Court File and Parties
COURT FILE NO.: CV-18-610288 DATE: 2019-12-02 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Andrew Szymanski, Plaintiff AND: Andrew Lozinski and Katarazyna Lozinska, Defendants
BEFORE: Master P. Tamara Sugunasiri
COUNSEL: M. Tufman, Counsel for the Plaintiff/Moving Party J. Stanleigh, Counsel for the Defendants
HEARD: November 4, 2019
REASONS FOR DECISION
Overview:
1On July 31, 2015 Andrew Lozinski transferred the matrimonial home to his wife Katarazyna, for no consideration. On March 20, 2017 Mr. Lozinski entered into a loan agreement with the Plaintiff. The Plaintiff demanded re-payment of the loan in August of 2018. He then issued a Statement of Claim in December.
2In his claim, not only does the Plaintiff seek repayment of the loan but also a declaration that the transfer of the matrimonial home was fraudulent and intended to defeat present and future creditors. The Plaintiff now seeks leave to register a certificate of pending litigation (CPL) against the matrimonial home.
3For the reasons that follow, I dismiss the motion.
Issues:
4Section 103 governs the registration of certificates of pending litigation. In Grefford v Fielding, 2004 8709 (ON SC), [2004] OJ No 1210, Justice Smith tackled the novel scenario of a plaintiff obtaining or maintaining a CPL before judgment where he has no interest in the land other than by way of the fraudulent conveyance allegation. In doing so, he articulated the following three-part test at paragraph 26:
a. The CPL claimant must satisfy the court that there is high probability that he would successfully recover judgment in the main action;
b. The claimant must introduce evidence demonstrating that the transfer was made with the intent to defeat or delay creditors; evidence that the transfer was for less than fair market value lightens the burden; and
c. The claimant must demonstrate that the balance of convenience favours issuing a CPL in the circumstances of the particular case.
5The Grefford test is applicable here even though the Plaintiff seeks judgment on his loan and alleges a fraudulent conveyance in one action rather than in two. This distinction is without a difference. As in the case at bar, Grefford was a loan collection case where the Plaintiffs only had an interest in the subject land as a result of the fraudulent conveyance allegations. I put this test to counsel for the moving party on the initial return of the motion and adjourned it to allow the Plaintiff to file supplementary materials (see my endorsement of January 28, 2019).
Law and Analysis:
A. The Plaintiff has established that he would recover judgment for his loan
6Mr. Lozinski admits in his affidavit filed in response to this motion that he owes the Plaintiff money.
B. The Plaintiff has failed to introduce evidence demonstrating that the transfer was made with the intent to defeat or delay creditors other than evidence that the transfer was for less than fair market value
7The underlying principle of the Grefford test is that simply alleging a fraudulent conveyance does not entitle a plaintiff to a CPL. The onus is on the Plaintiff to introduce evidence that suggests that the transfer was made with the intent to defeat creditors (often the Plaintiff will not have direct evidence but rather “badges of fraud” that can lead to an inference). This is a low threshold given the importance of reserving findings of fact that go to the heart of the case to the trial judge. In my view, the evidence need only demonstrate some basis to support the allegation beyond a bald statement. I also accept the Plaintiff’s submission that he can assert a fraudulent conveyance even though the Mr. Lozinski conveyed the matrimonial home two years before the loan agreement. (see Miller v Debartolo-Taylor, 2015 ONSC 2654).
8In this case, the Plaintiff’s evidence that the transfer was for less than fair market value lightens the Plaintiff’s burden. However, it alone is insufficient to satisfy his onus, especially in light of Mr. Lozinski’s uncontroverted evidence that the purpose of the transfer was to remortgage the property. He explained that due to his recent bankruptcy, the bank manager advised him to transfer the matrimonial home to his wife so that she would be the borrower. The Plaintiff did not cross-examine on this explanation nor has he tendered any other evidence on this subject.
C. The balance of convenience favours the Defendants
9Based on the record before me, the balance of convenience favours the Defendants. The Plaintiff has simply not tendered adequate evidence to support his request for a CPL. The only evidence before me is a short affidavit from a legal assistant attaching the Statement of Claim and the Title Abstract, and an affidavit from the Plaintiff, discussing the loan.
10While from a purely legal point of view a CPL merely serves as notice to non-parties of the claim, in reality its effects are far greater. It essentially prevents the owner from exercising “the most important incidents of ownership” and it is a kind of preventive execution by ensuring that the owner continues to own the land so that it is available to satisfy a judgement (see for example Queen’s Court Developments Ltd. v Duquette, [1989] OJ No 3039 at paras. 15-16).
11The consequence of a CPL to Ms. Lozinska is heightened in this case where she appears to have had nothing to do with the underlying loan and is now in danger of the Plaintiff effectively encumbering her home. On the other hand, the Plaintiff’s prejudice is significantly less. Without the CPL, he will seek judgment on his loan and fraudulent conveyance action without the security of having an asset to collect upon. In other words, he will be in the same position as most other Plaintiffs and have the same collection risks that they have. The Plaintiff’s thin record fails to tip the balance in his favour.
Disposition:
12For the foregoing reasons, I dismiss the motion.
Costs:
13The parties agreed on $5000 in costs to the successful party. I order the Plaintiff to pay the Defendants $5000 payable within 30 days of today’s date.
Original signed
Master P. Tamara Sugunasiri
Date: December 2, 2019