Settlement (Garnishment)

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Date Retrieved:	2025-05-09
CLNP Page ID:	2496
Page Categories:	Settlement Law, Judgement Enforcement
Citation:	Settlement (Garnishment), CLNP 2496, <https://rvt.link/fg>, retrieved on 2025-05-09
Editor:	MKent
Last Updated:	2025/05/01

Raso v. Bayne, 2020 ONSC 6654 (CanLII)

[11] Frank bears the onus of demonstrating that the settlement ought to be exempt from garnishment (House v. Baird, 2019 ONSC 1712 (Ont. S.C.J.), para. 62).

[12] In 20 Toronto Street Holdings Ltd. v. Coffee, Tea or Me Bakeries Inc. (2001), 2001 CanLII 28048 (ON SC), 53 O.R. (3d) 360 (Ont. S.C.J.) Justice Nordheimer states at para. 5:

I start from the basic proposition that garnishment is an equitable remedy and, as suggested by the use of the word “may” in subrule 60.18(16) above, the court may therefore make whatever order it deems just in the particular circumstances of any given case. As stated in the Halsbury’s Laws of England, 4th ed., vol. 17 at para. 539:

The court’s power to make a garnishee order, whether it is an order nisi or an order absolute, is discretionary. A garnishee order is basically an equitable remedy, and it may be refused 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.

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[22] In Mullin v. R-M & E Pharmacy, 2005 CanLII 1073 (ON SC), [2005] O.J. No. 196 (Ont. S.C.J.) the court determined that general damages for pain and suffering were exempt in the circumstances of that case. Associate Chief Justice Cunningham states at para. 9:

I liken this situation to that of bankruptcy. It is the law of Ontario that damages awarded for pain and suffering are exempt from a bankrupt’s trustee. As Goodman J.A. stated in Re Holley (1986), 1986 CanLII 2586 (ON CA), 54 O.R. (2d) 225, [1986] O.J. No. 165 (C.A.), at p. 240 O.R.:

It is clear that where damages for which the bankrupt asserts a claim are personal in nature, whether it be for physical suffering resulting from physical injuries sustained as a result of the negligence of another person or mental suffering from a libel or slander perpetrated upon him, such course of action does not become the property of his trustee in bankruptcy because it is not the policy of the law to convert into money for the creditors the mental or physical anguish of the debtor.

[23] In House, Justice Baird states at para. 70:

(a) Garnishment is an equitable remedy. As such, the court has the jurisdiction to exempt personal injury damages from pain and suffering from garnishment under Rule 60.08(16). The parties agree that damages for pain and suffering are not subject to garnishment: see Mullin v. R-M & E Pharmacy (2005), 2005 CanLII 1073 (ON SC), 74 O.R. (3d) 378 (S.C.).

(b) Damages that are personal in nature (such as damages for pain and suffering, future care and housekeeping) are not ordinarily subject to seizure by creditors: see Conforti (Re), 2015 ONCA 268.

House v. Baird, 2019 ONSC 1712 (CanLII)

[62] Pursuant to Rule 60.08(16) of the Rules of Civil Procedure, the court has the discretion to determine rights, liabilities or any matter in relation to the garnishment. The Baird settlement set damages at $500,000. It does not define the heads of damages breakdown. Baird acknowledges that it is his onus to show that the settlement is exempt from garnishment.

[63] Since Rule 60.08(16) grants the court discretion to determine any matter, I shall exercise my discretion to determine the distribution of settlement funds in order to determine what portion, if any, can be garnished. There is no settled approach to how the categories of damages should be allocated to out of court settlements. Where settlements are not broken into constituent components, the court may allocate the settlement into the heads of damages as best it can. This entails examining any evidence of the settlement negotiations.

[64] I have reviewed the affidavit of Baird’s counsel. Baird’s Pre-Trial Memorandum suggested that Baird was entitled to approximately $2.9 million, which was divided as follows: 7% for general damages; 49% for future care costs; 41% for past and future income loss (Baird was not receiving income replacement benefits at the time); and 3% for the Family Law Act claim.

[70] In all the circumstances, I find that it is appropriate to designate 50% of the Baird settlement for general damages, future care costs, and the Family Law Act claim. I find that this portion of the settlement should be exempt from garnishment, for the following reasons:

a) Garnishment is an equitable remedy. As such, the court has jurisdiction to exempt personal injury damages for pain and suffering from garnishment under Rule 60.08(16). The parties agree that damages for pain and suffering are not subject to garnishment: see Mullin v. R-M & E Pharmacy (2005), 2005 CanLII 1073 (ON SC), 74 O.R. (3d) 378 (S.C.).

b) Damages that are personal in nature (such as damages for pain and suffering, future care, and housekeeping) are not ordinarily subject to seizure by creditors: see Conforti (Re), 2015 ONCA 268.

[77] As a secondary argument, Baird submits that the Wages Act, R.S.O. 1991, c. W.1, applies to damages for lost income and that at least 80% of the portion that is considered wages should be exempt from garnishment. The Wages Act states that payments from insurance that is intended to replace income lost because of disability shall be deemed to be wages. 80% of a person’s wages are exempt from seizure or garnishment. A judge may order that the exemption be increased or decreased if satisfied that it is just to do so, having regard to the nature of the debt owed to the creditor, the person’s financial circumstances, and any other matter the judge considers relevant: see s. 7.

[78] The parties were unable to find caselaw to assist with the issue of whether insurance settlements are considered to be “wages” under the Wages Act. However, there are principles found in the caselaw that provide some assistance:

i. Income replacement benefits under the SABS are wages within the meaning of the Wages Act: see Lease Truck Inc. v. Serbinek, [2008] O.J. No. 4700 (S.C.).

ii. Periodic payments to a doctor under OHIP are not wages. The court can consider the debtor’s monthly expenses and designate a portion of OHIP payments as exempt from garnishment, pursuant to Rule 60.08(16): see Hongkong Bank of Canada v. Slesers (1992), 1992 CanLII 7649 (ON SC), 7 O.R. (3d) 117 (S.C.).

iii. Damages for wrongful dismissal are wages within the meaning of the Wages Act: see Landry (Re) (2000), 2000 CanLII 16846 (ON CA), 135 O.A.C. 381 (C.A.).

Wages Act, R.S.O. 1990, c. W.1

Definition

1 In this Act,

“wages” means wages or salary whether the employment in respect of which the same is payable is by time or by the job or piece or otherwise.

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Net wages subject to garnishment

7 (1) For the purposes of this section,

“wages” does not include an amount that an employer is required by law to deduct from wages. R.S.O. 1990, c. W.1, s. 7 (1).

Disability payments included

(1.1) For the purposes of this section, payments from an insurance or indemnity scheme that are intended to replace income lost because of disability shall be deemed to be wages, whether the scheme is administered by the employer or another person. 1999, c. 12, Sched. B, s. 18.

Exemption from seizure or garnishment

(2) Subject to subsection (3), 80 per cent of a person’s wages are exempt from seizure or garnishment. R.S.O. 1990, c. W.1, s. 7 (2).

Idem, support or maintenance

(3) Fifty per cent of a person’s wages are exempt from seizure or garnishment in the enforcement of an order for support or maintenance enforceable in Ontario. R.S.O. 1990, c. W.1, s. 7 (3).

Judge may decrease exemption

(4) A judge of the court in which a writ of execution or notice of garnishment enforceable against a person’s wages is issued may, on motion by the creditor on notice to the person, order that the exemption set out in subsection (2) or (3) be decreased, if the judge is satisfied that it is just to do so, having regard to the nature of the debt owed to the creditor, the person’s financial circumstances and any other matter the judge considers relevant. R.S.O. 1990, c. W.1, s. 7 (4).

Judge may increase exemption

(5) A judge of the court in which a writ of execution or notice of garnishment enforceable against a person’s wages is issued may, on motion by the person on notice to the creditor, order that the exemption set out in subsection (2) or (3) be increased, if the judge is satisfied that it is just to do so, having regard to the person’s financial circumstances and any other matter the judge considers relevant. R.S.O. 1990, c. W.1, s. 7 (5).

Employer may pay into court

(6) Where an employer receives notice of a motion under subsection (4) or (5), the employer may pay into court the part of the person’s wages that is not exempt from seizure or garnishment under subsection (2) or (3), as the case may be, and the judge on the hearing of the motion may make such order for payment out of court as is just. R.S.O. 1990, c. W.1, s. 7 (6).

Wage assignments

(7) Subject to subsection (8), an assignment of wages or any part of them to secure payment of a debt is invalid. R.S.O. 1990, c. W.1, s. 7 (7).

Idem, credit unions

(8) A person may assign to a credit union to which the Credit Unions and Caisses Populaires Act, 2020 applies the part of the person’s wages that does not exceed the part that may be seized or garnished under this section. R.S.O. 1990, c. W.1, s. 7 (8); 2020, c. 36, Sched. 7, s. 339.

R.R.O. 1990, Reg. 194: RULES OF CIVIL PROCEDURE

Garnishment Hearing

60.08 (16) On motion by a creditor, debtor, garnishee, co-owner of the debt or any other interested person, the court may,

(a) where it is alleged that the debt of the garnishee to the debtor has been assigned or encumbered, order the assignee or encumbrancer to appear and state the nature and particulars of the claim;

(b) determine the rights and liabilities of the garnishee, the debtor, any co-owner of the debt and any assignee or encumbrance;

(c) vary or suspend periodic payments under a notice of garnishment; or

(d) determine any other matter in relation to a notice of garnishment,

and the court may proceed in a summary manner, but where the motion is made to an associate judge and raises a genuine issue of fact or of law, it shall be adjourned to be heard by a judge. R.R.O. 1990, Reg. 194, r. 60.08 (16); O. Reg. 536/96, s. 6 (3); O. Reg. 711/20, s. 7; O. Reg. 383/21, s. 15.

(16.1) A copy of a notice of motion for a garnishment hearing shall be served on the sheriff by ordinary mail, or by personal service or an alternative to personal service under rule 16.03.

O. Reg. 258/98: RULES OF THE SMALL CLAIMS COURT

Powers of Court at Hearing

20.08 (15.2) At the garnishment hearing, the court may,

(a) if it is alleged that the garnishee’s debt to the debtor has been assigned or encumbered, order the assignee or encumbrancer to appear and state the nature and particulars of the claim;

(b) determine the rights and liabilities of the garnishee, any co-owner of the debt, the debtor and any assignee or encumbrance;

(c) vary or suspend periodic payments under a notice of garnishment; or

(d) determine any other matter in relation to a notice of garnishment.