NEWMARKET COURT FILE NO.: CV-10-098560-00

DATE: 20130819

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

NATALIA TSYMBALAROU and BUSINESS DEVELOPMENT BANK OF CANADA

Plaintiffs

– and –

IRINA GORDON, 7119321 Canada Inc., ROMAN KRASNOV, IRYNA KUTSYNA, OLEG PALCHYK, and LIS Custom Homes Inc.

Defendants

B. Tseitlin and A. Abramian for Natalia Tsymbalarou

D. Levangie and J. Schwartz, Student-at-law for Business Development Bank of Canada

H. Niroomand, for Irina Gordon, Roman Krasnov, Iryna Kutsyna

Oleg Palchyk, 7119321 Canada Inc., and LIS Custom Homes Inc.

HEARD: May 21, 22, 23, 27, July 3, 4, and 5, 2013

HOWDEN J.

INTRODUCTION

1This action originated from a claim by Natalia Tsymbalarou as a creditor of Irina Gordon. She claimed, in addition to damages, orders setting aside conveyances of three properties made by Irina Gordon. They are:

(i) 176 Don Head Village Blvd., Richmond Hill, purchased by Ms. Gordon on August 21, 2008 and channelled through one of Ms. Gordon’s numbered companies (2150714) to the plaintiff Natalia Tsymbalarou for $427,300 when a mortgage was obtained and advanced in the sum of $402,837, and the property finally was conveyed to 7119321 Canada Inc., one of the companies in which Ms. Gordon has a share and directing interest, on Feb.17,2010 for a consideration of $2;

(ii) 222 Florence Ave., Toronto, purchased on Nov. 13 2007 by Ms. Gordon and transferred by her to the defendant Roman Krasnov on July 31 2008 purportedly as trustee for Irina Gordon under a declaration of trust for a nominal consideration of $2; and

(iii) 198 Golden Forest Rd., Vaughan, purchased by Ms. Gordon on August 28, 2007 and transferred immediately to the defendants Iryna Kutsyna and Oleg Palchyk on August 28, 2007 and then to Lis Custom Homes Inc. purportedly by Kutsyna and Palchyk as trustees for whom the property was conveyed, according to the Land Transfer Tax (“LTT”) affidavit; Lis Custom Homes was incorporated in 2007, its head office at 179 John St., Markham and as of 2010 its head office was reported to be 222 Florence Ave., both residences of Irina Gordon and her family, its President being Irina Gordon and its directors the defendants Krasnov, Kutsyna and Palchyk .

2Two of these properties were claimed directly by the plaintiffs for re-conveyance and sale as the subjects of fraudulent conveyances. Ms. Tsymbalarou also claimed a non-dissipation order to freeze the sale proceeds from 198 Golden Forest Rd. The three properties are residential house lots known municipally as 222 Florence Ave., Toronto; 176 Don Head Village Blvd., Richmond Hill; and 198 Golden Forest Rd., Vaughan. The amended statement of claim puts the claim succinctly:

Gordon has fraudulently conveyed the above-noted properties (and others) in an obvious attempt to divest herself of all assets in an effort to defeat her creditors and as part of a fraudulent scheme in which she is involved with the other defendants. As such, the fraudulent conveyances should be set aside and the net proceeds from the Golden Forest property frozen pending a final determination of these proceedings.

3The ultimate aim of the plaintiffs is to restore 222 Florence to the defendant Irina Gordon as beneficial owner and to sell and realize on it pursuant to the s. 38 order as partial payment of what is owed them and to have the proceeds from the sale of 198 Golden Forest Road ordered to be paid to them pro rata on grounds of the alleged fraud. The plaintiffs differed initially in respect of the relief each claimed. Ms. Tsymbalarou was proceeding only against 222 Florence and the 198 Golden Forest proceeds as they were sufficient to restore her to where she would have been but for the fraudulent acts of the defendants. BDC was also proceeding to obtain the net funds from the recent sale of 176 Don Head Village Blvd. as claimed in the statement of claim. However, in the final submissions of BDC, Mr. Levangie set out the relief claimed by BDC, as did Ms. Tseitlin, and the orders sought by both plaintiffs relate only to 198 Golden Forest and 222 Florence Ave. Therefore the subject of the relief claimed are these two properties only, though other properties and their transactions were referred to in evidence as part of the same scheme or pattern of fraud alleged by the plaintiffs.

4The defendant Irina Gordon made an assignment in bankruptcy on June 24, 2009. She had first retained Gloria Green, a trustee in bankruptcy, to make a proposal to her creditors. The proposal was not accepted. The assignment in bankruptcy followed. The plaintiff Ms. Tsymbalarou obtained an order in 2010 under s. 38(1) of the Bankruptcy and Insolvency Act, 1985 R.S.C. ch. B-3 , permitting her to continue this action “in her own name and at her own expense in relation to” the three identified properties. The trustee did not oppose the granting of this order. S. 38(2) and (3) provide that:

(2) On an order under subsection (1) being made, the trustee shall assign and transfer to the creditor all his right, title and interest in the chose in action or subject-matter of the proceeding, including any document in support thereof.

(3) Any benefit derived from a proceeding taken pursuant to subsection (1), to the extent of his claim and the costs, belongs exclusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate.

5The s. 38 order provided for other creditors to join their own claims to this action if they contributed pro rata to the expense of this action. One creditor did so. The BDC had granted a loan to a company owned by Irina Gordon, payment of which was guaranteed by Ms. Gordon. That loan in the amount of $150,000 was advanced ostensibly to cover start up costs of acquiring data equipment by Infotech Logic Inc. in April 2008. The first payments were made but on July 2 2008, it fell into default. That default was never remedied. On October 19 2012, BDC became a co-plaintiff in this action pursuant to an order of Lauwers J. Pursuant to that order, it is further ordered as a matter of judicial “housekeeping” that the Business Development Bank of Canada be added as a party plaintiff to the title of proceedings of this action.

POSITIONS OF THE PARTIES

The Plaintiffs

6The plaintiffs’ essential position is that, as creditors of Irina Gordon, they have been hindered, delayed and defeated in part in their attempts to recoup their losses by a fraudulent scheme engaged in by Ms. Gordon and Roman Krasnov. They allege that Gordon would approach a banking institution, obtain a business loan for a non-operating business, convert all of the advance to her personal use and then default. By that time, any real properties that were listed as assets of Ms. Gordon when she obtained the loan would be transferred to a person or entity related or close to her and under her control who would pay little or no consideration for it. The transferees were sometimes Mr. Krasnov and sometimes one of Ms. Gordon’s non-operating companies. By the time of Ms. Gordon’s assignment in bankruptcy, she showed total assets of $2,122,800 in gross assets, most of it five real properties, and only $48,700 in estimated realizable value. (Statement of Affairs, I. Gordon, June 23 2009). Ms. Tsymbalarou became useful, following Gordon’s bankruptcy because of Gordon’s inability to obtain credit on her own, as a means of obtaining a line of credit or a mortgage for Gordon’s use. Ms. Tsymbalarou’s loss as proven in the Gordon bankruptcy, is accepted at $73,355.68 due to her paying the resulting debt obligation and the funds advanced which were used by or for the benefit of Ms. Gordon.

7In early 2008, the BDC granted Ms. Gordon’s corporation Infotech Logic Inc. a loan of $150,000 on the basis of financial statements from the company furnished by Ms. Gordon who was to act as guarantor and her own financial status as disclosed by her. Default occurred on July 2, 2008 and by the time BDC demanded payment on October 8, 2008, it is alleged that most or all of the properties had been transferred out of Infotech’s and Gordon’s names to what appear to be asset-less or shell corporations or to one or more of the co-defendants for little or no consideration. BDC’s claim in the bankruptcy was $100,000 plus interest.

8A settlement between BDC and Ms. Gordon was attempted at one point. Minutes of Settlement were signed by BDC and Ms. Gordon whereby she and her related companies would pay a compromise amount of $140,000 in two installments. $70,000 was paid pursuant to minutes of settlement but the defendants failed to pay the remainder of another $70,000 as undertaken in the settlement. The full amount owing now is therefore $170,000 less $70,000 = $100,000 plus interest.

9By then Ms. Gordon had transferred all of the substantial assets of herself and Infotech to others. BDC submits that the three real properties claimed against in this action are only a few of some 12 properties which were used to obtain credit and then disposed of before the parties could recover under a judgment. BDC and Ms. Tsymbalarou seek possession of 222 Florence Ave. within 30 days for purposes of sale, the proceeds from that sale and the net proceeds from the 198 Golden Forest Rd. sale to be paid to the co-plaintiffs and any residual amount remaining after satisfaction of the co-plaintiffs’ claims to be paid to the bankrupt’s estate for the benefit of all creditors. If the court finds fraud, BDC also will claim interest on its judgment pursuant to s. 178 of the Bankruptcy and Insolvency Act.

The Defendants

10The defendants brought forward two motions which I was able to deal with during the trial. The first involved a submission as to the extent to which the s.38 order controlled the ambit of the trial evidence. The second occurred following a five-week adjournment granted at the close of the plaintiffs’ case and before the defendants’ opened, in circumstances that I will come to.

11The defendants Irina Gordon and Roman Krasnov through their counsel submitted initially that because the S.38 order permits continuance of the action “in relation to” the three properties specifically claimed against, the same provision limits the evidence of fraudulent pattern of conduct only to those three properties. I treated this as an objection by counsel for the defendants, Mr. Niroomand, to admissibility of evidence of all dealings by the parties with all other properties. I heard argument on this point from all three counsel and gave my reasons orally, filled out in detail only later in written reasons. I ruled that the s.38 order does not contain language limiting the evidence to be led on the issue of the alleged fraudulent scheme or pattern. I also ruled that the pleadings go beyond the three properties directly claimed against to include others that are highly relevant to the plaintiffs’ claims that a fraudulent scheme was involved. I ruled that the real properties disclosed by Ms. Gordon as her assets or assets of the company Infotech in the financial statements of Infotech and Ms. Gordon and the dealings with them were admissible. I ruled also that evidence regarding other real properties held by Ms. Gordon between 2007 and 2010 inclusive, limited only to disposition by her and any successor in title, was admissible at this trial. In other words, I ruled that the pleadings alleged a fraudulent pattern or scheme engaged in by the defendants that went beyond the three properties directly claimed against by the plaintiffs.

12The second motion of substance was brought by the defendant Irina Gordon. She sought orders (i) setting aside the s.38 order granted by the Registrar in Bankruptcy on August 5, 2010, expunging the proof of claim of the plaintiff Natalia Tsymbalarou, and dismissing this action, and (ii) removing counsel for Ms. Tsymbalarou and her associates on grounds of conflict of interest due to a meeting Ms. Gordon had with Ms. Abramian twelve years ago. For reasons given orally on July 4, 2013, I denied both requests and dismissed the motions, the first on grounds of timeliness, lack of standing, and a finding that the trustee’s decision to accept the proof of claim was within the requirements of the Bankruptcy and Insolvency Act, and the second on grounds that the prior brief relationship was completely unrelated to the present retainer of Ms. Abramian and delay in expressing any concern about the 2001 matter until halfway through the trial. Ms. Gordon’s motion, as well as her request for another adjournment of the trial, were dismissed and Ms. Gordon proceeded with her evidence.

13In dealing with the defendants’ position at trial, I will first remind myself of their position as set out by their then counsel at the start of the trial. Mr. Niroomand was removed, on his own request, as counsel of record just before the defendants’ case was to begin. His relationship with his clients had broken down and he said that for reasons he could not divulge, he could not continue as their counsel. Following a five-week adjournment (granted over objections from the plaintiffs and subject to terms. as set out orally), Ms. Gordon was the only defendant to present a case and she did so without counsel. This had been the third trial adjournment. Therefore counsel’s opening for the defendants was helpful to me in explaining succinctly the defendants’ position in this trial.

14In his opening, Mr. Niroomand submitted that the case is limited by s. 38 to only two properties, 222 Florence and 198 Golden Forest Rd., as the plaintiff Tsymbalarou accepted but BDC initially did not. The third property claimed against - 176 Don Head Village Blvd. - has been sold, with little or no net funds available for creditors. I did not agree with the proposition advanced by Mr. Niroomand (for reasons again given orally during the trial) that s. 38 governed the range of evidence to be presented. However, as I have stated above, the relief sought now has come down to only the two properties and no order is sought for practical reasons in relation to 176 Don Head Village Blvd.

15Mr. Niroomand submitted for the defendants that 222 Florence Ave. was owned by the Gordon Family Trust, never by Ms. Gordon personally, and it and the other properties were and are held by the Trust for the benefit of the children of Irina Gordon. The key time is the time of the transfers and as of that time, Mr. Niroomand stated, the property was held in trust and the later transfer to Mr. Krasnov for no consideration was to him as trustee. Mr. Niroomand submitted that if the Gordon Family Trust was a valid trust at the time of the transfer, the lack of consideration is of no importance.

16As for 198 Golden Forest Rd., Mr. Niroomand submitted that it was purchased and transferred by Ms. Gordon on August 28, 2007 to two other defendants who in turn transferred it on February 2, 2009 to Lis Custom Homes Inc. of which Irina Gordon and Roman Krasnov were the directors then. The evidence will be that Ms. Gordon understood she could do what she did, as did the other defendants, as part of their prior agreement and as part of a valid trust agreement, the beneficiaries being Irina Gordon’s children.

17It is submitted for the defendants that the only evidence of fraud relates to dealings with other properties. Regarding these two properties, there is no fraudulent conduct and the trust is a valid one for a valid purpose. As pleaded succinctly by the defendants in para. 53A of the Amended Statement of Defense and Counterclaim:

53A. At all material times, the defendants were acting as trustees under the Gordon Family trust which is the beneficiary with respect to all the properties which are the subject of these proceedings.

18In her final submissions both orally and in writing, Ms. Gordon submitted the following in her own defense:

• Ms. Gordon is the original trustee of the Gordon Discretionary Family Trust, the settlement terms for which are set out in the original trust document dated July 1, 2002 created by Ms. Gordon’s mother for the benefit of Lilian Gordon and Stephanie Gordon, Ms. Gordon’s children. They are both still minors and students at an Ontario university; throughout the transactions in question, Ms. Gordon’s only intention was and remains to provide for and care for her children, not to defraud or hinder creditors;

• as to 222 Florence Ave., there is no evidence that Irina Gordon ever purchased this property personally; both she and Mr. Krasnov were trustees when each held this property and Mr. Krasnov swore in the Land Transfer Tax affidavit in the deed of transfer from her to him that he was the trustee to whom the property was being conveyed.

• as to 198 Golden Forest Rd., there is no evidence of fraud; it was validly transferred to Lis Custom Homes Inc. and the mortgage from the Scotia Mortgage Corp., which went on title when it was purchased by Kutsyna and Palchyk , has been discharged

• Ms. Gordon has already paid $70,0000 pursuant to minutes of settlement with BDC pre-bankruptcy but failed to pay the remaining reduced balance of $70,000 and partial judgment was signed on Dec. 31 2008 following that default for $170,000, as provided for in the minutes, against all defendants in that action including Irina Gordon

• the evidence of Mr. Yuri Gavris that he signed no documents relating to trust matters before 2011 is incorrect and is contradicted by the documents themselves

• there was no scheme showing fraudulent behavior on the part of any of the defendants

• the intention of Irina Gordon throughout has been to grow the Gordon Family Trust in order to provide for the support and care that her children require for education and future needs

• the burden of proof on the plaintiffs in a civil case like this one is proof on a balance of probabilities but where a fraudulent scheme or fraudulent conveyance is alleged, a higher degree of probability is required. Clear and sufficient proof is required, and even where badges of fraud are proven, the court is not compelled to draw an inference that the intent was fraudulent where a legitimate explanation is provided, citing , inter alia, Thompson v. 1465491 Ontario Inc. [2011] O.J. No. 1127 (S.C.J.).

19The defendant Irina Gordon states that she has provided a legitimate explanation for the transactions alleged to form a scheme, that no fraudulent scheme has been shown to the required standard of proof, and that the two properties against whom relief is now sought were never owned by Irina Gordon but by the Gordon Family Trust through trustees appointed by her as original trustee pursuant to the terms of the Gordon Family Trust.

20Of the other defendants, Roman Krasnov attended the trial but elected to give no evidence and present no submissions. Neither Oleg Palchyk nor Iryna Kutsyna took part in the trial.

ANALYSIS

(a) Burden of proof re fraud

21There have been differing submissions made on the burden of proof in this case. The plaintiffs’ position is that like any civil case, the burden of proof is to be met on a balance of probabilities with no additional requirement other than that. As I stated above, the defendant Irina Gordon submitted that the plaintiff must meet a higher degree of probability where serious misconduct is alleged such as fraud and that particularly cogent evidence of fraud is required. She cited some recent Ontario Superior Court cases at the trial level to support this view of the law. They include Bank of Montreal v. Peninsula Boilers Ltd., [2009] 0.J. No. 2906; CIT Financial Ltd. v. Zaida, (2006) 2006 ONSC 8469, 24 R.F.L. (6th) 78 (SCJ).

22I have been aware of this view of the law where a criminal course of conduct is alleged in a civil case for many years. I followed it myself as long ago as 1993 in a jury trial involving arson in Lindsay Ontario.

23I have been directed by plaintiffs’ counsel to the Supreme Court of Canada majority judgment in H (F) v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41. That case involved a civil trial of allegations of sexual assault, like fraud an allegation of criminal-type conduct in a civil case. The majority judgment, written by Rothstein J., puts this issue to rest in my view. The Supreme Court majority has now held that the law to be applied in all civil cases is that there is only one standard of proof and that is proof on a balance of probabilities. It recognized that some cases involved more serious allegations or consequences of events but that these considerations do not alter the standard of proof in civil cases. The proposition that a trial judge should apply different levels of scrutiny or that the evidence must be sufficiently clear and cogent to meet the test of balance of probabilities test in certain cases was rejected. H(F) v. McDougall, at paras 39-48; The Law of Evidence in Canada, 3rd ed., by A.W. Bryant, S.N. Lederman, and M.K. Fuerst, LexisNexis 2009, at paras 5.62.1-.2. Accordingly, I am required to follow that view of the law as it comes from the highest appellate level of court on this country and I will do so. Not only that, I am convinced by Rothstein J.’s reasons that it is the correct view.

(b) The alleged fraudulent conveyances: are they proven on a balance of probabilities?

24In s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, ch.F.29, the intent required to make a fraudulent conveyance and the consequences for doing so are set out:

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. [Emphasis Added.]

25By s. 4, a conveyance or transfer made for valuable consideration or with the intent of transferring the interest expressed in the transfer document as between the parties to it is not saved where it was executed with the intent set forth in s. 2:

4. Section 2 applies to every conveyance executed with the intent set forth in that section despite the fact that it was executed upon a valuable consideration and with the intention, as between the parties to it, of actually transferring to and for the benefit of the transferee the interest expressed to be thereby transferred, unless it is protected under section 3 by reason of good faith and want of notice or knowledge on the part of the purchaser.

26Fraudulent intent can be proved by demonstrating directly in evidence the intent required coupled with the effect of the transaction being to hinder or defeat creditors, or it can be inferred from the surrounding circumstances including certain suspicious circumstances known as the “badges of fraud”. Houlden and Morawetz, supra, at para 4.24-.29; XDG Ltd. v. 1099606 Ontario Ltd., (2002) 2002 ONSC 22043, 41 C.B.R. (4th) 294, at paras. 63-4 (S.C.J.). The badges of fraud have been held to include the following :

• the financial situation of the grantor

• transaction between near relatives or associates

• preservation by the grantor of an interest in the property

• result of the transaction being to substantially denude the grantor of all of her or his property that would otherwise be available to creditors

• effect of the transaction is to delay, hinder or defeat creditors

• secrecy of the transactions from creditors

• inadequate or no consideration

• transfer amounting to a trust of the property

27The evidence from the abstracts of title and the transfer documents, copies of which have been made exhibits to this trial, as well as the evidence of Mr. Chris Stadelmann, the manager of defaulting accounts with the BDC, show a distinct pattern of behaviour on the part of Ms. Gordon which relates to the dates of default on the loan made to Infotech and guaranteed by Ms. Gordon and the date of demand for payment made by BDC. The loan of $150,000 was approved and advanced by BDC on the guarantee by Ms. Gordon. A number of payments were made as required on the loan but on July 2 2008, the loan went into default which was never remedied. BDC made its demand for payment of the loan by letters dated October 3 2008 to Infotech and Ms. Gordon.

28The following chart was drawn by me using the data in the title documents filed in evidence as Ex. 3 (Summary of Properties), Ex. 1, Vol. 3, the personal financial disclosures by Ms. Gordon of February 27, 2007 and September 29, 2008 to BDC, and on June 23, 2009 to the Bankruptcy Trustee (Ex. 8).

Date of default: July 2, 2008

Properties disclosed to BDC by Ms. Gordon as her properties on February 27, 2007

Address

Acquired by I.G.

Transferred by I.G.

122 Beaverbrook

December 20, 2004 (for $300,300)

To 2144865 Ont. Ltd. for $2 on September 29, 2008

103 Denton

April 25, 2005 (for $305,000)

To 2150714 Ont. Ltd. for $2 on August 26, 2008

179 John (Her res.)

April 7, 2006 (for $565,000)

Substantially damaged by fire in June 2009 and sold under Power of Sale by Nat. Bk. Of Can. – ($155,000)

Properties disclosed to BDC by Ms. Gordon as her Properties on September 29, 2008

Address

Acquired by I.G.

Transferred by I.G.

198 Golden Forest Road

August 28, 2007

To Kutsyna/Palchyk mortgaged for 578,197 on August 28, 2007

To Lis Custom Homes inc. ($2) on August 28, 2009

Properties Disclosed by Ms. Gordon to Trustee in Bankruptcy on June 23, 2009 as her properties

Address

Acquired by I.G.

Transferred by I.G.

103 Denton

See above

122 Beaverbrook

See above

179 John St.

See above

75 Don Head Village Blvd.

September 21, 2006 ($330,000)

To 2144865 Ont. Ltd. on September 29, 2008 for $2

67 Belgreen

July 5, 2002

To Lila Mgt. Ltd. on June 5, 2008 for $2

Other Previously Undisclosed Properties Registered to Ms. Gordon

Address

Acquired by I.G.

Transferred by I.G.

222 Florence Ave.

November 13, 2007 ($2)

To R. Krasnov on July 31, 2008 for $2

29These are the relevant properties for this case, though there are other properties referred to in the plaintiffs’ Summary of Properties, Ex. 3, which bear out a similar pattern. For all properties but 67 Belgreen, 222 Florence Ave., and 179 John St., Ms. Gordon would acquire title to the property for its apparent full value prior to the default date. Then after the default of the BDC loan she would transfer the property to a numbered or other holding company in which Ms. Gordon was the principal officer and director for no tangible consideration. Of the three exceptions, two were properties occupied by Ms. Gordon and her children as her residence. 179 John lost much of its value due to fire following which Ms. Gordon moved to 222 Florence Ave. where she, her children and Mr. Krasnov now reside.

30Regarding 67 Belgreen, there was no evidence presented by the plaintiffs as to how it was acquired by Ms. Gordon except the abstract of title which shows a transfer from Edmund Woo, with whom Ms. Gordon had entered a marital agreement, to Ms. Gordon with no evidence regarding what she paid for it, if anything. After two transfers back and forth between her, Roman Krasnov and Nadejda Ginzburg, Ms. Gordon transferred it to Lilas Management Ltd., one of her so-called holding companies, for $2. I conclude from the title documents 67 Belgreen followed a similar pattern of acquisition by Ms. Gordon and latter disposition for nominal consideration to a company in which she had an interest, in this case shortly before default of the BDC loan. Therefore, apart from the two properties she lived in with her family, a pattern was followed of acquisition by Ms. Gordon and then after default on the loan and other debts, transfer for little or no consideration out of her name.

31Apart from the pattern of acquisition and disposition of these properties, Ms. Gordon also represented to BDC that Infotech was the owner of 67 Belgreen Avenue in Toronto and 77 New Seabury Drive in Concord. The financial statements of the company for the years ending in December 2005 and 2006 denote 67 Belgreen in 2006 as an asset of the company worth $480,000 and no mortgage. In 2005, it was shown as worth the same amount but under liabilities, a mortgage of $130,248 was shown as a corresponding liability. As matters turned out, in fact Infotech had never owned either property. Since 2002, 67 Belgreen was held in the name of Irina Gordon, Mr. Krasnov, Ginzburg, and finally Lilas Management Inc., a company whose only director was Irina Gordon, having its head office at 222 Florence Avenue, now Ms. Gordon’s home. And since 2005, 77 New Seabury Drive was owned by Ms. Gordon, Alexander and Nadejda Ginzburg and, since March 29, 2009, Alexandre Oustinov. Neither property was owned by Infotech in either 2005 or 2006 or since. And Ms. Gordon had transferred them out of her name in June 2008 (Belgreen) and October 2005 (New Seabury).

32The loan agreement signed by Ms. Gordon on behalf of Infotech with BDC contained a term in para 20.1 of the Standard Credit Terms. (Schedule A to, and part of, the agreement) that the company Infotech agreed not to sell any of its assets without the prior written consent of the Bank. I find that not only did she lie to the Bank in representing the two properties as assets of the company but she herself had already conveyed away one of the properties before she signed the loan agreement on March 29 2007.

33I now turn to 222 Florence Avenue. Ms. Gordon says that in the case of 222 Florence Ave., she never was the beneficial owner and therefore she never disclosed it to BDC or to the Trustee in Bankruptcy as her property. In her closing submissions, Ms. Gordon states in regard to 222 Florence Ave. that throughout the transfers of title, the Gordon Family Trust was the real owner and Ms. Gordon was acting on behalf of the Gordon Family trust; it is now registered in the name of the Gordon Family trust, Roman Krasnov as trustee.

34There are times when I find that Irina Gordon has tried to manage so many properties, moved numerous properties out of her name after default on the loan to BDC, and has arranged so many trust declarations for the various properties that she simply can’t keep her story straight. I find that 222 Florence Ave. is a good example of this. First, in para. 49 of the Amended Statement of Defence and Counterclaim filed on behalf of Irina Gordon as well as Mr. Krasnov and two of her companies, it is stated:

49. In June, 2007, Nadeja and Alexander Ginzburg obtained a mortgage and legal title to 222 Florence Ave. The Ginzburgs held title in trust for Gordon. Gordon was the beneficial owner of 222 Florence Avenue. The purchase price simply reflected the land value for 222 Florence Avenue. (Emphasis added)

35Later another paragraph was added to the pleading by the defendants to assert that at all material times the defendants (which included Gordon) were acting as trustees under the Gordon Family Trust. Nevertheless, the original admission was made and must be considered along with the amended pleading and all the circumstances.

36Second, the 2007 deed from the Ginzburgs, whom Ms. Gordon described as friends whom she tried to help when they ran into financial difficulties, is stated to be a conveyance for a nominal consideration of $2. Yet the Land Transfer Tax (“LTT”) affidavit is completed by Ms. Gordon and she swore or affirmed that she was taking title as the transferee named in the conveyance. In choosing that statement, she refused to describe herself as either a person in trust for whom the conveyance was being made or that she was a trustee to whom the land was being conveyed. They were the two trust-related statements listed in the affidavit form and she plainly did not adopt them.

37In her oral evidence, Ms. Gordon repeated at one point that she held title to 222 Florence between November 2007 and July 31 2008 but only as trustee for the Gordon Family Trust (“GFT”). She also said that the property was transferred to Roman Krasnov who acts as trustee of the GFT. He also lives in 222 Florence Avenue as does Ms. Gordon and her children. There is no inference from this that they are cohabiting. The evidence is that that is not the case. However both have been using this property as their home, or in Krasnov’s case, one of two homes since at least 2008. Ms. Gordon stated that the home was under construction until 2008.

38Roman Krasnov and Irina Gordon purportedly signed the document dated July 28 2008 headed “Affidavit in Support of A Transfer from Trustee to the Beneficial Owner and Exemption from the Land Transfer Tax Act”. A paralegal named Yuri Gavris is said to have signed indicating that he was the commissioner who swore or affirmed Krasnov and Gordon. Mr. Gavris attended at the trial under subpoena by the plaintiffs and gave evidence. In relation to a number of documents produced by Ms. Gordon relating to the GFT holding certain properties, Mr. Gavris said that he did not sign them or if he signed, the date had to be wrong if it was before 2011 because he knows through his soft ware program that any matters pertaining to the GFT never were broached to him before 2011. In relation to the exemption affidavit relating to 222 Florence (Ex.5, tab1), Mr. Gavris stated that the signature in the space for the Commissioner of Oaths is not his. He also added in relation to 222 Florence Avenue that he had talked several times in 2007 and 2008 with Irina Gordon about the ongoing construction. He understood directly from Ms. Gordon that 222 Florence Avenue was owned and under the control of Ms. Gordon.

39Mr. Gavris’ evidence regarding the 222 Florence Avenue documents and ownership was not challenged nor was the substance of his evidence as to other documents he says were not signed or stamped by him. He did not appear to be in any way hostile to Ms. Gordon and in fact said they had been friends and business associates. He appeared to have no axe to grind. I accept his evidence in respect of the exemption affidavit pertaining to 222 Florence Avenue and his understanding that Ms. Gordon was the beneficial owner of the property as well as his evidence regarding the other trust-related documents purportedly signed by him but were not. He denied signing as commissioner/witness three trust-related documents (Ex. 5, Tabs 1, 3, and 19). He said the date on the trust declaration was earlier than when he signed it in four instances. Two of them were obvious because the commission stamp reads “Expires January 8, 2013”, meaning it could not have been issued until January 8, 2010; yet two trust declarations stamped with his commissioner’s stamp bore a date in writing in 2006. The year was obviously written in error by someone who did not know that commissioner’s stamps only issue for three-year periods.

40The LTTA affidavit in fact says that Ms. Gordon was the beneficial owner of 222 Florence Avenue. Mr. Krasnov states the following:

2. I hold my interest in the property in trust for Irina Gordon.

3. I obtained title to the property on the 31st day of July 2008, when a conveyance to me as a trustee was registered…

4. Irina Gordon is, and always has been the beneficial owner of the said property.

5. I am a bare trustee and have no active duties to perform.

6. All obligations, including any mortgage obligations….will be performed by the Beneficial owner, Irina Gordon

41Ms. Gordon herself states in the same affidavit:

9. I, Irina Gordon, the Beneficial Owner, hereby indemnify and save harmless Roman Krasnov, the Trustee, from all claims, charges, encumbrances, obligations….during the entire period of time the the land is vested in his name as Trustee for me.

42This document was submitted to and relied on for the truth of its contents by an arm of the provincial government to obtain a tax benefit and Ms. Gordon maintained clearly that at least as of July 31 2008, she was the real owner of the property and had all the obligations of the owner of 222 Florence Avenue. It is inconsistent clearly with the evidence now of Ms. Gordon that at no time was she the beneficial owner of 222 Florence Avenue. Furthermore, I find that someone forged Mr. Gavris’s signature on the LTTA Exemption affidavit and on a balance of probabilities given the pattern of dishonesty emerging here from the defendants, I find that the potential sources of this document were Ms. Gordon and Mr. Krasnov, one of whom forged the name of Mr. Gavris on this document.

43Other examples of altered documents emerged during this trial. Regarding the deed conveying 222 Florence Avenue to Gordon from the Ginzburgs, I have noted above that Ms. Gordon in the LTT affidavit stated that she was the transferee, not that she took as a trustee. The copy of the actual deed as registered was marked in evidence as Ex. 3, Tab 2. There was a brief of documents filed on the defendants’ behalf and marked as ex. 23 subject to proof. In ex. 23, at tab 12 are the Florence Avenue documents produced for this trial by Ms. Gordon and Mr. Krasnov, the only participating defendants. The deed from the Ginzburgs to Gordon is produced as part of that tab but in the LTT affidavit in the document at tab 12 of ex.23, there is a difference in the text. The defendant’s production shows the LTT affidavit as stating that Ms. Gordon is “A trustee named in the above-described conveyance to whom the land is being conveyed.” No check mark appears, as it does on the copy of the deed produced by the plaintiffs in Ex. 3, beside the statement “A transferee named in the above-described conveyance.”

44In reply, a solicitor named Karen Purdy was called as a witness by the plaintiffs. She is a private investigator and as such has access to the Land Title System in which real estate documents are registered. She obtained a copy of the registered deed and compared it to the copy of the supposed same deed produced by the defendants. It is clearly shown that the document purporting to be a copy of the deed to 222 Florence Avenue produced by the defendants, has been tampered with and the statement in the LTT affidavit was changed from the deed as registered. The registered deed is no. AT1632293 registered on 2007 11 13 at 12:55. The defendant’s production has the same registration details exactly but different content in the LTT affidavit. The version produced by the defendants has been altered to accord with Ms. Gordon’s evidence that she took title as trustee of the GFT. But I find, on clear and uncontradicted evidence, that the defendants have produced a forged document to this court in order to strengthen their case.

45Unfortunately, this is not the end of altered evidence that has occurred in this case. Another reply witness, Mr. Arthur Dookhoo, an employee of the City of Toronto in charge of sending out letters regarding the fee for occupancy permits, stated that the copy of one of such letters purportedly sent by the City and produced by the defendants in Ex. 23, Tab 12 dated June 27, 2008 is not a copy of the actual letter sent by the City. The actual letter sent out was addressed to Nadejda Ginzburg, not to Mr Krasnov and the GFT. The copy in Ex.23 of the same letter is addressed to Roman Krasnov at 22 Florence Ave. The actual letter contained nothing about the date occupancy was granted, as the fictitious letter does in identifying May 16, 2008 as the occupancy date. This would accord with Ms. Gordon’s evidence that the house was under construction until 2008. Instead, the actual letter reads like a letter to a delinquent account and says nothing about occupancy date.

46A witness from the company having the mortgage on 222 Florence Avenue was called to say that a letter his company sent out on June 4 2013 had also been altered. Ms. Gordon had identified a letter dated the same date and marked as Ex. 22 containing particulars of the mortgage as a letter she had requested. It was addressed to the GFT. The actual letter sent out that day by the company was addressed to Roman Krasnov. Ms. Gordon denied changing the addressee. Again, a document produced by the defendant Irina Gordon was proven to have been altered from the original to agree with her view of the case that 222 Florence Avenue had always been trust property held by the GFT, Roman Krasnov as trustee.

47The settlement document which initiated the GFT (Ex 232, Tab 2) appointed Ms. Gordon as the Original Trustee. However, that was not the end of the matter. The terms of the trust in para. 1 (j) defined “trustee” as meaning “the Original trustee and at any other time means the person or persons holding office as trustee or trustees of this Settlement at such time”. In paras 6 and 10, a Trustee is authorized to appoint additional or substitutional trustees. I do not see any maximum number set by the document, though Ms. Gordon says the limit is 10. She is no doubt referring to paragraph 10 which whatever else it means, it only limits decision-making regarding disposition of the income and capital of the trust while there are less than 10 trustees but it fails to set a maximum limit on how many can be appointed.

48Ms. Gordon has made generous use of this power of appointment by issuing several declarations of trust.

49Regarding 222 Florence Avenue as an example of her free-style use of declarations of trust, there are five declarations of trust that have been produced in respect of the ownership of 222 Florence Avenue between July 16, 2007 and October 4 2011. Those declarations of trust can be summarized as follows:

Trustee

Beneficiary

Property

Date

Witness/Commr.

N. and A. Ginzburg

GFT

222 Florence

July 16, 2007

H.J. Gertner

I. Gordon

GFT

222 Florence

November 13, 2007

H.J. Gertner

R. Krasnov

I. Gordon

222 Florence

July 28, 2008

Y. Gavris?

R. Krasnov

GFT

222 Florence

September 3, 2010

Y. Gavris?

R. Krasnov

GFT

222 Florence

October 4, 2011

M.F. O’Toole

50Yuri Gavris testified that he did not sign the Declaration dated September 3, 2010 on that date as he had nothing to do with the GFT until 2011 and he could not have acted as a commissioner in respect of Mr. Krasnov because he has never met Mr. Krasnov apart from once seeing him at a party. None of these declarations have been withdrawn or terminated. It appears then that Mr. Krasnov, from the LTT affidavit, holds the property in trust for Irina Gordon while two years later he declares that he holds it in trust for the Gordon Family Trust. The Ginzburgs also are trustees in favour of the GFT on the same property, 222 Florence Avenue, since July 16 2007.

51There are some 18 other declarations of trust in respect of other properties. Two of those relate to 198 Golden Forest Rd., showing Lis Custom Homes as the trustee for Iryna Kutsyna and Oleg Palchyk on Feb. 2 2009 and April 1 2010. Yet Mr. Gavris stated that he never witnessed or signed the declaration dated Feb. 2, 2009 on which his name appears but not his commissioner’s stamp. Again he could not have witnessed Mr. Krasnov’s signature because he never met him for that purpose.

52There is similar use of trust declarations in respect of 6 other properties, in addition to 222 Florence and 198 Golden Forest Rd. The proceeds of sale of the latter property have been paid into court pending the result of this action.

53In addition, the invoices in Ex. 7 show that Ms. Gordon forged duplicate copies of the same invoices to corroborate purchases by her company. This was done to satisfy BDC and other banks, in the case of Ex. 7 the Bank of Nova Scotia and BDC, that the loan funds from each lender to Infotech and others of her companies were being used for corporate purchases. The problem is that the same purchases were being used to satisfy two different banks regarding use of different loan advances by two distinct companies.

54I understand Ms. Gordon when she says that in whatever she has done, her motive was to protect and care for her two children. However, that does not end the issue as to her intent as she transferred her properties out of her name to companies in her control or to close friends or associates not at arm’s length. As stated in Antle v. Canada, 2010 FCA 280, [2010] F.C.J. No. 1317(FCA):

11. It would be a surprising result if courts were bound by the formal expression of the parties and could not look to the surrounding circumstances, including the conduct of the parties, in assessing whether the intent to settle a trust is present.

55And in Air Canada v. M&L Travel Ltd.,[1993] 3 S.C.R., the Supreme Court of Canada held that the words of a trust document are “evidence of intention” and the Court went on to consider the conduct of the parties as well as the words in the trust documents.

56On all the evidence in this case, I find that Ms. Gordon, aided by Roman Krasnov and the Ginzburgs, as well as by the willingness of Palchyk and Kutsyna to take title to 198 Golden Forest and to relinquish it to Lis Custom Homes Inc., engaged in dishonest conduct, the intent of which was to preserve the properties named above for herself ( and according to her for her children) through use of the trust declarations but in doing so she has evinced a clear intent to hinder and defeat creditors. She was less than honest in failing to disclose to the BDC and to the trustee in bankruptcy her interest in 222 Florence Avenue.

57I find that Ms. Gordon would obtain the properties in her name as beneficial owner and then, after default on the BDC loan and no doubt other obligations listed in the bankruptcy documents, transfer them for little or no consideration to corporations controlled by her or to certain individuals with whom she had repeated dealings including Mr. Krasnov and the Ginzburgs. Despite all the self-serving attempts through manipulation of documents and use of trust declarations actually signed years after their date before a commissioner as part of a group of innocent documents, or by forging the commissioner’s signature, it is clear to me that her conduct showed a clear intent to preserve and increase her means at the expense of her creditors.

58I find that the following badges of fraud are proven in this case:

• transactions occurring between certain friends and Ms. Gordon repeatedly not at arm’s length

• result of the transactions following default on the BDC loan and incurring of other obligations being to denude substantially the grantor, Ms. Gordon, of properties that would otherwise have been available to creditors

• the effect of the transactions being to delay, hinder and defeat creditors

• repeated use of inadequate or no consideration to clear Ms. Gordon’s name of the properties

• use of transfers to others in trust as trust property

• failure to disclose to BDC or other creditors like Ms. Tsymbalarou that she was disposing of properties that formed her worth for purposes of obtaining the loan or to use Ms. Tsymbalarou’s credit to her detriment and to benefit Ms. Gordon or her family

• transactions being carried out secretly from her creditors

59This is a case of forgeries, altering of documents intended to be relied on in court, and use of a trust by a property and business investor who ceased to pay her financial obligations and transferred assets with the intent to hinder, delay and defeat creditors. It may be that Ms. Gordon did not start off with a premeditated scheme. As her actions unfolded, however, she followed a pattern of dishonesty and behaviour which had the effect of hindering, defeating and delaying creditors and which was intended to obstruct the course of justice. In all the circumstances as I have found them in this case, I find that the plaintiffs have proven their case beyond a balance of properties that the dispositions by Ms. Gordon, aided by Roman Krasnov, of 222 Florence Avenue and 198 Golden Forest Drive were done to delay, hinder and defeat creditors and that in each case, the conveyance was fraudulent. The conveyances in each case are void as against creditors and now are saved by s.3 of the Fraudulent Conveyances Act.

60Accordingly, the following order will issue in these terms:

(a) Declaring that Irina Gordon is the legal and beneficial owner of the property municipally known as 222 Florence Avenue, Toronto;

(b) The said property shall be re-conveyed to or, failing that, vested in Irina Gordon and the instruments that effected the fraudulent conveyance be deleted from title;

(c) Vacant possession and sale of 222 Florence Avenue shall be provided to the plaintiffs within 30 days of release of these Reasons for Judgment;

(d) The sale process shall be controlled by the plaintiffs and the net proceeds from sale of 222 Florence Avenue shall be paid to the Trustee in Bankruptcy;

(e) Declaring that Irina Gordon was the legal and beneficial owner of the property known municipally as 198 Golden Forest Rd., Vaughan at all material times;

(f) The Accountant of the Superior Court of Justice shall pay to A. Abramian in trust all monies paid into court to the credit of this action within 10 days;

(g) Any unsatisfied portion of the Partial Judgment in favour of BDC, being $104,402.05 is in fraud and is recoverable in full plus interest at a rate to be determined from June 24, 2009 in this action pursuant to s. 178(1) of the Bankruptcy and Insolvency Act.

61As to costs, I will receive at my chambers in Barrie a draft bill of costs and submissions on costs from the plaintiffs’ counsel and the post-judgment rate of interest within 15 days, addressed to my attention. The respondents Ms. Gordon and Mr. Krasnov shall have a further 15 days from delivery of the plaintiffs’ submissions to send to my attention their responding submissions. The plaintiffs have 10 days for brief reply.