DATE: 20031124

DOCKET: C38353

COURT OF APPEAL FOR ONTARIO

ROSENBERG, MacPHERSON and SHARPE JJ.A.

B E T W E E N :

GERTRUDE PIRNER-MOSER

D. Smith for the appellant

Applicant

(Appellant)

John Legge

• and -

for the respondent Diane Marion Pirner

DIANE MARION PIRNER

Respondent (Respondent)

Milton J. Bernstein for the respondent

• and -

THOMAS PIRNER Respondent (Respondent)

Thomas Pirner Heard: November 19, 2003

On appeal from the order of Justice Hugh M. O’Connell of the Superior Court of Justice dated May 8, 2002.

BY THE COURT:

[1] The application judge has dealt with these parties on many occasions and is intimately familiar with the complex proceedings that have resulted in dozens of orders both in the various matrimonial proceedings and the bankruptcy proceedings. The only issue before us is the very narrow one of whether the application judge had jurisdiction to make an order that the appellant convey the cottage property to Diane Pirner. We have concluded that he had no jurisdiction to make that order and accordingly we allow the appeal.

[2] In his very thorough and helpful reasons the application judge set out the basis for the order in these terms:

As the judgment [of Jennings J.] speaks, the conveyance from its date of transfer by the Trustees is void.

It is also to be noted that Justice Jennings found that Diane Pirner was entitled to a declaration setting aside the transfer to the trust. Despite this, Diane Pirner did not receive a declaration as per the other provisions of Justice Jenning’s judgment. However, his judgment did allow for the posting of security, which I am, in effect, doing at this time.

In order to satisfy the security required under Justice Jenning’s judgment and this motion and to put a stop to the never-ending litigation that has consumed the parties, I order that the title of the cottage property be transferred to and vested in Diane Pirner. In addition, the promissory note given to Mr. Pirner as security for his investment in the company shall be transferred to Mrs. Pirner by the Trustee.

This results in the cottage and promissory note being security for the payment ordered by Justice Jennings under the marriage contract, the child support arrears I ordered as of December 2000, and ongoing child support as ordered until the balance of the equity in the cottage is used up and the proceeds collected on the promissory note. The equity is based on the value of the cottage as of June 18, 2001. My order is pursuant to section 21 of the Family Law Act, paragraphs 13 and 14 of the Jennings’ judgment, and the security as requested in this motion. It is obvious from the affidavits filed, that the cottage has value greatly in excess of the security requested [emphasis added].

[3] As is apparent from these reasons, the basis for the order dates back to the divorce judgment made by Jennings J. in 1994. At that time, he found that the cottage was the matrimonial home and that the conveyance from Thomas Pirner to the Pirner Family Trust without Diane Pirner’s consent was therefore in violation of s. 21(1) of the Family Law Act. However, Jennings J. did not set aside the transfer. Instead he held as follows:

Accordingly, provided that the husband complies within 45 days with the orders for lump sum payments that I order to be made in the balance of this judgment, no order under section 21 shall issue. If he should fail to do so, counsel may move before me on notice for such an order and for an order securing support payments against the cottage property.

[4] This became paragraph 15 of the Judgment of Jennings J., which was in these terms:

THIS COURT ORDERS AND ADJUDGES that if the payment is made by the Husband pursuant to paragraphs 13 and 14 hereof, no order under section 21 of The Family Law Act shall issue against the cottage property … If the Husband fails to do so, counsel for the Wife may move before the Honourable Mr. Justice Jennings on notice for such an order pursuant to section 21 of The Family Law Act to secure the payments pursuant to paragraphs 13 and 14 against the said property.

[5] Mr. Pirner made only the payment required by paragraph 14 (spousal support). He did not make the payment ordered by paragraph 13 (required by the marriage contract). Both parties appealed the judgment of Jennings J. to this court. Those appeals were ultimately either abandoned or dismissed for want of perfection. In 1995, Diane Pirner moved before Jennings J. to secure the equalization payment against the cottage but he declined to act, apparently because of the pending appeal. In March 1995, the Pirner Family Trust transferred the cottage to the appellant, one of the beneficiaries of the trust.

[6] There have been numerous proceedings since then, including an attempt at arbitration before Walsh J. In 1997, Jarvis J. set aside the arbitration award and ordered Diane Pirner to remove all encumbrances from the cottage property and from a property in Toronto. A motion by Diane Pirner in 1999 to set aside that judgment on the basis of fraud was dismissed. At that time, the application judge found that the appellant was not a “straw person”.

[7] We have some doubt that it is still open to Ms. Pirner to rely upon paragraph 15 of the judgment of Jennings J. given the many intervening proceedings. However, at different times judges of the Superior Court of Justice and the General Division with great familiarity with these proceedings have apparently proceeded on the basis that the paragraph 15 procedure is still a live issue. See for example Pirner-Moser v. Pirner, [1998] O.J. No. 2245 per Smith A.C.J.O.C. We have therefore proceeded accordingly.

[8] The application that launched the proceedings that led to this appeal was an application by the appellant to require Ms. Pirner to remove all encumbrances from the Toronto property. In a cross-application, Ms. Pirner sought an order setting aside the conveyance of the cottage property to the appellant. That cross-application was based on the Fraudulent Conveyances Act and the Assignments and Preferences Act. The application judge dismissed those applications. This left only the possibility that an order could be made against the property under s. 21 of the Family Law Act, on its own, or in accordance with paragraph 15 of the judgment of Jennings J.

[9] The application judge held that Jennings J. had found that the conveyance of the cottage to the Pirner Family Trust was void. In our view, the application judge erred in that respect. The conveyance was voidable[^1] and Jennings J. did not set it aside.

[10] The appellant submits that once the parties were divorced, the jurisdiction under s. 21 of the Family Law Act lapsed and the application could no longer declare the conveyance void. We need not decide that issue since even if the application judge still retained jurisdiction under the Family Law Act, because of paragraph 15 of the judgment of Jennings J., he had no jurisdiction to order that the appellant convey the property to Ms. Pirner. As we have said, the application judge had already found that the appellant was not a “straw person” and that the original conveyance could not be set aside under the Fraudulent Conveyances Act and the Assignments and Preferences Act. Assuming the Family Law Act still applied, the application judge could have set aside the transaction (s. 21) at which point the property would have revested in Mr. Pirner on conditions that protected the appellant’s rights (s. 23(d)). He could then have made a charging order in favour of Ms. Pirner (s. 34). He could then have directed a sale under s. 13, again ensuring that the rights of the appellant were protected. But, he had no jurisdiction under the Act to order that the appellant convey the property to Ms. Pirner.

[11] We note that the application judge recognized that “the cottage has value greatly in excess of the security requested”. We also note the added complexity because of Mr. Pirner’s bankruptcy. Thus, once the transaction was set aside it might well have vested not in Mr. Pirner but in the trustee.

[12] Leaving aside the bankruptcy, any legal or equitable interest that Mr. Pirner had in the cottage might have been available to secure the various amounts owed by Mr. Pirner to Ms. Pirner. However, the application judge did not refer to any evidence that Mr. Pirner had any such interest in the cottage.

[13] We cannot see any alternative basis to justify the order made by the application judge. In particular, the fact that at various time orders have apparently been made that the cottage property secures the arrears, could not justify the order made by the application judge. Accordingly, the appeal must be allowed and the order set aside.

[14] As to costs, the appellant and Mr. Pirner will have ten days to submit their bills of costs and to make brief written submissions. Ms. Pirner will have ten days to respond and the appellant and Mr. Pirner will have five days to reply to those submissions. The submissions should be filed with the Senior Legal Officer.

Signature: “M. Rosenberg J.A.”

“J.C. MacPherson J.A.”

“Robert J. Sharpe J.A.”

RELEASED: “MR” NOVEMBER 24, 2003

[^1]: See Clarkson v. Lukovich (1988), 14 R.F.L. (3d) 436 (Ont. C.A.).