Morgan v. Guimond Boats Limited

In a judgment rendered December 2006 the Federal Court of Appeal upheld an award recognizing a foreign judgement against the Defendant. At a judgment debtor examination it was learned that the Defendant owned real property which was leased and generated a monthly rent. In fact, there was both a head lease and a sub-lease. An order was sought garnishing the amounts owed under the leases. The lessees put forward three arguments as to why the rent payment could not be subject to garnishment. First, they said that rent was never paid. Instead the lessees simply paid the debts of the lessor. Not surprisingly, the Court did not accept this argument. Second, it was argued that the rent payments were subject to a trust in favour of a mortgagee. The Court held, however, that a trust was only created if the mortgagee made such a request which had not occurred. Finally, it was argued that there was an outstanding debenture in favour of one of the lessees. However, the Court held that the debenture had not crystallized and so did not impede the garnishment of the rent payments.