and funds

on deposit with a financial institution are generally attachable. A guaranteed investment

certificate is attachable.4o Funds on deposit in a term deposit with a chartered bank are

attachable by garnishee summons where withdrawal is permitted on giving the bank 24

hours' notice.41

Funds in joint accounts cannot be attached if only one ofthe account holders is the debtor

(defendant) named in the garnishee summons.42

(ii) Mortgage and Rental Payments

Both present and future mortgage payments may be attached by a pre-judgment garnishee

summons, as they are held to be an unconditionalliability.43 Withrespect to rental

payments, current rent due is attachable, but future rent payments are unattachable.44

(iii) Inheritance

If the debtor is entitled to a specific bequest and the executors have agreed to pay this

inheritance, it is attachable by garnishee summons.45

40 Bank ofMontreal v. I.M. Krisp Foods Ltd [1997] 1 W.W.R. 209 (Sask. C.A.)41 Farmstart v. Dagenais (1983), 31 Sask. R. 81 (Q.B.)42 Teachers' Credit Union Ltd v. Toswnsend(1986), 55 Sask. R. 37 (Q.B.)43 Macpherson Fruit Co. v. Hayden (1905), 2 W.L.R. (N.W.T.S.C.) .44 Morse v. Lyone (1917), 10 Sask. L.R. 357; Saskatchewan Wheat Pool v. Sebastian (1991) 95 Sask. R. 232(Q.B.)

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(iv) Wages

A pre-judgment garnishee summons cannot attach wages unless, on an ex parte

application, the Court is satisfied that it would be conclusive to the ends ofjustice to do so.

(v) Discretionary Crown Payments

Payments such as payments under the Canada-Saskatchewan Crop Assistance Program are

not attachable, because of their discretionary nature. If the defendant could not sue the

Crown garnishee to enforce the payment, it similarly cannot be garnisheed.46

(vi) RRSP's

Moneys invested in an RRSP held by a trust company cannot be garnisheed as it has been

held that an RRSP held pursuant to a trust agreement (as opposed to a deposit account) did

not create a relationship ofdebt.47

(d) Default by Garnishee

As with post-judgment garnishment, section 18 of The Attachment ofDebts Act provides

that if the garnishee does not pay into court the amount due from him to the debtor, or an

amount equal to the claim and costs, and does not dispute the debt claimed to be due from

him to the debtor, the plaintiff may take out judgment for the amount of the claim and

costs against the garnishee, upon obtaining judgment against the defendant.

(e) Payment in and out of Court

A garnishee responds to the pre-judgment garnishee summons by paying the funds in

question into court where they are held pending a determination in the action. The plaintiff

has no priority to the funds paid into court. If the plaintiff is successful at trial, he can

apply to have the funds paid out ofcourt (after 10 days following service on the judgment

4S Strong v. Culver (1919] 1 W.W.R. 979 (Sask. e.A.)46 Schatz v. McLean [1991] 5 W.W.R. 536 (Sask. Q.B.)47 National Bank ofCanada v. Creative Touch Mil/works Inc. [1989] 2 W.W.R. 180 (Sask. Q.B.)

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debtor and the garnishee). If the defendant prevails, the funds are to be repaid to the

defendant.

E. WHEN THE COURT MAY REFUSE TO EXERCISE ITS DISCRETION TOGRANT PRE-JUDGMENT RELIEF

As previously stated, pre-judgment remedies are a significant weap'on in the hands of a

plaintiff. Therefore, the courts are cautious when exercising their discretion in this regard.

In the context of a Mareva injunction application the cautionary attitude of the courts was

expressed thusly:

The courts must be careful to ensure that the "new" Mareva injunction isnot used as and does not become a weapon in the hands ofplaintiffs to forceinequitable settlements from defendants who cannot afford to risk ruin byhaving an asset or assets completely tied up for a lengthy period of timeawaiting trial. I would respectfully adopt what Grange J. said in CanadianPacific Airlines Ltd. v. Hind (1981),32 O.R. (2d) 591, 122 D.L.R. (3d) 498at 503, 22 C.P.C. 179:

The adoption of the Mareva principle can lead to some sorlyabuse. I would hate to see a defendant's assets tied upmerely because he was involved in litigation. ...48

The availability of other forms of relief is not a bar to equitable pre-judgment injunctive

relief. In First Choice Capital Fund Ltd, supra, Baynton J. made it clear that "the fact that

a judgment creditor has access to various forms of statutory relief such as absconding

debtors legislation, fraudulent preferences legislation, bankruptcy legislation and the like,

is no valid basis upon which to restrict the injunctive authority of the court".

In the context ofpre-judgment garnishment, the Courts will set aside a garnishee

summons, or restrain further garnishment proceedings, if the garnishment proceedings

were employed for a purpose collateral to the securing of the plaintiffs claim, to embarrass

48 Chitel v. Rothbart, supra, note 17.

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or annoy the defendant, or for the purpose ofoppression or extortion.49 The circumstances

where the Court will so act were outlined in Hooker Engineering Ltd v. Arnott Kelly

O'Connor & Associates Ltd.5o as follows:

Superior courts will restrain plaintiffs from using the garnishment processof other than the legitimate purpose of securing the satisfaction of theirclaims. They do so on the basis that such misuse constitutes and abuse ofprocess which courts have the inherent jurisdiction to control. ... InRidgeway-Pacific, Meredith, J., at p. 666 succinctly states the over archingprinciple:

" ... the attachment process is an extraordinary one to beused only for the legitimate purpose ofsecuring to theplaintiffthe amount claimed - not for purposes of extortion,harassment or embarrassment. If it can be shown that thepurposes ofthe plaintiff are not legitimate then theattachment proceedings may be set aside as an abuse. Thus,in Whittimore v. Herbert ... garnishing proceedings were setaside where the court held that the combination ofmoves.initiated by the.plaintiff including the commencement of theaction in which the plaintiff failed to reveal the truefoundation of its claim, and the simultaneous garnishee ofthe defendant's bankaccountand another account allegedlyowing the defendant, were calculated to result in theparalysis of the operations ofthe defendant and his financialruin, and that the attachment was designed for other thanlegitimate purposes and thus struck the proceedings out as anabuse ofprocess."

Examples ofcases where the Court has set aside or restrained garnishment proceedings

include:

(a) where the garnishment proceedings were part of a "systematic scheme ofannoyance, nuisance and vexation" directed at the defendant, with theobject ofweakening her resolve in a related custody battleS1

; and

(b) where the sole purpose was to embarrass the defendant and for the purposeof oppression (evidenced by the plaintiff telling the defendant "he intendedto destroy him and his business"i2•

49 Ricco's Health & Fitness Centre Ltd v. Lemstra [1998] SJ. No. 497 (Q.B.)so (1994),122 Sask. R. 313 (Q.B.), at31651 Stupkav. Whiting [1987] SJ. No. 775 (Q.B.)52 Ricco's, supra

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Additionally, the Court may restrain further pre-judgment garnishment proceedings where

the defendant gives security for judgment, or agrees to pay into court an amount sufficient

to satisfy an eventual judgment.

F. THE ABSCONDING DEBTORS ACT

The Absconding Debtors Act provides a statutory form of pre-judgment attachment.

However, it is a relatively unused piece of legislation. In Saskatchewan, there· is only one

reported case where an application was brought under the Act in the 1990s. As further

testament of its lack ofuse, it is not even listed in the Saskatchewan Statutes Judicially

Considered. The legislation has not been amended since it was enacted in 1919.

As with all pre-judgment remedies, courts have restrictively interpreted absconding debtor

legislation, and required the same high standard for the supporting materials as is required

to support a pre-judgment garnishee summons.

In order to be entitled to seek relief under The Absconding Debtors Act, the plaintiff must

have commenced an action in debt for an amount over $50.00: an action based in tort will

not support an application under this legislation.

The supporting materials involve two affidavits. Firstly, the plaintiff must swear an

affidavit deposing:

(a) as to how the debt arose;(b) the amount of the debt; and(c) that without the benefit ofattachment the plaintiff will lose his debt or

sustain damage.

With respect to (c), the affidavit must disclose good reasons for believing that:

(1) the defendant is about to abscond or has absconded from Saskatchewanleaving personal property liable to seizure;

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(2) the defendant has attempted to remove such personal property out of theprovince or to sell or dispose of it with intent to defraud creditors; or

(3) tIre defendant is concealing himself to avoid seizure.

The statute requires that a second affidavit must be sworn by another "credible" person

who is well acquainted with the defendant, which affidavit must essentially repeat the

statements in the plaintiffs affidavit.

If an order is granted the property is seized and held by the Sheriff until the plaintiff

obtains judgment. If the seized property is livestock or perishable goods, the Sheriffmust

have the goods appraised. If the plaintiff does not deposit a bond with the Sheriff in an

amount equal to twice the appraised value of the goods together with all costs incurred by

the seizure and sale of the goods ifthe plaintiffdoes not obtain judgment, the Sheriffmust

return the goods to the defendant.

G. OTHER REMEDIES

I. Interim Preservation of Property Orders

Under Queen's Bench Rule 388 a plaintiff can obtain an order for the interim preservation

ofproperty. It states:

Where there is a dispute arising upon a contract or any alleged contractaffecting title to any property the court may make an order for thepreservation or interim custody of such property, or may order that theamount in dispute be brought into court or otherwise secured, or may orderthe sale of the property and the payment of the proceeds into court, withoutprejudice to the rights ofany party to the action.

The property sought to be preserved (or sold and the proceeds paid into court) must be the

subject matter of the action. An interim preservation order will not be granted in respect of

all ofthe defendant's assets; that is the function ofa Mareva injunction. However, Rule

387 does provide that "property" includes money. Therefore, if the plaintiff is suing the

defendant on a contract where the title to specific funds is in question, the court could grant

an interim preservation order ofthose funds.

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The considerations governing the granting ofan interim preservation order are identical to

those to be considered in the granting of an interlocutory injunction, namely:

(a) the plaintiffmust have a strongprimafacie case, or demonstrate that thereis a serious question to be tried;

(b) the plaintiff must satisfy the court that he will suffer irreparable harm (beingharm not susceptible of being or difficult to be compensated in damages);and

(c) the plaintiff must demonstrate that he will suffer greater harm from therefusal of the preservation order than the defendant would suffer from thegranting of it (the balance ofconvenience test).S3 .

II. Receivers

Subsection 45(8) of The Queen's Bench Act and Queen's Bench Rule 387A, in addition to

conferring the jurisdiction to grant interlocutory injunctions (such as the Mareva

injunction), also provide for the court's granting interim orders for the appointment of a

receiver.

In the case of an unsecured creditor, there is no security agreement pursuant to which a

receiver can be privately appointed, but instead a receiver must be appointed by court

order. The court has an equitable jurisdiction to appoint a receiver by interlocutory order

to receive and manage the property which is the subject of the litigation whenever it

appears to the court just or convenient to do so. Such a receiver will have only the rights,

powers and duties conferred upon him by the court, and is an officer ofthe court.

Generally a court-appointed interim receiver's duty is to collect and preserve property

pending the outcome ofthe litigation. The appointment does not affect third party property

rights, and creates no estate in the receiver.S4

S3 HMW-Bennett & Wright Contractors Ltd v. BWVInvestments Ltd (1991),95 Sask R 211 (Q.B.);Windecker v. Associates Commercial Corp. o/Canada Ltd (1996), 149 Sask. R 308 (Q.B.).

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In HMW-Bennett & Wright Contractors Ltd. v. BWVInvestments Ltd.55 the court stated

that although the Rules make it possible to obtain an order for the appointment of a

receiver where the subject matter of the proceeding is money, it should only be granted

where there is a real danger that if the money is not preserved it would be incapable of

being replaced.

III. Lis Pendens

Where the subject matter of the dispute is real property the plaintiff can request that the

Court will issue a certificate of lis pendens (pending suit) which can be registered against

the title to the lands in question. The jurisdiction for a lis pendens is found in subsection

48(1) of The Queen's Bench Act which provides for the issuance of a certificate signed by

the proper officer ofthe court, containing the names ofthe parties and certifying that some

title or interest is called in question in the land described in the certificate.

Subsection 48(1) provides that the institution of an action, or the taking of a proceeding in

which any title to or interest in land is brought into question, does not affect any person not

a party to it until a certificate of lis pendens has been registered in the Land Titles Office.

The certificate of lis pendens does not prevent the owner of the land from dealing with it,

but whoever takes the land, or any interest in the land, does so subject to the adjudication

of the court in the action which has been commenced.

IV. Setting Aside a Default Judgment on Terms

A plaintiff may have commenced a claim, and receiving no response from the defendant

within the prescribed time, taken default judgment out·against the defendant, and executed

on that judgment, including by obtaining a writ ofexecution (which is filed with the

sheriff, and perhaps registered at the Personal Property Registry and one or more Land

54 First Investors Corp. v. 237208 Alta. Ltd. (1982), 20 Sask. R. 335 (Q.B).ss Ibid.

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Titles Offices). Subsequently, the defendant applies to open up the default judgment, to

allow him to file a statement ofdefence.

Queen's Bench Rule 346 gives the court the discretion to set aside a default judgment

"upon such terms as to costs or otherwise as the court may think fit". In certain

circumstances the courts have entertained a request by the plaintiff to set aside a default

judgment on the condition that the writ ofexecution remain in place, to stand as security

pending the trial of the action.

For instance, in Pawluk v. Bank ofMontreal6 the Alberta Court ofAppeal confirmed an

order setting aside a default judgment with the term that the writs ofexecution remain filed

with the sheriffand the Land Titles Office, until the trial of the action. The Court stated

that the continuation ofthe writs of execution had two benefits: it preserved the plaintiff's

rank as a claimant against the title to the defendant's land, and it preserved the plaintiff's

claim as a judgment creditor in the sheriff's office should any money come into the

sheriff's hands for distribution among the defendant's creditors.

The Court candidly conceded that the result was a form of injunctive pre-judgment relief

pending trial. However, it appears that the test for obtaining this type of injunctive relief is

not as strict as is applied by the Courts when considering whether to grant a Mareva

injunction.

The Saskatchewan Courts have permitted writs of execution and other enforcement

processes to remain in place where the judgment has been set aside. In Kramer Tractor

Ltd. v. Ollenberger57 the Court of Queen's Bench set aside a default judgment but directed

56 (1990) 73 Alta. L.R. (2d) 266 (e.A.)57 (1990),90 Sask. R. 5 (Q.B.)

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that the garnishee summons remain in force and effect and the funds attached remain in

court until final judgment or further order.58

An alternative "remedy" was fashioned by the Saskatchewan Court of Appeal in First City

Capital Ltd. v. Abramson Enterprises Ltd59 where the default judgment and execution

thereon were set aside upon the defendants lodging security in court for the balance owing.

A similar result obtained in Bank ofMontreal v. Hermann60 where the court imposed a

term requiring the defendant to pay the full amount of the judgment and interest into court

as a condition ofopening up the judgment.

H. IMPACT OF BANKRUPTCY

Unsecured creditors who have effectively utilized a pre-judgment attachment remedy and

have had assets of the defendant "frozen" or paid into court often view those funds as

"security" for the payment of the judgment they anticipate obtaining. However, until such

time as a judgment is obtained, and the funds held are paid over to the plaintiff, those funds

remain, at law, the property of the defendant.

One unfortunate result (from a plaintiffs perspective) is that if the defendant makes an

assignment or is petitioned into bankruptcy, the funds paid into court or otherwise

preserved through pre-judgment attachment vest in the trustee in bankruptcy of the

bankrupt defendant, and form part of the estate of the bankrupt, for distribution pro rata

among all unsecured creditors. This is by virtue of subsection 70(1) of the Bankruptcy and

Insolvency Act (the "BIA"), which provides:

Every receiving order and every assignment made in pursuance of this Acttakes precedence over all judicial or other attachments, garnishments,certificates having the effect ofjudgments, judgments, certificates of

58 See also Engel v. 610213 Saskatchewan Ltd. (1997), 160 Sask. R 86 (Q.B.); Emigh v. DiamondMessenger Services (Saskatoon) Ltd. (1988), 7 A.C.W.S. (3d) 67 (Sask. Q.B.); Rhim Holdings Ltd v. Dr.Plant Tropical Foliage Corp. [1983] Sask. D. 3637-01. .59 (1988), 68 Sask. R 28160 [1975] 2 W.W.R 368 (Sask. Q.B.)

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judgment, judgments operating as hypothecs, executions or other processagainst the property of a bankrupt, except those that have been completelyexecuted by paYment to the creditor or his agent, and except the rights ofasecured creditor.

Therefore, notwithstanding that the funds were preserved by virtue of the plaintiffs pre­

judgment attachment, the plaintiff has no priority in respect of the funds, and is only

entitled to claim in the defendant's bankruptcy as an unsecured creditor, and to share in

those funds with all other unsecured creditors on a pro rata basis.

Subsection 70(2) of the BIA does give priority to the bill ofcosts ofthe creditor who has

fIrst attached, by way ofgarnishment, attachment, execution or other process, the property

of the bankrupt. However, to receive this priority, the creditor must have taxed his or her

costs and filed his execution or other process prior to the date ofbankruptcy.61

I. ALL IS NOT LOST

What happens if a plaintiff fails to seek pre-judgment relief to secure the defendant's

assets, and upon receiving judgment, fmds that the defendant has transferred or dissipated

his assets, leaving the plaintiff with a judgment that cannot be effectively enforced? Many

debtors, foreseeing impending fmandal collapse, take steps to assign their property to a

relative or friend, who is to retain it until the creditors clear away (or give up).62

All is not necessarily lost. Such transactions which are designed to defeat creditors may

well constitute fraudulent conveyances or preferences which can be challenged pursuant to

The Fraudulent Preferences Act R.S.S. 1978 c.F-21 and the Fraudulent Conveyances Act,

1571 (13 Eliz. I) c.S (the "Statute ofElizabeth'~. The general purpose of this legislation is

to strike down all conveyances ofproperty made with the intention ofdelaying, hindering

or defrauding creditors and others, except for conveyances made for good consideration

61 Re Mack's (1922) 3 C.B.R 515 (Que. S.C.)62 Dunlop: Creditor-Debtor Law in Canada (r' ed.), p. 591.

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and bonafide to persons not having notice ofsuch fraud.63 There are additional provisions

in the Bankruptcy and Insolvency Act permitted a trustee in bankruptcy to challenge

fraudulent transactions.

A discussion of the law of fraudulent conveyances is beyond the scope of this paper.

However, counsel should be aware that this legislation may provide a method by which to

reverse the course of asset dissipation undertaken by the judgment debtor, by declaring the

transactions void, thereby reverting the assets to the possession of the judgment debtor

such that the judgment creditor can seek attachment and execution thereon (or, in the case

of a bankrupt debtor, share in the recovery made by the trustee in bankruptcy).

J. CONCLUSION

Pre-judgment remedies have been created to prevent a plaintiff from proceeding through

the courts only to receive what is no more than a hollow victory, by virtue of the asset

dissipation activities undertaken by the defendant. No matter how creative or hard-won

the victory at trial, a client will undoubtedly be extremely unsatisfied if no recovery on that

judgment can be made, particularly after incurring significant legal fees and costs.

From a loss-prevention standpoint, counsel will want to avoid being in the position where

the client learns that there were steps that could have been taken to secure assets upon

which to satisfy the judgment, but no such pre-judgment remedies were pursued. No

lawyer wants to have to explain to his client that he has effectively closed the barn door,

but the horse is already gone.

slemsklseminar/CredDebt outlinelNovember 1, 1999

63 Dunlop, p. 598

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