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Law firm beats debtor’s legal manoeuvre for $2.8 million

Case shows trend towards tactical responses to collections efforts
|Written By Glenn Kauth

Lawyer Michael Myers had a rather unusual response to a demand letter he sent on behalf of his client, the National Bank of Canada, seeking debt repayment.

Changes to Rule 2.1.01 allows judges to summarily dismiss vexatious actions without going through a vexatious litigant proceeding, says Michael Myers

“Further communication from you, either by phone or mail or registered mail will confirm that you are personally now assuming full commercial LIABILITY for the unlawful and fraudulent claims of the National Bank, OR, you are confirming that you are an equal respondent on the commercial lien and affidavit of obligation that may be created should the harassment continue,” wrote the debtor, Gail Marie Blackman, to Myers.

Myers is a lawyer at Papazian Heisey Myers in Toronto whose practice focuses on contract enforcement and who is one of two counsel who manage the National Bank’s residential mortgage enforcement and retail debt collection portfolio in Ontario and western Canada.

At first, Myers says he and others at the firm laughed at the letters they received. But when they received an invoice in June 2014 in the name of a corporate respondent for almost $2.8 million and a copy of a financing statement registered against Myers and his firm for non-payment under the Personal Property Security Act, it wasn’t so funny anymore.

“That’s what got us angry,” says Myers fresh off his victory on Thursday in lifting the registration under the act.

“It is clear on the facts that the PPSA registration against the applicants without colour of right and should be discharged forthwith,” wrote Superior Court Justice Graeme Mew in Myers v. Blackman. Mew awarded Myers and the firm $22,500 in costs but declined to order the requested punitive damages and relief for injurious falsehood.

Mew held Blackman jointly and severally liable in the case along with the corporate respondent, 8750432 Canada Inc., that registered the financing statement.

The invoice sent to the firm was for “threats and intimidation,” “unsolicited correspondence,” and “unauthorized use of name,” according to Mew’s endorsement.

While Myers and his firm succeeding in having the registration thrown out, he says the case is emblematic of a trend towards so-called Internet debt elimination scams.

Myers says they follow the oft-noted Freemen on the Land movement of people who challenge government authority and reject courts’ and governments’ right to uphold the rule of law. In recent years, those facing debt collections have been able to buy packages of information on the Internet advising them on how to fight repayment.

“It’s not supposed to be understandable,” says Myers, explaining that adherents suggest people have two essences: the flesh-and blood person and the “government-created person” connected to official documents like social insurance numbers and birth certificates. “That person has all the debt,” says Myers, referring to the government-created person.

He notes adherents also suggest the government set up trust funds for every person connected to a social insurance number around the time of the Great Depression and will respond that creditors can seek repayment from that money.

The letters Myers received in his attempts to collect on behalf of the bank, he notes, echoed some of the themes arising in Internet debt elimination scams. “It’s not English. It’s not law,” he says of the letters he received.

He and his firm alleged the respondents in the case were organized pseudolegal commercial argument litigants, a term described in detail in the Alberta Court of Queen’s Bench 2012 case Meads v. Meads. While Mew didn’t make a finding the respondents in Myers were such litigants, he said a number of the characteristics described in Meads were present.

“An often employed tactic of OPCA litigants is said to be the use of ‘foisted’ obligations in various forms — with the recipient being given a limited amount of time to respond and disagree, failing which they are held to have agreed to the terms of a unilateral agreement.”

While it was an unusual case, Myers expects such situations to be more common in the future. While he has seen such arguments in his work in the past, he says it was the first time it rose to the level of a personal attack against him. In fact, a Law Society of Upper Canada event on Oct. 27 includes a session on dealing with Internet debt elimination scams, he notes. Myers was the second reported decision this year dealing with this type of action under the Personal Property Security Act, according to Myers.

“I think what we’re going to find is more of these cases coming to light,” he adds, suggesting he expects judges will eventually warm up to ordering punitive damages.

Despite his victory last week, Myers says there’s still more to do.

“We’re not finished with this lady because, of course, I now have debts to collect,” he says, referring to the original bank debt and now the cost order. “All of this has resulted in her doubling her indebtedness.”

In the meantime, he notes the Ontario government has made it easier to deal with such situations through changes to the Rules of Civil Procedure that took effect July 1. The change, under Rule 2.1.01, allows judges to summarily dismiss vexatious actions without going through a vexatious litigant proceeding, he notes.

“No cases on that yet,” he says. “I’m hoping I’m the first.”


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