Citation: Duffy Const. v. Dennis Const Date: PESCTD 95 Docket: GSC Registry: Charlottetown

Transcription

1 Citation: Duffy Const. v. Dennis Const Date: PESCTD 95 Docket: GSC Registry: Charlottetown PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION BETWEEN: AND: DUFFY CONSTRUCTION LTD. APPLICANT (PLAINTIFF) DENNIS CONSTRUCTION LTD. RESPONDENT (DEFENDANT) OTHER INTERESTED PARTIES: ULTRAMAR LTD., IRVING OIL LIMITED, MATHEWS LIME LTD., JACQUES, WHITFORD & ASSOCIATES, CURRAN & BRIGGS LIMITED, DAY & ROSS INC., LAFARGE CANADA INC., THE GOVERNMENT OF PRINCE EDWARD ISLAND, THE WORKERS COMPENSATION BOARD OF P.E.I., GORDON S ENTERPRISES LTD., and LOUNSBURY INDUSTRIAL (1996) LIMITED Before: The Honourable Madam Justice Linda K. Webber Tracey L. Clements - Solicitor for Duffy Construction Ewan W. Clark - Solicitor for Ultramar Ltd.; Irving Oil Limited; Jacques, Whitford & Associates Limited Ruth M. DeMone - Solicitor for the Government of Prince Edward Island Place and Date of Hearing - Charlottetown, Prince Edward Island October 2, 2000 Place and Date of Judgment - Charlottetown, Prince Edward Island December 5, 2000

2 Citation: Duffy Const. v. Dennis Const 2000 PESCTD 95 BETWEEN: AND: DUFFY CONSTRUCTION LTD. APPLICANT (PLAINTIFF) DENNIS CONSTRUCTION LTD. RESPONDENT (DEFENDANT) OTHER INTERESTED PARTIES: ULTRAMAR LTD., IRVING OIL LIMITED, MATHEWS LIME LTD., JACQUES, WHITFORD & ASSOCIATES, CURRAN & BRIGGS LIMITED, DAY & ROSS INC., LAFARGE CANADA INC., THE GOVERNMENT OF PRINCE EDWARD ISLAND, THE WORKERS COMPENSATION BOARD OF P.E.I., GORDON S ENTERPRISES LTD., and LOUNSBURY INDUSTRIAL (1996) LIMITED Supreme Court of Prince Edward Island - Trial Division Before: Webber J. Heard: October 2, 2000 Judgment: December 5, 2000 (8 pages) INTERPLEADER - Crown prerogative - creditors of equal degree - garnishment proceedings CASES CONSIDERED: Agricultural Credit Corp. of Saskatchewan v. Kozak, [1991] 4 W.W.R. 231 (Sask.Q.B.); Prince Edward Island v. Royal Bank (1978), 18 Nfld. & PEIR. 271 (P.E.I.S.C.A.D.); Household Realty Corporation v. A-G of Canada (1979), 105 D.L.R. (3d) 266 (S.C.C.); Powermatic of Canada v. Keenan (1978), 22 Nfld. & PEIR 516 (P.E.I.S.C.); MacDonald v. Galeb Construction Ltd. (1992), 99 Nfld. & PEIR. 340 (P.E.I.S.C.T.D.); CIBC v. Vanneste Farms Ltd. (1991), 97 Nfld. & PEIR. 183 (P.E.I.S.C.T.D.); STATUTES CONSIDERED: Revenue Administration Act, R.S.P.E.I. 1988, Cap. R-13.2, ss. 13, 15; Garnishee Act, R.S.P.E.I. 1988, Cap. G-2, s. 5, s-ss. 20(1), (2); Interpretation Act, R.S.P.E.I. 1988, Cap. I- 9, s-s. 14(1); Crown Proceedings Act, R.S.P.E.I. Cap. C-32, s-s. 17(6). Tracey L. Clements - Solicitor for Duffy Construction Ewan W. Clark - Solicitor for Ultramar Ltd.; Irving Oil Limited; Jacques, Whitford & Associates Limited Ruth M. DeMone - Solicitor for the Government of Prince Edward Island

3 WEBBER J.: [1] The facts leading to these proceedings revolve around the construction and improvement of various roads and highways in the Province of Prince Edward Island by Dennis Construction Ltd. (Dennis). Duffy Construction Ltd. (Duffy) claims against Dennis as a subcontractor who provided various goods, services and materials to Dennis for this and other work but was not paid the amounts owed for these goods, services and materials. Ultramar Ltd. claims against Dennis for goods and services provided by Ultramar but not paid for. The Government of Prince Edward Island (the Government) claims against Dennis for outstanding sales taxes, interest and penalties. [2] The motion before me relates to money paid into Court by the Sheriff of Queens County in connection with garnishments against creditors of Dennis. Duffy seeks payment of this money out of Court to it and Ultramar. The Government seeks payment of this money out of Court to it, saying the Crown has a prerogative right to this money over other creditors of equal degree. [3] While more than one motion was filed to deal with this matter, the parties agreed to proceed by way of Duffy s motion for payment of this money out of Court. The documents filed by Ultramar and the Government were agreed to be deemed amended as required to raise the issues set out in those documents as responses to Duffy s motion. [4] Duffy commenced an action in the Supreme Court of Prince Edward Island against Dennis by way of statement of claim issued on January 18, 2000, being action no. GSC herein. A claim of lien was filed by Duffy against Dennis on the same date, and notices of garnishment were issued on January 28, 2000 in relation to Island Coastal Services (Island Coastal), Birt & MacKay Backhoe Services Ltd., carrying on business as Birt & MacKay Construction (Birt & MacKay), Island Excavators (1985) Ltd. (Island Excavators), and the Province of Prince Edward Island as represented by the Minister of Transportation and Public Works (Public Works). The notice of garnishment was served on Island Excavators on February 1, 2000 and was served on all the others on January 28, Duffy entered judgments against Dennis on April 27, 2000 and May 5, 2000 in the amounts of $129, and $53, respectively. [5] Ultramar commenced action against Dennis, served a pre-judgment notice of garnishment on Dennis and Island Coastal on February 1, 2000, and obtained default judgment against Dennis on February 24, 2000 in the amount

4 Page: 2 of $224, [6] The Government obtained a judgment against Dennis, pursuant to the provisions of s. 13 of the Revenue Administration Act, R.S.P.E.I. 1988, Cap. R-13.2 on April 17, 2000, in the amount of $232, The Government did not issue or serve any pre-judgment notice of garnishment. [7] An interpleader order granted to the Sheriff of Queens County on August 15, 2000 directed him to pay into court present funds in his hands pursuant to enforcement of any execution against Dennis or pursuant to any garnishee order with respect to debts owing to Dennis, less expenses, and any such further funds coming into his possession. As of September 26, 2000 a total of $132, had been paid into Court by the Sheriff. [8] Duffy makes this motion for payment to it and Ultramar of the money paid into court by the Sheriff pursuant to the interpleader order. The basis for this claim is that both Duffy and Ultramar filed and served pre-judgment notices of garnishment, giving them a priority over other creditors. [9] While the motion by Duffy was served on the other registered creditors of Dennis, only Ultramar and the Government filed documents and/or appeared to argue on the motion. Ultramar supports the motion made by Duffy. [10] The Government of Prince Edward Island claims a Crown prerogative over the money paid into court by the Sheriff. The case law cited indicates that among creditors of equal degree the Crown prerogative will prevail to give the Crown priority over other creditors. (See Agricultural Credit Corp. of Saskatchewan v. Kozak, [1991] 4 W.W.R. 231 (Sask. Q.B.); Prince Edward Island v. Royal Bank (1978), 18 Nfld. & PEIR. 271 (P.E.I.S.C.A.D.); and Household Realty Corporation v. A-G of Canada (1979), 105 D.L.R. (3d) 266 (S.C.C.)). The issue on this aspect of the motion therefore becomes and the Government agrees with this are the creditors here of equal degree? [11] On the issue of what is meant by creditors of equal degree, those creditors who are more diligent in the pursuit of their claim than other creditors, e.g. those who take the additional step of obtaining a garnishee order, will set themselves apart so as not to be of equal degree with less diligent creditors. (See: Powermatic of Canada Ltd. v. Keenan (1978), 22 Nfld. & PEIR. 516 (P.E.I.S.C.); MacDonald v. Galeb Construction Ltd. (1992), 99 Nfld. & PEIR. 340 (P.E.I.S.C.T.D.); and CIBC v. Vanneste Farms Ltd. (1991), 97

5 Page: 3 Nfld. & PEIR. 183 (P.E.I.S.C.T.D.)) [12] Ultramar and Duffy say that because they took the initiative and pursued Dennis under garnishee proceedings, the law states that as creditors they are raised to an elevated status vis-a-vis other creditors who did not expend similar efforts. The Government appears to agree with this as a general statement of the law, but states that in the instant case, because of the provisions of the Garnishee Act, R.S.P.E.I. 1988, Cap. G-2, that rule does not apply to it. [13] First I will review the case law relevant to whether or not the issuance of a garnishee order gives a judgment creditor a priority over other judgment creditors. The attachment created by the Garnishee Act is set out in s. 5 as follows: 5. Any debts or liabilities due or owing or accruing due by any garnishee to any judgment debtor, or to any defendant or primary debtor, may be attached in the Supreme Court in the manner and with the effect prescribed by the rules of the court. [14] The most helpful case cited on this issue was Powermatic of Canada Ltd. V. Keenan, supra, referred to with approval in CIBC v. Vanneste Farms Ltd., supra. In Powermatic McQuaid M.J., J. concluded that a judgment creditor who served a garnishee order obtained a priority over other judgment creditors to the extent of that order. He refers to the case before him as one involving a judgment creditor who was diligent enough to proceed one step further than other judgment creditors, and states at paragraphs 8 and 9: 8 The law on the matter is clear. The money is impressed in the hands of the garnishee with a charge in favour of the judgment creditor as from the time of the service of the garnishee order [Anderson v. Dowber, (1915) 25 D.L.R. 644] and the service of the attaching order obtained after judgment creates an equitable charge upon the debt in favour of the garnishing creditor [Galbraith v. Grimshaw & Baxter, (1910) 1 K.B. 339]. This equitable charge, once it is established, is not effected by the fact that executions are subsequently issued by other judgment creditors. As is said by MacDonald, C.J.A. in Anderson v. Dowber (supra) at page 646: It seems to me that the service of the attaching summons, while not a transfer of the debt, creates a charge on it which is not taken away by the subsequent receipt of writs of execution by the Sheriff. (underlining mine)

6 Page: 4 9 If, as is obviously the case, the attached money is removed from the operation of subsequently issued writs of execution, it must surely be implied, and I so hold, that the first attaching judgment creditor has a priority over other judgment creditors who were less diligent in pursuing their right. [15] Further on, McQuaid J. states: 17 I find nothing in our Frauds on Creditors Act which prevents a secured creditor from obtaining through the medium of garnishee proceedings a preference over other secured creditors. By reason of Sections 50 and 73 of the Bankruptcy Act, the situation could admittedly be different had the debtor been declared insolvent or bankrupt under the provisions of that Act. But, that is not the situation here. [16] While that case does not deal with the Crown or the issue of Crown prerogative, it does very clearly deal with the issue of creditors obtaining a priority over one another through the Garnishee Act. Therefore, I find that as the Garnishee Act gives those who utilize its provisions a priority over other creditors, that priority makes those creditors not of equal degree with creditors who have not acted to obtain a garnishee order. [17] The next matter to deal with is the Government s claim that this law is not applicable to it because the Crown is not bound by proceedings instituted under the Garnishee Act. The Government s reasoning is as follows. [18] The Interpretation Act, R.S.P.E.I. 1988, Cap. I-9, states at subsection 14(1): 14(1) Unless an Act otherwise specifically provides, every Act and every regulation made thereunder, is binding on Her Majesty. [19] If that were all that was involved, Duffy and Ultramar, with their prejudgment attachments under the Garnishee Act, would as creditors have an elevated status as against the Government. However, the Crown Proceedings Act, R.S.P.E.I. 1988, Cap. C-32 states: 17(6) No execution or attachment or process in the nature thereof shall be issued out of any court for enforcing payment by the Crown of money or costs. And this in turn is qualified by s. 20 of the Garnishee Act as follows:

7 Page: 5 (1) Notwithstanding subsection 17(6) of the Crown Proceedings Act, R.S.P.E.I. 1988, Cap. C-32 Her Majesty in right of the province is subject to the provisions of this Act relating to garnishment as if Her Majesty were an ordinary person, to the extent set out in subsection (2). (2) A garnishee order may be issued pursuant to the rules of court for the attachment of salary or wages due or accruing due to a public officer who is an employee as defined in clause 1(h) of the Civil Service Act R.S.P.E.I., Cap. C-8. [Emphasis Added] [20] The Government s position is that s. 20 limits the applicability of the entire Garnishee Act to the situation set out in subsection (2) of s. 20; thus the attachment created by s. 5 does not apply to Government. That is, the Act only applies to Government by virtue of s-s. 20(2) as cited above. If the Act as a whole does not apply to Government, it is argued, then the elevated status claimed by Duffy and Ultramar is invalid: the Government cannot be bound by or have its Crown prerogative limited by an attachment not applicable to Government. [21] The validity of this argument depends upon the proper construction of s. 20 of the Garnishee Act. As has been noted in other cases, legislators wanting to preserve the common law Crown prerogative can do so quite easily by clearly saying so in a statute. Considered from this perspective, the interpretation of s-s. 20(1) of the Garnishee Act proposed by the Government is problematic. The legislature of this Province has in the Interpretation Act made the Government subject to the laws of this Province. That is the general proposition from which we must begin an interpretation of the Garnishee Act. Without anything further, the Garnishee Act applies to Government, so the elevated status given by the Courts to creditors who take extra actions to pursue funds from debtors through garnishee proceedings would apply to Duffy and Ultramar. The result would be that the Government is not a creditor of equal degree with Ultramar and Duffy; therefore, Crown prerogative does not apply. [22] The Crown Proceedings Act at s-s. 17(6) states that garnishment proceedings do not apply to the Crown, but does not state that all of the provisions of the Garnishee Act do not apply to the Crown. Rather, the intent of s. 20 of the Garnishee Act appears to be to subject the Crown to a certain type of garnishment proceeding (relating to the wages or salary of a civil servant) notwithstanding the general exemption set out in s-s. 17(6) of the Crown Proceedings Act.

8 Page: 6 [23] Thus, the plain meaning to be given to s. 20 as a whole is that Her Majesty in right of the Province is not subject to garnishment proceedings generally in the sense that she can be served with a garnishee notice, except insofar as that notice purports to attach the salary or wages related to a person employed as a civil servant. That is, the legislature has decided to allow creditors to utilize the garnishment process with respect to government s payment of wages to its civil servants, but not with respect to government s payments of any other money in any other situation. [24] Given the existence of s-s. 17(6) of the Crown Proceedings Act, a desire to allow attachment where civil servants are concerned required s. 20 of the Garnishee Act to specify that the Crown would be bound in this way. [25] Nothing in the rest of the Garnishee Act, however, suggests that the rest of the Act is to be construed in any special way. [26] Nothing in the words of s. 20 of the Garnishee Act appear in any way to override the general provision in the Interpretation Act, s. 14. [27] Nothing in s. 20 of the Garnishee Act specifically states that the intent of s. 20 is to preserve the Crown prerogative over funds that would otherwise be considered out of reach of the Crown because of the priority created by a garnishment proceeding instituted against a third party by another creditor. [28] I find that the Garnishee Act was intended by the legislature to give creditors who utilized it a priority over other creditors. Nothing in that Act suggests that the priority so obtained would not apply to the Crown. What is clear is that creditors were limited by the Crown Proceedings Act as to the circumstances in which they could obtain a garnishment against the Crown. That limitation is what is addressed in s. 20 of the Garnishee Act. [29] In the instant case, it was pointed out by Duffy that the equivalent of a garnishee order is obtainable by the Government by way of s. 15 of the Revenue Administration Act and requires only a letter from the Government. If such a letter had been sent it would likely have had a status equal to that of a garnishee order, since it achieves the same purpose. However, that is not an issue because no such action was taken by the Government in the instant case. [30] While it dealt with a failure of the Crown to participate in interpleader proceedings, the Agricultural Credit case, supra, makes comments also of

9 Page: 7 relevance to the rationale behind the requirement for creditors to be of equal degree before Crown prerogative can apply. Baynton J. stated at paragraph 51 as follows: 51...Surely the Crown cannot stand by and let its subjects pour their efforts and financial resources into an interpleader matter, and then, when the benefits have been realized, swoop in and take them away without compensation.... [31] In the instant case, evidence was produced of considerable efforts made by Duffy to obtain payment of the debt due to him, including an early prejudgment garnishee order. This extra effort is what gives his claim a priority over those who acted neither so swiftly nor so diligently. The same principle applies to the actions of Ultramar in serving a pre-judgment notice of garnishment. [32] As was pointed out in many of the cases cited herein, the fact that the creditors here are not of equal degree means that the Crown prerogative does not arise, not that the Crown prerogative is abrogated. Crown prerogative simply does not become an issue where the creditors are not of equal degree. [33] I find there is no Crown prerogative in the instant case because, for the reasons stated above, the Government is not a creditor of equal degree with Duffy or Ultramar. [34] Duffy s motion for payment out of court of monies, including any future payment into Court by the Sheriff of Queens County, arising from garnishee proceedings of Duffy and Ultramar, to Duffy and Ultramar as agreed between Duffy and Ultramar or, alternatively, as determined by further application to the Court is granted.

10 Page: 8 [35] Duffy and Ultramar shall have their party and party costs against the Government, as taxed. J. December 5, 2000