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THE UNIVERSITY OF BRITISH COLUMBIA

FACULTY OF LAW

FINAL EXAMINATION
APRIL 2018

LAW 443
CREDITORS REMEDIES

SECTION 1
PROFESSOR EDINGER

TOTAL MARKS — 100

TIME ALLOWED —3 HOURS pIus 10 minutes reading time.

This is an open book examination. You may bring into the examination room and use
the casebook, the statutory materials and your notes.

If you require any further information to solve the problem, state what information is
required and why you need it.

THIS EXAMINATION CONSISTS OF 3 QUESTIONS

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MARKS

30 1. Donald Drake has three sons, Huey, Dewey and Louie.

Huey incorporated a company in California for the purpose of importing

water by tanker from British Columbia for sale in California. Huey
negotiated a loan from Citibank in California in the amount of $3.5m
Canadian to cover the startup costs of the business. He persuaded his
father, Donald, to guarantee the loan. Unfortunately for Huey, British
Columbia enacted a law prohibiting the export of water from the province,
leaving Huey’s business high and dry. Huey’s company defaulted on the
loan to Citibank.

Citibank obtained a judgment in California against Huey’s company and the

guarantor, his father Donald. Both were served with California process but
neither appeared because neither had any defence. Because Citibank
anticipated a dry judgment against Huey’s company, it had already started
making inquiries about Donald.

Donald is actually Dr. Drake, an eminent member of the medical profession

in British Columbia. As medical practitioner, Dr. Drake receives payments
for his services pursuant to a provincial statute. He is also an Adjunct
Professor (a part-time professor) in the Faculty of Medicine at UBC where
he holds a major research grant from NSERC. The grant was originally for
$5m but Dr. Drake has been using the grant for two years and has spent
$2.5m on equipment and salaries. The equipment is located and used in
the laboratory at UBC.

When Dr. Drake was first married, his only income was derived from his
medical practice and the practice payments are still deposited into an
account held jointly with his wife. His bimonthly U.B.C. salary, however, is
directly deposited to an account in his name alone and in a different bank.

Despite their recent failure to make the playoffs, Dr. Drake continues to be
a Canuck fan. He has had season’s tickets for years and now leases a box
at Rogers Arena on a renewable annual basis. In recent months, the doctor
was persuaded by colleagues to acquire a one quarter interest in a race
horse, alleged to be very promising. In fact, the horse won its first race last
month. Dr. Drake was so delighted that he donated his considerable
winnings to charity. He regularly buys lottery tickets.

As his sporting interests indicate, Dr. Drake is a bit of a gambler. Citibank

knows nothing about his investments but has learned that he uses a broker
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at the Global Securities offices in Vancouver. Citibank also believes that

Dr. Drake has invested heavily in bitcoin.

Citibank retains you. Advise Citibank how it should proceed in order to

obtain payment from Dr. Drake, if he declines to pay the California
judgment voluntarily.

20 2. In a judgment in a contested Mareva injunction, Sharpe JA stated, “The

moving party must state its own case fairly and must inform the Court of
any points of fact or law known to it which favour the other side.”

To what British Columbia enforcement processes, if any, does that

proposition apply? What consequences ensue if the moving party fails to
discharge the obligations set out by Sharpe JA? Explain with reference to
any relevant case law.

3. Answer questions (a), (b) and (c), set out at the end of the fact pattern.

Bill, divorced from Hillary and now married to Monica, lives on a 50 acre
farm inherited from his father in the Okanagan area of British Columbia. In
recent years, droughts and untimely frosts have caused crop damage and
Bill has been sliding into debt. During this period also, the farmhouse was
destroyed by fire and Bill has been engaged in litigation with the insurance
company. The insurance company has finally made an offer to settle and
paid monies into court. Bill has not yet accepted the offer but is about to
do so. However, anticipating that the insurance company would pay up on
the policy, Bill took a second mortgage on the farm over a year ago so he
could commence rebuilding. Construction has just commenced.

Bill and Monica are now living in a manufactured (or mobile) home on the
farm. The mobile home has been hooked up to the water and electricity
lines and to the septic tank (the farm not being on any sewer line) and is
very comfortable. Title to the farm, retained by Bill when he divorced
Hillary, is held jointly by BiJl and Monica but the mobile home is in Bill’s
name only.

The crop failures and the cost of rebuilding have generated creditors.
Some have already obtained judgments against him and registered their
judgments against title. Charges on title are listed below.
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March 2006 A mortgage for $50,000 in favour of Canada Trust,

now nearly paid off.

October 2015 A judgment in favour of creditor A for $70,000

August 2016 A judgment in favour of creditor B for $4,500

December 2016 A construction mortgage for $250,000 from the

Bank of Montreal, payable in instalments.

January 2017 A judgment in favour of creditor C for $10,000

May 2017 A judgment in favour of Hillary who has received no

support payments from Bill for the last eighteen
months. He is supposed to pay her $3500 per
month.

January 2018 A judgment for $19,000 in favour of the Director of

Employment Standards on behalf of D and E, Bill’s
employees, who complained to the Director of
Employment Standards who issued a certificate and
filed it in British Columbia Supreme Court.

30 (a) Creditor C retains you. He wants to be paid. Advise him whether he can
commence an action for sale of the land under the Court Order
Enforcement Act and whether he has any other options. Describe the
process for an execution sale of land and, assuming that there will be a
shortfall, advise him how the proceeds will be distributed.

10 (b) Advise Bill about any options he may have or exemptions he may claim
with respect to the sale of the farm. The farm has been in the family for
two generations and he believes that Monica will leave him if he loses the
farm.

10 (c) Advise two other creditors, F and G, who have recovered judgments
against Bill but have not yet registered judgments against Bill’s title to land,
whether they will be paid anything if the farm is sold.

END OF EXAMINATION