Court and Parties
COURT OF APPEAL FOR ONTARIO DATE: 20211105 DOCKET: C68762
Doherty, Miller and Sossin JJ.A.
BETWEEN
Albert Gelman Inc., in its capacity as Trustee in Bankruptcy of Spiros Pantziris Plaintiff (Respondent)
and
1529439 Ontario Limited, Aglaia Pantziris, Aspe Consulting Services Ltd., Julie Pantziris also known as Julie Taylor also known as Julie Taylor Pantziris and Ellen Bowlin Defendants (Appellants)
Counsel: Steven Bellissimo, Kristina Bezprozvannykh and Frank Bennett, for the appellants Lou Brzezinski and Alex Fernet Brochu, for the respondents
Heard: October 28, 2021 by video conference
On appeal from the judgment of Justice B. Dietrich of the Superior Court of Justice dated September 28, 2020; reported at 2019 ONSC 5531.
Reasons for Decision
[1] In October 2013, the court made a bankruptcy order against Spiros Pantziris (the “bankrupt”) and appointed the respondent, the Trustee in bankruptcy (the “Trustee”). Subsequently, the Trustee took steps to recapture certain assets of the bankrupt. The Trustee brought a summary judgment motion seeking orders setting aside two transactions:
- The transfer by the bankrupt in August 2008 of the bankrupt’s 50 per cent interest in his residence to the appellant, Julie Pantziris, the bankrupt’s wife and joint owner of the residence; and
- The transfer of the bankrupt’s shares in 1529439 Ontario Limited (“the shares”) to the appellant ASPE Consulting Services Ltd. (“ASPE”) in April 2013.
[2] The defendants (appellants) brought a cross-motion seeking the dismissal of the Trustee’s claims on two grounds. First, the defendants argued that the proceedings constituted a misuse of the bankruptcy process and an attempt by the main creditor, Cobalt Capital Textile Investments L.P. (“Cobalt Capital”) to obtain double recovery from the bankrupt. Second, the defendants submitted the claims were time-barred under the Limitations Act, 2002 S.O. 2002 c. 24, Sch. B.
[3] The motion judge found in the Trustee’s favour on all issues. She granted summary judgment vesting the bankrupt’s 50 per cent interest in the residence in the Trustee. She also set aside the share transfer to ASPE and ordered that the Trustee be made the registered owner of the shares.
[4] The motion judge’s reasons are thorough and demonstrate that the issues raised by the parties could properly be addressed by way of summary judgment. We are in substantial agreement with the motion judge’s analysis of those issues.
The Residence
[5] After a thorough review of the evidence, the motion judge concluded the bankrupt’s transfer of his 50 per cent interest in the residence was both an “undervalue” transfer within the meaning of s. 96(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”) and a fraudulent conveyance under s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (“FCA”). The motion judge’s findings of fact are fully justified on the evidence before her. There is no basis upon which this court can interfere with those findings.
The Shares
[6] Mr. Pantziris executed a promissory note as security for a loan purportedly made to him by ASPE. ASPE was controlled by Mr. Pantziris’ mother. Mr. Pantziris did not repay the loan and ASPE sued. ASPE obtained default judgment and moved to transfer the shares in 1529439 Ontario Limited, a corporation controlled by the Pantziris family, to ASPE. ASPE took the position that the shares were security for the loan in respect of which it had obtained default judgment.
[7] The transfer of the shares to ASPE was authorized only a few days before the bankruptcy application. The face value of the shares substantially exceeded the amount of the loan purportedly made to Mr. Pantziris.
[8] The motion judge was satisfied that the transfer of the shares was made with intent to prefer ASPE, a non-arms length creditor, and with intent to defeat the interest of other creditors. The motion judge’s factual findings support that conclusion. The findings include:
- The value of the shares transferred far exceeded the value of the alleged debt;
- Mr. Pantziris was insolvent at the time ASPE obtained default judgment and was unable to repay the loan;
- ASPE was not a non-arms length creditor, apparently controlled by Mr. Pantziris’ mother; and
- The transfer occurred during the 12-month period prior to the bankruptcy.
[9] In addition to concluding the share transfer constituted an improper preference, the motion judge also found that ASPE had no enforceable security interest in the shares: Reasons, at paras. 92-97. In reaching that conclusion, the motion judge considered the relevant provisions of the Personal Property Security Act, R.S.O. 1990, c. P.10 (“PPSA”), as well as the language in the promissory note, the absence of any other documentation supporting the existence of a security interest, and the absence of any reference to a security interest when ASPE sued on the promissory note and obtained default judgment: Reasons, at paras. 87-97.
[10] The appellants have demonstrated neither an error by the motion judge in her interpretation of the PPSA, nor a material misapprehension of the evidence relevant to whether ASPE had an enforceable security interest in the shares. The motion judge’s order with respect to the shares stands.
The Limitations Act
[11] The appellants argue that, because the main creditor was aware of the facts underlying the claims advanced by the Trustee more than two years before the Trustee advanced those claims, the Limitations Act bars the Trustee from advancing those claims.
[12] The claims in issue are all claims by which the Trustee seeks, under various statutory provisions, to set aside transactions made by the bankrupt before the bankruptcy order was made. The claims are made so that certain property owned by the bankrupt may be brought back into the bankrupt’s estate for the benefit of the creditors.
[13] The motion judge analyzed the limitation period argument at some length: see Reasons, at paras. 104-14. We agree with her that, for the purposes of the claims made by the Trustee in this proceeding, the Trustee could not be “the person with the claim” under s. 5(1) of the Limitations Act, until the Trustee had been appointed by the court. The limitation period in respect of the claims advanced here could not begin to run until the appointment of the Trustee in October 2013. Even then, the provisions of the Limitations Act must be read, having regard to the powers given to the Trustee to recover the assets of the bankrupt.
[14] Nor does s. 12 of the Limitations Act have any effect on the Trustee’s right to bring forward the claims. The Trustee is not “a person claiming through a predecessor in right, title or interest”. The Trustee is claiming in its own right: Reasons, para. 118.
[15] The appellants make one further submission with respect to the Limitations Act. They contend, that even if the limitation period runs from the appointment of the Trustee, the claim with respect to the shares was not made until the Trustee amended the statement of claim in 2018, some five years after the Trustee commenced the action and three years after the two-year limitation period would have run.
[16] We do not accept this submission. A review of the substance of the amendments reveals they did not allege a new cause of action, but clarified the relief sought in the existing action.
[17] The motion judge properly rejected the appellants’ submissions based on the Limitations Act.
The Abuse of Process Allegation
[18] The appellants argued that its primary creditor, Cobalt Capital, was using the bankruptcy process to attempt to recover losses it had already recouped from the bankrupt. In oral argument in this court, the appellants submitted that Cobalt Capital maneuvered the appointment of the Trustee for that purpose and that the Trustee was complicit in the scheme.
[19] The Trustee was appointed on consent. There was no evidence before the motion judge that the Trustee was acting on anyone’s instructions. The appellants’ theory as to the Trustee’s motivation is speculation and was properly not relied on by the motion judge.
[20] The appeal is dismissed.
The Costs Appeal
[21] The Trustee seeks leave to appeal the costs order. The motion judge awarded the Trustee costs on a partial indemnity basis. The Trustee submits the motion judge should have awarded costs on a substantial indemnity basis. Further, the Trustee argues, that even if partial indemnity costs were appropriate, the motion judge wrongly deducted certain pre-litigation costs from the award and also erred in substantially reducing the quantum claimed on a partial indemnity basis.
[22] This court grants leave to appeal costs sparingly. Even if leave is granted, the court defers to costs decisions made by judges of the Superior Court. Those judges are much more familiar with the various nuances of setting costs in different litigation contexts than are members of this court.
[23] The Trustee submits that the unfounded allegations made by the appellants against the Trustee amounted to an attack on the integrity of a court officer and warranted costs on a substantial indemnity basis. The motion judge did not accept the Trustee’s characterization. She said:
I find that the allegations made against the Trustee in this case do not rise to the level of reprehensible, scandalous or outrageous conduct. The defendants’ conduct was more in the nature of an aggressive defence of the claim. Accordingly, substantial indemnity costs are not an appropriate sanction in this case.
[24] The Trustee’s submissions invite this court to reject the motion judge’s assessment and adopt the harsher characterization advanced by the Trustee. Deference demands that we decline that invitation. Instead, we defer to the motion judge’s assessment. Given the motion judge’s finding, partial indemnity costs were appropriate.
[25] Similarly, we see no reason to interfere with the motion judge’s treatment of the pre-litigation costs, or her assessment of the quantum of costs sought by the Trustee. We see no value in this court going back over the individual components of the costs claim with a view to redoing the work done by the motion judge.
[26] We grant leave to appeal the costs order and dismiss the appeal.
Costs of the Appeal
[27] The parties were able to agree on the appropriate order with respect to the costs of the appeals. The Trustee is entitled to the costs of the main appeal on a partial indemnity basis, fixed at $33,727. The appellants are entitled to the costs on the costs appeal, fixed at $8,531.
“Doherty J.A.”
“B.W. Miller J.A.”