Using the Interim Order for Preservation: Rule 45.01(1)
Rule 45.01(1) allows litigants to obtain an interim Order on any property in question in a proceeding or relevant to an issue in a proceeding. Though the rule is not extensively used, it does provide a litigant another tool in the toolbox to ensure their judgment is not more worthless than the paper it is written on.
A recent case provides some guidance on how to apply the rule. Following is a brief of that case.
This is a construction lien litigation wherein the plaintiff registered a lien on title. The defendant defended and raised a counterclaim.
The matter proceeded in the ordinary course. A trial was held and a “report” was issued. The report held that the defendant must pay into court within 30 days the lien amount plus 25%. The defendant opposed the confirmation of the report. While this was going on, the plaintiffs’ scrupulous lawyers discovered the defendant was attempting to sell the liened property. Though I am not sure how successful he would be given there is a lien on the property.
Rule 45.01 Motion.
The plaintiffs brought a motion for an order to preserve the proceeds of any sale of the liened property.
The Court began by laying out the leading case on the interpretation of Rule 45.01(1), which is the decision in BMW Canada Inc. v. Autoport Limited. In that case, the defendant brought a motion to require the plaintiff to continue to store inventory, which in that case were cars, until the disposition of the matter.
The Court went on to apply the test that was applied in BMW Canada Inc. which was a three-pronged test:
1) the asset sought to be preserved constitutes the very subject matter of the dispute;
2) there is a serious issue to be tried regarding the plaintiff’s claim to that asset; and
3) the balance of convenience favours the relief sought.
The facts of the case at bar had a twist. It appears the plaintiff was more concerned about the significant cost award which was greater than the actual successful lien claim. The defendant argued there was no connection between the property the defendant sought to sell and the cost award to justify an Order under Rule 45.01.
The Court rejected this argument and held that a preservation Order under Rule 45.01(1) concerning any proceeds of the sale of the property to the extent of the lien, costs and interests is available to the plaintiffs.
The Court reasoned that the report created the connection between the costs and interest to the lien claim. Further the plaintiff failed to post security in any case to remove the lien, this coupled with the fact that the defendant sought to sell the property while the report was issued, indicates the defendant sought to render out of reach the proceeds of the sale to satisfy plaintiffs’ lien, costs and interest.
This was being done while the defendant sought to oppose the confirmation of the report.
The Court viewed there was a serious issue to be tried on the plaintiffs’ claim on the proceeds of the sale. This was borne out of the Court’s report.
Lastly, the Court found the balance of convenience favours the relief sought. The impact on the defendant would be minor as the sale can proceed so long as the $220,000 of the proceeds of the sale are paid into the court.
The plaintiff was successful in ensuring the proceeds of the sale were to be paid into Court while the opposition of the report was underway. Rule 45.01 provides a way for plaintiffs to ensure monies are not shifted out before it can start enforcing their judgment.