SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

Court File No. 10-8629-00CL

RE: A. Farber & Partners Inc., the trustee of the bankruptcy estates of Montor Business Corporation, Annopol Holdings Limited and Summit Glen Brantford Holdings Inc., Applicant

AND:

Morris Goldfinger, Goldfinger Jazrawy Diagnostic Services Ltd., Summit Glen Bridge Street Inc., Mahvash Lechcier-Kimel, Annopol Holdings Limited and Summit Glen Brantford Inc., Respondents

Court File No. 31-OR-207640-T

RE: IN THE MATTER OF THE Bankruptcy of Summit Glen Waterloo/2000 Developments Inc.

BEFORE: D. M. Brown J.

COUNSEL: P. Shea and F. Lamie, for A. Farber & Partners Inc., the Trustee of the bankruptcy estates of Montor Business Corporation, Annopol Holdings Limited, Summit Glen Brantford Holdings Inc. and Summit Glen Waterloo/2000 Developments Inc.

M. Davis and B. Hughes, for Morris Goldfinger, 1830994 Ontario Limited and Goldfinger Jazrawy Diagnostic Services Ltd.

F. Tayar, for Mahvash Lechcier-Kimel

M. McQuade, for Morris Goldfinger, 1830994 Ontario Limited and Goldfinger Jazrawy Diagnostic Services Ltd. on the charging order motion

HEARD: October 10, 11, December 3, 4 and 5, 2012, February 12 and 13, and June 20, 2013.

REASONS FOR DECISION

I. Overview of these two proceedings

[1] Starting in about 1999, Dr. Morris Goldfinger invested approximately $6.5 with Jack Lechcier-Kimel (“Kimel”), a real estate developer who owned a group of companies known as the Summit Glen group of companies. In 2007 their relationship soured, which led Goldfinger and Kimel to enter into settlement agreements in 2008 and 2009. Goldfinger’s allegation that Kimel had breached the first, 2008 settlement agreement led him to sue Kimel and several of his companies. At the end of the day, several of the Summit Glen companies were placed into bankruptcy, with A. Farber & Partners Inc. (“Farber”) appointed as trustee in bankruptcy.

[2] Two proceedings were heard together by way of a hybrid trial. First, in the bankruptcy of one of the Summit Glen companies, Summit Glen Waterloo/2000 Developments Inc. (“SGW”), Goldfinger moved for the determination of the priority of several claims advanced against the $3.8 million in proceeds realized from the sale of the 105 University Avenue, Waterloo property once owned by SGW. In actual fact, the motion really involved the examination and determination of proofs of claim in the SGW bankruptcy under section 135 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B.3, an exercise which Farber, as trustee of SGW, had not performed. I will call that proceeding the “Claims Motion”.

[3] The second proceeding consists of an application commenced by Farber in which it asserted a number of preference-like claims against Goldfinger in its capacity as trustee in bankruptcy of three companies: Montor Business Corporation, which was not related to Kimel, as well as Annopol Holdings Limited and Summit Glen Brantford Holdings Inc., which were related to Kimel. I will call that proceeding the “Preferences Application”.

[4] Both proceedings were supported by extensive documentary records, including the transcripts of several out-of-court cross-examinations. In view of certain credibility issues surrounding some of the evidence, I conducted a hybrid trial of both proceedings in which focused viva voce evidence was heard from Kimel and two lawyers who had acted for Goldfinger at the time of the first, 2008 settlement.

[5] Following the conclusion of the trial, Goldfinger changed lawyers. His trial lawyers, the Davis Moldaver LLP firm, thereupon moved for an order granting them a charging order over any proceeds Goldfinger obtained from these proceedings. I reserved judgment on that motion until the release of these Reasons on the two main proceedings.

[6] These Reasons will first deal with the Claims Motion regarding the proceeds from the sale of 105 University, then with the Preferences Application and, finally, with the Charging Order Motion. To put those issues into their proper context requires a general description of the history of the business relationship between Goldfinger and Kimel.

II. The history of the relationship between Jack Lechcier-Kimel and Dr. Morris Goldfinger

A. The business relationship

[7] Jack Lechcier-Kimel was in the business of developing real estate. To that end, he incorporated a number of companies, together known as the Summit Glen group of companies.

[8] Kimel was a good friend of a radiologist, Dr. Morris Goldfinger. In about 1999 or 2000, Goldfinger agreed to provide money to some of Kimel’s Summit Glen group of companies to fund the development and operational expenses of various properties. From February, 1999 until December, 2005, Goldfinger advanced about $6.5 million to Kimel’s companies.[^1]

[9] In his November 4, 2008 affidavit Goldfinger described those advances as “interest free shareholder loans” and his arrangement with Kimel as a “joint venture” - “I had been a business partner, half-owner, and shareholder to the joint venture for more than seven years…”[^2] In his September 6, 2011 affidavit Goldfinger deposed that under his arrangement with Kimel he would “have a 50% equity interest in each of the various properties”, and Goldfinger was to receive 50% of the net profits realized from the sale of the properties in respect of which he was making loans - net, that is, of the repayment of his loans. As Kimel described the arrangement at trial:

A. [Goldfinger] provided the capital, the equity with which to purchase properties and my function was to manage and redevelop the properties to a higher state where they could be sold for a profit that we would then share.

Q. And do I understand that these moneys that Dr. Goldfinger advanced were loans to you or the companies and that he was to get no interest on the loans but he was to get 50% of the profits after they were resold?

A. Yes, that’s correct.

Q. And, am I correct that there, this agreement was never reduced to writing?

A. No, it wasn’t.[^3]

[10] In one of his affidavits Goldfinger described the nature of his business relationship with Kimel as follows:

…we agreed upon the following terms:

(a) Kimel suggested that I should participate as an equal business partner and 50% shareholder in the Summit Glen Companies (as defined herein). I would provide capital in the form of interest free shareholder loans, and in exchange, Kimel, acting as director and project operator, would provide ongoing property management at no fee or salary.

(b) Both Kimel and I would retain a 50% interest in the joint venture, and a 50% ownership interest in each of the purchased properties. Kimel and I also agreed that I would become an equal business partner in the Raleigh Street Properties.

(c) At all times, I retained the right to demand repayment of the shareholder loans, in addition to 50% of any growth or profit on the properties.

(d) I was not obligated to provide financing to projects I did not agree to participate in. I was fully aware that Kimel had other ongoing business interests, and was not interested in providing financing to all of his projects. As such, we agreed that the projects I chose to fund would be kept separate from his other interests. Where I acted as financier, I would also act as guarantor for any first mortgage financing as would be reasonably required.[^4]

[11] In the Preferences Application Farber took the position that it was intended Goldfinger would be a 50% owner of the various SG group of companies into which he had invested his funds,[^5] including Annopol.

B. The First Settlement: 2007/2008

[12] In 2007 the business relationship between Goldfinger and Kimel broke down, and they began to negotiate its dissolution. The negotiations resulted in the “First Settlement” memorialized by a Memorandum of Agreement dated December 11, 2007, but signed on May 20, 2008 and then amended on June 6, 2008. Under the First Settlement, Goldfinger would withdraw from the various projects by being repaid his shareholder loans of $6.5 million, as well as receiving an additional $5 million for what was thought at the time to be his equity in the properties by selling his shares in the various companies to Kimel.

[13] As part of the negotiations of the First Settlement, Goldfinger was paid $2.5 million in December, 2007 and January, 2008. He described the payment as “consideration in contemplation of the settlement, without which I would not have proceeded to any kind of written settlement”.[^6] Kimel testified that the payments were “made in anticipation of the settlement”.[^7]

[14] According to Kimel, the funds used to make that payment largely came from the sale in October, 2007 of a property owned by Summit Glen Fairway and the remortgaging of the Summit Glen Trayvan properties, with Kimel and his then wife, Mahvash Lechcier-Kimel, contributing about $200,000 of their personal funds.[^8] (The actual details about the source of those payments will be discussed below.)

[15] Farber, however, contended that the cheques issued in December, 2007 and January, 2008 to pay Goldfinger the $2.5 million came from Annopol, with those post-dated cheques describing the $2.5 million as payment for the “re-purchase shares”. Farber also stated that the $2.5 million paid to Goldfinger came from (a) inter-company loans from related companies and (b) a loan by a third-party to Annopol. Farber asserted that Goldfinger was aware that Annopol was borrowing money to pay him.[^9]

[16] Although Goldfinger received that $2.5 million payment in late 2007, most of the transactions contemplated by the First Settlement did not close until June 8, 2008.

C. Kimel’s breach of the First Settlement and Goldfinger’s enforcement actions

[17] Goldfinger contended that no sooner had Kimel entered into the 2008 First Settlement, than he breached it, in large part by dealing improperly with properties which formed part of the settlement – i.e. SG Trayvan gave a $4 million mortgage to Community Trust Company, and soon after Kimel sold the SG Fairway property.

[18] In July, 2008, Goldfinger had made demands on SG Brantford and SG Bridge, as well as others, and delivered notices pursuant to s. 244 of the Bankruptcy and Insolvency Act to those companies.

[19] On October 31, 2008, Goldfinger commenced an action seeking damages and the appointment of a receiver over a number of SG companies, including SG Brantford and SG Bridge (the “Goldfinger Action”).

[20] In November, 2008, Goldfinger moved in that action to appoint Zeifman & Partners Inc. (“Zeifman”) as interim receiver of several SG companies, including Summit Glen Waterloo, SG Brantford and SG Bridge. By order made December 1, 2008 this Court appointed Zeifman & Partners as receiver of a number of the SG companies to which Goldfinger had made loans, including SGW, but not Annopol.

[21] The appointment of a receiver caused some of the SG companies to default on loans made to them by third party lenders. That ultimately resulted in Montor, a company owned by Jack Perelmuter, an accountant who had provided accounting services to Kimel’s companies, making an assignment in bankruptcy on February 6, 2009. Farber was appointed Montor’s trustee. As such, Farber then issued a series of bankruptcy applications which resulted in its appointment as trustee in bankruptcy for Annopol, SGW and SG Brantford:

(i) Kimel’s wife, Mahvash Lechcier-Kimel, was the sole director of Annopol which was adjudged bankrupt on May 27, 2010; the date of the initial bankruptcy event was May 26, 2009. Farber was appointed the trustee;

(ii) SGW owned an apartment development located at 105 University Avenue, Waterloo. SGW was adjudged bankrupt on June 28, 2010; the date of the initial bankruptcy event was April 3, 2009. Farber was appointed trustee. As mentioned, in the SGW bankruptcy proceedings Farber sold that property and the proceeds of $3.8 million were paid into court;

(iii) Kimel owned all the shares of Summit Glen Group of Companies Inc. (“SGG”) which was adjudged bankrupt and Farber was appointed its trustee in bankruptcy; and,

(iv) Kimel owned all the shares of SG Brantford, which was adjudged bankrupt on May 27, 2010; the date of the initial bankruptcy event was April 30, 2009. Again, Farber was appointed the trustee.

[22] The appointment of the receiver also resulted in Goldfinger and Kimel defaulting on loans made to them by Community Trust Company which had been guaranteed by SGW.

[23] A number of motions were brought in that receivership. Certain secured creditors successfully applied to remove properties out of the receiver’s possession. Farber also moved to discharge the receiver over SG Brantford so that it could proceed with its bankruptcy application against that company, but the motion was never heard because Kimel and Goldfinger reached a new settlement of their dispute.

D. The Second Settlement: 2009

[24] On December 16, 2009, Goldfinger and Kimel, Annopol and SGW settled the Goldfinger Action by entering into Minutes of Settlement (the “Second Settlement”). Goldfinger agreed to certain releases as part of that Second Settlement. Zeifman was discharged as receiver in May, 2010.

[25] The key terms of the Second Settlement were as follows:

a) Goldfinger would receive a mortgage with a face value of $5 million on 40 Park Lane Circle, Toronto, a high-end property in the Bridle Path area, which Kimel earlier had bought in Mahvash’s name for $9.5 million and upon which they were building a luxury house;

b) the mortgage granted to Goldfinger on SG Waterloo’s property at 105 University as part of the First Settlement would be discharged and replaced with a $5 million mortgage;

c) the payments to Goldfinger would be capped at $5 million. This would include any money Goldfinger had collected after the First Settlement, but not the $2.5 million he was paid in December 2007 or the $471,000 from the SG Brantford re-financing;

d) the legal proceedings would be discontinued; and,

e) the parties would exchange full and final mutual releases.

[26] Goldfinger deposed that the Second Settlement represented a serious compromise of his interests: he gave up his right to further debt repayment, and mortgages he held were significantly downgraded. In his September 27, 2010 affidavit, Goldfinger deposed:

I made significant compromises to my rights through the 2009 Settlement Agreement, as I was entitled to no further repayment of the debt that was owed to me.

I agreed to significantly change the terms of my remaining security interests against 105 University and 41-67 Valleyview Road by converting them into long-term mortgages. In addition, I took on a long-term mortgage against a property that may never have sufficient equity to pay the outstanding debt to me, being Mahvash’s uncompleted residential property at 40 Park Lane Circle, Toronto.

The 2009 Settlement Agreement was precipitated by the fact that Jack was causing extensive costs to be incurred, and at the same time was likely to be adjudged bankrupt – which subsequently occurred when he made an assignment.

This, together with the fact that little, if any, additional assets to which I had an entitlement appeared to be available – other than those already included in the Receivership – and the fact that the Receiver’s requested information was not being forthcoming, were the factors that led to the 2009 Settlement Agreement.[^10]

[27] The Second Settlement was completed in January, 2010. Before that, Goldfinger waived registration of the $5 million mortgage on the SG Waterloo property. The $5 million mortgage on 40 Park Lane Circle was registered on January 29, 2010 in third position, behind HSBC’s mortgage for $9.5 million and a judgment in favour of Community Trust Company for $4 million.

E. Post-Second Settlement Events

[28] On March 19, 2010, Farber, in its capacity as trustee in bankruptcy for SGW, Annopol and SG Brantford, commenced the Preferences Application.

[29] In August and September, 2010, Goldfinger acquired the shares of SGW through transactions with Kimel and his wife, Mahvash. That couple had separated in January, 2009 and divorced in November, 2010. Mahvash married Goldfinger shortly thereafter, on November 18, 2010.

[30] I will deal in greater detail with some of these events at the appropriate points later in these Reasons. Let me turn, first, to the issues in the Claims Motion.

III. The Claims Motion: the Summit Glen Waterloo Property

A. The property and its realization

[31] Summit Glen Waterloo/2000 Developments Inc., an OBCA corporation incorporated on April 11, 2000, owned property located at 105 University Avenue, Waterloo (the “Property”). SGW had purchased 105 University pursuant to an agreement of purchase and sale with Bolliger Holdings Corporation dated January 12, 2000, for $950,000.

[32] On April 3, 2009, Farber, acting as trustee of Montor, applied for a bankruptcy order against SGW. A bankruptcy order was made against SGW over a year later, on June 28, 2010. Farber was appointed trustee. Pursuant to a consent order made November 22, 2010, Farber sold 105 University for $3,807,504.68. Those funds were paid into court; the trial of the Claims Motion concerned the entitlement of certain claimants to those proceeds.

B. The claims and the issues

[33] At trial, several claims were advanced against the proceeds of the sale of 105 University, Waterloo:

(i) Montor Business Corporation. Farber acts as Montor’s trustee in bankruptcy and it advanced a secured claim of $500,000 in respect of a loan made to SGW in December, 2005 and extended twice. The loan was secured by a charge on title to the Property. There is no dispute that at the direction of SGW, Montor paid the proceeds of the loan to Annopol. 183 and Goldfinger took the position that by paying the loan proceeds to Annopol, Montor enjoyed no claim, secured or otherwise, against the SGW sale proceeds or, as put by Goldfinger in his December 16, 2010 affidavit: “[T]here is no credible evidence that ... Montor advanced any funds to SG Waterloo in support of the secured interest that is registered in [its] favour”. Montor also advanced a secured claim in the amount of $25,000.00.

(ii) Annopol Holdings Limited. Farber acts as Annopol’s trustee in bankruptcy and asserted a claim against SGW based on inter-company loans with Annopol. SGW signed a $100,000 promissory note in favour of Annopol. As well, SGW granted Annopol a $100,000 charge against the Property and a $750,000 charge against the Property. 183 and Goldfinger opposed Annopol’s claim on the basis that Annopol was merely a “conduit” for money loaned to the Summit Glen group of companies and therefore no indebtedness had arisen between Annopol and SGW.

(iii) The Summit Glen Group of Companies Inc. (“SGG”). Again, Farber acts as SGG’s trustee in bankruptcy and asserted an unsecured claim against the sale proceeds in the amount of $565,998 based on inter-company loans and payments made by it for the benefit of SGW. 183 and Goldfinger opposed SGG’s claim on the basis that the latter was merely a “conduit” for money loaned to Summit Glen companies and therefore no indebtedness had arisen between SGG and SGW.

(iv) 1830994 Ontario Limited. The principal of 183 is Dr. Morris Goldfinger. 183 advanced claims against SGW based on an assignment to it from Community Trust Company of two mortgages granted to CTC by SGW in the amounts of $50,000 and $500,000; and,

(v) Dr. Goldfinger. As a lender of money to Kimel and his companies, Goldfinger asserted a constructive trust claim against the sales proceeds. Also, as the shareholder of SGW, Goldfinger asserted a claim to the sale proceeds. In his notice of motion initiating the Claims Motion, Goldfinger requested that following the determination of the priorities amongst 183, Montor and Annopol, the net surplus funds held in Court be paid out to him.

[34] In terms of the registration of the various mortgages against the title to 105 University at the time of SGW’s bankruptcy, there is no dispute that as a result of various postponements the CTC mortgages stood in first and second position, followed by the Montor mortgage and then the mortgages granted to Annopol.

[35] As claimants, each of Montor, Annopol, SGG and 183 Ontario must prove their claims against SGW. I adopt, as a comprehensive summary of the principles which guide assessing any claim made by a creditor against the estate of a bankrupt the following passages from the decision of the Saskatchewan Court of Queen’s Bench in Mamczasz Electrical Ltd. v. South Beach Homes Ltd.:

[35] To succeed, the [the creditor] must establish that it has a claim provable in bankruptcy on the day on which the bankrupt became bankrupt… Section 121 of the BIA is the governing section and it provides:

(1) All debts and liabilities, present or future, to which the bankrupt is subject on the day on which the bankrupt becomes bankrupt or to which the bankrupt may become subject before the bankrupt's discharge by reason of any obligation incurred before the day on which the bankrupt becomes bankrupt shall be deemed to be claims provable in proceedings under this Act.

[36] The scope of ‘debt’ and ‘liability’, employed in that provision, has been succinctly summarized in text authorities:

A debt is a sum due by certain and express agreement, a specified sum of money owing to some person from another, including not only the obligation of a debtor to pay, but the right of a creditor to receive and enforce payment. To be a provable claim, a debt must be due, either at law or in equity, by the bankrupt to the person seeking to prove a claim and must be recoverable by legal process.

The meaning of the word “liability” is broader than that of the word “debt”, including almost every character of hazard or responsibility and in particular, as provided in s. 121, includes all obligations to which the bankrupt is subject on the day on which he or she becomes bankrupt. [footnotes omitted] (Honsberger and DaRe, Bankruptcy in Canada, 4^th ed, (Aurora: Canada Law Book, 2009) at p. 390)

[37] Failure to disclose a claim in its records or in its statement of affairs does not affect the validity of the claim and has been found to be an irrelevant consideration. Flewitt v. Agravoice Productions Ltd. (Trustee of) (1986), 61 C.B.R. (N.S) 280.

[38] Inasmuch as s. 121 deals with the substantive right to participate in estate assets, sections 121 and 135, read together, address the method and process employed to determine claims. These sections provide:

(1) Every creditor shall prove his claim, and a creditor who does not prove his claim is not entitled to share in any distribution that may be made.

(2) A claim shall be proved by delivering to the trustee a proof of claim in the prescribed form.

(4) The proof of claim shall contain or refer to a statement of account showing the particulars of the claim and any counter-claim that the bankrupt may have to the knowledge of the creditor and shall specify the vouchers or other evidence, if any, by which it can be substantiated.

135.(1) The trustee shall examine every proof of claim or proof of security and the grounds therefor and may require further evidence in support of the claim or security.

(2) The trustee may disallow, in whole or in part,

(a) any claim;

(b) any right to a priority under the applicable order of priority set out in this Act; or

[39] It is undisputed that a creditor who wishes to participate and share in estate dividends must prove its claim. (s. 124(1) BIA) This process begins with filing a proof of claim in the prescribed form which shows and/or includes:

… the particulars of the claim and any counter-claim that the bankrupt may have to the knowledge of the creditor and shall specify the vouchers or other evidence, if any, by which it can be substantiated.” (s.124(4) BIA)

[40] The underlined words in s. 124(4) clearly impose an evidentiary burden on creditors to file sufficient and adequate material to enable the trustee to “make an informed decision as to whether the claim has merit.” (Roderick Wood, Bankruptcy & Insolvency Law, (Toronto: Irwin Law, 2009) at p. 243) Subsection 135(1) imposes a corresponding duty on trustees to examine every proof of claim and the grounds in support to determine validity (s. 135(1) BIA). This duty extends to proposals. (Re Toronto Permanent Furniture Showrooms Co. (1960), 1 C.B.R. (N.S.) 16).

[41] Where a trustee is unsatisfied with the material provided in support of a claim, the trustee has both a right and duty to demand further evidence from the creditor. In the exercise of this duty, the trustee may conduct examinations or obtain the production of documents. (see s. 163 BIA; Houlden and Morawetz, Bankruptcy and Insolvency Law of Canada, 4th ed. looseleaf, vol. 2, p. 5-181)

[44] Decided cases have framed the issue of onus or burden of proof in terms of creditors’ duties and sufficiency of response. In Re Norris (1988), 67 C.B.R. (N.S.) 246 (Ont. Sup. Ct.) the trustee requested additional material from the creditor (Canada Revenue Agency “CRA”) in support of its claim. The CRA in reply provided a copy of the notice of assessment (Income Tax Act, R.S.C. 1985, c. 1 (5^th supp.)) but nothing more. The trustee found this reply inadequate and disallowed the claim. Although ultimately overturned on appeal on the ‘adequacy’ issue ((1989), 1989 4079 (ON CA), 75 C.B.R. (N.S.) 97 (Ont. C.A.)), the following comments are worth noting:

In my opinion the proof of claim with a statement of account, vouchers and/or supporting evidence should be sufficient to enable the trustee to make an informed decision as to whether the claim represents a claim which has merit and should be allowed or whether it is a claim unsupported by particulars and supporting material being in the nature of a claim which the trustee should disallow.

[45] The British Columbia Court of Appeal in Port Chevrole, supra, considered the appeal from the perspective of creditor compliance with s. 124(4) of the BIA. Examined factually, the Court found the creditor had failed to specify the vouchers or provide any other probative evidence to support its claim, and in consequence had failed to meet the threshold of ‘sufficiency’ required by s. 124(4).

[46] Case authority is quite clear: the creditor bears the onus of establishing its claim. It does so by providing vouchers, statement of account or other evidence sufficient to substantiate it. Put another way, the creditor must provide sufficient evidence so as to enable the trustee to make an informed decision on the validity of the proposed claim. The test to be applied when examining proofs of claim has been described as follows:

In deciding the validity of a claim, certainty is not the test. If the method used in calculating the amount of the claim is reasonable and the evidence in support of the claim is relevant and probative, the claim should be admitted. Re HDYC Holdings Ltd. 1995 488 (BC SC), (1995), 35 C.B.R. (3d) 294. [Houlden and Morawetz p. 5-181; emphasis added]

[47] If a creditor adduces relevant and probative evidence from which a valid claim can be reasonably inferred, the test has been met and the claim is provable. In the face of that, particularly where a trustee has suspicions, the obligation shifts to the trustee to investigate further. Disallowing a claim based on a hunch or suspicion is not enough.

The trustee is entitled to have all claims investigated and if, necessary, litigated before he or she can be called to pay….The trustee “is entitled to go behind such forms to get at the truth ….When the trustee is in doubt as to whether a claim should be allowed or disallowed, the trustee may apply to the court for directions.

[Bankruptcy In Canada, p. 409][^11]

C. Some comments about the written record filed at trial

[36] Farber reported that it had only been able to recover limited books and records for SGW and Annopol. At one point it had to resort to obtaining entry orders and search warrants to secure SGW records. That, no doubt, hampered Farber’s ability to gain a clear picture of the financial history of both companies, however the determination of the various claims will have to be based on what documentation exists and was adduced at trial.

[37] Much pre-trial skirmishing went on between counsel for Farber and counsel for Goldfinger over the production of documents in the possession of Farber, wearing its many trustee hats.[^12] I wish to express my disappointment at the evident lack of co-operation between counsel, co-operation mandated by the “3Cs” principle of the Commercial List. That lack of co-operation resulted in an unnecessarily large and unfocussed evidentiary record, necessitating its lengthy review, and resulting in the delay in releasing these Reasons.

IV. Summit Glen Waterloo: Montor’s claim

A. Evidence

[38] Farber, as trustee of Montor, filed an April 29, 2011 proof of claim in the SGW bankruptcy proceeding for a secured claim of $583,486.06, plus interest and costs in accordance with the security. Although the proof of claim recorded the principal amount loaned as $525,000, Farber’s January 11, 2011 Report stated that Montor was asserting a secured claim of $500,000, plus interest and costs.

[39] Jack Perelmuter, an accountant, owned Montor which carried on business providing mortgage and other loans primarily to Kimel’s companies, including SGW and Annopol. Through his accounting firm Perelmuter had provided accounting services to the Summit Glen group of companies, including Annopol, SGW and SGG.

[40] On his September 19, 2012 out-of-court examination, Perelmuter stated he could not recall Montor’s mortgage transaction with SGW because there had been so many transactions with Kimel. Consequently, his evidence was given at a very general level and Perelmuter, by and large, let the documents speak for themselves.

[41] In December, 2005, Montor agreed to loan SGW $500,000 secured by a charge over 105 University. Montor and SGW engaged counsel to document the loan. Kimel, in a December 1, 2005 email to his counsel, Mike McCarter, stipulated that the mortgage to Montor would stand in third place, behind the CTC charges, but ahead of Annopol’s and, in addition:

We would also like all funds from this mortgage to be paid directly to Annopol Holdings Limited rather than the borrower company. Will you please prepare the necessary direction to this effect, for execution by the borrower.

[42] Kimel, in a December 2, 2005 email to Perelmutter, which he signed on behalf of SGW, directed that Montor make the cheques for the $500,000 loan payable to Annopol, not SGW, and continued:

Notwithstanding this, we acknowledge that we [SGW] are solely responsible for the repayment of all and any monies advanced by you under this loan, and all interest that pertains, as it falls due and until maturity of the loan, whether monies were actually advanced to Annopol Holdings or to ourselves.

[43] Montor did so. As a result, Montor wrote two December 5, 2005 cheques to Annopol, one for $165,000 and the other for $35,000. The same day Montor wrote a cheque to its lawyers for $300,000 in respect of the “2^nd mortgage”. Kimel signed a direction authorizing Montor’s lawyers to pay the proceeds of the transactions to his own lawyers. That was done, and Kimel’s lawyers wrote a cheque to Annopol. In the result, the $500,000 Montor loan was deposited into Annopol’s account and, of that amount, about $413,000 was disbursed by Annopol to other SG companies. At trial Kimel did not dispute that Montor had disbursed the borrowed funds in accordance with his direction.

[44] On December 12, 2005, Mahvash signed a director’s resolution authorizing SGW to borrow $500,000 from Montor and to grant security for the loan.

[45] SGW granted Montor a $500,000 charge on 105 University which was registered on December 15, 2005 (the “Montor $500K Charge”). As well, on December 5, 2005, Kimel, on behalf of SGW, executed a promissory note in the amount of $200,000 in favour of Montor. Although Farber could not locate a similar promissory note for the remaining $300,000 of Montor’s $500,000 advance to SGW, Kimel testified that he had no doubt such a promissory note had existed.[^13] In any event, a subsequent promissory note dated July 7, 2008, given on the extensions of the loan evidenced the $500,000 debt. As part of the December, 2005 transaction, Annopol postponed its two mortgages on the Property to that of Montor.

[46] The terms of the loans were such that payments were interest only, and SGW provided Montor with post-dated cheques for the interest payments.[^14] Farber adduced evidence that SGW made interest payments to Montor until the appointment of Zeifman as its receiver. Farber was not able to find any evidence that SGW had made payments against the principal amount of the loan.

[47] Prior to trial, in an August 24, 2009 affidavit, Kimel had deposed that the funds borrowed from Montor were used for purposes related to SGW.[^15] Over a year later, in a November 16, 2010 affidavit, Kimel did an about-face, contending that SGW had received no funds from that mortgage.[^16] At trial he questioned the correctness of his initial evidence:

Q. In paragraph six, you indicate that the proceeds from the loan were paid out for three purposes, to discharge a collateral debt owing to Community Trust by Summit Glen Waterloo, to pay costs related to two Ontario Municipal Board zoning proceedings relating to Summit Glen Waterloo, to pay for the operating and related expense of Summit Glen Waterloo, that statement correct?

A. I’m not sure that is entirely correct, no.[^17]

Kimel did admit that some of the money Montor had advanced to Annopol was used to pay SGW, but when at trial he was asked why he was changing his affidavit evidence about the use of the Montor loan, Kimel’s answer revealed that little stock can be put parts of his evidence:

Q. Mr. Davis took you to payments out from Annopol to Summit Glen Fairway. So, could Fairway have been using those fund to pay down Community Trust company?

A. I don’t remember that any of the Montor funds were used to pay anything to Community Trust Company.

Q. Okay, then why would you swear they were?

A. In, uh, previous years, prior to my own bankruptcy, and, uh, the collapse of my business, I was involved in many different aspects of litigation, and, um, sometimes in doing affidavits or in providing responses at that point in time, I was often attempting to cater responses to allow for what I thought might still be the protection and ultimate salvation of my business. And, because of the constraints that I felt I may have coloured things in a certain fashion which, uh, was not entirely correct.

Q. So you lied.

A. Yes.[^18]

[48] At SGW’s request, Montor twice renewed the loan and the charge, and Montor loaned an additional $25,000 to SGW by way of cheque dated November 25, 2008. On November 20, 2008, SGW signed a promissory note in favour of Montor for the sum of $525,000, which was accompanied by a “commitment to replace note with mortgage security”. No new mortgage security in favour of Montor was registered following that commitment. Perelmuter testified that he was not sure whether Kimel ever gave the commitment to his lawyers:[^19]

And we’re renewing it for $500,000 plus 25 which makes 525,000. So basically I would expect that there is going to be 525,000 renewal by a mortgage. I’m not sure that was ever done by him. At this point, this is 2008, maybe at this point he start letting things go.[^20]

[49] Although Montor’s February 6, 2009 statement of affairs in its bankruptcy proceeding listed the amount of the security it held against SGW at $525,000, Montor’s bankruptcy application against SGW estimated the value of its security at $500,000, with the amount of the total indebtedness at $525,000.[^21]

[50] SGW included in its March 31, 2006 and March 31, 2007 financial statements, and showed in its accounting records, the $500,000 debt owing to Montor.[^22] Kimel swore a statement of affairs in SGW’s bankruptcy which confirmed that SGW owed Montor $500,000 and that Montor enjoyed security over 105 University for that loan.

[51] At trial Kimel admitted that SGW was obliged to repay the Montor loan:

Q. The money wasn’t advanced to Annopol, it was paid to Annopol. The loan was to Summit Glen Waterloo, wasn’t it?

A. Yes.

Q. And Summit Glen Waterloo was obliged to repay the funds, correct?

A. Yes.[^23]

[52] Goldfinger and 183 took the position that Montor had failed to prove how much was owing to it on account of its security because it had not accounted for any monies realized from the various companies which had received the proceeds of the December, 2005 Montor loan. 183 and Goldfinger opposed Montor’s claim on the ground that since SGW had directed Montor to pay Annopol the proceeds from the loan to SGW, the charge no longer had any effect as against the Property.

B. Analysis

[53] There is no dispute that Montor lent $500,000 to SGW. As well, the evidence supports a finding that SGW gave promissory notes in that amount to Montor, both at the time the loan was advanced and on its extension, and I so find. The consideration necessary to support a promissory note includes not only a benefit conferred on the maker of the note, but also a benefit conferred on a third party at the request of the maker of the note. A party to a note may receive value for a note or consideration for a note even though it does not personally receive the proceeds of a loan pursuant to it.[^24]

[54] Farber submitted that Montor provided SGW with two kinds of consideration in support of the promissory notes – the advance of the $500,000 to the person directed by SGW and the extensions of the loans. Goldfinger contended that the extent of SGW’s debt to Montor was limited to those borrowed funds which SGW used for its own corporate purposes. I accept the submission of Farber and reject the position advanced by Goldfinger. SGW, as debtor, directed that the funds it borrowed from Montor be paid to Annopol. Montor complied with the debtor’s direction. How SGW, or its designated payee, Annopol, used the funds borrowed by SGW is not relevant to the question of whether SGW is indebted to Montor.

[55] SGW granted the Montor $500K Charge to secure the debt evidenced by the promissory notes. 183 and Goldfinger did not question the validity of the charge.

[56] Goldfinger argued that because Farber had never accounted for the monies received from the other Kimel Summit Glen companies which received the proceeds of the $500,000 Montor loan, Montor had not established the amount of the debt outstanding to it at the time of the bankruptcy of SGW. I disagree. The indebtedness was that of SGW to Montor. Certainly, if any monies had been re-paid to Montor on account of the $500,000 loan to SGW, either from SGW or from another Summit Glen company at SGW’s direction, due account would have to be made for such amounts. However, notwithstanding the extensive documentary disclosure made in this proceeding about the affairs of Montor and SGW, no evidence of any such repayment was adduced. On the contrary, the evidence disclosed the following state of affairs:

(i) The only repayments of the loan made by SGW or any other Summit Glen company prior to the appointment of Zeifman as receiver of SGW were the monthly payments of interest to Montor in accordance with the terms of the loan;

(ii) Kimel, in his sworn statement of affairs regarding SGW, confirmed that SGW owed $500,000 to Montor; and,

(iii) the financial statements of SGW for the years ended March 31, 2006 and 2007 recorded SGW’s debt to Montor of $500,000 as part of its “mortgages payable” liabilities.

[57] In light of that evidence, I conclude that Farber, in its capacity as trustee of Montor, has provided sufficient evidence in support of its claim that SGW, at the time of its bankruptcy, was indebted to Montor in the amount of $500,000.00, and that such indebtedness was secured by the Montor $500K Charge.

[58] So, too, the evidence adduced by Farber, in its capacity as trustee of Montor, established that SGW was indebted to Montor for the further sum of $25,000 advanced on November 25, 2008. However, the evidence disclosed that SGW never gave security for that amount, so I allow that claim as an unsecured one.

[59] Both claims are allowed with interest until the date of payment in accordance with the terms of the loans.

IV. Summit Glen Waterloo: Annopol’s claim

A. The amounts claimed

[60] Farber, in its capacity as the trustee in bankruptcy of Annopol, advanced claims in the SGW bankruptcy based on inter-company loans made over the years by Annopol to SGW in order to fund operating and development expenses for 105 University. As trustee of Annopol, Farber filed two proofs of claim dated February 28, 2011, in the SGW bankruptcy:

(i) The First Proof of Claim made an unsecured claim of $420,000 and a secured claim of $100,000. In support of its claim, Farber attached two charts.[^25] One recorded payments by Annopol to SGW from its TD Bank account between June 27, 2000 and March 24, 2005, totaling $152,600. The other recorded transactions between Annopol and SGW from an HSBC account showing net payments to SGW of $367,400 between September 13, 2005 and December 4, 2008. In a response to a refusal made on the cross-examination of Martin Cyr, one of the trustees, Farber stated that it arrived at the amount of the claim based upon a review of the banking records of Annopol and SGW to identify inter-company loan transactions;

(ii) The Second Proof of Claim made a secured claim of $750,000. In support of the claim Annopol’s trustee attached a SGW director resolution authorizing the borrowing and the Annopol $750,000 Charge. No other evidence to support advances under the charge was attached to the proof of claim. Although on a cross-examination Martin Cyr, the trustee, refused to explain why $750,000 was put in the proof of claim on the basis that the question went beyond the permitted scope of the examination,[^26] in a subsequent response Farber stated that it used the $750,000 for Annopol’s proof of claim because it “was the face amount of the charge/mortgage”.

[61] 183 and Goldfinger took the position that SGW did not owe any money to Annopol because Annopol had not carried on any business, but merely had acted as a “conduit” for money loaned by third parties to SGW.

[62] In his trial evidence Kimel acknowledged that Annopol did carry on some business with third parties, specifically the making of short term loans,[^27] and did own some properties, usually for Planning Act purposes. On a Statement of Personal Net Worth dated August 29, 2006, long before the breakdown in his relationship with Goldfinger, Kimel went even further, describing Annopol as a “50% joint venture partner in a number of Commercial/Industrial properties located in Southwestern Ontario” with a value of $8 million.[^28]

[63] As mentioned, Farber also is the trustee in bankruptcy of Annopol. According to a March 19, 2012 Claims Register for that estate, secured claims of about $578,000 and unsecured claims of approximately $6.848 million have been filed, of which Montor filed an unsecured claim for $2.7 million and Goldfinger filed a contingent proof of claim for $2.956 million.

B. Evidence: the Annopol $750K Charge

[64] SGW’s acquisition of 105 University closed on April 14, 2000. A few days before, on April 11, 2000, Mahvash, as sole director of SGW, passed a resolution authorizing SGW to borrow $750,000 from Annopol upon the terms of a draft mortgage.

[65] When SGW acquired the 105 University property on April 14, 2000, Kimel caused Annopol to register against title the Annopol $750K Charge. It was not disputed that at the time of registration Annopol did not advance any money to SGW.[^29] Goldfinger deposed that he did not learn about this mortgage until 2007, when his relationship with Kimel soured. I accept his testimony on that point.

[66] By its terms, the Annopol $750K Charge required the on-going payment of interest only and the mortgage was to mature two years later. The terms contained in the Schedule to the Charge spoke only about the “principal sum hereby secured”, and the Schedule contained the standard “no obligation to advance” clause. Farber was not able to locate any evidence that as of the date of registration Annopol had advanced $750,000 to SGW or that SGW had made a promissory note in that amount to Annopol.

[67] In its January 18, 2011 Report Farber stated:

Farber acknowledges that it does not have much information with respect to the Annopol $750,000 Charge.[^30] This is due to the lack of books and records for SG Waterloo and Annopol.

Based on the evaluation of information, it appears that the Annopol $750,000 Charge may have been intended to be collateral security for loans advanced by Annopol to other companies to protect third parties lending money to Annopol.

Farber did produce a schedule summarizing transfers Annopol made to other Summit Glen companies. By the same token, Annopol had the benefit of a number of charges against properties owned by other Summit Glen companies.

[68] As of the time of its January 18, 2011 Report, Farber stated that “further evidence is required with respect to the Annopol $750,000 Charge”. In its June 25, 2012 Report, Farber stated:

Aside from the documentary evidence referenced in connection with the Annopol $100K Charge, Farber has not located any documentary evidence to establish that cash advances beyond the advances identified above [i.e. $557,600] were made by Annopol to SG Waterloo.

[69] As to advances made by Annopol to SGW subsequent to the granting of the Annopol $750K Charge, Kimel’s evidence at trial was inconsistent. On the one hand, under examination by counsel for Farber, Kimel testified as follows:

Q. Were there subsequent advances?

A. By Annopol to Waterloo?

Q. Yes.

A. Yes.

Q. Yes. So the mortgage would’ve secured those subsequent advances.

A. I suppose so, yes.

Q. That was what it was intended to do, to ensure that to the extent Annopol was advancing funds into Summit Glen Waterloo, those advances would be protected?

A. Yes.

Q. Thank you. Did you tell Dr. Goldfinger that?

A. No.[^31]

Q. And then in 2009 when you settled with Goldfinger, those mortgages remained on the properties, correct?

A. Yes.

Q. And they would secure any advances, or intended to secure, any advances that Annopol made to Summit Glen Waterloo over the period to develop the property, correct.

MR. DAVIS: Sorry, I missed that question.

Q. Sorry. The intention of the mortgages was to secure advances made by Annopol to Summit Glen Waterloo, correct?

A. Yes.

Q. Thank you.[^32]

On the other hand, under examination by Goldfinger’s counsel, Kimel contradicted that evidence.[^33]

[70] On June 22, 2000, Kimel wrote to his lawyer asking that the amount secured by the $750,000 mortgage be increased to $850,000. He had so written in response to his lawyer’s letter of June 14, 2000 asking whether Kimel had “had any further thoughts about securing your family’s injection of monies into projects with registered mortgages”.[^34] In the result, the amount of the $750,000 mortgage was not increased.

C. Evidence: The Annopol $100K Charge

[71] An October 18, 2000 resolution of the director of SGW approving the Annopol $100K Charge indicated that the charge was to secure advances to be made by Annopol up to $100,000 and was “to better secure the present and future indebtedness of the Corporation to the Lender…” SGW executed a five-year promissory note dated October 18, 2000 for the lesser principal amount of: (a) $100,000 and (b) “the unpaid balance of all advances made by the Lender to the undersigned under the loan as recorded by the Lender on the grid on the reverse hereof.” No amounts were recorded on the grid. On re-examination Kimel contended that he did not read the resolution or promissory note before they were signed.

[72] By its terms, the Annopol $100K Charge registered on November 10, 2000, stated:

This Charge is held by the Mortgagee as security for the payment of all indebtedness of the Company to the Mortgagee relating to loans to Summit Glen Waterloo/2000 Developments Inc. which indebtedness is referred to as the “Indebtedness”.

[73] It was not disputed that at the time of registration of the Annopol $100K Charge, Annopol did not advance any money to SGW.[^35]

[74] Kimel testified that there was no loan of money corresponding to the registration of each mortgage. Instead, the mortgages were placed on the property to secure the equity in the property in favour of a company controlled either by Kimel or his wife, Mahvash.

D. The state of the accounts between Annopol and SGW

[75] Farber’s Reports described three basic features of the financial relationship between Annopol and SGW:

(i) Between 2000 and 2005 Annopol wrote cheques to SGW which were noted as shareholder loans. When the cheques written by Annopol were deposited into SGW’s bank account, they were recorded as loans from Annopol. SGW wrote cheques to Annopol which were described as the repayment of loans;

(ii) From 2005 to 2009 there were multiple transfers between the bank accounts of Annopol and SGW which were recorded as loans from Annopol to SGW and repayments by SGW to Annopol;

(iii) Annopol borrowed funds from third parties which were deposited into its bank accounts, and in most cases the loans to Annopol from third parties did not parallel the transfers from Annopol to SGW in that the records did not disclose a deposit of third party funds into Annopol followed by an immediate payment out of Annopol’s bank account to a SG group company;

(iv) The accounting records of Annopol and SGW reflected an inter-company loan from Annopol to SGW, although the quantum of the loan reflected on the accounting records of Annopol and of SGW did not match each other, nor did the quantum match the amount of the inter-company loan determined by Farber based on the companies’ banking records.

[76] Farber, as trustee for Annopol, relied for its claim on the evidence concerning the intercompany transactions between Annopol and SGW. Farber reported that it had been able to reconstruct the inter-company account for Annopol and SGW for the period March, 2005 until May, 2010 from HSBC account records. In terms of the TD Bank records for the 2000 to 2005 period, Farber reported that they were not as extensive.

Bank account records

[77] As mentioned, in support of its First Proof of Claim for an unsecured claim of $420,000 and a secured claim of $100,000 Farber attached two charts:[^36]

(i) One recorded payments by Annopol to SGW from its TD Bank account between June 27, 2000 and March 24, 2005, totaling $152,600;

(ii) The other recorded transactions between Annopol and SGW from an HSBC account showing net payments to SGW of $367,400 between September 13, 2005 and December 4, 2008.

[78] In its January 18, 2011 Report Farber stated that SGW owed Annopol no less than $519,600. It continued:

Farber acknowledges that only $100,000, plus costs and interest, of the obligations owing by SG Waterloo to Annopol will be secured by the Annopol $100,000 Charge and the advances in excess of $100,000 will be an unsecured claim against SG Waterloo.

[79] By the time of its June 25, 2012 Report, Farber was stating that between 2000 and 2008 Annopol “appears to have advanced no less than $557,600” to SGW. Farber explained the increase in this amount since the filing of the 2011 proofs of claim as the result of securing additional SGW records from the execution of entry orders and search warrants. Farber reported that based on its review of these additional records, it had determined that between January 27, 2000 and March 24, 2005, Annopol had advanced no less than $190,200 to SGW.[^37] Virtually all of the cheques from Annopol, as well as many of the SGW bank deposit slips, contained the notation, “Loan Advance”. Farber also adduced a few cheques from SGW to Annopol noted as “partial loan repmt”.

Financial statements

[80] The SGW unaudited, notice to reader financial statements for the years ended March 31, 2005, 2006 and 2008 did not show the Annopol charges as a liability of SGW. The company’s unaudited financial statements for the year ended March 31, 2001 only showed a mortgage payable of $375,000 – i.e. the Bolliger VTB.

[81] Annopol’s unaudited balance sheet as at February 29, 2008, did record, as an asset, a loan to SGW in the amount of $200,460.00.

E. The financial characterization of the dealings between SGW and Annopol

[89] In its Reports Farber concluded that Annopol had acted as a kind of “bank” for the Summit Glen group of companies, including SGW, and had provided, in effect, an operating line of credit to SGW.

[90] In response, Goldfinger submitted that the dealings between SGW and Annopol did not give rise to any indebtedness between the companies. Goldfinger advanced two main arguments: (i) a lack of documentation argument, and (ii) an “Annopol as mere conduit” argument.

The lack of documentation argument

[91] Goldfinger submitted that Farber had refused his request to provide copies of all Annopol documents and, as a result, no Annopol bank records were placed into evidence save for one from December, 2005. This led Goldfinger to assert that Farber had not proved its “bald statements of loans from Annopol to SGW” and, therefore, Farber’s claims with respect to the $850,000 of Annopol mortgages should be disallowed.

[92] I have reviewed the extensive materials filed by the parties on the issue of documentary production. While it would be easy to conclude that both parties demonstrated unreasonableness in the various positions they took prior to the hearing about the scope and terms concerning the production of documents, I am satisfied that ultimately Farber provided appropriate access to all relevant documents to counsel for Goldfinger.

[93] Moreover, this argument was undermined by evidence which Goldfinger, himself, filed in his Responding Motion Record, Tab 14 of which contained a copy of Annopol’s balance sheet and trial balance as at February 29, 2008. It is not clear who at, or who on behalf of, Annopol prepared those documents, although Goldfinger, relying on hearsay from Kimel, deposed that the company’s bookkeeper or accountant, Perelmuter, had prepared them. Significantly, and not surprisingly, the balance sheet and trial balance recorded as assets “loans” made by Annopol to many other Summit Glen Companies, including SGW. Those internal Annopol documents strongly suggested that Annopol treated inter-company advances to SGW as creating loan assets.

The “Annopol as mere conduit” argument

[94] Goldfinger also relied on evidence given by Kimel, both before and at trial, that Annopol had operated merely as a “conduit” for funds. As a conduit, he argued, no debtor/creditor relationship existed between SGW and Annopol in respect of any of the funds which flowed between the two companies.

[95] At trial, in response to questions posed by counsel for Goldfinger, Kimel explained how Annopol had operated:

Q. Now, we’re going to talk about the fact that various moneys flowed through that company. What was the purpose behind using Annopol for your various business endeavours?

A. Well, it became a conduit, a pass-through company. I was advised by the accountants that, uh, I was using at the time, that because I wasn’t really certain of, uh, whether some of the entities that I was operating would have profits or losses, that it would be best to have a neutral entity through which I could register various advances or various write-offs, then apply, where I felt, or they felt, it made sense from a tax perspective to then take losses or revenues into account.

Q. So you used Annopol as the vehicle, um, for flowing that money through so that at the end of the year, you or your accountants could determine which company to take the expense under, is that right?

A. Absolutely correct, yes.[^39]

[96] Notwithstanding that Annopol had received money from third parties and then disbursed funds to various Kimel companies, including SGW, at trial Kimel took the position that none of the flows of money between Annopol and SGW constituted loans:

Q. Okay. Now, I’m going to read you another sentence from paragraph fifteen where my friend says, “Annopol also carried on business providing what were akin to operating lines of credit for various of the S.G. companies (that’s Summit Glen) including Summit Glen Waterloo.” So, the suggestion is that Annopol also carried on business providing operating lines of credit or something akin to that, is there anything to that statement, were operating lines credit provided by Annopol to anybody, or anything like an operating line of credit?

A. I don’t believe that’s, uh, that’s a correct reflection of what Annopol was doing, no. Annopol had no revenues of it, of its own generated, no interest or administration, or brokerage fees of any kind, uh, it, uh, never took profits on anything. It, basically, raised money, or when I say raised, money was given to it from either other individuals or other companies to basically flow through it to some other entity. But, uh, a line of credit to me implies that it would’ve been charging interest or a fee for its services and none of that ever happened.

Q. And, similarly, money from other people that you raised in various arrangements, or money from financial institutions, were deposited to Annopol at you direction.

A. Yes.

Q. And that’s so you could flow the money through Annopol to wherever you needed it.

A. That’s correct.

Q. And when you flowed the money from Annopol to these other companies, such as Summit Glen Waterloo, Summit Glen Brantford, Summit Glen Trayvan, or any of the other companies, you never expected any of these companies to pay any of the money back to Annopol, correct?

A. That is correct.

Q. So, when my friend comes along and he says that loans were made by Annopol to others, that is incorrect agreed?

A. I agree.[^40]

[97] Kimel concluded on this point by testifying:

Q. And, also, am I right that moneys may have flowed from one company to another, but none of those moneys were ever a repayment of a loan?

A. Yes, you’re right.

Q. And is it fair to say that you never expected any moneys that were advanced by Annopol, or Summit Glen Group to be repaid.

A. That’s correct.

Q. And, if there are promissory notes given by Annopol,that was done as a mere convenience to paper the transaction?

A. Yes.[^41]

[98] For several reasons I do not accept Kimel’s assertion that Annopol generally operated as a mere conduit of funds in the sense that no inter-company liabilities arose between Annopol and other SG companies, including SGW, with the result that at the date of its bankruptcy SGW could not be indebted to Annopol. First, Kimel’s evidence revealed that he lacked honesty in his financial dealings with others, a characteristic which diminished the overall credibility of his evidence. For example, Kimel admitted during his testimony that he had misled lenders in the past, such as misleading Community Trust Company when attempting to arrange the take-out financing for 105 University:

Q. Now, we’ve seen in the record, can’t put my hands on it as we speak, a letter you wrote to Community Trust in advance of the loan suggesting that you put $400,000 into the property, remember that?

A. Vaguely.

Q. And, it’s fair to say you never put the $400,000 in, that was a letter that you wrote just in an attempt to secure the financing?

A. Yes, that’s correct.[^42]

[99] Kimel also admitted to providing false statements of net worth:

Q. And, the next thing I want to do is take you to tab ‘H’, and that’s a statement of personal net worth dated August 29, 2006, did you prepare this?

A. Yes, I did.

Q. And two-thirds of the way down where it says equity incorporation net of debt, you show Summit Glen Group of Companies, and you describe it as parent umbrella of various subsidiaries, that wasn’t the true statement, was it?

A. No, it was just something I put, uh, for matter of convenience.

Q. And you put a value of thirty-two million dollars on the Summit Glen Group of Companies, that wasn’t true, was it?

A. No.

Q. And, similarly, over on the next page, at item ‘C’, you have Annopol Holdings Limited and it says, “fifty per cent joint venture partner in a number of commercial industrial properties located in Southwestern Ontario that you values at eight million dollars, that was completely untrue, correct?

A. Yes.

Q. And, if you go down below, it says Annopol U.S Holdings Corporation also fifty per cent owner of various properties that you valued at fourteen million dollars, that was also untrue.

A. It was untrue.

Q. And, similarly, the family trust that you referred to, not true, correct?

A. They were not true.

Q. And you put together this statement for the purpose of getting financing from financial institutions and, basically, you misrepresented the state of the various assets, right?

A. Yes.[^43]

[100] Second, Kimel denied the obvious by taking the position that notwithstanding the bank statements for his companies recorded certain transactions as loans from one Summit Glen company to another, those notations meant nothing:

Q. And, where it says, just, I know we might be beating, flogging a horse but, where it says in the bank statement, loan to this company or that company, they weren’t really loans to that company, you were just using Annopol as a conduit, so you get the five hundred thousand from Montor and you distribute it wherever you need it and you never expected any of those companies to pay it back, right?

A. That’s correct.[^44]

Similarly, in respect of the records of SGG, Kimel testified:

Q. Now, I then want to take you to my friend’s document brief at tab number one, or volume number one, I should say, tab number six, and you’ll see here there’s a series of cheques all drawn on the Summit Glen Group of Companies’ account at TD Bank, you see that?

A. Yes, I do.

Q. And, pretty well every one of them, I think every one of them, has a reference saying loan advance, can you tell the Court whether or not these really were loan advances?

A. Well, they weren’t loan advances, but the reason that I noted them as that were, was exactly what I, I think explained to you before, that all of these moneys were flowing through either Summit Glen Group or Annopol, and were being noted as, in this instance for example, loan advances, so that at some point in the future, they could be, they would have attribution against some other entity, uh, for purposes of writing them off or utilizing them.[^45]

[101] Third, Kimel acknowledged that the evidence he was giving at trial was inconsistent with the documentary record, but he was doing so in order to support Goldfinger’s position at trial:

Q. Can you tell the Court why you have since provided information, documentation, and assistance to my client?

A. Previously I, um, thought that I had, uh, assets to protect, properties and family to protect and, uh, took steps that I thought were necessary to do that. And in the intervening period, I no longer have any properties or assets, I’m bankrupt, my business has been basically destroyed, my family life has been destroyed, and, uh, frankly I no longer have anything to lose. And, uh, at this point, I think it’s only appropriate that I do what, uh, is correct to try to make amends, uh, and, um, assist in any way possible that I can to verify and, uh, point out what my intentions and what my thoughts were at the different points in time that you’ve asked me about in terms of, uh, documentation and such.[^46]

[102] Fourth, Kimel’s favourable evidence in response to questions posed by Goldfinger’s counsel describing Annopol as a mere conduit cannot be reconciled with answers he then gave at trial in response to questions posed by Farber’s counsel. When questioned on the issue of funds advanced by individual third party investors to Annopol, Kimel took the position that Annopol owed those persons the monies advanced, hardly a position consistent with Goldfinger’s theory of “Annopol as a mere conduit”:

Q. So, you don’t know if Annopol, sorry, explain that to me. You don’t know if Annopol borrowed money from them, but they advanced money to Annopol. I’m afraid that you’re going to have to explain that to me. This is a list of debts, all sources?

A. Yes.

Q. So, who owed Mardarowicz [a third party investor] one point six million?

A. The money was advanced to Annopol.

Q. So, did Annopol owe him one point six million?

A. Yes.

Q. Annopol owed Jack Mardarowicz one point six million?

A. Yes.

Q. Fruma. Who owed Fruma the half a million dollars?

A. Well, the moneys were advanced to Annopol but then they went through Annopol to other entities.

Q. So when you say they went through Annopol to other entities, this is Mr. Davis’s conduit argument.

A. It’s not an argument, it’s, it’s a fact.

Q. So, we’ll get to that in a moment, but your position is, then, that the funds were advanced by Fruma Srubiski to Annopol, but Annopol didn’t owe him, or her, any money back?

A. Well, they all understood that the money was going out of Annopol to other companies for other purposes.

Q. Who owed them the obligation to pay the money back?

A. They all asked for something from Annopol, which I gave them.

Q. So, Annopol owed them the money back then.

A. Yes.[^47]

[103] Fifth, Kimel testified that the inter-corporate accounting of funds passing between the various SG group companies usually recorded advances made by one company to another as loans:

Q. So, how did you keep track of all of that?

A. Well, internal bookkeeping.

Q. How would you record, did you record it as loans?

A. Yes, typically, again, based on accountant, uh, advice, every cheque I would write ‘loan advance’ or something of that nature because, uh, in that fashion at the time that we were doing statements we would determine where we could attribute. If a company had profits and needed write-offs, it allowed us to utilize them where we, we could best utilize them.

Q. So, the statements would show an interest, so the statements for who, let’s start with the statements for who. So, let’s say Annopol was providing funds to Summit Glen Waterloo, cash would go across to Summit Glen Waterloo marked as a loan on the cheque, correct?

A. Yes.

Q. And then when you prepared your statements you would show interest paid from Waterloo to Annopol?

A. No.

Q. Okay, so how would you do it then?

A. We would, uh show the advance on, uh, well whoever it came from or whatever it came from, so that, uh, even though Annopol was the company making the advance, if the money had come through, uh, Trayvan or it had come through Raleigh Street, or it had come through some other entity, then that was the entity that we attributed the expense against, or in favour of.

Q. An expense. So, you would show on Trayvan’s financial statement an expense that Summit Glen Waterloo had incurred?

A. No, we would show an outstanding loan, or an outstanding debt.

Q. And I still don’t understand how that allows you, how an outstanding debt allows you to sop up an expense, oh, sorry, sop up profit.

A. By writing if off as uncollectable.

Q. So, but you would collect it sometimes?

A. No. We never expected, I never expected that any of these were loans that would ever be repaid, uh, these were advances that, uh, were used to support various companies at different points in their existence but it was never expected or anticipated that the loans would be repaid.[^48]

[104] Sixth, Goldfinger’s “Annopol as a mere conduit” position also was undermined by the way in which he treated his own advances to Kimel and his companies over the years. In a January 9, 2012 letter Goldfinger’s accountant described how the advances made by Goldfinger were treated on the financial statements of his companies, Goldfinger Jazwary Diagnostic Services Inc. and 2048754 Ontario Inc.: the amount of $50 was shown as share capital in each of the companies, including Annopol, and the rest of the advances were recorded as shareholder loans, including shareholder loans of $2.057 million to Annopol.

[105] In a similar vein, evidence was filed regarding communications from Annopol to individual investors which certainly would lead the investor to believe that Annopol had placed the funds in an investment of a fixed duration on his behalf, and Annopol provided the investors with monthly cheques on its account to pay interest to the investor.[^49] Also, Annopol issued T-5s to some investors for interest paid on their loans during a year. Kimel, in a February 27, 2007 letter on Annopol letterhead to Perelmuter’s accounting firm, enclosed a list of people to whom Annopol had paid interest over the course of the year.[^50]

[106] Indeed, Kimel’s evidence, when taken as a whole, revealed that the SG companies to which third party investors had advanced funds, including Annopol, were liable to those investors for the repayment of the invested funds, with the ability of that company to repay its investors dependent upon the performance of real estate developments undertaken by other SG companies in which the third party funds were invested. The following testimony by Kimel at trial encapsulated the point:

Q. So, if the loans would never be repaid, how would, for example, let’s use Annopol for the example since it’s the company we’re dealing with, Annopol borrows money from Jack Mardarowicz, who you’ve agreed Annopol owed one point six million to, correct?

A. Yes.

Q. So, Annopol takes Mr. Mardarowicz’s money, we’ll get to how some of that money was used in a moment, and transfers it to Summit Glen Waterloo reflected as a loan, correct?

A. Well, his money wouldn’t have gone necessarily to Summit Glen Waterloo.

Q. Well let’s just...

A. Assuming, yeah.

Q. Let’s assume it did. Pick one of them. I’m just trying to do a hypothetical. So, the money goes to Summit Glen Waterloo. Summit Glen Waterloo is never obliged to pay that money back, how would Annopol ever pay back Mr. Mardarowicz?

A. Through the development and sale of Summit Glen Waterloo.[^51]

[107] Seventh, Annopol’s HSBC bank statements recorded “loans” to SGW from Annopol.[^52]

[108] Finally, on his examination Perelmuter, Annopol’s former accountant, was not prepared to agree that Annopol was a mere conduit: “What you’re saying is conceivable but not necessarily this is the whole truth about Annopol because he may have been involved in other deals”.[^53]

[109] Whether the financial dealings between two entities are intended to create a debtor/creditor relationship is a matter to be determined from the specific facts of a particular case. Counsel for Goldfinger drew my attention to the decision of Power J. in Coast Operations of Canada Ltd. (Trustee of) v. Ottawa Credit Exchange Ltd.,[^54] in which the court concluded that a flow of funds between two companies did not create a debtor/creditor relationship. In that case the trial judge accepted such an explanation for “questionable book entries”, and the Court of Appeal did not interfere with that finding of fact. Such were the facts in that case. In the present case, however, I conclude that the evidence overwhelmingly demonstrated that Kimel operated the Summit Glen group of companies, including Annopol and SGW, on the basis that funds provided by a third party investor to one company, such as Annopol, would give rise to a liability from Annopol to that investor. Annopol, in turn, would advance those third party funds to another Summit Glen company, such as SGW, to finance various real estate developments, and that advance would give rise to a liability from the recipient company, such as SGW, to Annopol.

[110] In light of that finding, I need not deal with the claim based on unjust enrichment advanced by Farber in its Factum.[^55]

F. Analysis

F.1 Annopol’s First Proof of Claim: $100,000 Annopol Charge and unsecured claim

[111] Annopol’s First Proof of Claim asserted an unsecured claim of $420,000 and a secured claim of $100,000, for a total claim of $520,000.

[112] As to the secured claim, although Annopol did not advance funds to SGW at the time of the granting and registration of the Annopol $100K Charge, by its terms that charge granted security in respect of future indebtedness – “security for the payment of all indebtedness of the Company to the Mortgagee relating to loans to Summit Glen Waterloo/2000 Developments Inc.” The SGW director’s resolution of October 18, 2000 also expressed an intention that the charge would secure “present and future indebtedness”.

[113] The question then becomes, at the date of SGW’s bankruptcy, June 28, 2010, what amount was due and owing from SGW to Annopol? Or, put another way, has Farber, as trustee of Annopol, adduced relevant and probative evidence from which a valid claim can be reasonably inferred – i.e. that Annopol, as a creditor of SGW, had, at the date of bankruptcy, the right to receive and enforce payment of the amount claimed?

[114] Farber, as trustee of Annopol, did not file in support of its claim a reconciliation of the accounts between SGW and Annopol as at the date of bankruptcy. Instead, Farber has asked this Court to draw the inference that because bank account records showed net payments from Annopol to SGW during two periods of time ($190,200 from June 27, 2000 until March 24, 2005, and $367,400 from September 13, 2005 until December 4, 2008), the amount due from SGW to Annopol at the date of bankruptcy was the aggregate of the two amounts, i.e. $557,600.

[115] The method used by Farber to calculate Annopol’s claim suffers from several obvious difficulties. First, a gap exists in the bank account analysis, with several months unaccounted for – March 25 through to September 12, 2005. Second, the analysis stopped at December 4, 2008, some year and one-half prior to the date of bankruptcy. Third, while the unaudited financial statements of Annopol suffered from the fact that they were based on information provided by Kimel, a person of very low credibility, the company’s unaudited balance sheet as at February 29, 2008 recorded a liability due from SGW of only $200,460. Also, the unaudited financial statements of SGW placed into evidence did not record the Annopol charges as a liability, an unusual omission given the evidence that at the time of their creation Kimel was attempting to preserve his family’s “equity” in 105 University. If nothing else, Kimel was consistent in his drive to protect his own self-interest, so one would have expected some recognition of charges in favour of his related companies on SGW’s financial statements had he thought the charges truly secured some amount of indebtedness. Finally, at least in respect of the unsecured portion of Annopol’s claim, it relies on inter-company transactions which took place more than two years prior to the date of bankruptcy, raising questions about how much of the claim would not be sustainable because it was statute-barred at the date of bankruptcy.[^56]

[116] On the other side of the evidentiary ledger, one must recognize that Farber encountered significant difficulties in obtaining the books and records of Annopol and SGW. Further, although Farber’s reconciliation of the amounts due from SGW to Annopol stopped a year and one-half prior to the date of SGW’s bankruptcy, the evidence disclosed that the affairs of SGW did not improve after December 4, 2008, so it was most unlikely that SGW would have been in the position to reduce its indebtedness to Annopol between then and the date of its bankruptcy.

[117] In light of these conflicting issues regarding the evidence adduced on behalf of Annopol’s First Proof of Claim, I conclude that, when taken as a whole, the evidence supports a finding that at the date of SGW’s bankruptcy it owed Annopol at least $100,000 and that indebtedness was secured by the Annopol $100K Charge. I allow that portion of the First Proof of Claim, with interest to the date of payment in accordance with the terms of the loan.[^57]

[118] As to the amount of any unsecured claim, the Court is hampered in this case by the absence of any analysis from a trustee in bankruptcy whose only interest lay with the estate against which the claim was made. Farber could not play that role because of the multiple hats it wore. In the ordinary course of the administration of an estate a trustee would consider whether all or part of any claim made against the estate was statute-barred. The analysis filed by Farber in support of this part of Annopol’s claim disclosed that in the two years prior to the date of bankruptcy (June 28, 2008 – June 28, 2010), Annopol paid SGW a net amount of $44,600. Most of the unsecured claim, therefore, relates to payments made more than two years prior to the date of bankruptcy. At trial only cursory submissions were made regarding the limitations issue, but because the Court is acting in this case as a reviewer of first instance of these claims, I have concluded that the parties must make further submissions on the effect, if any, of any limitations period on this part of Annopol’s claim. Accordingly, I require submissions from the parties on the issue of whether all or part of Annopol’s unsecured claim is statute-barred:

(i) Farber may serve and file brief written submissions, together with any authorities, no later than November 30, 2013;

(ii) Goldfinger may serve and file brief responding written submissions, together with authorities, no later than January 15, 2014; and,

(iii) Farber may file brief reply submissions no later than January 22, 2014.

F.2 Annopol’s Second Proof of Claim: the Annopol $750K Charge

[119] I find that at the time SGW granted the Annopol $750K Charge no funds were advanced by Annopol to SGW.

[120] The language used in that charge, when read in the light of the language used in the contemporaneous authorizing SGW director’s resolution, leads to the conclusion that the charge was intended to secure an advance of funds made at that time, not to secure any future indebtedness of SGW to Annopol. On this point, the language in the Annopol $750K Charge differed from that used in the Annopol $100K Charge and the May 6, 2005 Annopol Charge granted by SG Bridge, discussed later in these Reasons, which stipulated that the charges stood as security for both present and future indebtedness.

[121] It follows that since Annopol did not advance any funds to SGW at the time the latter granted it the Annopol $750K Charge, the charge, as registered, does not secure any indebtedness of SGW to Annopol.

[122] Farber pointed to a February 21/22, 2005 email exchange between Kimel and Eden Cheng at HSBC as evidence that Kimel understood that the Annopol $750K Charge secured subsequent advances made by Annopol to SGW. I do not accept that submission. Cheng, in his email to Kimel, wrote: “I was asking you to fax to me anything you have regarding the CAD750M mortgage receivable you expect to receive in end-March…” On their faces, neither email referred to 105 University or SGW; the authors were discussing 41 Valleyview, Henry Street and 27 Bridge Street. SG Bridge had granted Annopol a $750,000 charge. In light of the absence in the mails of any reference to 105 University, I cannot conclude that this email exchange had anything to do with that Property.

[123] In its evidence filed in support of this Second Proof of Claim, Farber stated that it used the figure of $750,000 because it “was the face amount of the charge/mortgage”. Absent proof that funds were advanced, the mere registration of the charge did not create an indebtedness from SGW to Annopol. As previously noted, the Schedule to the charge contained a standard “no obligation to advance” clause. In the event, Annopol made no advance secured by the Annopol $750K Charge. I therefore disallow this claim by Farber, as trustee of Annopol.

F.3 Summary of conclusion on Annopol’s claims

[124] By way of summary, I allow the claim of Farber, as trustee of Annopol, for a secured claim of $100,000 secured by the Annopol $100K Charge, with interest to the date of payment, and call for further submissions on the unsecured portion of Annopol’s First Proof of Claim. I disallow the claim of Farber, as trustee of Annopol, for a secured claim in respect of the Annopol $750K Charge.

V. Summit Glen Waterloo: Claim by Farber as the trustee of Summit Glen Group of Companies Inc. (“SGG”)

[125] SGG was the management company for the entire Summit Glen group of companies, including Annopol and SGW. Starting in 2005, SGG had an operating line of credit with HSBC.

[126] Farber, in its capacity as trustee of SGG, filed in the SGW bankruptcy a proof of claim “as of July 7, 2012” making an unsecured claim for $578,336. In support of its claim Farber simply appended extracts from its June 25, 2012 Report. Farber later filed a further proof of claim, for the same amount, dated July 9, 2012.

[127] In its June 25, 2012 Report, Farber, as trustee of SGG, made its first reference to a possible unsecured claim against SGW on two bases: (i) a debt claim in the amount of $16,450 in respect of inter-company loans made by SGG to SGW to fund operating expenses for 105 University; and, (ii) a claim based on unjust enrichment in the amount of $565,998 for payments made by SGG for the benefit of SGW relating to costs concerning the re-development of 105 University.

[128] 183 and Goldfinger took the position that SGW did not owe any money to SGG because SGG had not carried on any business, but merely had acted as a “conduit” for money loaned by third parties to SGW.

A. SGG’s Debt claim

[129] Based on its review of cheques written by SGG, Farber stated that between May, 2003 and May, 2004, SGG had made direct advances to SGW totaling $16,450. Farber could not locate any loan agreements between SGG and SGW, nor did SGW grant SGG a charge over 105 University.

[130] At trial Kimel admitted that SGG wrote cheques to SGW marked as loan advances.[^58] He also agreed that in respect of the HSBC operating line obtained by SGG, if one of the SG group of companies sold a property, the proceeds would work their way back to HSBC through SGG.[^59]

[131] According to Farber’s investigation, unlike Annopol, SGG did not receive significant advances from persons other than Goldfinger and Annopol. SGG did use an operating line of credit with HSBC under which it borrowed monies. HSBC has filed a $885,375 unsecured claim against SGG for amounts owing under that operating line, but HSBC has not filed a claim against SGW.

[132] Goldfinger took the position that SGG was used as a conduit in the same manner as Annopol and, therefore, no debtor/creditor relationship ever arose between SGW and SGG. I reject Goldfinger’s conduit argument for the reasons given above in rejecting his similar claim regarding Annopol.

[133] Although that was the only objection raised by Goldfinger, the Court once again is hampered in the case of this proof of claim by the absence of any analysis from a trustee in bankruptcy whose only interests relate to the estate against which the claim is made. As mentioned earlier, in the ordinary course of the administration of an estate a trustee would consider whether all or part of any claim made against the estate was statute-barred. Farber has remained silent on that point. This particular claim for $16,500 raises obvious questions about the limitations period. According to the claimant, those inter-company payments were made in 2003 and 2004. Farber did not adduce any evidence that repayment of those amounts was due at a time other than their advance. SGW became bankrupt in June, 2010. Given that chronology, one could ask whether claims dating back to the period 2003 and 2004 might be statute-barred. Farber adduced no evidence to support a late discoverability argument in respect of this part of SGG’s claim. I do not think that a court, when asked to consider a proof of claim in the first instance, can avoid asking the basic question of whether the claim might be statute-barred. Accordingly, before finally determining Farber’s claim, as trustee of SGG, for $16,500, I require submissions from the parties on the issue of whether all or part of that claim is statute-barred:

(iv) Farber may serve and file brief written submissions, together with any authorities, no later than November 30, 2013;

(v) Goldfinger may serve and file brief responding written submissions, together with authorities, no later than January 15, 2014; and,

(vi) Farber may file brief reply submissions no later than January 22, 2014.

B. SGG’s unjust enrichment claim

B.1 The positions of the parties and the applicable law

[134] In its June 25, 2012 Report Farber stated that SGG made payments totaling $565,998 to third parties, such as architects, engineering firms and lawyers, who had provided services for the re-development of 105 University. Farber grounds its claim, as trustee of SGG, against SGW in unjust enrichment.[^60]

[135] The cause of action for unjust enrichment has three elements: (i) an enrichment of the defendant; (ii) a corresponding deprivation of the plaintiff; and, (iii) an absence of juristic reason for the enrichment.[^61] The first element employs a “straightforward economic approach”. An enrichment occurs when the plaintiff confers a tangible benefit on the defendant, such as the payment of money, or a negative benefit such as sparing the defendant an expense it would otherwise have incurred.[^62] In addressing the third element – the absence of juristic reason for the enrichment – the Supreme Court of Canada, in Garland v. Consumers’ Gas Co., laid down the following analytical approach:

[I]n my view, the proper approach to the juristic reason analysis is in two parts. First, the plaintiff must show that no juristic reason from an established category exists to deny recovery… The established categories that can constitute juristic reasons include a contract…, a disposition of law…, a donative intent…, and other valid common law, equitable or statutory obligations... If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.

The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery. As a result, there is a de facto burden of proof placed on the defendant to show the reason why the enrichment should be retained. This stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery.

As part of the defendant's attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations. It may be that when these factors are considered, the court will find that a new category of juristic reason is established. In other cases, a consideration of these factors will suggest that there was a juristic reason in the particular circumstances of a case which does not give rise to a new category of juristic reason that should be applied in other factual circumstances. In a third group of cases, a consideration of these factors will yield a determination that there was no juristic reason for the enrichment. In the latter cases, recovery should be allowed. The point here is that this area is an evolving one and that further cases will add additional refinements and developments.[^63]

[136] Again, as in the case of the claim for the $16,500 loan by SGG, Goldfinger’s objection to this claim was brief. He contended that SGG was used as a conduit in the same manner as Annopol:

Accordingly, it never intended, or was capable of forming a debtor/creditor relationship with SG Waterloo.

For the same reasons set out with respect to Annopol’s claim, the claim of SG Group should be denied.[^64]

Goldfinger raised no other objection to this claim.

B.2 Analysis

[137] Having reviewed the description of SGG’s claim in Farber’s June 25, 2012 Report, together with the supporting documents filed in Volume 1 of its Brief of Documents of the same date, I am not satisfied that Farber has filed sufficient particulars regarding parts of this claim. Specifically:

(i) as to the monies SGG paid to an architect, Joe Somfay Architects, although Farber reported that that firm was retained for the purpose of developing 105 University, all Farber filed in evidence was a summary of invoices, credit notes and payments prepared by Somfay. That summary was entitled, “Summit Glen Developments”, not, as one might expect, “Summit Glen Group” if the payor were SGG. No invoices were produced for examination to ensure they related to work on 105 University nor was adequate evidence adduced to establish who the payor of any invoice was. The invoices totaled $346,029.13 and dated from 2002 until May 30, 2007;

(ii) in respect of Courtland Engineering ($1,588.95 invoice dated May 10, 2004) and GSP Group ($10,406.51 of invoices from March 19, 2004 through to September 10, 2008), Farber did not file adequate documentation to support those claims, specifically copies of the invoices and cheques. The same was true for MTE’s invoices. It was incumbent on Farber, as trustee of SGG, to put together a claim which complied with BIA s. 124(4) containing not only a statement of account showing the particulars of the claim, but “the vouchers or other evidence, if any, by which it can be substantiated”. Farber, as trustee of SGG, did not provide the latter information;

(iii) in respect of the Stikeman Elliott law firm, the Trustee adduced invoices rendered by that firm between November 18, 2004 and May 28, 2007. The client to whom those invoices were sent was Summit Glen Developments Limited, not SGG. It also adduced cheques payable to that firm between October 4, 2002 and April 30, 2005. Of those cheques, most were made by SGG; one was made by Summit Glen Trayvan Holdings Inc. There was no evidence of payment of the three invoices rendered after May 19, 2005;

(iv) Farber reported that the records of SGW disclosed that payments were made by SGG to Sze Straka who performed engineering services in respect of 105 University. The cheque stubs filed by the Trustee did not identify on their face that SGG had paid invoices rendered to SGW or for work performed for SGW, nor were the relevant invoices filed;[^65]

(v) invoices from Minden Gross to SGG from February 27, 2007 through to November 27, 2007 were filed. On their face they do not refer clearly to work performed for or in respect of SGW or for 105 University; they simply were headed, “Housing Initiative”. No evidence was adduced to explain the work recorded on the invoices. Those invoices appear to have been subject to a May 1, 2009 Order for Assessment. In its Report Farber asserted that SGG paid those invoices, but no evidence to support that statement was filed; and,

(vi) Farber reported that SGW’s HST records indicated that SGG had paid an additional $62,943 in operating and other day-to-day operating expenses on behalf of SGW between the period May 16, 2003 and December 31, 2008, with most pre-dating 2007. No documentation was filed by Farber to support those assertions.

[138] In sum, I am not satisfied that Farber, as trustee of SGG, has filed sufficient information in support of its claim as required by BIA s. 124(4). However, as will be seen from my treatment below of 183’s claim under the CTC $50,000 Charge, I plan to give 183 an opportunity to file further evidence in support of its claim pursuant to BIA s. 135(1). Fairness dictates that Farber be given a similar opportunity. I give both parties these further opportunities in an effort to bring finality to the dispute by affording both the chance to deal with the substantive issues concerning their claims. Accordingly, I make the following orders:

(i) Farber shall provide Goldfinger with any evidence dealing with the deficiencies in its unjust enrichment claim which I have identified above no later than November 30, 2013 and file with the Court, to my attention, a report dealing with that issue;

(ii) Goldfinger shall file any further submissions on this issue no later than January 15, 2014;

(iii) I shall then release supplementary reasons deciding Farber’s claim by February 14, 2014.

[139] Also, as already noted, SGW went into bankruptcy on June 28, 2010. SGG made the payments claimed more than two years prior to the bankruptcy of SGW. One could ask whether claims dating back to that period would be statute-barred. Farber did not adduce evidence to explain why the discoverability date for those payments should be other than the time the payments were made. Before deciding that point, I will give the parties an opportunity to make brief written submissions on the point:

(vii) Farber may serve and file brief written submissions, together with any authorities, no later than November 30, 2013;

(viii) Goldfinger may serve and file brief responding written submissions, together with authorities, no later than January 15, 2014; and,

(ix) Farber may file brief reply submissions no later than January 22, 2013.

VI. Summit Glen Waterloo: Claim by Goldfinger’s company, 1830994 Ontario Ltd., based on the assignment of the CTC mortgages

A. Evidence

[140] SGW acquired 105 University from Bolliger Holdings Corporation in 2000 for $950,000. Goldfinger advanced the required cash; Bolliger took back a $450,000 VTB with a term of six months, maturing on September 30, 2000. SGW did not pay out the VTB mortgage at that time.

[141] Bolliger issued a notice of power of sale on January 5, 2001. To deal with the Bolliger VTB, two types of financing were arranged. First, SGW obtained $50,000 in direct financing from Community Trust Company (“CTC”) secured by a charge against 105 University. Second, Goldfinger and Kimel each borrowed $250,000 from CTC and signed promissory notes in its favour. SGW guaranteed those personal loans. SGW granted a $500,000 charge as security for those guarantees. Goldfinger and Kimel each guaranteed the other’s borrowing. They both signed directions that the proceeds from their personal loans be paid to SGW. There is no dispute that funds CTC lent to Goldfinger and Kimel were contributed to SGW.[^66] Most of the money from the CTC financing went to SGW to pay the Bollinger VTB, tax arrears and other SGW expenses and the Bolliger VTB, on which about $355,000 was due, was paid out as a result of that financing. The refinancing did result in excess funds paid to counsel for SGW of about $113,000.

[142] On April 27, 2001, SGW granted a charge against 105 University to Community Trust Company in the amount of $50,000 (the “CTC $50K Charge) securing the loan made to SGW. The same day SGW granted a charge against 105 University to CTC as collateral security for the two promissory notes in the amount of $250,000 given to CTC by each of Goldfinger and Kimel (the “CTC $500K Charge”). According to Kimel, this three-part financing structure was used at the insistence of CTC.

[143] On the registration of the CTC mortgages, Annopol postponed its mortgages to CTC.

[144] The personal loans were renewed on an annual basis. SGW paid CTC the interest on each of the Goldfinger and Kimel loans.[^67] In his trial evidence Kimel described what happened was as follows:

Summit Glen Waterloo didn’t actually have the funds to, uh, available to it to make those payments, moneys had to be funneled into Summit Glen Waterloo to make those payments.[^68]

Upon the appointment of Zeifman as receiver of SGW, those payments ceased and CTC commenced an action against Goldfinger and Kimel to recover the amounts due under the personal loans. CTC also sued SGW and obtained default judgment dated May 22, 2009 in the amount of $573,506 (the “CTC Default Judgment”). Farber contended that the CTC Default Judgment was obtained without any leave granted to lift the stay of proceedings in the receivership and therefore the estate of SGW was not bound by the CTC Default Judgment.

[145] On May 28, 2010, CTC informed Farber, as trustee of Annopol, that it intended to sell 105 University under power of sale; this was a month before SGW was adjudged bankrupt. On July 12, 2010, CTC wrote to Farber’s counsel enclosing loan statements for its two mortgages, both of which showed the full amount of the principal outstanding. As well, both showed additional claimed expenses which brought the amounts due under each mortgage up to $142,819.10 and $582,690.76 respectively. CTC indicated that there would be additional unbilled legal fees and disbursements. CTC provided subsequent August 3, 2010 statements of mortgage showing the amounts due under each mortgage to be $151,239.26 and $586,034.58 respectively.

[146] On August 4, 2010, CTC assigned both charges to a company which Goldfinger had incorporated, 1830994 Ontario Limited. Goldfinger deposed that 183 paid $751,000 for the two mortgages; Farber asserted that Goldfinger paid $742,273, which was the figure cited by CTC’s counsel in its August 4, 2010 letter as the amount payable by 183. The assigned charges were registered on August 5, 2010. In addition, by assignments dated August 3, 2010, CTC assigned to 183 its CTC Default Judgment. Notice of that assignment was given to Farber’s counsel on August 6, 2010.

[147] 183 filed a proof of claim dated September 17, 2010 for a secured claim of $765,792.38 in respect of the two charges.

B. The claim under the CTC $50K Charge

B.1 The position of Goldfinger and 183

[148] Goldfinger argued that 183, as assignee of the two CTC mortgages, was entitled to stand in the same position as CTC because an assignee at law stands in the same position as the assignor in relation to the assigned chose in action. On this basis, 183 contended that it was entitled to claim from the estate of SGW the amounts it had paid to CTC in return for the assignments of the two mortgages, including interest on that amount, together with its solicitor-client costs.

B.2 The position of Farber

[149] Farber did not oppose the technical validity of the CTC $50K Charge. Nor did Farber dispute that CTC had advanced $50,000 to SGW and that CTC would have been entitled to claim against SGW for any amounts owing under the CTC $50K Charge.

[150] Farber opposed 183’s claim in respect of the CTC $50K Charge on two grounds. First, Farber took issue with the quantum of the amount due under the charge. Second, Farber argued that a release given by Goldfinger to SGW in 2009 released this claim against SGW.

[151] As to the quantum, Farber argued that as trustee it was entitled under BIA s. 135(1) to require from 183 evidence in support of its security, but 183 had failed to provide documentary evidence to support portions of its claim under the CTC $50K Charge. Farber contended that a claim against the estate of a bankrupt was determined on the merits of the underlying claim and therefore an assignee could not take the position that its claim should be based on the amount it paid for the chose in action, rather than on the state of accounts between the assignor and the bankrupt. On this basis, the trustee disputed the following amounts claimed by 183 under the CTC $50K mortgage:

(i) Legal fees of $35,000, when the CTC August 3, 2010 statement of mortgage only indicated legal fees of $26,441.14;

(ii) Three months interest under section 17 of the Mortgages Act. Farber took the position that such an amount could not be claimed where a mortgagee was taking steps to enforce payment of amounts owing under a charge. It is worth observing that Farber did not dispute that amount in its Reports dated January 18, 2011 and July 23, 2011;

(iii) Realty taxes of $37,301.49 outstanding as at August 5, 2010. Farber contended that 183 did not provide any evidence about the amount of realty taxes in fact paid by CTC and that as of November 15, 2010, only $10,655 in realty taxes were owing for 105 University. Farber stated that all outstanding realty taxes were paid from the proceeds of sale;

(iv) Operating expenses of $25,283.67, subject to a credit of $8,921.70 in rental income. Farber reported that 183 had not provided any documentation to support claims that CTC had contributed cash to make a shortfall in operating costs for 105 University; and,

(v) “Estimated utility expenses for July to September” 2010 in the amount of $15,000. Farber reported that 183 had not provided any documentation to support those claims.

Accordingly, Farber argued that 183’s claim based on the CTC $50K Charge should be fixed at $50,000, plus interest and nominal costs.

[152] In correspondence that passed between counsel prior to the hearing, Goldfinger took the position that the documents supporting the amounts claimed under the charges were not relevant and that Goldfinger was entitled simply to rely on the CTC statement.[^69] Goldfinger, in his August 8, 2012 affidavit, tried to mitigate the effect of that position by contending that the documents were not in his possession, leaving hanging the implication that he could not obtain them.

[153] Finally, Farber took the position that 183’s claim against SGW based on the August 5, 2010 assignments had been extinguished by the release given by Goldfinger to SGW as part of the December 16, 2009 Minutes of Settlement. Farber contended that Goldfinger was bound by the Second Settlement even if one of the transactions which formed part of that settlement (the charge against 40 Park Lane) was successfully challenged under the BIA.

B.3 Analysis

[154] There is no dispute concerning the validity or enforceability of the assignment of the CTC $50K Charge from CTC to 183. The assignment was made for valuable consideration. Consequently, 183, as assignee, is entitled to payment of the principal amount of the CTC $50K Charge, together with interest until the date of payment, and I so order.

[155] BIA s. 135(1) clearly provides that a trustee “may require further evidence in support of the claim or security”. Consequently, Farber was acting well within the rights of a trustee to require 183 to provide further evidence of the various amounts claimed in respect of the CTC $50K Charge. 183’s position that the trustee was not entitled to such information because 183 could claim the amount which it had paid its assignor was incorrect. The trustee could have asked for such further information from CTC; its assignee stood in no better position.

[156] One can understand why Farber would have asked for further evidence in support of various amounts, given that the expenses claimed exceeded the principal amount of the charge.

[157] Although I am tempted simply to disallow 183’s claim for those expenses because of its unreasonable refusal to provide the further evidence requested by the trustee, unreasonableness has characterized the positions of both parties to this Claims Motion. Consequently, I make the following orders:

(i) 183 shall provide Farber, as trustee of SGW, with the further evidence previously requested in respect of the additional items claimed for the CTC $50K Charge no later than November 30, 2013;

(ii) Farber shall file with the Court, to my attention, no later than December 24, 2013, a further report providing its views about the sufficiency of the further evidence provided and its position on the amounts claimed in light of that further evidence;

(iii) 183 shall file any further submissions on this issue no later than January 15, 2014, with such submissions not to exceed 10 pages;

(iv) I shall then release supplementary reasons deciding 183’s claim for those additional amounts by February 14, 2014.

[158] From this it follows that I have rejected Farber’s argument that 183’s claim against SGW in respect of the CTC $50K Charge was extinguished by the release given by Goldfinger to SGW as part of the December 16, 2009 Minutes of Settlement.

[159] The parties to the December, 2009 Second Settlement were Morris Goldfinger, on the one hand, and on the other: Jack Lechcier-Kimel, Summit Glen Trayvan Holdings Inc., Summit Glen Waterloo/2000 Developments Inc., Summit Glen Brantford Holdings Inc., Raleigh Street Investments Inc., Summit Glen Bridge Street Inc., Summit Glen Fairway Holdings Inc., Annopol Holdings Ltd. and Mahvash Lechcier Kimel. The Second Settlement required the parties to enter into Mutual Releases:

The parties hereto will promptly exchange full and final mutual releases in the form attached as schedule #1 once each of the following has occurred (“the Release Date"):

a) the Park Lane Mortgage has been registered; and

b) any existing mortgages in favour of the Plaintiff registered on the Remaining Properties have been discharged and replaced with the Valleyview/University Mortgages.

The parties agree that the aforementioned releases are intended to release the Plaintiff and the Defendants from any claims they may have between each other arising from Community Trust Company's action against Jack Lechcier-Kimel and Morris Goldfinger (Hamilton Court file #09-8872) and also from any claims relating to any possible flow of funds out of the defendant companies. (emphasis added)

[160] As to the nature of the claims released, the operative language of the Full and Final Mutual Release read as follows:

SAVE AND EXCEPT AS NOTED BELOW, HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE, EACH OTHER WJTHOUTQUALIFICATION OR LIMITATION:

from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contract, complaints, claims and demands for damages, monies, losses, indemnity, costs, interest in loss, or injuries howsoever arising which hereto may have been or may hereafter be sustained by Goldfinger or the Kimel Parties directly, or indirectly, as a consequence of any agreement between the parties and from any and all actions, causes of action, claims or demands of whatsoever nature, whether in contract or in tort or arising as a result of a fiduciary duty or by virtue of any statute or upon or by reason of any damage, loss or injury arising out of the matters set forth above and, without limiting the generality of the foregoing, from any and all matters that were pleaded in, or could have been pleaded, in Ontario Superior Court of Ontario Action 00007823-00Cl (herein referred to as the "Action").

WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, the parties hereto declare that the intent of this Full and Final Mutual Release subject to the specific exclusions set out herein, is to conclude all issues arising from the matters set forth above and from the Action and it is understood and agreed that this Release is intended to cover, and does cover, not only all known injuries, losses and damages, but also injuries, losses and damages not now known or anticipated but which may later develop or be discovered, including all the effects and consequences thereof.

AND FOR THE SAID CONSIDERATION it is agreed and understood that Goldfinger and the Kimel Parties will not make any claim or take any proceedings against any other person or corporation who might claim, in any manner or forum, contribution or indemnity in common law or in equity, or under the provisions of any statute or regulation, including the Negligence Act and the amendments thereto and/or under any successor legislation thereto, and/or under the Rules of Civil Procedure, from each of Goldfinger and The Kimel Parties discharged by this Full and Final Mutual Release, in connection with the matters outlined above and in the Action. (emphasis added)

[161] I have rejected Farber’s submission that the 2009 Release applied to bar 183’s claim as assignee of the CTC Charges for several reasons:

(i) 183, the assignee of the CTC Charges, was not a party to that release. Although the 2009 Release included in the definition of “Goldfinger” any “successor corporations under his control”, that term, when read in the context of the entire definition, referred to any successor corporation who was claiming “a right or interest through him” in respect of the matters released. 183 took assignments of the CTC charges in its own right and was not claiming a right or interest through Goldfinger;

(ii) The assignments were made well after Goldfinger and the Kimel Parties had entered into the 2009 Release;

(iii) The assignments were made for valuable consideration given at the time of the assignments;

(iv) Finally, to the extent that the release may have caught post-execution events, the assignment of the charges by CTC to 183 did not fall within the matters released, which the 2009 Release described as matters:

…which hereto may have been or may hereafter be sustained by Goldfinger or the Kimel Parties directly, or indirectly, as a consequence of any agreement between the parties and from any and all actions, causes of action, claims or demands of whatsoever nature, whether in contract or in tort or arising as a result of a fiduciary duty or by virtue of any statute…

C. The claim under the CTC $500K Charge

C.1 The position of Farber

[162] Farber opposed 183’s claim under the CTC $500K Charge on three grounds. First, Farber submitted that the assignment from CTC to 183 was incomplete. Second, Farber contended that the charge could not support a claim against SGW because of its collateral nature. Finally, Farber argued that a release given by Goldfinger to SGW in 2009 released this claim against SGW.

[163] In its first argument, Farber contended that although 183 had taken an assignment from CTC of the charge “and any debt owing under the CTC Charges”,[^70] 183 had failed to take an assignment of the SGW Guarantee of the personal loans to Goldfinger and Kimel and also failed to take an assignment of the promissory notes given by Goldfinger and Kimel to CTC, with the result that “183 Ontario cannot rely on the SGW Guarantee or the CTC $500K Charge in circumstances where it is not able to assign to SGW, on payment, the debt owing by Goldfinger and [Kimel] to which the SGW Guarantee and the CTC $500K Charge relate.”

[164] In respect of its second argument, Farber stated that SGW had granted CTC the $500K Charge to stand as security for SGW’s guarantee of the loans CTC had made to each of Goldfinger and Kimel in the amount of $250,000. Farber argued that if the estate of SGW was required to pay 183, as assignee of CTC, the full amounts due under the CTC $500K Charge, then Goldfinger, as the principal debtor on the personal loan from CTC, should be required to pay SGW (i) an amount equal to what SGW pays 183 in respect of its guarantee of the Goldfinger personal loan together with (ii) 50% of what SGW pays 183 in respect of the guarantee of the Kimel personal loan, the latter because Goldfinger had provided CTC with his own guarantee of the Kimel loan.

[165] In effect, this argument by Farber did not deny the validity of the CTC $500K Charge, its assignment to 183 or the amount claimed under the charge. Farber argued that the potential claim-over by SGW against Goldfinger, both in respect of his personal loan and Kimel’s loan, should trigger an immediate obligation by Goldfinger to pay SGW all but $125,000 of the amount paid by SGW to 183 under the CTC $500K Charge, plus interest and costs. Farber contended that its position on this point was supported by the fact that Goldfinger had provided 183 with the funds to acquire the CTC Charges. As the argument was put in its January 18, 2011 Report, Farber contended that:

Farber understands that the CTC $500,000 Charge relates to these personal loans [to Goldfinger and Kimel]. Dr. Goldfinger is, by using 183 Ontario to acquire CTC’s claim vis a vis the personal loans, attempting to recover a personal loan made to him and a personal loan made to Mr. Lechcier-Kimel that he guaranteed from SG Waterloo.

Or, as put by Farber’s counsel in his letter of August 13, 2010 to 183:

As the guarantor of the obligations owing by Dr. Goldfinger and Mr. Lechcier-Kimel by Community Trust, SG Waterloo is entitled, on the payment of the amount guaranteed, to take an assignment of the claims as against Dr. Goldfinger and Mr. Lechcier-Kimel. In this regard, 183 Ontario owes an obligation to the SG Waterloo bankruptcy estate not to prejudice SG Waterloo’s interest as guarantor of the obligations now owing to 183 Ontario.

[166] Finally, Farber contended that the Release given as part of the 2009 Second Settlement affected 183’s ability to claim as assignee of the CTC Charges in two ways. First, Farber pointed to paragraph 14 of the Second Settlement which stated:

The parties agree that [the full and final release is] intended to release the Plaintiff and Defendants from any claims they may have between each other arising from Community Trust Company’s action against Jack Lechcier-Kimel and Morris Goldfinger…

Second, Farber argued that under the Release, Goldfinger was prohibited from making any claim that would result in any person claiming contribution or indemnity from Kimel, and since 183, a company controlled by Goldfinger, was now asserting a claim which could result in SGW seeking contribution and indemnity from Kimel, the Release barred such a claim.

C.2 The position of Goldfinger and 183

[167] Goldfinger argued that 183, as assignee of the two CTC mortgages, was entitled to stand in the same position as CTC since an assignee at law stands in the same position as the assignor in relation to the assigned chose in action. On this basis, 183 contended that it was entitled to claim from the estate of SGW the amounts it had paid to CTC in return for the assignment of the two mortgages, including interest on that amount, together with its solicitor-client costs.

[168] 183 argued that Farber’s arguments based on the nature of the CTC $500K Charge as collateral security for SGW’s guarantee of personal loans to Goldfinger ignored the separate legal existence of 183. As put by Goldfinger and 183 in their Factum:

If 183 is not permitted to stand in the shoes of CTC as ranking as first mortgagee, the effect would be to put Farber in a better position than if 183 had not paid off CTC and the related encumbrances. Such a result would be unfair. Thus, if for some reason, 183 was not entitled to stand in the same position as CTC, subrogation would be an appropriate remedy in this case.

C.3 Analysis

First argument: The completeness of the assignment

[169] In support of its argument that the assignment from CTC to 183 was incomplete, Farber relied on the decision of the Court of Appeal in McLennan v. McLennan.[^71] One must approach applying that decision with some caution, turning as it did on complex facts concerning “unusual transactions”. In that case the Court of Appeal was not prepared to interfere with the findings of fact made by lower courts that, properly interpreted in its factual matrix, the assignment of a collateral mortgage assigned only the mortgage, but not the debt secured by the mortgage.

[170] By contrast, in the present case, the Assignment of Security and Mortgage Debt executed on August 4, 2010 by CTC and 183 (the “Assignment”) in respect of both CTC Charges provided, in part:

Whereas the Assignor holds first and second registered Mortgages/Charges on the lands and premises described municipally as 105 University Avenue East, Waterloo…

And Whereas the Assignor holds a Security Agreement as a Secured Party given by Summit Glen Waterloo/2000 Developments Inc. (the “Debtor”), on or about the 25^th day of April, 2001.

[T]he Assignor assigns to the Assignee all of the outstanding Mortgage debt in and to the Mortgaged Lands, debts, sums of money, choses in action, causes of action, Judgments and all other right, title, and interest in the Mortgage debt and in the security it presently holds in respect of the debtors obligations as that term is defined in the Security Agreement which is annexed hereto as Schedule “A”, for the absolute use and benefit of the Assignor. (emphasis added)

[171] The Security Agreement dated April 25, 2001 from SGW to CTC stated that it was given “as security for the repayment of all present and future indebtedness of the Debtor [SGW] to the Secured Party [CTC] and interest thereon and for the payment and discharge of all other present and future liabilities and obligations, direct or indirect, absolute or contingent, of the Debtor to the Secured Party (all such indebtedness, interest, liabilities and obligations being hereinafter collectively called the “Obligations”)”. Section 9 provided that default by SGW “under any of the Obligations” constituted a default under the Security Agreement, and section 10 provided that upon such a default CTC “may declare any or all of the Obligations to be immediately due and payable…” The liabilities and obligations of SGW to CTC were set out in the guarantee dated April 25, 2001 from SGW to CTC, under which SGW “guarantees payment to Community Trust of all debts and liabilities, present or future, direct or indirect, absolute or contingent, matured or not, at any time owing by the Borrower [Kimel and Goldfinger] to Community Trust or remaining unpaid by the Borrower to Community Trust…” Section 3 provided that CTC was not bound to exhaust its recourse against Kimel and Goldfinger before entitled to payment from SGW.

[172] Given the assignment of the “Mortgage debt” and the definition of “Obligations” used in the Security Agreement, which was also assigned, I find that by its terms the Assignment assigned the debt created as between SGW and CTC. The language of the Assignment certainly evidenced an intention that it would assign the underlying debt to the assignee of the charges. Nor did CTC purport to retain for its own benefit any part of the guaranteed debt; it made a full assignment to 183.

[173] Moreover, Farber’s argument ignored the simple fact that 183 paid valuable consideration to CTC for the assignment of the CTC Charges. Given that 183 took out CTC by paying off what CTC contended was due to it on the mortgage debt, in the circumstances of this case the principle of equitable subrogation would apply to place 183 fully in the shoes of CTC in order to achieve fairness in light of all the circumstances.[^72]

[174] Finally, the right of action enjoyed by the estate of SGW to recover from the principal debtors amounts paid under the guarantee arises by operation of law.[^73]

[175] For these reasons I do not accept Farber’s argument that the Assignment was not effective to enable 183 to enforce the debt secured by the CTC $500K Charge.

Second argument: the collateral nature of the Assignment

[176] An assignee of a charge is subject to the state of account upon the charge as between the chargor and chargee, and the assignee can assert no greater rights than those held by its assignor of the charge.[^74] More generally, an assignee steps into the shoes of the assignor and has the rights and is subject to the obligations of the assignor under the assigned agreement.[^75]

[177] If a third party other than 183 had taken an assignment of the CTC security for value, it is highly unlikely that Farber would be advancing arguments about the collateral nature of the charge. The assignee would take subject to the state of account between SGW and CTC, and it would not be open to Farber to argue for the disallowance of the assignee’s proof of claim by contending that the bankruptcy estate might enjoy some right to seek recovery from another person for the monies paid. I do not see how the identity of the assignee changes that analysis with respect to the validity of a claim against SGW under the CTC $500K Charge. 183 enjoys a separate legal personality from Goldfinger. 183 paid good and valuable consideration for the assignment; this is not a case involving some sort of sham transaction. As an assignee for value of the Charge and the mortgage debt, 183 is subject to the state of account between SGW and its predecessor, CTC, but is not subject to the state of account between SGW and some other person.

[178] Whether the estate of SGW might enjoy some claim of recovery against some other person, such as Goldfinger or Kimel’s bankruptcy estate, is a matter for the trustee to assess in light of all the circumstances, including the obligations imposed upon SGW by the releases exchanged as part of the 2009 Settlement – releases, which I should note, Farber did not attack.

[179] In the circumstances of this case, I do not accept Farber’s contention that as part of the process of reviewing a creditor’s proof of claim under the BIA, the court notionally should entertain and determine the surety’s potential quia timet “action” against one of the principal debtors, Goldfinger. Quite apart from the conflation which would result of a BIA proof of claim process with the determination of a civil cause of action, the proof of claim under review is that of a person – 183 – which enjoys a separate legal personality from the principal debtor, Goldfinger, and which paid valuable consideration for the Assignment.

Third argument: recovery under the Assignment is barred by the 2009 Settlement Release

[180] I reject Farber’s submission that the 2009 Release barred 183’s claim under the CTC $500K Charge for the reasons given above rejecting a similar argument in respect of the CTC $50K Charge.

[181] By way of summary, I allow 183’s claim in respect of the CTC $500K Charge, with interest until the date of payment.

VII. Summit Glen Waterloo: Goldfinger’s constructive trust claim

[182] Although not specifically mentioned in his notice of motion, in his factum Goldfinger argued that since he had made all of the cash payments for the acquisition of 105 University by SGW, as well as a payment against the Bolliger VTB, he should be entitled to a constructive trust claim against the estate of SGW for those amounts.

Goldfinger’s argument

[183] Goldfinger deposed that in the first quarter of 2000, he had issued cheques totaling $130,000 to Summit Glen Fairway Holding which were used, in part, to pay the deposit for the 105 University property, title of which was taken in the name of SGW. The acquisition closed on April 14, 2000. Goldfinger deposed that he provided all the cash for the closing (about $415,000) by way of a $467,000 cheque dated April 13, 2000 to SGW, with Bolliger taking a $450,000 five-month VTB for the balance of the purchase price.

[184] Although the Bolliger mortgage was to mature in September, 2000, the parties continued the arrangement for a period of time until the Community Trust Company refinancing took place. On October 16, 2000, SGW paid down $50,000 of the Bolliger VTB principal. Goldfinger deposed that the monies SGW used came from a $25,000 cheque he made out to SGW on July 6, 2000 and from an August 10, 2000, cheque for $35,000 which he provided to Summit Glen Fairway Holdings.

[185] As part of the First Settlement, SGW was to deliver to Goldfinger a promissory note “in a principal amount equal to the unpaid Shareholder Loans of the company as set forth in Schedule 3”. In the case of SGW, the amount of the Shareholder Loan, or “outstanding indebtedness to Goldfinger”, was fixed by the parties at $867,556. The note, dated June 6, 2008, was to be paid in two installments ending in December, 2009. Kimel and each of the Summit Glen Companies, including SGW, severally guaranteed repayment of the Shareholder Loans, and each company was to grant to Goldfinger second mortgages on the Properties, which included 105 University. Annopol delivered a postponement, in favour of Goldfinger, of “all present and future debts and liabilities of whatever nature or kind due or accruing due to” it by, inter alia, SGW. Although the First Settlement contemplated that Goldfinger would deliver a release to Kimel and the Summit Glen Companies, he was only required to do so once they had fully complied with all of the terms of the First Settlement. They never did so.

Analysis

[186] Section 81(1) of the BIA requires that any person who claims property in the possession of the bankrupt must file a proof of claim with the trustee; BIA s. 124 requires that every creditor shall prove his claim by delivery to the trustee of a proof of claim. Goldfinger did not file with the trustee of SGW a proof of claim in respect of a trust property claim or a proof of claim in respect of a related debt or liability claim. Goldfinger raised the issue for the first time in his factum. In light of Goldfinger’s failure to comply with the claims mechanisms specified by the BIA, I disallow his “constructive trust” claim.

[187] In any event, Goldfinger’s claims also fails for substantive reasons. In Credifinance Securities Limited v. DSLC Capital Corp., the Ontario Court of Appeal considered the issue of claims in a bankruptcy founded on constructive trust:

There is no question that the remedy of constructive trust is expressly recognized in bankruptcy proceedings. Both the case law and authors of texts make this clear, although the test for proving the existence of a constructive trust in a bankruptcy setting is high: L.W. Houlden & Geoffrey Morawetz, Houlden and Morawetz Bankruptcy and Insolvency Analysis (Toronto: WL Can, 2011) at F§5(1). The authors add this at F§5(8):

A constructive trust will ordinarily be imposed on property in the hands of a wrongdoer to prevent him or her from being unjustly enriched by profiting from his or her wrongful conduct” (citations omitted).

Thus, a constructive trust in bankruptcy proceedings can be ordered to remedy an injustice; for example, where permitting the creditors access to the bankrupt’s property would result in them being unjustly enriched. The prerequisite is that the bankrupt obtained the property through misconduct. The added necessary feature is that it would be unjust to permit the bankrupt and creditors to benefit from the misconduct.

Constructive trust is a discretionary remedy. In a bankruptcy there are other interests to consider besides those of the defrauder and the defraudee: there are other creditors. Thus, the exercise of remedial discretion must be informed by additional considerations than in a civil fraud trial.[^76]

[188] The evidence does not support Goldfinger’s claim for a constructive trust in respect of the monies which he advanced to SGW in 2000 to finance part of the purchase price for 105 University and to make a payment against the Bolliger VTB. On his own evidence, Goldfinger made those advances, as well as all his other advances to SG companies, on the expectation that his loans would be repaid from the successful re-development of those properties and, in addition, he would share in the ultimate net profit from the resale of the properties. In the present case, the redevelopment of 105 University was not successful and SGW went into bankruptcy. In making his investments Goldfinger assumed the risk of an investor who looked to the profits of the undertaking to recoup his investment. At the time he extended his loans to Kimel’s companies, it was open to Goldfinger to require that they grant him security in return; he did not obtain such security,yet advanced funds.

[189] Goldfinger argued that it would be inequitable to deny him a constructive trust on some of the assets of SGW because Kimel deceitfully placed the Annopol mortgages on the property without the knowledge of Goldfinger. On his own evidence, Goldfinger became aware of Kimel’s activities in 2007. He then entered into the First Settlement with Kimel. When Kimel breached that settlement, Goldfinger commenced the Goldfinger Action. The Second Settlement resolved that action. Neither the First nor Second Settlement gave Goldfinger a constructive trust over some of the assets of SGW.

[190] Finally, the 2009 Release precludes Goldfinger from asserting such a claim at this point of time. The claim falls within the matters released, and Goldfinger executed that release with full knowledge of the long history of Kimel’s misconduct against him and others.

[191] Given those circumstances, I see no substantive basis for Goldfinger’s constructive trust claim – there was no injustice which required a remedy by way of constructive trust. For these reasons, I dismiss Goldfinger’s constructive trust claim.

VIII. Goldfinger’s claim as the sole shareholder of Summit Glen Waterloo

A. Evidence

[192] From the incorporation of SGW in April, 2000 until 2008, Mahvash was its sole registered shareholder.

[193] According to Goldfinger, during that period of time he believed he should have an equity interest in SGW and other SG companies. After Goldfinger and Kimel had arrived at an agreement in principle to resolve their dispute in the Fall of 2007, Goldfinger engaged two lawyers at the Minden Gross firm, Reuben Rosenblatt and Carl Schwebel, to flesh out and paper their agreement. Both lawyers testified at the trial. Both testified that while Goldfinger thought that he had been promised shares in the Summit Glen group of companies, neither lawyer had ever seen any share certificates which evidenced his shareholding in SGW or other Summit Glen companies.[^77]

[194] As part of the closing structure of the First Settlement, Mahvash transferred 50% of the shares of SGW to Goldfinger who immediately transferred them to Kimel. The transfer from Mahvash to Goldfinger reflected the following acknowledgement contained in the First Settlement:

Notwithstanding that the shares of the Summit Glen Companies have not been formally issued, Goldfinger is, and for all purposes shall be deemed to be, the legal and beneficial owner of 50% of the share capital of each of the Summit Glen Companies…

SGW was included in the definition of “Summit Glen Companies”. On the closing of the First Settlement, Goldfinger transferred all his “deemed” shares in the Summit Glen Companies to Kimel for $5 million, half of which had been satisfied by the late 2007 and early 2008 payments of $2.5 million, and the rest was to be paid out by the end of 2009. It never was.

[195] As part of their later matrimonial separation arrangement, Kimel transferred his 50% shareholding to Mahvesh. Goldfinger ultimately acquired the outstanding shares of SGW from Mahvesh for $50,000 through a Transfer of Shares dated September 27, 2010.

[196] Although Farber argued that Goldfinger had been a shareholder of SGW from its inception, pointing to statements contained in (i) 2007 memoranda prepared by Minden Gross LPP, (ii) Goldfinger’s accountant’s recording of $50 for Goldfinger’s capital contribution to SGW, and (iii) recitals in the First Settlement, the corporate records of SGW contained no entry showing Goldfinger as a shareholder or the issuance of any shares to Goldfinger.

[197] Goldfinger moved for an order that the net surplus of monies remaining from the sale of 105 University, after payment of proper amounts owing to creditors, be paid to him. Farber opposed Goldfinger’s request for a distribution of any of the sale proceeds to him as the sole shareholder of SGW on the basis that the administration of the SGW bankruptcy was not yet complete and therefore it was unclear whether any surplus funds would be available for distribution to an equity claimant.

[198] Farber contended that the transactions through which Goldfinger acquired the shares of SGW prima facie would be void against the trustees of the estates of Kimel and Mahvash (in the event that a bankruptcy order issued against her) under the BIA. That issue is not before me for determination. Farber is not the trustee of the Kimel’s estate. No claim to that effect by Kimel’s trustee is before me. Mahvash has not been adjudged bankrupt; Farber is not the trustee proposed in the bankruptcy proceedings against Mahvash.

B. Analysis

[199] Goldfinger’s claim to part of the proceeds of the sale of 105 University as sole shareholder of SGW clearly is an “equity claim” as defined by BIA s. 2. Section 140.1 of the BIA provides that a creditor is not entitled to a dividend from the estate in respect of an equity claim until all claims that are not equity claims have been satisfied. Further, section 144 of the BIA stipulates that the bankrupt only is entitled to any surplus following payment to the bankrupt’s creditors and payment of the costs, charges and expenses of the bankruptcy proceedings.

[200] Farber, as trustee of SGW, reported that the administration of that bankrupt’s estate was not yet complete. In my view, it would be premature to make any order regarding the distribution of any surplus of the estate of SGW until the trustee reports that all claims of non-equity creditors have been paid and the costs of administration satisfied. Accordingly, I am not prepared to make the order sought by Goldfinger for a distribution of surplus to him in his capacity as shareholder of SGW.

[201] That said, it is important that the administration of the estate of SGW be completed within a reasonable period of time. Accordingly, I am seizing myself of all court proceedings involving the SGW estate, and I require counsel to appear before me on a 9:30 appointment before the end of November, 2013, to report on what further steps remain in the administration of this estate and the anticipated timing for their completion.

D. Allegations of conflict of interest against Farber by Goldfinger

[202] Goldfinger submitted that by acting as trustee in bankruptcy of SGW, as well as trustee for claimants against SGW, such as the estates of Montor, Annopol and SGG, Farber stood in a conflict of interest position, had failed to act impartially in respect of the claims advanced against the estate of SGW and had failed to provide full information to interested parties, in breach of the BIA Rules governing the conduct of trustees. Goldfinger also contended that the reports filed in this proceeding by Farber adopted an adversarial position and went beyond the scope of such reports as mandated by BIA s. 170.[^78]

[203] On the latter point I would note that Goldfinger previously brought a motion in the Preferences Application to strike out one of Farber’s reports. That motion was dismissed on March 31, 2011.

[204] While my review of Farber’s reports does not raise undue concerns about the trustee’s attempt to provide the Court with full and impartial information, the various hats worn by Farber in this proceeding causes some concern. The proof of claim scheme created by the BIA contemplates that the trustee of the bankrupt will examine every proof of claim and then either allow or disallow the claim. A trustee must give reasons for its determination or disallowance, and the trustee’s decision is final and conclusive unless the claimant appeals to the court. That scheme assumes that the trustee who examines and determines a claim has no interest in the claim. In the present case, Farber was acting as trustee both for the bankrupt, SGW, and several of the claimants: Annopol, Montor and SGG. In light of those mandates, Farber could not act impartially in considering the claims filed by Annopol, Montor and SGG. Thus resulted this motion where the court, in effect, played the role of the trustee under section 135 of the BIA in examining and determining claims.

[205] In my view, such a procedure for considering claims against a bankrupt should be avoided to the extent possible. The BIA squarely places the responsibility for the examination and determination of proofs of claims in the hands of the trustee. In order to be able to discharge that duty, a trustee should avoid taking on any mandate which might put it in a conflict of interest situation where it is contemplated that there may be a highly contested claims process. I am concerned that Farber, by acting as trustee for both the bankrupt and claimants, did not afford the court the full benefit of independent arguments in respect of the claims on behalf of the estate, on the one hand, and the claimants, on the other. That said, I am satisfied in the present case that Farber placed before the court a sufficiently fulsome record relating to the claims advanced, and I am not persuaded, as argued by Goldfinger, that Farber’s obvious conflict of interest in the claims procedure caused an inadequate record to be placed before the court, although I have required Farber to provide more sufficient information for SGG’s unjust enrichment claim.

IX. Summary of conclusions on the Claims Motion

[206] A summary of the orders disposing of the Claims Motion can be found towards the end of these Reasons in Part XIV.

X. The Preferences Application: Summary of the allegations against Dr. Goldfinger

[207] In the Preferences Application, Farber, in its capacity as the trustee in bankruptcy of the estates of Montor, Annopol and SG Brantford, has advanced claims to set aside a number of transactions which formed part of, or which were related to, the First Settlement (2008) between Goldfinger, on the one hand, and Kimel, Mahvash and their companies on the other. Specifically, according to Farber’s July 3, 2012 Fresh as Amended Notice of Application, it seeks the following orders:

(i) repayment of the $2.5 million paid by Annopol to Goldfinger in December, 2007 and January, 2008 in anticipation of the First Settlement;

(ii) alternatively, an order requiring Mahvash, as a director of Annopol, to pay the $2.5 million to the Annopol estate;

(iii) setting aside the charges/mortgages of land granted by SG Brantford to Goldfinger over a property at 176 Henry Street in Brantford, Ontario (the “Goldfinger 176 Henry Charges”);

(iv) setting aside charges/mortgages of land granted by Summit Glen Bridge Street Inc. (“SG Bridge”) to Goldfinger over a property located at 70 Bridge Street in Kitchener, Ontario (the “Goldfinger 70 Bridge Charges”);

(v) setting aside subordinations made by Annopol of charges/mortgages of land granted by SG Brantford (the “Annopol 176 Henry Charges”) and SG Bridge (the “Annopol 70 Bridge Charges”) in favour of the Goldfinger Charges on those properties (the “Annopol Subordinations”);

(vi) the repayment of $471,000 paid by SG Brantford to Goldfinger in November, 2008 to discharge the Goldfinger 176 Henry Charges; and,

(vii) payment to the Annopol estate of the surplus from the sale of 70 Bridge (the “Bridge Surplus”) currently being held in trust for the benefit of Goldfinger’s counsel, Davis Moldaver LLP (“Davis”) and Farber’s counsel, Gowling Lafleur Henderson LLP (“Gowlings”).

[208] Although Farber initially also attacked the 2009 Second Settlement, by the time of trial it had amended its application to limit its preference claims to the $2.5 million paid under the First Settlement, the $471,000 payment made in November, 2008, and Goldfinger’s claim to the surplus of SG Bridge.[^79]

[209] Goldfinger contended that Farber’s position was unfair in that it sought to deprive him of substantial benefits negotiated under the First Settlement while holding Goldfinger to releases which he gave in the Second Settlement (2009). Goldfinger deposed that he would not have entered into the Second Settlement without having obtained the payments which formed part of the First Settlement.

XI. The 2007/2008 $2.5 million settlement payments to Goldfinger

A. The allegations and positions of the parties

[210] Farber seeks the repayment of the $2.5 million paid by Annopol to Goldfinger in December, 2007 and January, 2008 in anticipation of the execution of the First Settlement. The date of the initial bankruptcy event in the Annopol bankruptcy was May 26, 2009; the date of bankruptcy was May 27, 2010. Farber seeks to void or set aside the $2.5 million payment on several grounds:

(i) as a transfer at undervalue under s. 96 of the BIA;

(ii) as a voidable transaction under the Fraudulent Conveyances Act, R.S.O. 1990, c. F. 29 (the “FCA”) or the Assignments and Preferences Act, R.S.O. 1990, c. A.33 (the “APA”);

(iii) as relief for a finding of oppressive conduct made under s. 248 of the OBCA; or,

(iv) on the basis of unjust enrichment.

Farber did not attack the payments under BIA s. 95.

[211] Goldfinger opposed any such findings or remedies.

B. The First Settlement: 2008

[212] As mentioned, in May and June, 2008, Goldfinger, Kimel and many of his companies signed the First Settlement. The parties to it were Goldfinger, on the one hand, and Kimel, Mahvash, Annopol, as well as several of Kimel’s companies on the other, collectively referred to as the Summit Glen Companies (the “SG Companies”), which included Summit Glen Brantford Holdings Inc. (“SG Brantford”) and Summit Glen Bridge Street Inc. (“SG Bridge”). Annopol was not included in the definition of the SG Companies. All parties acknowledged in the First Settlement having been represented by independent counsel. Farber is trustee for three of the signatories (Annopol, SG Brantford, SG Waterloo) and a petitioning creditor for yet another (Mahvash).

[213] The First Settlement was designed in such a way as to repay to Goldfinger the amounts already lent to the SG Companies and to enable Goldfinger to extract an amount representing his notional equity or profit in the various real estate developments. The material terms concerning the repayment of amounts already advanced by Goldfinger were as follows:

(i) The SG Companies acknowledged that they were indebted to Goldfinger in the amount of $6.5 million, which amount was termed the “Shareholder Loans”. (As noted, the SG Companies did not include Annopol.) Those companies provided Goldfinger with promissory notes in the amount of the unpaid Shareholder Loans, with payment of half the principal amount due December 11, 2008, and the balance on December 11, 2009;

(ii) Kimel and each of the SG Companies guaranteed repayment of the Shareholder Loans;

(iii) As collateral security for the repayment of the Shareholder Loans, the SG Companies granted to Goldfinger what were called the Shareholder Mortgages, each in the amount of $6.5 million on specified properties, including 176 Henry Street, Brantford owned by SG Brantford and 70 Bridge Street West, Kitchener, owned by SG Bridge.

[214] Although shares in the SG Companies had never been issued, the First Settlement deemed Goldfinger to own beneficially 50% of the shares of each company and went on to provide that:

(i) The SG Companies would purchase Goldfinger’s 50% interest in the companies for $5 million, or what was termed the Share Purchase Price. The parties agreed that the $2.5 million previously paid to Goldfinger represented a partial payment of the Share Purchase Price. Kimel would provide Goldfinger with a secured promissory note for $1.5 million, with the final payment due December 11, 2009, and Kimel would provide Goldfinger with an unsecured promissory note for $1 million, again with the final payment due by December 11, 2009;

(ii) Each SG company guaranteed payment of both notes, and granted Goldfinger $1.5 million Third Mortgages on each property;

(iii) Also, each member of the Kimel Group, which included Annopol, postponed all their claims against the SG Companies to the prior payment of the Shareholder Loans and both notes. Annopol also agreed to postpone $750,000 charges it held on the 176 Henry and 70 Bridge properties in favour of Goldfinger’s Shareholder Mortgages and Third Mortgages.

[215] The Kimel Parties agreed that until all of the payments to Goldfinger were made, the SG Companies would not sell or encumber the properties, except the Valleyview and Fairway properties. If either property was sold or mortgaged, the proceeds would be paid out in accordance with an agreed formula.

[216] The First Settlement contained an Indemnity under which Kimel and the SG Companies would indemnify and hold Goldfinger harmless from certain claims:

On closing, Kimel and each of the Summit Glen Companies shall jointly and severally, covenant and agree to indemnify and hold harmless Goldfinger, his personal representatives, heirs, executors, administrators, successors and assigns (collectively, the "Indemnified Parties"), from and against any and all claims, damages, losses, liabilities, demands, suits, judgments, causes of action, legal proceedings, penalties or other sanctions and any and all costs and expenses arising in connection therewith, including, without limitation, reasonable legal fees and disbursements on a solicitor and his own client substantial indemnity basis, which may be suffered or incurred by any of the Indemnified Parties howsoever resulting from or arising out of: (i) a breach or inaccuracy of any of the representations or warranties made by the Kimel Group or the Summit Glen Companies (or any of them) in this Agreement; (ii) any non-observance or non-performance of any of the covenants, obligations and agreements of the Kimel Group or the Summit Glen Companies (or any of them) under this Agreement; (iii) any liabilities, debts, contracts or obligations of the Summit Glen Companies, whether present or future, absolute or contingent, direct or indirect; and (iv) any claims, suits and proceedings which are pending or hereafter made against the Summit Glen Companies.

[217] The First Settlement also required Kimel, Mahvash, Annopol and the SG Companies to provide Goldfinger with a release containing the following language:

IN CONSIDERATION of the sum of TWO DOLLARS ($2.00), the completion of the transactions contemplated in the Memorandum of Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), [Kimel, Mahvash, Annapol and the SG Corporations] (collectively, the “Releasing Parties”) [do] hereby irrevocably release, remise, and forever discharge each and all of [Goldfinger, his personal representatives, heirs, executors, administrators, successors and assigns], their respective officers, directors, shareholders, heirs, personal representatives, successors and assigns, from any and all manner of Claims which the Releasing Parties or any of them has or in the future may have, suffer or incur, by reason of, arising from or in connection with, or in any way relating to, the Properties and other assets, undertaking, operations and liabilities of the Summit Glen Companies.

And for the same consideration, each of the Releasing Parties further agrees not to make any Claims, or take any proceedings in connection with any Claims released herein against any other person or corporation who might claim contribution or indemnity under the provisions of any statute or otherwise from any of the Released Parties.

[218] The lawyers who papered the First Settlement for Goldfinger, Messrs. Rosenblatt and Schwebel of the Minden Gross firm, were not involved in the negotiation of the $2.5 million payment; they understood that Goldfinger and Kimel had agreed on that amount before approaching the lawyers. Schwebel understood that conceptually the $2.5 million payment would represent a partial payment to Goldfinger of his notional equity in all the properties, while the mortgages issued by the SG Companies would serve to secure repayment of Goldfinger’s Shareholder Loans.[^80] However, the lawyers also testified that the allocation of the indebtedness due to Goldfinger amongst the SG Companies which were party to the First Settlement was not based on valuations of the properties, but on an agreement reached amongst the two parties.[^81]

[219] The First Settlement was completed on June 8, 2008, at which time Goldfinger received the promissory notes, guarantees, postponements, and mortgages due to him under it.

[220] As part of the closing of the First Settlement, shares in SG Waterloo were transferred to Goldfinger from Mahvash, and then immediately transferred to Kimel.

[221] In the Preferences Application Farber has not challenged the validity or enforceability of the Indemnity or the Release contained in the First Settlement.

C. Farber’s claim under BIA s. 96

C.1 The statute

[222] Farber seeks to set aside or declare void the $2.5 million payment to Goldfinger made prior to the execution of the First Settlement as a transfer at undervalue under BIA s. 96. Although Farber’s amended notice of application and factum were not as clear as they could have been on this point, presumably Farber brought its challenge to the transaction in its capacity as trustee in bankruptcy of Annopol, the entity from which the cheques were issued to Goldfinger. Section 96 of the BIA provides as follows:

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

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

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

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

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

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

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

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

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

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

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

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

C.2 The transfers

[223] BIA s. 2 defines a “transfer at undervalue” as “a disposition of property or provision of services for which no consideration is received by the debtor or for which the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor”. That section includes “money” in the definition of “property”, so a payment of money falls within the definition of a disposition of property.

[224] The evidence established that Goldfinger received payments totaling $2.5 million from Annopol. The company’s bank statements showed that on December 5, 2007 Annopol transferred $1.5 million to Goldfinger. Annopol also issued four cheques to Goldfinger which he negotiated in December, 2007 and January, 2008: December 12, 2007 ($300,000); December 21, 2007 ($200,000); December 28, 2007 ($300,000); January 10, 2008 ($200,000). Each cheque bore the notation: “re-purchase shares”.

[225] Goldfinger, in his September 6, 2011 affidavit, deposed that he had “no idea as to the source of the funds” for the $2.5 million payment “or that there was any issue regarding the solvency of Kimel, Mahvash or any of the SG companies”:

At the time I received the payment, Kimel told me that approximately $1.5 million came from Mahvash’s inheritance, and the balance came from an elderly gentleman who attended the same synagogue as Kimel. I was further told that Kimel was required to sign an “I.O.U” in front of the synagogue’s rabbi.[^82]

[226] Farber stated that the $2.5 million paid to Goldfinger came from (a) inter-company loans from related companies and (b) a $200,000 loan by a third-party, Mr. Srubiski, to Annopol.[^83]

[227] According to Kimel, the funds used to make the payments largely came from three sources. First, part came from the proceeds of the sale on October 4, 2007 of a property owned by Summit Glen Fairway (the 293 Fairway property). Of the net sale proceeds of about $1 million, Kimel testified that half was paid to Annopol. That company’s bank statement showed the deposit of $485,000 received on October 5, 2007 from SG Fairway.[^84] Annopol had a mortgage registered against that property which was discharged on the closing.

[228] It is not self-evident from the record that funds from the SG Fairway property sale were used to fund part of the payments to Goldfinger. All payments to Goldfinger were made out of Annopol’s HSBC bank account. On December 2, 2007, three days before the first payment (wire transfer) to Goldfinger, the balance in Annopol’s HSBC account was just over $1,000.00, raising questions about what had been done with the early October deposit of funds Annopol had received from SG Fairway. Kimel testified that the funds could have been put into a term certificate or “temporarily utilized to pay down a line of credit in another company, or various things”.[^85] The records for that bank account disclosed that the funds Annopol used to cover the $1.5 million wire transfer to Goldfinger consisted of a December 5 transfer to Annopol from SG Trayvan ($1 million), together with a series of transfers on that date to Annopol from a variety of Summit Glen companies, with SG Fairway contributing only $24,000.00.

[229] One must note that Annopol’s opening bank account balance on December 5, before the wire transfer to Goldfinger, was just over $6,000.00, with a $39.64 closing balance following the wire transfer to Goldfinger. That banking history leads me to find that Annopol used monies from other Summit Glen companies transferred to it on December 5, 2007 to fund its $1.5 million wire transfer to Goldfinger. That wire transfer had no material impact on Annopol’s bank account balance for that day.

[230] Second, Kimel testified that another source of the funds which enabled Annopol to pay Goldfinger were proceeds from the re-financing of the Trayvan properties (41-67 Valleyview) in the Fall of 2007. Annopol’s HSBC bank statements do show a transfer from SG Trayvan to Annopol of $1 million immediately prior to the $1.5 million wire transfer sent to Goldfinger on December 5, 2007.

[231] As to the balance, Kimel variously testified that about $200,000 might have come from his wife, Mahvash, or from a third party investor, Srubiski.[^86]

[232] Turning from the wire transfer to the Annopol cheques provided to Goldfinger, Annopol’s HSBC bank records disclosed the following transactions:

(i) the initial cheque of December 12, 2007 for $300,000 was debited from Annopol’s HSBC account on December 14, 2007. The account’s closing balance on December 12 was just over $2,000.00. On December 13 a number of deposits were made, most identified as coming from other Summit Glen companies, including a $25,000 transfer from SG Fairway. Following the negotiation of the cheque to Goldfinger, the closing balance in Annopol’s bank account was just over $18,000;

(ii) the December 21 cheque for $200,000 was debited from Annopol’s HSBC account the same day. The closing balance on December 20 was about $2,000. The cheque to Goldfinger was covered by the deposit on December 21 of a $200,000 cheque from another HSBC account and a $10,000 transfer from SG Fairway. Kimel was unsure whether those funds came from his wife or from a third party investor, Mr. Srubiski. The closing balance at the end of December 21 was just over $10,000;

(iii) the December 28 cheque for $300,000 was debited the same day from Annopol’s HSBC bank account. The cheque was covered by a $300,000 transfer of funds from SGG the same day. SGG had an operating line of credit with HSBC; the cheque to Annopol drew that line of credit up over the $2 million mark. On December 28 the HSBC account’s opening balance was just over $10,000; its closing balance was an overdraft of about $3,000, largely the result of other cheques written that day on the account;

(iv) the January 10, 2008 cheque for $200,000 was debited the same day from Annopol’s HSBC account. The prior opening balance was about $2,500. The cheque to Goldfinger was covered by a transfer to Annopol from SGG which SGG, in turn, funded by drawing on its HSBC line of credit, pushing it up to $2.376 million. The day’s end closing balance on Annopol’s account was the same as the opening balance.

In sum, Annopol’s bank records disclosed that it relied on transfers of funds from other Summit Glen companies just prior to the negotiation of the cheques in order to cover the amounts paid to Goldfinger. SGG’s HSBC line of credit statements showed that it borrowed $500,000 from its line to fund, through Annopol, that amount of the payments made to Goldfinger. It is not possible from the record to determine the ultimate source of the other funds transferred by the other Summit Glen companies in order to cover the cheques paid to Goldfinger.

C.3 Was the transfer at undervalue?

[233] Mr. Baigel, one of the trustees at Farber, deposed, in his August 15, 2012 affidavit, that the value of the $2.5 million paid by Annopol to Goldfinger obviously was $2.5 million and Annopol did not receive any consideration from Goldfinger in return for the $2.5 million or, if there was consideration, the value of that consideration was zero. Farber pointed to BIA s. 96(2) which requires the trustee to state its opinion about the value of the actual consideration received by the debtor, and then goes on to provide that “the values on which the court makes any finding under this section are, in the absence of evidence to the contrary, the values stated by the trustee”. Farber then argued that Goldfinger had not adduced any evidence to question the correctness of the trustee’s opinion as to value, so “the Court must, as a result, conclude that Goldfinger provided no consideration in return for the $2.5 million”.

[234] I disagree. Additional evidence regarding the value of the consideration was filed, in particular the text of the First Settlement, together with evidence explaining how the First Settlement came about.

[235] By its terms the First Settlement constituted the compromise of a dispute between Kimel and Goldfinger. Section 1(e) stated:

This Agreement accurately records our understanding of the discussions that have taken place between the Parties to date in connection with the resolution of the existing shareholders' dispute.

Section 17 provided that if the Kimel Group and the Summit Glen Companies performed all their obligations under the settlement, Goldfinger would be required to deliver a release in their favour from all claims relating to the Properties and other assets of the companies. Annopol would be a beneficiary of such a release.

[236] Goldfinger argued that the First Settlement constituted a legitimate exchange of value: a compromise of Goldfinger’s claims to recover his $6.7 million investment and a surrender of some mortgage security, in return for only some of the misappropriated money from Kimel and his companies. He deposed that he entered into the First Settlement after “formal demand” had been made by his lawyers against Kimel.[^87] Goldfinger also deposed that he would not have entered into the First Settlement without the prior payment of the $2.5 million: “Rather I would have immediately commenced and continued the litigation against the Kimels and their various companies.”[^88] Goldfinger deposed that over the course of his dealings with Kimel, $2.956 million of his money had been deposited into Annopol.[^89]

[237] Forbearance from suit, either actual or promised, can constitute good consideration to support a transaction.[^90] Under cross-examination Goldfinger agreed that instead of commencing legal proceedings against Kimel, he sat down with him and negotiated a resolution of their dispute.[^91] Indeed, in November, 2007, Goldfinger had threatened litigation and had gone so far as having counsel prepare a draft affidavit for him to swear in an action he was thinking of bringing against Kimel and several Summit Glen companies, including Annopol, for the appointment of a receiver over a number of the properties.[^92] In the context of a dispute where one party had invested $6.5 million with the other, the partial repayment of $2.5 million of that investment in return for the investing party compromising and fixing his rights in accordance with the terms contained in the First Settlement, does not strike me as a circumstance where the “the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor”. I therefore conclude that the payments of $2.5 million by Annopol to Goldfinger did not constitute a “transfer at undervalue”.

[238] In the event that I am wrong about that conclusion, let me proceed to examine the other elements a trustee must establish under BIA s. 96.

C.4 Were Goldfinger and Annopol at arm’s length?

[239] Different tests apply depending upon whether the party, Goldfinger, was or was not dealing at arm’s length with the debtor, Annopol. Persons who are related to each other are deemed not to deal with each other at arm’s length: BIA, s. 4(5). The evidence disclosed that at the time of the First Settlement, Goldfinger was not a registered shareholder of Annopol. Although the First Settlement “deemed” Goldfinger to be a shareholder of Annopol, taken as a whole the evidence regarding the First Settlement indicated that such a designation was merely a technical device, probably tax-driven, by which to structure the deal. Viewed substantively, prior to the execution of the First Settlement (and indeed thereafter), Goldfinger never exercised any control over the affairs of Annopol, or any other Summit Glen company. I therefore find that Goldfinger and Annopol were not related persons within the meaning of BIA s. 4(2) and (3).

[240] That does not end the inquiry. BIA s. 4(4) provides that “it is a question of fact whether persons not related to one another were at a particular time dealing with each other at arm’s length”. An oft-cited statement of the test for ascertaining whether parties, in fact, are acting at arm’s length, can be found in the decision in Re Abou-Fached[^93] which followed the test in Tremblay, Gingras, Robitaille, Marcoux Ltee. v. Beaudry[^94] as follows:

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

More recently, the Alberta Court of Appeal, in Piikani Nation v. Piikani Energy Corp., held that factors which have been developed in the jurisprudence under the Income Tax Act concerning “not dealing at arm’s length” can provide helpful guidance in the BIA context, in particular three factors identified by the Supreme Court of Canada in McLarty v. R:[^95] (i) was there a common mind which directs the bargaining for both parties to a transaction; (ii) were the parties to the transaction acting in concert without separate interests; and, (iii) was there de facto control?[^96]

[241] Farber submitted that Goldfinger did not act at arm’s length with Annopol, whose affairs were directed by Kimel, because he was a close personal and family friend of Kimel, as well as his business associate. While it is true that Goldfinger had been close friends with Kimel, one must look at the nature of their relationship at the time the payments of $2.5 million were made. The evidence disclosed that although Goldfinger had lent a large amount of money to Kimel and his companies, he had not been involved in the operation of the Summit Glen companies and had quite limited information about their affairs. In 2007 Goldfinger discovered that he had been misled by Kimel, in particular learning that many of the Summit Glen properties were encumbered with mortgages about which Goldfinger was not aware. Goldfinger sought explanations and a return of his money, but Kimel stalled. Settlement discussions commenced only after Goldfinger had retained counsel who, in letters dated November 12 and 13, 2007, required Kimel to respond to a settlement proposal, failing which proceedings would be commenced against him in this Court. Each side was represented by their own counsel. Although the amount of the initial $2.5 million repayment was arrived at by Goldfinger and Kimel, the overall structure and details of the First Settlement were negotiated with the assistance of counsel. In my view, those facts do not disclose bonds of “dependence, control or influence” which generally are necessary in order to find that two parties are not acting at arm’s length.

[242] Farber relied on a few cases to argue that a broader view should be taken of those relationships which could qualify as not at arm’s length. In Piikani Energy Corporation (Re),[^97] the Alberta Court of Queen’s Bench considered an application by a trustee under BIA s. 95 to set aside payments to two individuals and one of their wholly-owned corporations at a time when the two individuals were directors and officers of the bankrupt corporation. The payments in issue represented the unearned portion of one person’s service contract with the bankrupt and a severance payment to the other. In finding both individuals to be not at arm’s length to the bankrupt, the court focused on the process by which a corporation, such as the bankrupt, would make decisions to pay others. Both individuals were directors of the corporation which had made the challenged payments, and the court stated that “it is hard to think that such decision-makers could be at arm’s length to the corporation when they make payment decisions, especially to themselves”.[^98] That decision recently was over-turned on appeal.[^99]

[243] Farber also relied on another decision of the Alberta Court of Queen’s Bench, this one in Visonwall Technologies Inc. (Re).[^100] That case did not involve sections 95 or 96 of the BIA, rather the unpaid supplier provisions of BIA s. 81.1(1), specifically the ability of a supplier to repossess goods as long as at the time of demand the goods had not been resold at arm’s length and were not subject to any agreement for sale at arm’s length. In dispute was whether the Export Development Corporation was an arm’s length purchaser of the materials in question. EDC had guaranteed the performance bond which had been issued to the bankrupt for the completion of a construction contract, for which the materials in question had been ordered. When the bankrupt company encountered financial difficulties, a plan was developed which would see the construction contract completed by another company and, to facilitate that plan, EDC agreed to purchase the materials in question. As put by the court, if the construction contract was not completed and EDC was called on its guarantee of the bond, it would face a potential hit of $3 million. Against that background the court concluded that EDC was not at arm’s length to the bankrupt because it was “a vital cog” in the transaction to complete the construction contract and “stood to lose $3,000,000 if the contract was not completed”. That financial interest in the transaction meant EDC was not an arm’s length purchaser of the materials.[^101] Also, the court noted that the trustee had dealt the materials to EDC after it had received notice from the supplier for their return.

[244] The present case is distinguishable from that in Visonwall. When considering a transaction under BIA s. 96, the party who dealt with the bankrupt necessarily had a financial interest in the transaction. The question is whether the transfer was at undervalue. Consequently, the existence of a financial interest by the party to the transfer cannot, in and of itself, turn that party into a person not dealing at arm’s length with the bankrupt. Something more is required.

[245] For those reasons, I conclude that in respect of the payments of $2.5 million, Goldfinger was dealing at arm’s length with the debtor, Annopol.

C.5 Did the transfer take place within one year before the date of the initial bankruptcy event?

[246] In light of that finding, BIA s. 96(1)(a) governs the balance of the analysis. Did the payments occur “during the period that begins on the day that is one year before the date of the initial bankruptcy event and that ends on the date of the bankruptcy”? In the case of Annopol, the date of the initial bankruptcy event was May 26, 2009 and the date of bankruptcy was May 27, 2010. Accordingly, the review period for transfers under BIA s. 96 commenced May 26, 2008. The $2.5 million payments occurred in the period between December 5, 2007 and January 10, 2008, prior to and outside of the statutory review period.

[247] Consequently, the transfers of $2.5 million are not reviewable under BIA s. 96 and Farber’s claim, as trustee of Annopol, under that section must fail.

[248] Notwithstanding that conclusion, I shall deal with the remaining elements of a challenge under BIA s. 96 since they involve some of the same factual issues as arise in Farber’s claims under provincial preferences legislation.

C.6 Was Annopol insolvent at the time of the transfer or was Annopol rendered insolvent by it?

[249] Section 2 of the BIA defines an insolvent person as one who is not bankrupt, but (i) who is unable to meet its obligations as they generally come due, (ii) has ceased paying its current obligations in the ordinary course of business as they generally become due, or (iii) the aggregate of whose property, at fair valuation, would not be sufficient to enable payment of its obligations, due and accruing due.

[250] As set out in a response to an undertaking given on the examination of Michael Baigel, Farber stated that it was relying on the following evidence in support of its assertion that Annopol was insolvent at the time the $2.5 million payments were made to Goldfinger: (i) Mr. Baigel’s affidavit of August 15, 2012; (ii) Annopol’s financial statements for 2007 and 2008; and, (iii) the fact that Annopol had to borrow funds to pay its expenses and interest.

[251] Baigel, in his March 19, 2010 affidavit, deposed simply that “based on the value at which the Goldfinger/Kimel Properties were sold, it appears that the Goldfinger/Kimel Companies are and have always been insolvent.” Annopol was not included in Baigel’s definition of the “Goldfinger/Kimel Companies”.

[252] The Statement of Affairs signed by Kimel for Annopol on June 14, 2010 showed that liabilities of $12.875 million greatly exceeded assets of $350,000.

[253] Perelmuter prepared Annopol’s financial statements at the material time, but he did so on a “notice to reader” basis, relying largely on information provided to him by Kimel. Perelmuter conceded that he was familiar “to some degree” with the financial affairs of Kimel’s company, and he testified that in December, 2007[^102] and August, 2008 he had assumed that Annopol was solvent.[^103]

[254] This evidence does not establish that at the time of the transfers (December, 2007 and January, 2008) Annopol had ceased paying its obligations or was unable to meet its obligations as they became due. Annopol’s bank account statements for that period disclosed that it received funds from other Summit Glen companies, and perhaps third parties, which enabled it to meet its on-going obligations. However, applying the balance sheet test of insolvency, its assets certainly were insufficient to meet its liabilities, as disclosed by the 2008 unaudited notice to reader financial statements, and that circumstance was corroborated by the 2010 statement of affairs signed by Kimel which showed liabilities greatly exceeding assets.

[255] Against that evidence, Goldfinger advanced several reasons in support of his argument that Annopol was not insolvent at the time it made the $2.5 million payments to him. First, pointing to Montor’s proof of claim in the Annopol bankruptcy which showed loans and payments made by Montor after the date of the payments to Goldfinger, he argued that Montor most likely would not have made those payments to Annopol (which amounted to about $500,000) had it known Annopol was insolvent at the time, particularly since Annopol’s principal, Perelmuter, was the accountant for Annopol.[^104] That evidence certainly tends to show that Perelmuter and Montor did not believe Annopol to be insolvent at the time of the transfers, but their perception of Annopol’s affairs is not the same thing as whether Annopol, in fact, was solvent or insolvent.

[256] Goldfinger also argued that since Annopol was not the ultimate source of the funds used to pay him the $2.5 million - rather the funds came from other Summit Glen companies or Kimel family money - one should not treat the payments, for purposes of assessing Annopol’s solvency, as coming out of Annopol’s assets. In the same vein Goldfinger deposed that at the time of the First Settlement, he received a June 11, 2008 statutory declaration from Kimel and Mahvash which led him to believe that the SG companies were financially viable.[^105] Goldfinger also argued that since Annopol was merely a flow-through conduit for Kimel and the SG group of companies, Farber’s claims on its behalf were “specious”. Specifically, Goldfinger argued in his factum:

The $2.5 million paid to Goldfinger under the First Settlement was not Annopol’s money as Farber, again, wrongly alleges. The money came principally from the sale of the Summit Glen Fairway property, and the refinancing of SG Trayvan’s Valleyview property.

[257] Earlier in these Reasons I reviewed how each payment to Goldfinger was funded through Annopol’s bank account. Other Summit Glen companies transferred funds to Annopol to enable it to cover the cheques issued to, or wire transfer made to, Goldfinger and, in the result, those payments had no net impact on Annopol’s bank accounts. In that sense, the payments did not render Annopol insolvent, at least on a cash-flow basis. But, those transfers in and out would have given rise to credits and debits on Annopol’s balance sheet, and the 2008 financial statements, unaudited though they may have been, were based on information which came from Kimel and showed a very significant excess of liabilities over assets.

[258] Consequently, I find that at the time of the December, 2007 and January, 2008 transfer of $2.5 million from Annopol to Goldfinger, Annopol was insolvent under the balance sheet test.

C.7 Did Annopol intend to defraud, defeat or delay a creditor?

[259] That then leads to the final inquiry under BIA s. 96(1)(a)(iii): did the debtor, Annopol, intend to defraud, defeat or delay a creditor by making the transfers to Goldfinger? For the purposes of this analysis, I accept Farber’s submission that the intention of Annopol at the time should be determined by reference to the intention of Kimel, the person who directed the company’s affairs.[^106]

The case law concerning ascertaining the debtor’s intention

[260] The general approach to ascertaining the intention of the debtor in respect of a transfer or transaction was summarized by Rouleau J., as he then was, in Conte (Executrix and trustee of) v. Alessandro:[^107]

In this type of case it is unusual to find direct proof of intent to defeat, hinder or delay creditors. It is more common to find evidence of suspicious facts or circumstances from which the court infers a fraudulent intent.

These suspicious facts or circumstances are sometimes referred to as the “badges of fraud.” These badges of fraud are evidentiary indicators of fraudulent intent and their presence can form the prima facie case needed to raise a presumption of fraud…

The presence of one or more of the badges of fraud raises the presumption of fraud. Once there is a presumption, the burden of explaining the circumstantial evidence of fraudulent intent falls on the parties to the conveyance. The persuasive burden of proof stays with the plaintiff; it is only the evidentiary burden that shifts to the defendants.

[261] The decision of Anderson J. in Re Fancy[^108] often is referred to as a classic enumeration of the badges of fraud. In the 1988 decision of Ricchetti v. Mastrogiovanni this Court dealt with Re Fancy as follows:

The law on the subject of fraudulent conveyances is accurately stated by Mr. Justice Anderson in Re Fancy (1984), 1984 2031 (ON SC), 51 C.B.R. (N.S.) 29 ....

The plaintiff must prove that the conveyance was made with the intent defined in that section [i.e. section 2 of the Fraudulent Conveyances Act]. Whether the intent exists is a question of fact to be determined from all of the circumstances as they existed at the time of the conveyance. Although the primary burden of proving his case on a reasonable balance of probabilities remains with the plaintiff, the existence of one or more of the traditional "badges of fraud" may give rise to an inference of intent to defraud in the absence of an explanation from the defendant. In such circumstances there is an onus on the defendant to adduce evidence showing an absence of fraudulent intent. Where the impugned transaction was, as here, between close relatives under suspicious circumstances, it is prudent for the court to require that the debtor's evidence on bona fides be corroborated by reliable independent evidence.

The "badges of fraud" referred to by Mr. Justice Anderson are those et [sic] out in Re Dougmor Realty Holdings Ltd., (1966), 1966 214 (ON SC), 59 D.L.R. (2d) 432:

(1) Secrecy

(2) Generality of Conveyance

(3) Continuance in possession by debtor

(4) Some benefit retained under the settlement to the settlor.

The above passages set out the test to be applied. The badges of fraud alleged by the plaintiff are established.[^109]

[262] The case law[^110] has identified the following circumstances as constituting “badges of fraud” for purposes of ascertaining the intention of a debtor: (i) the transferor has few remaining assets after the transfer; (ii) the transfer was made to a non-arm’s length person; (iii) there were actual or potential liabilities facing the transferor, he was insolvent, or he was about to enter upon a risky undertaking; (iv) the consideration for the transaction was grossly inadequate; (v) the transferor remained in possession or occupation of the property for his own use after the transfer; (vi) the deed of transfer contained a self-serving and unusual provision; (vii) the transfer was effected with unusual haste; or, (viii) the transaction was made in the face of an outstanding judgment against the debtor.

The evidence and analysis

[263] The direct evidence adduced by the Trustee on the issue of the intention of Kimel/Annopol in respect of the $2.5 million payments was given by Michael Baigel. His evidence, in actual fact, was limited to the state of Goldfinger’s knowledge. On his cross-examination Baigel was asked to identify the information which the Trustee possessed about Goldfinger’s knowledge about the financial status of Annopol at the time:

Q. 208. What evidence do you have that Goldfinger even knew that Annopol had other creditors at that point in time?

A. I assume ‑‑ well, I can't assume.

Q. 209. Right.

A. So I'll just say the evidence is that he was heavily involved with these people. Surely he wouldn't have just gone ahead and taken this, and he didn't have access to financial statements. He was investing heavily with these people. Wouldn't he have known that there were liabilities out there? I can't believe he would have put however many millions of dollars he says he's put in without following up and just trusting ‑‑ especially where he was, Jack Lechcier‑Kimel, and saying, yeah, that's okay. You've got no liabilities.

Q. 210. I take it from that, that you have no evidence that Goldfinger even knew Annopol had other creditors in December of 2007 or January of 2008. Correct?

A. Well, but hold on. There was back in one of his affidavits he starts talking about that he wasn't aware that Jack Lechcier‑Kimel put other securities on the various properties. Annopol had related properties, and surely when he was talking about that ‑‑ I think that started in July 2007 from memory ‑‑ he would have been aware of all these other liabilities out there.

Q. 211. Isn't it fair to say that you have it backwards, that what he wasn't aware of was the mortgages in favour of Annopol on these various properties, not loans or monies owing by Annopol? It was mortgages to Annopol that he was unaware of, correct?

A. I agree with you on that, but I'm not sure it's backwards. It's because that obviously diminishes what he has available if there's mortgages there.[^111]

Q. 214. You've told me about mortgages that I suggested to you were backwards. I'm asking you a really simple question. What evidence do you have that Goldfinger knew that Annopol had creditors? If you have no such evidence, just tell me.

A. At this point in time I would like to get back to you with anything that I do have.

Q. 215. So today ‑‑

A. Today I'm saying I can't remember.

[264] In an answer to an undertaking given on that examination, Farber stated:

Farber does not know what Goldfinger knew vis-à-vis Annopol as at December of 2007 or January of 2008. However:

a. Goldfinger was aware that the $2.5 million was being paid to him by Annopol. He was, for example, given post-dated cheques from Annopol.

b. In an e-mail exchange between JLK and Goldfinger on 9 December 2007, JLK indicated to Goldfinger that money to pay the $2.5 million was being borrowed.

c. In paragraph 118 of his Affidavit sworn 6 September 2011 Goldfinger swears that he was told by JLK that the $1 million of the $2.5 million paid to him by Annopol was borrowed.

d. Rubin Rosenblatt has confirmed that JLK advised that money to make the $2.5 million payment was being borrowed.

[265] The direct evidence of Kimel comes from his cross-examinations. On one of them Kimel was asked whether he had considered the impact the payment of the $2.5 million to Goldfinger would have on other creditors:

Q. 100. Please answer the question. Did you consider the impact of providing security to Goldfinger and subordinating Annopol's charge would have on the ability of Annopol to recover under the charge?

A. No, I didn't consider that.

Q. 101. You will agree that subordinating the charge...so $6.5 million in security to Goldfinger would make it difficult for Annopol to recover, correct?

A. I didn't, at that time, even think in terms of any of the concepts you are broaching.

Q. 102. So what were you thinking about at the time you granted the security?

A. Simply arriving at a fair and equitable settlement to buy his share back of the business...or buy him out of the business in total.

Q. 103. So you were not thinking about the other creditors of the companies or the other stakeholders in these businesses?

A. I didn't think in terms of any other stakeholders. I didn't consider there were any.

Q. 104. What about the people that were lending money to Annopol which is being advanced onto companies like SG Bridge?

A. Well, they had always advanced the money on the basis of properties being rezoned and redeveloped and being repaid from the redevelopment of those properties.

Q. 105. But by placing $6 million in security ahead of them, did you not prejudice their right to recover from the redevelopment?

A. I think you are asking me to look in hindsight and these were not items that...or thoughts that I, in any way, thought I had to consider at that time.

Q. 106. Okay, fair enough. So you didn't consider other interests except the interests of yourself and Dr. Goldfinger?

A. Yes.[^112]

[266] Elsewhere on that cross-examination Kimel testified:

Q. 386. When you were negotiating your settlement with Dr. Goldfinger, did you consider the possible impact that settlement might have on creditors like HSBC and Community Trust?

A. As I mentioned before, no, none of these situations were evident. The collapse hadn't taken place. The receivership hadn't occurred. I had no reason to assume that things wouldn't progress from a settlement to the ultimate plans that I had for redevelopment of the many properties.

Q. 387. But I guess...so you never considered their interests?

A. No.

Q. 389. When the first settlement got made, the one we call the December 2007 settlement, or the one that was finally finalized in June 2008, none of the companies who participated in that settlement had defaulted on any payments to anyone at all, right?

A. That's correct.

Q. 390. And as you understood it, none of those companies were insolvent, they were all companies with really strong potential for the various developments they were involved in, correct?

A. Yes, that's correct.[^113]

[267] Kimel testified that although his wife, Mahvash, was the sole owner and director of Annopol, he ran that company on a day-to-day basis and he did not discuss its affairs with her in any detail. Mahvash signed any documentation Kimel asked her to.[^114] According to Kimel, Mahvash was aware of the $2.5 million payment to Goldfinger, but she had not been involved in the settlement negotiations.[^115]

[268] As to the direct evidence from Mahvash, she deposed that Kimel managed and controlled all of the family’s finances and did not provide her with information about the companies’ affairs. Mahvash stated that she became aware of the $2.5 million payment to Goldfinger in June, 2008, when she signed documents for the First Settlement, but only in 2010 did she become aware of the source of the funds for that payment. She stated that she had no way of knowing whether her personal funds had been used to fund that payment because Kimel had exercised complete control over all of the family’s assets and he had not discussed with her the source of the settlement funds. In May, 2010, Mahvash deposed:

In summary, I did not cause any of the challenged transactions or payments to have been made, nor was I even aware that they were being made at the time that they occurred. I have only learned of these transactions as a result of the litigation instituted against me by Dr. Goldfinger and others during the past year and a half.

[269] Goldfinger testified that he was not aware of the day-to-day business affairs of Kimel’s companies nor did Kimel provide him with their financial statements.[^116] He stated that Kimel provided him with “extremely limited information” about the companies.[^117]

[270] Finally, at trial the two lawyers who had represented Goldfinger during the negotiation of the First Settlement gave some evidence on the issue of the impact of that deal on other creditors. Schwebel testified that he did not recall any discussion with Goldfinger about the impact which the $2.5 million payment might have on the ability of the SG Companies to repay their creditors, but Schwebel described Goldfinger’s understanding of those companies’ state of affairs at that time as follows:

A. Well, my understanding was that these -- these properties had appreciated considerably in value and that there was a fair -- a lot of equity in this -- in this group of companies over and above the mortgages that were secured against them, and that -- um, I think it was my understanding that Annopol or that the Kimels were the only other creditors of these companies.

Q. Was any consideration ever given to the impact that this settlement might have on the companies’ ability to repay those loans?

A. The -- the understanding was that these mortgages would be paid out on the sale or refinancing of the property, um, at which time, the other mortgages would have to as well be taken account of.[^118]

[271] On that point, Rosenblatt testified as follows:

Q. And at that point in time, it was likely -- well, let me rephrase that for a moment. So, they weren’t paying their debt to Dr. Goldfinger. Did you have any knowledge with respect to the value of their properties?

A. We never did appraisals, but when we were -- when Dr. Goldfinger and Mr. Kimel were negotiating what the “equity” was, is Dr. Goldfinger, I think, thought it was worth -- the equity was 11 or 12 million dollars over and above the mortgages, Mr. Kimel thought they were around 9 million and Dr. Goldfinger thought his share was worth five and a half million, Mr. Kimel felt four and a half million. And that’s how they worked it out at the five million. Other than that, we did not do appraisals. They -- uh, they seemed to know the values, they agreed on the values, and that’s what we thought the values were.[^119]

[272] When inquiring into the intention of a debtor for the purposes of BIA s. 96(1)(a)(iii) – and the provincial preferences statutes for that matter – a court must ascertain the intention at the time of the transfer or transaction in light of the information known at that time. A court must resist the temptation to inject back into the circumstances surrounding the impugned transaction knowledge about how events unfolded after that time. The focus must remain on the belief and intention of the debtor at the time, as well as the reasonableness of that belief in light of the circumstances then existing.

[273] When looked at that way, the direct and circumstantial evidence, taken together, lead me to conclude, on the balance of probabilities, that by making the $2.5 million payments to Goldfinger, Kimel and Annopol did not intend to defraud, defeat or delay other creditors. I reach this conclusion for several reasons.

[274] First, the terms of the First Settlement, which originated around the time the payments were made, indicated that the parties thought the Summit Glen companies would continue as going concerns and would generate sufficient value to repay fully Goldfinger for the advances he had made within two years – by December 11, 2009. The evidence disclosed that the parties to that agreement believed the properties owned by the Summit Glen companies possessed significant future value, a value which would prove sufficient to pay off those companies’ liabilities and generate a profit for Kimel and Goldfinger to share. In hindsight one might question the reasonableness of that belief, but the evidence given by Schwebel and Rosenblatt about the parties’ thinking at the time indicated a genuine belief in the value of the properties. I place significant weight on that evidence.

[275] For the settlement to work, the parties had to expect that the Summit Glen companies would continue as going concerns and that the underlying real estate projects would generate a net benefit for division between the parties. Otherwise, the security granted to Goldfinger would have no value. As part of the closing documentation for the First Settlement, Goldfinger received a statutory declaration made by Kimel and Mahvash, in paragraph 6 of which they declared:

There is no fact, matter or event which is known to me which has not been disclosed to Goldfinger which is likely to have a material adverse effect on the performance of the respective obligations of the Kimel Group and/or the Summit Glen Companies under this Agreement or which has or is likely to have a material adverse effect on the Properties or the operations of the Summit Glen Companies.

[276] Of course, within half a year of the execution of the First Settlement the North American credit markets had collapsed, with a general depressing effect on real estate values. The parties did not adduce expert valuations of the properties at the time of the payments or the First Settlement. The monies paid into Court from the sale of 105 University and the prospect of full recovery in that estate of both secured and unsecured claims (subject to the issue of the Trustee’s costs of administration) suggest that some of the properties had a net worth.

[277] Second, the First Settlement was not put together in a rush; it was the product of over six month’s negotiation. Both parties were represented by counsel.

[278] Third, as I have found, they were dealing at arm’s length.

[279] Fourth, there was consideration for the settlement.

[280] Fifth, the payment and the First Settlement were not put in place in the face of claims by judgment creditors against the debtor.

[281] In sum, I conclude that the payments of $2.5 million to Goldfinger made in December, 2007 and January, 2008, were not made by the debtor, Annopol/Kimel, with the intent to defraud, defeat or delay a creditor.

[282] For these reasons, I dismiss Farber’s claim for a declaration under BIA s. 96(1) to set aside the payment of $2.5 million to Goldfinger pleaded in paragraph IV(a) of its July 3, 2012 Fresh as Amended Notice of Application.

D. Farber’s claim under the Assignments and Preferences Act and Fraudulent Conveyances Act

[283] In paragraph III(a) of its Fresh as Amended Notice of Application, Farber sought declarations that the $2.5 million payment to Goldfinger was void as a preference or fraudulent conveyance pursuant to the provincial Assignments and Preferences Act and the Fraudulent Conveyances Act.

The Assignments and Preferences Act claim

[284] Sections 4(1)(2) and 5(1) of the Assignments and Preferences Act (“APA”) provide:

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

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

(1) Nothing in section 4 applies to an assignment made to the sheriff for the area in which the debtor resides or carries on business or, with the consent of a majority of the creditors having claims of $100 and upwards computed according to section 24, to another assignee resident in Ontario, for the purpose of paying rateably and proportionately and without preference or priority all the creditors of the debtor their just debts, nor to any sale or payment made in good faith in the ordinary course of trade or calling to an innocent purchaser or person, nor to any payment of money to a creditor, nor to any conveyance, assignment, transfer or delivery over of any goods or property of any kind, that is made in good faith in consideration of a present actual payment in money, or by way of security for a present actual advance of money, or that is made in consideration of a present actual sale or delivery of goods or other property where the money paid or the goods or other property sold or delivered bear a fair and reasonable relative value to the consideration therefor.

[285] Although any payment of money to a creditor, whether or not the payment is intended to prefer the creditor and defeat other creditors, is protected under s. 5(1) of the APA,[^120] in the present case Goldfinger has filed what he termed a “contingent” proof of claim in Annopol’s bankruptcy, taking the position that he would only assert a claim as a creditor in the event the Court set aside the $2.5 million payment. In light of that position, the saving condition in APA s. 5(1) is not available to Goldfinger.

[286] Considering Farber’s claim under APA s. 4(1), I repeat my finding above that at the time of the $2.5 million payments Annopol was insolvent. I also repeat my finding that the debtor, Kimel/Annopol, did not intend to defeat, hinder, delay or prejudice creditors, and I rely on the same evidence for that finding to make the additional finding that neither did Goldfinger possess such an intent, to the extent such a finding might be necessary. On the latter point, Farber, in its February 8, 2013 Factum, stated that it was not asserting that in receiving the payments of $2.5 million or $471,000 (SG Bridge) Goldfinger had intended to defeat, hinder or delay creditors.

[287] As to Farber’s claim under APA s. 4(2),[^121] Goldfinger did not file an unconditional proof of claim as a creditor, and Farber, in paragraph 129 of its February 7, 2013 Factum, was prepared to proceed on the basis that the payment of $2.5 million could not be attacked on the basis that Goldfinger was a creditor of Annopol. In any event, the evidence I have relied upon to make the findings above with respect to the intent of Kimel/Annopol and Goldfinger also leads me to conclude that at the time of the payments neither possessed the intent to give Goldfinger an unjust preference over other creditors.

The Fraudulent Conveyances Act claim

[288] The Fraudulent Conveyances Act provides, in part, as follows:

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

As put by Sedgwick J. in Dapper Apper Holdings Limited v. 895453 Ontario Limited (c.o.b. Dunn’s Famous Delicatessen):

If the court is satisfied that a conveyance is made with intent on the part of the grantor to defeat, hinder, delay or defraud creditors and others, the parties to the conveyance (the grantor and the grantees) must show that it was made for good consideration and good faith and to a person (or persons) who was (or were) without notice or knowledge of the grantor's fraudulent intent. Bank of Montreal v. Jory (1981), 39 C.B.R. (N.S.) 30 (B.C. S.C.). Otherwise, the conveyance is void against creditors of the grantor.[^122]

[289] The evidence reviewed above concerning the intent of Kimel/Annopol and Goldfinger applies equally to Farber’s claim under the FCA. Based on that evidence, I find that they did not possess the intent “to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures” as required by FCA s. 2.

Summary

[290] For the reasons set forth above, I dismiss Farber’s claim to set aside the $2.5 million payment to Goldfinger under the APA and FCA as pleaded in paragraphs III (a)(ii) and (c) of its Fresh as Amended Notice of Application.

E. The oppression claim under OBCA s. 248.

[291] Next, Farber challenged the payment of $2.5 million to Goldfinger under the oppression provisions found in section 248 of the Ontario Business Corporations Act. Farber submitted that as trustee of Annopol it was a proper “complainant” under OBCA s. 248. Goldfinger contended that the court possessed the discretion to recognize a trustee as a complainant under OBCA s. 245(c), but it should not do so in the present case.

[292] Where the bankrupt is a party to an impugned transaction, the court possesses the discretion to determine whether, in the circumstances of the particular case, the trustee is a proper person to act as a complainant.[^123] In the Olympia & York Developments case, the Court of Appeal held that where it was likely the creditors of a bankrupt corporation would have been recognized as complainants for the purpose of challenging a transaction under OBCA s. 248, then it was proper to recognize the trustee of the bankrupt as a complainant “in effect on behalf of the creditors of” the bankrupt.[^124] I will proceed with my analysis on the basis that Farber, as trustee of Annopol, has status as a “complainant” for purposes of OBCA s. 248.

[293] The oppression remedy concerns the reasonable expectations of the stakeholders of a corporation and whether the corporation has acted in a way to violate those reasonable expectations by conduct which is “oppressive or that unfairly prejudiced” or “unfairly disregarded” those reasonable expectations.[^125]

[294] In its factum Farber framed the reasonable expectations it was advancing in the following terms:

77./ Applying these factors to the relationship between Annopol and its third-party creditors, the most basic reasonable expectations of those creditors are that:

(a) Annopol would not make payments to reproduce salaries or by way of equity distributions (or gratuitous payments) where: (i) Annopol’s financial situation was such that it was not be able to repay creditors; or (ii) the payments would result in Annopol being unable to repay its creditors;

(b) Annopol would pay stakeholders only in accordance with the relative priority of their claims against Annopol; and,

(c) Annopol would not take steps or enter into agreements that would prejudice the company’s ultimate ability to pay its creditors.

[295] I accept that creditors of a corporation possess a reasonable expectation that the company will not engage in conduct which runs afoul of the provincial preferences legislation or the preference/ transfer for undervalue provisions of the BIA. However, for the reasons set out above, I have concluded that the payment of $2.5 million by Annopol to Goldfinger did not run afoul of BIA s. 96, the Assignments and Preferences Act or the Fraudulent Conveyances Act. In reaching that conclusion I found that at the time of the payments neither Annopol/Kimel nor Goldfinger possessed the intent to defeat, hinder, delay or defraud creditors. I would rely on the same findings to conclude that Annopol’s payment to Goldfinger did not violate the reasonable expectations of its creditors.

[296] Although that part of Farber’s argument seems duplicative of what it submitted under the BIA, APA and FCA, in its factum it put forth an additional submission:

84./ The payment of $2.5 million to Goldfinger could not possibly have been foreseen by Annopol’s third-party creditors and there is nothing those creditors could have reasonably done to protect themselves from JLK and MLK causing Annopol to pay $2.5 million to Goldfinger.

85./ The detriment to Annopol’s creditors caused by the $2.5 million payment is obvious. As a result of the $2.5 million payment, Annopol was completely stripped of assets and incurred further debt in order to make a prohibited equity payment or distribution to Goldfinger. The result has been the bankruptcy of Annopol and a significant loss to Annopol’s creditors. By way of contrast, Goldfinger recovered a $2.5 million equity payment.

Farber argued that Goldfinger in fact was a shareholder of Annopol at the time the $2.5 million payment was made and that the payment constituted the re-purchase of his issued shares or the making of a capital dividend in contravention of OBCA ss. 30(2) and 38(3) which prohibit such actions where there are reasonable grounds to believe that the corporation is not solvent.

[297] In December, 2007 and January, 2008, Goldfinger was not a shareholder of Annopol. He had not subscribed for any shares; Annopol had not issued any shares to him. As set out in paragraph 193 above, the two lawyers who acted for Goldfinger on the First Settlement never saw any share certificates issued to him by any of the Summit Glen group of companies. Also, Farber possessed the minute book for Annopol, which included a shareholder register, but it could not locate any share certificates or other documents which indicated that Goldfinger was a shareholder of Annopol. Although Goldfinger thought that under his arrangement with Kimel he would become a shareholder in many of the Summit Glen companies, that never came about.

[298] It is true that each of the December, 2007 and January, 2008 cheques to Goldfinger bore the notation, “re-purchase of shares”, but a notation on a cheque does not alter the state of a corporation’s records or corporate treasury. Moreover, about six months after the $2.5 million payments were made, the First Settlement closed. As mentioned, in the First Settlement the parties acknowledged that no shares in the SG Companies (which did not include Annopol) had been issued to Goldfinger, but that for purposes of the settlement “Goldfinger is, and for all purposes shall be deemed to be, the legal and beneficial owner of 50% of the share capital of each of the Summit Glen Companies”. Kimel then agreed to purchase Goldfinger’s shares in the capital of the SG Companies (which did not include Annopol) for $5 million and, in respect of the payment of the Share Purchase Price, Goldfinger acknowledged “receipt prior to the execution of this Agreement of the sum of $2,500,000.00 on account of the Share Purchase Price”. The SG Companies identified on Schedule 1 to the First Settlement consisted of those which owned properties. Given that the First Settlement agreement purported to be made as of December 11, 2007, but it was not executed until early June, 2008, its provisions concerning the purchase of Goldfinger’s “deemed” shares in the SG Companies strongly suggest that the “re-purchase shares” notation found on the cheques paid to him in December, 2007 and January, 2008 actually referred to the notional re-purchase of the deemed shares in the SG Companies, not to the re-purchase of Annopol shares.

[299] It follows that since Goldfinger was not a shareholder of Annopol at the time the $

I. Overview of these two proceedings

II. The history of the relationship between Jack Lechcier-Kimel and Dr. Morris Goldfinger

A. The business relationship

B. The First Settlement: 2007/2008

C. Kimel’s breach of the First Settlement and Goldfinger’s enforcement actions

D. The Second Settlement: 2009

E. Post-Second Settlement Events

III. The Claims Motion: the Summit Glen Waterloo Property

A. The property and its realization

B. The claims and the issues

C. Some comments about the written record filed at trial

IV. Summit Glen Waterloo: Montor’s claim

A. Evidence

B. Analysis

IV. Summit Glen Waterloo: Annopol’s claim

A. The amounts claimed

B. Evidence: the Annopol $750K Charge

C. Evidence: The Annopol $100K Charge

D. The state of the accounts between Annopol and SGW

Bank account records

Financial statements

Other documents

E. The financial characterization of the dealings between SGW and Annopol

The lack of documentation argument

The “Annopol as mere conduit” argument

F. Analysis

F.1 Annopol’s First Proof of Claim: $100,000 Annopol Charge and unsecured claim

F.2 Annopol’s Second Proof of Claim: the Annopol $750K Charge

F.3 Summary of conclusion on Annopol’s claims

V. Summit Glen Waterloo: Claim by Farber as the trustee of Summit Glen Group of Companies Inc. (“SGG”)

A. SGG’s Debt claim

B. SGG’s unjust enrichment claim

B.1 The positions of the parties and the applicable law

B.2 Analysis

VI. Summit Glen Waterloo: Claim by Goldfinger’s company, 1830994 Ontario Ltd., based on the assignment of the CTC mortgages

A. Evidence

B. The claim under the CTC $50K Charge

B.1 The position of Goldfinger and 183

B.2 The position of Farber

B.3 Analysis

C. The claim under the CTC $500K Charge

C.1 The position of Farber

C.2 The position of Goldfinger and 183

C.3 Analysis

First argument: The completeness of the assignment

Second argument: the collateral nature of the Assignment

Third argument: recovery under the Assignment is barred by the 2009 Settlement Release

VII. Summit Glen Waterloo: Goldfinger’s constructive trust claim

Goldfinger’s argument

Analysis

VIII. Goldfinger’s claim as the sole shareholder of Summit Glen Waterloo

A. Evidence

B. Analysis

D. Allegations of conflict of interest against Farber by Goldfinger

IX. Summary of conclusions on the Claims Motion

X. The Preferences Application: Summary of the allegations against Dr. Goldfinger

XI. The 2007/2008 $2.5 million settlement payments to Goldfinger

A. The allegations and positions of the parties

B. The First Settlement: 2008

C. Farber’s claim under BIA s. 96

C.1 The statute

C.2 The transfers

C.3 Was the transfer at undervalue?

C.4 Were Goldfinger and Annopol at arm’s length?

C.5 Did the transfer take place within one year before the date of the initial bankruptcy event?

C.6 Was Annopol insolvent at the time of the transfer or was Annopol rendered insolvent by it?

C.7 Did Annopol intend to defraud, defeat or delay a creditor?

The case law concerning ascertaining the debtor’s intention

The evidence and analysis

D. Farber’s claim under the Assignments and Preferences Act and Fraudulent Conveyances Act

The Assignments and Preferences Act claim

The Fraudulent Conveyances Act claim

Summary

E. The oppression claim under OBCA s. 248.

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues