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What is a pre-judgment garnishing order?
Posted in Commercial

Pre-judgment garnishing orders have been called “unique and extraordinary”.  They are one of only two forms of pre-judgment execution available in B.C., the second being the far more onerous Mareva injunction. What is a pre-judgment garnishing order and what does it do?

A pre-judgment garnishing order is a way of securing funds from a debtor to satisfy a judgment you have yet to obtain. Courts treat them as “an extraordinary remedy” because, as a general rule, a plaintiff is not entitled to judgment execution against a defendant without first obtaining a judgment. A pre-judgment garnishing order can be obtained despite the fact that the defendant debtor has not granted security over its assets to the plaintiff creditor. Using a garnishing order, a plaintiff can cause a person or institution (i.e., banks, credit unions, etc.) indebted to a defendant to pay the amount the person or institution owes to the defendant into court. That money is then held pending a decision about the plaintiff’s claim. If the plaintiff obtains judgment, the money is used to satisfy it.

Garnishing orders are authorized by the Court Order Enforcement Act, R.S.B.C. 1996, c. 78 (“COEA”). To obtain a garnishing order, a plaintiff must swear an affidavit setting out the nature of their claim, the actual amount of the debt, claim or demand, that it is justly due and owing and, most importantly, that all just discounts have been made. The courts have held that a plaintiff’s claim must be for a “liquidated sum”. That means the debt must be readily capable of calculation. For example, a loan is a “liquidated sum” because it is for a certain sum, but a claim for general damages is not.

Provided the evidence in support is sufficient, the court will issue a pre-judgment garnishing order, all without notice to the defendant. The garnishing order is served on the garnishee (i.e., the bank) who is then compelled to pay any money owed to the defendant (up to the value of the plaintiff’s claim) into court. The plaintiff must then give notice of the garnishing order to the defendant. The garnished funds remain in court until either judgment is given or the garnishing order is set aside.

If successful, a garnishing order is a powerful tool as it deprives a defendant of the use of its property (i.e., its money). It can provide a strategic advantage in subsequent negotiations with a defendant. Unlike Mareva injunctions, a plaintiff is generally not responsible for any resulting damage to a defendant caused by an improper garnishment (i.e., if the plaintiff ultimately loses).

Because of their extraordinary nature, the courts require plaintiffs to strictly and meticulously comply with the requirements in the COEA for the issuance of a garnishing order. A common response to a garnishing order is for a defendant to apply to set it aside. In general, a garnishing order can be attacked on two grounds: the supporting materials were flawed in some way or the court “considers it just in all the circumstances” to set the garnishing order aside. When reviewing the evidence in support of a garnishing order, the courts will not require perfection by a plaintiff but there must not be any confusion or uncertainty over the basis of the underlying claim. If the garnishing order is set aside, the defendant gets some or all of their money back.

If you are an unpaid creditor and are going to have to sue your debtor in order to recover, then you might want to consider using pre-judgment garnishment to assist you. As this form of pre-judgment execution can be quite technical, it would be a good idea to seek legal advice on how to do this properly.

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