Effective December 1, 2019, the New Brunswick government will finally finalize the reform of N.B.’s money judgment enforcement regime with the new Enforcement of Money Judgments Act and the new Debtor Transactions Act. The N.B. government passed both laws in 2013 and 2015 respectively; however, neither have ever taken effect. The new regime significantly overhauls and modernizes how a litigant can enforce a judgment for a fixed sum of money in New Brunswick, improving the efficiency and effectiveness of the process for judgment creditors, particularly benefitting those that regularly obtain judgments against debtors, such as banks, leasing companies and financing companies. The government says it will publish regulations detailing the mechanics of the reformed regime in the coming weeks. In the meantime, here are the 10 key changes to the regime that will enhance judgment creditors’ ability to enforce money judgments in N.B.

1. Simplified Enforcement Process  

The new regime simplifies the judgment enforcement process by unifying all judgment enforcement procedures under one law, and amending or repealing the more than 40 laws currently governing the process.

2. Expanded Pool of Property Available

A key component of the new regime is the expanded pool of property against which a judgment creditor can enforce a judgment, such as surplus income. Unless the property is specifically exempted from seizure, it can be seized to enforce a judgment. The new regime provides a clear list of the items that are partially exempt from seizure:

• Non-surplus income.
• Payments from a retirement fund.
• One motor vehicle suitable for highway use.
• Tools and equipment the judgment debtor uses in the practice of their profession or occupation.
• Household items such as furniture, appliances, food, clothing, home heating fuel, medical and dental aids and household pets.

While the regime aims to protect the sustainability of individual judgment debtors and their dependents, the items are only partially exempt to the extent they are necessary to meet their reasonable needs. Importantly, the exemptions apply only to individual debtors and not corporate debtors.

In addition to, but unlike, the partial exemptions, there’s an absolute bar against seizure of a judgment debtor’s retirement funds, including registered retirement savings plans, registered retirement income funds and deferred profit sharing plans. Pensions also continue to be exempt from seizure under pension laws. Importantly, however, the absolute exemption doesn’t apply to payments from a retirement fund to the judgment debtor, which fall into the partial exemption category.

3. Increased Authority of Sheriff

The sheriff has increased authority in the judgment enforcement process, ranging from demanding payments to coordinating and performing enforcement procedures. The sheriff also has authority over serving and delivering all notices and documents under the new regime.

4. Preferential Enforcement Initiation

A judgment creditor can initiate enforcement procedures against a judgment debtor by simply delivering an “enforcement instruction” to the sheriff. While utilizing the sheriff to enforce judgments in this way isn’t mandatory, the new regime encourages it by granting those judgement creditors that do so priority in the distribution of enforcement proceeds over those that don’t.

5. Improved Access to Judgment Debtor Information

The sheriff has authority to require a judgment debtor to disclose information about their property, including exempt property, and their ability to satisfy a judgment. If the judgment debtor doesn’t comply with the sheriff’s request, the sheriff has authority to obtain an order requiring they attend an examination so the judgment creditor can question them to obtain that information. This process improves a judgment creditor’s access to information about a judgment debtor’s ability to satisfy a judgment, reducing the frequency – and associated costs – of creditor-invoked examinations of the judgment debtor.

6. More Recourse for Failure to Comply with Disclosure Requirements

A judgment creditor has recourse to any of several avenues when a judgment debtor fails to comply with the disclosure requirements or provides incomplete or dishonest answers:

• If the judgment debtor fails either to attend an examination or to provide complete and accurate answers, the judgment creditor can file contempt proceedings and the sheriff can seize property of the judgment debtor that would otherwise have been exempt.
• The judgment creditor can request that another person provide the information requested or attend an examination.
• The sheriff can apply for an order for authority to deliver a demand for information to any person who may have information about the judgment debtor’s property or resources.

7. Availability of Co-owned & Partnership Property

The sheriff has authority to sever and seize a judgment debtor’s interest in jointly held property. However, the sheriff must seize the property in a way that won’t deprive the co-owner of their possession or use of the property, and provide the co-owner with the first opportunity to purchase the judgment debtor’s interest. The sheriff also has authority to seize partnership property when the judgment debtor is a partner in a partnership.

8. Class Priority of Enforcement Proceeds Distribution

The new regime establishes a hierarchy of claimant classes when enforcement proceeds are to be distributed. The claims of each class must be satisfied in full before the enforcement proceeds will flow to the next class. If there are insufficient proceeds to discharge all the claims in a class, the class of claimants share the available proceeds on a pro rata basis.

9. Pre-Judgment Asset Preservation

Before obtaining a judgment, a creditor can apply to the court for a preservation order when they believe a debtor is depleting property, or is likely to do so. This mechanism replaces what’s commonly called the “Mareva” injunction, and is a more flexible way for a creditor to restrict dealings with the debtor’s property, require accounts owing to the debtor to be paid into court or impose conditions on the debtor. The court will issue a preservation order when satisfied of one of the following:

• The defendant is concealing or removing property or is dealing with it in any manner that is not for ordinary business or social purposes.
• The defendant’s actions are likely to seriously impede the claimant in the enforcement of a judgment against the defendant.
• There’s a reasonable likelihood the claimant will obtain judgment against the defendant.

10. Ability to Deal with Pre-Judgment Debtor Transactions

Even before obtaining judgment against a debtor, a creditor can apply for a court order when it believes the debtor entered into any a transaction in any of these circumstances:

• With the intention to hinder the claimant’s ability to enforce a claim.
• For consideration that was less than the value of the benefit conferred.
• When the debtor was insolvent at the time of the transaction or became insolvent within six months after it.

However, this doesn’t apply to transactions between spouses to divide property and financial resources following the breakdown of their relationship. The Court has authority to make any order it deems reasonable to restore the claimant’s ability to enforce its claim, including an order: revesting the transacted property in the debtor; that the transferee pay a sum equivalent to the value of the benefit received; and setting aside the transaction.

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Please contact your McInnes Cooper lawyer or any member of our Litigation Team @ McInnes Cooper to discuss this topic or any other legal issue.