DATE: 20041012
DOCKETS: C37761, C39245 and C41387
IN THE MATTER OF THE BANKRUPTCY OF PAUL ALEXANDER ROBSON, OF THE CITY OF TORONTO, IN THE PROVINCE OF ONTARIO
COURT OF APPEAL FOR ONTARIO
RE: TESSIS & PARTNERS RECEIVERS AND TRUSTEES INC. AS TRUSTEES OF THE ESTATE OF PAUL ALEXANDER ROBSON (Plaintiff/Respondent) -and- PAUL ALEXANDER ROBSON, ANTI-AGING HOLDINGS LIMITED, RX CORPORATION and CELLEX-C INTERNATIONAL INC. (Defendants/Appellants)
BEFORE: BORINS, LANG and JURIANSZ JJ.A.
COUNSEL: Paul Alexander Robson
the appellant
in person and
for the appellant RX
John B. Laskin and Sean E. Cumming
for the appellants
Anti-Aging Holdings Limited and Cellex-C International Inc.
Hillel David and Richard Howell
for the respondent
Tessis & Partners
HEARD: September 7, 2004
Appeals C37761 and C39245 are from the judgment of Justice Joan L. Lax of the Superior Court of Justice dated February 1, 2002, as amended by supplementary reasons dated June 3, 2002. Appeal C41387 is from the order of Lax J. dated February 9, 2004 reported at [2004] O.J. No. 55.
E N D O R S E M E N T
[1] These appeals primarily question whether the trial judge erred in finding that Paul Robson acquired certain property while he was an undischarged bankrupt between July 8, 1992 and May 15, 1996 and whether Mr. Robson diverted any such property, and funds arising from that property, in violation of the Bankruptcy and Insolvency Act, R.S.C. 1986, c. B‑3, (the “Act”), in particular, pursuant to the Act’s provisions regarding “after-acquired property” (s. 67(1)(c)).
[2] The appellants also challenge the following findings made by the trial judge:
The bankruptcy court had jurisdiction over Anti-Aging Holdings Limited (“AAH”) and Cellex-C International Inc. (“Cellex”) who were “strangers to the bankruptcy”;
AAH and Cellex are accountable to the trustee for monies paid on account of Mr. Robson’s share ownership;
AAH and Cellex were accountable for additional monies demanded by the trustee at the time the judgment was settled without adequate opportunity for them to make submissions and without adequate reasons by the trial judge;
Mr. Robson was required to elect to call no evidence before proceeding with his motion for non-suit; and
The plaintiffs were entitled to costs on a substantial indemnity basis.
[3] The main issue on appeal rests on the trial judge’s finding that the bankrupt, Mr. Robson, acquired shares in AAH and, through AAH, in Cellex at a time when he remained an undischarged bankrupt. While the intended owner of the shares was initially said to be Paul Robson, the share certificates were eventually issued to his wife’s company RX Corporation (“RX”), which the trial judge concluded to be an “artifice” and equivalent to issuing the shares to Mr. Robson.
[4] The appellants say that the shares at issue were given to Mr. Robson through RX after his bankruptcy and hence could not be subject to any claim by the bankruptcy trustee. To establish a gift of the shares to Mr. Robson during the bankruptcy, the trustee was required to prove, among other elements, that the shares had been delivered in a manner that provided Mr. Robson with a legally enforceable entitlement to the shares. The appellants argued that the trustee failed to establish this essential element of gift.
[5] This was not a case, however, where Mr. Robson had nothing more than a promise to receive the shares at a future date; rather, it was a case where the trial judge found that Mr. Robson had an actual ownership interest from June 21, 1993, from which flowed his interest in the shares in question and the income arising from those shares. In our view, there was more than ample evidence to support these findings.
[6] That evidence included:
i) Mr. Robson’s sworn affidavit in another proceeding that he had been a shareholder during the time of his bankruptcy;
ii) Corporate documentation evidencing his 1993 share ownership;
iii) Mr. Robson’s later directions to his law clerk to alter the corporate records to amend the date of his share ownership; and
iv) Meagan McLellan’s evidence in another proceeding that Mr. Robson was a shareholder in 1993. (Ms. McLellan was the principal witness for Mr. Robson at trial.)
Further, there was evidence to support the finding that Mr. Robson’s share ownership entitled him to an interest in Cellex.
[7] While in her initial reasons the trial judge did not appear to differentiate between payments to Mr. Robson through RX on account of share ownership and payments on account of work contributed by him, in her February 9, 2004 confirmation of the Registrar’s Report, the trial judge clearly found that the payments related to RX’s percentage ownership of the shares and not to legal services performed by Mr. Robson. Further, the trial judge was entitled to conclude on the evidence that the monies paid accrued during and were attributable to the period of Mr. Robson’s bankruptcy. Further, while the appellants raised the applicability of s. 68 of the Act, that section cannot apply retrospectively to income not disclosed by the bankrupt and of which the trustee was unaware during the bankruptcy period.
[8] On the question of jurisdiction, this was determined by Spence J. on the motion of Mr. Robson and RX. On January 17, 2002, he ruled that the issues raised by these proceedings are within the jurisdiction of the Bankruptcy Court. Jurisdiction was not, and is not, challenged by Cellex or by AAH. As Mr. Robson has not pursued an application for leave to appeal from the ruling of Spence J., he is unable to raise the jurisdictional issue before this court.
[9] In addition to her findings against Mr. Robson and RX, the trial judge made credibility findings against Ms. McLellan. The trial judge found Ms. McLellan to be the controlling shareholder and directing mind of AAH, its affiliated company Anti-Aging International Inc. (“AII”), Cellex, and its sister company Cellex Cosmaceuticals Inc. (“Cosmaceuticals”) colluded with Mr. Robson to deprive the trustee in bankruptcy of the disputed shares and of monies paid to RX in consequence of its ownership of those shares. There was ample evidence to support a finding that “McLellan and Robson collaborated to attempt to conceal assets