CITATION: Tibollo v. Robinson, 2023 ONSC 3492
COURT FILE NO.: DC-19-1162
DATE: 20230609
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Lederer, Lococo, and Hooper JJ.
BETWEEN:
NICHOLAS TIBOLLO
Plaintiff (Appellant)
– and –
JANUSZ ANDREZEJ SZKUP, WIESLAWA JANINA SZKUP, CHRISTOPHER JOSEPH ROBINSON and JESSICA ALICJA ROBINSON
Defendants (Respondents)
Claudio Aiello, for the Plaintiff (Appellant)
Richard Wellenreiter, for the Defendants (Respondents) Christopher Robinson and Jessica Robinson
No one appearing for the Defendants Janusz Andrzej Szkup and Wieslawa Janina Szkup
HEARD: January 26, 2023, by video conference
REASONS FOR DECISION
HOOPER J.
[1] The Appellant appeals the order of Bird J. dated October 1, 2018, dismissing his motion for leave to issue a Certificate of Pending Litigation (“CPL”) against 555 Greenhill Avenue in the City of Hamilton. Leave to appeal that decision was granted by a panel of this court on April 5, 2019.
[2] 555 Greenhill Avenue is owned by the Respondents, Christopher and Jessica Robinson. The Robinsons purchased the property in September 2017 from Jessica Robinson’s parents, the Respondents, Janusz and Wieslawa Szukup. The Agreement of Purchase and Sale was signed the same night Janusz Szukup was served with the Appellant’s Statement of Claim against Mr. Szkup alleging deficiencies in work performed at the Appellant’s property. The Respondents’ position is that the sale of the home had been contemplated for some time, and the timing of the execution of the APS was purely coincidental.
[3] Upon learning of the sale of Mr. Szukup’s primary asset, the Appellant commenced the within litigation seeking to set aside that sale on the basis that it was a fraudulent conveyance. A motion for leave to issue a Certificate of Pending Litigation on 555 Greenhill Avenue was brought. The dismissal of that motion is what is now being appealed.
[4] The Appellant argues that while the motion judge cited the proper test for leave to issue and register a Certificate of Pending Litigation, she misapplied that test in her analysis. The Appellant further argues that, with respect to the balance of convenience, the motion judge made findings without any evidentiary basis.
[5] For the reasons that follow, the appeal is dismissed.
Background Facts
[6] The Appellant, Nicholas Tibollo, is a lawyer practicing in the Vaughan area. In April 2017, he hired Janusz Szkup to remove and replace approximately 3500 square feet of granite flagstone pavers. Mr. Tibollo was dissatisfied with Mr. Szkup’s work and emailed Mr. Szkup on June 30, 2017 that, unless the defects and deficiencies were rectified, he would be sued. On July 25, 2017, Mr. Tibollo wrote a formal letter on his firm’s letterhead advising Mr. Szkup that he would be held liable for the cost of rectification and repair of the work performed.
[7] A statement of claim was issued on September 7, 2017 and was served on Mr. Szkup at 7:20 p.m. that evening.
[8] That same evening, an Agreement of Purchase and Sale (“APS”) was executed between Christopher and Jessica Robinson and Janusz and Wieslawa Szkup selling the Szkups’ residence. Jessica Robinson is Mr. Szkup’s daughter; Christopher Robinson, his son-in-law. That agreement was executed at 8:00 p.m. on September 7, 2017, forty minutes after Mr. Tibollo’s negligence claim was served. The closing date on the APS was September 15, 2017.
[9] Upon the closing of the sale on September 15, 2017, 555 Greenhill Avenue became the Robinsons’ matrimonial home.
Analysis
Standard of Review
[10] A lower court’s decision should not be interfered with unless the judge made an error in law, exercised his or her discretion on the wrong principles, or misapprehended the evidence such that there was a palpable and overriding error.
[11] For questions of law, the standard of review is correctness. For questions of mixed fact and law, the standard of review is palpable and overriding error unless there is an extricable question of law, to which the correctness standard would apply. As stated in Housen v. Nikolaisen 2022 SCC 33, [2002] 2 SCR 235 at para 27:
Once it has been determined that a matter being reviewed involves the application of a legal standard to a set of facts and is thus a question of mixed fact and law, then the appropriate standard of review must be determined and applied. Given the different standards of review applicable to questions of law and questions of fact, it is often difficult to determine what the applicable standard of review is. In Southam, supra, at para. 39, this Court illustrated how an error on a question of mixed fact and law can amount to a pure error of law subject to the correctness standard:
. . . if a decision-maker says that the correct test requires him or her to consider A, B, C, and D, but in fact the decision-maker considers only A, B, and C, then the outcome is as if he or she had applied a law that required consideration of only A, B, and C. If the correct test requires him or her to consider D as well, then the decision-maker has in effect applied the wrong law, and so has made an error of law.
Therefore, what appears to be a question of mixed fact and law, upon further reflection, can actually be an error of pure law.
[12] Both parties agree that the motion judge applied the correct test in this case as set out in Grefford v. Fielding, 70 O.R. (3d) 371 (S.C.). However, in applying the Grefford test, Mr. Tibollo argues the motion judge made two errors:
- In relation to the second branch of the test, the motion judge misapplied the law and therefore committed an error in law.
The standard of review for this alleged error is correctness.
- In relation to the third branch of the test, the motion judge made a finding of fact without an evidentiary basis, and therefore committed an error of fact.
The standard of review for this alleged error is overriding and palpable error.
The legislative authority and common law test for a CPL
[13] Section 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43 governs the issuance of CPLs. It provides:
- The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).
[14] The Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 defines what is meant by the term “fraudulent conveyance” at s. 2:
Every conveyance of real 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 other persons and their assigns.
[15] The term, “creditor or others” is broad enough to contemplate a person who, while not a creditor at the time of the conveyance, may become one in the future. If the transferor had the intention to defraud when the conveyance was made, it does not matter whether it was to defeat present or future creditors: Indcondo Building Corp v. Sloan, 2014 ONSC 4018, 121 O.R. (3d) 160, at para. 48.
[16] As already stated, the parties agree that the test for granting leave to issue and register a CPL when the plaintiff has not yet become a creditor is set out in the decision in Grefford at para. 26:
(a) Has the plaintiff satisfied the Court that there is a high probability that it will successfully recover judgment in the underlying/main action?
(b) Has the plaintiff introduced evidence demonstrating that the impugned transaction was made with the intent to defeat or delay creditors?
(c) Has the plaintiff demonstrated that the balance of convenience favours the issuance of the CPL in the circumstances of the case?
The motion decision
[17] The motion judge had no difficulty finding there was a high probability that Mr. Tibollo would successfully recover judgment against Mr. Szkup in the negligence action.
[18] On the issue of whether there was evidence to demonstrate that the impugned transaction was made with an intent to defeat or delay creditors, the motion judge conducted a fulsome review of the evidence before her and found that while badges of fraud did exist, the Respondents had successfully rebutted the presumption of fraud:
Based on the presence of some badges of fraud, there is circumstantial evidence that calls into question the legitimacy of the transaction. However, there is a significant body of evidence that supports the defendants’ position that the sale of the property was bona fide and not undertaken for the purpose of defeating a creditor. (see: Tibollo v. Szkup et al, ONSC 5800 at para. 13 (unreported))
The evidence establishes that the sale of the home from the Szkups to the Robinsons had been contemplated long before Mr. Szkup agreed to do work on the plaintiff’s home. Concrete steps were taken to facilitate the transfer well before the statement of claim was served.
In addition, although the parties to the transfer of the home were not at arms-length, the transaction was conducted as if they were. The Szkups and Robinsons were each represented by independent lawyers. All of the standard searches were done. There is nothing about the manner in which the sale was handled that supports a suggestion that it was anything other than legitimate.
While the price the Robinsons paid for the home was less than the appraised value, it was not far outside of the range. The Robinsons had to secure a mortgage for the property and paid a total of $350,283.09 on closing. This included the $30,000 the Szkups had gifted them but it cannot be said that the consideration given was nominal or grossly inadequate.
For these reasons, I find that the defendants have rebutted any presumption of fraud. The evidence is consistent with the transfer of the property being done for an honest purpose in accordance with the long held intentions of the parties and not with the intent to defeat a creditor, namely a plaintiff (see Tibollo v. Szkup et al., at paras. 19, 20, 21, 22)
[19] In granting leave to appeal, the Divisional Court panel specifically referenced the decision of Diamond J. in Jodi L. Feldman Professional Corporation v. Foulidis, 2018 ONSC 7766 as a decision that appeared to be in conflict with this motion judge’s analysis.
[20] In Feldman, Diamond J. heard an appeal on the same issue – the dismissal of a motion for leave to issue a CPL. In reversing the Master’s decision and granting leave for the issuance of a CPL, Diamond J. wrote:
With respect to the second part of the Grefford test, the Master embarked upon a detailed analysis of the evidentiary record before him and concluded that “given the higher standard of proof outlined in Grefford, he was not satisfied that there was evidence in the record from which a trial judge could conclude that there was a fraudulent intent on Lynne’s part in granting the mortgage… “at least not enough to justify CPL”.
Numerous “badges of fraud” were raised by the plaintiff, including (a) the inadequacy of the consideration for the mortgage, (b) the close relationship between Lynne and Danny, (c) the proximity and time between Lynne’s delivery of a Notice of Intent to Defend and the granting of this mortgage, (d) the fact that Lynne and Danny continued to have an involvement with one another after the mortgage was granted, and (e) the fact that the mortgage was allegedly security for “past consideration”. The Master undertook a meticulous and comprehensive assessment of these alleged “badges of fraud” which the plaintiff contended laid a foundation to support an ultimate finding at trial that the mortgage was carried out with the intent to delay or defeat creditors, including the plaintiff. The Master weighed the evidence, rejected the plaintiff’s arguments and found that there were no facts capable of permitting a trial judge to conclude that there was a fraudulent intent on Lynne’s part in granting the mortgage (see: Feldman at paras. 14, 15).
In my respectful view, the learned Master made an error in law. I agree with the plaintiff that in satisfying the second element of the Grefford test, a moving party must lead positive evidence to show the existence of a triable issue (see: Feldman at para. 17).
In my view, the Master usurped the function of a trial judge, or at the very least a judge hearing a motion for summary judgment. On a motion seeking leave to issue a CPL, the Court may not avail itself of the enhanced fact finding powers in Rule 20. The court must simply be satisfied that a triable issue exists based on the evidentiary record (see: Feldman at para. 20).
A review of the Master’s Cost Decision supports my conclusion. While the Costs Decision may not technically form part of the Order under appeal, the Master’s reasoning in awarding Lynne her costs of the motion highlights the legal error. At paragraph 9 of his Costs Decision, the Master stated as follows (my emphasis in bold):
Second, I also accept Mr. Zeitz’s argument that an alleged fraud under the FCA and APA does not necessarily involve the kind of moral turpitude seen in cases where there are unfounded allegations of dishonesty and fraud that impugned the character and reputation of a party. That is the case here. This was a “close call.” There was evidence that appeared on the surface to point to “badges of fraud”, such as the relationship between the Defendant, Danny and George and the proximity and time between the pleadings and the Feldman Action and a settlement of Danny’s action. In the end, I found that there was not enough evidentiary substance to those apparent badges on this motion. Such a “close call” does not justify a deviation from the normal standard of costs, namely partial indemnity.
In my view, the Master exceeded the jurisdiction afforded him on a motion for leave to issue a CPL and applied incorrect principles in his assessment of the second part of the Grefford test. On the record before him, there was and remans triable issues with respect to whether the impugned transaction was carried out with the intent to defeat or delay creditors, including the plaintiff.
While it may be that a trial judge, or perhaps a judge hearing a motion for summary judgment (as that option is still available to the defendants), could conclude that there is insufficient evidence to support the plaintiff’s claims, such a determination ought not to have occurred at this preliminary stage in the absence of clear, cogent, and convincing evidence that the evidence supporting the plaintiff’s claims was devoid of merit. As the Master already found that this was indeed a “close call”, triable issues exist and the plaintiff has thus satisfied the second part of the Grefford test (see: Feldman at paras. 22, 23, 24).
[21] Decisions released after Feldman have followed the principle set out by Diamond J. - all that is necessary to satisfy the second branch of Grefford is to demonstrate a triable issue exists that the impugned transaction was carried out with the intent to defeat or delay creditors, including the plaintiff: Elitrex Plumbing Ltd. v. Cassavia Estates Homes (Maple) Ltd. 2021 ONSC 4928 at para. 28 and 36; Fewson v. Bansavatar et al., 2021 ONSC 6697 at para. 24.
[22] It should be noted the CPL motion on this appeal was heard on September 19, 2018, with the motion judge releasing her decision on October 1, 2018, prior to the release of Feldman (December 14, 2018). As such, the motion judge did not have the benefit of Diamond J.’s analysis before her.
Applying Diamond J.’s analysis to the case on appeal
[23] As in Feldman, in the present case, the motion judge did not find Mr. Tibollo’s claim for a fraudulent conveyance to be devoid of merit. She recognized that there was circumstantial evidence to support a finding of a fraudulent conveyance. She also found badges of fraud existed. While her original decision did not specifically state there was a triable issue, this conclusion was confirmed within her costs decision:
It must be remembered that my decision did not involve a final disposition of the plaintiff’s action. While I did not grant the plaintiff’s motion, it cannot be said that his position is entirely without merit. It remains to be seen whether the transactions involving the property is ultimately set aside as being a fraudulent conveyance (see: Tibollo v. Szkup et al., ONSC 6400 at para. 4 (unreported costs endorsement)).
[24] For there to be the possibility of success in the setting aside of the sale of 555 Greenhill Avenue, a triable issue must exist that the impugned transaction was carried out to defeat current or future creditors, including Mr. Tibollo. That is all that is necessary to satisfy the second part of the Grefford test. As a result, the motion judge erred in finding that this part of the test had not been met.
Did the motion judge err in finding that the balance of convenience weighed against the granting of leave to issue a CPL?
[25] In Feldman, having dismissed the motion on the second branch of the test, the Master did not make any finding in relation to the balance of convenience. Therefore, once Diamond J. found an error had been made, it was open to him to conduct his own analysis of the balance of convenience.
[26] That is not what occurred in the present case. Here, the motion judge analyzed the facts in relation to the third branch of the Grefford test:
Moreover, the balance of convenience in this case does not favour granting a certificate of pending litigation. The plaintiff is trying to obtain security for a judgment which he may obtain in the future. The Robinsons had no involvement in the contract between Mr. Szkup and the plaintiff which gives rise to the claim for damages in the original action. The property is their matrimonial home.
While the plaintiff is seeking $150,000 in damages against Mr. Szkup there is no evidentiary foundation for such an amount particularly since Mr. Szkup was only paid $22,900. The plaintiff has not provided any evidence that he has had the work repaired and at what cost. In light of the amount of money that was paid to Mr. Szkup it is possible that the amount of damages ultimately recovered may fall within the jurisdiction of the small claims court. In these circumstances, encumbering the matrimonial home of the Robinsons is disproportionate to the interests at stake in the underlying action (see: Tibollo v. Szkup et al., at paras. 23, 24).
[27] The Appellant has put one case before the court, Xerox Canada Ltd. v. Baba Publications Inc. et al. (Master) wherein the court found that the failure to file positive evidence on the balance of convenience created an assumption of an absence of prejudice. I do not agree with this as a general principle. While there may not have been any evidence filed by the Respondents, there were uncontested facts before the motion judge that allowed her to weigh the balance of convenience in the Respondents’ favour including:
(a) This was the Respondents’ matrimonial home;
(b) There was no evidence that either of the Respondents had any involvement in Mr. Szkup’s business;
(c) There was no evidence that the Appellant had incurred any damages to rectify Mr. Szkup’s work. The only potential damages as of the motion were within the jurisdiction of the small claims court.
[28] A judge has broad discretion in examining the equities between the parties. Absent an overriding or palpable error, that discretion is entitled to considerable deference: Kampers v. York Fire & Casualty Insurance Company, 2019 ONCA 56 at paras. 12, 13 and 20. No error occurred here and the motion judge’s finding on balance of convenience stands. The motion for leave to issue a CPL fails on the third branch of the Grefford test.
Conclusion
[29] As a result, the appeal is dismissed.
[30] Costs of $5,000 were awarded in the leave application to whichever party was successful on this appeal. For the appeal, costs have been agreed to in the amount of $10,000. Therefore, the Respondents are entitled to a total cost award of $15,000.
Hooper J.
I agree
Lederer J.
I agree
Lococo J.
Released: June 9, 2023
CITATION: Tibollo v. Robinson, 2023 ONSC 3492
COURT FILE NO.: DC-19-1162
DATE: 20230609
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
NICHOLAS TIBOLLO
Appellant
– and –
JANUSZ ANDREZEJ SZKUP, WIESLAWA JANINA SZKUP, CHRISTOPHER JOSEPH ROBINSON and JESSICA ALICJA ROBINSON
Respondents
REASONS FOR DECISION
Hooper J.
Released: June 9, 2023