Conde v. Ripley et al.

[Indexed as: Conde v. Ripley]

Ontario Reports

Ontario Superior Court of Justice,

Dunphy J.

May 26, 2015

125 O.R. (3d) 689 | 2015 ONSC 3342

Case Summary

Limitations — Fraudulent conveyances — Plaintiff bringing application for support and remedial constructive trust under Family Law Act ("FLA") in 2005 — Plaintiff misdescribing farm property in schedule to FLA claim and mistakenly obtaining and registering certificate of pending litigation against only small portion of farm — Court finding that plaintiff was defendant's spouse within meaning of s. 29>(a) of FLA [page690] — Defendant conveying his undivided half interest in larger portion of farm to company controlled by his sister in 2007 — Plaintiff commencing action in 2012 to set aside that conveyance under s. 2 of Fraudulent Conveyances Act — Action constituting "action to recover any land" under s. 4 of Real Property Limitations Act — Ten-year limitation period applying — Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, s. 2 — Real Property Limitations Act, R.S.O. 1990, c. L.15, s. 4.

The plaintiff commenced proceedings under the Family Law Act in 2005 seeking support and a declaration of a remedial constructive trust in respect of half of the defendant's interest in a farm property. The farm was correctly identified in the FLA claim by its postal address, but was misdescribed in the schedule to the FLA claim. The plaintiff obtained and registered a certificate of pending litigation which mistakenly applied only to a two-acre parcel of the 100-acre farm. In 2007, after the court found that the plaintiff was the defendant's "spouse" within the meaning of s. 29(a) of the FLA, the defendant conveyed his undivided half interest in the 98-acre portion of the farm which was unaffected by the certificate of pending litigation to a company controlled by his sister. In November 2012, the plaintiff brought an action to set aside that conveyance under s. 2 of the Fraudulent Conveyances Act ("FCA"). The defendants brought a motion for summary judgment dismissing the action as barred by the Limitations Act, 2002, S.O. 2002, c. 24. The plaintiff brought a cross-motion to amend her claim by adding an explicit claim for constructive trust relief, including tracing remedies.

Held, the defendants' motion should be dismissed; the plaintiff's motion should be granted.

The plaintiff's unresolved claim for support gave her standing as a "creditor or other" to bring a claim under s. 2 of the FCA.

The FCA claim, as a claim to set aside a conveyance of real estate, was an action to "recover any land" under s. 4 of the Real Property Limitations Act. The applicable limitation period was therefore ten years. The action was not statute-barred. The requested amendments to the statement of claim to allege claims of constructive trust and tracing were also governed by s. 4 of the Real Property Limitations Act and were not statute-barred.

If the FCA claim was governed by the Limitations Act, 2002, it was statute-barred as the plaintiff became aware in April 2010 of the facts which grounded the claim.

Stone v. Stone (2001), 55 O.R. (3d) 491, [2001] O.J. No. 3282, 203 D.L.R. (4th) 257, 156 O.A.C. 345, 39 E.T.R. (2d) 292, 18 R.F.L. (5th) 365, 107 A.C.W.S. (3d) 269, 2001 24110 (C.A.); Toronto Standard Condominium Corp. No. 1703 v. 1 King West Inc., [2010] O.J. No. 1675, 2010 ONSC 2129, 68 C.B.R. (5th) 120, 94 C.P.C. (6th) 364, 261 O.A.C. 272, 318 D.L.R. (4th) 378, 188 A.C.W.S. (3d) 443 (Div. Ct.), affg [2009] O.J. No. 4216, 181 A.C.W.S. (3d) 672, 2009 55330 (S.C.J.), consd

Other cases referred to

Longo v. MacLaren Art Centre Inc., [2014] O.J. No. 3242, 323 O.A.C. 246, 2014 ONCA 526, 242 A.C.W.S. (3d) 426; McConnell v. Huxtable (2014), 118 O.R. (3d) 561, [2014] O.J. No. 477, 2014 ONCA 86, 41 R.P.R. (5th) 1, 42 R.F.L. (7th) 157, 370 D.L.R. (4th) 554, 315 O.A.C. 3, 237 A.C.W.S. (3d) 505; Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., [2013] O.J. No. 634, 2013 ONSC 80 (S.C.J.); Tucker v. Aero Inventory (U.K.) Ltd., [2011] O.J. No. 3816, 2011 ONSC 4223, 80 C.B.R. (5th) 1, 338 D.L.R. (4th) 577, 206 A.C.W.S. (3d) 466 (S.C.J.) [page691]

Statutes referred to

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 95 [as am.]

Family Law Act, R.S.O. 1990, c. F.3 [as am.], s. 29, (a)

Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, s. 2

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.], ss. 2(1)(a), 4, 5 [as am.], (1)(a), (b), (2)

Real Property Limitations Act, R.S.O. 1990, c. L.15 [as am.], s. 4

MOTION by the defendants for summary judgment dismissing an action; CROSS-MOTION by the plaintiff for leave to amend a statement of claim.

Tim Gleason and Jonathan Schachter, for plaintiff.

D. Larry Todd, for Mary Guzman and 1216784 Ontario Limited.

[1] DUNPHY J.: — An action may be commenced under s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 ("FCA") against a transferee of real property or personal property to declare a conveyance of such property to be void as against "creditors or others" in circumstances where fraudulent intent is to be found. This case considers whether the limitation period applicable to such an action depends upon either (i) the nature of the underlying claim of the "creditors or others" bringing the action; or (ii) whether the conveyance involved real property, personal property or both?

[2] I have concluded in this case that the nature of the claim by which the "creditors or others" obtain standing to bring a claim under the FCA has no bearing upon whether the claim to set aside the conveyance itself is one governed by the Real Property Limitations Act, R.S.O. 1990, c. L.15 ("RPLA") or the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. Rather, if a claim is brought under the FCA to set aside a conveyance of real property, such a claim is on its face a claim to "recover any land" to which the RPLA applies a ten-year limitation period whereas conveyances of personal property give rise to "claims" under the Limitations Act, 2002 which governs other types of conveyances attacked under the FCA. The outcome, while somewhat inelegant in applying two different statutory limitation periods to two actions under the same section of the same statute (s. 2 of the FCA), appears to me to be the correct one mandated by the statutes.

Background

[3] The case concerns competing claims over an approximately 100-acre farm near Sunderland, Ontario. The farm [page692] was purchased on July 20, 1998 by the defendant 1216784 Ontario Limited ("121") and the defendant Robert Ripley. While conveyed with a single instrument, the farm's legal description consisted of two lots -- the southern portion of which consisted of approximately two acres while the northern portion consisted of approximately 98 acres.

[4] The defendant 121 is an Ontario corporation controlled by the defendant Mary Guzman. Ms. Guzman is the sister of Mr. Ripley.

[5] On June 21, 1999, the lands on which the farm is situate were converted to the land titles system. When converted, two PIN's were created, one for the north lot (PIN 722008-122) and one for the south lot (PIN 722008-124). The postal address of the farm remained at all times the same: S-14200, Side Road 18, R.R. #4, Sunderland, Ontario.

[6] The plaintiff, Zalia Conde, is the former spouse of Mr. Robert Ripley. Ms. Conde and Mr. Ripley lived together on the farm for a number of years. After separating in August 2004, Ms. Conde commenced proceedings under the Family Law Act, R.S.O. 1990, c. F.3 ("FLA") in March 2005 seeking, among other things, support and a declaration of a remedial constructive trust in respect of half of Mr. Ripley's interest in the farm.

[7] While the farm was correctly identified in the FLA claim by its postal address, and described as having been purchased as both an operating farm and a location for a B&B (bed and breakfast) business, the FLA claim "more particularly" described the farm in Schedule "A" thereto with a legal description that made reference to only one of the two PIN's which together constituted the farm property. The PIN referenced in the claim was that of the two acre parcel and omitted the PIN of the 98-acre parcel containing the bulk of the farm including the main farm buildings.

[8] On March 15, 2005, a certificate of pending litigation (or "CPL") was obtained. The CPL only applied to the two acre parcel or the "South lot", repeating the error made initially by the plaintiff in "more particularly" describing the farm in the FLA claim.

[9] While Mr. Ripley denied that the relationship between the two went so far as to grant Ms. Conde the status of spouse within the meaning of s. 29(a) of the FLA, the plaintiff's claim to have been the spouse of Mr. Ripley was upheld after a bifurcated trial (confined to the s. 29(a) issue) by Backhouse J. in extensive reasons released on April 20, 2007 and was subsequently affirmed by the Court of Appeal in 2009. [page693]

[10] Two months after the decision of Backhouse J. which affirmed that status of the plaintiff as a "spouse", Mr. Ripley conveyed his undivided half interest in the north lot (the one unaffected by the CPL) to 121 which, as noted, is controlled by his sister on June 18, 2007. He continues to own a part interest in the south lot, although the precise extent of that interest is unclear from the record (but is not material to this case). It is this conveyance which the plaintiff seeks to characterize as a fraudulent transfer under the FCA.

[11] In April 2010, having exhausted his appeals to the Court of Appeal on the "spouse" issue, Mr. Ripley at last turned his mind to complying with the court orders requiring him to make financial disclosure which he theretofore all but ignored. In an affidavit sworn by him on April 19, 2010, Mr. Ripley attested that he had conveyed his interest in "the farm property that I live on" to his sister for $75,000. No date for the conveyance was mentioned. The same affidavit later mentioned that he owned "a 12% interest in a piece of farm land owned with my sister" without identifying the land more precisely.

[12] Mr. Ripley's affidavit did not mention that he had conveyed only his interest in the north lot (the larger of the two) nor did it hint at the error committed by the plaintiff (or her lawyer) in seeking and registering the CPL as against the PIN for the south lot only.

[13] The plaintiff filed a responding affidavit only four days later. In her responding affidavit of April 23, 2010, she expressed incredulity at the alleged transfer of the farm which she characterized as possibly fraudulent in light of the small amount of consideration and her pending claim which had resulted in a registered CPL. She clearly doubted that the alleged transfer had occurred and attached as an exhibit to her affidavit an on line property search (with a currency date of April 20, 2010) that she had obtained evidencing Mr. Ripley continuing to appear on title as owner. The tenor of her affidavit clearly expresses scepticism if not outright disbelief that the transfer had in fact occurred.

[14] Unfortunately, the plaintiff (or her lawyer) had made the same error as was noted in the original 2005 FLA claim and searched the wrong PIN. Asking the wrong question often generates the wrong answer and this case was no exception.

[15] A reader alerted by the affidavit of Mr. Ripley to the existence of a sale might have wanted to double-check the legal description searched or at least to conduct a very careful review of the search results obtained online, perhaps supplementing these with an official title search at nominal cost. The online [page694] search produced in Ms. Conde's April 23, 2010 affidavit contained clues that might have alerted her or her counsel to something being off. There was included a reference to an assessed value (in 2010) that was well below both the purchase price paid for the entire farm in 1998 and the value her own affidavit ascribed to the land. The degree of discrepancy was significantly more than might be expected as falling within the normal range of variation for MVA assessments. As well, the search described the property both in terms of area (in square metres) and perimeter (in metres). Neither value was remotely close to what a 100-acre farm should have had in terms of area or perimeter.

[16] Either of these two clues, if noticed, would have precluded relying on the online search result as conclusively disproving the truth of Mr. Ripley's affidavit. Unfortunately, while hindsight quite often wins vision contests, there is no evidence that the discrepancy was actually noticed by the plaintiff or her lawyer at the time.

[17] In the meantime, Mr. Ripley appears to have profited from a lull in the litigation caused by his ex-spouses dwindling resources to disappear. He was eventually noted in default in the FLA proceedings after having refused to pay costs awarded by the Court of Appeal.

[18] Mr. Ripley's present whereabouts are not known with certainty. As a result, the plaintiff filed a cross-motion heard together with the defendants' motion for summary judgment requesting, among other things, an order for substituted service (which I granted) permitting him to be served at three addresses associated with him (including his sister in Ontario and brother in Texas).

[19] The plaintiff was of limited financial means and lacked the ability to pursue her FLA case with vigour given the disappearance of her former spouse and the non-payment of the costs award. She eventually obtained a legal aid certificate and was able to seek to bring things back on the rails in early 2012.

[20] The plaintiff finally became convinced that Mr. Ripley was telling the truth of the transfer of the farm in late January 2012 in circumstances discussed further below. The mistake in the CPL legal description was also discovered at that time.

[21] This claim was commenced on November 15, 2012 seeking, among other things, an order setting aside the (2007) conveyance to 121 pursuant to s. 2 of the Fraudulent Conveyances Act.

[22] In January 2014, an order was granted in the FLA proceedings amending the CPL to include the full legal description (i.e., both PINs). The amended CPL was issued on January 29, 2014. [page695]

[23] The defendants 121 and Mary Guzman moved for summary judgment to dismiss the plaintiff's action on the basis that it is barred by the Limitations Act, 2002. That motion was originally scheduled to be heard on October 21, 2014, but was adjourned to allow the plaintiff to prepare responding materials.

[24] On December 19, 2014, the plaintiff moved by way of cross-motion to amend her claim by adding an explicit claim for constructive trust relief, including tracing remedies, as against the defendants 121 and Mary Guzman.

[25] Although disputed in the written materials filed, at the hearing of this motion, the defendants 121 and Ms. Guzman have not resisted the proposed amendments to the statement of claim adding the constructive trust and tracing remedies beyond noting that these same matters have been claimed in the FLA proceedings and it would obviously be in the interests of justice that the two proceedings be coordinated to avoid duplication or the risk of conflicting decisions. The plaintiff, for her part, agrees with this latter sentiment and both parties assure me that they will co-operate in seeking an appropriate consolidation order to ensure the efficient management of the litigation going forward.

Issues

[26] The issues before me are

(a) what is the true nature of an action under s. 2 of the FCA;

(b) what limitation period applies to actions brought under s. 2 of the FCA;

(c) when was the FCA claim "discoverable" in this case; and

(d) ought the plaintiff be granted leave to amend her claim?

Discussion

(i) Nature of action under [s. 2](https://www.canlii.org/en/on/laws/stat/rso-1990-c-f29/latest/rso-1990-c-f29.html#sec2_smooth") of [FCA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-f29/latest/rso-1990-c-f29.html)

[27] Section 2 of the FCA provides that a conveyance of real or personal property made with the requisite fraudulent intent is void against "creditors or others". The phrase "creditors or others" has been considered many times. Originally, it was thought that only judgment creditors or those with liquidated claims had standing to prosecute FCA actions. Over time, the courts gave life to the "or others" language and softened that approach. A convenient place to review the history of the jurisprudence concerning this phrase as used in s. 2 of the FCA is Stone v. Stone (2001), 55 O.R. (3d) 491, [2001] O.J. No. 3282, 2001 24110 (C.A.). [page696]

[28] In Stone, the court considered whether the FCA could be employed by a spouse seeking to set aside certain transfers by her spouse prior to his death which defeated her claim to equalization of net family property. Feldman J.A. reviewed at some length the history of the phrase "creditors or others" and concluded that a spouse with a claim to equalization under the FLA, even if proceedings had not yet been commenced or reduced to judgment, nonetheless had standing as "creditors or others" to bring suit under s. 2 of the FCA. She held (at paras. 23-25):

Longstanding case law decided under the Fraudulent Conveyances Act has addressed the issue of who is a "creditor or other" for the purpose of s. 2. In Hopkinson v. Westerman (1919), 1919 466 (ON CA), 45 O.L.R. 208 (C.A.) at 211, the court held that "others" extended to persons who, though not judgment creditors, had pending actions in which they were sure to recover damages. In that case, the person who transferred the land was a defendant in a tort action. In Bell v. Williamson, 1945 95 (ON CA), [1945] O.R. 844 (C.A.), the court similarly held that the claimant need not be a judgment creditor at the time of the conveyance, but a person may fall within the words "or others" even if the person has, at the time of the impugned transaction, only a claim for unliquidated damages in contract or in tort. Robertson C.J.O. stated at p. 848:

I do not doubt for a moment that a transaction may be null and void within s. 2 of The Fraudulent Conveyances Act, although the plaintiff who brings the action attacking it may, at the time of the transaction, and even when action is brought attacking it, have had nothing more than a claim for unliquidated damages in contract or in tort. The effect of the words "or others" following the word "creditors" is to give to such persons a right of action to have a transaction set aside as null and void as against them, if made with the required intent[.]

This interpretation of the phrase "creditors or others" has been applied many times including in the family law context: See for example: Shephard v. Shephard (1925), 56 O.L.R. 556 (C.A.); Ferguson v. Lastewka, 1946 96 (ON SC), [1946] O.R. 577 (H.C.J.); Oliver v. McLaughlin (1893), 24 O.R. 41 (Q.B.); Murdoch v. Murdoch (1976), 1976 260 (AB SCTD), 26 R.F.L. 1 (Alta. S.C.); Chan v. Chan, [1993] B.C.J. No. 442 (B.C.S.C.); and Lepore v. Lepore, [1998] O.J. No. 733 (Dist. Ct.), aff'd by Ontario Court of Appeal (October 22, 1990).

Therefore, in order for a spouse to qualify as a person who is intended to be protected from conveyances of property made with intent to defeat her interest, she must have had an existing claim against her husband at the time of the impugned conveyances, that is a right which she could have asserted in an action.

(Emphasis added)

[29] In many ways, an FCA action can be likened to a class proceeding. The outcome of such an action is neither a conveyance of the subject land to the plaintiff nor even a money judgment against the transferee in favour of the plaintiff. Rather, the conveyance is deemed void as against "creditors or others" with the result that whatever remedies that the creditor may have exercised as against the transferor's property may similarly be [page697] asserted against the subject property as if the transfer had never occurred because -- as against "creditors or others" least -- the transfer is void.

[30] The class nature of such a claim is underscored by the fact that on bankruptcy of the transferor, an FCA action accrues to the trustee in bankruptcy of the transferor. This is because the property that is the subject matter of the action effectively returns (at least as regards "creditors or others") to the estate of the transferor and is thus among the assets transferred to the trustee upon bankruptcy. This is a significant exception to the general rule that a trustee stands in the shoes of the bankrupt as the bankrupt transferor would not, in his or her own right, have any standing to challenge his or her own fraudulent transfer.

[31] In the case of Tucker v. Aero Inventory (U.K.) Ltd., [2011] O.J. No. 3816, 2011 ONSC 4223 (S.C.J.), Morawetz J. examined the analogous provisions of s. 95 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 in a case where the defendant transferee had challenged the right of the trustee in bankruptcy to challenge an alleged fraudulent conveyance for the sole benefit of a secured creditor. While noting the line of cases to the effect that such actions are for the benefit of the unsecured creditors as a whole and not merely a single secured creditor, Morawetz J. concluded that property might, potentially, be recovered in favour of a trustee in bankruptcy while also being subject to an existing proprietary right of a secured creditor.

[32] If a prospective, unliquidated claim for equalization under the FLA was considered by the Court of Appeal to be a claim by a "creditor or others" for the purposes of the FCA in Stone, it certainly stands to reason that a filed but unresolved claim for support in FLA proceedings already commenced in 2005 would afford the plaintiff adequate standing to bring this FCA action to invalidate a transfer made in 2007.

[33] That being said, I have some doubts as to whether the constructive trust claim of the plaintiff -- which is a proprietary remedy in trust law -- can also provide her with standing to bring an FCA claim. The FCA is intended to defend the rights of creditors and others generally, not to pursue the interests of one creditor to the potential exclusion of all others. By contrast, a constructive trust claim, if demonstrated, would create a property right to the exclusion of all others. This would appear to me to be incompatible with such a claim being for the benefit of all creditors and passing to the trustee in bankruptcy upon a filing should same occur. That is not to say that property which is transferred in a transaction to which the FCA applies may not [page698] also be subject to proprietary claims as was alleged to be the case in Tucker. In the present case, Ms. Conde has a support claim which, in my view, grants her the requisite standing to bring an FCA claim even if she also has a proprietary claim for which she claims the application of a tracing remedy over the same property. There is no incompatibility in pursuing both claims at once.

(ii) What limitation period is applicable to [s. 2](https://www.canlii.org/en/on/laws/stat/rso-1990-c-f29/latest/rso-1990-c-f29.html#sec2_smooth)

FCA actions?

[34] Section 2(1)(a) of the Limitations Act, 2002 provides that that act does not apply to a proceeding to which the RPLA applies.

[35] Section 4 of the RPLA provides that a ten-year limitation period applies to "an action to recover any land".

[36] The Court of Appeal held in McConnell v. Huxtable (2014), 118 O.R. (3d) 561, [2014] O.J. No. 477, 2014 ONCA 86 that a claim for a family law remedial constructive trust over real estate is "an action to recover any land" to which s. 4 of the RPLA applies. There can thus be no doubt that the constructive trust claim as against Mr. Ripley is also covered by the same ten-year limitation period.

[37] Whether the plaintiff's claim against Mr. Ripley was brought within the ten-year period of the RPLA is not before me as that is a matter to be determined in the FLA proceedings still pending. The legal description of the land claimed was amended in 2014, less than ten years after the claimed separation date of August 2004. Without deciding the point, I assume for the purposes of this motion that her original constructive trust claim against Mr. Ripley in the FLA proceedings, as amended in 2014, is not barred by s. 4 of the RPLA applying McConnell v. Huxtable.

[38] The question to be determined here is what limitation applies to the FCA action to set aside the transfer by Mr. Ripley to 121 which occurred in 2007. In my view, s. 4 of the RPLA applies to that claim as well.

[39] It would be inconsistent in the extreme if a two-year Limitations Act, 2002 limitation period were to be applied to an FCA action seeking to invalidate a subsequent transfer of an interest in land while the claim to the land itself is subject to a ten-year limitation period. The action to set aside the subsequent transfer of the land would be barred before the action to claim the interest is barred, a result which appears contrary to common sense.

[40] In arguing for a two-year limitation period, the moving parties have confused standing to bring a claim under the FCA with the nature of the FCA claim itself. Standing -- which is [page699] granted by s. 2 of the FCA to "creditors or others" -- is to be distinguished from the nature of the action itself. As I have explained at some length, standing to bring FCA claims is granted to "creditors or others" whereas a claim, once brought by a creditor with standing, has many of the characteristics of a class proceeding. For limitations purposes, in my view, it is necessary to consider the nature of the FCA claim and not the standing of the individual claimant.

[41] An FCA claim, if successful, does no more or less than invalidate the impugned transfer as against "creditors or others" of whom the plaintiff is obviously an exemplar. Where the conveyance attacked is of real property, such an action is thus quite literally an "action to recover land" since the outcome of the action, if successful, is to "recover" the land to the estate of the transferor (in this case, Mr. Ripley) so that -- once so recovered -- it can respond to the claims of creditors or others as if it had never been transferred. The outcome of the plaintiff's claim against the transferor may well be a money judgment -- the outcome of the claim against the transferee under the FCA is an order "to recover land" which is then available to satisfy that claim.

[42] Importantly, even if the underlying claim of the "creditor or others" is a money claim, the outcome of an FCA action is not a money judgment ordering the transferee to pay that claim. The transferee may well pay the judgment to free the property of the claim -- if they so choose. That, however, is a consequence of choice and not of the order made.

[43] I recognize that a corollary of this reasoning is that two separate limitation periods could apply to actions brought under s. 2 of the FCA depending upon whether the transaction being attacked concerns a conveyance of real property or personal property (since the FCA expressly applies to both).

[44] This might seem somewhat inelegant or even regrettable. In my view, it is neither. It is simply the by-product of the FCA being a descendent of a very old statute going back literally hundreds of years upon which has been overlaid a more comprehensive and newly elaborated system of limitation periods than formerly applied. FCA actions were once considered to be actions for which no limitation period specifically applied. The legislature has seen fit to change that, and in so doing, to differentiate between actions involving recovery of land and other types of actions. The result, when applied to this old statute, is what I have described.

[45] The moving parties strongly urged me to follow the decision of H. Sachs J. on behalf of the Divisional Court in [page700] Toronto Standard Condominium Corp. No. 1703 v. 1 King West Inc., [2010] O.J. No. 1675, 2010 ONSC 2129 (Div. Ct.), on appeal from the decision of Master Glustein (as he then was) (at [2009] O.J. No. 4216, 2009 55330 (S.C.J.)).

[46] TSSC 1703 involved a claim by a creditor to set aside certain mortgages granted by the defendant under the FCA. Master Glustein had found at first instance that the FCA action was a "claim" within the meaning of the Limitations Act, 2002. He considered the applicability of the RPLA but found that, having regard to the underlying claim of TSSC 1703 which was "to protect recovery on a judgment", it is not "an action to recover any land" and thus found the RPLA does not apply.

[47] The matter was appealed to the Divisional Court where Master Glustein's judgment was upheld but without any mention of the argument under s. 4 of the RPLA. The plaintiff on appeal does not appear to have argued the question of the RPLA but instead focused on whether the FCA action was a "claim" and if so whether it was discoverable within the meaning of the Limitations Act, 2002.

[48] It is not necessary for me to consider whether an action to set aside a mortgage under the FCA is an action "to recovery any land". This case clearly involves an actual transfer of land. With all due respect to Master -- now Justice -- Glustein, I think that the nature of the underlying claim by which a creditor or other has standing to pursue an action under the FCA is not be confused with the nature of the FCA action itself. The end result may be to enhance the ability of a plaintiff to collect on a judgment, but the actual impact is not a money judgment in favour of the plaintiff. Rather, it is an order that the transaction is void as against the creditor or others similarly situate (including, potentially, a trustee in bankruptcy). This makes the property available for collection proceedings as a matter of practical reality, but in form and substance, it results in the recovery of property from one estate (the transferee) for the benefit of another (creditors and others with claims against the transferor). It is thus in every sense an action to recover property -- that is both its object and the end result of any judgment that might be obtained. As such, it is an FCA action is one to which the RPLA applies on its face in any instance where, as here, the conveyance impugned is a conveyance of real property.

[49] I therefore find that s. 4 of the RPLA contains the limitation period applicable to the conveyance in 2007 of the farm to 121 by Mr. Ripley and must accordingly dismiss the motion for summary judgment of the FCA claim based on the alleged expiry of the two-year limitation period under s. 4 of the [page701] Limitations Act, 2002. Her claim to set aside the 2007 transfer under the FCA, having been brought within the ten-year limitation provided by s. 4 of the RPLA, is not statute-barred.

(iii) Discoverability under [s. 5](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html#sec5_smooth) of the [Limitations Act, 2002](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html)

[50] Having found that the ten-year limitation period under the RPLA applies to the claim of Ms. Conde to an action under the FCA to set aside the transfer by Mr. Ripley to 121 in 2007, the issue of discoverability under s. 5 of the Limitations Act, 2002 does not arise in this case. However, as the matter was extensively argued before me and in the event I am found to have been incorrect regarding the applicable limitation period, I set forth below my conclusions regarding the Limitations Act, 2002 were same to be applied in this case.

[51] Sections 4 and 5 of the Limitations Act, 2002 provide as follows:

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

5(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[52] The "injury, loss or damage" that s. 5 of the Limitations Act, 2002 refers to in this case is the transfer of his interest in the north lot to 121 by Mr. Ripley on June 18, 2007, which the plaintiff alleges was undertaken with fraudulent intent. Thus, the claim is presumed, by s. 5(2) of the Limitations Act, 2002 to have been known to Ms. Conde on June 18, 2007 "unless the [page702] contrary is proved" and the two-year limitation period prescribed by s. 4 would commence from that date.

[53] The effect of s. 5(2) is that the onus is upon the plaintiff to establish that she did not know of the matters in s. 5(1)(a) until some later date. A plaintiff is required to act with due diligence in determining if she has a claim, even if the nature and extent of the required actions will depend on the circumstances of each case: Longo v. MacLaren Art Centre Inc., [2014] O.J. No. 3242, 2014 ONCA 526, at paras. 41-44.

[54] The respondents 121 and Ms. Guzman argue that the plaintiff acquired actual knowledge of the transfer by Mr. Ripley to Ms. Guzman (121 was not mentioned in the affidavit) and of the damage that the transfer may have caused her by April 2010. Mr. Ripley's affidavit of April 19, 2010 mentioned the transfer to "my sister" while Ms. Conde's response of April 23, 2010 characterized the alleged transfer as possibly fraudulent and, in particular, suggested the transfer was at a considerable undervalue. The plaintiffs argue, and I agree, that all of the necessary ingredients to inform a plaintiff of the potential for a claim under s. 2 of the FCA were contained in those two affidavits filed in the FLA action.

[55] The plaintiff argues that, by reason of the error in the real estate search, she did not have actual knowledge of the transfer until 2012. She clearly disbelieved Mr. Ripley's assertion and thought it just another instance of him pleading (falsely) poverty as an excuse for not paying the various costs awards made against him. She pleads that s. 5(1) (b) requires the court to have regard to what a reasonable person of her abilities and circumstances would know in the circumstances described. It was reasonable to believe, she claims, that this was a further instance of her former spouse's efforts at evasion and deception and that the error in the legal description of the farm property was a subtle one which she could not be expected to have noticed.

[56] In my view, the plaintiff cannot discharge her onus under s. 5(2) of the Limitations Act, 2002 by arguing that she reasonably disbelieved Mr. Ripley when in fact he had told her the truth.

[57] In April 2010, she knew (i) of her constructive trust claim against Mr. Ripley; (ii) of his claimed transfer of the farm to "his sister"; (iii) that the transfer as alleged was for less than fair value; and (iv) that she had concluded that such a transfer would have been potentially fraudulent. Whatever her own level of abilities, she had in fact engaged a lawyer to represent her in this matter and her lawyer's knowledge is, in my view, her own. [page703] In short, she had all of the elements of the FCA action which she did not in fact bring until November 2012.

[58] The plaintiff's response is that she disbelieved Mr. Ripley's affidavit about having conveyed the property. Mr. Ripley did not conceal the fact. He publicly proclaimed it. She or her lawyer had only to conduct a proper search of public records to verify the facts if they chose to be sceptical.

[59] The error was her own -- or that of her lawyer -- in repeating or compounding the error made in 2005 when the wrong legal description was first included in the request for a CPL. The plaintiff or her counsel chose to disregard the explicit notice received in favour of relying upon the April 20, 2010 "on line" search. A careful review of that document would have put both the plaintiff and her lawyer on notice of the error made in the original legal description.

[60] In considering the issue of discoverability in relation to s. 5, it is relevant to consider the chain of events which actually brought the claim to the attention of the plaintiff in order to assess whether those same steps could not have been taken earlier. There is nothing that happened in 2011-2012 that could not have happened in 2010.

[61] The sequence of events leading to the discovery of the mistaken legal description of the property is as follows (as told by the plaintiff and not challenged on the motion).

[62] In September 2011, the plaintiff's lawyer sought a quote for the cost of obtaining an appraisal of the farm property. The appraiser approached forwarded a quotation to her via e-mail on September 27, 2011[^1]. The quotation delivered in connection with that request included a different online title search, this one conducted by the prospective appraiser. That search result disclosed an area and perimeter many multiples larger than what was contained in the 2010 on line search attached to the plaintiff's April 23, 2010 affidavit. In addition, it specifically confirmed the transfer from Mr. Ripley to 121 on June 18, 2007 at a value of $75,000 -- this is the same transfer the plaintiff had doubted in April 2010.

[63] This information appears to have gone unnoticed at the time. The quotation was then attached to an October 20, 2011 request for funding to Legal Aid Ontario to help pay for the appraisal without commenting on the issue. A follow-up request for such funding was then made on the plaintiff's behalf on [page704] January 24, 2012. Ms. Conde indicates that she only noticed the title search information in the quotation from the appraiser at this time when she happened to review the attachments to the follow-up request to Legal Aid. It is then that the plaintiff saw confirmation of Mr. Ripley's affidavit (that the transfer had occurred) and the chain of inquiries leading to his action was begun.

[64] Needless to say, there is nothing that the appraiser did in 2011 and the plaintiff noticed in 2012 that could not have been done with more care in 2010. While I have great sympathy for the plaintiff who had retained counsel and doubtless relied upon her counsel to get such things as legal descriptions of land correctly, the fact of the matter is the affidavit of Mr. Ripley and her reply to it contained all of the elements of the claim she ultimately brought in 2012. She had actual knowledge of the transfer and of the price at which the transfer occurred.

[65] A claim all the elements of which are sitting in black and white in the solicitor's file does not become "undiscoverable" simply because the solicitor has failed to put the pieces together due to his or her own error in conducting a title search compounded by a failure to read carefully the updated search results in 2010.

[66] I must find that the client -- having retained a solicitor -- has the knowledge and information that her solicitor had or ought to have had in the circumstances. Having been put on notice by Mr. Ripley's affidavit, the plaintiff ought to have examined the resulting online title information carefully or, better still, have conducted a more thorough property search to ascertain the true state of affairs. The property appraiser in 2011 had no trouble finding the correct information while preparing a simple quotation. The plaintiff or her lawyer could have conducted proper title searches in 2010 instead of a cursory online search. While the plaintiff was of limited means, a simple property search entails only a very minor expenditure.

[67] The limitation period commences when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence: Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., [2013] O.J. No. 634, 2013 ONSC 80 (S.C.J.), at para. 56. The plaintiff here had the facts but chose to disbelieve them due to a search conducted without due care and accepted without sufficient examination. As between the two, it may well be that the solicitor should have found what her client failed to, but I must attribute the knowledge of one to the other. [page705]

[68] To hold otherwise would be, in my view, to provide a solicitor's negligence exception to the Limitations Act, 2002. While such a development would, I have no doubt, warm the hearts of lawyer insurance providers everywhere, I can find no support for it in the statute. Section 5(1)(b) requires the application of an objective test to a consideration of the subjective capacities of the plaintiff.

[69] Were the Limitations Act, 2002 to be applied to the FCA proceeding instituted by the plaintiff, I would find her claim to be barred by the passage of more than two years from April 23, 2010 when she swore her affidavit containing admissions of knowledge of all of the required elements of the claim she eventually brought in November 2012.

(iv) Cross-motion to amend

[70] The plaintiff has filed a cross-motion seeking leave to amend her statement of claim. That motion was subject to minor amendment on May 7, 2015 (deleting references in the earlier draft to claims against a bank holding a mortgage on the farm).

[71] The claim as amended would add a request for a declaration that Ms. Guzman and 121 hold the property in trust for the plaintiff or an order that Mr. Ripley held it in trust for her and a tracing order permitting her to follow the trust property into the hands of Ms. Guzman or 121. These trust and tracing claims are over and above the FCA claims originally pleaded.

[72] While they initially opposed the amendments on the basis that the amended claims would also be statute-barred, the responding parties (121 and Ms. Guzman) accepted at the hearing that the RPLA would apply to the proprietary constructive trust claims and are not statute-barred since the transfer from Mr. Ripley to 121 occurred in 2007 (less than ten years prior to the date of the proposed amendment to add the claims).

[73] In my view, the responding parties were well advised to adopt the position they took at the hearing. A constructive trust claim or a tracing claim in respect of a particular piece of real estate (in this case, the farm) is clearly an action to recover land to which s. 4 of the RPLA applies and, by that reason, the Limitations Act, 2002 does not.

[74] I advised the parties at the hearing that I would grant leave to amend the statement of claim in the form submitted to me at the hearing (after a minor amendment removing references to the bank).

Disposition

[75] Accordingly, I have found [page706]

(a) the plaintiff's unresolved claim for support grants her standing as a "creditor or other" to bring a claim under s. 2 of the FCA;

(b) the FCA claim, being one to set aside a conveyance of real estate, is an action to "recover any land" under s. 4 of the RPLA with its corresponding ten-year limitation period commencing no earlier than the date of the 2007 conveyance she seeks to set aside;

(c) the requested amendments to the statement of claim set forth in the second supplementary motion record of the plaintiff dated May 7, 2015 to allege proprietary claims of constructive trust and tracing are also governed by s. 4 of the RPLA;

(d) not being statute-barred, the leave to make the requested amendment is therefore granted; and

(e) the plaintiff has been successful in this motion and is entitled to her costs as against the responding parties.

[76] I direct the plaintiff to provide an outline of costs and a submission (restricted to three pages) within 14 days of release of these reasons. 121 and Ms. Guzman may respond within 14 days thereafter and the plaintiff to have seven days to reply (maximum one further page). Note, the substituted service motion will be separately assessed and costs will be payable on that motion as against Mr. Ripley alone. The plaintiff is to include her submissions in respect of costs of that motion in her outline of costs and submissions.

[77] I would ask the plaintiff to collect all of the costs submissions and reply if any and deliver same to me by e-mail or fax care of my assistant at judge's reception, 361 University Avenue (with copies sent by the same medium to the responding parties).

[78] Finally, I have not made a consolidation order only because no such motion is before me. I am relying on the parties to ensure that this proceeding is properly coordinated with the FLA proceedings to avoid any duplication or overlap of matters or risk of conflicting decisions. I would expect the FLA proceeding to be the proper one in which to bring a motion to coordinate matters.

Defendants' motion dismissed; plaintiff's motion

granted.

Notes

[^1]: The attachment was erroneously dated 2010, but I am quite satisfied that this was just a typographical error.

End of Document