RBC v. Wong 2022 ONSC 54

Court File and Parties

COURT FILE NO.: CV-20-00002034

DATE: 2022-01-04

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ROYAL BANK OF CANADA, Plaintiff

AND:

JANET WONG, 2526982 ONTARIO INC., 2592933 ONTARIO INC. and LUCKY RED POCKET CORPORATION, Defendants

BEFORE: Kurz J.

COUNSEL: Natalina Marconi, for the Plaintiff

HEARD: December 8, 2021

ENDORSEMENT

Introduction

1The Plaintiff (“RBC”) has obtained a judgment and a series of executions against the Defendants. One of the Defendants, Janet Wong, owns a home (which I describe in these reasons as the “land”). RBC wishes to sell the land to realize on its judgment. Ordinarily, such a sale is conducted by the local sheriff under the terms of the Execution Act, RSO 1990, Ch. E-24, as amended, s. 9. That process is commonly referred to as a sheriff’s sale.

2Lately, some financial institutions have sought to avoid the process of a sheriff’s sale by seeking instead a reference and then a judicial sale of the property. That process directly involves an overburdened court in the enforcement process after it has already granted judgment, even though the Execution Act calls for another process.

3Here, RBC moves for a reference and the appointment of a referee under Rule 54.02 of the Rules of Civil Proceedings as a pre-requisite to its sale of the land under Rule 55.06. RBC says that if its motion is granted, it would ask the court to engage in a reference into Ms. Wong’s interest in the land. During that reference it will ask the court to identify:

1. any executions or liens or other interests in the land;
2. the property or interests in the land that is liable to be sold, and
3. any reason why it should not be sold.

The order that RBC requests would allow the parties to apply to the court for further directions, and direct that the referee report their findings to the court.

4RBC does not point to any particular, let alone, special circumstances that would take this case outside of the ordinary process by which judgments are executed against real properties under s. 9 of the Execution Act. Rather, it generally refers to the logistical hoops through which it, like all judgment creditors, is required to jump in order to realize its judgment through the mechanism of a sheriff’s sale. It also relies on the right of execution debtors to participate in judicial sales, as opposed to sheriff’s sales, where they have no role unless they move to oppose the sale or its terms.

5RBC cites Rule 1.04(1) and its requirement that the Rules of Civil Procedure be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits”. It argues that a reference and judicial sale represents the most just, expeditious and cost-effective manner of collecting on its judgment against Ms. Wong.

6Despite the fact that it is seeking to initiate a new judicial process to sell Ms. Wong’s land, one with two separate elements, RBC claims to be looking to save money on her behalf. Recall as well that RBC claims to be looking out for Ms. Wong’s interests when it points out the inherent right of judgment debtors to participate in judicial sales as another reason to choose that process. Listening to its arguments, one could almost forget that RBC is attempting to sell Ms. Wong’s land in order to use the proceeds to realize on its judgment against her.

RBC’s Evidence in Support of its Motion

7In support of this motion, RBC presents an affidavit of an employee of its lawyers in this proceeding, who holds an unspecified position within the law firm. The employee says nothing about her experience in either sheriff’s sales or the judicial sales of land. She states that she was advised of certain information by “the Plaintiff’s employee with carriage of this matter”. The deponent says nothing about that RBC employee’s background, save that she has “carriage of this matter”. That RBC employee advised the deponent that RBC “is not keen on attempting a sheriff’s sale of the property”, as if RBC’s enthusiasm for a particular remedy were a relevant factor in the determination of this motion.

8The deponent then lists a series of reasons that “a judicial sale would be preferable to a sheriff’s sale”. She does so without stating whether these are her own reasons or those communicated to her by the instructing RBC employee. To the extent that these reasons are statements of fact or opinion, I do not know the basis of the information, the expertise or the experience of the person offering it.

9Nonetheless, the following summarizes the evidence given by the lawyer’s employee, presumably on behalf of the RBC employee, which is intended to favour a reference and judicial sale over a sheriff’s sale in this case:

a. In a sheriff’s sale all that is being sold is the interest of the debtor in the property rather than the property itself;

b. Sheriff’s sales are conducted in a courthouse and are “sparsely attended”.

c. Typically, the sheriff only obtains a price that is 60% of the value of the home being sold. That is because the purchaser “is not getting clear title nor vacant possession”. Rather they are getting the mere “right to a subsequent legal battle to eject the current occupant”.

d. A sheriff’s sale will take the debtor’s circumstances into account while a judicial sale will proceed regardless of those circumstances.

e. Anyone with “an interest in the property will be able to make submissions to the court if the debtor is unable to resolve this matter”.

10I note that none of those general factors speak to any unique facts, parties, or particular circumstances of this case. Rather, if accepted, those factors would apply to all cases with writs of seizure and sale and exigible realty. They would throw open an already unfastened door to every attempt to involve this court rather than the sheriff in enforcing judgments against real property. It would also ignore the fact that the sheriff is the officer whom the Ontario Legislature tasked with that responsibility.

11In oral submissions, counsel for RBC submitted, without evidence, that a creditor must pay $8,000 to the sheriff to carry out a sheriff’s sale. This amount will come out of the net sale proceeds of the sold property. However, counsel did not say that such an advance payment would present a hardship to RBC. Nor did she offer any estimate, let alone an undertaking as to the costs of a reference and judicial sale that would be paid out of the proceeds of that sale, so that the court could compare the costs of the two processes.

Applicable Authorities

12Under s. 9(1) of the Execution Act, the sheriff is authorized to sell the lands of an execution debtor as follows:

Sheriff may sell any lands of execution debtor

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

13In order to get a sense of what is involved in the process recommended by RBC I set out some of the relevant Rules regarding references. Rule 54.02 allows a judge to direct a reference to the whole of a proceeding or an issue within it. It reads as follows:

Where Reference may be Directed

Reference of Whole Proceeding or Issue

54.02 (1) Subject to any right to have an issue tried by a jury, a judge may at any time in a proceeding direct a reference of the whole proceeding or a reference to determine an issue where,

(a) all affected parties consent;

(b) a prolonged examination of documents or an investigation is required that, in the opinion of the judge, cannot conveniently be made at trial; or

(c) a substantial issue in dispute requires the taking of accounts.

Reference of Issue

(2) Subject to any right to have an issue tried by a jury, a judge may at any time in a proceeding direct a reference to determine an issue relating to,

(a) the taking of accounts;

(b) the conduct of a sale;

(c) the appointment by the court of a guardian or receiver, or the appointment by a person of an attorney under a power of attorney;

(d) the conduct of a guardianship or receivership or the exercise of the authority of an attorney acting under a power of attorney; or

(e) the enforcement of an order.

14Under Rule 54.03, a reference is directed to the “referring judge, to another judge with that judge’s consent, to a registrar or other officer of the court or a person agreed on by the parties”. Rule 55.05 allows a referee, judge, or associate judge to hear and dispose of motions in connection with the reference. Rule 54.07 requires the referee to make a report that contains his or her findings and conclusions.

15The terms for a reference on the conduct of a sale are broad and discretionary. But they do not allow for the summary sale of the lands in question. They do allow a variety of other methods of sale, and for numerous steps to be taken leading to the sale, as follows:

Method of Sale

55.06 (1) Where a sale is ordered, the referee may cause the property to be sold by public auction, private contract or tender, or partly by one method and partly by another.

Advertisement

(2) Where property is directed to be sold by auction or tender, the party having carriage of the sale shall prepare a draft advertisement according to the instructions of the referee showing,

(a) the short title of the proceeding;

(b) that the sale is by order of the court;

(c) the time and place of the sale;

(d) a short description of the property to be sold;

(e) whether the property is to be sold in one lot or several and, if in several, in how many, and in what lots;

(f) the terms of payment;

(g) that the sale is subject to a reserve bid, if that is the case; and

(h) any conditions of sale different from those set out in Form 55F.

Conditions of Sale

(3) The conditions of sale by auction or tender shall be those set out in Form 55F, subject to such modifications as the referee directs.

Hearing for Directions

(4) At a hearing for directions under subrule 55.02 (3), the referee shall,

(a) settle the form of the advertisement;

(b) fix the time and place of sale;

(c) name an auctioneer, where one is to be employed;

(d) give directions for publication of the advertisement;

(e) give directions for obtaining appraisals;

(f) fix a reserve bid, if any; and

(g) make all other arrangements necessary for the sale.

Who May Bid

(5) All parties may bid except the party having carriage of the sale and any trustee or agent for the party or other person in a fiduciary relationship to the party.

(6) Where the party having carriage of the sale wishes to bid, the referee may transfer carriage of the sale to another party or to any other person.

Who Conducts Sale

(7) Where no auctioneer is employed, the referee or a person designated by the referee shall conduct the sale. R.R.O. 1990, Reg. 194, r. 55.06 (7).

Purchaser to Sign Agreement

(8) The purchaser shall enter into an agreement of purchase and sale at the time of sale. R.R.O. 1990, Reg. 194, r. 55.06 (8).

Deposit

(9) The deposit required by the conditions of sale shall be paid to the party having carriage of the sale or the party’s lawyer at the time of sale and the party or lawyer shall forthwith pay the money into court in the name of the purchaser.

Interim Report

(10) Where a sale is made through an auctioneer, the auctioneer shall make an affidavit concerning the result of the sale, and where no auctioneer is employed, the referee shall enter the result in the procedure book and, in either case, the referee may make an interim report on the sale (Form 55G).

Objection to Sale

(11) A party may object to a sale by making a motion to the referee to set it aside, and notice of the motion shall be served on all parties to the reference and on the purchaser, who shall be deemed to be a party for the purpose of the motion.

(14) The purchase money may be paid out of court in accordance with the report,

(a) on consent of the purchaser or the purchaser’s lawyer; or

(b) on proof to the Accountant that the purchaser has received a transfer or vesting order of the property for which the money in question was paid into court.

(15) No transfer shall be approved until the referee is satisfied that the purchase money has been paid into court and, where a mortgage is taken for part of the purchase money, that the mortgage has been registered and deposited with the Accountant.

Applicability of Canaccede International Acquisitions Ltd. v. Abdullah

16In its written materials, RBC relies on the decision of Broad J. in Canaccede International Acquisitions Ltd. v. Abdullah, 2015 ONSC 5553 (“Canaccede”). There, Broad J. entertained a request by another financial institution to enforce a judgment by reference and judicial sale. He described that relief as “equitable relief” and “equitable execution” even though he was relying on a regulation, the Rules of Civil Procedure, rather than a common law or inherent power of this court.

17Broad J. ultimately relied on an inherent right to engage in the judicial reference and sale process in order to do justice between the parties. As he wrote at para. 27:

[27] In my view, where the court has an inherent jurisdiction to make an appropriate order which will do justice between the parties, the court is at liberty to do so and should do so where the circumstances warrant it, in the absence of binding authority or an overriding policy reason constraining it from following such a course.

18In making that finding, Broad J. relied on the decision of the Court of Appeal for Ontario in Citi Cards Canada Inc. v. Pleasance (2011), 103 O.R. (3d) 241, [2011] O.J. No. 15, 2011 ONCA 3. In that case, as Broad J. described it, the Court of Appeal for Ontario “held that a mortgagee is prevented by the Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5 (‘PIPEDA’) from providing a mortgage statement to a third-party judgment creditor of the mortgagor/debtor so that the creditor may pursue a legal remedy to enforce its judgment.”

19Broad J. explained that when:

a mortgagee is prevented by PIPEDA from providing such mortgage discharge statements required by sheriffs, the practical implication is that an execution creditor who wishes to initiate a sheriff's sale of any encumbered property will likely be required to undertake potentially protracted and expensive examinations in aid of execution and other processes, with uncertain outcomes, just to get into the position of being able to initiate the sale process.

20Even if PIPEDA is not a “complete impediment” to a sheriff’s sale, it created what Broad J. found to be ‘special circumstances”. Those circumstances allow the court to exercise its inherent jurisdiction to call for a reference and judicial sale.

21In arriving at his decision, Broad J. did not state that the court should grant the right to a reference in any case in which it is requested to collect a judgment debt by selling real property. At para. 20, he cites the decision of the British Columbia Court of Appeal in Quest Capital Corp. v. Osoyoos Sands Joint Venture, [2012] B.C.J. No. 189, 2012 BCCA 49, which offered the following definition of the law regarding equitable execution at its para. 15-16:

Equitable receivers are appointed pursuant to legislation . . . or by court rules . . . or as part of the inherent jurisdiction of the court (Capewell v. Her Majesty's Revenue and Customs, [2007] 2 Costs L.R. 287 (H.L.) at para. 19). They are appointed over property.

E. R. Edinger describes the rules governing the appointment of equitable receivers in "The Appointment of Equitable Receivers: Application of Rules or Exercise of Pure Discretion?" (1988) 67 Can. B. R. 306 at p. 308 as follows:

. . . [F]irst, the asset must be of a kind that is exigible by a common law or legal process; second, there must be some impediment to employment of a legal process; third, there must be some benefit to be obtained by the appointing of an equitable receiver and the appointment must be just and convenient; but fourth, special circumstances established by the judgment creditor may permit the court to disregard the second rule.

22In short, in an ordinary case such as this, there must be:

1. an impediment to the employment of a sheriff’s sale, which Broad J. referred to as “special circumstances”; and
2. a benefit to the employment of an equitable receiver that would make their use just and equitable.

23In its factum, RBC cites some unreported cases which relied on the Canaccede precedent to grant relief similar to that granted by Broad J. Those decisions did not offer extensive legal reasons other than the presiding judge’s reliance on Canaccede. They do not refer to any other authorities.

The Contrary Approach in Luu v. Abuomar

24In Luu v. Abuomar, 2016 ONSC 4299, Gray J. rejected the application of the Canaccede approach in any but truly special circumstances, particular to the case before the court. I thank Ms. Marconi for fulfilling her professional obligation to bring this opposing authority to my attention. I also note that I also came across Luu during the course of research on the issues raised in this motion.

25In Luu, Gray J. wrote:

62 I confess to some difficulty with the analysis of Justice Broad in Canaccede. It seems to me that a sale of property can be effected only where a statute authorizes it, or a recognized principle of law or equity authorizes it.

63 Property can be sold in order to satisfy the interest of a creditor pursuant to the Execution Act, and pursuant to a power of sale under a mortgage as governed by the Mortgages Act. In the case of jointly-owned property, it can be sold at the instance of a person having an interest in the property pursuant to the Partition Act.

64 In Canaccede, Broad J. decided that property could be sold to satisfy the interest of an execution creditor, by analogy to the rules governing the appointment of an equitable receiver.

65 With respect, I do not necessarily see how the principles surrounding equitable receivers can be translated into a power in the court to order a judicial sale of property simply because it seems convenient. Equitable principles have been developed by the courts over the decades, indeed centuries, based on clear standards. They do not allow the court to simply do what might appear to be a good idea in any particular case.

26While Gray J. agreed that the court has the inherent jurisdiction to appoint an equitable receiver, he stated at para. 67 that it should only do so where “it is for the purpose of seizing or intercepting a debtor's interest in a property or a revenue stream that is otherwise difficult to get at because of legal or practical impediments that are in the way.” But he made clear that the impediments must be particular to the case. He continued:

68 Justice Broad, in Canaccede at para. 21, stated that it is appropriate to employ the principles governing equitable execution in considering whether to follow an alternative process to a sheriff's sale for the enforcement of money judgments against land. I am not certain that engaging in the process of judicial sale is analogous to the appointment of a receiver. A judicial sale is actually a rather cumbersome and expensive process, probably more so than a sale under the Execution Act.

69 Justice Broad held that the parties should not be left to their remedy of sale under the Execution Act because the procedures under that Act now appear to be inconvenient, in some cases, as result of the Personal Information Protection and Electronic Documents Act (PIPEDA), as discussed in the decision of the Court of Appeal in Citi Cards Canada Inc. v. Pleasance, (2011), 2011 ONCA 3, 103 O.R. (3d) 241 (C.A.).

70 It seems to me that if the procedures under the Execution Act are inconvenient, it is up to the court to determine whether the inconvenience can be overcome by tailoring the sale procedures under the Execution Act, rather than simply coming up with an alternative procedure to avoid the Execution Act process altogether. I note that the Court of Appeal's subsequent decision in Royal Bank of Canada v. Trang (2014), 2014 ONCA 883, 123 O.R. (3d) 401 (C.A.) has been appealed to the Supreme Court of Canada and it remains to be seen whether PIPEDA will necessarily result in the same inconvenience contemplated in Citi Cards.

Factors Relied upon in Luu that were Absent in Canaccede

27I note three things here. First, unlike the circumstances that led to the Cannacede decision, Gray J. was presented with argument that opposed a judicial sale.

28Second, Justice Gray considered the nature and costs of a judicial sale. That is something that Broad J. was not asked to do in Canaccede because that proceeding was undefended. Gray J. found that the process of appointing a referee and conducting a judicial sale is cumbersome and expensive by nature. He was a very experienced judge of this court and would know whereof he speaks. Just a review of the applicable rules set out above confirms the validity of his comments in that regard.

29Third, Gray J. astutely referred to the pending appeal of the Court of Appeal for Ontario’s decision in Royal Bank of Canada v. Trang. That case dealt with the same PIPEDA privacy issue regarding mortgage payout statements to execution creditors that was central to Broad J.’s reasoning. In Trang, the Court of Appeal came to the same conclusion that it arrived at in Citi Cards Canada Inc. v. Pleasance. But the Supreme Court of Canada then reversed the decision of the Court of Appeal: Royal Bank of Canada v. Trang, 2016 SCC 50, 2016 S.C.C. 50, [2016] 2 S.C.R. 412. There, Supreme Court found that PIPEDA did not preclude a mortgagee from producing a mortgage discharge statement to a mortgagor’s judgment creditor without the mortgagor’s express consent.

30In other words, the “special circumstance” relied upon by Broad J. to ground a foray into an alternative judicial method to sell a home when a sheriff’s sale is available, no longer commonly applies. It seems fair to say that if the Supreme Court’s decision in Trang had been released before Broad J. decided Canaccede, the result may well have been a different one.

Statutory Interpretation of the Legislature’s Choice of the Sheriff’s Sale Process

I add two further factors to the analysis. First, the Ontario legislature, through its statute, the Execution Act, signalled its choice of a sheriff’s sale as the vehicle for the enforcement of a writ of seizure and sale against real property. In Sullivan on the Construction of Statutes, 6th ed., (2014) LexisNexis, Toronto, the learned author states:

§17.4 Legislation is paramount. It follows from the principle of legislative sovereignty that validly enacted legislation is paramount over the common law [referring to all judge-made law, including equity]. Acting within its constitutionally defined jurisdiction, the legislature can change, add to or displace the common law as it thinks appropriate and the courts must give effect to that intention regardless of any reservations they may have concerning its wisdom. As stated by Martin J.A. in Schiell v. Morrison [[1930] S.J. No. 47, [1930] 2 W.W.R. 737, at 741 (Sask. C.A)]:

It is true that the legislation is an encroachment on the common-law doctrine … but if it is clear that it was the intention of the Legislature in passing a statute to abrogate the common law, it must give way, and the provisions of the statute must prevail.

31Professor Sullivan discusses two exceptions to this rule. The first is that common law will prevail to avoid unjust outcomes. Second, the common law will prevail where the legislation is silent on a subject.

32Here, while the Execution Act is silent on when a judicial sale may be held, it is far from silent in setting out legislatively approved procedures for enforcing a writ of seizure and sale. Since procedures are provided, it is easy to infer the Legislature intended these procedures to prevail. Absent special circumstances or some other injustice, the process of the Execution Act should prevail over a common law process.

Conflict Between Statute and Regulation

33Second, I add a further point highlighted by Gray J. in Luu: the process requested by RBC is not, strictly speaking, equitable relief. It is a process set out in the Rules of Civil Procedure. Those rules are a regulation made under the Courts of Justice Act (R.R.O. 1990, Reg. 194). The Rules of Civil Procedure, like all other regulations promulgated by the Ontario government, are made, in the words of the Interpretation Act, “for the due enforcement and carrying into effect of any Act of the Legislature …”.

34In part for that reason, where there is a conflict between a statute and a subordinate regulation, the regulation must be read as not violating the statute. If that is not possible, the regulation is ultra vires: Belanger v. R., (1916) 1916 87 (SCC), 54 S.C.R. 265, 1916 CarswellNat 50 (S.C.C.), at para. 34; Krossel v. Vocational Rehabilitation Services, 1972 423 (ON CA), [1972] 1 O.R. 895, 1972 CarswellOnt 340 (Ont. C.A.), at para.8.

Application of Authorities to the Facts of this Case

35Here, RBC has failed to offer any substantial evidence of any exceptions to the rule cited by Professor Sullivan for the judicially enabled reference/sale process. Nor has it offered any evidence of special circumstances that would make the two-part reference/judicial sale process the most just and expeditious as well as least expensive process of the sale of Ms. Wong’s lands.

36I am also not convinced that the remedy sought by RBC in this motion meets the rule 1.04(1.2) requirement that the court make orders and give directions that are proportionate to the importance and complexity of the issues and to the amount involved in the proceeding.

Additional Factor: Scarcity of Judicial Resources

37I add, since recourse to the relief sought by RBC appears to be increasing, that this court simply cannot afford to offer additional resources to the type of endeavour that RBC calls upon it to engage. At a time when families are waiting, in some jurisdictions for up to six months for a first case conference, civil jury trials are delayed by years and courts are straining with pandemic related backlogs of criminal jury trials, our courts should not be asked to engage in the reference/judicial sale process unless the reasons for the request are exceptional and compelling. They cannot be, as many institutional litigants seem to wish them to be, routine.

Conclusion

38For the reasons set out above, this motion is dismissed.