In British Columbia, pre-judgment garnishment is a legal process used in civil litigation to “freeze” a defendant’s funds before the outcome of that litigation is determined.
Using the process set out in the BC Court Order Enforcement Act, R.S.B.C. 1996, c. 78, a creditor can obtain a “garnishing order” from the court to:
(1) seize funds owed to a debtor by a third party, such as funds owed to the debtor by a bank in a bank account, up to the value of the creditor’s claim; and
(2) compel the third party (usually, a bank or credit union) to pay those funds to the court, where they remain until the debtor and creditor agree on how to distribute them, or a determination is made regarding their ownership by the court.
This can be done without notifying the debtor until the garnishing order is served on the third party, such that the debtor is not able to move or dissipate the funds beforehand.
Crucially, in British Columbia, the garnishing order can also be obtained, and served on the third party, before the debtor is even aware they are being sued by the creditor. This is, as courts have noted, an extraordinary and unique process. Pre-judgment garnishing orders are unavailable in lawsuits commenced in other provinces in Canada.
As a result of their extraordinary nature, certain restrictions have been placed on the use of pre-judgment garnishing orders. Most notably, they can only be used for “debts or liquidated claims” owed by the debtor to the creditor. A debt is a sum currently owed to a creditor, usually under a contract. A liquidated claim is a claim for “a specific sum which has either been ascertained or is capable of being ascertained as a matter of mere calculation”. The creditor, as plaintiff, must also “account for all just discounts” (fair deductions) in the calculation of the amount owed which is submitted to the court to receive the garnishing order.
To obtain pre-judgment garnishing order, a creditor (as the plaintiff in the lawsuit), or their legal counsel, must first swear or affirm an affidavit setting out the nature of the claim, the actual amount of the debt or liquidated claim owing, and confirming that amount is due and owing, after all just discounts have been made.
The affidavit must also set out who holds the funds to be garnished, and where they are located. For a bank account, the creditor/plaintiff must know the bank branch where the debtor opened the account (or, for a credit union, the headquarters of the credit union). This information can be gleaned from a cheque made out by the debtor, a bank account statement, several other bank or credit union transfer documents, or from the personal knowledge of the creditor.
If the debtor’s bank branch is outside British Columbia, but the bank has a commercial presence in British Columbia, it is still possible to garnish that out-of-province bank account. This requires additional steps in conjunction with the garnishing order application.
Garnishing orders are not always successful at “attaching to” (garnishing) funds. Often, the process fails as the debtor does not have any remaining funds on deposit at their bank, or actually owes the bank money despite having a positive balance in a particular account (for example, where the debtor has a larger outstanding line of credit owed to the same bank). If so, the legal costs of applying for the garnishing order are wasted. Debtors served with a garnishing order also have the option to apply to court to set them aside, and seek return of the funds, if a court can be convinced the garnishing order application was flawed, or is unjust in the circumstances (for example, if the garnished funds are needed for employee payroll).
Nonetheless, pre-judgment garnishing orders remain a powerful tool for plaintiffs in British Columbia – both to ensure funds are available to secure a plaintiff’s claim, and to create leverage in settlement negotiations with a defendant.