COURT OF APPEAL FOR ONTARIO
Strathy C.J.O., Gillese and Blair JJ.A.
BETWEEN
Indcondo Building Corporation
Plaintiff/Appellant/ Respondent in Cross-Appeal
and
Valerie Francis Sloan, David Robin Sloan and Cave Hill Properties Ltd.
Defendants/Respondents/ Appellant in Cross-Appeal
Counsel:
Trung Nguyen, for the appellant
Philip Healey, for the respondents
Heard: October 19, 2015
On appeal from the judgment of Justice Michael A. Penny of the Superior Court of Justice, dated July 31, 2014.
ENDORSEMENT
1Following oral argument, we dismissed the appeal and cross-appeal with reasons to follow. These are those reasons.
2The appellant sought to set aside four transfers of property pursuant to the Fraudulent Conveyances Act, R.S.O. 1990, c. F-29, in order to satisfy a judgment it obtained against the respondents in 2001. The action was twice dismissed prior to trial, first on a limitations issue and second as an abuse of process. Both orders were reversed by this court and the matter went to trial.
3Success was divided. The trial judge found that the respondent Sloan’s conveyances in 1987 and 1988 to his wife and her company were not made with intent to defraud his creditors. He found, however, that transfers of the matrimonial home and a Florida property between 1992 and 1994 were made for that purpose, and set them aside.
4The trial judge’s analysis hinged primarily on his determination of when Sloan knew he was in financial trouble. He found the conveyances in 1987 and 1988 occurred at a time when Sloan could not reasonably have known that they would impair his ability to discharge his financial obligations. By 1992, however, his circumstances had changed. He knew that he was in significant financial jeopardy. The circumstances surrounding those transactions pointed to a fraudulent intent.
5The trial judge also dismissed the appellant’s claim to pierce the corporate veil of the wife’s company and dismissed the respondents’ defence that the action should be dismissed on the basis of the doctrine of laches.
6The appeal and cross-appeal impugn the trial judge’s findings of fact. This was a case in which the documentary and testimonial evidence suffered from some infirmities due to the passage of time. The trial judge was in the best position to consider and weigh all that evidence, recognizing the challenges faced by both parties. His findings were based on inferences he drew from the evidence, and from the lack of evidence, and on his assessment of the credibility of the witnesses. They are supported by that evidence. We are not persuaded that the trial judge made a palpable and overriding error in any of his factual findings.
7In attacking the 1987 and 1988 conveyances, the appellant says the trial judge should have found the trust arrangements were a “sham”, relying on Duca Financial Services Credit Union Ltd. v. Bozzo, 2011 ONCA 455, 68 E.T.R. (3d) 1. It says that on the trial judge’s findings, Sloan maintained control of his wife’s company, and this is inconsistent with having parted with the beneficial interest in the properties.
8We do not accept this submission. Although the Duca case was not brought to the attention of the trial judge, he addressed the argument that the transactions were shams and found otherwise. Indeed, in both cases, based on Sloan’s evidence and that of his lawyer, the trial judge found that the appellant had failed to establish that the conveyances were made with fraudulent intent. The trial judge recognized that the documentation was not as complete as it might have been, but observed this did not mean the transaction was lacking in good faith.
9Applying the principles from Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 CanLII 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), at pp. 433-34, affirmed by [1997] O.J. No. 3754 (C.A.), the trial judge concluded that the corporate veil argument could not succeed separate and apart from the issue of the fraudulent conveyances. He was willing to accept that Sloan dominated the affairs of his wife’s company to bring it under his complete control. He noted, however, that the second part of the test – “conduct akin to fraud that would otherwise unjustly deprive claimants of their rights” – had not been met. The conduct upon which the appellant relied was the same conduct it relied upon to set aside the transactions as fraudulent conveyances. Thus, the corporate veil argument did not add anything to its attacks of the specific transactions, which he had already dismissed on their merits.
10Turning to the cross-appeal, the trial judge found that Sloan’s circumstances were markedly different by 1992. The appellant had started an action against Sloan and three banks were putting pressure on him. It was in these circumstances that Sloan transferred his interest in the matrimonial home to his wife in 1992 and his half interest in their Florida condo to her in 1993. On the matrimonial home, the trial judge found that Sloan knew the transfer would materially impact his ability to pay his creditors. That was the very reason he made the transfer, and his wife knew that was the reason it was done.
11As for the Florida condo, the trial judge found that the badges of fraud pointed overwhelmingly to a fraudulent intent and the respondents had not overcome their evidentiary burden of establishing the validity of the transfer.
12The trial judge was then entitled to determine that the entire proceeds of sale were available to Sloan’s creditors, as the respondents produced no evidence to show the property was encumbered.
13On the cross-appeal, the respondents also say the trial judge erred in not giving effect to the defence of laches.
14We see no merit to this submission. As the trial judge noted, laches is an equitable doctrine. The party relying on the defence must establish both delay and prejudice resulting from the delay. The trial judge indicated that he would be prepared to find the appellant had been guilty of inordinate delay in the prosecution of the claims. He found, however, that the defendants had not established actual prejudice as a result of the delay.
15Having presided at the trial, the trial judge was in the best position to determine whether the respondents’ defence was prejudiced by the 23-year delay in bringing the matter to trial. The respondents essentially ask us to re-assess the circumstances and to make our own findings as to prejudice. We are not prepared to do so. Nor are we prepared to interfere with the trial judge’s exercise of his discretion.
16The respondents also submit on the cross-appeal that the trial judge erred in failing to give effect to s. 5(1) of the Assignments and Preferences Act, R.S.O. 1990, c. A.33, which, the respondents claim, “exempts any payment of money to a creditor provided it was made in satisfaction of a pre-existing debt, whether the payment was intended to prefer the creditor or not.” This submission does not reflect the actual words of the section, which contains no reference to a “pre-existing debt.” Nor does it take into account the concluding words of the sub-section:
… that is made in good faith in consideration of a present actual payment in money, or by way of security for a present actual advance of money, or that is made in consideration of a present actual sale or delivery of goods or other property where the money paid or the goods or other property sold or delivered bear a fair and reasonable relative value to the consideration therefor.
17The wording of the provision suggests that it does not refer to payments for pre-existing debts but rather to present payments, advances, sales or deliveries.
18We do not, however, find it necessary to resolve the issue. This provision was not pleaded and the submission was not made to the trial judge. We are not satisfied that we have all the facts necessary to address the issue and that it can be addressed without causing unfairness to the appellant: 767269 Ontario Ltd. v. Ontario Energy Savings L.P., 2008 ONCA 350, at para. 3; Kaiman v. Graham, 2009 ONCA 77, 245 O.A.C. 130, at para. 18.
19Both parties sought to introduce fresh evidence on the appeal. In a case of this vintage, a party’s claim to have discovered new evidence is viewed with some scepticism. We are not satisfied that the evidence could not have been obtained by due diligence before trial. Whether we apply the Palmer test (R. v. Palmer, 1979 CanLII 8 (SCC), [1980] 1 S.C.R. 759), or the Sengmueller test (Sengmueller v. Sengmueller (1994), 1994 CanLII 8711 (ON CA), 17 O.R. (3d) 208 (C.A.)), the fresh evidence is not admissible. See Chiang (Trustee of) v. Chiang, 2009 ONCA 3 at paras. 72-78.
20For these reasons, the motions to admit fresh evidence are dismissed. The appeal and cross-appeal are dismissed. As success is divided, there will be no order as to costs.
“G.R. Strathy C.J.O.”
“E.E. Gillese J.A.”
“R.A. Blair J.A.”
