The ruling means the Mohawk Council of Kanesatake remains liable for a decades-old debt
Under Quebec law, creditors can reset the 10-year window they have to enforce payment of a debt by filing and serving a notice of execution to seize a debtor’s property, even if they never actually seize the property, the Supreme Court of Canada ruled in a unanimous decision Friday.
The decision affirmed two lower court rulings, both of which found that creditors had successfully extended the deadline for enforcing a decades-old debt owed by the Mohawk Council of Kanesatake in 2016.
The high court dismissed the council’s argument that, because the creditors never actually seized its property, the creditors’ 10-year window for collecting the owed debt had expired.
The dispute dates back to the early 2000s, when a lawyer and other professionals provided services to the council regarding its protest of a mining project.
The council, which governs the members of the Mohawks of Kanesatake, explained that Kanesatake was in “political and social turmoil” around this time and was struggling financially as a result. The council failed to pay the professionals for some of their work.
The professionals obtained default judgments against the council in the Superior Court of Quebec, but the debts were never paid. In 2016, the professionals had a bailiff file and serve a notice of execution to seize the council’s property. However, the bailiff determined that the council’s property was exempt from seizure and did not take anything.
Under the Civil Code of Quebec, filing a “judicial application” to seize a debtor’s property interrupts the so-called prescription period – the 10-year window that parties have for exercising a right they were granted via court order, such as collecting money owed from a debtor. This interruption effectively resets the prescription period.
However, the Civil Code also holds that an interruption does not occur if the application is dismissed or the proceedings are discontinued. The crux of the parties’ dispute before the SCC was whether the prescription period was interrupted or reset if the bailiff never followed through with seizing the council’s property.
The high court sided with the Superior Court of Quebec and the Quebec Court of Appeal, both of which determined that even an unsuccessful attempt to seize a debtor’s property interrupts the prescription period.
Writing for the court, Justice Nicholas Kasirer said that to resolve the dispute, the SCC “must undertake, in tandem, the interpretation of provisions” of the Civil Code and Quebec’s Code of Civil Procedure. Together, the two govern the procedure for executing court judgments and set out the rules for seizing a debtor’s property.
The justice noted that the court must consider that when the latest iteration of the CCP was enacted in 2014, the legislature replaced the writ of execution with the notice of execution in the interests of efficiency. Kasirer said the former – a type of court order previously required to seize property – was viewed by many in Quebec “as overly formalistic and involving unnecessary procedural steps for the enforcement of judgments.” Notices of execution, which are filed in court and served on debtors by a bailiff, are meant to be simpler and more efficient.
The justice said that by “resisting the effects” of the bailiff’s notice of execution, the Mohawk Council was effectively arguing “for a return to the formalism that the legislature has plainly sought to reject in the new law.”
When the Civil Code and the CCP are read in light of the Quebec legislature’s intent to increase efficiency with the new CCP, it becomes clear that a notice of execution like the one filed by the professionals “is part and parcel of the seizure as a ‘judicial application’ that interrupts prescription,” Kasirer said.
“The legislature intends to allow for interruption when the simplified notice of execution that begins the seizure is filed in court and served on the debtor.”
While the bailiff did not follow through with seizing the council’s property, the seizure was never formally dismissed by a court, the justice said, “so it cannot be said that the interruption of prescription was retroactively deemed to have never occurred.”
Kasirer added, “As the Court of Appeal wrote, ‘the situation should be considered as an unsuccessful seizure, which interrupted prescription as the respondents clearly expressed their intention to obtain payment of the sums that are owed to them by the appellant.’”
Nicholas Dodd, a lawyer with Montreal-based firm Dionne Schulze who represented the council, told Canadian Lawyer on Friday he was disappointed with the SCC’s decision. He focused on the court’s prioritization of efficiency over formalism, as indicated in its discussion of the Quebec legislature’s intentions for the new CCP.
The decision said “that we’ve moved away from focus on formalism, we’re more flexible now, and we want to be purposive, which usually I think everyone agrees with,” Dodd says. “But here the formalism is also protection.
“Second only to criminal law and the threat of imprisonment, the seizure and sale of your property is the most draconian our law gets,” he adds, “And the reason that formalism is important in those circumstances is because the formalism is protection for people who are at risk of losing a huge amount of their property and livelihood.
“I'm disappointed that that kind of concern with the protection of debtors is not reflected in the judgment.”
Dodd notes that his client is financially struggling, but unlike many other entities, Indigenous band councils likely cannot seek relief under the Bankruptcy and Insolvency Act. In a factum submitted to the SCC, Dodd and his co-counsel cite a 2014 article finding that the Bankruptcy and Insolvency Act’s definition of a “person” who can become bankrupt and therefore seek insolvency relief likely does not encompass bands.
“Because the band council can’t declare bankruptcy, it’s stuck with this debt that keeps getting bigger and bigger and bigger with no exit in sight,” Dodd says. “That’s why we have to fight on these levels because the other option is essentially financial extinction.”
Counsel for the creditors did not respond to a request for comment.
