Court File and Parties

COURT FILE NO.: 3454/14 DATE: 2016 06 01

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Royal Bank of Canada Applicant L. Hansen, Counsel for the Applicant

- and -

Carlo Casamirro Nonis, Paddon and Yorke Inc. In Its Capacity as Trustee of The Estate of Carlos Casamirro Nonis c.o.b as CN Enterprises and Adina Nonis Respondents D. Quirt, Counsel for the Respondent A. Nonis

HEARD: May 31, 2016

Reasons for Judgment

LEMAY J

[1] One of the Respondents, Mr. Carlo Cassamirro Nonis (“Carlo”), was in business. He personally guaranteed the debts of his company. In July of 2013, he got a notice from the Royal Bank of Canada, one of his creditors, that they were seeking to collect the money that Carlo and his businesses owed them.

[2] Carlo also appeared on title as the owner of one half of the matrimonial home that he shared with Ms. Adina Nonis (“Adina”), another one of the Respondents. One week after Carlo received notice from RBC that they were seeking to collect on his debts, Carlo transferred his interest in the matrimonial home to Adina. Less than three months later, Carlo made an assignment in bankruptcy.

[3] RBC brings this application for an Order for a declaration that Carlo owns 50% of the matrimonial home, located at 255 Bousfield Crescent in Milton, as well as an Order for partition and sale of the property.

[4] Adina resists this application, and says that between 2009 and 2013, when Carlo was on title, he was holding the property in trust for her. As a result, Adina argues that RBC is not entitled to any of the relief it is seeking.

[5] It is common ground between the parties that, if Carlo did not hold his interest in the matrimonial home in trust for Adina, then this transaction is a fraudulent transaction within the meaning of the Bankruptcy and Insolvency Act and/or the Fraudulent Conveyances Act.

[6] For the reasons that follow, I find that Carlo did not hold his interest in the matrimonial home in trust for Adina. As a result, the transfer of Carlo’s share of the matrimonial home to Adina in the summer of 2013 was a fraudulent conveyance and the relief sought by RBC is granted. For clarity, the relief should be granted under both the Bankruptcy and Insolvency Act and the Fraudulent Conveyances Act.

Facts

a) The Original Property Purchase

[7] The property in question is a home at 255 Bousfield Crescent in Milton Ontario. The parties jointly purchased this home in 1995, and were both on the title when it was purchased.

[8] It was purchased with proceeds from a previous home, and it was not clear on the evidentiary record who owned that previous home. However, Adina conceded on cross-examination that she presumed that they both owned the home at this stage.

[9] In 1996, it was transferred to Adina’s name solely as a result of the fact that Carlo was having financial difficulties. The transfer documentation suggests that it was transferred for natural love and affection between spouses. No consideration was paid by Adina for this transfer, and there were no documents other than the deed to establish that it was a gift.

[10] It is also worth noting that, in 2001, Carlo remained a guarantor on debts relating to the property. He also was listed as one of the mortgagors on the mortgage renewal agreement with TD in 2003. This mortgage renewal ran through to 2009.

b) Events In 2009

[11] Between 1996 and 2009, Adina remained the only person on title. However, in 2009, Carlo was added as an owner to the property, and the consideration that is shown for this transfer is the sum of $100,000.00 in debt that he assumed.

[12] Mr. Quirt, on behalf of Adina, argued that this “consideration” was designed to deal with issues relating to the Land Transfer Tax, and that there really was no consideration at all for this transfer. I reject this submission. The mortgage documents show that the total debt being assumed on the mortgage was $200,000.00. The only reasonable inference that can be drawn from the transfer documents, when read with the mortgage documents, is that both Carlo and Adina were jointly responsible for the mortgage. As a result, the consideration for transferring the property to Carlo was the fact that he would be responsible for his half of the $200,000.00 that was owing.

[13] I was advised that the reason for adding Carlo to the title for the property in 2009 was that TD wished to have him on title. However, in all of the documentation that was provided, it is clear that Carlo held himself out to TD as an owner of the property and had done so consistently since 1996. It is also clear that Adina knew he had held himself out as an owner of the property to TD and took no steps to advise TD that it was her position that Carlo was only holding his interest in the property as a trustee for her.

[14] Then, in 2011, Carlo provided RBC with a Personal Statement of Affairs in which he indicated that the ownership of the matrimonial home was shared 50/50 between himself and Adina.

c) The Events of 2013

[15] On or about August 7th, 2013, counsel for RBC wrote to Carlo and advised him that his company owed approximately $240,000.00, and RBC was making a formal demand for the payment of these amounts. It is also clear that Carlo had guaranteed these amounts personally.

[16] Approximately a week later, on August 14th, 2013, Carlo and Adina arranged for Carlo’s interest in the matrimonial home to be transferred to Adina. There was no consideration for this transfer, and the documents show that it was for mutual love and affection.

[17] On or about October 18th, 2013, Carlo made an assignment in bankruptcy, and a Trustee was appointed by the Court to manage his estate. The claims register for the assignment in bankruptcy shows that Carlo had debts in excess of $350,000.00.

[18] Further litigation ensued, including this Application, and I will return to that below.

d) The Organization of the Parties Affairs

[19] In his submissions, Mr. Quirt pointed to the fact that Adina had made most, if not all, of the payments for property taxes and mortgages on the property. Certainly, in 2009 and forward, there are records to support this assertion.

[20] However, it is not completely clear who made all of these payments for the earlier periods when Adina was the sole registered owner of the property. First, it was conceded by Adina in cross-examination that the utilities were generally paid by Carlo throughout the period when the parties owned the house.

[21] Second, in the period between 1996 and 2003, Adina’s tax returns show an income that was generally less than $10,000.00. Her testimony was that she did babysitting and drove a mini school bus on a part time basis in this time period and earned approximately $24,000.00 a year. She advises that her actual income was higher than her taxable income because she had expenses. However, the tax returns speak to the disposable income that she would have had in this time period, and they suggest that she earned less than $10,000.00 per year.

[22] Given that the mortgage and the property taxes alone would have been over $9,500.00 in most years, it is clear that Carlo was making contributions towards the upkeep and the maintenance of the house. It is also clear that these contributions were made throughout the parties marriage.

Analysis

a) The Applicant’s Authority to Bring this Application

[23] The Applicant, RBC, is one of Carlo’s creditors. They asked the Trustee in Bankruptcy to pursue Carlo’s interests in the matrimonial home. The Trustee advised that there were insufficient funds in the estate to support a legal proceeding.

[24] As a result, RBC brought a motion in Bankruptcy Court to permit it to commence this proceeding, at its own expense and risk, to pursue Carlo’s interest in the matrimonial property. This motion was granted by Master Jean on May 6th, 2014.

[25] The Trustee has assigned its interest in the property to RBC. Other creditors were invited to opt into participating in the proceeding, and none have chosen to participate.

[26] As a result, if the Application is successful, RBC’s counsel advised me that RBC will be paid out what it is owed from Carlo’s half of the proceeds from the sale of the matrimonial home and any residual amounts will be given to the Trustee to distribute to the other parties.

[27] As a result, RBC has the authority to bring this application, standing in the shoes of the Trustee in Bankruptcy. I understood that Adina took no issue with RBC’s standing to bring this application.

b) The Relief Sought by the Applicant

[28] RBC is seeking to have the conveyance of the matrimonial home that was made on August 14th, 2013 to be set aside based on sections 95 and 96 of the Bankruptcy and Insolvency Act and section 2 of the Fraudulent Conveyances Act.

[29] Sections 95 and 96 of the BIA in essence permit the Court to set aside a transaction if it was made in favour of a non-arms length party less than twelve months before the assignment in bankruptcy was made. Similarly, section 2 of the Fraudulent Conveyances Act renders any transaction that was made with the intent to defeat, hinder delay or defraud creditors void.

[30] In support of its position that this transaction is caught by these provisions, RBC directed me to the decision in Prodigy Graphics Group Inc. v. Fitz-Andrews ([2000] O.J. No. 1203). In that decision, Cameron J. sets out fourteen indicia of a fraudulent transaction, generally referred to as badges of fraud. A significant number of those indicia are met in this case:

a) The transfer was to a non-arms length person. b) There was grossly inadequate consideration for the transfer, in that there was NO consideration given by Adina to Carlo. c) It is possible that Carlo continues to reside at the matrimonial home- so he might very well remain in possession of the property. However, this was not clear on the record. d) There were actual liabilities facing Carlo when he made this transfer. Indeed, he had just been advised that his bankers were calling approximately $240,000.00 in loans. e) The transfer was effected with unusual haste, in that it was completed within a week after the loans were called.

[31] Many of the other badges of fraud that were listed in Prodigy could very well be present in this case as well. However, it was not necessary to explore these issues completely as the presence of one or more of the badges of fraud raises the presumption of fraud (see Conte Estate v. Allessandro ([2002] O.J. No. 5080)).

[32] The most important badge of fraud in this case is the timing of this transaction. The fact that the transaction took place approximately a week after Carlo was advised that his creditors were calling approximately a quarter of a million dollars in debt strongly suggests that the transaction was taken to prevent Carlo’s creditors from obtaining his interest in the home.

[33] As a result, unless it can be shown that a trust exists in this case, the transaction is a fraudulent transaction within the meaning of the Bankruptcy and Insolvency Act, and it must be set aside. This proposition was not seriously disputed by Mr. Quirt in his argument and I so find. I now turn to Adina’s trust claim.

a) The Respondent’s Trust Claim

[34] Carlo, Adina and Carlo’s Trustee in Bankruptcy were all parties to this Application. However, the only party that was represented at the hearing of this Application was Adina. She alleges that the interest in the matrimonial home that Carlo transferred to her was held in trust by Carlo for Adina.

[35] The basis for this allegation is twofold. First, Adina points to section 14 of the Family Law Act, which she says creates a presumption of a trust. That section states:

14. The rule of law applying a presumption of a resulting trust shall be applied in questions of the ownership of property between spouses, as if they were not married, except that,

(a) the fact that property is held in the name of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses are intended to own the property as joint tenants; and

(b) money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants for the purposes of clause (a). R.S.O. 1990, c. F.3, s. 14; 2005, c. 5, s. 27 (3).

[36] I disagree with Adina’s interpretation of this section. In my view, this section clearly creates the presumption that both parties to a marriage have an interest in the matrimonial home, even if only one of them holds the title on the matrimonial home. As a result, it is up to Adina to demonstrate that Carlo has no interest in the matrimonial home. This section does not assist her because it is designed to protect the spouse who does not have title to the matrimonial home. It is not designed to ensure that the spouse who was given title to the matrimonial home can claim a trust against the spouse who did not have title if the spouse without title is added on to the title. That interpretation would defeat the purpose of the provisions.

[37] Adina pointed to the decision of Conlan J. in Holtby v Draper (2015 ONSC 7160) as supporting her position. While this case sets out some very helpful principles relating to family law and trusts starting at paragraph 44, it is not applicable to the facts before me. Conlan J. applies these principles in a case where there has been no consideration for the transfer of the property. However, in this case, as I have set out above, there was consideration when Adina transferred the property to Carlo. The case is also distinguishable on the nature of the transaction that Conlan J. was considering. I will now set out my reasons for finding that there was consideration in this case.

[38] Adina points to the fact that Carlo had transferred the property to her name solely in 1996 as evidence that he intended to make a gift of the property to her, and that she never rescinded this gift. I reject this assertion for the following reasons:

a) The transfer from Carlo to Adina was done because Carlo was having financial difficulties. b) Carlo continued to pay all of the utilities costs associated with the property. c) On the information I have on income, Adina could not have carried this property without support from Carlo. d) Carlo continued to be a guarantor on the mortgage on the property.

[39] However, even if I accepted that a gift was made from Carlo to Adina in 1996, there is still the effect of the transfer of the property back to Carlo in 2009. Adina asserts that this transfer was only for the purposes of obtaining financing from the Bank, and that she continued to be the sole beneficial owner of the property. She alleges that Carlo’s 50% interest in the matrimonial home was held in trust by him for her benefit.

[40] I reject this assertion for a number of reasons. First, there is the fact that when the property was transferred to Carlo in 2009 he assumed responsibility for 50% of the mortgage debts and signed the mortgage documentation. In short, there was consideration for this transaction, which suggests that there was no trust interest created. The benefit that Adina got for the transfer was Carlo’s assumption of responsibility for a portion of the debt.

[41] Second, there is the fact that Adina herself signed documentation with TD Bank in 2009 indicating that Carlo was a beneficial owner of the property. As noted in Henao v. R. (2015 TCC 81), at paragraph 36, if an individual holds out to the bank that they are a co-owner, that has implications. If a person is a trustee, they must be a trustee for all purposes. The fact that Carlo and Adina told TD Bank in 2009 that Adina was a co-owner of this property with Carlo means that Adina has acknowledged that Carlo is not a trustee, but a beneficial owner of the property, at least for some purposes. This acknowledgement is fatal to her claim.

[42] Third, one of the key indicia of determining whether a trust exists is the intention of the parties involved. As noted in Korman v. Korman (2015 ONCA 578), the actual intention of the transferor is the governing consideration. By holding out to TD Bank that the property was half Carlo’s, Adina made her intentions clear. These intentions are also fatal to her claim of a trust in this case.

[43] Fourth, Adina has not produced any documents or other records to show that there was any intent for Carlo to hold his portion of the matrimonial home in trust for Adina. This is a very important omission. Section 14(a) of the Family Law Act clearly sets out that if property is held in the name of spouses as joint tenants, then that is proof absent evidence to the contrary that the spouses intended to own the property as joint tenants. Adina has provided no “evidence to the contrary” except for her own Affidavit saying that the parties intended for the property to be held in trust. In the absence of something more than a self-serving after the fact assertion, the Court simply cannot accept this assertion, especially since this bald assertion contradicts Adina’s earlier representations to TD.

[44] This is an Application. As an Applications judge, I have a number of options open to me. I can grant the application in its entirety, I can convert the Application into an Action, order the trial of an issue or I can dismiss the application in its entirety.

[45] In considering whether to grant the application in its entirety, I must be satisfied that there are no material facts in dispute. Put another way, I must determine whether there is a genuine issue requiring a trial in this case.

[46] I have set out in detail why I reject Adina’s assertion that there is a resulting trust in this case. In the circumstances, I have weighed all of the evidence that was filed on this application. The only real dispute in this case is whether a resulting trust existed as between Adina and Carlo. For the reasons set out above, it is clear that Adina and Carlo cannot prove that such a trust exists. Indeed, the evidence clearly shows that such a trust did not exist.

[47] As a result, there are no material facts in dispute, and there is no genuine issue requiring a trial. I can dispose of this mater fully and fairly on the basis of the evidentiary record before me, and I do so by granting the relief sought by RBC.

Disposition

[48] An Order is to issue as follows:

a) Carlo Casamirro Nonis has a 50% ownership interest in the property located at 255 Bousfield Crescent in Milton. b) The property described in paragraph (a) is to be partitioned and sold pursuant to the Partition Act. c) 50% of the proceeds from the partition and sale are to be paid to RBC’s solicitors in trust for disposition to either RBC or to the Trustee in Bankruptcy. d) I retain jurisdiction over this matter to the extent that the parties cannot agree on the process for managing the partition and sale of the property.

[49] In terms of costs, I will receive written submissions of no more than two (2) pages in length, exclusive of any bills of costs or offers to settle from RBC’s counsel within seven (7) days of the release of these reasons.

[50] Adina’s counsel will have seven (7) days to provide responding submissions, again of no more than two (2) pages in length, exclusive of bills of costs or offers to settle.

[51] Both sets of costs submissions should address the issue of whether, if costs are awarded to RBC, they should be paid from Carlo’s portion of the property or whether Adina is responsible for the costs of this Application separately.

[52] There will be no reply submissions on costs without leave of the Court.

LEMAY J

Released: June 1, 2016