Ontario utilizes a "loser pays" legal system in which
the losing party is usually ordered by the court to pay a portion
of the successful party's legal fees. As a result, regardless
of who wins, someone ends up with a piece of paper requiring the
other party to pay money.
Assuming that the losing party does not voluntarily cut a
cheque, a bank garnishment ought to be the most
straightforward and direct means to collect. I emphasize the word
Put simply, once a bank is served with a Notice of Garnishment
it is required to seize any funds the debtor holds at the bank and
pay those funds (up to the amount owed to the creditor) to the
sheriff. Ultimately the sheriff hands the money over to the
The catch is that in order to garnish the account, the creditor
must serve the Notice of Garnishment at the branch where the debt
is payable. If the creditor does not know the branch location then
they are out of luck.
For example, the debtor may have $1 million dollars in a savings
account at TD Canada Trust. However, if the creditor serves the
Notice of Garnishment at the main branch, and the debtor's
"branch of account" is actually a different branch just
around the corner from the main branch, then the bank is not
required to garnish and pay the funds over to the sheriff.
From a practical perspective, this means that if the creditor
does not have any banking information for the debtor they have
The creditor can require the debtor to attend an examination and
disclose his/her banking information. However, debtors often fail
to show at these examinations and when they do they are often not
very forthcoming. The result is more time and money wasted while
the creditor returns to court to compel proper answers.
The creditor could also take a shot-gun approach and try to
garnish different branches. While this may work in small rural
areas, in larger urban centers there can be hundreds of bank
branches which makes this approach cost prohibitive.
All of this got me to thinking, why on earth is it necessary to
locate a specific bank branch. The answer, it seems, was that this
was initially required to make lives easier on the banks!
from 1981 discusses why the Bank Act created this
requirement. At paragraph 32 the court states
"The subsection was necessary to protect the bank
against garnishing orders issued, say, in Victoria when there was
an account, say, in Halifax. The bank would be bound, upon
receiving each garnishing order, to search the records of every
branch in Canada and probably out of Canada, a quite impractical
proposition. What need be done now is to search only the branch at
which the garnishing order is served. If there is found to be
neither property in the possession of the bank belonging to the
person garnisheed nor moneys to the credit of that person, the bank
need not search further."
I agree that in 1981 having a bank search the records of every
branch in Canada was likely "a quite impractical
proposition". However, over 30 years later one has to think
that banks could, from a central location (or any location for that
matter), easily search all of their records to see if the debtor
has any accounts at any branch across the Province or Canada.
A simple amendment to s. 462 of the Bank Act could
radically improve the way that litigants are able to recover sums
of money that the courts have awarded to them.
Instead of hunting for specific branches, litigants could easily
take a shot-gun approach and serve all of the major banks.
Recovery prospects would increase dramatically. Enforcement
costs would be reduced drastically given that litigants would only
be paying fees associated with issuing 5 Notices of Garnishment as
opposed to 500.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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