The analytical framework specific to seizure before judgment: distinction with the debate on the merits of the case
On December 15, 2021, in Mercedes-Benz Financial Services Canada Corporation v. Seweha,1 the Quebec Court of Appeal reiterated that in matters of seizure before judgment, the analysis of the sufficiency of the allegations must be based on the allegations contained in the affidavit submitted in support of the seizure, and not on the allegations contained in the statement of claim.
In May 2021, the customer (the defendant in this case) went to a dealership to purchase a vehicle. The customer then contractually agreed to make monthly payments to the plaintiff, who is the vehicle owner and the assignee of the instalment sales contract between the parties (the “Contract”).
However, the customer failed to make payments for the vehicle. The plaintiff then attempted to serve her with a notice of repossession, but could locate neither the customer nor the vehicle at the address specified in the Contract. Upon further investigation, the plaintiff concluded that it had been defrauded by the customer and that there was a serious risk of it being unable to recover the debt and of the vehicle disappearing. The customer was no longer working for the employer named in her credit application, her credit record had significantly deteriorated, and she could not be reached at the phone number and email address provided in the Contract.
The plaintiff applied to the Court of Quebec to obtain a writ of seizure before judgment of the automobile, on the basis of an affidavit from one of its representatives. The Court authorized the seizure. At the same time, the plaintiff filed a statement of claim asking the Court to declare it the sole owner of the vehicle and to declare that the seizure already carried out was valid (the “Application”).
The defendant challenged the validity of the seizure and moved that it be quashed on the grounds that the allegations were insufficient and false. She also requested that the Application be dismissed.
The decision of the Court of Quebec2
At the outset, the trial judge confined the debate to the sufficiency of the allegations, since the defendant was not present at the hearing and thus could not testify to the falsity of the allegations, nor could the plaintiff’s lawyer cross-examine her on the facts alleged in her affidavit.
In support of her motion to quash the seizure, the defendant argued that the Application did not contain any valid conclusions and that the vehicle repossession process provided for in the Consumer Protection Act3 (the “CPA”) had not been followed.
With respect to the first point of law raised by the defendant, the Court noted that the Application did not refer to any monetary or contractual relationship between the parties. Moreover, the Court observed that the declaration of ownership sought was of no practical use, given that the Contract expressly provides that the plaintiff remains the owner until payment has been made in full. The Court therefore found that the Application did not identify any debt whose recovery needed to be protected.
The Court then observed that the CPA provides for the right to repossess a vehicle in the context of an instalment sales contract, but the consumer must be given prior notice and the repossession must be ordered by the Court. The Court noted that, in this case, no notice appears to have been given to the defendant and the plaintiff seems to be attempting to circumvent this process by asking the Court to confirm its ownership of the vehicle.
The Court concluded that the above findings warrant a quashing of the seizure. This conclusion was based on the Court’s analysis of the allegations contained in the Application, as the Court failed to analyze the allegations in the affidavit in support of the seizure before judgment.
The decision of the Quebec Court of Appeal
The plaintiff applied to the Court of Appeal to have this judgment reversed.
The Court of Appeal began by reviewing the principles that a court must follow when ruling on a motion to set aside a seizure on the grounds that the allegations were insufficient or false. The judge must decide on the validity of the seizure in light of the facts alleged in the affidavit. These facts must not only be accepted as true but must also demonstrate a serious and objective fear, supported by specific facts, that the debt is in jeopardy.
The Court of Appeal found that this process was not followed by the trial judge, who failed to analyze the allegations contained in the affidavit. Instead, he focused on the conclusions in the statement of claim.
The Court of Appeal observed that the judge had tried the Application on its merits, which is not appropriate at the stage of a motion to set aside a seizure before judgment. Therefore, the Court of Appeal determined that it was not appropriate to consider the plaintiff’s request to be declared the owner of the vehicle, nor to consider the application of the CPA to the Contract.
The Court of Appeal concluded that an analysis of the allegations in the affidavit would have led to the finding that the seizure before judgment was good and valid, given that the appellant had a debt to collect and there were several circumstances suggesting that the debt was in jeopardy (e.g., overdue payments, the plaintiff’s inability to contact the defendant, the defendant leaving her job, and the drastic drop in her credit rating).
The Court therefore reversed the trial judgment and denied the motion to quash the seizure.
This decision of the Quebec Court of Appeal is a useful reminder of the framework for analyzing a motion to set aside a seizure before judgment as well as the applicable burden of proof at the sufficiency of allegations stage. The decision also highlights the importance of the allegations contained in the affidavit in support of an application for seizure before judgment at the stage of analyzing the sufficiency of the allegations.
1 2021 QCCA 1893.
2 Mercedes-Benz Financial Services Canada Corporation v. Seweha, 2021 QCCQ 7087.
3 Chapter P-40.1.