Part 5 I&IIPart 5 I&IIUnsecured CreditorsUnsecured Creditors

Post-Judgment RemediesPost-Judgment RemediesPrioritiesPriorities

TerminologyTerminology ““Bound” JC has interest in property of the Bound” JC has interest in property of the

debtor which is effective against third partiesdebtor which is effective against third parties Corresponds to “perfection” in PPSACorresponds to “perfection” in PPSA

““Judgment” the order of the court that the Judgment” the order of the court that the defendant pay $ to the plaintiff: Form 60Adefendant pay $ to the plaintiff: Form 60A

““Memorial of judgment” evidence of the Memorial of judgment” evidence of the judgment which can then be registered in the judgment which can then be registered in the land registry to bind landland registry to bind land

““Notice of judgment” notice of judgment which Notice of judgment” notice of judgment which is registered in PPR to bind personal propertyis registered in PPR to bind personal property

TerminologyTerminology Enforcement orders: order of the court addressed Enforcement orders: order of the court addressed

to the sheriff ordering the sheriff to seize and sell to the sheriff ordering the sheriff to seize and sell assets of the debtor.assets of the debtor. Traditionally called “writs of execution” Traditionally called “writs of execution”

““writ of fi.fa. for personalty, “elegit” for landwrit of fi.fa. for personalty, “elegit” for land Now “order for seizure and sale” for land and real Now “order for seizure and sale” for land and real

property (Form 61A)property (Form 61A) Garnishment – ‘execution’ against debt owing by Garnishment – ‘execution’ against debt owing by

account debtor to judgment debtoraccount debtor to judgment debtor Corresponds to right to collect on intangibles under Corresponds to right to collect on intangibles under

PPSAPPSA ““Attaching order” is order prohibiting AD for paying JDAttaching order” is order prohibiting AD for paying JD

Relevant ActsRelevant Acts Nfld and Alta have reformed judgment enforcement systemNfld and Alta have reformed judgment enforcement system

Judgment/Civil Enforcement ActsJudgment/Civil Enforcement Acts Unreformed jurisdictionsUnreformed jurisdictions

Creditors Relief ActCreditors Relief Act Priorities among unsecured creditorsPriorities among unsecured creditors Binding of property of judgment debtor, ie priority between JC & third Binding of property of judgment debtor, ie priority between JC & third

parties (in conjunction w PPSA etc.)parties (in conjunction w PPSA etc.) Mini-bankruptcy – obsolete & prob. unconstitutionalMini-bankruptcy – obsolete & prob. unconstitutional

PPSA/Registry Act/Land Titles ActPPSA/Registry Act/Land Titles Act Binding of property of judgment debtorBinding of property of judgment debtor

Memorials and Executions ActMemorials and Executions Act Enforcement against land and personal propertyEnforcement against land and personal property

Garnishee ActGarnishee Act Enforcement against debts owing to JDEnforcement against debts owing to JD

PrioritiesPriorities

BindingBinding Once the property is bound by the judgment any Once the property is bound by the judgment any

third party taking an interest in the property third party taking an interest in the property takes subject to the judgment creditor’s right to takes subject to the judgment creditor’s right to executeexecute

E.g. N.B. Creditors Relief Act 2.3(10)E.g. N.B. Creditors Relief Act 2.3(10) Where an interest acquired in personal property that Where an interest acquired in personal property that

is bound by registration of a notice of judgment is is bound by registration of a notice of judgment is subordinate to the interest of a judgment creditor,subordinate to the interest of a judgment creditor,

(a) the property is subject to enforcement proceedings to the (a) the property is subject to enforcement proceedings to the same extent as if the subordinate interest did not exist, andsame extent as if the subordinate interest did not exist, and

(b) a person who acquires the property as a result of (b) a person who acquires the property as a result of enforcement proceedings obtains title free of the subordinate enforcement proceedings obtains title free of the subordinate interest.interest.

BindingBinding ProblemProblem

Conflict of interests between Conflict of interests between JC JC Third parties dealing with the collateralThird parties dealing with the collateral

BalanceBalance Easy and effective bindingEasy and effective binding

AgainstAgainst Adequate protection for third partiesAdequate protection for third parties

History of BindingHistory of Binding Originally the judgment of the court was Originally the judgment of the court was

binding when judgment was delivered or binding when judgment was delivered or when writ was issuedwhen writ was issued Harsh against third parties – effective even Harsh against third parties – effective even

against a BFPFV without notice of the writ against a BFPFV without notice of the writ First modification – not binding until First modification – not binding until

judgment entered on rollsjudgment entered on rolls Statute of Frauds 1677 provided that a writ Statute of Frauds 1677 provided that a writ

was not binding until delivered to the sheriffwas not binding until delivered to the sheriff Still harsh absent an effective system of noticeStill harsh absent an effective system of notice

History of BindingHistory of Binding Judicial response was to Judicial response was to

circumscribe the binding effect of circumscribe the binding effect of the writthe writ Binding effective of the writ only Binding effective of the writ only

applies to goods exigible at common applies to goods exigible at common law, e.g. tangible goods and chattelslaw, e.g. tangible goods and chattels

Personalty made exigible by legislation Personalty made exigible by legislation is bound only on actual seizureis bound only on actual seizure

History of BindingHistory of Binding LandLand

Writ against land (”elegit”) is still binding on Writ against land (”elegit”) is still binding on delivery to the sheriff unless legislation delivery to the sheriff unless legislation provides otherwiseprovides otherwise

This is still the case in OntarioThis is still the case in Ontario ProblemProblem

This requires an additional search to verify titleThis requires an additional search to verify title Most other jurisdictions require Most other jurisdictions require

registration in the land registryregistration in the land registry E.g. NBE.g. NB

Land – N.B.Land – N.B. Memorials and Executions ActMemorials and Executions Act

5 A memorial of a judgment . . . registered in the 5 A memorial of a judgment . . . registered in the registry office of the county in which the lands registry office of the county in which the lands are situated, binds the lands of the person are situated, binds the lands of the person against whom the judgment was recovered, against whom the judgment was recovered, decree made or execution issued. . .decree made or execution issued. . .

Registration binds landRegistration binds land . . . but no writ of fieri facias issued on such . . . but no writ of fieri facias issued on such

judgment or decree, and delivered to the sheriff judgment or decree, and delivered to the sheriff to be executed shall bind such lands.to be executed shall bind such lands.

Delivery to sheriff does notDelivery to sheriff does not

Land – NBLand – NB Registration of judgment has limited lifeRegistration of judgment has limited life Memorials and Executions ActMemorials and Executions Act

6 Every judgment or decree of which a memorial is so 6 Every judgment or decree of which a memorial is so registered binds the lands of the person against registered binds the lands of the person against whom the judgment or decree was recovered for five whom the judgment or decree was recovered for five years from the registry, and after that period, if the years from the registry, and after that period, if the judgment or decree remains unsatisfied, the judgment or decree remains unsatisfied, the memorial may be renewed for a further period of five memorial may be renewed for a further period of five years with like effect, and so on as often as required years with like effect, and so on as often as required by registering it again in accordance with this Act.by registering it again in accordance with this Act.

Overall limit of 20 years due to Limitations ActOverall limit of 20 years due to Limitations Act

History of BindingHistory of Binding Legislative Response – Goods & Chattels Legislative Response – Goods & Chattels

U.K. U.K. Mercantile Law Amendment Act Mercantile Law Amendment Act 1856 1856 and adopted in most provinces, but not NB, and adopted in most provinces, but not NB, NS or PEI:NS or PEI:

No writ of fi fa would affect the right of a BFPFV No writ of fi fa would affect the right of a BFPFV without notice from execution debtor or seizure. without notice from execution debtor or seizure.

Result was that JC had to seize in order to Result was that JC had to seize in order to “perfect” at least as against BFPFV“perfect” at least as against BFPFV

This remains the position in Ont., B.C., This remains the position in Ont., B.C., ManitobaManitoba

Personal Property – Personal Property – OntarioOntario

Execution ActExecution Act 10.(1) Subject to the Land Titles Act and to section 11 a writ of 10.(1) Subject to the Land Titles Act and to section 11 a writ of

execution binds the goods and lands against which it is issued execution binds the goods and lands against which it is issued from the time it has been received for execution and recorded from the time it has been received for execution and recorded by the sheriff.by the sheriff.

(2) Despite subsection (1), no writ of execution against goods (2) Despite subsection (1), no writ of execution against goods other than bills of sale and instruments in the nature of chattel other than bills of sale and instruments in the nature of chattel mortgages prejudices the title to such goods acquired by a mortgages prejudices the title to such goods acquired by a person in good faith and for valuable consideration unless such person in good faith and for valuable consideration unless such person at the time of acquiring title had notice that such writ person at the time of acquiring title had notice that such writ or any other writ by virtue of which the goods of the execution or any other writ by virtue of which the goods of the execution debtor might be seized or attached has been delivered to the debtor might be seized or attached has been delivered to the sheriff and remains in the sheriff's hands unexecuted.sheriff and remains in the sheriff's hands unexecuted.

““Notice” in subsection (2) means actual noticeNotice” in subsection (2) means actual notice

History of BindingHistory of Binding Requiring seizure was good for BFPFV, but could Requiring seizure was good for BFPFV, but could

be a problem for JC since be a problem for JC since 1) A JC ranked behind a secured creditor whose 1) A JC ranked behind a secured creditor whose

interest was subsequently created but registered prior interest was subsequently created but registered prior to seizureto seizure

2) Prior debtor could prefer other creditors btw time of 2) Prior debtor could prefer other creditors btw time of judgment and seizure by giving them a security judgment and seizure by giving them a security interest before seizure (so long as the other creditors interest before seizure (so long as the other creditors were not aware of the preference and subject to were not aware of the preference and subject to Fraudulent Preferences ActFraudulent Preferences Act).).

3) 2) is particularly a problem with respect to new 3) 2) is particularly a problem with respect to new assets, since if new assets were acquired the assets, since if new assets were acquired the enforcement process had to be recommencedenforcement process had to be recommenced

Personal Property – New Personal Property – New RuleRule

General ruleGeneral rule Property Property notnot bound bound exceptexcept by by

registrationregistration Registration in PPR binds propertyRegistration in PPR binds property

In Nfld registration is in Judgment In Nfld registration is in Judgment Enforcement RegistryEnforcement Registry

Personal Property – New Personal Property – New RuleRule

E.g. NB Creditors Relief ActE.g. NB Creditors Relief Act 2.3(1) Personal property of a judgment debtor 2.3(1) Personal property of a judgment debtor

shall not be bound except by registration of a shall not be bound except by registration of a notice of judgment in accordance with notice of judgment in accordance with subsection 2.2(1) [in PPR].subsection 2.2(1) [in PPR].

2.3(2) 2.3(2) Registration of a notice of judgment Registration of a notice of judgment binds binds all of the judgment debtor's non-exempt all of the judgment debtor's non-exempt exigible personal property on registration and exigible personal property on registration and all non-exempt exigible personal property all non-exempt exigible personal property acquired by the judgment debtor after acquired by the judgment debtor after registration from the time of its acquisition.registration from the time of its acquisition.

Personal Property – New Personal Property – New RuleRule

ExpiryExpiry Creditor may select period of time for Creditor may select period of time for

which registration of notice of judgment which registration of notice of judgment in PPR is to be effective, up to a in PPR is to be effective, up to a maximum of 20 yearsmaximum of 20 years

After 20 years recovery is barred by After 20 years recovery is barred by Limitations Act s.47.1Limitations Act s.47.1

Modern PositionModern Position Personal PropertyPersonal Property

Old Rule – Ontario, Manitoba, B.C.Old Rule – Ontario, Manitoba, B.C. Personal property bound on seizure of goodsPersonal property bound on seizure of goods

New Rule – Other provinces, with some variation in New Rule – Other provinces, with some variation in detailsdetails

Personal property bound on registration of notice of judgment Personal property bound on registration of notice of judgment in the PPRin the PPR

LandLand Old Rule – Ontario Old Rule – Ontario Registry ActRegistry Act

Land bound on delivery of writ to sheriffLand bound on delivery of writ to sheriff New Rule – Atlantic Provinces, Ont New Rule – Atlantic Provinces, Ont Land Titles ActLand Titles Act

Land bound on registration of memorial of judgment in land Land bound on registration of memorial of judgment in land registryregistry

Binding by RegistrationBinding by Registration When property can be bound by When property can be bound by

registration, person dealing with the registration, person dealing with the property of the debtor must search property of the debtor must search the registry for a notice of judgment, the registry for a notice of judgment, as for a financing statementas for a financing statement

Why should a JC be able to bind Why should a JC be able to bind property by registration?property by registration?

Subsequent Interest Subsequent Interest HoldersHolders

Once the property is bound, subsequent Once the property is bound, subsequent interest holders (e.g. purchasers or secured interest holders (e.g. purchasers or secured parties) take subject to the JC’s interestparties) take subject to the JC’s interest

Exceptions:Exceptions: LandLand

No exceptions until the registration expiresNo exceptions until the registration expires Personal PropertyPersonal Property

Registered judgment is like registered security interestRegistered judgment is like registered security interest Exceptions for transferees Exceptions for transferees

Also pmsi, repairer’s lien (not covered in this course)Also pmsi, repairer’s lien (not covered in this course)

Subsequent TransfereeSubsequent TransfereePersonal PropertyPersonal Property

Ordinary course, yard sale and serial Ordinary course, yard sale and serial number equipment rules apply to number equipment rules apply to judgments as they do to security judgments as they do to security interests.interests.

(JC may register by serial number)(JC may register by serial number) Why?Why?

Thus the JC must register by serial # to Thus the JC must register by serial # to protect interest against purchasersprotect interest against purchasers This is different from the question of This is different from the question of

whether registration against equipment whether registration against equipment without serial # is effective against JCwithout serial # is effective against JC

Subsequent Transferee – Subsequent Transferee – Personal Property – Why?Personal Property – Why? Creditors Relief Act Creditors Relief Act 2.3(6) A person to whom 2.3(6) A person to whom

personal property bound by a notice of judgment is personal property bound by a notice of judgment is transferred has priority as against the persons transferred has priority as against the persons referred to in subsection (5) in the same referred to in subsection (5) in the same circumstances that a transferee of personal property circumstances that a transferee of personal property subject to a security interest perfected by subject to a security interest perfected by registration has priority as against the secured party registration has priority as against the secured party under subsections 30(1) to 30(4) [ordinary course under subsections 30(1) to 30(4) [ordinary course and “yard-sale”], subsections 30(6) and 30(8) and “yard-sale”], subsections 30(6) and 30(8) [equipment] and section 31 of the Personal Property [equipment] and section 31 of the Personal Property Security Act [reified intangibles], and those Security Act [reified intangibles], and those provisions apply with the necessary modifications.provisions apply with the necessary modifications.

Subsequent Security Subsequent Security InterestsInterests

Personal PropertyPersonal Property PMSI (if registered in timely PMSI (if registered in timely

manner) and repairer’s lien have manner) and repairer’s lien have priority over prior registered JCpriority over prior registered JC PPSA s.22 & 32PPSA s.22 & 32

Exceptions may arise for other Exceptions may arise for other statutory liensstatutory liens

Prior InterestsPrior Interests To what extent is a prior interest To what extent is a prior interest

affected by a binding judgment?affected by a binding judgment? Prior unregistered interestsPrior unregistered interests Future advancesFuture advances

Prior Interests – Prior Interests – Common LawCommon Law

Starting point:Starting point: You can’t grant a security interest in You can’t grant a security interest in

someone else’s propertysomeone else’s property A judgment debtor can’t bind someone A judgment debtor can’t bind someone

else propertyelse property So, common lawSo, common law

The JC steps into the shoes of the The JC steps into the shoes of the debtordebtor

Prior Interests – Prior Interests – Common LawCommon Law

The rule in The rule in Jellett v WilkieJellett v Wilkie ". . .an execution creditor can only sell the ". . .an execution creditor can only sell the

property of his debtor subject to all such property of his debtor subject to all such charges, liens and equities as the same charges, liens and equities as the same was subject to in the hands of his debtor”was subject to in the hands of his debtor” Jellett v WilkieJellett v Wilkie (1896) 26 S.C.R. 282 (1896) 26 S.C.R. 282

The rule in The rule in Jellett v WilkieJellett v Wilkie is simply a statement is simply a statement of of nemo datnemo dat in the judgment enforcement context in the judgment enforcement context

The alternative to The alternative to Jellett v WilkieJellett v Wilkie is some form is some form “first-to-register wins”“first-to-register wins”

Prior Interests – LandPrior Interests – Land Interest of JC with registered memorial Interest of JC with registered memorial

of judgment is of course subordinate to of judgment is of course subordinate to prior prior registeredregistered interests in the property interests in the property Same as secured partySame as secured party

Interest of JC is also subordinate to priorInterest of JC is also subordinate to prior unregisteredunregistered interests: interests: Jellett v WilkieJellett v Wilkie Different from security interestsDifferent from security interests Any unregistered interest is void as against Any unregistered interest is void as against

a prior registered security interesta prior registered security interest

Prior Interests – LandPrior Interests – Land The rule in Jellett and Wilkie applies in most The rule in Jellett and Wilkie applies in most

jurisdictionsjurisdictions Including land titles jurisdictionsIncluding land titles jurisdictions

Including NB Land Titles ActIncluding NB Land Titles Act Can only be changed by clear languageCan only be changed by clear language

Modified by NB Modified by NB Registry ActRegistry Act 19(2) Subject to subsections (3), (4) and (5), all 19(2) Subject to subsections (3), (4) and (5), all

instruments shall, if not registered within three months instruments shall, if not registered within three months of the date of their execution, be deemed fraudulent of the date of their execution, be deemed fraudulent and void as against any bona fide -judgment creditor, and void as against any bona fide -judgment creditor, when, prior to the registry of such conveyance, a when, prior to the registry of such conveyance, a memorial of the judgment has been registered.memorial of the judgment has been registered.

Prior Interests – LandPrior Interests – Land Why should JC who registers be treated differently Why should JC who registers be treated differently

from secured party who registers?from secured party who registers? JC is different from secured party in that JC does not rely on register, JC is different from secured party in that JC does not rely on register,

so why prejudice bona fide purchaser who failed to register?so why prejudice bona fide purchaser who failed to register? But what about successor in title to JC, namely purchaser But what about successor in title to JC, namely purchaser

from sheriff?from sheriff? Must be able to give clear title to get best priceMust be able to give clear title to get best price ““No doubt if the sheriff had sold and the purchaser had registered No doubt if the sheriff had sold and the purchaser had registered

his transfer, the Act would apply, and would in that case his transfer, the Act would apply, and would in that case invalidate prior unregistered transfers made by the execution invalidate prior unregistered transfers made by the execution debtor before the registry of the execution...” debtor before the registry of the execution...”

Jellett v WilkieJellett v Wilkie But that is too late for purchaser, who has already But that is too late for purchaser, who has already

purchasedpurchased

Prior Interests – LandPrior Interests – Land Consider problem of fraudulent conveyancesConsider problem of fraudulent conveyances

Conveyances intended to defeat judgment creditor Conveyances intended to defeat judgment creditor ““Better that my spouse gets the land rather than my Better that my spouse gets the land rather than my

creditor”creditor” After registration of judgment JD executes conveyance to After registration of judgment JD executes conveyance to

spouse and backdates itspouse and backdates it Fraudulent conveyances can be attacked under Fraudulent conveyances can be attacked under

fraudulent preferences Acts (Assignments and fraudulent preferences Acts (Assignments and Preferences Act in NB), but these require showingPreferences Act in NB), but these require showing

Intent to defraud, andIntent to defraud, and That D was insolvent at time of the transferThat D was insolvent at time of the transfer

Prior Interests – LandPrior Interests – Land Should rule in Jellett v Wilkie be Should rule in Jellett v Wilkie be

abolished in respect of land in favour of abolished in respect of land in favour of a rule that JC with registered memorial a rule that JC with registered memorial of judgment has priority over prior of judgment has priority over prior unregistered interests?unregistered interests? Consider: Consider:

Prejudice to purchaser from sheriffPrejudice to purchaser from sheriff Prejudice to prior unregistered interest holderPrejudice to prior unregistered interest holder Burden on prior unregistered interest holderBurden on prior unregistered interest holder Problem of fraudulent conveyancesProblem of fraudulent conveyances

Prior Interests – Personal Prior Interests – Personal PropertyProperty

Rule in Jellett v Wilkie does Rule in Jellett v Wilkie does notnot apply to prior apply to prior security interestssecurity interests

PPSA PPSA 20(1) An unperfected security interest in 20(1) An unperfected security interest in collateral is subordinate to the interest ofcollateral is subordinate to the interest of (a) a judgment creditor who has registered a notice of (a) a judgment creditor who has registered a notice of

judgment in the Registry pursuant to subsection 2.2(1) judgment in the Registry pursuant to subsection 2.2(1) of the Creditors Relief Act if the security interest is of the Creditors Relief Act if the security interest is unperfected when the notice is registered,unperfected when the notice is registered,

This rule applies even to This rule applies even to priorprior unperfected unperfected security interestssecurity interests

Note: In Ontario the JC must actually seize to get priority Note: In Ontario the JC must actually seize to get priority over a prior unregistered security interestover a prior unregistered security interest

Prior Interests – Personal Prior Interests – Personal PropertyProperty

Rule in Jellett v WilkieRule in Jellett v Wilkie does does apply to prior apply to prior ownershipownership interests interests This is simply to say that a judgment creditor cannot This is simply to say that a judgment creditor cannot

attach property that does not belong to the debtorattach property that does not belong to the debtor We cannot say that a prior unregistered We cannot say that a prior unregistered

ownership interest is subordinate to a registered ownership interest is subordinate to a registered JC because there is no ownership registry – an JC because there is no ownership registry – an owner could never protect themselvesowner could never protect themselves

Note that there are mechanisms to deal with Note that there are mechanisms to deal with fraudulent conveyancesfraudulent conveyances Where debtor conveyed property prior to binding in Where debtor conveyed property prior to binding in

order to defeat judgment creditororder to defeat judgment creditor

Future Advances – Future Advances – Personal PropertyPersonal Property

PPSA rule for future advances is different for JC than PPSA rule for future advances is different for JC than for SP2for SP2

35(6) A perfected security interest has priority over 35(6) A perfected security interest has priority over the interest of a judgment creditor referred to in the interest of a judgment creditor referred to in paragraph 20(1)(a) [with registered notice of paragraph 20(1)(a) [with registered notice of judgment] only to the extent ofjudgment] only to the extent of (a) advances made before the judgment creditor registers the (a) advances made before the judgment creditor registers the

notice of judgment referred to in paragraph 20(1)(a), [and]notice of judgment referred to in paragraph 20(1)(a), [and] (b) advances made before the secured party has knowledge of (b) advances made before the secured party has knowledge of

the registration of the notice of judgment referred to in the registration of the notice of judgment referred to in paragraph 20(1)(a),paragraph 20(1)(a),

Like Like Hopkinson v RoltHopkinson v Rolt – JC who registers – JC who registers andand gives gives actual notice has priority over future advancesactual notice has priority over future advances

Future AdvancesFuture AdvancesPersonal PropertyPersonal Property

Why is JC treated differently from SP Why is JC treated differently from SP in respect of future advances under in respect of future advances under the PPSA?the PPSA?

Future AdvancesFuture AdvancesLandLand

In land, the rule regarding the In land, the rule regarding the priority of JC with respect to future priority of JC with respect to future advances is not clear.advances is not clear. What should it be?What should it be?

Priorities as between JCsPriorities as between JCs

Common-LawCommon-Law First writ delivered to the sheriff has priorityFirst writ delivered to the sheriff has priority

Regardless of the time at which the debt was Regardless of the time at which the debt was incurred to the judgment obtainedincurred to the judgment obtained

That is,That is, Sheriff has several writs of executionSheriff has several writs of execution Sheriff executes the first writ delivered to himSheriff executes the first writ delivered to him When that writ is satisfied in full, sheriff turns to When that writ is satisfied in full, sheriff turns to

the second writthe second writ What is wrong with this rule?What is wrong with this rule? Still the law in PEIStill the law in PEI

Pro-Rata SharingPro-Rata Sharing The common law was modified by Creditors The common law was modified by Creditors

Relief Acts near the turn of the centuryRelief Acts near the turn of the century Unsecured creditors share pro-rataUnsecured creditors share pro-rata

That is, in proportion to their share of the total debtThat is, in proportion to their share of the total debt E.g. D owes $30,000 to Unsecured Creditor 1, $10,000 to UC2E.g. D owes $30,000 to Unsecured Creditor 1, $10,000 to UC2 D’s total assets are $1000D’s total assets are $1000

UC1 gets $750, UC2 gets $250UC1 gets $750, UC2 gets $250 E.g. NB Creditors Relief ActE.g. NB Creditors Relief Act

3 Subject to the provisions hereinafter contained, 3 Subject to the provisions hereinafter contained, there is no priority among creditors by execution from there is no priority among creditors by execution from The Court of Queen's Bench of New Brunswick. The Court of Queen's Bench of New Brunswick.

Pro-rata SharingPro-rata Sharing Pro-rata sharing is “subject, . . . to Pro-rata sharing is “subject, . . . to

the payment of the costs of the the payment of the costs of the creditor under whose execution the creditor under whose execution the money was levied.” CRA s.4(1)money was levied.” CRA s.4(1)

Why?Why?

Implementation of Pro-Implementation of Pro-rata Sharingrata Sharing

CRA CRA s.4(1) Where a sheriff levies money upon an s.4(1) Where a sheriff levies money upon an execution against the property of a debtor . . .he execution against the property of a debtor . . .he shall forthwith enter in a book to be kept in his shall forthwith enter in a book to be kept in his office, open to public inspection without charge, a office, open to public inspection without charge, a notice stating that the levy has been made, and notice stating that the levy has been made, and the amount thereof, the amount thereof, and the money shall and the money shall thereafter be distributed rateably amongst all thereafter be distributed rateably amongst all execution creditors and other creditors whose execution creditors and other creditors whose writs, or certificates given under this Act, were in writs, or certificates given under this Act, were in the sheriff's hands at the time of the levy, or who the sheriff's hands at the time of the levy, or who delivered their writs or certificates to the sheriff delivered their writs or certificates to the sheriff within one month from the entry of notice; . within one month from the entry of notice; . . .. .

Establishing a ClaimEstablishing a Claim Creditor must establish a claim to be entitled to Creditor must establish a claim to be entitled to

share in the distribution: CRA s.5share in the distribution: CRA s.5 Traditionally, it was not necessary to have Traditionally, it was not necessary to have

obtained a judgmentobtained a judgment Although the initiating creditor had to have obtained a Although the initiating creditor had to have obtained a

judgment in order that a writ of execution would issuejudgment in order that a writ of execution would issue ““Certificate system” allowed creditors to obtain a Certificate system” allowed creditors to obtain a

certificate through a summary administrative certificate through a summary administrative procedureprocedure That certificate was then equivalent to a judgmentThat certificate was then equivalent to a judgment If objections were raised, they would be dealt with by a If objections were raised, they would be dealt with by a

courtcourt

Establishing a ClaimEstablishing a Claim The certificate system is was The certificate system is was

abolished in NB with PPSAabolished in NB with PPSA CRA CRA 2.3(13) A judgment creditor is 2.3(13) A judgment creditor is

not entitled to share in the proceeds not entitled to share in the proceeds of a levy by the sheriff against the of a levy by the sheriff against the personal property of the judgment personal property of the judgment debtor under this Act unless the debtor under this Act unless the creditor has registered a notice of creditor has registered a notice of judgment under subsection 2.2(1).judgment under subsection 2.2(1).

Establishing a ClaimEstablishing a Claim 2.3(14) In applying the provisions of this Act 2.3(14) In applying the provisions of this Act

for the purposes of determining the for the purposes of determining the entitlement of creditors to share in the entitlement of creditors to share in the proceeds of a levy by the sheriff, a reference proceeds of a levy by the sheriff, a reference to an execution or certificate or the delivery to an execution or certificate or the delivery of an execution or certificate to the sheriff of an execution or certificate to the sheriff shall be construed as a reference to a shall be construed as a reference to a registered notice of judgment or the registered notice of judgment or the registration of a notice of judgment, unless registration of a notice of judgment, unless the context otherwise requires. the context otherwise requires.

Defects of CRADefects of CRA In NB, NS & BC, Creditors Relief Act In NB, NS & BC, Creditors Relief Act

does not apply to garnishment, only does not apply to garnishment, only to executionto execution Apparently a drafting errorApparently a drafting error

Is CRA redundant in light of Is CRA redundant in light of bankruptcy?bankruptcy?

Defects of CRADefects of CRA Recall CRA s.4(1) Recall CRA s.4(1)

Where Where a sheriffa sheriff levies money upon an levies money upon an execution . . . the money shall execution . . . the money shall thereafter be distributed rateably thereafter be distributed rateably amongst all execution creditors amongst all execution creditors

Defects of CRADefects of CRA What about where SP distributes surplus What about where SP distributes surplus

funds?funds? PPSA PPSA s. 60(2) Surplus distributed in order of s. 60(2) Surplus distributed in order of

prioritypriority JC1 gets paid out before JC2 because JC1 gets paid out before JC2 because sheriffsheriff is is

not distributingnot distributing What about CRA s. 3?What about CRA s. 3? S. 3 Subject to the provisions hereinafter S. 3 Subject to the provisions hereinafter

contained, there is no priority among creditors contained, there is no priority among creditors by execution from The Court of Queen's Bench by execution from The Court of Queen's Bench of New Brunswick. of New Brunswick.