Consolidated Civil Enforcement Inc v Shipalesky, 2022 ABKB 718

Court of King’s Bench of Alberta Citation: Consolidated Civil Enforcement Inc v Shipalesky , 2022 ABKB 718 Date: 20221027 Docket: NA03 00004 Registry: Edmonton IN THE MATTER OF THE Civil Enforcement Act; AND IN THE MATTER OF a seizure on behalf of John Deere Financial Inc. Between: Consolidated Civil Enforcement Inc.

Applicant - and - Callie Patricia Shipalesky and Donald Alfred Shipalesky Respondents _______________________________________________________ Reasons for Decision of the Honourable Justice Kevin Feth _______________________________________________________ [ 1 ] Callie Patricia Shipalesky acquired a John Deere Compact Track Loader under a lease agreement with a purchase option. She defaulted under the agreement leaving an outstanding debt owing to John Deere Financial Inc. (“John Deere”) of approximately $41,500.

Through the lease agreement, John Deere holds a registered security interest in the Loader. [ 2 ] Consolidated Civil Enforcement Inc. (“Consolidated”), an Alberta civil enforcement agency, was retained by John Deere to seize the Loader in accordance with secured creditor’s rights under the Personal Property Security Act , RSA 2000, c P-7 .

[ 3 ] To effect the seizure, Consolidated applies for a “permanent injunction” directing Ms. Shipalesky, as the secured debtor, and her father, Donald Alfred Shipalesky, to reasonably assist and co-operate with its efforts to locate, seize and remove the Loader. [ 4 ] Consolidated also seeks a forced entry Order allowing the agency and any bailiff on its behalf to seize and remove the Loader from an indeterminate location.

The forced entry Order (sometimes called a “break and enter” Order) would authorize Consolidated and any bailiff on its behalf to break into and enter any location or the premises of any person to seize and remove the Loader. [ 5 ] These requests initially came before me as a Desk Application and are brought without notice to Callie and Donald Shipalesky or any other potentially affected person.

According to Consolidated’s legal counsel, the requests and the lack of notice are consistent with a broader practice followed by this civil enforcement agency. [ 6 ] The application and the wider practice it supposedly represents raise several concerns. Concerns about the absence of notice [ 7 ] Consolidated relies on s 5 of the Civil Enforcement Act , RSA 2000, c C-15 (“the Act ”) for the relief sought. However, s 5 prescribes in relevant part: 5

(1) The Court may, on application by an interested party or an agency [including a civil enforcement agency], give directions in respect of or determine any matter or issue that arises out of any civil enforcement proceedings.

(1.1) An application under this Act (

a) must be made by way of an application to the Court, and (

b) shall not be made ex parte unless it is expressly authorized under this Act or the Alberta Rules of Court to be made ex parte . [ emphasis added ] [ 8 ] No reasons were given in the Desk Application for the lack of notice. Counsel for Consolidated was directed to appear before me. Consolidated now submits that the Court should dispense with service, relying on Rule 6.4 of the Alberta Rules of Court , Alta Reg 124/2010 (“ Rules ”): 6.4 Despite any other rule to the contrary, notice of an application is not required to be served on a party if an enactment so provides or permits or the Court is satisfied that (

a) no notice is necessary, or (

b) serving notice of the application might cause undue prejudice to the applicant. [ 9 ] Consolidated argues that the additional expense of serving the Respondents with notice of the application and the possibility that they might evade service is undue prejudice.

I disagree. [ 10 ] Applications without notice (formerly ex parte applications) are extraordinary because they offend the fundamental principle that a party has the right to be heard before their rights are negatively affected: Secure 2013 Group Inc v Tiger Calcium Services Inc , 2017 ABCA 316 at para 41 [ Tiger Calcium ] . [ 11 ] The circumstances in which a court will hear such an application “are exceptional and limited to those situations in which the delay associated with notice would result in harm or where there is a fear that the other party will act improperly or irrevocably if notice were given”: Ruby v Canada (Solicitor General) , 2002 SCC 75 at para 25 ; Tiger Calcium at para 41 .

Clear and compelling evidence is required to explain the harm that will be done by giving notice or waiting until notice can be given. [ 12 ] Section 5(1.1) of the Act aligns with these principles. [ 13 ] The limited record before me indicates that a bailiff recently communicated with Ms. Shipalesky by telephone and then in person at her apartment in Spruce Grove, Alberta. The debtor said the Loader was “stuck in the mud at a customer’s place”, but she was not prepared to disclose the specific location. She told the bailiff that she had found new employment and would now be able to pay for the Loader.

The evidence does not establish that she has been evasive about her own whereabouts. [ 14 ] Consolidated’s application is supported by an Affidavit from its Division Supervisor of Vehicle and Equipment Recovery who asserts that Ms. Shipalesky is now unlikely to answer her door for any bailiff because she is aware of Consolidated’s involvement. No specific facts are adduced to support this assertion. While some debtors undoubtedly avoid collection agencies and bailiffs, no evidence is offered to show that the generalization applies to Ms. Shipalesky.

The assertion is pure conjecture. [ 15 ] The debtor’s father is not a party to the lease agreement nor liable for the debt. He appears to be a stranger to the dispute between his daughter and John Deere.

Nothing in the evidence indicates that Consolidated has attempted to serve him with notice of anything or that he has been evasive about his whereabouts. [ 16 ] The marginal additional expense of serving the Respondents is not undue prejudice. [ 17 ] No evidence is presented that delay caused by serving the Respondents will result in harm or that the debtor will act improperly or irrevocably to the prejudice of the secured creditor. To the contrary, Consolidated’s counsel submits that if the proposed Order is granted, no enforcement steps will be taken for at least one week after the Respondents are served.

The concession is made to

provide some comfort that the Respondents will not be ambushed by enforcement efforts, resulting in conflict. However, the concession reveals the lack of urgency and Consolidated’s acknowledgement that service in some manner is possible. [ 18 ] The lack of notice is especially troubling because the proposed injunction would compel the debtor and her father to take positive action, including to “deliver up possession” of the Loader, “disclose the specific whereabouts” of the Loader, and “fully assist and co-operate” in delivering up possession.

In effect, the Respondents would be subject to the extraordinary remedy of a mandatory injunction without an opportunity to tell the Court whether the secured debt is still in default, whether John Deere is entitled to possession, whether each Respondent’s ability to fully assist and co-operate is limited in any way, and what the adverse consequences might be of immediately delivering up the Loader on a bailiff’s demand (especially if the Loader is being used by third parties who are unaware of the debtor’s struggles with the secured creditor). Consolidated has not presented an undertaking to indemnify Ms.

Shipalesky or her father for any damages suffered if the seizure is ultimately found to be unjustified. [ 19 ] A direction that a debtor immediately disclose the location of secured property, deliver up possession, and co-operate in transferring possession can be appropriate without notice in various circumstances, including where the applicant demonstrates a substantial risk that the property will otherwise be damaged or concealed.

However, no such evidence is before me. [ 20 ] Directing a person other than the debtor to actively take steps to deliver up possession and to fully assist and co-operate in transferring possession is more problematical.

Some meaningful explanation is required from the applicant for why a stranger to the debt and the lease agreement should be compelled to actively assist – at the risk of being held in contempt of the Court’s Order if the direction is not followed – without a prior opportunity to be heard. [ 21 ] Here, the only evidence about Donald Shipalesky’s involvement is that he shares a common mailing address with his daughter (although she resides elsewhere).

The facts do not show that his daughter stores equipment at his residence or that he ever possessed the Loader. [ 22 ] Notes from a bailiff indicate that the daughter operates a company called “Hotshot Earthworks” and that the “address” for the company is her father’s residence. However, the evidence does not show the company operating from that location. Donald Shipalesky also owns an acreage near Duffield, Alberta, which was visited by a bailiff. The land is fenced and has a gate with multiple locks. A berm obscured the bailiff’s ability to see the entire property.

He did not see the Loader and could not determine what buildings are on the property. A gooseneck flatbed trailer was spotted, but nothing indicates it transported the Loader. [ 23 ] From these meagre facts, the Division Supervisor opined in her Affidavit that the Loader is “likely located” on the father’s land. In my view, that is not a reasonable conclusion to be drawn from the facts, especially since Ms. Shipalesky told a bailiff that the Loader is stuck at a customer’s place. Her father should have an opportunity to be heard before any Order is granted against him.

Compelling him to assist with seizure efforts, cooperate by potentially informing on his daughter, and stand aside while his lands and buildings are forcibly searched infringes on privacy interests, property rights and personal freedoms. [ 24 ] In short, both Respondents should be given notice of this application. Concerns about a permanent injunction [ 25 ] The application seeks a “permanent injunction” rather than an interlocutory injunction. Both Respondents would be directed to take “all reasonable steps to enable [Consolidated] and/or any bailiff on its behalf to seize and remove” the Loader.

No time limit is imposed. The obligation continues indefinitely until the Loader is found, seized and removed. [ 26 ] The application does not address the relevant factors in considering a permanent (perpetual) injunction: Nalcor Energy v NunatuKavut Community Council Inc , 2014 NLCA 46 at paras 46-72 ; Liu v Hamptons Golf Course Ltd , 2017 ABCA 303 at paras 17- 18 . [ 27 ] No justification is offered for directing final relief against the Respondents without ever hearing from them. They would have no opportunity to address the injunction’s legitimacy or scope.

The effect would be to exclude the Respondents’ evidence and perspectives while immunizing the injunction from any subsequent review by the Court. [ 28 ] The procedural unfairness is plain. [ 29 ] As for the merits, Consolidated asks the Court to make an Order granting injunctive relief relying on s 5(2) of the Act .

However, even if such an application could be heard without notice, Consolidated does not explain why a stranger to the debt and the lease agreement – like the debtor’s father – is subject to a duty to actively assist the agency or a bailiff in seizing or removing the personal property from any location or to provide information about its location. The evidence does not demonstrate, for example, a reasonable likelihood that Mr.

Shipalesky ever possessed the Loader or actively participated in concealing it, nor are family members compelled to be informants merely because that facilitates civil enforcement. [ 30 ] Moreover, the application is brought on hearsay evidence rather than personal knowledge.

Rule 13.18(3) of the Rules directs that an affidavit used in support of an application that may dispose of all or part of a claim “must be sworn on the basis of the personal knowledge of the person swearing the affidavit.” Consolidated relies on the Affidavit of the Division Supervisor whose evidence is derived from a review of hearsay documents.

The agency fails to explain why a final determination of rights should be made and a permanent remedy imposed without the best evidence. [ 31 ] The application could be structured as a request for an interlocutory injunction, either on notice or in the event of undue prejudice, subject to further review before the Court. If a temporary injunction is granted without notice, the Order should be “limited to the shortest time possible so that notice can be given to the parties affected by it”: Tiger Calcium at para 167 quoting from Robert J.

Sharpe, Injunctions and Specific Performance , (Aurora, Ont: Canada Law Book, 1998).

Concerns about the forced entry authority [ 32 ] The Act allows a bailiff to enter any location or premises of a debtor for the purposes of carrying out the seizure and the removal of the debtor’s property: s 13(2)(a). However, if the premises are the debtor’s residence, the bailiff shall not:

a) enter the residence except in the presence of a person whom the bailiff believes to be an adult living in the residence,

b) enter the residence after entry has been refused, or

c) use force to gain access, unless authorized to do so by Court order: s 13(2)(c). [ 33 ] The Act also prescribes that where a bailiff has reasonable grounds for believing that a debtor’s personal property is located at a location or in premises of a person other than the debtor (i.e. a third party), the bailiff has the right to enter that location or those premises for the purposes of carrying out the seizure and/or the removal of the debtor’s personal property: s 13(2)( a.1 ). However, in those circumstances, the bailiff shall not:

a) enter or attempt to enter the location or premises after entry has been refused, or

b) use force to gain access to the location or premises, unless authorized to do so by Court: s 13(2)(b). [ 34 ] Further, if the location is the third party’s residence and entry has not been refused, the bailiff shall not enter the residence except in the presence of a person whom the bailiff believes to be an adult living at the residence, unless otherwise authorized by Court order: s 13(2)(c). [ 35 ] These “forced entry” powers must be exercised by a bailiff.

Section 2 (

g) of the Act directs that in carrying out civil enforcement proceedings, the rights, duties and functions of bailiffs “must be exercised or discharged in good faith and in a commercially reasonable manner.” A bailiff means a civil enforcement bailiff appointed under

Part 2 of the Act by a sheriff. Bailiffs are regulated by the Act and the Civil Enforcement Regulation , Alta Reg 276/95 and must comply with the Code of Conduct for Civil Enforcement Bailiffs . A bailiff enjoys the protections afforded to a peace officer under the Criminal Code of Canada but is not appointed as a peace officer under the Peace Officer Act , SA 2006, c P-3.5 : see also Civil Enforcement Procedure Manual , Alberta Justice Court Services, revised March 8, 2021 at 1.2. [ 36 ] The Order sought by Consolidated omits many of the statutory safeguards.

Instead, the proposed wording merely reads: ... for the purposes of effecting the said seizure and removal, the said enforcement agency and/or any bailiff on its behalf is hereby authorized to use reasonable force, including the breaking open of any door of any location or premises of any person, including any garage attached to a residence, but not the residence itself unless for the purpose of accessing a garage with no man door and with a vehicle entry door that cannot be opened from the outside. [ 37 ] The proposed Order is deficient in at least the following respects: (

a) Entering a third party’s location or premises is not conditional on reasonable grounds for believing that a debtor’s personal property is located there, nor is a bailiff required to hold that belief; (

b) The civil enforcement agency is given the option and authority to forcibly enter the location or premises of either a debtor or third party in lieu of using a bailiff. Granting that authority to a person who is not a bailiff offends ss 9(4) and 10(2) of the Act ; (

c) The agency and/or bailiff is not directed to exercise this authority in good faith and in a commercially reasonable manner; and (

d) No constraints are imposed on the reasonable force to be used or the manner of entry, such as an obligation to use locksmiths to open locks or to only enter residential premises (including an attached garage) in the presence of an adult living there. [ 38 ] The proposed Order also fails to impose any obligation to first make reasonable efforts to obtain the occupier’s permission and cooperation before forcibly entering the location or premises. [ 39 ] More fundamentally, the proposed Order does not identify any specific location or premises to which it applies. No specific person is targeted.

Instead, a blanket warrant is sought, allowing the agency or bailiff to forcibly enter the property or premises of anyone and anywhere. [ 40 ] The proposed Order removes judicial oversight from the determination of whether a particular location or premises may be entered, the manner and timing of the entry, and who may be targeted.

In the absence of details about the location or premises, the Court does not have specific facts demonstrating reasonable grounds for entry. [ 41 ] Consolidated contends that despite the broad wording of the proposed Order, it will only use bailiffs for any forced entry and that bailiffs can be trusted to comply with their regulatory obligations and the Code of Conduct . I am asked to accept that bailiffs will always conduct themselves in good faith and in a commercially reasonable manner. [ 42 ] Consolidated’s position invites the Court to abdicate its legislated oversight responsibility.

Not even highly trained and

experienced sheriffs and police officers, operating in the public interest, are given this measure of independence and discretion to interfere in people’s lives and to access their properties and premises. This

interpretation and application of s 13(2) of the Act also raises potential issues about unreasonable search and seizure under s 8 of the Charter of Rights and Freedoms . [ 43 ] The concern is not merely hypothetical. Here, for example, Consolidated’s Division Supervisor (who is not a bailiff) has decided that the Loader is likely at Mr. Shipalesky’s rural residence, even though I have found that conclusion to be unreasonable. Relying on that conclusion, Consolidated wants to open or break the locks on the gate to Mr.

Shipalesky’s property, enter the land, and undertake a search (since the Loader’s alleged location on the land is not known). Even a residence might be entered to access a garage. Nothing about that scenario offers comfort. [ 44 ] The proposed Order substantially infringes civil liberties, privacy interests, and property rights. An unwitting target could be confronted by bailiffs and police officers demanding access to their land, buildings, and even a residence.

Debtors and the public at large are entitled to greater protection than the hope that civil enforcement agencies and bailiffs will exercise adequate restraint in the service of their clients’ interests. [ 45 ] The safety risks associated with intrusive enforcement efforts are expressly mentioned in the Desk Application. Consolidated requests a police assistance clause because the bailiffs might be exposed to danger when arriving unannounced on private property. The application specifically references the killings of RCMP officers in Mayerthorpe, Alberta, years ago during an attempted seizure.

However, that tragedy is also a reminder that forced entry into private property should be conducted in a manner minimizing the possibility of conflict. [ 46 ] Judicial oversight ensures that forced entry is justified and moderated. A blanket warrant to enter any location and the premises of any person, without explaining to the Court why that location reasonably ought to hold the debtor’s property, sterilizes the Court’s function.

The specific circumstances justifying forced entry into a particular location or premises must be assessed by the Court. [ 47 ] Establishing reasonable grounds for a forced entry into the location or premises of a third party requires more then a mere suspicion that the personal property will be present. Forced entry engages significant privacy interests including dignity, personal integrity, and autonomy. Even when bailiffs proceed in a respectful manner, an occupant’s psychological well-being and health may be compromised. Property interests are infringed, including security, quiet enjoyment and use.

If such substantial rights and interest are to be compromised, the standard to be applied should require a reasonable likelihood that the debtor’s property will be found within the third party’s location or premises. [ 48 ] In Ontario, the Execution Act , RSO 1990, c E 24 , at s 20 describes the standard as “reasonable and probable grounds”. Nothing before me suggests that the Alberta Legislature contemplated a lower standard under the Act . [ 49 ] In

summary, the proposed Order contemplates a blanket grant of authority to the civil enforcement agency and/or bailiffs to forcibly enter the location or premises of any person to search for, seize and remove the Loader. The specific location and circumstances, and the factual basis for the reasonable grounds to enter, would not be considered by the Court.

Such an Order eviscerates the judicial oversight contemplated by the Act for the protection of the public. [ 50 ] To the extent that any forced entry is authorized, the Order should specify the limits on a bailiff’s authority, including the obligation to proceed in a commercially reasonable manner. The manner of entry, including any use of locksmiths, should be clearly stated. The bailiffs and third parties reading the Order are entitled to that clarity.

Concern about Consolidated’s practice [ 51 ] This application is not an isolated incident nor a result of carelessness by the civil enforcement agency on this occasion. In June 2022, Consolidated sought a similar Order from me on behalf of another secured creditor against another debtor. The same overreaching language was proposed, also without notice to the debtor. In an unpublished Endorsement, I declined the application and noted my concerns about notice and excessive authority. [ 52 ] This latest application has been made by Consolidated notwithstanding my previous caution.

These Reasons are therefore more comprehensive in expressing the Court’s concern. [ 53 ] In making these observations, I recognize that civil enforcement agencies often need to recover secured property in a manner that is efficient, cost-effective and timely. Cost reduction can benefit debtors and creditors alike. However, that rationale does not justify a wholesale disregard for personal freedoms, privacy interests, property rights and legislated safeguards for the public. The Court should not condone such a practice.

Conclusion [ 54 ] If Consolidated wishes to proceed with an application for either an interlocutory injunction or a forced entry order, the application shall proceed on notice to Ms. Shipalesky and any other affected person. The application may be scheduled for the week of November 27, 2022, when I am sitting in Commercial Chambers. If that timeframe is not manageable for counsel, the application may be brought before another Justice of this Court in morning Chambers. In that event, I direct that a copy of these Reasons be provided to the sitting Justice. Heard on the 21 st day of October, 2022.

Dated at the City of Edmonton, Alberta this 27 th day of October, 2022. Kevin Feth J.C.K.B.A. Appearances: Brian Sussman, K.C. Biamonte LLP for the Applicant