The Bank of Nova Scotia v. Donald, 2016 ONSC 2086
CITATION: The Bank of Nova Scotia v. Donald, 2016 ONSC 2086
COURT FILE NO.: 14-508566
DATE: 20160329
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: The Bank of Nova Scotia for itself and on behalf of all creditors of Alexander Donald also known as Alexander Peter Donald, Plaintiff
AND:
Alexander Donald also known as Alexander Peter Donald, Elford & Donald Bros Ltd., and Donna Sandy Donald, Defendants
BEFORE: Stewart J.
COUNSEL: Ian Klaiman, for the Plaintiff
Michael F. Cooper, for the Defendants
HEARD: November 27, 2015
ENDORSEMENT
[1] The Plaintiff, The Bank of Nova Scotia (“BNS”), has brought a motion seeking summary judgment against the Defendants.
[2] BNS seeks judgment against Alexander Donald (“Alexander”) and Elford & Donald Bros. Ltd. (“Elford”) pursuant to their guarantees to BNS of the financial obligations of North Island Publishing Ltd.
[3] In addition, BNS seeks an order setting aside Alexander’s transfer of his undivided half interest in 34 Thirty Sixth Street, Toronto to his wife, Donna Sandy Donald (“Donna”), as being a fraudulent conveyance.
[4] Alexander and Elford acknowledge the debt owing to BNS on their guarantees and do not oppose the judgment sought against them on this motion.
[5] The only issue in contention is whether the claim of fraudulent conveyance against Alexander and Donna should be summarily determined on this motion. Alexander and Donna submit that a trial is required since a genuine issue for trial has been raised by them.
[6] Pursuant to Rule 20.04(2), the Court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial. In determining whether there is a genuine issue requiring a trial, the motion judge has the power to weigh evidence, evaluate the credibility of a deponent, and draw any reasonable inference from the evidence unless it is in the interest of justice for such power to be exercised only at trial.
[7] Hyrniak v. Mauldin, 2014 SCC 7 sets out the procedure to be followed on a motion for summary judgment. The motion judge should first determine if there is a genuine issue requiring a trial based only on the evidence without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportional procedure.
[8] If there appears to be a genuine issue requiring a trial, the motion judge should determine if a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). The Judge may use those powers, provided that doing so does not offend the interests of justice and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
[9] The Fraudulent Conveyances Act (the “Act”) provides (in sections 2 and 3):
Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore and hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suites, debts, accounts, damages, penalties or forfeitures are void as against such person and their assigns.
Section 2 does not apply to an estate of 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.
[10] Where a plaintiff establishes prima facie that a conveyance was made with fraudulent intent for purposes of section 2 and without good consideration for purposes of section 3, the conveyance is subject to be set aside unless the defendant establishes either that the transferor lacked the fraudulent intent or that the conveyance was made for good consideration and that the transferee acted in good faith and without notice or knowledge of the fraudulent intent of the transferor (see: CIT Financial Ltd., v. Zaidi, 2006 CanLII 8469 (ON SC), [2006] O.J. No. 1073).
[11] Where the transaction is between near relatives and is made in suspicious circumstances, an evidentiary burden is imposed on the defendants to prove the bona fides of the transaction. In such cases, the testimony and explanation of the defendants must be scrutinized with care and suspicion (see: 633746 Ontario Inc. (Trustee of) v. Salvati, 1990 CanLII 6740 (ON SC), [1990] O.J. No. 995).
[12] The intention of the parties is to be determined from antecedent and contemporaneous circumstances, and not from subsequent events.
[13] BNS has pointed to several “badges of fraud” that would suggest that this conveyance was fraudulent, including the suspicious timing of the transfer.
[14] In response, Alexander and Donna have tendered sworn affidavits denying any fraudulent intent or knowledge, and assert that the transfer was not a fraudulent conveyance.
[15] Alexander describes in his affidavit the extent of mortgage financing arranged by him and Donna in 2010 which, incidentally, was with BNS. He does so to demonstrate how very little equity remained in the property, arguing that this fact of his minimal equity would militate against any possible finding of a fraudulent intent on his part to remove the asset from the hands of creditors.
[16] More significantly, Alexander provided evidence as to the serious health problems he was facing in the summer of 2013 when he was diagnosed as suffering from colon cancer. Surgery was carried out in August, 2013 out as part of his treatment, the medical-surgical records of which were tendered as proof of the seriousness of the problem. BNS does not challenge the veracity of this evidence.
[17] Alexander and Donna both swear that, as a result of this shocking development, a decision was made to transfer Alexander’s half-interest in the family home to Donna. The major reason advanced for so doing was the concern that Alexander’s cancer diagnosis could have a negative impact on the availability of any effort to obtain future financing using the home as security.
[18] The other reason for this decision was that it was done to simplify administration of the home as part of Alexander’s estate should he succumb to the cancer he was battling.
[19] In my view, a just and fair consideration of the issues necessary to determine whether this transfer should be set aside as a fraudulent conveyance requires a trial. To decide this issue on this record would not be in the interests of justice.
[20] As the issue is a comparatively narrow one, any trial would be short and thereby early dates for same could be arranged easily. In such circumstances, there is no major advantage of timeliness affordability or proportionality that would be achieved by attempting to decide these important issues of credibility for the parties on a paper record.
CONCLUSION
[21] BNS shall have judgment against Alexander and Elford as set out in the draft judgment provided by counsel in the following amounts:
Alexander shall pay to BNS the sum of $159,484.52;
Alexander shall pay to BNS the further sum of $8,332.93;
Elford shall pay to BNS the sum of $160,559.18;
Elford shall pay to BNS the sum of $8,064.48; and
Alexander and Elford shall pay to BNS costs of this part of the action fixed in the all-inclusive sum of $10,000.00 payable within 60 days.
[22] The judgment referenced in paragraph 21 shall bear interest at the contractually agreed upon rates as set out in the draft judgment provided by counsel.
[23] The balance of the motion is hereby dismissed. The parties may proceed to a trial on a date to be scheduled by the Civil Trial Co-ordinator.
COSTS
[24] If either party wishes to make further submissions as to costs, they may do so within 20 days of the date of this decision.
Stewart J.
Date: March 29, 2016