Garnishment can be a powerful debt collection method by which a creditor can satisfy a judgment it obtains against a debtor. It is commonly used in the context of employment, where a debtor’s employer must turn over a portion of the debtor’s wages to the creditor. However, it can also be used in other contexts where a third party owes money to the debtor. In some circumstances, the third party may have reason to contest the garnishment, and this post will also discuss the nuances of that process.

How Does the Garnishment Process Generally Work?

The garnishment process is primarily governed by Rule 60.08 of the Rules of Civil Procedure. Generally speaking, to initiate the process, a creditor who has obtained judgment (or another order) must file a copy of it with the Court together with an affidavit that sets out a variety of information such as the name and address of the person or business upon whom a notice of garnishment is to be directed, also known as a “garnishee” (see Rule 60.08(4)). The creditor must also fill out a “Notice of Garnishment” to be submitted with the affidavit, setting out information related to the garnishee. That notice will remain valid for six years from the date of issue, subject to renewal as set out in the Rules.

Service of the Notice of Garnishment

The Court will then return the submitted Notice of Garnishment to the creditor so they may serve it on both the debtor and the named garnishee. The Notice must be served on the debtor with the affidavit filed with the Court, while the Notice must be served on the garnishee with a blank “Garnishee’s Statement.” Service can be through a variety of methods named in the Rules, including ordinary mail. Creditors should consult the Rules to ensure they comply with the nuances of the process.

Once the Notice of Garnishment is served on a garnishee, they become liable to pay to the sheriff “any debt of the garnishee to the debtor” within 10 days of service or, if the debt is not then payable, 10 days of the date it becomes payable. The amount of this liability is up to the amount shown on the Notice of Garnishment or any supplementary notice, less a small amount for the cost of making the payment. There are other exceptions to this liability set out in the Rules.

Payment of the Garnished Amount

A garnishee that pays the garnished amount to the sheriff in accordance with the Notice of Garnishment will have their liability validly discharged as between the garnishee and the debtor to the extent of the payment. Garnishees must be careful to make sure the payment is made to the appropriate party; otherwise, they may remain liable (see Rule 60.08(18)).

Specific rules apply to the amount that may be garnished from a debtor’s wages. These rules are set out in the Wages Act. For example, section 7 of that statute provides that 80% of a person’s wages are exempt from garnishment, except where the garnishment is in enforcement of an order for support or maintenance, in which case only 50% are exempt. These amounts are subject to adjustment by a court.

Contesting a Notice of Garnishment

Under Rule 60.08(15), a garnishee who wishes to dispute a garnishment must complete a “Garnishee’s Statement” setting out the particulars of that dispute. This must be filed with the court and served on the creditor and debtor within ten days of service on the garnishee of the Notice of Garnishment.

If a garnishee disputes a garnishment, they must do so in accordance with the Rules since non-compliance may permit the creditor to seek an order against the garnishee directly (see Rule 60.08(17)).

The Court of Appeal outlined the law applicable to Garnishee’s Statements in Benzcar v. Terk in 2023. These principles include the following, as summarized in CIBC v. Berkovits:

• If a garnishee fails to serve a Garnishee’s Statement as required, the creditor is entitled to an order for payment by the garnishee “of the amount the court finds is payable by the debtor to the garnishee, or the amount of the notice, whichever is less”;
• If a Garnishee’s Statement is “materially false without reasonable justification,” it may be treated by a court as being equivalent to no statement at all;
• In considering whether a Garnishee’s Statement is “materially false without reasonable justification,” a court must assess the statement as a whole, “taking into account what it says and what it omits to say on the subjects the statement is required to address”; and
• A Garnishee’s Statement must include what is owed to the debtor by the garnishee and what the garnishee will owe to the debtor “because of arrangements existing when the garnishment notice is served”.

It should be noted that a court’s powers regarding garnishee orders are discretionary. A court has the discretion to refuse an order “where the attachment of the debt would work inequitably or unfairly or cause prejudice or injustice to some person or persons other than the judgment creditor” (see 20 Toronto Street Holdings Ltd. v. Coffee, Tea or Me Bakeries Inc.).

What if the Garnishee Doesn’t Respond?

In the recent case of RBC v. El Hossaini, the Superior Court of Justice considered the effect on a garnishee’s liability of that garnishee’s failure to respond to either a Notice of Garnishment or a motion for an order requiring them to pay an amount to a creditor. The plaintiff, RBC, obtained a judgment against the debtor, El Hossaini. RBC served a Notice of Garnishment on H&M Flooring Inc., the garnishee. The garnishee did not file and serve a Garnishee’s Statement, and RBC brought a motion seeking to require H&M Flooring Inc. to pay the full amount of the judgment.

RBC brought forward affidavit evidence, including a skip trace report, in support of its motion; however, the Court noted flaws in the evidence. RBC argued that the debtor’s brother owned the garnishee and that the debtor was paid by the garnishee occasionally. This evidence was largely hearsay. The Court indicated that the spelling of the surname of the debtor and the brother was not the same and refused to draw an adverse inference against the garnishee.

Most significantly, the Court confirmed that the Rules “do not call for a presumption that a failure to respond to a garnishment notice means that the full amount claimed is owed by the garnishee to the debtor.” Instead, as the Court observed, it must “determine the amount owed to decide whether it is more, less, or the same as the amount claimed in the notice of garnishment.”

Thus, the failure of a creditor to serve a Garnishee’s Statement does not automatically entitle the creditor to the full amount claimed in the Notice of Garnishment.

Milosevic & Associates: Providing Strategic Debt Recovery Services in Toronto

At Milosevic & Associates, we assist businesses in pursuing legal remedies to recover outstanding debts. Our team provides strategic advice on the likelihood of successful recovery, conducts thorough reviews of debtor history, and enforces both Ontario and foreign judgments. Our dynamic debt collection lawyers are experienced in enforcement processes, including conducting examinations in aid of execution, garnishing wages and bank accounts, securing writs of seizure and sale, and registering liens.

We also obtain injunctions and other urgent court orders to freeze assets, block fund transfers, stop real estate transactions, and safeguard our clients’ interests as creditors when necessary. To discuss your debt collection matter, please call (416) 916-1387 or contact us online.