COURT FILE NO.: 04-FD-299927/FS-10-16657

DATE: 20120705

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FELICIA PURCARU

AND:

MARINA SELIVERSTOVA et al.

BEFORE: PENNY J.

COUNSEL: Felicia Purcaru in person

Gary Joseph for Marina and Anna Seliverstova

HEARD: June 21, 2012

ENDORSEMENT

[1] This is a motion by the applicant, Mrs. Purcaru, for an order

(1) releasing to her $101,290 held in trust;

(2) varying my order of March 7, 2012 (regarding the status of a February 27, 2012 affidavit of the applicant); and

(3) varying my order of June 4, 2012 (concerning the preparation of an accounting to the applicant by her former solicitor).

[2] The respondent Ms. Seliverstova opposes all of the relief sought, although counsel for the respondent, Mr. Joseph, gave assurances that, while the February 27, 2012 affidavit of the applicant was not filed for the purposes of the February 27, 2012 motion (because it was not served until parties were in the courtroom), he accepted that it has been filed for any future purposes.

[3] For the reasons that follow, I allow the motion on the first issue and dismiss the motion on the second and third issues.

Release of Funds Held in Trust

Background

[4] In his final order of May 6, 2009, Paisley J. ordered the applicant’s former husband, Dan Purcaru, to pay to the applicant

(i) $165,840 for net equalization;

(ii) $140,000 for tax liabilities imposed on the applicant as a result of the husband’s improper conduct;

(iii) child support based on the husband’s deemed income of $350,000 in the amount of $7,534 per month;

(iv) arrears of child support and section 7 expenses of $518,481; and

(v) arrears of spousal support of $240,506.

[5] Costs were later ordered to be paid by the husband to the applicant of over $425,000.

[6] The husband appealed Paisley J.’s order.

[7] Pending the appeal, there were motions brought before McFarland J.A. in chambers. The husband sought to stay the payments ordered by Paisley J. The motions were dismissed.

[8] In dismissing the motions, McFarland J.A. made reference to the fact that the husband admitted to being in breach of four non-depletion orders. She also referred to the fact that the husband had substantially depleted his assets by paying substantial sums to Ms. Seliverstova and to his brother in Romania, all at the expense of the applicant and her children.

[9] McFarland J.A. also found:

The record discloses that he [the husband] is a highly intelligent, well-educated and sophisticated businessman who has organized his affairs in such a way to make them unavailable. He has demonstrated and utter lack of respect for orders of the court.

[10] The husband’s appeal was dismissed, with costs, by the Court of Appeal on February 3, 2010.

[11] As a result of the husband’s transfers of assets and failure to comply with orders of the court, the applicant commenced an application under the Assignments and Preferences Act and the Fraudulent Conveyances Act against the respondent, Ms. Seliverstova; the respondent’s daughter, Anna; the husband; his companies and the husband’s brother in Romania, alleging that the husband had transferred assets to the respondents by way of fraudulent conveyances or improper preferences.

[12] Although the allegations are broader than this, part of the fraudulent conveyance/improper preference claim is a transfer of $300,000 from the husband to Ms. Seliverstova, as found by Kelly J. in her July 15, 2010 Reasons, p. 2:

8. In the summer of 2005, Mr. Purcaru purchased a home at 37 Gloucester St. in Toronto with Ms. Marina Seliverstova for $740,000. Ms. Seliverstova financed $300,000 of the purchase price.

9. After the purchase of 37 Gloucester, there were four court orders that restrained Mr. Purcaru from depleting assets. The first was given on October 16, 2006 by Jarvis J. and the second was ordered by Herman J. on January 16, 2007.

10. Despite the existence of the two court orders, Mr. Purcaru secured a line of credit in the amount of $500,000, using 37 Gloucester St. as security. He paid Ms. Seliverstova back her investment in the home.

[13] The applicant’s claim is, in part, also founded on the similar finding of McWatt J. in her May 4, 2011 Reasons finding the husband in contempt of court. McWatt J. said:

38. There is evidence from the Applicant which I accept that Ms. Marina Seliverstova also knew of the Court Orders in question. That evidence is as follows:

(1) On her consent, a temporary Non-Depletion Order was issued by Madam Justice Greer on October 24, 2006 restraining Ms. Seliverstova from selling, depleting or otherwise encumbering the 37 Gloucester St. property. That order was never withdrawn or set aside;

(2) Ms. Seliverstova has accompanied the Respondent repeatedly throughout the pretrial and trial attendances and has been in court with him when the Restraining and Non-Depletion orders were pronounced against him;

(3) On June 3, 2008, Ms. Seliverstova and the Respondent [husband] signed a mortgage for $500,000 against their interest in 37 Gloucester St. which would have contravened Justice Greer’s October 24, 2006 Order;

(4) Justice Herman’s Endorsement of January 16, 2007 records Ms. Seliverstova’s presence in court.

[14] On March 2, 2010, Czutrin J. granted an ex parte order prohibiting Ms. Seliverstova and her daughter from assigning, encumbering or conveying their assets, listing several specific properties.

[15] This injunction was continued by Kelly J. in her order of April 28, 2010.

[16] Kelly J. struck the husband’s pleadings in this matter on July 15, 2010 for failure to comply with the order of Paisley J. The corporate respondents are controlled by the husband. The husband’s brother did not defend. As a result, the Seliverstovas are effectively the only respondents in this proceeding.

[17] Also of importance to this matter is that, on October 28, 2010, Czutrin J. made an order vesting the entire right, title and interest of Dan Purcaru and Marina Seliverstova in the premises municipally known as 37 Gloucester St. in Felicia Purcaru in partial satisfaction of her security under the Divorce Act pursuant to para. 8 of the May 6, 2009 final order of Paisley J. Similarly, Czutrin J.’s order also vested in Felicia Purcaru the entire right, title and interest of Dan Purcaru and of Marina Seliverstova in the premises municipally known as 30 Gloucester St., Units 1604 and 1902, also in partial satisfaction of her security under the Divorce Act pursuant to para. 8 of the Paisley J. May 6, 2009 order.

[18] The properties 37 Gloucester St. and 30 Gloucester St., Unit 1604, were sold by the applicant under the authority of Justice Czutrin’s order.

[19] The property at 30 Gloucester, Unit 1902 has not yet been sold. There is a related matter before the courts involving an alleged tenant of Unit 1902, 30 Gloucester St. His name is Cornelius Sima. There are administrative and court proceedings outstanding involving the validity of Mr. Sima’s tenancy. The applicant is seeking to obtain vacant possession of this property so that it too can be sold.

[20] By virtue of a consent order dated June 30, 2011, Czutrin J. ordered that $100,000 of the proceeds from the sale of 37 Gloucester be paid to Mrs. Purcaru and that “the remaining amount of $101,290.81 shall remain in trust pending further order of the court or agreement”.

[21] Mrs. Purcaru brought a motion before me on February 27, 2012 for an order authorizing the distribution to her of the remaining funds held in trust by virtue of Czutrin J.’s prior consent order. I declined to grant that relief on the basis that there was no evidence of changed circumstances, or of anything new, since the Czutrin J. order was made.

[22] In later proceedings involving Mrs. Purcaru personally, I indicated that if her circumstances warranted a renewed motion based on financial need, she was at liberty to bring another motion for release of the funds on better evidence.

[23] This is what she did on June 21, 2012. The evidence on the motion was that:

(a) Mr. Purcaru has still not paid over $1 million in support and equalization payments pursuant to Paisley J's order of May 6, 2009;

(b) Since December 8, 2010, when Mr. Purcaru's appeal was dismissed by the Court of Appeal, he has paid only about 13% of the periodic child support he was ordered to pay;

(c) Mr. Purcaru has made no child support payments for over a year. The arrears of periodic child support exceed another $180,000;

(d) Although trained and qualified for employment in the financial services industry, Mrs. Purcaru is unable to find a job. This is a result of a poor credit rating caused by Mr. Purcaru's debts to the Canada Revenue Agency. Mrs. Purcaru was a director or officer of some of Mr. Purcaru’s companies and, as a result, was tainted with liability for some of the corporate obligations. Although she has been able to clear up the question of liability to the CRA, the stain on her credit rating remains and, on the evidence, cannot be removed for a period of years;

(e) All Mrs. Purcaru can afford for accommodation is a rented apartment;

(f) Monthly expenses with her two children exceed $8,000 per month;

(g) Mrs. Purcaru has less than $1,000 in the bank, her MasterCard is maxed out at over $19,000 and she has no savings;

(h) Mrs. Purcaru has paid out more than $500,000 in litigation costs. Mr. Purcaru still owes her, in unpaid costs alone, more than $550,000; and

(i) The $101,290 held in trust was received as child support. Mrs. Purcaru requires these funds to look after the interests of her children.

[24] Mr. Joseph advanced essentially two arguments in opposition to the release of further funds to Mrs. Purcaru:

1. She is in breach of my order of March 7, 2012 requiring her to provide particulars of her claims of fraudulent conveyances/improper preferences; and

2. She is impecunious and in breach of my order of March 22, 2012 requiring her to pay costs to Ms. Seliverstova of $14,000. Mrs. Purcaru is, therefore, on that account both liable to post security for Ms. Seliverstova’s substantial costs and unable to do so. In addition, due to her impecuniosity, Mrs. Purcaru is also unable to make good on her undertaking as to damages in connection with the injunction continued by Kelly J. on April 28, 2010.

Particulars

[25] In my March 7, 2012 Endorsement, I said:

[20] It is clear that the Applicant challenges the Respondent's receipt of $300,000 from Mr. Purcaru. The parties seem to be well aware of the details of that transaction and of the timing and amount of the funds which changed hands. No further order of particulars seems necessary with respect to the Applicant’s challenge to this transaction.

[25] In my view, with respect to any additional transactions (beyond the 37 Gloucester transaction noted above), the Applicant has failed to comply with the July 29, 2010 order of Kelly J. [Emphasis added.]

[26] It may well be that the applicant has failed to provide particulars of any challenged transactions in addition to the $300,000 alleged loan repayment Ms. Seliverstova received from Mr. Purcaru in 2007. However, in my view, any remedy for the applicant’s failure to provide additional particulars, assuming, arguendo, such non-compliance is established, is not to strike her claim or deny any relief but, rather, simply to restrict any relief sought to the transactions which have been properly identified in her pleading.

[27] Accordingly, I do not think the applicant’s non-compliance with my March 7, 2012 order constitutes any ground upon which to deny the relief sought in her present motion.

Security for Costs

[28] Mr. Joseph argues that, in addition to Mrs. Purcaru’s motion for a vesting order on October 28, 2010, there was also before Czutrin J. a request by Ms. Seliverstova for security for costs. The latter motion, it appears, was not heard on the merits given time constraints. In the transcript of proceedings from that day, Czutrin J. commented that his “expectation is that we will finish the issue of security for costs before any proceeds of sale would be paid out.” Mrs. Purcaru, however, was granted the right to return anytime to seek further distributions. She availed herself of that opportunity in June 2011. At that time, the matter was resolved on the basis of a consent order which allowed $100,000 to be released to Mrs. Purcaru. Ms. Seliverstova did not then pursue, and has not since pursued, a motion for security for costs.

[29] While I appreciate that the motion for security for costs was not reached on October 28, 2010, it is not clear to me why the motion could not have been pursued since then. Mr. Joseph offered no explanation for why Ms. Seliverstova did not pursue a motion for security for costs, for example, in the face of the applicant’s June 2011 motion, February 27, 2012 motion or, for that matter, the applicant’s June 21, 2012 motion, other than to say it was “overtaken by other events.”

[30] Because the security for costs motion was not pursued, however, I am now in the position of having to weigh a potential claim for security for costs by Ms. Seliverstova against Mrs. Purcaru’s more immediate claim to release of funds which, unambiguously, came to her as a result of the sale of properties in which she was granted an irrevocable vesting order as security for payment of, largely, child support.

[31] An order for security for costs is discretionary. The court may order security of costs only when at least one of the following conditions is met:

(a) the plaintiff or applicant is ordinarily resident outside Ontario;

(b) the plaintiff or applicant has another proceeding for the same relief pending in Ontario or elsewhere;

(c) the defendant or respondent has an order against the plaintiff or applicant for costs in the same or another proceeding that remain unpaid in whole or in part;

(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;

(e) there is good reason to believe that the action or application is frivolous and vexatious and that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent; or

(f) a statute entitles the defendant or respondent to security for costs.

[32] Is clear, in the circumstances of this case, that only (c) and (e) above could apply.

[33] While it is true that my order for the payment of $14,000 costs by Mrs. Purcaru to Ms. Seliverstova is unpaid, this results from the fact that: a) Mr. Purcaru has failed to pay support; and b) only a portion of the proceeds of the sale of properties which secured support for Mrs. Purcaru has been released to her. The argument regarding costs is, in my view, circular. If “support” in the form of the proceeds of the sale of the property vested in Mrs. Purcaru is paid, she will have the funds to pay the cost order made against her.

[34] Our courts have consistently held that if a plaintiff is impecunious, the plaintiff need only show that the claim is “not plainly devoid of merit” before the claim will be allowed to proceed without an order for security of costs. This is a very low bar. See: Zeitoun et al. v. The Economical Insurance (2008), 2008 CanLII 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.), at para. 49; John Wink Ltd. v. Sico Inc., 1987 CanLII 4299 (ON SC), [1987] O.J. No. 5 (Ont. H.C.J.); Lysko v. Maxbeau Co., 2010 ONSC 6523 at para. 6.

[35] The source of this test, and its rationale, can be traced to John Wink v. Sico, above, at para. 8:

There can be no question that an injustice would result if a meritorious claim were prevented from reaching trial because of the poverty of a plaintiff. If the consequence of an order for costs would be to destroy such a claim no order should be made. Injustice would be even more manifest if the impoverishment of plaintiff were caused by the very acts of which plaintiff complains in the action.

[36] Given the prior findings of this Court and the Court of Appeal with respect to the transfer to Ms. Seliverstova of $300,000 from Mr. Purcaru in 2007, it is not possible to conclude that, at least to the extent of that transfer, Mrs. Purcaru's claim is “plainly devoid of merit.” Indeed, to the contrary, given these prior findings of this Court and the Court of Appeal, one can only conclude that Mrs. Purcaru has a strong prima facie case for an improper preference paid to Ms. Seliverstova in connection with that transaction.

[37] Thus, when I weigh Mrs. Purcaru’s claim to the money currently held in trust, based on the prior orders of this court and the Court of Appeal, against a potential, discretionary claim to an order by Ms. Seliverstova for security for costs, I must conclude that Mrs. Purcaru’s claim prevails.

[38] Accordingly, an order shall issue releasing to Mrs. Purcaru $101,290 currently held in trust to the credit of this action. Of this amount, $14,000 plus any accrued interest must be paid to Mr. Joseph in trust for his client. It is not clear to me whether the funds are still held by Mrs. Purcaru’s former counsel, John Legge, or whether they have otherwise been secured. In any event, this order is sufficient authority for the release of these funds in the manner directed.

The February 27, 2012 Affidavit

[39] Mr. Joseph conceded that, whatever the status this affidavit had on February 27, 2012, given its late filing, the affidavit has now been filed and is part of the Continuing Record. Given this concession, no further order is required. Accordingly, this ground of relief in Mrs. Purcaru's motion is dismissed.

The Accounting of Funds Received from the Sale of Properties Vested in Mrs. Purcaru

[40] I am not satisfied there is any basis to vary my order requiring an accounting to Mrs. Purcaru, copied to Ms. Seliverstova, of the disposition of proceeds from the sale of the secured properties. It is relevant information in the context of the fraudulent conveyance/improper preference claims for damages against Ms. Seliverstova. It involves no waiver of privilege. Whether Mr. Legge has complied with this obligation or not is not before me. If he has already done so, that is the end of matter. In any event, this aspect of Mrs. Purcaru’s motion is dismissed.

Further Proceedings/Settlement Conference

[41] This case has consumed inordinate resources of both the courts and the parties. There have been literally dozens of court appearances, motions and other proceedings. The matter has dragged on since 2004. Further, there is no end in sight. The trial on the fraudulent preference claims had to be adjourned, and still outstanding are the additional contempt and other enforcement proceedings against Mr. Purcaru, as well as the matter of Mr. Sima’s tenancy in one of the properties vested in Mrs. Purcaru by virtue of Czutrin J.’s October 28, 2010 order. There are additional proceedings involving the Receiver of Mr. Purcaru’s estate. This is by no means a comprehensive list.

[42] In my view, this case cries out for an attempt at global settlement. Accordingly, before any further motions or proceedings can be brought (apart from dates already booked or provided by the court), the parties are directed to attend a half-day settlement conference before Czutrin J. on the earliest date the parties and Justice Czutrin are available in the fall of 2012. The scheduling of this conference shall be given priority and expedited. All parties with an interest, including Mr. Purcaru and Mr. Sima, shall attend this settlement conference.

Costs

[43] In view of my disposition of this matter, there shall be no order as to costs.

PENNY J.

Date: July 5, 2012