Court File and Parties

Court File No.: 3994/15 Date: 2017-04-12 Ontario Superior Court of Justice

Between: FAREED AHMED, SABA FAREED, and ADAM SYED, RABI SYED and RAYAN SYED, all minors under the age of 18 years by their Litigation Guardian, SABA FAREED, and ARIF AHMED, Plaintiffs – and – ARNOLD ROWE and LETNA ORINTHIA ALLEN-ROWE, Defendants

Counsel: Rikin Morzaria and Lindsay Charles, for the Plaintiffs Alan L. Rachlin, for the Defendants

Heard: April 3, 2017

Judge: Gray J.

[1] In this action for personal injuries arising out of an automobile accident, the plaintiffs claim at least $20,000,000 in damages. The defendant Arnold Rowe (“Arnold”) is potentially covered by insurance policies for up to $2,000,000. Since the commencement of this action, Arnold has transferred his interest in the matrimonial home to his wife Letna (“Letna”) for no consideration.

[2] Upon learning of the transfer of property, the plaintiffs amended the Statement of Claim to add Letna as a defendant, and to assert a claim under the Fraudulent Conveyances Act. In addition, they obtained a Certificate of Pending Litigation and registered it against the title to the matrimonial home.

[3] Counsel for Arnold now moves for an order dismissing the Fraudulent Conveyances Act claim, or an order staying that claim pending the outcome of the claim for damages for personal injuries.

[4] For the reasons that follow, the motion is dismissed.

Background

[5] On October 29, 2014, the plaintiff Fareed Ahmed (“Fareed”) was struck by a vehicle driven by Arnold. Fareed was a pedestrian. It is alleged that Fareed suffered catastrophic injuries which have left him unable to return to his job as an accountant. It is alleged that he requires 24-hour attendant care.

[6] Arnold alleges that the collision was inevitable due to health-related issues on his part.

[7] Fareed, his wife, his children, and his brother have claimed, in this action, damages in excess of $20,000,000 against Arnold. The Statement of Claim was served on Arnold on October 20, 2015.

[8] On November 9, 2015, Arnold transferred the matrimonial home into the sole name of his wife, Letna, for $2. Arnold had owned the property since July 31, 1991.

[9] After discovering the transfer, the plaintiffs amended the Statement of Claim to plead that the conveyance was fraudulent and void, pursuant to s.2 of the Fraudulent Conveyances Act. The plaintiffs also claimed punitive damages.

[10] Counsel for the plaintiffs has confirmed that the claim for punitive damages is based on the claim under the Fraudulent Conveyances Act, and not under the personal injuries claim.

[11] A Certificate of Pending Litigation has been registered against the title to the property.

[12] The Statement of Claim has been further amended, in which it is alleged that there are other transfers of property that should be declared void under the Fraudulent Conveyances Act. No particulars have been provided to date.

[13] Arnold was insured, at the time of the accident, by a motor vehicle policy with a third party liability limit of $1,000,000. He was also insured by a homeowners’ policy with a third party liability limit of $1,000,000, but it excludes coverage for injuries arising from the use or operation of a motor vehicle.

[14] Examinations for discovery have not yet taken place. A jury notice has been filed.

[15] Affidavit evidence has been filed by the plaintiffs, that has not been contradicted, that suggests that the examination for discovery of each of Arnold and Letna on the Fraudulent Conveyances Act issue should take no more than one hour in each case, and that an additional ten documents or so might be relevant to that issue.

[16] Letna has retained separate counsel to represent her on the Fraudulent Conveyances Act issue. Mr. Rachlin appeared for both Arnold and Letna on the motion, albeit he appeared as agent for Letna’s counsel.

[17] Arnold is the moving party on this motion. He seeks an order pursuant to rule 5.05 of the Rules of Civil Procedure, striking out the paragraphs in the amended Statement of Claim relating to the Fraudulent Conveyances Act claim and the punitive damages claim, or, in the alternative, staying those claims pending final determination of the claim for damages for personal injuries.

Submissions

[18] Mr. Rachlin submits that the claim under the Fraudulent Conveyances Act does not become relevant unless and until the plaintiffs have established liability in the claim for damages for personal injuries, and they have received a judgment in excess of the policy limits under the relevant insurance policies.

[19] Mr. Rachlin submits that even if it can be said that a cause of action arises under the Fraudulent Conveyances Act before judgment has been obtained in the personal injuries claim, it would be unjust to require the claim under the Fraudulent Conveyances Act to proceed until the personal injuries claim has been established. At the very least, Mr. Rachlin submits that the fraudulent conveyance claim should be stayed pending the outcome of the personal injuries claim.

[20] Mr. Rachlin submits that analogous issues have arisen where parties have attempted to join claims for negligence against their solicitors at the same time as actions against other parties, arising out of actions taken by their solicitors, are proceeding. In those cases, the courts have held that such claims do not properly arise against solicitors unless and until the claims against the other parties have been disposed of, and the claims against solicitors should be dismissed or at least stayed until those claims have been disposed of.

[21] Mr. Rachlin submits that to establish liability for the accident and determine the quantum of the plaintiffs’ damages, examinations for discovery and exchange of documentary productions will be required. Expert reports will be exchanged. None of that evidence will be relevant to the claim for the alleged fraudulent conveyance or the punitive damages claim.

[22] Mr. Rachlin submits that if the fraudulent conveyance and punitive damages claims are not stayed or dismissed, there will be a need to lengthen the examinations for discovery, and require Letna to participate in them, as well as the trial. This will prove to be quite unnecessary if the underlying claims of the plaintiffs are dismissed, or damages are awarded that are within the policy limits.

[23] Mr. Rachlin submits that the claims for personal injuries and the fraudulent conveyance claims have no question of law or fact in common, and it would frustrate the convenient administration of justice to permit them to proceed at the same time.

[24] Mr. Morzaria, counsel for the plaintiffs, submits that the motion should be dismissed.

[25] Mr. Morzaria points out that a claim under the Fraudulent Conveyances Act can be pursued where it is alleged that a conveyance was made with the intent to defeat, hinder, delay or defraud “creditors or others”. As such, it is not necessary that a plaintiff be a creditor in order to pursue a claim under the Act. The term “or others” is of broad import, and has been construed to include plaintiffs whose claims have not yet crystalized by way of a judgment.

[26] Furthermore, the relevant limitation period for commencing a fraudulent conveyance claim arises once a plaintiff discovers that a fraudulent conveyance has occurred. Accordingly, it is incumbent on the plaintiff to commence the action expeditiously.

[27] Mr. Morzaria points out that fraudulent conveyance claims have, in fact, been joined with other claims, and have been determined by the trial judge after the other claims have been held to be valid.

[28] Mr. Morzaria submits that if the fraudulent conveyance claim can only proceed after the plaintiffs obtain judgment on the personal injuries claim, the plaintiffs will suffer prejudice. It would be necessary for them to go through the entire litigation process a second time, and be examined for discovery twice, followed by further pre-trial proceedings and another trial. The plaintiffs would be significantly delayed in recovering judgment, and realizing on their judgment if successful.

[29] Mr. Morzaria submits that there would be no undue prejudice to the defendants if the claims proceed at the same time.

[30] The uncontradicted evidence is that the examinations for discovery of the defendants on the fraudulent conveyance claim will be brief, and there will be little additional documentary production.

[31] Mr. Morzaria submits that the trial judge will have ample authority to structure the way in which the two claims are heard at trial, in order to avoid any undue prejudice to the defendants, and to have the claims determined with a minimum of cost and difficulty.

[32] Authorities relied on by the parties include Samuel v. Klein (1976), 14 O.R. (2d) 389 (H.C.J.); Thames Steel Construction Ltd. v. Portman (1980), 28 O.R. (2d) 445 (H.C.J.); Bagaco v. Union Energy Limited Partnership (2009), 76 C.P.C. (6th) 314 (Ont. S.C.J.); Pryzhlack v. Urbancic (1975), 10 O.R. (2d) 263 (H.C.J.); Rade v. Rade (1983), 45 C.P.C. 186 (Ont. Div. Ct.); International Chemalloy Corporation v. Hugo (1979), 24 O.R. (2d) 818 (H.C.J.); Murphy v. Cruickshank, [2000] O.J. No. 5781 (S.C.J.); Peter v. Medtronic Inc. (2009), 83 C.P.C. (6th) 379 (Ont. S.C.J.); Inuit Tapirisat of Canada v. Canada (Attorney General), [1980] 2 S.C.R. 735; 728654 Ontario Inc. v. Ontario (2005), 202 O.A.C. 4 (C.A.); Conde v. Ripley (2015), 2015 ONSC 3342, 125 O.R. (3d) 689 (S.C.J.); Toronto Standard Condominium Corporation No.1703 v. 1 King West Inc., [2009] O.J. No. 4216 (Master); aff’d 2010 ONSC 2129, [2010] O.J. No. 1675 (Div. Ct.); MacDonald v. Stanger (2002), 18 C.L.R. (3d) 217 (Ont. S.C.J.); Nehall v. Shivcharran, [1998] O.J. No. 1648 (Gen. Div.); Boomer v. Penn, [1966] 1 O.R. 119 (H.C.J.); and Hagg v. Bohnet (1962), 33 D.L.R. (2d) 378 (B.C.C.A.).

Analysis

[33] Section 2 of the Fraudulent Conveyances Act provides as follows:

2. 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. [Emphasis added]

[34] The relevant provisions of rule 5 of the Rules of Civil Procedure are as follows:

5.01 (1) A plaintiff or applicant may in the same proceeding join any claims the plaintiff or applicant has against an opposite party.

(2) A plaintiff or applicant may sue in different capacities and a defendant or respondent may be sued in different capacities in the same proceeding.

(3) Where there is more than one defendant or respondent, it is not necessary for each to have an interest in all the relief claimed or in each claim included in the proceeding.

5.02 (2) Two or more persons may be joined as defendants or respondents where,

(a) there are asserted against them, whether jointly, severally or in the alternative, any claims to relief arising out of the same transaction or occurrence, or series of transactions or occurrences;

(b) a common question of law or fact may arise in the proceeding;

(c) there is doubt as to the person or persons from whom the plaintiff or applicant is entitled to relief;

(d) damage or loss has been caused to the same plaintiff or applicant by more than one person, whether or not there is any factual connection between the several claims apart from the involvement of the plaintiff or applicant, and there is doubt as to the person or persons from whom the plaintiff or applicant is entitled to relief or the respective amounts for which each may be liable; or

(e) it appears that their being joined in the same proceeding may promote the convenient administration of justice.

5.04 (2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

5.05 Where it appears that the joinder of multiple claims or parties in the same proceeding may unduly complicate or delay the hearing or cause undue prejudice to a party, the court may,

(a) order separate hearings;

(b) require one or more of the claims to be asserted, if at all, in another proceeding;

(c) order that a party be compensated by costs for having to attend, or be relieved from attending, any part of a hearing in which the party has no interest;

(d) stay the proceeding against a defendant or respondent, pending the hearing of the proceeding against another defendant or respondent, on condition that the party against whom the proceeding is stayed is bound by the findings made at the hearing against the other defendant or respondent; or

(e) make such other order as is just.

[35] Section 138 of the Courts of Justice Act provides as follows:

138. As far as possible, multiplicity of legal proceedings shall be avoided.

[36] I am not persuaded that the provisions of the Statement of Claim relating to the fraudulent conveyance should be struck out. There is little doubt that the words “or others” in section 2 of the Fraudulent Conveyances Act are broad enough to include a person whose claim has not yet been reduced to judgment: see Conde v. Ripley (2015), 2015 ONSC 3342, 125 O.R. (3d) 689 (S.C.J.), supra, at paras. 27 and 28; and Stone v. Stone (2001), 55 O.R. (3d) 491 (C.A.).

[37] I do not think the cases in which claims against solicitors have been struck out or stayed are of assistance. Those cases were decided on the basis that no cause of action arises against the solicitor unless and until liability has been established in the main action. That is unlike the situation here, where a fraudulent conveyance claim properly arises as soon as a fraudulent conveyance has been effected.

[38] The real issue in this case is whether the fraudulent conveyance claim, and the claim for punitive damages, should be stayed pending the outcome of the personal injuries claim.

[39] In the final analysis, this boils down to the question as to how the court should exercise its discretion.

[40] On the one hand, to require the two sets of claims to be litigated at the same time may result in additional expense and difficulty for the defendants, and particularly Letna, that may prove to be unnecessary. If the plaintiffs fail in the personal injuries claim, or if they achieve a judgment that is within the policy limits, the fraudulent conveyance claim will be moot. Letna will have been required to participate in the litigation unnecessarily.

[41] However, if the plaintiffs succeed, and if they achieve a judgment in excess of the policy limits, they will be delayed in attempts to collect on that portion of their judgment that is in excess of the policy limits. Another set of examinations for discovery will need to be conducted. Another trial will need to be held. There will be considerable delay and additional expense.

[42] In my view, the trial judge has ample power to conduct the proceedings in a way that will minimize, if not eliminate, any prejudice to the defendants. The trial judge can conduct the trial of the personal injuries claim with a jury first, and hold the fraudulent conveyance claim in abeyance. The trial judge can instruct counsel to make no reference to the fraudulent conveyance claim before the jury, and make no reference to the pleadings in that regard. If it is necessary to try the fraudulent conveyance claim, the trial judge can dispense with the jury if appropriate, and hear the claim immediately after the trial of the personal injuries claim.

[43] I do not think the cases in which fraudulent conveyance claims have been decided by the trial judge immediately after hearing the main claims, namely, MacDonald v. Stanger (2002), 18 C.L.R. (3d) 217 (Ont. S.C.J.), supra, and Nehall v. Shivcharran, [1998] O.J. No. 1648 (Gen. Div.), supra, are of assistance. In both cases, there does not seem to have been any objection to the claims being pursued at the same time. In both cases, the court made no ruling as to the propriety of doing so.

[44] On balance, it is better, in my view, that the claims proceed at the same time. Any additional production and discovery, based on the uncontradicted evidence, will be minimal. Any unnecessary involvement of Letna can be compensated in costs. Multiplicity of proceedings will be avoided to the extent possible, as required by s. 138 of the Courts of Justice Act.

Disposition

[45] For the foregoing reasons, the motion is dismissed.

[46] I will entertain brief written submissions with respect to costs, not to exceed three pages together with a costs outline. Mr. Morzaria will have five days, and Mr. Rachlin will have five days to respond. Mr. Morzaria will have three days to reply.

Gray J. Released: April 12, 2017