The Toronto-Dominion Bank v. Phillips et al.

[Indexed as: Toronto-Dominion Bank v. Phillips]

Ontario Reports

Court of Appeal for Ontario,

MacFarland, Pepall and Strathy JJ.A.

August 29, 2014

122 O.R. (3d) 181 | 2014 ONCA 613

Case Summary

Bankruptcy and insolvency — Consumer proposal — Section 70(1) of Bankruptcy and Insolvency Act ("BIA") applying to consumer proposals under s. 66.4(1) of BIA — Appellant filing consumer proposal after creditor registered writ of execution against her and respondent — House owned by appellant and respondent as joint tenants subsequently sold under power of sale and surplus remaining after payment of mortgage — Court ordering execution creditor's debt to be paid out of surplus — Payment severing joint tenancy — Execution creditor precluded from executing any remedy against appellant or her property by virtue of stay of proceedings imposed by s. 69.2(1) of BIA — Execution creditor's [page182] debt to be paid entirely out of respondent's half of surplus — Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 66.4(1), 69.2(1), 70(1).

The appellant and the respondent were spouses and jointly owned residential property. They granted a mortgage on the property to TD. The appellant incurred debt using an overdraft facility on the parties' joint bank account with BMO. BMO obtained a judgment against the appellant and the respondent and filed a writ of seizure and sale. The mortgage went into default, and TD commenced power of sale proceedings. The appellant and the respondent separated. The appellant filed a Division II consumer proposal pursuant to s. 66.13 of the Bankruptcy and Insolvency Act ("BIA"). Her proposal was accepted and was deemed to have been approved by the court. When the residential property was subsequently sold, there was a surplus after payment of the mortgage and TD's costs. The application judge ordered BMO's debt to be paid out of that surplus and, upon payment, BMO withdrew its claim in the proposal proceedings. The application judge ordered the remainder of the surplus to be divided equally between the appellant and the respondent. The appellant appealed, arguing that she was entitled to an amount equal to half of the surplus before BMO's debt was paid -- that is, that the debt should be paid out of the respondent's 50 per cent share.

Held, the appeal should be allowed.

At the time the proposal was filed and approved, BMO was an execution creditor and its debt was unsecured. Section 70(1) of the BIA applies to consumer proposals under the BIA. Section 66.4(1) of the BIA directs that certain general provisions of the BIA, including s. 70(1), should be read to apply to consumer proposals even though there is no explicit reference. Moreover, quite apart from the statutory language, the policy rationale for treating unsecured creditors equally means that the hierarchy reflected in s. 70(1) applies with equal force to consumer proposals. BMO was precluded from executing any remedy against the appellant or her property by virtue of the stay of proceedings under s. 69.2(1) of the BIA. The joint tenancy was severed when the parties consented to, and the application judge granted, an order authorizing payment to BMO. Accordingly, the payment to BMO could only be from the respondent's 50 per cent share of the surplus.

National Bank of Canada v. Young, [2002] O.J. No. 3823, [2002] O.T.C. 742, 4 R.P.R. (4th) 79, 117 A.C.W.S. (3d) 91 (S.C.J.); Polsak (Re) (1978), 1978 CanLII 1456 (ON SC), 19 O.R. (2d) 570, [1978] O.J. No. 3348, 85 D.L.R. (3d) 748, 27 C.B.R. (N.S.) 227, [1978] 2 A.C.W.S. 22 (S.C.), distd

Arnold Bros. Transport Ltd. v. Murphy, [2013] M.J. No. 243, 2013 MBQB 137, 295 Man. R. (2d) 66, 34 R.P.R. (5th) 217, [2013] 12 W.W.R. 377, 231 A.C.W.S. (3d) 242; Sirois v. Breton, 1967 CanLII 193 (ON SC), [1967] 2 O.R. 73, [1967] O.J. No. 973, 62 D.L.R. (2d) 366 (Co. Ct.), consd

Other cases referred to

Cameron Estate (Re) (2011), 108 O.R. (3d) 117, [2011] O.J. No. 5019, 2011 ONSC 6471, 10 R.P.R. (5th) 326, 83 C.B.R. (5th) 272, 343 D.L.R. (4th) 370, 210 A.C.W.S. (3d) 303 (S.C.J.); Cohen (Re), 1948 CanLII 404 (AB SCAD), [1948] 4 D.L.R. 811n, [1948] O.W.N. 781, 29 C.B.R. 163n (C.A.), affg 1948 CanLII 282 (ON CA), [1948] O.J. No. 545, [1948] 4 D.L.R. 808, [1948] O.W.N. 540, 29 C.B.R. 111 (H.C.J.); Forest v. Hancor Inc., 1995 CanLII 3536 (FCA), [1995] F.C.J. No. 1411, [1996] 1 F.C. 725, 106 F.T.R. 239n, 191 N.R. 360, 37 C.B.R. (3d) 117, 59 A.C.W.S. (3d) 1115 (C.A.); James Hunter and Associates Inc. v. Citifinancial Canada Inc., 2007 CanLII 56505 (ON SC), [2007] O.J. No. 5012, 40 C.B.R. (5th) 149, 162 A.C.W.S. (3d) 881 (S.C.J.); Maroukis v. Maroukis, 1984 CanLII 76 (SCC), [1984] 2 S.C.R. 137, [1984] S.C.J. No. 35, 12 D.L.R. (4th) 321, 54 N.R. 268, 5 O.A.C. 182, 41 R.F.L. (2d) 113, 34 R.P.R. 228, 27 A.C.W.S. (2d) 306; [page183] msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd. (2013), 117 O.R. (3d) 81, [2013] O.J. No. 4432, 2013 ONCA 550, 310 O.A.C. 282, 368 D.L.R. (4th) 1, 235 A.C.W.S. (3d) 310; Ontario Development Corp. v. Trustee of the Estate of I.C. Suatac Construction Ltd. (1976), 1976 CanLII 876 (ON CA), 12 O.R. (2d) 465, [1976] O.J. No. 2136, 69 D.L.R. (3d) 353, 22 C.B.R. (N.S.) 42 (C.A.); Power v. Grace, 1932 CanLII 116 (ON CA), [1932] O.R. 357, [1932] O.J. No. 339, [1932] 2 D.L.R. 793 (C.A.); Royal & SunAlliance Insurance Co. v. Muir, [2011] O.J. No. 1688, 2011 ONSC 2273, 71 E.T.R. (3d) 37, 9 R.P.R. (5th) 104 (S.C.J.); Québec (Attorney General) v. Bélanger (Trustee of), 1928 CanLII 514 (UK JCPC), [1928] J.C.J. No. 1, [1928] A.C. 187, [1928] 1 D.L.R. 945, [1928] 1 W.W.R. 534, 8 C.B.R. 579, 46 B.R. 291 (P.C.); Sklar and Sklar (Re), 1958 CanLII 193 (SK CA), [1958] S.J. No. 49, 37 C.B.R. 187, 15 D.L.R. (2d) 750, 26 W.W.R. 529 (C.A.)

Statutes referred to

Bankruptcy Act, R.S.C. 1970, c. B-3 [rep. by R.S.C. 1985, c. B-3], s. 50

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, Part III [as am.], Divisions I [as am.], II [as am.], ss. 66(1), 66.4(1), 66.11 [as am.], 66.12(3), 66.13, 66.28(2)(a), 69.2(1) [as am.], (a), (4) [as am.], Part IV, s. 70 [as am.], (1)

Execution Act, R.S.O. 1990, c. E.24 [as am.], s. 1 [as am.]

Mortgages Act, R.S.O. 1990, c. M.40, s. 27 [as am.]

Authorities referred to

Lem, Jeffrey W., and Rosemary Bocska, Halsbury's Laws of Canada — Real Property, 1st ed. (Markham, Ont.: LexisNexis Canada, 2012)

APPEAL from the judgment of Gray J., [2013] O.J. No. 5219, 2013 ONSC 7016 (S.C.J.).

Gustavo F. Camelino, for appellant Cindy Louise Phillips.

Michael Odumodu, for respondent Richard Joseph Phillips.

The judgment of the court was delivered by

PEPALL J.A.: —

[1] This appeal addresses the interaction between a consumer proposal under s. 66.13 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 ("BIA") and a writ of execution registered against joint debtors, one of whom has filed a consumer proposal.

[2] The appellant, Cindy Louise Phillips, the consumer debtor who filed the proposal, submits that after payment to the execution creditor, the application judge erred in ordering that the remaining sum of $32,217.64 be distributed equally between her and the respondent, her estranged husband, Richard Joseph Phillips.

[3] For the reasons that follow, I agree with the appellant.

A. Facts

(1) Joint indebtedness

[4] The appellant and the respondent were spouses and owned residential property in Guelph, Ontario as joint tenants. In [page184] November 2008, they granted a mortgage on the property in the amount of $268,000 to the Toronto-Dominion Bank ("TD").

[5] The appellant incurred debt using an overdraft facility on the parties' joint bank account with the Bank of Montreal ("BMO"). On April 6, 2011, BMO obtained a default judgment against the appellant and the respondent in the amount of $32,734.37 plus costs of $1,161.15.

[6] On April 13, 2011, BMO filed a writ of seizure and sale with the sheriff of the County of Wellington (Guelph).

[7] The mortgage in favour of TD went into default. On November 5, 2012, TD commenced power of sale proceedings.

[8] In December 2012, the appellant and the respondent separated.

(2) Consumer proposal

[9] On February 1, 2013, the appellant filed a Division II consumer proposal pursuant to s. 66.13 of the BIA. Hoyes, Michalos & Associates Inc. was appointed as the proposal administrator. Notice of the proposal was provided to the appellant's creditors, including BMO. The proposal contemplated payment of secured creditors and preferred claims and payment of $18,000 over five years for the benefit of unsecured creditors. Property would remain vested in the appellant. The appellant's statement of affairs did not mention any interest in the Guelph property. The appellant stated that at the time she filed her proposal, she was unaware that there would be any equity left in the Guelph property.

[10] BMO filed two claims in the proposal proceedings.

[11] BMO and the other creditors that participated voted in favour of the proposal. On March 18, 2013, the appellant's proposal was deemed to have been approved by the court. Under the proposal, BMO was entitled to a dividend of $3,682.79.

[12] On April 4, 2013, TD sold the property. There was a surplus of $52,295.14 after payment of its mortgage and associated costs.

[13] The proposal administrator advised the appellant's creditors of the surplus funds and gave them an opportunity to request a meeting of creditors in order to amend the proposal. No creditor responded.

(3) TD's court application

[14] TD applied to pay the surplus funds into court less $750 on account of its costs of the application, leaving a surplus of $51,545.14. On the return of the application, the application judge heard submissions from the parties to the application and [page185] from BMO. The appellant and the respondent agreed that the sum of $19,327.50 would be paid out of the surplus to the Bank of Montreal, and the application judge so ordered. On payment, BMO withdrew its claim in the proposal proceedings. According to the appellant's oral submissions before this court, the payment to BMO was without prejudice to the positions of the appellant and the respondent on the proper allocation of the remaining balance of $32,217.64.

[15] Before the application judge, the respondent argued that after TD and BMO had been paid, the remaining balance of $32,217.64 should be split equally between the appellant and the respondent. In contrast, the appellant argued that, due to the operation of the stay of proceedings imposed by s. 69.2(1) of the BIA, 50 per cent of the remaining balance should be paid to her, and BMO's writ should be paid out of the respondent's 50 per cent share. Under this proposed distribution plan, the appellant would receive $25,772.57 and the respondent would receive $6,445.07, which is the balance remaining after payment to the appellant and BMO.

[16] The motion judge ordered distribution of the funds in accordance with the scheme proposed by the respondent. Applying s. 27 of the Mortgages Act, R.S.O. 1990, c. M.40, and provisions of the Execution Act, R.S.O. 1990, c. E.24, he determined that a writ of execution created a right to or an interest in land. As such, BMO was a subsequent encumbrancer within the meaning of s. 27 of the Mortgages Act and had to be paid before there was any residue owing to the appellant and the respondent.

B. Grounds of Appeal

[17] The appellant submits that the application judge erred in finding that an execution creditor is a subsequent encumbrancer within the meaning of s. 27 of the Mortgages Act and erred in respect of BMO's right to enforce its writ against her. It is her position that BMO's claim against her was stayed as a result of s. 69.2(1) of the BIA. Accordingly, BMO could only realize against the respondent's share of the residue remaining after payment of the mortgagee, TD. As such, the respondent is entitled to $6,445.07 and the appellant is entitled to $25,772.57.

[18] The proposal administrator is funding this appeal on behalf of the appellant, who has agreed that her interest in the surplus will be paid to the administrator to pay its fees and to fund payments due under the proposal. This would include any amendments that may be agreed upon between the appellant and her creditors as a result of the disclosure of the existence of [page186] the surplus funds. In the event that there is a balance left over, it would be paid to the appellant.

C. Analysis

(1) Proposals

[19] Under the BIA, insolvency may be addressed by proposals and by bankruptcy. In general terms, a proposal provides a debtor with an opportunity to restructure debt, whereas bankruptcy provides a mechanism for liquidation of assets.

[20] Proposals enable debtors to make arrangements with their creditors, including settlement of debts and extensions of time for payment. They are available under Divisions I and II of Part III of the BIA. Division I proposals are available to an insolvent or bankrupt debtor, including a corporation. A Division II proposal, which is at issue in this appeal, is known as a consumer proposal. A consumer proposal is available to an insolvent or bankrupt individual who has indebtedness of not more than $250,000 (or any other prescribed amount) excluding debts secured by the individual's principal residence.

[21] Consumer proposals are described in s. 66.11 and following of the BIA. A consumer proposal is to be made to the creditors of the debtor generally: s. 66.12(3). A consumer proposal that is accepted, or deemed to have been accepted, by the creditors, and approved, or deemed to have been approved, by the court, is binding in respect of all unsecured claims: s. 66.28(2)(a).

[22] Unlike a bankruptcy where the debtor's property vests in the trustee in bankruptcy, in a proposal property may remain with the debtor. Like a bankruptcy, however, a stay of proceedings is available to a debtor on the filing of a consumer proposal. Section 69.2(1) of the BIA states:

69.2(1) . . . on the filing of a consumer proposal under subsection 66.13(2) or of an amendment to a consumer proposal under subsection 66.37(1) in respect of a consumer debtor, no creditor has any remedy against the debtor or the debtor's property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy until

(a) the consumer proposal or the amended consumer proposal, as the case may be, has been withdrawn, refused, annulled or deemed annulled; or

(b) the administrator has been discharged.

[23] Section 69.2(4) exempts secured creditors from the stay, although in appropriate circumstances, the court may extend the application of the stay to secured creditors as well. [page187]

[24] Section 69.2(1) therefore imposes a comprehensive prohibition on remedies against the debtor or the debtor's property once a consumer proposal has been filed. The stay includes a prohibition against the commencement or continuation of any action, execution or other proceeding for the recovery of a claim.

(2) Execution creditor

[25] This appeal also involves a writ of execution held by BMO, the execution creditor.

[26] Section 1 of the Execution Act defines "execution creditor" as including "a person in whose name or on whose behalf a writ of execution is issued on a judgment, or in whose favour an order has been made for the seizure and sale of personal property, real property or both real property and personal property".

[27] In bankruptcy, it has long been established that an execution creditor is not a secured creditor: see Québec (Attorney General) v. Bélanger (Trustee of), 1928 CanLII 514 (UK JCPC), [1928] J.C.J. No. 1, [1928] A.C. 187 (P.C.), at p. 197 A.C.; Sklar and Sklar (Re), 1958 CanLII 193 (SK CA), [1958] S.J. No. 49, 37 C.B.R. 187 (C.A.), at p. 194 C.B.R.; Ontario Development Corp. v. Trustee of the Estate of I.C. Suatac Construction Ltd. (1976), 1976 CanLII 876 (ON CA), 12 O.R. (2d) 465, [1976] O.J. No. 2136 (C.A.), at p. 476 O.R.; and James Hunter and Associates Inc. v. Citifinancial Canada Inc., 2007 CanLII 56505 (ON SC), [2007] O.J. No. 5012, 40 C.B.R. (5th) 149 (S.C.J.), at para. 22. Rather, unless the execution has been completed by payment to the creditor, the debt of the execution creditor is treated rateably with other unsecured debt.

[28] This jurisprudence relies in part on the need to treat unsecured creditors equally under the bankruptcy regime and on s. 70 of the BIA and its predecessor, s. 50 of the Bankruptcy Act, R.S.C. 1970, c. B-3. Section 70(1) of the BIA is found under the subheading General Provisions in Part IV of the BIA. It states:

70(1) Every bankruptcy order and every assignment made under this Act takes precedence over all judicial or other attachments, garnishments, certificates having the effect of judgments, judgments, certificates of judgment, legal hypothecs of judgment creditors, executions or other process against the property of a bankrupt, except those that have been completely executed by payment to the creditor or the creditor's representative, and except the rights of a secured creditor.

(Emphasis added)

[29] This subsection speaks of the precedence of bankruptcy orders and assignments. Arguably a proposal or an order approving a proposal is not a bankruptcy order or assignment and does not fall within the ambit of that provision. However, s. 66.4(1) of the BIA provides that: [page188]

66.4(1) All the provisions of this Act, except Division I of this Part, in so far as they are applicable, apply, with such modifications as the circumstances require, to consumer proposals.[^1]

[30] In my view, s. 66.4(1) directs that certain general provisions of the BIA, including s. 70(1), should be read to apply to consumer proposals even though there is no such express reference. Moreover, quite apart from the statutory language, the policy rationale of treating unsecured creditors equally applies to the proposal regime: see Forest v. Hancor Inc., 1995 CanLII 3536 (FCA), [1995] F.C.J. No. 1411, 37 C.B.R. (3d) 117 (C.A.), at p. 72 C.B.R. In short, I would conclude that the hierarchy reflected in s. 70(1) applies with equal force to consumer proposals.

[31] Section 27 of the Mortgages Act therefore could not serve to elevate BMO's status to achieve priority over the appellant's other unsecured creditors. The decisions of National Bank of Canada v. Young, [2002] O.J. No. 3823, [2002] O.T.C. 742 (S.C.J.) and Polsak (Re) (1978), 1978 CanLII 1456 (ON SC), 19 O.R. (2d) 570, [1978] O.J. No. 3348 (S.C.) do not assist. The former did not engage the provisions of the BIA, and the latter involved a secured creditor who clearly took priority over any claim of the mortgagors to residue.

[32] At the time the proposal was filed and approved, BMO was an execution creditor and its debt was unsecured. Consistent with this characterization, BMO filed a proof of its unsecured claim in the appellant's proposal proceedings. Its debt was paid only after TD commenced its court application, BMO appeared and made submissions, and the parties consented to payment.

(3) Stay of proceedings

[33] Pursuant to s. 69.2(1)(a), BMO's claim against the appellant was stayed once the proposal was filed. The stay of proceedings is akin to the stay imposed in a bankruptcy, which is designed to prevent creditors from gaining an unfair advantage and to allow for an orderly restructuring or liquidation: see Cohen (Re), 1948 CanLII 282 (ON CA), [1948] O.J. No. 545, 29 C.B.R. 111 (H.C.J.), at pp. 113-14 C.B.R., affd 1948 CanLII 404 (AB SCAD), [1948] 4 D.L.R. 811n, [1948] O.W.N. 781 (C.A.); msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd. (2013), 117 O.R. (3d) 81, [2013] O.J. No. 4432, 2013 ONCA 550, at para. 40. [page189]

[34] Accordingly, I would find that BMO was precluded from executing any remedy against the appellant or her property by virtue of the operation of the statutory stay of proceedings.

(4) Joint tenancy

[35] Having said the above, the appellant and the respondent held the real property as joint tenants. The judgment and execution in favour of BMO was also joint. As such, it would be open to BMO to realize the joint debt as against the respondent, as any interest of the respondent was unaffected by the stay. As Perell J. noted in Royal & SunAlliance Insurance Co. v. Muir, [2011] O.J. No. 1688, 2011 ONSC 2273, 9 R.P.R. (5th) 104 (S.C.J.), at para. 23: "Joint tenants have identical undivided interests in the same property. Each joint tenant holds 'totum tenet et nihil tenet' or 'per mie et per tout' which means each holds everything and yet holds nothing."

[36] The characteristics of a joint tenancy are succinctly described in Jeffrey W. Lem and Rosemary Bocska, Halsbury's Laws of Canada -- Real Property, 1st ed. (Markham, Ont.: LexisNexis Canada, 2012), at HRP-37:

There are four essential attributes of a joint tenancy, known as the four unities. A joint tenancy requires:

(1) Unity of Interest -- the interest of each joint tenant must be equal in nature, extent and duration;

(2) Unity of title -- the interests must arise from the same act or instrument;

(3) Unity of Time -- the interests must vest at the same time; and

(4) Unity of possession -- the interests must relate to the same piece of property.

A joint tenancy depends on the continuance of the unity of interest, title and possession. The unity of time of vesting only applies to the original creation of the tenancy and cannot be affected by any subsequent act.

[37] The continuance of a joint tenancy depends on the maintenance of the unities of title, interest and possession; a destruction of any of these unities leads to a severance: Power v. Grace, 1932 CanLII 116 (ON CA), [1932] O.R. 357, [1932] O.J. No. 339 (C.A.), at p. 360 O.R. Severance of a joint tenancy may occur: through the unilateral action of a joint tenant on his or her own share, such as selling or encumbering it; through a mutual agreement between the co-owners to sever the joint tenancy; or through any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common: Lem and Bocska, at HRP-41. [page190]

[38] Severance also may occur on bankruptcy. This is because the bankrupt's property vests in the trustee in bankruptcy, and the four unities are therefore not maintained: see Cameron Estate (Re) (2011), 108 O.R. (3d) 117, [2011] O.J. No. 5019, 2011 ONSC 6471 (S.C.J.), at footnote 9.

[39] Severance by execution is not so straightforward. Lem and Bocska describe such severance, at HRP-42:

Seizure of property through lawful execution procedures will sever a joint tenancy. However the mere filing of the writ is insufficient; it must be acted upon. Thus, where the sheriff holds a writ of execution against a joint tenant but does not execute it prior to that tenant's death, the surviving joint tenant inherits the property free from the execution.

[40] The appellant argues that the joint tenancy in the surplus was severed such that BMO could only recover from the respondent's 50 per cent interest in the surplus. The appellant submits that the joint tenancy was severed in either one of two ways: as a result of BMO's efforts to collect its debt, or as a consequence of her consumer proposal. She particularly relies on Power, supra, and Muir, supra, in support of her position.

[41] The respondent counters with the following: there was no severance; the application judge's determination that the joint tenancy was not severed was a finding of fact; and in any event, the parties' interests are subject to an accounting and the equities of the case. He relies in part on Arnold Bros. Transport Ltd. v. Murphy, [2013] M.J. No. 243, 2013 MBQB 137, 34 R.P.R. (5th) 217 and on Sirois v. Breton, 1967 CanLII 193 (ON SC), [1967] 2 O.R. 73, [1967] O.J. No. 973 (Co. Ct.) in support of his position.

[42] In Power, this court determined that while advertisement of a sale was sufficient to constitute a seizure that severed a joint tenancy, the mere filing of a writ of execution with the sheriff was insufficient. In Maroukis v. Maroukis, 1984 CanLII 76 (SCC), [1984] 2 S.C.R. 137, [1984] S.C.J. No. 35, at p. 143 S.C.R., the Supreme Court stated that Power "stands for the proposition that, where a writ of fieri facias is delivered to the sheriff covering the interest of one joint tenant in real property and no further steps are taken in the execution process, the death of that joint tenant will pass the whole estate to the survivor free of execution".

[43] In Muir, Perell J. concluded that the execution creditor took sufficient steps to execute the judgment, severing the joint tenancy. The steps included advertising the sale of property by the sheriff. Perell J. stated, at para. 26:

Severance may occur when an execution creditor takes sufficient steps to execute the judgment against the debtor's interest in the property, [page191] although the filing of the writ of execution does not by itself result in a severance.

[Citations omitted]

[44] The decision of Sirois, relied upon by the respondent, also determined that the mere filing or delivery of a writ to the sheriff was insufficient to effect a severance of a joint tenancy. This is of little assistance on this appeal. Similarly, Arnold Bros. is a very different case. The key issues were whether the sale of property by a mortgagee or property division negotiations between separated spouses served to sever the joint tenancy. Neither was found to sever the joint tenancy, and the creditor, who held an execution in the name of only one of the joint tenants, was entitled to be paid from the pool of funds prior to any distribution to the joint tenants.

[45] The facts in the case under appeal are quite different and, indeed, rather unusual. Here, there could be no execution against the appellant because execution against her was stayed. However, the debt was joint, and BMO therefore was at liberty to recover its debt against the respondent. The parties to the application and BMO appeared before the application judge and made submissions. The parties consented to, and the application judge granted, an order authorizing payment to BMO. The execution was completed and acted upon. In my view, in these circumstances, the joint tenancy was severed, and the payment to BMO could only be from the respondent's 50 per cent share of the surplus.

[46] I am also not persuaded of the respondent's other submissions. In my view, the application judge erred in law in ignoring the stay and in not finding a severance of the joint tenancy. Furthermore, in the face of a proposal, it is not open to the court to effect ostensible equitable readjustments to the allocation of the funds in issue. Lastly, I note that in oral argument, counsel for the appellant acknowledged that the respondent could seek redress under the provisions of the BIA; however, I do not propose to address that potential eventuality.

D. Disposition

[47] For these reasons, I would allow the appeal.

[48] The issues raised were somewhat novel. In these circumstances, I would vacate the $4,500 costs order below in favour of the respondent and order both parties to bear their own costs of both the appeal and the application.

Appeal allowed.

[^1]: The counterpart provision for Division I provides to the same effect with necessary modifications: s. 66(1).

End of Document