Hamilton v Hamilton, 2015 ONSC 2901

ONTARIO

SUPERIOR COURT OF JUSTICE

CITATION: Hamilton v Hamilton, 2015 ONSC 2901

COURT FILE NO.: 08-909

DATE: May 5, 2015

B E T W E E N:

ROGER JOHN HAMILTON and SHEILA DIANE BAKER

Christine Carter for Gayle Gavin

Applicant

• and -

WILLIAM JAMES HAMILTON, STACEY MARIANNE HAMILTON, TERRY KERR HAMILTON, LLOYD HAMILTON, JAMES HALLEY HAMILTON, SHEILA MAUREEN KIRK

Mark Rush for Stacey Hamilton

No one appearing for the other parties

Respondents

HEARD: January 23, 2015

REASONS FOR JUDGMENT

James J.

1This matter comes before the court as an application by Stacey Marianne Hamilton for payment out of court of the sum of $36,987.34 plus accrued interest.

2The relationship between the parties is complicated. William James Hamilton was one of five children of Mary Kerr Hamilton. Mary Kerr Hamilton died in November 2006. At the time of her death she owned a cottage at 238 Black Fish Bay Road, Combermere, Ontario. Pursuant to her will, the title to the cottage was transferred to her five children in equal shares. Eventually the cottage was sold and each of the children acquired his or her respective share of the proceeds of sale except that the share in favour of William James Hamilton was paid into court.

3William James Hamilton was married to Sheila Kirk. There were children of that marriage, Stacey Marianne Hamilton and Steven Hamilton.

4Subsequently they were divorced and Mr. Hamilton married Gayle Dianne Gavin. They had one child, Heather, born in 1989. Mr. Hamilton and Ms. Gavin separated in 1997.

5When the estate of Mary Kerr Hamilton was probated, the transfer of the cottage property into the names of the beneficiaries was delayed for several years. When the respective interests of the beneficiaries were actually transferred out of the estate, William James Hamilton directed that his 20% interest was to be registered as a joint tenancy with his daughter Stacey. Stacey’s claim on the funds in court is as the survivor of that joint interest.

6There are competing claims against the money in court. Firstly, Stacey Hamilton claims to be entitled to the full amount as the survivor of the joint tenancy with her father. Alternatively, Stacey Hamilton says that if she is not entitled to receive the funds in court then she has a priority claim for the funeral costs of her father amounting to $5,156.81. Gayle Gavin has a claim of about $45,000 against the funds based on her status as a creditor of William Hamilton for child support in relation to their daughter Heather. William Hamilton’s first wife, Sheila Kirk, has a claim as a creditor for unpaid child support as well which she says amounts to $10,920 without interest or $37,196.25 with interest at 5.5%.

7At the hearing of this motion the argument focused on a narrow issue, namely, did William Hamilton contravene the provisions of the Fraudulent Conveyances Act when he conveyed a portion of his fractional interest in the cottage by directing that his 20% interest was to be conveyed to his daughter Stacey and himself as joint tenants with right of survivorship because at the time of the transfer, Gayle Gavin was a creditor of William Hamilton for child support in British Columbia in relation to his daughter Heather.

8If it is determined that the conveyance ought to be set aside, is Mr. Hamilton’s first wife, Sheila Kirk, entitled to share in the funds to be paid out of court in her capacity as a creditor for child support purposes in addition to Ms. Gavin.

9On the first issue, whether or not the Fraudulent Conveyances Act has been contravened, can it be said that the claims of Mr. Hamilton’s creditor or creditors were “hindered” when he gave half of his 20% fractional interest to his daughter Stacey.

10In my view, the answer to this question is yes.

11When a transferee does not pay adequate consideration for his or her interest, the focus of the inquiry is on whether or not in making the transfer, the transferor intended to defeat, delay or hinder the lawful claims of his or her creditors. This question is usually determined by a review of the circumstances of the transfer for the purpose of determining the presence or absence of the so-called badges of fraud that have developed in the cases decided under the Fraudulent Conveyances Act. No fraudulent intent of the part of the transferee need be shown and none was suggested here.

12It is unusual in a case under the Fraudulent Conveyances Act for the property interest in question to have been converted to a pool of cash as a result of a partition and sale proceeding. The usual remedy is for an order setting aside the transfer and returning the property into the name of the transferor. Here, the property interest has been monetized and the cash proceeds are available to the party or parties most entitled to receive them. Technically speaking, however, I don’t think that the results should be altered by the conversion of the real property interest to cash.

13Some but not all of the established criteria for assessing whether or not the transferor had the necessary intent under the statute to defeat the claims of his creditors are present on the facts of this case. The presence or absence of these three factors:

i. no consideration,

ii. transfer to a close family member, and

iii. no loss of the right to possession, can be critically important to a determination of whether or not a property transfer has been made in contravention of the Act.

14As pointed out by Rouleau, J (as he then was) in Conte v. Alessandro, 2002 CanLII 20177,

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.

The 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.

Once there is a presumption the burden of proving 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.

In cases of non-arm’s length transactions, independent corroborative evidence is strongly recommended but not required if the defendant’s evidence is found to be credible (paras. 22-23).

15I accept that there may well have been valid reasons for the transfer to Stacey. Stacey Hamilton is the only child of William Hamilton who resides in Ontario. She was close to her father. She spent time at the cottage. It is natural that Mr. Hamilton would be prompted in the circumstances to share his cottage interest with his daughter.

16However, the presence of an actual or contingent creditor at the time of transfer changes the situation significantly.

17Usually in a contest between a creditor and a transferee who paid nothing to acquire his or her interest in real property, the creditor prevails unless the transferee can demonstrate the bona fides of the transfer. On the facts here, I am satisfied that the circumstances raise a presumption of fraudulent intent on the part of the transferor that has not been displaced.

18Accordingly, Ms. Hamilton is not entitled to payment out of court in her capacity as the surviving joint tenant.

19I now turn to a review of the creditor’s claims. The largest claim is the claim for unpaid arrears of child support advanced by Ms. Gavin. The original order was made in British Columbia. It was registered in Ontario in 2014. Mr. Hamilton died on August 30, 2010. At that time he owed about $45,300 in child support arrears according to the records of the Family Maintenance Enforcement Program in the province of British Columbia.

20Counsel for Ms. Hamilton argues that Heather’s attendance at university was irregular and rarely full time and that I should treat the child support obligations of Mr. Hamilton as having come to an end when Heather turned 18 in or about 2008. I do not accept this submission. The child support order remained in place. Child support continued to accrue after Heather turned 18 years old. She registered in a post-secondary education institution. If her attendance was irregular or she dropped out or failed her courses, at some point it would have been open to Mr. Hamilton to apply to bring his child support obligation to an end. He did not do so. For the purposes of this motion, I accept Ms. Gavin’s child support claim as being the amount outstanding at the time of Mr. Hamilton’s death being $45,300.

21I will now review the claim of Sheila Kirk. Ms. Kirk’s claim is quite old and not documented. She deposes that her entitlement arises from the breakdown of her marriage with Mr. Hamilton in June, 1962. She says that child support was payable in relation to their daughter Stacey until June 1997 when Stacey became 18 years old. She says that child support was payable in relation to Stacey at the rate of either $14 per week or $18 per week and she has used the lower amount for the calculation of the arrears of child support which she says amount to $10,920. There is circumstantial evidence in support of this claim in addition to Ms. Kirk’s sworn testimony in her affidavit. When Mr. Hamilton applied for his divorce from Ms. Kirk, he acknowledged that a child support order was in place. The evidence of Ms. Kirk respecting these child support arrears is unchallenged by Ms. Gavin. It’s clear that Ms. Kirk is aligned in interest with her daughter, Stacey Hamilton respecting this motion but I don’t think anything turns on that fact.

22I note as well that actions under the Fraudulent Conveyances Act are in the nature of class actions, and although often brought by only one creditor, all creditors stand to benefit because when the impugned transaction is set aside and the property interest is returned to the transferor. The benefits accrue in favour of all creditors in proportion to the amount owed.

23In the absence of evidence to the contrary, I accept Ms. Kirk’s assertion that she is a creditor on account of child support arrears. However Ms. Kirk’s interest claim is not allowed. It appears to me that the claim for interest on the indebtedness owed to Ms. Kirk is speculative and in the absence of better proof, it will not be allowed. Similarly, I am not allowing interest on Ms. Gavin’s claim from 2010 either.

24Finally, I turn to the claim of Stacey Hamilton for the funeral and burial costs of her father. As noted above, his estate has not been probated. There is no estate trustee who has the benefit of a certificate of appointment.

25I accept that the burial costs are expenses payable by the estate of William Hamilton. Although Stacey Hamilton incurred these costs voluntarily, I see no good reason why she should be deprived of her status as a creditor entitled to a proportionate share of the funds in court. I do not accept that this claim ought to be granted priority over the other claims. In my view this claim is that of an ordinary creditor and ought to be dealt with on a pro rata basis.

26In conclusion, the funds in court, together with the accrued interest, are to be paid out to the three creditors in proportion to the value of their claims without interest. I calculate the proportions as follows: Ms. Gavin-73.8%, Ms. Kirk-17.8% and Ms. Hamilton- 8.4%.

27An order shall issue directing the accountant of the Superior Court of Justice to forward all the proceeds paid into court to the credit of this proceeding to the firm of Papazian, Heisey and Meyers, solicitors for Gayle Dianne Gavin who will be responsible to distribute the funds proportionately. If required, a teleconference can be arranged with the trial coordinator at Pembroke for a teleconference with me to resolve any outstanding items.

28On the issue of costs, Ms. Carter has delivered a bill of costs for fess of $6,955 based on her hourly rate of $225 per hour. Total disbursements are $203.80. Normally costs are allowed on a partial indemnity basis, usually 60% of the full indemnity rate. The costs claimed by Ms. Gavin are reasonable. I am inclined to award these costs in full and direct that they be paid as a priority payment from the funds in court before calculating the parties’ proportionate shares. I acknowledge that Ms. Gavin is paying the largest share of the costs because her proportionate claim is the largest and for this reason I am allowing Ms. Gavin to recover her full indemnity costs of $8,062.95, inclusive of disbursements and HST.

29These costs are recoverable from the funds in court as a priority payment so that the calculation of the proportionate shares shall be based on an amount remaining after payment of these costs.

30No costs are payable to Sheila Kirk as she was unrepresented.

31No costs are payable to Stacey Hamilton as her claim was primarily based on her ownership interest in the property and this argument was not accepted.