COURT OF APPEAL FOR ONTARIO

CITATION: Montor Business Corporation v. Goldfinger, 2016 ONCA 406

DATE: 20160530

DOCKET: C57879

Cronk, Pepall and Lauwers JJ.A.

In the Matter of the Bankruptcy of Summit Glen Waterloo/2000 Developments Inc., of the City of Toronto, in the Province of Ontario

BETWEEN

A. Farber & Partners Inc., the Trustee of the Bankruptcy Estate of

Montor Business Corporation, Annopol Holdings Limited and

Summit Glen Brantford Holdings Inc.

Applicant (Appellant/

Respondent by way of cross-appeal)

and

Morris Goldfinger, Goldfinger Jazrawy Diagnostic Services Ltd.,

Summit Glen Bridge Street Inc., Mahvash Lechcier-Kimel,

Annopol Holdings Limited and Summit Glen Brantford Inc.

Respondents (Respondents/Appellants by way of cross-appeal)

Patrick Shea and Brent Arnold, for the appellant/respondent by way of cross-appeal

Maurice J. Neirinck and Michael McQuade, for the respondents/appellants by way of cross-appeal

Heard: October 14 and 15, 2015

On appeal from the judgment of Justice David M. Brown of the Superior Court of Justice, dated October 28, 2013, with reasons reported at 2013 ONSC 6635, 8 C.B.R. (6th) 200.

Pepall J.A.:

Introduction

[1] A failed relationship between an investor, Dr. Morris Goldfinger, and a real estate developer, Jack Lechcier-Kimel (“Kimel”), and the subsequent bankruptcy of several of Kimel’s companies has generated three appeals. The appeals involve claims to funds asserted by A. Farber & Partners Inc. (“Farber”), the Trustee in bankruptcy of five companies: Annopol Holdings Limited (“Annopol”), Summit Glen Brantford Holdings Inc. (“SG Brantford”), Summit Glen Waterloo/2000 Developments Inc. (“SG Waterloo”), Summit Glen Group of Companies Inc. (“SG Group”) and Montor Business Corporation (“Montor”). All but Montor were companies owned and controlled by Kimel or his then-spouse, Mahvash Lechcier-Kimel (“Mahvash”).

[2] In the primary appeal, which is the subject matter of these reasons, Farber, in its capacity as Trustee of Annopol, challenges the trial judge’s refusal to set aside transactions arising from a settlement between Goldfinger, Kimel and some of Kimel’s companies. In particular, Farber seeks to set aside certain transactions arising from the settlement: (1) payments totalling $2.5 million to Goldfinger from Annopol (the “Payments”); and (2) mortgages granted to Goldfinger by SG Brantford and Summit Glen Bridge Street Inc. (“SG Bridge”) over their respective properties, and Annopol’s subordination of mortgage security in favour of Goldfinger (the “Brantford/Bridge 2008 Transactions”).

[3] The trial judge rejected Farber’s assertions that the transactions were:

• transfers at undervalue under s. 96 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”);

• unjust preferences under s. 4 of the Assignments and Preferences Act, R.S.O. 1990, c. A.33 (the “APA”);

• fraudulent conveyances under s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (the “FCA”);

• oppressive under s. 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”); and

• an unjust enrichment.

[4] Goldfinger cross-appeals on the basis that the trial judge erred in setting aside a $471,000 payment in his favour from SG Brantford. The trial judge found that the payment was contrary to s. 2 of the FCA and oppressive under s. 248 of the OBCA.

[5] In the remaining two appeals, both Farber and Goldfinger or his company, 1830994 Ontario Ltd., take issue with the treatment of certain claims asserted in the various bankruptcy proceedings. These appeals are addressed in separate sets of reasons released contemporaneously with these reasons, bearing court file numbers C57898 and C58356.

[6] For the reasons that follow, I would dismiss this appeal and Goldfinger’s cross-appeal.

Background Facts

A. The Parties’ Relationship

[7] Kimel was a real estate developer. He incorporated numerous companies for that purpose. He attracted investors to lend to and invest in his companies. Those companies would then lend money to other Kimel companies that would in turn acquire real estate. The investor loans were to be repaid from the proceeds generated from selling the real estate. The investors would also receive a portion of the profit generated from the sales.

[8] Goldfinger was not a real estate developer; he was a radiologist. He was also a good friend of Kimel. He decided to lend and invest money into some of Kimel’s companies. From February 1999 to December 2005, Goldfinger lent approximately $6.5 million to Kimel’s companies, $2,956,000 of which he claimed was advanced to Annopol. Annopol’s affairs were directed by Kimel. Annopol then lent these funds to other Kimel companies for the purpose of acquiring properties in the Kitchener/Waterloo and Brantford areas.

[9] The terms of the arrangements with Goldfinger were not reduced to writing. Goldfinger described the funds advanced as “interest-free loans” and claimed that he was engaged in a “joint venture” with Kimel.

[10] In 2007, the relationship between Goldfinger and Kimel broke down. Goldfinger discovered that Kimel had misled him and that many of the properties that had been acquired were encumbered by mortgages of which he was unaware. He sought explanations and the return of his money, but Kimel stalled. Goldfinger retained counsel who, in letters dated November 12 and 13, 2007, threatened litigation. Goldfinger prepared a draft affidavit in support of a request for a court-appointed receiver over some of Kimel’s companies, including Annopol. In that affidavit, he asserted that he had repeatedly requested an accounting from Kimel without success and had concluded that Kimel had not been dealing in good faith. Kimel also retained counsel.

B. The First Settlement

[11] The parties commenced settlement negotiations and negotiated the dissolution of their business relationship (the “First Settlement”). Goldfinger and Kimel reached a resolution independently and arrived at an amount to be paid to Goldfinger, but the overall structure and details of the settlement were negotiated with the assistance of counsel. The parties agreed that Goldfinger would withdraw from the various projects and would be repaid his shareholder loans of $6.5 million, plus an additional $5 million in return for his shares in the various companies. At the time, this latter sum was thought to represent his equity in the properties.

[12] As agreed, between December 2007 and January 2008, Annopol paid $2.5 million to Goldfinger. The Payments were broken down as follows. On December 5, 2007, Annopol transferred $1.5 million to Goldfinger. Annopol also issued four cheques in his favour dated December 12 and 28, 2007 in the amount of $300,000 each and December 21, 2007 and January 10, 2008 in the amount of $200,000 each, for a total of $1 million. Each cheque bore the notation “re-purchase shares”. Annopol relied on transfers of funds from other Summit Glen entities to cover the amounts paid to Goldfinger.

[13] The settlement was memorialized in a Memorandum of Agreement (the “Memorandum”) dated December 11, 2007 but signed on May 20, 2008 and amended on June 6, 2008. The terms of the Memorandum originated around the time that the aforesaid payments were made. Goldfinger testified that the Payments of $2.5 million were consideration in contemplation of the settlement. Kimel also stated that the Payments were made in anticipation of the settlement.

[14] The parties to the Memorandum were: Goldfinger, Kimel, Mahvash, Annopol, and enumerated Summit Glen companies including SG Brantford and SG Bridge (collectively, the “Summit Glen Companies”).

[15] The Memorandum provided that:

• Notwithstanding that shares of the Summit Glen Companies had not been formally issued, Goldfinger was, and for all purposes deemed to be, the legal and beneficial owner of 50% of the share capital of each of the Summit Glen Companies.

• The Summit Glen Companies acknowledged the $6.5 million debt to Goldfinger which, in aggregate, was allocated to each of them in separate amounts. The advances were described as shareholder loans.

• The Memorandum accurately recorded the parties’ understanding of the discussions that had taken place.

• Each of the Summit Glen Companies was to deliver an interest-free promissory note for its share of the $6.5 million to Goldfinger, one-half payable on December 11, 2008 and the other half payable on December 11, 2009.

• Kimel and each of the Summit Glen Companies were to guarantee the payment of $6.5 million.

• The Summit Glen Companies were to provide $6.5 million in collateral mortgages to Goldfinger. These included mortgages on 176 Henry St., Brantford, which was owned by SG Brantford, and on 70 Bridge St. W., Kitchener, which was owned by SG Bridge.

• Kimel would purchase Goldfinger’s shares for $5 million. The parties agreed that the $2.5 million already paid represented a partial payment of the purchase price. The remainder was to be paid by a $1.5 million secured promissory note and a $1 million unsecured promissory note.

• Each of the Summit Glen Companies, including SG Brantford and SG Bridge, was to guarantee payment to Goldfinger of these secured and unsecured promissory notes and was to give collateral third mortgages as security for the guarantees. SG Brantford granted a third mortgage over 176 Henry St. in Brantford and SG Bridge granted a third mortgage over 70 Bridge St. W. in Kitchener to secure the sum of $1.5 million.

• Annopol, Kimel and Mahvash postponed all of their claims against the Summit Glen Companies, including SG Brantford and SG Bridge, in favour of Goldfinger.

• Annopol also postponed its mortgages, including those over 176 Henry St. and 70 Bridge St. W., in favour of Goldfinger (the “Annopol Subordinations”).

• Kimel and the Summit Glen Companies provided Goldfinger with an indemnity and they, together with Mahvash and Annopol, also provided him with a release.

[16] Lawyers acted for the parties on the settlement, but Goldfinger’s lawyers testified that Kimel and Goldfinger had agreed on the $2.5 million figure prior to approaching them.

[17] The settlement “was designed in such a way as to repay to Goldfinger the amounts already lent to the SG Companies and to enable Goldfinger to extract an amount representing his notional equity or profit in the various real estate developments”: reasons, at para. 213.

[18] The Memorandum transactions closed in June 2008 and Goldfinger received the promissory notes, guarantees, postponements and mortgages due to him pursuant to the terms of the Memorandum.

C. The Brantford/Bridge 2008 Transactions

[19] Prior to the closing, the 176 Henry St. property owned by SG Brantford was subject to: a first mortgage of $2.85 million in favour of First National Financial Corporation (“First National”); a second mortgage of $450,000 in favour of Montor; and a third mortgage of $750,000 in favour of Annopol. Montor was owned by Jack Perelmuter, an accountant who had provided accounting services to Kimel’s companies.

[20] As a result of the settlement, SG Brantford provided Goldfinger with two mortgages over 176 Henry St. and Annopol agreed to postpone its third mortgage in favour of Goldfinger’s two mortgages. As such, Goldfinger’s mortgages were in third and fourth position on the property and Annopol’s mortgage was in fifth place.

[21] The 70 Bridge Street property owned by SG Bridge was subject to a mortgage in favour of Annopol. As a result of the settlement, SG Bridge provided Goldfinger with two mortgages over 70 Bridge Street and Annopol postponed its mortgage in favour of Goldfinger’s two mortgages.

D. Events Surrounding the Bankruptcies

[22] By July 2008, Goldfinger alleged that Kimel had breached the terms of the Memorandum and he proceeded to serve demand notices on some of Kimel’s companies.

[23] Meanwhile, the global credit market crisis was brewing, with matters coming to a head with Lehman Brothers’ Chapter 11 filing in mid-September 2008.

[24] In November 2008, the 176 Henry St. property had to be refinanced, as the first mortgage in favour of First National was due. It was renegotiated and the principal sum secured was increased. As part of the transaction, Kimel signed an agreement on behalf of Montor to subordinate its second mortgage so that the principal amount of the first mortgage could be increased. SG Brantford then paid $471,000 to Goldfinger, and his third and fourth mortgages were discharged. This payment to Goldfinger was made in the absence of any payment to Montor.

[25] On December 1, 2008, Goldfinger obtained an order appointing Zeifman & Partners Inc. as receiver of a number of Kimel’s companies to which Goldfinger had made loans, including SG Waterloo, but not including Annopol. Following this, some other Kimel companies defaulted on loans.

[26] Perelmuter assigned his company, Montor, into bankruptcy on February 6, 2009. Farber was subsequently appointed Montor’s Trustee in bankruptcy.

[27] Annopol and SG Brantford were each adjudged bankrupt on May 27, 2010, the initial bankruptcy event having occurred on May 26, 2009, in the case of Annopol, and on April 30, 2009 in the case of SG Brantford. Farber was appointed Trustee in bankruptcy of both companies, as well as of SG Group and SG Waterloo. SG Waterloo was adjudged bankrupt on June 28, 2010, the date of its initial bankruptcy event being April 3, 2009.

E. The Litigation

[28] As mentioned, Farber, in its capacity as Trustee in bankruptcy of Annopol, challenged the $2.5 million Payments from Annopol to Goldfinger. It argued that the Payments were: (1) transfers at undervalue contrary to s. 96 of the BIA; (2) unjust preferences under s. 4 of the APA; (3) fraudulent conveyances under s. 2 of the FCA; (4) oppressive under s. 248 of the OBCA; and (5) an unjust enrichment.

[29] The trial judge heard the proceedings in a hybrid trial conducted over the course of eight days. He heard viva voce evidence and also reviewed extensive documentary records, including several transcripts of out-of-court cross-examinations.

[30] The trial judge dismissed all of Farber’s challenges to the Payments. Farber now appeals from that judgment, arguing that the trial judge erred in upholding the Payments on each of the grounds set out above.

[31] Also relying on the same statutory provisions, before the trial judge Farber challenged the Brantford/Bridge 2008 Transactions (the mortgages granted by SG Brantford and SG Bridge to Goldfinger and the Annopol Subordinations) and the $471,000 paid to Goldfinger. The trial judge dismissed Farber’s claims with the exception of the $471,000 payment to Goldfinger, which he found to be contrary to s. 2 of the FCA and s. 248 of the OBCA. On appeal, Farber submits that the trial judge erred in failing to set aside the Brantford/Bridge 2008 Transactions under the OBCA.

[32] Goldfinger cross-appeals from the trial judge’s decision ordering him to repay Farber the $471,000.

Appeal Relating to the Payments

A. Are the Payments Transfers at Undervalue under the BIA?

(i) Introduction

[33] Dealing first with the BIA claim, Farber challenged the Payments as transfers at undervalue contrary to s. 96 of the BIA. In order to succeed on this ground, Farber was required to establish that:

(a) the Payments were transfers at undervalue;

(b) the transfer occurred:

(i) within one year before the initial bankruptcy event (May 26, 2009), if Goldfinger was at arm’s length with the debtor, Annopol; or

(ii) within five years before the initial bankruptcy event (May 26, 2009), if Goldfinger was not at arm’s length with the debtor, Annopol; and

(c) the debtor, Annopol, was insolvent at the time of the Payments or was rendered insolvent by the Payments; and

(d) the debtor, Annopol, intended to defraud, defeat or delay a creditor.

[34] As I will discuss, undervalue means either that no consideration has been received by the debtor or that the consideration received is conspicuously less than the fair market value of the consideration given by the debtor: BIA s. 2. Section 96 is reproduced in Schedule “A” attached to these reasons.

(ii) Trial Judge’s Decision on s. 96 of the BIA

[35] Before the trial judge, Farber argued that it had established all of the s. 96 requirements and therefore was entitled to an order that the Payments were transfers at undervalue.

[36] The trial judge rejected this argument. He found that the transfers were not at undervalue because consideration was given to Annopol by Goldfinger.

[37] The trial judge explained that forbearance from suit, either actual or promised, can constitute good consideration. He found that Goldfinger had lent $6.5 million to Kimel’s companies and could bring proceedings for that amount. Moreover, formal demand had been made on Kimel and in November 2007, Goldfinger had his counsel prepare an affidavit for him to swear in an action he was contemplating against Kimel, Annopol and the Summit Glen Companies, for the appointment of a receiver over a number of their properties. Instead, Goldfinger settled and did not proceed with his threatened litigation.

[38] The trial judge held that the terms of the settlement reflected a compromise of Goldfinger’s claims to recover his investment of $6.5 million. Goldfinger deposed that: (1) but for the prior payment of $2.5 million, he would not have entered into the settlement and would have proceeded with the litigation against Kimel and his various companies; and (2) over the course of his dealings, $2.956 million of his money had been deposited into Annopol. Goldfinger’s forbearance from suit was not consideration that was conspicuously less than the fair market value of the Payments and there were no transfers at undervalue. This was the ratio of the trial judge’s decision on s. 96 of the BIA.

[39] Nonetheless, he proceeded to consider the other elements Farber was required to establish under s. 96 of the BIA.

[40] The trial judge concluded that at the time of the Payments (December 2007 and January 2008), Annopol was insolvent using a balance sheet test.

[41] The trial judge also addressed the nature of the relationship between Goldfinger and Annopol and considered whether they were at arm’s length. Although the Memorandum deemed Goldfinger to be a shareholder, the trial judge found that Goldfinger was not a registered shareholder of Annopol. He found that this deal structure was simply a technical device that was probably tax-driven. Goldfinger never exercised any control over the affairs of Annopol, or any of Kimel’s other companies. As a result, Goldfinger and Annopol were not related persons within the meaning of ss. 4(2) and (3) of the BIA.

[42] In addition, he addressed s. 4(4) of the BIA, which provides that “[i]t is a question of fact whether persons not related to one another were at a particular time dealing with each other at arm’s length.” He concluded that they were acting at arm’s length.

[43] Although the trial judge accepted that Goldfinger and Kimel had been close friends, he acknowledged that one had to examine the nature of their relationship at the time the Payments were made. Goldfinger had not been involved in the operation of Kimel’s companies and had quite limited information about their affairs. In 2007, Goldfinger discovered that he had been misled. He sought explanations, but Kimel stalled. Although Goldfinger and Kimel arrived at the amount of $2.5 million together, the overall structure and details of the settlement were negotiated with the assistance of counsel. The trial judge determined that the facts did not disclose bonds of “dependence, control or influence”, which are generally necessary in order to find that two parties are not acting at arm’s length.

[44] Given that the parties were found to be at arm’s length, to succeed under s. 96 of the BIA, Farber had to show that the Payments were made within one year prior to the initial bankruptcy event. Annopol’s initial bankruptcy event was May 26, 2009 and therefore, the one-year statutory review period commenced on May 26, 2008. The Payments, having occurred between December 5, 2007 to January 10, 2008, were outside the one-year statutory review period reflected in s. 96(1)(a) of the BIA. Accordingly, the trial judge concluded that the Payments were not reviewable under s. 96.

[45] Lastly, the trial judge considered whether, by making the Payments, Annopol intended to defraud, defeat or delay a creditor. He accepted Farber’s submission that Annopol’s intention should be determined by reference to the intention of Kimel, who directed Annopol’s affairs.

[46] The trial judge recognized that an inference of intent may arise from suspicious facts or circumstances, sometimes referred to as “badges of fraud”. He found that when making the Payments, Kimel and Goldfinger did not intend to defraud, defeat or delay any of Annopol’s creditors. In making that finding, he relied on the following facts:

• the terms of the Memorandum, which originated around the time the Payments were made, indicated that the parties thought the Summit Glen Companies would continue as going concerns and that the properties would generate sufficient value to repay the remaining amount owing to Goldfinger by December 11, 2009;

• the parties to the Memorandum also believed that the properties owned by the Summit Glen Companies had significant future value;

• the Memorandum was not put together in a rush, but was negotiated over six months and both parties were represented by counsel;

• the parties were at arm’s length;

• the two lawyers’ evidence on the parties’ thought processes at the time suggested a genuine belief in the sufficient value of the subject properties;

• consideration was given;

• the Payments and the Memorandum were not put in place in the face of claims by Annopol’s judgment creditors; and

• this was all done prior to the collapse of the credit markets, which occurred months after the execution of the Memorandum.

(iii) Farber’s s. 96 Submissions on Appeal

[47] On appeal, Farber advances three arguments with respect to the trial judge’s treatment of the s. 96 BIA claim.

[48] First, in concluding that the Payments were not transfers at undervalue, Farber submits that the trial judge erred in deciding that Goldfinger provided valuable consideration. Compromising his potential legal claim did not amount to sufficient consideration, as s. 96 requires that the consideration be given at the same time as the transfer and the compromise only occurred at the time of the Memorandum. Furthermore, Annopol did not receive anything in exchange for the Payments; the Memorandum lists the $2.5 million as payment for a debt owing by Kimel. Farber also submits that the trial judge erred in failing to examine the sufficiency of the consideration provided – there was no documentary evidence of any forbearance or settlement with Annopol at the time of the Payments.

[49] Second, Farber submits that the trial judge erred in finding that the parties were acting at arm’s length. Although he identified the correct test, he failed to apply it. Specifically, he failed to consider the parties’ relationship at the time of the Payments and that the Payments were the opposite of what one would expect from arm’s-length parties. The trial judge also failed to consider that Goldfinger refused to produce his e-mail exchanges with Kimel from the time of the Payments and failed to consider Goldfinger’s evidence that he used his relationship with Kimel to obtain the Payments.

[50] Third, Farber argues that the trial judge erred in his analysis of Annopol’s intention to defraud, defeat or delay a creditor. Again, Farber states that the trial judge focused on the evidence relating to the Memorandum rather than the Payments themselves and also failed to identify and consider the badges of fraud that were present. In addition, Annopol had a subjective intent to defraud its creditors, HSBC and a third-party investor, Srubiski, and its actions were deliberate. It had borrowed money from those creditors on the basis that the funds would be invested in real estate; instead, Annopol gave the money to Goldfinger. The effect of the Payments was to defraud and defeat its creditors.

(iv) Analysis

(1) Transfers at Undervalue

[51] Section 2 of the BIA defines a “transfer at undervalue” as follows:

[A] disposition of property or provision of services for which no consideration is received by the debtor or for which the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor.

[52] In the absence of evidence to the contrary, Farber’s opinion on both the fair market value of the property or services and the value of the actual consideration given or received by the debtor are to be accepted by the court: see s. 96(2) of the BIA.

[53] Weighing the adequacy of consideration is not an exercise in precision but one of judgment. Nominal or grossly inadequate consideration is insufficient and may be an indication or badge of fraud: see Feher v. Healey, [2006] O.J. No. 3450 (Sup. Ct.), at para. 45, aff’d 2008 ONCA 191.

[54] Forbearance from suit and a settlement agreement may constitute adequate consideration: see Ronald Elwyn Lister Ltd. v. Dunlop Canada Ltd., 1982 19 (SCC), [1982] 1 S.C.R. 726, at p. 743; Stott v. Merit Investment Corp. (1988), 1988 192 (ON CA), 63 O.R. (2d) 545 (C.A.), at pp. 558-60, leave to appeal dismissed, [1988] S.C.C.A. No. 185.

[55] Here, formal demand had been made on Kimel and in November 2007 Goldfinger had his counsel prepare an affidavit for him to swear in an action he was contemplating against Kimel, several of the Summit Glen Companies and Annopol. Rather than proceeding with the litigation, Goldfinger negotiated a resolution to the parties’ dispute. He abandoned his pursuit of the legal action against Kimel and his companies, including Annopol. But for the $2.5 million payment, he would have commenced and continued with his litigation.

[56] The evidence supports the finding that Goldfinger was genuinely threatening legal action. In particular, the record contains Goldfinger’s draft affidavit and, as well, his lawyer prepared a memorandum referring to the proposed settlement and that as a result, “Jack [Kimel] staves off receivership”. In addition, Annopol was to be a beneficiary of a release under the settlement. The trial judge did not err in concluding that Goldfinger’s forbearance constituted consideration.

[57] One must then consider whether the consideration given by Goldfinger was adequate, or, to use the language of s. 2 of the BIA, was “conspicuously less than the fair market value” of the consideration given by Annopol.

[58] Of the $6.5 million invested by Goldfinger, $2.956 million had been paid to Annopol. Based on the record before him, it was open to the trial judge to conclude that a payment of $2.5 million in return for a compromise of Goldfinger’s remaining rights was adequate consideration. At a minimum, Goldfinger paid Annopol and Kimel $2.9 million. Given the potentially ruinous consequences of a lawsuit, the trial judge did not err in concluding that the Payments did not constitute a transfer at undervalue.

[59] Farber also asserts that s. 96 requires that consideration be given at the same time as the transfer and, in this case, the compromise only occurred at the time of the Memorandum.

[60] Section 96 does not address timing and Farber provided no authority for this proposition. However, assuming without deciding that Farber’s proposition is correct, the trial judge found at para. 274 of his reasons that the terms of the settlement originated around the time the $2.5 million was paid. This finding of fact is also relevant to the trial judge’s determination that the Payments were not motivated by a desire to defraud, defeat or delay a creditor.

[61] This finding was also available on the record. Goldfinger testified that he and Kimel came up with the terms of the settlement themselves and only then approached the lawyers to structure and paper the agreement. In one of his affidavits, he stated that the parties had reached an agreement in November 2007, before the first payment was made. The evidence of Goldfinger’s two lawyers lends credence to Goldfinger’s version of events.

[62] In addition, one of the lawyers, Carl Schwebel, prepared a memo dated November 28, 2007 that recorded discussions with Goldfinger, Kimel and members of Schwebel’s firm at a meeting that same day. Although not identical to the terms of the Memorandum, the memo recorded the terms of the settlement negotiated by Goldfinger and Kimel, including the payment of $2.5 million.

[63] In light of this evidence, I would not give effect to Farber’s submission that the trial judge erred in his transfer at undervalue analysis.

(2) Acting at Arm’s Length

[64] Given my conclusion on the transfer at undervalue issue, it is not strictly necessary to address Farber’s other arguments about s. 96 of the BIA. I will do so because my conclusions on the balance of the s. 96 factors inform my conclusions on Farber’s other grounds of appeal attacking the validity of the Payments.

[65] On the issue of whether the parties were at arm’s length, Farber does not challenge the trial judge’s description of the applicable test or his finding that Goldfinger and Annopol were unrelated. Rather, it challenges his application of the test and his conclusion that Goldfinger and Annopol were acting at arm’s length.

[66] Section 4(4) of the BIA states: “It is a question of fact whether persons not related to one another were at a particular time dealing with each other at arm’s length.” As a result, absent a palpable and overriding error, the trial judge’s finding on this issue is entitled to deference.

[67] The trial judge considered the dicta in Abou-Rached (Re), 2002 BCSC 1022, 35 C.B.R. (4th) 165, at para. 46:

[A] transaction at arm’s length could be considered to be a transaction between persons between whom there are no bonds of dependence, control or influence, in the sense that neither of the two co-contracting parties has available any moral or psychological leverage sufficient to diminish or possibly influence the free decision-making of the other. Inversely, the transaction is not at arm’s length where one of the co-contracting parties is in a situation where he may exercise a control, influence or moral pressure on the free will of the other. Where one of the co-contracting parties is, by reasons of his influence or superiority, in a position to pervert the ordinary rule of supply and demand and force the other to transact for a consideration which is substantially different than adequate, normal or fair market value, the transaction in question is not at arm’s length.

[68] He also considered Piikani Energy Corporation (Trustee of) v. 607385 Alberta Ltd., 2013 ABCA 293, 556 A.R. 200, which identified factors that provide guidance on non-arm’s length analysis in the context of Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) jurisprudence. These factors, enumerated at para. 29 of Piikani, are: was there a common mind which directed the bargaining for both parties to a transaction; were the parties to the transaction acting in concert without separate interests; and was there de facto control?

[69] There was no common mind directing Goldfinger and Annopol or indeed, Kimel. They were adverse in interest and on the verge of litigation. The evidence also fails to suggest that they were acting in concert. As discussed, the trial judge did not fail to consider the parties’ relationship at the time of the Payments. Nor did Goldfinger or Annopol exercise de facto control over the other.

[70] Goldfinger was never involved in the operation of the companies, had little information about their operation or finances, discovered Kimel had misled him and then threatened to sue. As mentioned, although Goldfinger and Kimel decided on the amount Goldfinger would be paid, the overall structure and details of the settlement were negotiated with the assistance of counsel.

[71] Farber argues that the Payments were the opposite of what one would expect from arm’s length parties and that the trial judge erred in declining to draw certain inferences from the evidence. However, the trial judge is the fact finder, not this court, and he was not required to recite every piece of evidence in his 372 paragraphs of reasons. Moreover, there was a dearth of evidence suggesting that the parties were not at arm’s length and the trial judge did not err in finding to the contrary. I would reject this argument.

(3) Intention to Defraud, Defeat or Delay a Creditor

[72] The burden was on Farber to establish the requisite intent under s. 96 of the BIA. An inference of intent may arise from the existence of one or more badges of fraud. However, the presence of such indicia does not mandate a finding of intent. Whether the intent exists is a question of fact to be determined from all of the circumstances as they existed at the time of the conveyance: see Re Fancy (1984), 1984 2031 (ON SC), 46 O.R. (2d) 153 (H. Ct. J.), at p. 159.

[73] Case law has identified the following, non-exhaustive list of “badges of fraud” (see DBDC Spadina v. Walton,2014 ONSC 3052, at para. 67; Indcondo Building Corp. v. Sloan, 2014 ONSC 4018, 121 O.R. (3d) 160, aff’d 2015 ONCA 752, 31 C.B.R. (6th) 110, at para. 52):

• the transferor has few remaining assets after the transfer;

• the transfer was made to a non-arm’s length person;

• the transferor was facing actual or potential liabilities, was insolvent, or about to enter a risky undertaking;

• the consideration for the transaction was grossly inadequate;

• the transferor remained in possession of the property for his own use after the transfer;

• the deed of transfer contained a self-serving and unusual provision;

• the transfer was secret;

• the transfer was effected with unusual haste; or

• the transaction was made in the face of an outstanding judgment against the debtor.

[74] As stated, Farber complains that the trial judge failed to consider the presence of badges of fraud, focused on the evidence relating to the Memorandum rather than the Payments themselves, and ignored Annopol’s intent to defraud its creditors.

[75] The trial judge found that the terms of the settlement originated around the time that the $2.5 million was paid. Furthermore, the evidence suggested that the parties expected the Summit Glen Companies and Annopol to continue as going concerns. As is evident from paras. 260 and following of his reasons, the trial judge did consider the issue of badges of fraud, but ultimately concluded that there was no intent. Indeed, his findings undermine Farber’s assertions that badges of fraud were present. He assessed the evidence and made findings of fact that supported his reasons for finding an absence of intent. Those findings were available on the record. I see no basis to interfere with them.

[76] As for Farber’s submissions relating to Annopol’s alleged subjective intent to defraud its creditors, HSBC and Srubiski, the evidence did not support such a finding of intent. Neither the Payments nor the settlement were effected in the face of claims by Annopol’s judgment creditors. No evidence was tendered from any creditor and there was no evidence that established that Annopol paid creditor funds to Goldfinger.

[77] In conclusion, I would reject Farber’s submissions on s. 96 of the BIA.

B. Are the Payments Unjust Preferences under the APA?

(i) Introduction

[78] At the trial, Farber also argued that the Payments were void as unjust preferences pursuant to s. 4 of the APA. To be successful, Farber needed to establish that:

(a) Annopol was insolvent at the time of the Payments;

(b) Annopol intended to defeat, hinder, delay or prejudice a creditor; and

(c) Goldfinger was not a creditor of Annopol within the meaning of s. 5(1) of the APA.

[79] Sections 4 and 5 of the APA are reproduced in Schedule “A” attached to these reasons.

(ii) Trial Judge’s Decision on the APA

[80] The trial judge did not accept Farber’s APA argument. He found that the first and third requirements under the APA were satisfied – Annopol was insolvent, and Goldfinger was not a creditor of Annopol within the meaning of s. 5(1) of the APA. However, the trial judge relied on his earlier analysis under s. 96 of the BIA to conclude that the second requirement was not met: Annopol did not have the requisite intent to defeat, hinder, delay or prejudice a creditor.

(iii) Parties’ APA Submissions on Appeal

[81] On appeal, Farber reiterates its position on intent. In response, Goldfinger takes issue with the trial judge’s finding that he was not a creditor within the meaning of s. 5(1).

(iv) Analysis

[82] I have already addressed the issue of intent under s. 96 of the BIA and that analysis is equally applicable to the requirement of intent under the APA. For these reasons, I would dismiss Farber’s APA ground of appeal. Given that conclusion, there is no need to address Goldfinger’s submission on his status.

C. Are the Payments void under the FCA?

(i) Introduction

[83] Before the trial judge, Farber submitted that the Payments were also contrary to s. 2 of the FCA. To succeed, Farber had to demonstrate that:

(a) Annopol made the Payments with an intent to defeat, hinder, delay or defraud creditors or others; and

(b) Goldfinger did not provide good consideration in exchange for the Payments; or

(c) if Goldfinger did provide good consideration, he had notice or knowledge of Annopol’s intent to defeat, hinder, delay or defraud creditors or others.

[84] Sections 2 and 3 of the FCA are reproduced in Schedule “A”.

(ii) Trial Judge’s Decision on the FCA

[85] The trial judge confined his FCA analysis to an examination of intent. He concluded that the evidence concerning intent under the other statutes applied equally to Farber’s claim under the FCA. Consequently, he dismissed the FCA claim.

(iii) Farber’s Submissions on Appeal

[86] On appeal, Farber submits that the trial judge erred in failing to consider the factual matrix surrounding the Payments; the evidence relating to Annopol’s actual or imputed intent; and that Goldfinger was wilfully blind.

(iv) Analysis

[87] I have already addressed the issue of intent, which is equally fatal to this ground of appeal. There is therefore no need to address the issue of Goldfinger’s knowledge. The trial judge was correct in dismissing Farber’s claim under the FCA.

D. Oppression Claim

(i) Introduction

[88] Before the trial judge, Farber submitted that the Payments were oppressive within the meaning of s. 248 of the OBCA. To succeed, Farber had to establish that:

(a) it was a “complainant” within the meaning of s. 245 of the OBCA; and

(b) the Payments were oppressive, unfairly prejudicial or unfairly disregarded the interests of Annopol’s creditors.

Section 248 of the OBCA is reproduced in Schedule “A”.

(ii) Trial Judge’s Decision on Oppression

[89] The trial judge proceeded with his analysis of the oppression claim on the basis that Farber, as Trustee in bankruptcy of Annopol, had status as a complainant under s. 245 of the OBCA. In that regard, he noted that in Olympia & York Developments Ltd. (Trustee of) v. Olympia & York Realty Corp.(2003), 2003 25511 (ON CA), 68 O.R. (3d) 544, at para. 46, this court held that where it was likely the creditors of a bankrupt would have been recognized as complainants for the purpose of challenging a transaction under s. 248 of the OBCA, it was proper to recognize the Trustee of the bankrupt as a complainant “in effect on behalf of the creditors” of the bankrupt.

[90] The trial judge accepted that creditors of a corporation have a reasonable expectation that the corporation will not engage in conduct that runs afoul of provincial preference legislation or the preference/transfer for undervalue provisions of the BIA. However, the trial judge had already found that the Payments by Annopol to Goldfinger did not run afoul of the BIA, the APA or the FCA, and he therefore relied on the same findings to conclude that the Payments did not violate the reasonable expectations of Annopol’s creditors.

[91] Farber also argued that Goldfinger was a shareholder of Annopol at the time of the Payments and the $2.5 million represented the repurchase of shares or the payment of a dividend. However, the trial judge rejected this contention. Rather, in substance, Goldfinger received the re-payment of $2.5 million of the funds he had loaned to Kimel and his companies, together with some additional security. He wrote, at para. 300 of his reasons: “The business substance of the December, 2007 and January, 2008 payments was that Goldfinger received back some of the principal he had invested; there was no profit or equity yet available for distribution.” For these reasons, he rejected Farber’s oppression claim.

(iii) Parties’ Oppression Submissions on Appeal

[92] Goldfinger submits that while the court has discretion to recognize a Trustee in bankruptcy as a complainant under the OBCA, the exercise of that discretion was unjustified in this case. Furthermore, Farber put forward no evidence on the reasonable expectations of the creditors on whose behalf it purported to act. Goldfinger submits that the trial judge erred in recognizing Farber as a complainant.

[93] For its part, Farber asserts that Goldfinger is raising the issue of Farber’s status as a complainant for the first time on this appeal. The decision was within the trial judge’s discretion and there is no basis on which this court should interfere.

[94] On the issue of oppression, Farber reiterates that the Payments were unlawful preferences. In addition, Farber submits that Annopol’s creditors expected that its funds would be used for real estate development. The Payments to Goldfinger resulted in unfair prejudice, as Annopol’s creditors will likely recover nothing from its bankrupt estate. Annopol and Kimel acted with unfair disregard for Annopol’s creditors’ interests. As a result, Farber submits that Goldfinger should be ordered to repay the $2.5 million to Annopol’s bankrupt estate.

(iv) Analysis

[95] Dealing first with the issue of Farber’s status as a complainant, s. 245 of the OBCA defines “complainant” for the purposes of the oppression remedy as follows:

(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or of any of its affiliates,

(c) any other person who, in the discretion of the court, is a proper person to make an application under this Part.

[96] Farber relied on subsection (c) in support of its position that it should be given standing as a complainant. In Olympia & York Developments Ltd., at para. 45, this court held that Trustees in bankruptcy are neither automatically barred nor automatically entitled to standing, but it is a matter of discretion in each case whether to grant standing.

[97] I do not read the trial judge’s reasons as having conclusively held that Farber was a proper person to be a complainant under s. 245. Rather, given his other findings, the trial judge simply proceeded on the assumption that Farber, in its capacity as Trustee in bankruptcy of Annopol, was a complainant. In light of his conclusion on the merits of the oppression claim, and my concurrence with it, I see no need to interfere with his approach. I would also observe that Goldfinger objected to Farber’s status to assert a claim for oppression for the first time on this appeal.

[98] Turning to the merits of the oppression ground of appeal, this court has recognized that the oppression remedy contained in s. 248 of the OBCA is a “flexible, equitable remedy that affords the court broad powers to rectify corporate malfeasance”: see Unique Broadband Systems, Inc. (Re), 2014 ONCA 538, 121 O.R. (3d) 81, at para. 107. The granting of an oppression remedy is a discretionary decision.

[99] In BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, the Supreme Court addressed the oppression provision found in the Canada Business Corporations Act, R.S.C. 1985, c. C-44, which is similar to the provision found in the OBCA. At para. 68, the Court outlined the following two-step test: (1) Does the evidence support the reasonable expectations asserted by the claimant? and (2) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms “oppression”, “unfair prejudice” or “unfair disregard” of a relevant interest?

[100] The Court addressed the concept of reasonable expectations under the first part of the test, at paras. 62 and 63:

[T]he concept of reasonable expectations is objective and contextual. The actual expectation of a particular stakeholder is not conclusive. In the context of whether it would be “just and equitable” to grant a remedy, the question is whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations.

Particular circumstances give rise to particular expectations. Stakeholders enter into relationships, with and within corporations, on the basis of understandings and expectations, upon which they are entitled to rely, provided they are reasonable in the context. These expectations are what the remedy of oppression seeks to uphold. [Citations omitted.]

[101] The court addressed the second stage of the test, at para. 67:

Even if reasonable, not every unmet expectation gives rise to a claim under [s. 248]. The section requires that the conduct complained of amount to “oppression”, “unfair prejudice” or “unfair disregard” of relevant interests. “Oppression” carries the sense of conduct that is coercive and abusive, and suggests bad faith. “Unfair prejudice” may admit of a less culpable state of mind, that nevertheless has unfair consequences. Finally, “unfair disregard” of interests extends the remedy to ignoring an interest as being of no importance, contrary to the stakeholders’ reasonable expectations. The phrases describe, in adjectival terms, ways in which corporate actors may fail to meet the reasonable expectations of stakeholders. [Citations omitted.]

[102] The trial judge’s analysis under the BIA, the APA and the FCA effectively disposed of that part of Farber’s submissions relating to unjust preferences. As for Farber’s argument that there was unfair disregard for the interests of Annopol’s creditors, this submission must be placed in context. While Kimel stated that he was not thinking of his creditors when he made the Payments, Kimel and his companies were facing the prospect of potentially ruinous litigation. He believed that the Payments would permit the companies to continue as going concerns and that they would generate profit. The evidence did not suggest that this was a misguided proposition at that time. The cataclysmic, and unforeseen, economic meltdown that enveloped the global economy months after the Payments were made cannot be ignored. In this context, the trial judge did not err in exercising his discretion and dismissing Farber’s claim of unfair disregard for the interests of Annopol’s creditors.

[103] As for the expectations of HSBC and Srubiski as creditors, Farber claims that Annopol paid Goldfinger with funds it had received from Srubiski. The trial judge found that it was not possible to trace the vast majority of funds to any particular source or creditor. As the trial judge noted, Kimel’s evidence was that money may have come from Srubiski or Mahvash. There was also no conclusive evidence that the funds paid by Annopol to Goldfinger came from Srubiski. Moreover, the line of credit from HSBC was provided to SG Group and not to Annopol. Consequently, HSBC was not a creditor of Annopol. HSBC, a sophisticated party, would have known that it was not a creditor of Annopol. There could be no reasonable expectation to the contrary.

[104] The trial judge’s decision reflected an exercise in discretion and is entitled to deference. I would not accede to Farber’s submissions on oppression.

E. Did the Payments Unjustly Enrich Goldfinger?

(i) Introduction

[105] Before the trial judge, Farber submitted that the Payments unjustly enriched Goldfinger. To succeed, Farber had to establish that:

(a) the Payments enriched Goldfinger;

(b) there was a corresponding deprivation suffered by Annopol; and

(c) there was no juristic reason for that enrichment.

(ii) Trial Judge’s Decision on Unjust Enrichment

[106] The trial judge gave brief reasons for his dismissal of Farber’s unjust enrichment claim. In essence, he relied on his reasons for dismissal of the oppression claim, stating at para. 304 of his reasons: “Farber also advanced a claim sounding in unjust enrichment on the basis that the $2.5 million payments were a re-purchase of shares or equity distribution. For similar reasons [i.e. similar to those for dismissing the oppression claim], I dismiss that claim.”

(iii) Parties’ Submissions on Appeal

[107] Farber submits that the trial judge failed to consider the test for unjust enrichment, which it says was met based on the evidence. Farber says that the first two parts of the test were easily satisfied on the basis of the Payments from Annopol to Goldfinger. With respect to lack of a juristic reason, the Payments were contrary to the reasonable expectations of Annopol’s creditors and it was contrary to public policy for Goldfinger to have received the Payments from an insolvent company.

[108] Goldfinger responds that he merely received his money back and Annopol got what it bargained for. The Payments were a repayment of an obligation and in line with the parties’ expectation of a settlement of their dispute. Settlement of disputes is supported by public policy and may constitute the rationale for a payment.

(iv) Analysis

[109] As Iacobucci J. noted in Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at para. 30, the test for unjust enrichment requires that a claimant establish the following three elements:

a) an enrichment of the defendant;

b) a corresponding deprivation of the plaintiff; and

c) an absence of juristic reason for the enrichment.

[110] As noted in Garland, at para. 31, the first two elements are determined by applying a “straightforward economic approach”. Iacobucci J. explained, at para. 36: “Where money is transferred from plaintiff to defendant, there is an enrichment.”

[111] The analysis in respect of the third element proceeds in two steps.

[112] At the first stage, the claimant has the burden of demonstrating that “no juristic reason from an established category exists to deny recovery.” The established categories include a contract, a disposition of law, a donative intent, and other valid common law, equitable or statutory obligations: see Garland, at para. 44.

[113] If the claimant can show that there is no established juristic reason, then, at the second stage, the defendant bears the burden of demonstrating that there is another reason to deny recovery. When determining if there is a reason to deny recovery at this stage, courts are required to consider the reasonable expectations of the parties and public policy considerations: see Garland, at paras. 45-46.

[114] As this court noted in Campbell v. Campbell (1999), 1999 2294 (ON CA), 43 O.R. (3d) 783, at pp. 794-95, and Simonin Estate v. Simonin, 2010 ONCA 900, 329 D.L.R. (4th) 513, at para. 24:

[W]hat is at the heart of the third requirement is the reasonable expectation of the parties, and whether it would be just and fair to the parties considering all of the relevant circumstances, to permit the recipient of the benefit to retain it without compensation to those who provided it.

[115] Applying these principles to the issues on appeal, the first two requirements for unjust enrichment were clearly met. Goldfinger was enriched and there was a corresponding deprivation to Annopol. The real issue turns on the third element: was there a juristic reason for the enrichment?

[116] Farber was unsuccessful in attacking the Memorandum and, in any event, it did not ask that the Memorandum be set aside. A contract is a recognized category on which to reject a claim for unjust enrichment. The settlement provided an established rationale for the Payments and hence amounted to a juristic reason. In addition, Goldfinger’s advance of $2.9 million to Annopol amounted to a juristic reason.

[117] Finally, a juristic reason may be made out based on an examination of the reasonable expectations of the parties. On the facts of this case, Goldfinger advanced funds to whichever company Kimel requested. He advanced a total of about $2.9 million to Annopol itself. Kimel treated all the companies as, effectively, a common pool. Therefore, it was in line with past practice and the reasonable expectations of the parties that Goldfinger received payment in respect of funds from Annopol.

[118] This ground of appeal therefore fails.

Appeal Relating to the Brantford/bridge 2008 transactions

A. Are the Brantford/Bridge 2008 Transactions Oppressive under the OBCA?

(i) Introduction

[119] As mentioned, Farber had originally advanced an oppression claim with respect to the Brantford/Bridge 2008 Transactions. Ultimately, the dispute devolved into a claim to approximately $280,000 in proceeds from the sale of the Bridge Street property that is held in trust pending resolution of the action. The payment of this sum turns on whether the Brantford/Bridge 2008 Transactions were oppressive within the meaning of s. 248 of the OBCA and therefore ought to have been set aside by the trial judge.

(ii) Trial Judge’s Decision on the Brantford/Bridge 2008 Transactions and Oppression

[120] The trial judge relied on his findings under the BIA, the APA and the FCA claims to conclude that Goldfinger’s charges over the SG Brantford and SG Bridge properties, as well as the Annopol Subordinations, did not violate the reasonable expectations of creditors. There was no intent to defeat, hinder, delay or defraud creditors. He concluded that no s. 248 OBCA remedy was justified.

(iii) Farber’s Submissions on Appeal

[121] Farber submits that the trial judge did not consider whether the transactions should be set aside pursuant to s. 248 of the OBCA. Its primary submission is that the trial judge dismissed its claim on the basis of lack of intent; however, this is an irrelevant consideration in an oppression analysis. Goldfinger was at best an unsecured creditor, and Annopol held prior security over the Henry Street and Bridge Street properties. As a result of the Memorandum, Goldfinger became secured. But for the transactions, Annopol’s creditors would be entitled to the $280,000 in sale proceeds.

[122] Farber argues that the trial judge erred in failing to make a finding of oppression and in refusing to set aside the Brantford/Bridge 2008 Transactions.

(iv) Analysis

[123] The trial judge clearly turned his mind to the oppression claim as is evident from paras. 317, 327, 328, 348, 349 and 351 of his reasons. It is a fair inference from his reasons and his conclusion on the Brantford/Bridge 2008 Transactions that he was of the view that his prior findings supported his conclusion that they did not violate the reasonable expectations of creditors.

[124] The trial judge relied on his same reasons, found at paras. 274-280, for concluding that Annopol did not intend to defeat, hinder, delay or defraud its creditors by making the Payments to Goldfinger. In addition, the trial judge’s reasons were that the Payments were part of a global settlement meant to avoid potentially ruinous litigation; the settlement in question was concluded at arm’s length after fairly lengthy negotiations; and the parties’ compromise was reasonable at the time they reached it.

[125] The trial judge’s decision that the Payments and the Brantford/Bridge 2008 Transactions were defensible for the same reasons was justified on the record. Both sets of transactions resulted from the same settlement. Therefore, the validity of the Brantford/Bridge 2008 Transactions falls to be decided on the same basis as that applicable to the Payments. For the reasons given, I would reject Farber’s submissions with respect to the Brantford/Bridge 2008 Transactions.

Cross-Appeal

A. Is the $471,000 Payment to Goldfinger a Fraudulent Conveyance?

(i) Introduction

[126] Farber, in its capacity as Trustee in bankruptcy of SG Brantford, asked the trial judge to order Goldfinger to return the sum of $471,000 to SG Brantford. Goldfinger objected.

(ii) Trial Judge’s Decision

[127] To recap, about five months after the Memorandum, the mortgage from the first mortgagee, First National, on 176 Henry St., a property owned by SG Brantford, came due. As part of the refinancing, the First National mortgage was to be increased. To complete the refinancing with First National, SG Brantford had to arrange for the postponement of the second mortgage in favour of Montor.

[128] The trial judge was not prepared to find that Kimel forged Montor’s signature on the postponement. He instead found that the Montor postponement was signed by Kimel purporting to act as the secretary-treasurer of Montor.

[129] However, he did find that the postponement arose as a result of Kimel’s and SG Brantford’s deliberate misrepresentation of the true state of affairs to Montor. Moreover, Perelmuter, the sole shareholder of Montor, was unaware that part of the refinancing proceeds would be paid to a junior secured creditor, namely Goldfinger. The trial judge concluded that Kimel and SG Brantford made the misrepresentation in order to defeat, hinder, delay or defraud Montor.

[130] He held that the evidence on intent as of November 26, 2008 was materially different from the evidence at the time of the Memorandum. By November 2008, Goldfinger knew that Kimel and his companies, including SG Brantford, had defaulted on their obligations. He and Kimel also knew that there were insufficient funds to pay Goldfinger’s charges over the SG Brantford and SG Bridge properties if Montor were to be paid from the refinancing.

[131] On the trial judge’s findings, when Kimel and SG Brantford misrepresented the true state of affairs to Montor, they did so intending to defeat, hinder, delay or defraud Montor. Goldfinger had notice or knowledge of that intent within the meaning of s. 3 of the FCA.

[132] The trial judge concluded that Goldfinger knew that the payment of $471,000 to him would prefer his interests over those of Montor. He based his conclusion on the FCA, but held that he would have reached a similar result under s. 248 of the OBCA. Therefore, the payment by SG Brantford to Goldfinger of $471,000 in preference to the payment of that amount to Montor violated s. 2 of the FCA and was not saved by s. 3 of the FCA.

[133] Accordingly, Goldfinger was ordered to repay the sum of $471,000 to Farber, as Trustee in bankruptcy of SG Brantford.

(iii) Goldfinger’s Submissions on Appeal

[134] Goldfinger argues that he was not involved with, and did not know, the terms of the postponement. He asserts that the trial judge erred in finding that he had the intent to defeat Montor’s interest. He had nothing to do with the postponement of the Montor mortgage. Goldfinger was unconditionally entitled to payment of the $471,000.

[135] He asks that if his cross-appeal is denied, he should, in the alternative, be given judgment for the restoration of his position, including judgment for $183,000 representing the net proceeds from the sale of the Henry Street property on August 31, 2010 being held by the Trustee pending the outcome of the appeals.

(iv) Analysis

[136] I would reject Goldfinger’s cross-appeal. As Goldfinger notes in his factum, at para. 53, where the issue on appeal involves the trial judge’s interpretation of the evidence as a whole, his findings should not be overturned absent palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 23-24.

[137] The trial judge’s conclusion on this issue rested on factual findings. In particular, he found that Goldfinger had notice or knowledge of Kimel’s and SG Brantford’s intent to defeat, hinder, delay or defraud Montor and that he knew the $471,000 payment would prefer his interests over those of Montor. Goldfinger has not identified any palpable and overriding error that would serve to displace these findings.

[138] For these reasons, I would dismiss the cross-appeal.

[139] Further, I see no basis on which to grant the alternative relief Goldfinger requests. Based on the evidence, even with the repayment of the $471,000, there will be a significant shortfall in recovery on account of Montor’s mortgage. Moreover, no such request was made of the trial judge.

Disposition

[140] For these reasons, I would dismiss both the appeal and the cross-appeal. As agreed by the parties, I would order Farber to pay Goldfinger $40,000 in costs of the appeal and Goldfinger to pay Farber $20,000 in costs of the cross-appeal, both sums inclusive of disbursements and applicable taxes.

Released:

“MAY 30 2016” “S.E. Pepall J.A.”

“EAC” “I agree E.A. Cronk J.A.”

“I agree P. Lauwers J.A.”

SCHEDULE “A”

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3

96 (1) On application by the trustee, a court may declare that a transfer at undervalue is void as against, or, in Quebec, may not be set up against, the trustee — or order that a party to the transfer or any other person who is privy to the transfer, or all of those persons, pay to the estate the difference between the value of the consideration received by the debtor and the value of the consideration given by the debtor — if

(a) the party was dealing at arm’s length with the debtor and

(i) the transfer occurred during the period that begins on the day that is one year before the date of the initial bankruptcy event and that ends on the date of the bankruptcy,

(ii) the debtor was insolvent at the time of the transfer or was rendered insolvent by it, and

(iii) the debtor intended to defraud, defeat or delay a creditor; or

(b) the party was not dealing at arm’s length with the debtor and

(i) the transfer occurred during the period that begins on the day that is one year before the date of the initial bankruptcy event and ends on the date of the bankruptcy, or

(ii) the transfer occurred during the period that begins on the day that is five years before the date of the initial bankruptcy event and ends on the day before the day on which the period referred to in subparagraph (i) begins and

(A) the debtor was insolvent at the time of the transfer or was rendered insolvent by it, or

(B) the debtor intended to defraud, defeat or delay a creditor.

(2) In making the application referred to in this section, the trustee shall state what, in the trustee’s opinion, was the fair market value of the property or services and what, in the trustee’s opinion, was the value of the actual consideration given or received by the debtor, and the values on which the court makes any finding under this section are, in the absence of evidence to the contrary, the values stated by the trustee.

(3) In this section, a person who is privy means a person who is not dealing at arm’s length with a party to a transfer and, by reason of the transfer, directly or indirectly, receives a benefit or causes a benefit to be received by another person.

Assignments and Preferences Act, R.S.O. 1990, c. A.33

4. (1) Subject to section 5, every gift, conveyance, assignment or transfer, delivery over or payment of goods, chattels or effects, or of bills, bonds, notes or securities, or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made by a person when insolvent or unable to pay the person’s debts in full or when the person knows that he, she or it is on the eve of insolvency, with intent to defeat, hinder, delay or prejudice creditors, or any one or more of them, is void as against the creditor or creditors injured, delayed or prejudiced.

(2) Subject to section 5, every such gift, conveyance, assignment or transfer, delivery over or payment made by a person being at the time in insolvent circumstances, or unable to pay his, her or its debts in full, or knowing himself, herself or itself to be on the eve of insolvency, to or for a creditor with the intent to give such creditor an unjust preference over other creditors or over any one or more of them is void as against the creditor or creditors injured, delayed, prejudiced or postponed.

(3) Subject to section 5, if such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, it shall, in and with respect to any action or proceeding that, within sixty days thereafter, is brought, had or taken to impeach or set aside such transaction, be presumed, in the absence of evidence to the contrary, to have been made with the intent mentioned in subsection (2), and to be an unjust preference within the meaning of this Act whether it be made voluntarily or under pressure.

(4) Subject to section 5, if such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, it shall, if the debtor within sixty days after the transaction makes an assignment for the benefit of the creditors, be presumed, in the absence of evidence to the contrary, to have been made with the intent mentioned in subsection (2), and to be an unjust preference within the meaning of this Act whether it be made voluntarily or under pressure.

(5) The word “creditor” when used in the singular in subsections (2), (3) and (4) includes any surety and the endorser of any promissory note or bill of exchange who would upon paying the debt, promissory note or bill of exchange, in respect of which the suretyship was entered into or the endorsement was given, become a creditor of the person giving the preference within the meaning of those subsections.

5. (1) Nothing in section 4 applies to an assignment made to the sheriff for the area in which the debtor resides or carries on business or, with the consent of a majority of the creditors having claims of $100 and upwards computed according to section 24, to another assignee resident in Ontario, for the purpose of paying rateably and proportionately and without preference or priority all the creditors of the debtor their just debts, nor to any sale or payment made in good faith in the ordinary course of trade or calling to an innocent purchaser or person, nor to any payment of money to a creditor, nor to any conveyance, assignment, transfer or delivery over of any goods or property of any kind, 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.

(2) In case of a valid sale of goods or other property and payment or transfer of the consideration or part thereof by the purchaser to a creditor of the vendor under circumstances that would render void such a payment or transfer by the debtor personally and directly, the payment or transfer, even though valid as respects the purchaser, is void as respects the creditor to whom it is made.

(3) Every assignment for the general benefit of creditors that is not void under section 4, but is not made to the sheriff nor to any other person with the prescribed consent of creditors, is void as against a subsequent assignment that is in conformity with this Act, and is subject in other respects to the provisions thereof until and unless a subsequent assignment is executed in accordance therewith.

(4) Where a payment has been made that is void under this Act and any valuable security was given up in consideration of the payment, the creditor is entitled to have the security restored or its value made good to him before, or as a condition of, the return of the payment.

(5) Nothing in this Act,

(a) affects the Wages Act or prevents a debtor providing for payment of wages due by him or her in accordance with that Act;

(b) affects any payment of money to a creditor where the creditor, by reason or on account of the payment, has lost or been deprived of, or has in good faith given up, any valid security held for the payment of the debt so paid unless the security is restored or its value made good to the creditor;

(c) applies to the substitution in good faith of one security for another security for the same debt so far as the debtor’s estate is not thereby lessened in value to the other creditors; or

(d) invalidates a security given to a creditor for a pre-existing debt where, by reason or on account of the giving of the security, an advance in money is made to the debtor by the creditor in the belief that the advance will enable the debtor to continue the debtor’s trade or business and to pay the debts in full.

Fraudulent Conveyances Act, R.S.O. 1990, c. F.29

2. 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.

3. Section 2 does not apply to an estate or interest in real property or personal property conveyed upon good consideration and in good faith to a person not having at the time of the conveyance to the person notice or knowledge of the intent set forth in that section.

Business Corporations Act, R.S.O. 1990, c. B.16

248. (1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section.

(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,

(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;

(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.

(3) In connection with an application under this section, the court may make any interim or final order it thinks fit including, without limiting the generality of the foregoing,

(a) an order restraining the conduct complained of;

(b) an order appointing a receiver or receiver-manager;

(c) an order to regulate a corporation’s affairs by amending the articles or by-laws or creating or amending a unanimous shareholder agreement;

(d) an order directing an issue or exchange of securities;

(e) an order appointing directors in place of or in addition to all or any of the directors then in office;

(f) an order directing a corporation, subject to subsection (6), or any other person, to purchase securities of a security holder;

(g) an order directing a corporation, subject to subsection (6), or any other person, to pay to a security holder any part of the money paid by the security holder for securities;

(h) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or any other party to the transaction or contract;

(i) an order requiring a corporation, within a time specified by the court, to produce to the court or an interested person financial statements in the form required by section 154 or an accounting in such other form as the court may determine;

(j) an order compensating an aggrieved person;

(k) an order directing rectification of the registers or other records of a corporation under section 250;

(l) an order winding up the corporation under section 207;

(m) an order directing an investigation under Part XIII be made; and

(n) an order requiring the trial of any issue.

(4) Where an order made under this section directs amendment of the articles or by-laws of a corporation,

(a) the directors shall forthwith comply with subsection 186 (4); and

(b) no other amendment to the articles or by-laws shall be made without the consent of the court, until the court otherwise orders.

(5) A shareholder is not entitled to dissent under section 185 if an amendment to the articles is effected under this section.

(6) A corporation shall not make a payment to a shareholder under clause (3) (f) or (g) if there are reasonable grounds for believing that,

(a) the corporation is or, after the payment, would be unable to pay its liabilities as they become due; or

(b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities.