Write Your Exam Code Here: Return this exam question paper to your invigilator at the end of the exam before you leave the classroom. THIS EXAMINATION CONSISTS OF 6 PAGES PLEASE ENSURE THAT YOU HAVE A COMPLETE EXAMINATION THE UNIVERSITY OF BRITISH COLUMBIA FACULTY OF LAW FINAL EXAMINATION APRIL 2017 LAW 443 CREDITORS REMEDIES SECTION 1 PROFESSOR EDINGER TOTAL MARKS - 100 TIME ALLOWED 3 HOURS PLUS 10 MINUTES READING TIME This is an open book examination. You may bring into the examination room and use the casebook, the statutory materials and your notes. If you require any further information to answer the problems, state what information is required and why you need it. THIS EXAMINATION CONSISTS OF 3 QUESTIONS
2 MARKS 20 1. The Penticton Hospitality Association (PHA) is incorporated as a society. Its membership consists of hotels, motels and other tourist accommodation operators in the Penticton area. Its monthly income is in the vicinity of $45,000 and derives from hotel room taxes which are remitted to PHA by the provincial government. In the spring of 2014, Liam Hodge had discussions with Edward Brown, the then president of PHA, concerning the possibility of providing services to PHA as an administrative and marketing consultant. Brown died in October 2014 and was replaced as PHA president by Robert Appelbaum who was appointed from outside PHA, never having served on the board before. On July 24, 2014, as a result of the discussions with Brown, Hodge entered into an Administrative Services Agreement with PHA. Under the agreement, Hodge was to be paid $60.00 per hour and to work at least 2 days per week. The term of the agreement was for 18 months and was renewable for another 18 months. If the agreement were terminated, Hodge was to be remunerated for a full term (ie 18 months). The agreement was signed by Hodge and by Robert Appelbaum. On September 21, 2016, PHA terminated Hodge but did not pay him for the last pay period or for the amount due under the contract. Hodge commenced an action against PHA on November 17, 2017 and issued a garnishing order on November 27. The notice of civil claim states that Hodge had started working 2 days a week for PHA but soon had increased to 3 days per week at $60 per hour and that he was entitled to compensation for another 18 months. The garnishing order was for $73,440.00. The 18 months was calculated on the basis of 2 days work per week and was stated to be only a portion of what was owed. Hodge served the garnishing order on the CIBC, described in the affidavit as the Bank of Commerce. The CIBC paid the money into court. The garnishing order contained typographical errors pertaining to dates which were corrected by hand but which were not initialed. You have been retained by PHA. What objections, if any, can PHA make to the garnishing order?
3 40 2. Your client, Al Ledger, is a professional accountant. Beatrice (Bea) Flatt is Al s client and his former business partner in a failed restaurant. You have just obtained a default judgment for him against Bea in the amount of $50,000 for professional accounting services rendered and now Al wants you to sue Bea for losses he incurred amounting to $1.2M in connection with the failed restaurant business. He alleges those losses all arose from Bea s fraud and breaches of her fiduciary duty to him. Bea, of course, denies Al s allegations. Al informs you that Bea is a violinist in the Vancouver String ensemble and an occasional solo performer at concerts throughout Canada. Flatt is an accomplished violinist but a poor manager of her own finances. Bea told Al in December, 2016, when he was pressing her for payment, that she was flat broke and that two other creditors had just obtained judgments against her and that both judgment creditors, the Bank of Kerrisdale, which has a judgment for $350,000 and Dr Sade, the orthodontist who put braces on her childrens teeth and who has a judgment for fees for $70,000, have delivered writs of seizure and sale to the Court Bailiff. So far as Al knows, the Court Bailiff has not taken any action on behalf of those other judgment creditors. Al wishes to collect on his judgment as soon as possible. Because he knows Bea so well, he is able to provide you with a fair amount of information about Bea s assets. Bea owns a modern violin worth about $5000 and a Guarneri worth about $200,000 which she uses only for the solo concerts. When Bea told Al about the two judgments, she also confided that she had sold the Guarneri to her unmusical brother for $80,000 when the first notice of civil claim was served. Her brother agreed to pay Bea by means of 10 annual instalments of $8000 and to let her use the violin for the balance of her performing career. Bea agreed to continue to pay for insurance and maintenance of the violin. She received the first instalment in January 2017 and stashed it in the safety deposit box where she stores important documents. Bea owns 30% of the shares in a closely-held family pest control business run by her brother, who owns 60% of the shares and is the sole director. The company is thriving but Al has no idea what its assets are worth. Bea also owns shares in several Canadian and American companies which are traded on the Toronto and New York stock exchanges. None of the companies does business in British Columbia.
4 Bea earns a monthly salary from the Ensemble of $3500 (before deductions for income tax, Canada Pension, Employment Insurance and union dues). Bea owns a life insurance policy with a cash surrender value of $5000. Her brother is the named beneficiary. Bea always wears diamond earrings which Al believes to be very valuable. Bea also has a savings account which she holds jointly with her mother. Al is pretty sure that the savings account is at a branch of HSBC close to Bea s mother s home in Point Grey. He is also pretty sure that the bulk of the money in the joint account belongs to Bea s mother and that Bea was made a joint holder only recently when her mother s health started to fail. Al gives you Bea s residential address but says that he knows that she has no equity in the property because her home is mortgaged to the hilt. Finally, Al mentions a painting which Bea inherited when her father died and which still hangs in her mother s home both for safekeeping and for sentimental reasons. Bea could not bring herself to deprive her mother s home of the picture. Bea believes that the painting is very valuable. Al has heard that Bea is about to courier that painting to Sotheby s in New York for appraisal and, if it is as valuable as she believes it is, then to have Sotheby s entrust it to a cousin living in New York for safekeeping until her financial difficulties have blown over. Draft a memorandum for Al advising him of all his options to enforce the judgment that he already has and the judgement which he is sure that he will get. Include in your memorandum a discussion of any exemptions which Bea may be able to claim and of whether Al will have to share with the other judgment creditors.
5 40 3. lan M Pecunious (Ian) has been sliding into financial difficulties in recent years. The home in Kelowna in which he and his second wife, Zelda, live with their large family now has many charges registered against title. July 2002 First mortgage; Bank of Montreal January 2007 Judgment in favour of A from British Columbia Small Claims Court; renewed September, 2008; August, 2010; September, 2012; July, 2014; July 2016. November 2013 Judgment in favour of Crown in Right of Canada from Federal Court; renewed August, 2015. December 2013 Second mortgage; HSBC. April 2014 Judgment in favour of B. June 2014 Judgment in favour of Cindy, Ian s divorced first wife, for support payments. May 2015 Judgment in favour of D; renewed January 2017. September 2015 Builders lien in favour of Y Inc. for work commenced February 2015; lien declaration granted September 2016. June 2016 Judgment in favour of Director of Employment Standards on behalf of Ian s employees. January2017 JudgmentinfavourofE. In addition to the judgment creditors who have registered their judgments on the title, Ian has two more judgment creditors with BC Supreme Court judgments who have delivered writs of seizure and sale to the Court Bailiff and a judgment against Ian has just been delivered in Alberta. The current market value of Ian s interest in the property will be sufficient to pay in full the charges registered up to and including the judgment of D, registered In May 2015. Answer the four following questions. (i) If Ian accepts a very good offer from a developer to purchase his property, how will the proceeds be distributed?
6 (ii) (iii) (iv) Can judgment creditor E commence an application for sale pursuant to the Court Order Enforcement Act, and, if so, what would you advise the Registrar to recommend with respect to for distribution of monies realized from the sale of the property? What, if anything, can Ian claim? Can the judgment creditor from Alberta, a corporation, enforce its judgment against Ian in BC? END OF EXAMINATION