Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20230426 DOCKET: COA-22-CV-0143

van Rensburg, Huscroft and George JJ.A.

BETWEEN

Subhathini Senthillmohan Applicant (Respondent)

and

Sockalingam Senthillmohan Respondent (Respondent)

and

2401242 Ontario Inc. Added Party (Appellant)

Counsel: Monica U. Peters and Melanie Battaglia, for the appellant Michael J. Stangarone, Stephen P. Kirby and Yadesha Satheaswaran, for the respondent Subhathini Senthillmohan Sockalingam Senthillmohan, acting in person

Heard: March 22, 2023

On appeal from the order of Justice Richard T. Bennett of the Superior Court of Justice, dated August 3, 2022.

Reasons for Decision

[1] The respondents, Subhathini Senthillmohan (“wife”) and Sockalingam Senthillmohan (“husband”), were married but are now separated. In January 2020 the wife commenced an application seeking an unequal division of the parties’ net family property or, in the alternative, an equalization of net family property and sale of their matrimonial home. The respondents owned the matrimonial home as joint tenants. On January 28, 2021, the court granted an order directing a sale of the matrimonial home and that the net proceeds of the sale be held in trust pending further agreement between the parties or court order.

[2] The appellant, 2401242 Ontario Inc., a third-party creditor, had obtained default judgment against the husband in a civil action, and a writ was filed in September 2021. The details of the civil action are not relevant to this appeal.

[3] In October 2021, the respondents entered into an Agreement of Purchase and Sale to sell the matrimonial home. The appellant agreed to temporarily lift the writ to facilitate the sale. The home ultimately sold for $1.9M. The proceeds, after the discharge of secured encumbrances, was approximately $925,000.

[4] In November 2021, the wife brought an urgent motion in the family action to sever the joint tenancy in the matrimonial home. On consent, Jarvis J. granted the motion such that title was now held by each respondent as tenants in common. This order is silent on the effective date of the severance and does not address the appellant nor its default judgment against the husband.

[5] In February 2022, the wife brought a motion for the release of her 50% share of the net sale proceeds, which led to the order under appeal. On the day of the hearing the appellant’s agent counsel sought an adjournment as its usual counsel was on vacation, which the motion judge denied. The appellant’s agent counsel also argued that the Superior Court of Justice (Family Branch) did not have jurisdiction to hear the matter, which was rejected by the motion judge.

[6] Relying on Jarvis J.’s order which, as mentioned, did not address retroactivity, the appellant argued that the respondents were joint tenants when default judgment was obtained and when the writ was filed, and that it therefore had priority over the wife’s interest in the proceeds of sale. The motion judge rejected that argument. He found that the joint tenancy had been severed by the time the appellant obtained the default judgment against the husband, because: 1) when he made his order, Jarvis J. was aware that the appellant was a creditor of the husband, and 2) the respondents were already separated when the husband entered a creditor-debtor relationship with the appellant. The motion judge explained that “there’s absolutely no way that that could somehow defeat the interests of the wife in the matrimonial home”. The wife was therefore entitled to $602,356.19 from the net sale proceeds, which took into account the husband’s outstanding obligations to the Canada Revenue Agency (“CRA”).

[7] The appellants appeal the order, arguing that the motion judge: 1) erred in concluding that the joint tenancy of the matrimonial home was retroactively severed by Jarvis J.’s order; 2) erred in determining that the wife had priority entitlement over the appellant’s writ; 3) erred by failing to consider that the writ attached to the full proceeds of a voluntary sale of the jointly owned home; 4) did not have jurisdiction to determine the priority entitlement; and 5) erred by refusing to grant an adjournment.

[8] Because a creditor cannot seize the interest of a non-debtor joint tenant, the appeal must be dismissed.

[9] In our view, the appellant’s position fundamentally misunderstands the law of creditors’ remedies against jointly-held property where only one of the owners guaranteed the debt. Having so concluded it is not necessary to consider the appellants’ arguments about the date of severance.

[10] The appellant relies on authorities which stand for the proposition that each joint tenant holds an undivided interest in the whole of the property: Zeligs v. Janes, 2016 BCCA 280; Royal & SunAlliance Insurance Co. v. Muir, 2011 ONSC 2273, 9 R.P.R. (5th) 104. As Royal & SunAlliance notes at para. 2, each joint tenant “holds everything and yet holds nothing.” The appellant’s argument is that, because joint tenants are essentially one owner until the joint tenancy is severed, a creditor has the right to claim against the full interest. While Royal & SunAlliance does set out the characteristics of joint tenancy – unity of title, unity of interest, unity of possession, and unity of time – it does not support the conclusion that where the debt itself is not jointly held that the entire property is exigible.

[11] While there is little jurisprudential guidance on this discrete question, it is the natural corollary of the generally accepted and commonly cited proposition that an execution creditor can execute against the debtor’s interest in jointly held property. In other words, to accept the appellant’s position would render meaningless the use of the words “the debtor’s interest in”.

[12] Arnold Bros. Transport Ltd. v. Murphy, 2013 MBQB 137, 295 Man. R. (2d) 66, aff’d. 2014 MBCA 9, 303 Man. R. (2d) 140, upon which the appellant relies, does not assist as it interprets the statutory scheme that governs in Manitoba, which differs from the law in Ontario. In Manitoba, s. 136(3) of the Real Property Act, C.C.S.M. c. R30, prescribes the order of payment as follows: 1) expenses occasioned by the sale; 2) payment due or owing to the mortgagee or encumbrancer; 3) payment of subsequent mortgages, encumbrances, or liens, if any, in the order of their priority; with 4) the surplus being paid to the owner or other person entitled. In Manitoba, a writ constitutes a lien on the land and accordingly falls within step 3 above. In this way, writs are paid out before any remaining surplus is paid to joint tenants.

[13] In Ontario, s. 9(1) of the Execution Act, R.S.O. 1990, c. E.24 provides that:

9(1) The sheriff to whom a writ of execution against lands is delivered for execution may seize and sell thereunder the lands of the execution debtor, including any lands whereof any other person is seized or possessed in trust for the execution debtor and including any interest of the execution debtor in lands held in joint tenancy. [Emphasis added.]

[14] The process of seizure and execution on debts only contemplates the execution against the debtor’s exigible interest in the land held in joint tenancy. For instance, when a sheriff takes sufficient steps to seize property, the joint tenancy is severed and, once severed, the debtor joint tenant has no claim to the whole. So, too, for the creditor, who can now execute against the debtor’s share of the tenancy in common.

[15] Section 10(6) of the Execution Act also provides that a writ “binds the lands against which it is issued”. While this does not expressly state that a writ can effect only a seizure of the debtor’s exigible interest in land held in joint tenancy, it is the natural interpretation of the provision when read in conjunction with s. 9 and the right of survivorship. That is to say, where property is jointly held and one joint tenant dies, the remaining joint tenant acquires the entire interest in the property through their right of survivorship. And, where a writ is filed against jointly held land before the debtor joint tenant’s death, it does not continue to bind the surviving non-debtor’s complete interest in the property acquired through their right of survivorship: Power v. Grace, [1932] O.R. 357 (Ont. C.A.).

[16] The wife is therefore entitled to her half-share of the net proceeds from the sale of the matrimonial home, which was correctly calculated by the motion judge to be $602,356.19.

[17] The appellant challenges the apportionment between the husband and wife, which continues to conflate their respective interests. The motion judge properly deducted, in equal amounts from each respondent’s share, their mortgage, construction lien, legal fees and real estate commission on the sale; and correctly concluded that the husband’s $278,893.97 CRA lien was not a shared debt and should only be deducted from his share, which led to $602,356.19 being held in trust for the wife, and $323,462.22 for the husband. We see no error in that conclusion.

[18] We reject the appellant’s argument about equalization. The wife’s claim to the sale proceeds has nothing at all to do with equalization. Hers is a direct ownership claim: Rawluk v. Rawluk, [1990] 1 S.C.R. 70.

[19] We also reject the appellant’s position on jurisdiction. The motion clearly concerned the proceeds of the matrimonial home.

[20] Finally, we do not find that the motion judge erred by refusing an adjournment where the appellant was represented by agent counsel. That decision was discretionary, is owed deference on appeal, and was reasonable in the circumstances.

[21] For these reasons, the appeal is dismissed.

[22] Costs to the respondent wife in the amount of $20,000 inclusive of HST and disbursements.

“K. van Rensburg J.A.”

“Grant Huscroft J.A.”

“J. George J.A.”

Footnotes

[1] Mr. Senthillmohan did not appear at the hearing and made no written or oral submissions on his own behalf.