Can An Execution Creditor Realize Any Benefits From A Debtor's Beneficial Interest?

• Published date: 30 April 2020
• Author: Ms Caitlin E. Steven
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Debt Capital Markets, Financial Services, Trials & Appeals & Compensation
• Law Firm: WeirFoulds LLP

Obtaining a judgment for damages is sometimes half the battle. Actually realizing on that judgment might turn into another long, drawn-out fight with no guarantee of success. In 1842752 Ontario Inc. v. Fortress Wismer 3-2011 Ltd. et al.,¹ the Court of Appeal considered a judgment creditor's attempt to enforce its writ of seizure and sale against a debtor's beneficial interest in land. Interestingly, the judgment creditor did not seek to sell the debtor's beneficial interest. Instead, the judgment creditor sought declarations that the writ of seizure and sale applied to the registered owner of the lands and that the writ of seizure and sale had priority over advances made under a previously registered charge. The Court of Appeal was not convinced.

Background

Pace Developments (The Mark) Ltd. ("Pace Mark") is the registered owner of lands being developed as an 18-storey residential condominium. The lands are registered under the Land Titles Act.²

Pace Mark holds the lands under an unregistered trust agreement specifying that Fortress Wismer 3-2011 Ltd. ("Fortress Wismer") and two other entities are the beneficial owners of the lands as tenants in common. The trust agreement was unregistered because the Land Titles Act prohibits registration of notice of an express, implied or constructive trust. Fortress Wismer has a 35 percent beneficial interest in the lands.

In 2016, Pace Mark gave a construction financing charge to Firm Capital Mortgage Fund Inc. ("Firm Capital") and a further charge to another company.

In November 2017, 1842752 Ontario Inc. ("184") obtained a judgment against Fortress Wismer for payment of $100,000 plus interest and costs.

On January 30, 2018, 184 filed a writ of seizure and sale with the sheriff in the jurisdiction where the lands are located. 184 also gave Firm Capital actual notice of the writ of seizure and sale. 184 took the position that any subsequent advances under Firm Capital's charge would be subordinate to 184's writ. Not surprisingly, Firm Capital disagreed.

184 commenced an application and sought declarations that:

1. 184's writ of seizure and sale against Fortress Wismer applies against or binds Pace Mark (the registered owner of the lands);
2. 184's writ of seizure and sale may be executed against Pace Mark; and
3. any advances made to Pace Mark from Firm Capital after January 30, 2018 rank subordinate to 184's interest.

The application judge held that 184 was not entitled to enforce its writ of seizure and sale against Pace...