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Equity - Assignment

. First v. Fillion

In First v. Fillion (Ont CA, 2020) the Court of Appeal considered a case involving equitable assignment involving personal injury funded by litigation investors. The appellant was a litigation investor:
[16] The motion judge did not make an express finding that the Agreement and the Irrevocable Directions constituted equitable assignments of the settlement funds. However, it is implicit from the manner in which she resolved the priority issue that she considered both to be equitable assignments.

[17] The appellant argues that the motion judge failed to consider binding authority from this court as to what is required to make an equitable assignment and that her interpretation of the Agreement and the Irrevocable Directions is accordingly not owed deference. It submits that, considering the applicable jurisprudence, only the Irrevocable Directions are equitable assignments, and, therefore, the appellant has priority. In the alternative, relying on Bank of Montreal v. Union Gas Co. of Canada Ltd. (1969), 1969 CanLII 257 (ON CA), 7 D.L.R. (3d) 25 (C.A.), citing Dearle v. Hall (1828), 38 E.R. 475, it submits that the motion judge erred by determining priority by the order of execution of the Agreement and the Irrevocable Directions, rather than by considering the order of notice given to McNally Gervan.

[18] We agree with the appellant that the motion judge erred by failing to consider what is required to make an equitable assignment and that, having regard to what is required, only the Irrevocable Directions are equitable assignments. The appellant, as an equitable assignee based on the Irrevocable Directions, has priority over Mr. First, as a judgment creditor. Accordingly, it is not necessary to consider whether, as the appellant argues, when the funds at issue have not been paid over, priority of equitable assignments is determined by the order of notice given to the person holding the funds, rather than by the order of the assignments.

[19] This court has described the law of equitable assignment as follows, in Thibodeau v. Thibodeau, 2011 ONCA 110, 104 O.R. (3d) 161, at para. 57, citing the House of Lords in Swiss Bank Corp. v. Lloyds Bank Ltd., [1981] 2 All E.R. 449 (H.L.), at p. 453, quoting Rodick v. Gandell (1852), 42 E.R. 749, at p. 754:
an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by the debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor, will create a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers.
[20] Equity does not require a particular form to effect a valid assignment. But whatever form is used must clearly show an intention that the assignee is to have the benefit of the debt or chose in action assigned: Nadeau v. Caparelli, 2016 ONCA 730, 132 O.R. (3d) 729, at para. 19. [Emphasis added.]

[21] The motion judge did not consider the requirement that the Agreement must clearly show an intention that Mr. First was to have the benefit of the settlement funds. Indeed, she found that the Agreement “could certainly have been drafted more clearly”. We agree with the motion judge that the Agreement does not clearly show an intention that Mr. First was to have the benefit of the settlement funds. Rather, it provides that the monies payable under the Agreement became due and payable on the later of September 15, 2015 or “the day on which all claims made by Andre Fillion for compensation for losses sustained by his personal injury are resolved or settled”. If the action settled before September 15, 2015, Mr. Fillion had the benefit of the settlement funds. The Agreement did not direct him to pay the monies he owed Mr. First out of the settlement funds.

[22] In contrast, the Irrevocable Directions required Mr. McNally to pay any and all sums owing to the appellant “immediately upon receipt by him/her or his/her law firm of all or any portion of the Settlement Funds and to make the aforesaid payment in priority to any other payment out of the Settlement Funds, saving and excepting any payment to my solicitor or his/her law firm”. This language clearly shows an intention that the appellant was to have the benefit of the settlement funds.

[23] Moreover, a direction by an assignor to a person holding funds of the assignor to pay the funds over to a third party has been recognized as “an instance of a good equitable assignment”: Bitz, Szemenyei, Ferguson & MacKenzie v. Cami Automotive Inc., 1997 CarswellOnt 2309 (Gen. Div.), at para. 21. This is also true of a direction to pay a portion of a specified fund: Bitz, at paras. 17, 19.

[24] We note that the motion judge did not rely on the garnishment process as a basis for according priority to Mr. First, and we agree with her that the garnishment process does not assist Mr. First. Rule 60.08(1) of the Rules of Civil Procedure provides:
A creditor under an order for the payment or recovery of money may enforce it by garnishment of debts payable to the debtor by other persons. [Emphasis added.]
[25] Mr. First could use the garnishment process against McNally Gervan only if it were an “other person” with a “debt payable” to Mr. Fillion. The settlement funds are monies owed to Mr. Fillion by the defendant in the action which Mr. Fillion directed be paid first to McNally Gervan in trust and then to the appellant in accordance with the Irrevocable Directions. Once those amounts are paid, there will be no balance remaining and no amount that could be argued is a garnishable debt: Richter LLP v. Big Truck TV Productions Inc., 2015 ONCA 567, 127 O.R. (3d) 314.


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