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The Ontario Superior Court recently recognized a novel way for judgment creditors to move for a sale of their judgment debtors’ property, outside of the sheriff’s sale process set out in the Execution Act.[1]  In Canaccede International Acquisitions Ltd. v Abdullah,[2] Justice Broad allowed the judgment creditor to move under the rules of court for a “reference” which, in this instance, resulted in a judicially-supervised sale of the property.  This is the first time an Ontario Court has imposed this remedy outside of a mortgage enforcement proceeding, family law proceeding, or other litigation with respect to a specific property.

The benefits of the findings in the Canaccede case are clear. The proposed sale procedure will likely be a faster and cheaper mechanism to enforce judgments as against a debtor’s property, without requiring the involvement of the sheriff.  The proposed sale procedure also provides fair notice to all those with potential claims against the property.  As a result, judgment creditors may wish to consider enforcement of their outstanding judgments by way of the procedure proposed in Canaccede.

Privacy Laws Prohibit Third-Party Judgment Creditors from Obtaining Mortgage Discharge Statements

The Court’s willingness to use the reference procedure for a judicially-supervised sale stems from the 2011 Court of Appeal decision in Citi Cards Canada Inc. v. Pleasance.[3]

In Citi Cards, the Court of Appeal held that a mortgagee is prevented by the Personal Information Protection and Electronic Documents Act[4] from providing a mortgage statement to a third-party judgment creditor of the mortgagor/debtor.  The Court of Appeal acknowledged that this causes a challenge for the enforcement of judgments by way of a sheriff’s sale, as mortgage statements are required by the sheriff.  The only alternative is to conduct “protracted and expensive” examinations in aid of execution, the outcomes of which are uncertain.

The Court’s Jurisdiction to do Justice Between the Parties

Justice Broad noted that unless a specific statute sets out otherwise, the Superior Court has jurisdiction “to do justice between the parties”.  Here there was no statute or other regulation prohibiting the proposed procedure.

Importantly, the judgment creditor’s proposed procedure preserved the right of the respondents and the encumbrancers to show cause on a case-specific basis as to why a judicial sale should not proceed.  In addition, if a sale of the property was ordered, the proposed process would allow for the “realistic and active marketing of the properties” and should “result in higher sale prices, to the potential benefit of all interested parties.”

Recommended Procedure

In the result, the Court approved the judgment creditor’s proposed procedure, as follows:

Step One: An Order Directing a Reference

As a prerequisite to seeking an order for sale, the judgment creditor first must seek an order pursuant to Rule 54.02(2)(b) of the Rules of Civil Procedure directing a reference to inquire into and determine all issues relating to the conduct of the sale of the property of the judgment debtor. 

The judgment creditor in this case proposed that the reference hearing perform the following functions:

• determine what property or interest in the lands is liable to be sold under the judgment;
• determine who has interests in the lands;
• define those interests and determine their priority;
• determine how the proceeds of a sale should be distributed; and
• allow an opportunity for the respondent or any interested party in each case to show cause why it would be unjust or inequitable to require the sale of the respondent’s property or interest in the lands.

The judgment creditor in this case personally served an Application Record seeking this relief on the judgment debtor.  The Application Record was also served on each party shown on the parcel register for the property and shown on execution searches against the judgment debtor as being parties having an interest in each particular property.

Step Two: An Order for Sale by Private Contract

Once the initial reference hearing is complete, if the referee determines that the respondent (i.e. the judgment debtor) has an interest in the land that may be sold to satisfy the judgment debt against him or her, the judgment creditor will return to Court with the referee’s report and move for an order for sale by private contract pursuant to Rule 55.06(1).

Conclusion

The decision in Canaccede acknowledges the reality of the sheriff’s sale process: it is unpredictable and expensive, can lead to no recovery for the judgment creditor, and modern privacy legislation makes it difficult to obtain important information about the debtor’s property.  Judgment creditors may therefore wish to consider the approach taken in Canaccede as an alternative process to the sheriff’s sale.