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Debtor Examination Hearing: The Available Enforcement Procedure for Discovering Financial Details
Question: What are the essential steps a creditor must follow to commence a debtor examination hearing?
Answer: To initiate a debtor examination hearing, a creditor must first ensure there is a default under a payment order and then request the court clerk to issue a notice of examination. This process is critical for obtaining pertinent financial information from the debtor, potentially enhancing the creditor's ability to enforce the judgment effectively.
Commencing Financial Discovery Proceedings
The debtor examination hearing process provides an opportunity for a Creditor to obtain information regarding the financial situation of a Debtor. The financial information sought aims to help a Creditor to focus enforcement efforts on a targeted manner such as the gathering of bank account details that can be targeted with a garnishment process or the existence of realty assets that can be targeted with a Writ.
The Law
The right to the examination hearing process is prescribed whereas the Rules of the Small Claims Court, O. Reg. 258/98, where it is said:
Examination of Debtor or Other Person
20.10 (1) If there is default under an order for the payment or recovery of money, the clerk of a court in the territorial division in which the debtor or other person to be examined resides or carries on business shall, at the creditor’s request, issue a notice of examination (Form 20H) directed to the debtor or other person.
It is notable that the rule begins with the condition, “If there is a default under an order …”; and accordingly, a Creditor should take heed that commencing the debtor examination hearing process is improper without a payment default. As such, where an Order of payment of monies is made, a Creditor is required to await a payment default rather than immediately pursuing the examination process. If the Order provides thirty (30) days for payment or some other term, including a payment term stated vaguely as “forthwith” which is generally defined as immediately or a reasonable amount of time.
Examining a Debtor
At a debtor examination hearing, the Debtor is required to answer questions about employment, ownership of real property or personal property, and details about bank accounts, investments, income sources, etc. The details of bank accounts, investments, income sources, etc., include those bank accounts, investments, income sources, etc., whether solely or jointly held.
Examining a Person Other Than Debtor
A person other than a Debtor may be questioned using the examination hearing process. The examination of another person may include an employer, a business partner, a bank manager, among others; however, despite the broad appearance of right to examine a person other than the Debtor per Rule 20.10(1), reference to Rule 20.10(5) is also necessary as well as the common law cases. Specifically, it is important to review:
Caution, however, should be exercised by a judge before whom an application is made so that persons who are strangers to the litigation are not unduly harassed by examinations. The relatives of a judgment debtor or a stranger should not be ordered to be examined unless the judgment creditor has exhausted all means available before resorting to an application of this kind.
Relevance of Examination
A person, being a Debtor or other person, who is undergoing the examination process may be questioned only on certain issues as prescribed within Rule 20.10(4); and accordingly, the right to examine a person beyond a Debtor should be exercised carefully without abuse of such a process whereas if a Judge to hear the examination deems that the person being examined was called to court unnecessarily, the Judge may decline the examination of the person and a costs award may be ordered as a penalty against the Creditor. The restrictive Rule as well as concern for abuse of process for improper examination and potential for a costs award can be reviewed per Rule 20.10(4) and per the case of Premier Brands v. Monk’s Group of Pubs, 2015 CanLII 54308, whereas the Rule and the case each respectively state:
20.10 (4) The debtor, any other persons to be examined and any witnesses whose evidence the court considers necessary may be examined in relation to,
(a) the reason for nonpayment;
(b) the debtor’s income and property;
(c) the debts owed to and by the debtor;
(d) the disposal the debtor has made of any property either before or after the order was made;
(e) the debtor’s present, past and future means to satisfy the order;
(f) whether the debtor intends to obey the order or has any reason for not doing so; and
(g) any other matter pertinent to the enforcement of the order.
40. I find that that Premier has not identified any area of examination for Ms. Grant which meets any reasonable test of necessity under Rule 20.10 (4) or even relevance to the purpose of Rule 20.10. To allow an examination of Ms. Grant on this Record would be an abuse of the examination process and is an unjustifiable intrusion into the affairs of Ms. Grant and her rights as a non-party not to be disturbed.
41. For these reasons, I deny Premier's request to examine Ms. Grant and strike out the Notice of Examination which was served on her. At the risk of stating the obvious, any costs associated with issuance of the Notice of Examination, service of same on Ms. Grant and transcript charges relating to the argument of the request to examine Ms. Grant are not reasonable costs of enforcing the judgment against Mr. Grant and are not recoverable as such.
42. If Premier, as the party denied the examination, or Ms. Grant, the purported target of the now struck Notice of Examination, wish to claim costs from the other party for their attendance on July 8, 2015 to deal with the issue of the examination of Ms. Grant, they may file written submissions ...
Requirements of Person Under Examination
A Creditor or other person to undergo the examination hearing process is required to co-operate with the process by being prepared to answer questions and by bringing relevant supporting documents. Specifically, the applicable Rules state:
Duties of Person to be Examined
20.10 (4.1) A person who is served with a notice of examination shall,
(a) inform himself or herself about the matters mentioned in subrule (4) and be prepared to answer questions about them; and
(b) in the case of an examination of a debtor who is an individual, complete a financial information form (Form 20I) and,
(i) serve it on the creditor requesting the examination, but not file it with the court, and
(ii) provide a copy of it to the judge presiding at the examination hearing.
(4.2) A debtor required under clause (4.1) (b) to complete a financial information form (Form 20I) shall bring such documents to the examination hearing as are necessary to support the information that he or she provides in the financial information form.
…
20.11 (1) If a person on whom a notice of examination has been served under rule 20.10 attends the examination but refuses to answer questions or to produce records or documents, the court may order the person to attend before it for a contempt hearing.
Manner of Hearing
The way a debtor examination hearing is conducted is prescribed by the Rules which include requirements that the examination be conducted privately, be under Oath, and be recorded. Specifically, the applicable Rules state:
Examinations Private, Under Oath and Recorded
20.10 (6) The examination shall be,
(a) held in the absence of the public, unless the court orders otherwise;
(b) conducted under oath; and
(c) recorded.
Whereas court clerk staff is generally unable to review and police all filings, it is imperative that Creditors, Debtors, legal representatives, among others, provide assistance by self-regulating to protect against the filing of information and documents that fall within the gambit of Rule 20.10(6). This expectation to assist the court with the exclusion of certain financial information and documents from entering into the court file was stated within the Premier Brands case wherein it was said:
44. Rule 20.10 (6) mandates that judgment debtor examinations are to be private, more precisely "held in the absence of the public". It defeats the restriction on disclosure and privacy imposed by that Rule to have transcripts of judgment debtor examinations or any other material which reveals what went on in an examination put on deposit in a Court file or transmitted in any other way to third parties. Court files are available for inspection by any member of the public. If a transcript of a judgment debtor examination is filed without being sealed by Court Order, the protection of privacy afforded by Rule 20.10 (6) is thwarted. In a world where identify thieves abound, there is risk of harm to a debtor if court ordered financial disclosure finds its way without restriction into the Court file. It is unclear why a creditor who spent money to conduct an examination would want to deposit the information collected in the Court file without restriction and risk sharing it with strangers and potentially competing creditors.
45. Court staff who are directed to accept material for filing cannot reasonably to be expected to monitor all filings for such privacy concerns. It is incumbent on parties and their legal representatives to self-police their compliance with the privacy obligation in Rule 20.10 (6) by not filing transcripts of judgment debtor examinations in the Court file without leave of the Court. Based on my review of the Court file, the Transcript of the Examination of Mr. Grant on April 20, 2015 and any transcript of the Examination of July 8, 2015 should not be in the Court file without being sealed. I Order that these transcripts be placed in an envelope and sealed from public view for this Reason, subject to any further Court Order permitting broader access being made.
