Senthillmohan v Senthillmohan, 2023 ONCA 280

By: Joseph Ma, Articling Student

The Court of Appeal has recently provided clarity on the matter of debt enforcement against a jointly held property in Senthillmohan v Senthillmohan.

The respondents, who are a separated wife and husband, held their matrimonial home as joint tenants. In September 2021, a third-party creditor obtained a default judgment against the husband and subsequently filed a writ against the title of the matrimonial home.

In October 2021, the respondents entered into an Agreement of Purchase and Sale for the sale of the subject property. In order to facilitate the sale, the Judgment creditor agreed to temporarily lift the writ that had been placed. After settling outstanding obligations such as the mortgage, construction lien, and other secured encumbrances, the net proceeds from the sale amounted to approximately $925,000.00.

The wife subsequently filed an urgent motion to sever the joint tenancy in the matrimonial home and was successful. As a result, the respondents held the title to the matrimonial home as tenants in common, which carries important implications for their respective rights and interests in the property.

In February 2022, the wife brought a motion seeking the release of her 50% portion of the net proceeds from the sale of the matrimonial home. The Judgment creditor opposed the release of the sale proceeds on the basis that the writ was attached to the interests of both the husband and wife and claimed that the wife’s interest did not take priority over the writ. Additionally, the Judgment creditor claimed that at the time of obtaining the default judgment and filing the writ, the respondents still held the home in joint tenancy.

The motion judge rejected both of these arguments finding that the wife was entitled to half of the net proceeds from the sale despite the writ. It was determined that the wife’s interest in the property should be given priority, disregarding the creditor’s claims based on the joint tenancy status of the respondents at the time of the default judgment and writ filing. Consequently, the wife was granted her share of the net proceeds of the sale.

The Judgment creditor appealed the decision on the basis that the motion judge, inter alia, erred in determining that the wife had priority entitlement over the appellant’s writ and erred by failing to consider that the writ attached to the full proceeds of a voluntary sale of the jointly owned home. The Court of Appeal dismissed the appeal and held that the Judgment creditor could not seize the interest of a joint tenant who is not a debtor.

In reaching this conclusion, the Court referred to the precedent in Royal & SunAlliance and emphasized that the fundamental characteristics of joint tenancy, which include the unity of title, unity of interest, unity of possession and unity of time, do not automatically justify a creditor’s right to claim the entire property when the debt itself is not jointly held. Furthermore, with reference to s. 9(1) and 10(6) of the Execution Act, the Court held that a creditor can only claim against the debtor’s exigible interest in the land held in joint tenancy. This sets a clear precedent that protects non-debtor joint tenants from having their interests in a property subject to creditor claims.

It is important to understand that the judgment not only safeguards the rights of non-debtor joint property owners, but also serves as a crucial reminder to Judgment creditors regarding the boundaries of their claims. The Senthillmohan decision firmly reinforces the principle of proportionality in debt enforcement. It underscores the significance of honouring the distinct interests and rights of joint tenants regardless of whether one of the tenants is indebted. The ruling emphasizes that creditors must operate within the confines of the relevant legal framework governing debt enforcement. Creditors cannot overreach by attempting to seize the entire property solely based on the joint tenancy status. This decision serves as a crucial reminder to creditors that they must respect the individual rights and limitations associated with jointly held properties when pursuing debt collection efforts.