Judgment Funds Held in Court Against a Pending Set-Off

The Dispute

Two former spouses had been through a trial and an appeal, and the result left one of them owing the other a sum in the low six figures. That money was paid into court rather than to him, and it stayed there while the litigation continued. He needed it to pay for the case and to keep his home, and a further hearing on the same funds was two weeks away.

The Parties’ Positions

The judgment creditor applied for payment out of the funds held in court, relying on Rule 22-5 of the Supreme Court Family Rules, which governs money in court, and on the inherent jurisdiction of the court. He acknowledged that the application had no direct precedent on this fact pattern, and framed it as an application for an equitable charging order, a form of equitable execution the court may make against money held in court. His footing was that he alone held a present claim to the funds, the judgment debtor’s claim being hypothetical until it was tried. Payment out would let him fund representation at the coming hearing and meet the costs already incurred.

The judgment debtor resisted the application and asked that it be dismissed or adjourned to the trial. She submitted, primarily, that payment out would defeat the entire purpose of the trial listed two weeks later, at which she had leave to seek orders that amounts owing to her be set off or deducted from the same funds. She relied on authority in which the court required money held in the litigation to be paid as security for support, framed on section 12 of the Federal Child Support Guidelines, which permits an order for security for child support. In the alternative she contended that the applicant was seeking to re-litigate an application already dismissed, an earlier order having refused him permission to pursue execution of the same sum at her expense.

The Court’s Decision

The Supreme Court of British Columbia declined to exercise its discretion to make the order sought. It confirmed the jurisdiction to make an equitable charging order against money held in court, treated its exercise as discretionary, and found that the balance of fairness lay with the judgment debtor on this record. Paying the funds out two weeks before the trial would, the court held, undermine and indeed defeat applications for which leave had already been granted and which therefore had to be allowed to proceed. The court declined to accede to the alternative submission that the applicant was re-litigating a dismissed application, and it stated expressly that it was not dismissing the application but adjourning it to the trial. Special costs were refused and costs ordered in the cause, so the judgment creditor left the hearing without the funds and with payment out folded into the trial.

Key Lessons for Judgment Creditors and Judgment Debtors

• Record the statutory basis on the face of any order that money be paid into court. The court could not tell whether the payment in had been made under the Court Order Enforcement Act or under the Supreme Court Family Rules, and noted that if the former, Rule 22-5 would not apply.
• Settle the terms of payment out at the same time as the payment in. An indication in submissions that a party may later apply for the funds is not a term of the order, and the applicant here was left seeking a discretionary remedy.
• Do not assume that a final judgment gives early access to money already held in court. Where the other party has obtained leave to claim against the same funds, an application for payment out may be adjourned to be heard together with those claims.
• Plan litigation funding without counting on money held in court. The court expressed a sympathetic appreciation of the applicant’s position and still declined the order, the timing of access to funds in court being a matter of discretion.

The outcome of this application turned on the procedural history of this litigation, the terms of the consent order under which the funds were paid into court, and the leave already granted for the competing applications. A similar application may be decided differently on a different record.

ATAC LAW acts for judgment creditors and judgment debtors in family property and enforcement disputes in British Columbia.

This matter was conducted by Dan H. Griffith, a partner at ATAC LAW, who acted for the judgment creditor on the application.