Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20211124 DOCKET: C69086

Gillese, Trotter and Nordheimer JJ.A.

BETWEEN

Environmental Waterproofing Inc. and Randy Wilson c.o.b. Maple Hill Electric Plaintiffs (Respondents)

and

Huron Tract Holdings Inc., John D. Marshall, The Estate of Richard Lehnen, Jake Bulk and United Communities Credit Union Defendants (Appellant)

Counsel: Sean N. Zeitz, for the appellant Martha Cook, for the respondents

Heard: November 19, 2021

On appeal from the order of Justice Maria V. Carroccia of the Superior Court of Justice, dated January 12, 2021, with reasons reported at 2021 ONSC 278.

REASONS FOR DECISION

[1] Libro Credit Union Limited (formerly United Communities Credit Union) appeals from the order made by the motion judge in which she dismissed the appellant’s motion for a declaration that it had priority to certain funds held by the Sheriff in response to garnishment proceedings.

[2] The issues between the parties arise out of steps that the respondents took to garnish monies that Jokey Plastics North America Inc. (“Jokey”) owed to Huron Tract Holdings Inc. (“Huron”). Huron operated a commercial real estate management company. It was placed into receivership. The respondents were owed monies by Huron. It discovered that Jokey owed monies to Huron. The respondents took garnishment steps against those funds pursuant to a default judgment they had obtained against Huron.

[3] Initially, Jokey refused to pay the monies covered by the garnishment. About a month later, the appellant became aware of the garnishment steps. The appellant is a secured creditor of Huron. The appellant advised the respondents of its security interest and of its priority claim to the monies owed by Jokey.

[4] The respondents brought a motion to require Jokey to pay the monies to the Sheriff pursuant to the garnishment. The motion came on before Gorman J., who ordered Jokey to pay certain monies to the Sheriff. The monies ordered to be paid to the Sheriff were the monies over which the appellant and the respondents had the priority dispute. Other monies that Jokey owed Huron were paid directly by Jokey to the appellant pursuant to its security interest.

[5] The appellant then brought a motion for an order determining that it had the right to receive the monies that had been paid to the Sheriff. That motion initially came on before Garson J., who, on consent, adjourned it to a special hearing date and also set a schedule for the delivery of materials.

[6] The appellant’s motion came on for hearing before the motion judge. At the hearing, the respondents took the position that the issue of priority had been determined by Gorman J. and that the appellant’s motion amounted to a collateral attack on that order. The motion judge accepted the respondents’ position and dismissed the appellant’s motion.

[7] With respect, the motion judge’s conclusion that Gorman J. had determined the priority issue is simply wrong. There was no such determination made by Gorman J. in her endorsement, and no such determination appears in her order – realities that counsel for the respondents was compelled to acknowledge before us. Indeed, in her endorsement, Gorman J. said, in relation to the priority dispute, “[t]his may indeed be an issue for another day”. While the motion judge refers to this portion of the endorsement, she found that it “does not necessarily assist in answering that question”.

[8] The simple fact is that there was never any determination of the priority dispute. The motion judge erred in concluding otherwise.

[9] The appeal is allowed, the order of the motion judge is set aside, and the matter is returned to the Superior Court of Justice for a hearing of the priority dispute on its merits before a different judge. The appellant is entitled to its costs of the appeal which are fixed in the agreed amount of $20,000, inclusive of disbursements and HST. The appellant is entitled to its costs of the motion below, which were fixed by the motion judge also in the amount of $20,000, inclusive of disbursements and HST.

“E.E. Gillese J.A.”

“Gary Trotter J.A.”

“I.V.B. Nordheimer J.A.”