Court of Appeal for Ontario
Date: 2017-11-22
Docket: M48387 (C64088)
Feldman J.A. (In Chambers)
Between
Bryon Wilfert and Elizabeth Wilfert (Appellants/Moving Parties)
and
Ian McCallum and Jacqueline Boughner (Respondents/Responding Parties)
Counsel
Paul Starkman, for the moving parties
Shaun A. Hashim, for the responding parties
Heard: October 18, 2017
Reasons for Decision
A. Introduction
[1] The appellants move for a stay pending their appeal of the judgment of Faieta J., dated June 23, 2017, which dismissed their action on a motion brought by the respondents under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. See Wilfert v. McCallum, 2017 ONSC 3853, 49 C.B.R. (6th) 272.
B. Background
[2] The action was brought under s. 38 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"), for an order setting aside as a fraudulent conveyance, the 1993 conveyance by McCallum of his one half interest in the matrimonial home to his wife, Boughner. The appellants have appealed the dismissal of the action to this court and seek a stay to prevent Boughner from disposing of the property pending the appeal.
[3] The appellants are judgment creditors of the respondent McCallum, as a result of an action for defamation they brought against him in respect of statements made in 2014. They obtained default judgment on May 12, 2015, following which, McCallum filed an assignment in bankruptcy in September 2015. The appellants obtained an assignment of rights under s. 38 of the BIA to bring the fraudulent conveyance action.
[4] The relevant portions of the statement of claim are in paras. 8-12, which plead:
- In order to judgment proof himself, McCallum, with the cooperation and assistance of Boughner, has taken steps to defeat, hinder, delay or defraud his creditors and future creditors including the Plaintiffs, by among other things:
(a) Arranging for the Property, which was jointly owned by McCallum and Boughner to be transferred for no or nominal consideration so that it became registered solely in the name of Boughner;
(b) Effecting the transfer in subparagraph (a) above, in spite of the fact that McCallum paid all or substantially all of the down payment for the Property as well as paid and continued to pay the expenses associated with it and continued to live in the Property.
At the time of the Transfer of the Property to Boughner solely, namely November 1, 1993, there was a Charge/Mortgage of Land in favour of the Royal Trust Corporation of Canada registered as Instrument No. R432228 on May 11, 1987 (the "RT Charge") naming both McCallum and Boughner as Chargors. The RT Charge was not discharged until the registration of a Discharge of Charge on January 31, 2007.
At the time of the transfer, McCallum had creditors including, but not limited to Royal Trust Corporation.
The transfer referred to above was completed for the purpose of defeating, delaying, hindering or defrauding McCallum's creditors and further creditors and should be declared void as against the Plaintiffs and other creditors.
The registered owner, Boughner, did not take title in good faith. Boughner knew or ought to have known that the Property was being registered solely in her name as part of a scheme to delay, hinder, defeat or defraud creditors and future creditors of McCallum.
[5] On the motion brought under Rule 21 to dismiss the claim, the motion judge addressed three issues and found: (i) the Wilferts were not "creditors or others" within the meaning of s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (the "FCA"), and therefore had no standing to bring the action; (ii) the court could not address the limitation issue as to whether the claim was statute barred on the Rule 21 motion; and (iii) there was an irregularity in the procedure used by the Wilferts but it could be cured nunc pro tunc.
C. The Motion for a Stay
[6] The test on a motion for a stay pending appeal under Rule 63.02(1) is the same as the test for an interlocutory injunction: (i) whether there is a serious issue to be tried; (ii) whether the moving party will suffer irreparable harm if the stay is not granted; and (iii) whether the balance of convenience favours the granting of the stay. See Circuit World Corp. v. Lesperance, 33 O.R. (3d) 674, at para. 8; Pathan v. Qureshi, 2009 ONCA 575, at para. 11; and Starkman v. Home Trust Company, 2015 ONCA 436, at para. 7.
[7] In my view, none of the grounds favour a stay on this record.
(1) Serious Issue to Be Tried
[8] The primary legal issue on the appeal is whether the 1993 conveyance was a fraudulent conveyance within the meaning of s. 2 of the FCA and whether the appellants are "creditors or others" within the meaning of the section. Section 2 provides:
Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns. [Emphasis added.]
[9] The appellants became creditors of the respondents many years after the impugned conveyance. The leading case on the test for when a subsequent creditor can set aside a conveyance as fraudulent is Gauthier v. Woollatt, [1940] 1 D.L.R. 275, which identified two circumstances: (i) if there remains unpaid a creditor from the time of the conveyance who would have been entitled to impeach the conveyance; or (ii) if the debtor's purpose in making the conveyance was to defraud present and future creditors generally. See also IAMGOLD Ltd. v. Rosenfeld, 81 O.T.C. 215, at para. 11.
[10] On the record before the court, there was a mortgage on the property to the Royal Trust Corporation of Canada at the time of the conveyance which was discharged in 2007.
[11] There is a bare pleading that there were other creditors, beyond Royal Trust, in 1993 and that the respondents' intent was to defraud. However, there are no particulars whatsoever to support that bare allegation, for example the names of any such creditors and whether their debts remain unpaid, any precarious financial position of McCallum at the time of the conveyance, or an impending risky financial venture at that time.
[12] The appellants rely on the principle that on a Rule 21 motion the facts pleaded are taken to be true. However, that principle must be tempered by the principle that fraud must be pleaded with particularity: see Rule 25.06(8); Balanyk v. University of Toronto, 1 C.P.R. (4th) 300, at para. 28; and South Holly Holdings Limited v. The Toronto-Dominion Bank, 2007 ONCA 456, at para. 2.
[13] In my view, on the basis of the record and the law, the issue to be tried cannot be said to be a serious one.
(2) Irreparable Harm and Balance of Convenience
[14] The appellants filed no evidence to support a claim of irreparable harm, or to demonstrate that the balance of convenience favours the granting of a stay pending appeal. They rely on the discharge of the CPL as establishing irreparable harm. However, there is no evidence that the respondent Boughner intends to sell the property imminently, or that if she did, the proceeds would not be available to satisfy a judgment if the appeal were to be successful.
D. Disposition
[15] I would therefore dismiss the motion for a stay with costs of $1,500, inclusive of disbursements and HST.
"K. Feldman J.A."
