CANADA Trends and Developments Contributed by: Kathryn Manning, John Mather and Max Libman, DMG Advocates LLP
be very costly, time-consuming and onerous to obtain. In cases where a claim is for payment of specific, iden - tifiable funds, litigants would do well to consider seek - ing an order under Rule 45.02 of the Ontario Rules of Civil Procedure. Rule 60.08 (16) v Rule 60.08 (17): tread carefully and know the difference In Bahauddin v New Lahore Tikka House Inc . ( Lahore Tikka House ), the Ontario Court of Appeal warned that judgment creditors seeking to garnish a judgment debtor’s funds should be mindful of the limits in scope and reach afforded by Rules 60.08 (16) and 60.08 (17) of the Ontario Rules of Civil Procedure. Syed Bahauddin was a former chef at the Toronto res - taurant New Lahore Tikka House. He was dismissed by his employer New Lahore Tikka House Inc. without cause in 2016, after which he sued New Lahore Tikka House Inc. for unjust dismissal. The two parties ended up settling for an immediate payment of CAD25,000 and a subsequent payment of CAD150,000. As part of the settlement, New Lahore Tikka House Inc. con - sented to a judgment in the amount of CAD150,000 in the event that it did not provide the CAD150,000 payment contemplated in the settlement agreement. New Lahore Tikka House Inc. ultimately failed to pro - vide the required payment. While enforcing the judgment, Mr Bahauddin learned that the New Lahore Tikka House restaurant was in fact owned by a company called 1436318 Ontario Ltd., and that New Lahore Tikka House Inc. rented the New Lahore Tikka House restaurant space and operated the business. Mr Bahauddin also learned that 1436318 Ontario had registered a mortgage on the restaurant in favour of New Lahore Tikka House Inc., for CAD754,988.37. Mr Bahauddin served a Notice of Garnishment on 1436318 Ontario, seeking to intercept mortgage pay - ments from 1436318 Ontario to New Lahore Tikka House Inc. 1436318 Ontario refused to pay any funds and sub - mitted a Garnishee Statement claiming that it owed no money to New Lahore Tikka House Inc. Mr Bahauddin brought a motion under Rule 60.08 (17) of the Ontario
Rules of Civil Procedure for an order that 1436318 Ontario Ltd. pay the full garnishment amount. Rule 60.08 (17) states: Where the garnishee does not pay to the sheriff the amount set out in the notice of garnishment as owing by the garnishee to the debtor and does not serve and file a garnishee ’ s statement , the creditor is entitled on motion to the court , on notice to the garnishee , to an order against the garnishee for payment of the amount that the court finds is payable to the debtor by the garnishee , or the amount set out in the notice , whichever is less . When the motion went before the Ontario Superior Court of Justice, 1436318 Ontario sought to argue that it did not in fact owe New Lahore Tikka House Inc. any money, as the mortgage was registered solely to prevent fraud on title and there was nev - er any intention for mortgage funds to be paid and collected. The motion judge rejected this argument, finding that the registration of a mortgage created a strong presumption of the existence of a debt owed by 1436318 Ontario to New Lahore Tikka House Inc., and that 1436318 Ontario’s evidence did not rebut this presumption. The motion judge further cited the Ontario Superior Court of Justice decision in Turchiaro v Liorti (2004 CarswellOnt 8212), which held that, for the purpose of Rule 60.08 (17), if a Garnishee Statement contains false information, the court may treat the garnishee as though it had not submitted a statement at all. Having found 1436318 Ontario to have falsely stat - ed on its Garnishee Statement that it owed no debt to New Lahore Tikka House Inc., the motion judge ordered that 1436318 Ontario pay Mr Bahauddin the CAD150,000 owed plus interest. The motion judge also stated, however, that even if he had found that there was no debt owed by 1436318 Ontario to New Lahore Tikka House Inc, he would still have exercised the court’s “discretion to apply equitable principles in favour of the plaintiff” (para 13). On appeal, it was this final statement that drew con - cern from the Ontario Court of Appeal. Said Court ultimately upheld the motion court’s decision, but also devoted part of its decision to emphasising that the
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