Article written by Nils Preshaw

Claimants can be surprised to learn that obtaining judgment and collecting funds are often two entirely separate things.

In British Columbia, a successful litigant who has obtained judgment -either post-trial or perhaps via default, may still have to have the judgment assessed (e.g. quantified) and, absent willing payment by the judgment debtor, apply for a Court Order via the Court Order Enforcement Act (the “Act”) for exclusive conduct of sale of their property.

Pursuing a judgment debtor via the Act makes good sense where the debtor owns property worth more than the outstanding debt.

Litigation example

In a corporate claim conducted recently by Nils Preshaw of Kornfeld LLP, default judgment was taken in consequence of the Defendant’s failure to file a response to civil claim within deadlines contemplated by the BC Supreme Court Civil Rules. A Certificate of Judgment was subsequently obtained and registered with the Land Title and Survey Authority of BC on title of the Defendant’s property to prevent any subsequent sale.

Assessment

In order to have its default judgment quantified Mr. Preshaw then applied to the Court to have the quantum of damages, disbursements, legal costs and pre-judgment interest assessed.

Our notice of the application had to be served on the Defendant along with a variety of affidavits and other supporting materials.

The associate judge who heard the application determined that approximately a quarter of a million dollars in damages, disbursements, legal costs and pre-judgment interest were appropriate. Post-judgment interest and legal costs related to the statutory process were left to be determined at a later date.

Steps under Court Order Enforcement Act

Sections 92 to 101 of the Act set out the procedure for a judgment creditor to obtain an order for the sale of real property.

On the basis that “a man’s home is his castle”, the law in BC requires a lengthy and somewhat complicated process before a judgment debtors’ property can be sold. The steps include:

  • – a show cause hearing to determine if the property is liable to be sold pursuant to s.92 of the Act;
  • – a reference to the Registrar to determine the debtor’s interest in the property to be sold pursuant to s. 94 of the Act (“Registrar’s Hearing”); and
  • – a confirmation hearing to determine when and how the property is to be sold pursuant to sections 92 to 101 (“Confirmation Hearing”).

 

Step 1: Show Cause Hearing

A show cause hearing to determine whether the property is liable to be sold is governed by s.92 of the Act.

Notice of the application and supporting materials had to be served on the Defendant, any joint owners of the property, and any interested parties (for example, if a defendant has an existing mortgage, then notice of any show cause hearing would have to be served on that lender).

In our experience, lenders do not typically become involved in hearings under the Act. Their interest in a given property is usually secured by a mortgage, and as such lenders are often content not to participate in the process provided they have reasonable assurance that there is sufficient equity in the property that will lead to payment in full of any outstanding mortgage amounts in priority to the judgment debtor.

At a show cause hearing an associate judge sitting in chambers considers the application, ensures that all relevant parties have been given notice and:

  • – confirms that the property is liable to be sold (here, due to the existence of a default judgment);
  • – enquires into the nature and particulars of the Defendant’s interest in the property;
  • – ensures that the Defendant is an owner of the property;
  • – checks to see what judgments may form liens or charges against title of the property and if there is any priority between those judgments, if more than one exists;
  • – determines how proceeds from the sale of the property should be distributed; and-
  • – reports all such findings to a justice of the BC Supreme Court.

 

At show cause hearings judgment debtors often seek the court’s approval to file a Certificate of Pending Litigation (“CPL”) on title of the Defendant’s property to ensure once again that the property cannot be sold without prior court approval.

A successful applicant at a show cause hearing seeks an order that they be permitted to apply to the Registrar of the BC Supreme Court for something called a “reference”.

Step 2: Registrar’s Hearing

The next step in the statutory process is a reference to the Registrar and is intended to determine the debtor’s interest in the property to be sold pursuant to s. 94 of the Act.

Once again notice of the application and all supporting materials have to be served on the Defendant.

At the hearing a “Registrar’s Report” is sought that typically lists:

  • – the exact property that is liable to be sold (e.g. the unique parcel identifier and civic address of the property);
  • – the extent of the judgment debtor’s interest in the property (e.g. sometimes a judgment debtor is the sole owner or sometimes they are joint owners with some other person/corporation;
  • – any charges that exist on title of the property (e.g. mortgages, certificates of judgment or CPLs listed on title of the property); and
  • – how the proceeds from the sale of the property are proposed to be distributed.

 

Gross proceeds from the sale of the property are typically distributed as follows:

  • – payment of taxes, arrears of taxes, water rates, and the like (if any);
  • – payment of real estate commissions owing with respect to the sale of the property, plus GST; and
  • – payment of the balance due and owing under any existing mortgages in favour of any existing lenders.

 

After these amounts are paid, the net proceeds of sale are typically ordered to be distributed as follows:

  • – payment of judgments in favour of judgment creditors; and
  • – payment of any remaining funds to the judgment debtor (i.e. the owner of the property or interest therein).

 

Step 3: Confirmation Hearing

The third step is the confirmation process set out in sections 71.1, 94(5), 96-97 and 99-101 of the Act.

This application is typically brought before an associate judge. The judgment creditor seeks orders permitting it to:

  • – offer the defendant’s property for sale; and
  • – have exclusive conduct of the sale of the property and do all things reasonably incidental to the sale including paying to a real estate agent or firm to list the property for sale and receive a commission of not more than 7% on the first $100,000 and 3% on the balance of the gross selling price, plus GST, to be paid from the gross proceeds of sale; and

 

Sales are typically subject to the approval of the court (a 4th step really) unless agreed to by the judgment debtor and any other owners of the property.

Although the Act contemplates that a sheriff be hired to handle the listing of a given property for sale, case law such as Kriegman v. Wilson, 2018 BCSC 1497, at paragraph 38 (varied by 2020 BCCA 66 on other grounds), supports listing the property with a real estate agent instead.

Similarly, the court has jurisdiction under s. 101(3) of the Act to waive the advertising requirement prescribed by sections 101(1) and (2). Since present day real estate listings are widely advertised through the real estate association’s multiple listing service it is routine to argue that statutory advertising requirements should be waived.

Note: not all property can be sold. s.71.1(1) of the Act exempts a debtor’s principal residence from sale if their equity does not exceed $12,000.  A method of calculating net equity was approved by BC’s courts in Royal Bank of Canada v. Nguyen and Luu, 2004 BCSC 895 at paragraph 18, namely:

  • – expected sale amount of debtor’s interests;
  • – less amounts owed to secured creditors; and
  • – less the $12,000 statutory exemption ( the $12,000 figure applies where a debtor’s principal residence is within the Capital Regional District or Metro Vancouver Regional District — elsewhere in BC, the prescribed exemption is $9,000).

 

Assuming the property is not exempt, the confirmation hearing often becomes contentious once the prospect of an actual sale becomes real. At this stage, judgment debtors often attend court to try to stave off the sale. As you can imagine, these hearings can become quite heated, and it is not uncommon for the court to allow a judgment debtor an adjournment(s) so they can have an opportunity to refinance the property so as to avoid a sale.

The sale of a combative person’s home can be difficult and sometimes requires the services of a private bailiff who may have to be paid (up front) to help with enforcing court orders.

A reluctant seller can cause all sorts of issues in the course of listing a property for sale, refusing to allow showings and refusing to leave a property post-sale. It is worth reminding an uncooperative owner that such conduct can lead to a lower sale price and therefore be self-defeating.

In our experience, negotiations often take place at this stage of the process. The courts may give judgment debtors multiple adjournments in the hopes that they can arrange financing to pay off their debt rather than ordering the sale of their home.

If settlement is not possible, eventually an associate judge will issue an order approving the Registrar’s report and order the sale of property pursuant to the Act.

Further Steps

Although described above as a three-step process, practically speaking where a property has to be sold further court applications/appearances will likely be required to assess post-judgment interest and legal costs and obtain court approval of the final distribution of sale proceeds.

If you have obtained judgment versus an individual or corporation that owns property in British Columbia, please do not hesitate to contact us to discuss enforcing that judgment under the Court Order Enforcement Act.

Nils Preshaw is a lawyer based in Vancouver who regularly advises and assists clients regarding civil litigation and appeals. Mr. Preshaw can be reached at npreshaw@kornfeldllp.com or by telephone at +1 (604) 331-8300.