Denault
J.:
Reasons
for
Order
The
garnishee
is
appealing
a
decision
of
the
prothonotary
Morneau
which
ordered
that
all
monies
due
or
to
become
due
by
the
garnishee
to
the
judgment
debtor
for
services
rendered
and
goods
sold
and
delivered
in
the
amount
of
$35,407.02
be
finally
seized,
assigned
and
transferred
to
Her
Majesty
the
Queen
to
satisfy
a
claim
pursuant
to
s.
223
of
the
Income
Tax
Act,
namely
the
sum
of
$28,812.61
plus
interest
and
costs.
The
issue
in
the
case
at
bar
turns
essentially
on
the
scope
of
the
adoption
in
the
new
Civil
Code
of
Quebec
of
the
second
paragraph
of
art.
1673.
That
article
reads
as
follows:
1673.
Compensation
is
effected
by
operation
of
law
upon
the
coexistence
of
debts
that
are
certain,
liquid
and
exigible
and
the
object
of
both
of
which
is
a
sum
of
money
or
a
certain
quantity
of
fungible
property
identical
in
kind.
A
person
may
apply
for
judicial
liquidation
of
a
debt
in
order
to
set
it
up
for
compensation.
The
question
essentially
is
whether
this
second
paragraph
of
art.
1673
had
the
effect,
as
the
garnishee
argues,
of
creating
a
new
right
formerly
exercised
by
a
counterclaim,
which
is
no
longer
any
impediment
to
the
retroactivity
of
judicial
compensation
to
the
date
of
the
claim
for
compensation
rather
than
to
its
liquidation
by
judgment.
Counsel
for
Her
Majesty
the
Queen
argued,
for
his
part,
that
the
seizure
served
on
the
garnishee
before
the
latter’s
debt
against
the
judgment
creditor
became
certain,
liquid
and
exigible
must
prevail
and
makes
the
amount
seized
not
subject
to
compensation.
In
law,
he
argued,
the
addition
of
the
second
paragraph
of
art.
1673
did
not
overturn
the
well-settled
precedents
on
the
absence
of
retroactivity
in
judicial
compensation,
as
the
legislature
only
codified
the
practice
followed
by
the
courts
of
authorizing
a
party
to
raise
judicial
compensation
through
a
counterclaim.
He
argued
that
in
any
case
the
rule
that
compensation
cannot
adversely
affect
rights
acquired
by
a
third
party
still
exists
(art.
1681
C.C.Q.)
as
it
did
formerly
(art.
1196
C.C.L.C.)
and
is
an
impediment
to
the
application
of
judicial
compensation.
The
prothonotary,
Mr.
Morneau,
dismissed
the
argument
made
by
the
garnishee
and
in
fact,
after
acknowledging
that
the
rule
that
judicial
compensation
is
not
retroactive
should
continue
to
be
applied
despite
the
statutory
amendment,
he
refused
to
set
up
against
the
judgment
creditor
compensation
which
was
only
conceptual
in
nature.
With
respect,
I
cannot
share
this
view
of
the
prothonotary
and
thus
dismiss
this
appeal
from
his
decision.
Judicial
precedent
and
theoretical
commentary
in
Quebec
have
long
recognized
that
judicial
compensation
should
not
be
made
retroactive
to
the
judgment
granting
it.
In
1924.
in
Peacock
c.
Mile
End
Milling
Co.
(1924),
37
B.R.
221
(B.R.
Que.),
the
Court
of
King’s
Bench
considered
whether
judicial
compensation
granted
by
the
court
in
the
exercise
of
its
discretionary
authority
only
existed
by
virtue
of
a
judgment
or
whether
it
should
be
retroactive
to
the
date
of
the
principal
claim
or
of
the
counterclaim.
The
Court
clearly
stated
that
[TRANSLATION]
“it
is
the
judgment
which
creates
a
right,
that
did
not
previously
exist”.
Bernier
J.
added
(at
228):
[TRANSLATION]
Accordingly,
in
a
case
of
judicial
compensation
the
rule
that
the
judgment
is
retroactive
to
the
date
the
action
was
filed
must
be
rejected:
this
rule
can
only
apply
in
the
case
of
legal
compensation
or
in
the
case
of
compensation
by
exception.
This
judgment
has
been
followed
and
respected
by
our
courts
and
legal
commentary
in
Quebec.
In
1985,
in
Labrèche
v.
Bergeron
though
well
aware
of
the
controversy
on
the
point
existing
primarily
in
French
legal
commentary,
the
Court
of
Appeal
ruled
on
the
point:
[TRANSLATION]
Even
pleaded
in
due
form,
judicial
compensation
is
not
retroactive
to
the
date
the
two
debts
coexisted:
it
can
only
be
effective
as
of
the
date
of
the
judgment
granting
it
and
liquidating
the
two
debts.
However,
did
paragraph
2
of
art.
1673
of
the
Civil
Code
of
Quebec
create
a
new
right
the
effect
of
which
was
to
supersede
earlier
precedents
holding
that
judicial
compensation
is
not
retroactive?
I
do
not
think
so.
I
feel
that
the
most
the
new
provision
does
is
to
codify
the
rule
that
existed
before
the
legislative
amendment,
namely
that
judicial
compensation
can
be
claimed
provided
there
is
a
sufficient
nexus
between
the
debts,
which
is
generally
encountered
in
the
event
of
misfeasance
or
contractual
failure
of
performance.
The
issue
in
the
case
at
bar
between
the
garnishee/applicant
(Honeywell)
and
the
judgment
debtor
(Alarme
La
Providence)
has
not
yet
been
resolved
by
a
judgment
which,
even
if
it
were
favourable
to
Honeywell,
might
allow
it
to
set
off
the
debts
between
the
parties.
However,
since
I
feel
that
judicial
compensation
cannot
be
retroactive
to
the
date
of
the
claim
and
a
third
party
will
already
have
exercised
its
rights
before
the
judicial
compensation
can
operate
—
that
is
the
case
here
—
the
latter
can
only
take
priority
over
the
garnishee/applicant.
It
thus
becomes
unnecessary
to
discuss
the
question
of
the
nexus
between
the
debts
raised
by
counsel
for
Honeywell,
or
that
of
art.
1681
C.C.Q.,
namely
that
compensation
does
not
occur
to
the
detriment
of
rights
acquired
by
a
third
party.
For
these
reasons
the
appeal
by
the
garnishee/applicant
is
dismissed
with
costs.
Appeal
dismissed.
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