Re Adeline Margaret Bodnarchuk, [1995] 2 CTC 269, 95 DTC 5500

John A. Hargrave, Prothonotary:-A year ago, in Re Guterres, [1994] 2 C.T.C. 308, 94 D.T.C. 6603 (F.C.T.D.), I gave reasons for an order that a Registered Retirement Savings Plan (an "RRSP") was exigible under a writ of fieri facias and pursuant to section 52 of the Court Order Enforcement Act, R.S.B.C. 1979, c. 75. In that proceeding Vancouver City Savings Credit Union had refused to collapse a Vancouver City Savings Retirement Plan, an RRSP, when called upon to do so by Pacific Court Bailiff Execution Services Inc., who presented the writ of execution to the credit union.

Now, almost on the anniversary of the Guterres case, Vancouver City Savings Union again refuses to deliver up RRSP funds in the face of a writ of fieri facias. Thus the present motion on the part of the Minister of National Revenue to direct Vancouver City Savings Credit Union to collapse Adeline Bodnarchuk’s RRSP, to transfer the funds held in that RRSP to the Minister and to claim costs against the credit union.

Garnishment and retirement savings plans

In refusing to pay RRSP funds to Revenue Canada, the credit union now relies upon DeConinck, S. v. Royal Trust Corp., [1989] 1 C.T.C. 179, 90 N.B.R. (2d) 321, a decision of the New Brunswick Court of Appeal. In the DeConinck case Revenue Canada, in their realization proceedings, used subsection 224(1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"), which provides for garnishment and which is phrased in terms of the liability of a tax debtor. The New Brunswick Court of Appeal found against Revenue Canada on the basis that the relationship was not one of debtor and creditor, as between the trust company and their customer, Mr. DeConinck, but rather was one of trustee and cestui que trust. Thus the garnishment was ineffective and the trust company, which had improperly paid the RRSP proceeds to the Crown, was liable in lost interest and in capital gains that the self-directed RRSP might have realized over ensuing years.

I do not have to consider the New Brunswick Court of Appeal’s decision in DeConinck, for that case dealt with garnishment. The writ of execution, in the present instance, is very different. However, I would note in passing that the Federal Court in In re Gero, [1979] C.T.C. 309, 79 D.T.C. 5228 (F.C.T.D.), did find that RRSP proceeds were garnishable and in doing so referred to a then recent unreported Supreme Court of Canada decision in Robitaille v. Marie-Jeanne Hins-Dion and New York Life Insurance Company, a judgment dated October 26, 1978, rendered, for the Court, by The Honourable Mr. Justice Pigeon, who stated:

In effect it is clearly evident that one cannot by a contract shelter his assets from seizure by his creditors unless as a result of a special disposition of law such as is found in the Supplementary Pension Plan Act (S.Q. 1965 c. 25, section 31). Thus it is perfectly clear that one cannot in making a bank deposit stipulate that it is unseizable.

The Honourable Mr. Justice Walsh, in the Gero case, supra, recognized that it was arguable that RRSP funds were not a debt owing or accruing under Federal Court Rule 2300, governing garnishment proceedings, unless or until the owner of the RRSP requested the trust company holding the RRSP to make payment, however, he pointed out "...it would be contrary to the whole principle of garnishment proceedings to adopt such an interpretation and hence provide a means for an individual to shelter his assets from seizure by his creditors" (page 310).

Realization under a writ of execution

While the question of garnishment of RRSP funds may still be open in some jurisdictions, that is not the case where a party is realizing under a writ of execution and has the benefit of a provision such as is contained in section 52 of the Court Order Enforcement Act, R.S.B.C. 1979, c. 75:

52. Any sheriff or other officer to whom any writ of execution is directed shall seize and take any money or bank notes, and any cheques, bills of exchange, promissory notes, bonds, specialties or other securities for money, belonging to the execution debtor, and may and shall pay and deliver to the execution creditor any money or bank notes which are seized, or a sufficient part of it; and shall hold any cheques, bills of exchange, promissory notes, bonds, specialties or other securities for money as security for the amount by the writ of execution directed to be levied, or as much of it as has not been otherwise levied and raised; and the sheriff or other officer may sue in his own name for the recovery of the sums secured by it, if and when the time of payment of it has arrived.

An RRSP is subject to seizure and sale pursuant to this provision: Bank of British Columbia v. 225280 B.C. Ltd. (1985), 65 B.C.L.R. 23, at page 24 (B.C.S.C.).

Costs against someone not a party

It is unfortunate that Vancouver City Savings Credit Union did not obtain legal advice, as they were urged to do, before taking, through maintained ignorance by their lack of reasonable assessment and action, an untenable position, thus forcing Revenue Canada to the expense of this application. I therefore considered whether this is an appropriate instance in which costs ought to be awarded against Vancouver City Savings Credit Union, who is not a party.

Taken at face value, Federal Court Rule 344(1), which reads:

344(1) The Court shall have full discretionary power over payment of the costs of all parties involved in any proceedings, the amount and allocation of those costs and determining the persons by whom they are to be paid.

[Emphasis added.]

could allow the Federal Court to award costs against someone other than a party. However, the Ontario Court of Appeal in Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd. (1972), 27 D.L.R. (3d) 651, [1972] 3 O.R. 199 at page 659 (O.R. 207), put a limit on a similar Ontario provision by restricting it to parties to the proceeding:

It is my view that a literal interpretation of the words in section 82 "and the court or judge has full power to determine by whom and to what extent the costs shall be paid" would lead to obvious absurdities, and that the decisions to which I have already referred correctly held that such a literal interpretation should not be given to the words in question. In my view the words "by whom" should be interpreted to mean "by which of the parties to the proceeding before the court or judge".

The Court does, however, have an inherent jurisdiction to prevent abuse of process, and, in a special circumstance, might award costs against someone who is not a party: see for example Re Sturmer and Town of Beaverton (1912), 2 D.L.R. 501, 25 O.L.R. 566 (Ont. Divisional Court of Appeal). In the Sturmer case the award of costs, for abuse of process, against someone other than a party, was made against an individual who had induced an insubstantial person to allow his name to stand as plaintiff for the purpose of avoiding payment of costs. Vancouver City Savings Credit Union, in the present instance, have attempted a transfer of costs.

Counsel for the Minister submitted that this second refusal by the Vancouver City Savings Credit Union, to respond to a writ of execution by collapsing an RRSP, is an abuse of process, particularly as the credit union’s untenable position came about through self-enforced ignorance. At the conclusion of counsel’s submission I indicated that while the credit union’s activities were a misuse of the Court, I did not feel they constituted an abuse.

I have since re-read the affidavit material and particularly the correspondence between the credit union and the sheriff, in the person of Pacific Court Bailiff Execution Services Inc., in which the sheriff asked the credit union the name of the credit union’s counsel, on two occasions, so the sheriff might discuss the matter, which could well have avoided the present motion.

I have now concluded that the argument of counsel for the Minister is a reasonable one, for the credit union, rather than taking the short time and paying the minimal, if any, expense of seeking advice from their counsel, or of sending counsel to appear on this motion, have required the Department of Justice to make needless expenditures.

The result is that Vancouver City Savings Credit Union took an untenable position, forced extra costs on Revenue Canada, added to the burden of the Court and abused the taxpayer by wasting the taxpayer’s money.

Vancouver City Savings Credit Union, by reason of abuse of process, will pay the Minister’s costs of the motion, set at $200.

Motion granted.