Court File and Parties
COURT FILE NO.: CV-19-00622100 DATE: 20200225 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PHILIP ANISMAN, Plaintiff – and – GARTH H. DRABINSKY and ANN ELIZABETH WINFORD-DRABINSKY, Defendants
BEFORE: E.M. Morgan J.
COUNSEL: Philip Anisman, on his own behalf Zoltan Matthew Kaslik and Gayatri Nava, for the Defendants
HEARD: February 19, 2020
REASONS FOR JUDGMENT
1On September 11, 2015, the Defendants, Garth H. Drabinsky and his wife, Ann Elizabeth Winford-Drabinsky, transferred their joint ownership of their home at 478 Spadina Road, Toronto (the “Property”) to Ms. Winford-Drabinsky for nominal consideration of $2.00, when the Property had an appraised value of $2,625,000.00.
2At the time of the transfer, Mr. Drabinsky had substantial debts, including to the Plaintiff for whom he had missed several monthly payments due under a settlement agreement previously negotiated. The transfer of title was proposed shortly after Mr. Drabinsky stopped payment on the Plaintiff’s monthly cheques and was completed only weeks after the Plaintiff demanded that the payments be brought up to date.
3The Plaintiff commenced this action to reverse the transfer of title to the Property in May 2019.
4The parties have each brought summary judgment motions under Rule 20 of the Rules of Civil Procedure, the Plaintiff seeking judgment on its claim and the Defendants seeking the claim’s dismissal. Together, the motions raise two questions to be determined:
a) Was the transfer done with intent to defeat, hinder, delay or defraud Mr. Drabinsky’s creditors, rendering it void under section 2 of the Fraudulent Conveyances Act, RSO 1990, c. F.29 (the “FCA”)?
b) Is the action limitation barred?
I. Request to redact the record
5At the outset of the hearing of this motion, counsel for the Defendants moved to have portions of the record removed or redacted from the publicly filed materials. The grounds put forward for this request are threefold: a) confidentiality with respect to Mr. Drabinsky’s health issues, b) questions of solicitor-client privilege, and c) the lack of a Reply pleading with respect to the limitation defence.
6The health issue is raised by Defendants’ counsel on the basis of very sparse evidence. The materials indicate that Mr. Drabinsky was hospitalized for a time but has since been released and is now apparently in recovery. There is no indication of what the cause of the hospitalization might have been. The Defendants’ materials merely state that for reasons related to a business venture in which Mr. Drabinsky was engaged at the time, it was important for him not to have his health issues known to the general public.
7The starting point for any analysis of such a request is the fundamental precept of open courts. The Supreme Court of Canada has stated emphatically that, “[t]he open court principle is one of the hallmarks of a democratic society…[and] is inextricably tied to the rights guaranteed by s. 2(b) of the Charter”: Canadian Broadcasting Corp. v New Brunswick (Attorney General), [1996] 3 SCR 480, at para. 26. When it comes to documents filed as part of a court proceeding, any restriction on “public access and public scrutiny… would clearly infringe the public’s freedom of expression guarantee”: Sierra Club of Canada v Canada (Minister of Finance), 2002 SCC 41, [2002] 2 SCR 522, at para 36.
8While an encroachment on the open courts principle is possible in certain circumstances, there must be a realistic concern about privacy and prejudice to a party. As this court stated in Ferenczy v MCI Medical Clinics (2004), 70 OR (3d) 277, at para 18, citing Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1999), at pp. 23-38, “Prima facie relevant evidence is admissible, subject to a discretion to exclude where the probative value is outweighed by its prejudicial effect. This is the test in both criminal and civil cases.”
9There is no personal health data or other personal records produced in this litigation, and no specific confidential material is identified other than the passing reference to the fact that at certain times during the course of the matters in issue here one of the Defendants was hospitalized with an undisclosed ailment. Even the business prejudice referenced by Defendants’ counsel appears to be in the past and is apparently not an ongoing matter. There are no grounds to redact or seal any material based on privacy or health-related concerns.
10Turning to the Defendants’ submission that solicitor-client privileged material be removed or redacted from the record, that is, of course, a recognized ground for excluding material. One can see how this could potentially be an issue here since, as both sides concede, the Plaintiff was a lawyer acting for Mr. Drabinsky for a period of just under a year. In that capacity, he would have had access to privileged communications not only between Mr. Drabinsky and himself but between Mr. Drabinsky and other lawyers representing him in other matters at the time.
11That said, the Plaintiff’s representation of Mr. Drabinsky ended in June 2014, while the transfer of the Property and other material facts in evidence all took place in 2015. The communications between the Plaintiff and Mr. Drabinsky that are in the record relate to the post-retainer fee dispute and litigation thereof between the Plaintiff and Mr. Drabinsky. That includes the Plaintiff’s issued claim against Mr. Drabinsky, the settlement agreement with respect to that dispute, and the payment arrangements and default under that settlement agreement. None of that material is privileged.
12Likewise, nothing appears to have been produced in this record from other lawyers that relates to the Plaintiff’s previous representation of Mr. Drabinsky. The only materials from other lawyers that have found their way into the record are those produced by the Defendants themselves in the discovery process as part of their defence to the present claim. Paragraph 11 of the Statement of Defence herein states:
In 2015, at the time Drabinsky conveyed to Winford his interest in the Property, the Defendants acted entirely in accordance with and in response to their lawyers and other professional advisors at the time together with numerous other counter-parties and individuals involved directly and indirectly with both the Defendants’ personal matrimonial dealings and the Property’s secured lenders all of which were required by the Defendants’ lenders to occur simultaneously as a condition of the required secured refinancing.
13Counsel for the Defendants concedes that he produced various lawyer-drafted documents as part of his clients’ affidavit of documents, but states that the Defendants did not thereby intend to waive privilege over those documents. He says that the documents were relevant to the Defendants’ defence and had to be produced, but otherwise they must remain privileged.
14With respect, Defendants’ counsel’s position is not legally tenable. Paragraph 11 of the Statement of Defence constitutes a waiver of privilege over any documents or communications referenced therein. One cannot defend oneself by claiming to have been acting on legal advice and then continue to assert privilege over that very legal advice. That would truly be to have one’s cake and eat it too.
15Perhaps even more to the point, I have not seen anything in the record that actually looks like it would be a privileged form of legal advice in the first place. The documents identified by Defendants’ counsel appear to be documents which contain no advice and which, for the most part, have already been given to other parties. These include several marriage and other financial agreements between the parties which were provided to the Canadian Imperial Bank of Commerce (“CIBC”) as mortgagee of the Property – i.e. not the advice relating to the agreements but the documented agreements themselves. They also include closing documents and formal reporting letters enclosing those documents relating to mortgage and transfer transactions with respect to the Property – again, not the advice relating to the transactions but the documented transactions themselves.
16There is nothing privileged about a concluded spousal agreement already given to one’s bank and the documentation relating to real estate transactions already registered in the provincial Land Registry Office. I can find no documents in the record that should be barred from being there due to solicitor-client privilege.
17Finally, Defendants’ counsel submits that the Plaintiff’s factum makes improper reference to his response to the Defendants’ limitation argument. It is the Defendants’ position that since the Plaintiff never issued a Reply pleading in response to the limitation point raised in the Statement of Defence, the Plaintiff is prohibited from arguing any defence to the limitation challenge. Defendants’ counsel therefore asks that those paragraphs be struck from the Plaintiff’s factum.
18I will address the merits of this argument in Part IV below in the context of my discussion of the limitation defence itself. For now, suffice it to say that I do not agree that those paragraphs must be struck from the Plaintiff’s factum or that the limitation issue cannot even be addressed by the Plaintiff.
19The Plaintiff may not have a pleading to support his point, but there is evidence in the record that has been fairly adduced that supports it. The Court of Appeal has expressly held that under such circumstances it would be an error to proceed on the basis suggested by Defendants’ counsel: “Again, this was a summary judgment motion, the resolution of which depended on a consideration of the evidence adduced by the parties, and not their pleadings:” Collins v Cortez, 2014 ONCA 685, at para 12.
20The Plaintiff here seeks summary judgment, and it is incumbent on me to consider the record as a whole rather than to focus narrowly on the pleadings alone. I therefore find no reason to redact or excise any portion of the evidentiary record or any factum.
II. The debt to the Plaintiff
21The Plaintiff is a lawyer who represented Mr. Drabinsky in a proceeding brought against him by enforcement staff of the Ontario Securities Commission from April 29, 2013 to June 3, 2014. Upon his resignation, the Plaintiff gave Mr. Drabinsky a final invoice for $110,848.98, including disbursements and HST.
22After a brief dispute and negotiation, the Plaintiff and Mr. Drabinsky agreed on October 29, 2014 that Mr. Drabinsky would pay the Plaintiff a total of $50,863.00, spread over a 6-month period. Mr. Drabinsky provided the Plaintiff with 19 post-dated cheques in the amount of $2,677.00 each, dated the 15th of each month from January 15, 2015 to July 15, 2016. The cheques were drawn on the account of Flagship Entertainment Limited, a company controlled by Mr. Drabinsky which also pays the CIBC mortgage on the Property as well as the Property’s municipal taxes and a number of the Defendants’ household expenses.
23Ms. Winford-Drabinsky and Mr. Drabinsky have lived at the Property since their marriage on May 8, 2005. Prior to that, Ms. Winford-Drabinsky was employed as a paralegal. She stopped working shortly after her marriage and was unemployed until mid-2015, when she began working as a real estate salesperson.
24The first two post-dated cheques were deposited by the Plaintiff and honoured by the bank. On March 12, 2015, Mr. Drabinsky, through his assistant, requested that the Plaintiff not deposit the March 15, 2015 cheque for “a couple of weeks”. The Plaintiff agreed, and waited two weeks – until March 30, 2015 – until depositing the cheque.
25On March 31, 2015, Mr. Drabinsky called the Plaintiff himself in order to ask that he hold off longer with depositing the cheque, but the Plaintiff advised him that it had already been deposited. Less than two weeks thereafter, on April 10, 2015, the Plaintiff received a notice from his bank that payment on the March 15, 2015 cheque had been stopped.
26On April 14, 2015, Mr. Drabinsky advised the Plaintiff that that he had a medical issue and had stopped payment on the cheque due to a lack of funds. He assured the Plaintiff that he would shortly make up the amount owing. The following month, on May 15, 2015, Mr. Drabinsky again asked the Plaintiff not to deposit that month’s cheque or any of the previously uncashed cheques. Mr. Drabinsky communicated with the Plaintiff next on June 30, 2015, indicating that he was trying to sell his cottage and would pay the amount owing out of the proceeds of sale.
27Mr. Drabinsky repeated the same thing to the Plaintiff on August 24, 2015. At that time the Plaintiff indicated that he was not willing to continue to hold off on receiving the payments due to him, and insisted that Mr. Drabinsky bring the monthly payments up to date.
28On October 7, 2015 and throughout the balance of 2015 and 2016, Mr. Drabinsky told the Plaintiff not to deposit cheques as they became due. Each time, he explained that there were developments taking place that would enable him to honour his agreement in the near future and he provided replacement cheques for cheques that became stale.
29In January 2017, in response to a further request for payment, Mr. Drabinsky sent the Plaintiff two post-dated cheques, one dated March 1, 2017 for $25,000.00 and the other dated March 15, 2017 for $20,509.00. The March 1, 2017 cheque was returned by the bank. In a subsequent conversation with Mr. Drabinsky, the Plaintiff told him that the limitation period with respect to his March 15, 2015 breach of the agreement between them was approaching. In view of his desire for more time, Mr. Drabinsky agreed to waive the limitation period, and on March 2, 2017 he sent the Plaintiff a signed waiver.
30The Plaintiff brought an action with respect to the debt owed to him on January 19, 2018. On November 15, 2018, the Plaintiff brought a motion for summary judgment in that action, which ultimately resulted in the Plaintiff obtaining a consent judgment against Mr. Drabinsky in the amount of $47,727.56, plus costs of $14,000.00. That judgment has not been paid, and the Plaintiff remains a judgment creditor of Mr. Drabinsky’s.
III. Transfer of title
31Mr. Drabinsky acquired the Property in 2000 and registered it on the name of his brother, Cyril Drabinsky. In 2004, Cyril transferred title to Mr. Drabinsky for nominal consideration. Shortly thereafter, Mr. Drabinsky gave a mortgage to Cyril Drabinsky for $500,000.
32In 2005, Mr. Drabinsky gave a mortgage to the Royal Bank of Canada for $1,950,000, which Cyril guaranteed. Also in 2005, Mr. Drabinsky married Ms. Winford-Drabinsky and for nominal consideration transferred title to the Property to himself and Ms. Winford-Drabinsky as joint tenants. On August 18, 2006, Mr. Drabinsky and Ms. Winford-Drabinsky gave a mortgage for $250,000.00 to the Canada Trust Company. Subsequently, in October 2012, the Minister of National Revenue registered a lien against the Property for income taxes of $173,852.81 owed by Mr. Drabinsky.
33Having been previously told by the Royal Bank that it would not be renewing its mortgage on the Property upon its expiration, Mr. Drabinsky spoke with his private banking advisor at the CIBC, Frank Rampino, in March-April 2015 about refinancing the Property. In his affidavit herein, Mr. Drabinsky states that a condition imposed by CIBC for placing a mortgage on the Property was that title be transferred to Ms. Winford-Drabinsky alone, so that she would be the sole mortgagor and Mr. Drabinsky and Cyril would be guarantors.
34That evidence, however, is contradicted by the testimony of Mr. Rampino, who was examined in this motion under Rule 39.03. Mr. Rampino testified that he did not request or direct a transfer of title to the Property. In fact, he stated emphatically that it was Mr. Drabinsky who requested putting the Property in Ms. Winford-Drabinsky’s name. In Mr. Rampino’s words: “[T]he ask was to put the property in Elizabeth’s name, and we’d definitely need his guarantee as long – as well as Cyril’s guarantee.”
35According to Mr. Rampino, CIBC acceded to Mr. Drabinsky’s request to transfer title. The mortgage approval therefore stated that Ms. Winford-Drabinsky would be the mortgagor and Mr. Drabinsky and Cyril would be the guarantors. As Mr. Rampino explains it, the bank was indifferent as to whether it was Mr. Drabinsky or Ms. Winford-Drabinsky, or both of them, on title. Neither of them was credit-worthy and they would not on their own qualify for the mortgage. CIBC’s approval was premised on Cyril being a guarantor of the mortgage, as he was the only one of the three who was in a financial position to qualify for a mortgage.
36Ms. Winford-Drabinsky had no income from employment in the prior four years. Mr. Drabinsky was deeply in debt, with ongoing monthly debt payments coming to more than double his monthly income. He also had several unpaid judgments against him, including the $45,509.00 judgment in favour of the Plaintiff.
37Under these circumstances, it is not surprising that the bank was unenthusiastic about lending to either or both of the Defendants and that it did not matter to the bank which of them, in whatever combination, was on title. Mr. Rampino, who was the CIBC official in charge of negotiating and placing this mortgage, testified pointedly to this effect: “[W]e only wanted to lend to Cyril.”
38In order to transfer title, Mr. Drabinsky had to remove the Minister of National Revenue’s lien by paying the tax debt. He also had to remove writs of seizure and sale filed by two judgment creditors. According to Mr. Rampino, this took a number of months to complete, especially as one of the judgments was in favour of a party in the United States. As Mr. Rampino described it:
A: Part of the discussion was consolidating and paying off his debts, that he’d asked at that time that it be in Elizabeth’s name only …
I believe it was June we had everything ready to go, I guess, if there was an approval. June.
Q: June?
A: Yeah.
Q: And so it was supposed to go in June, so started in or around April, and it was supposed to be closed in June.
And then, do you recall the reason it went from June to September?
A: One reason, I think the main reason was another judgment.
Q: That was –
A: That was the – from – coming from the U.S.
39Having started the refinancing discussions with CIBC in late March or early April 2015, Mr. Drabinsky and the bank worked through the spring and summer to clear off enough of Mr. Drabinsky’s debts to allow the title transfer and mortgage to be completed. Both were ultimately completed and registered on the same day, September 11, 2015.
40Ms. Winford-Drabinsky played little to no role in negotiating and securing the mortgage. In cross-examination she testified that she signed “whatever documents were necessary from the bank”. Since she was being put on title as sole owner, she indicated that her main concern was to ensure that she would receive sufficient funds from Mr. Drabinsky’s life insurance to cover the mortgage in the event of his death. In this respect, Ms. Winford-Drabinsky’s interest coincided with that of the CIBC as mortgagee. Both wanted to ensure that the mortgage would be paid in the event of Mr. Drabinsky’s death, as neither expected Ms. Winford-Drabinsky to otherwise be capable of carrying a mortgage.
41To this end, a series of revised marriage contracts were entered into between Mr. Drabinsky and Ms. Winford-Drabinsky. The successive agreements reflect the changes in their circumstances over time.
42In August 2005, the two Defendants entered into their first marriage contract. That agreement provided, inter alia, that Mr. Drabinsky will maintain a life insurance policy of $2,000,000 for the benefit of Ms. Winford-Drabinsky. The agreement was re-drawn in June 2015, in the midst of arranging for the transfer of title to the Property. The June 2015 version of the Defendants’ marriage agreement states that Ms. Winford-Drabinsky will be sole owner of the Property and that Mr. Drabinsky will direct his life insurance proceeds of $2,270,000 to be paid to cover the mortgages. That agreement was then supplemented by a Home Ownership and Insurance Proceeds Agreement dated August 2015 – i.e. just prior to the transfer of title. Under this latter agreement, Mr. Drabinsky is obligated to maintain life insurance for Ms. Winford-Drabinsky’s benefit in the amount of $5,000,000.
43On September 11, 2015, title to the Property was transferred from Mr. Drabinsky and Ms. Winford-Drabinsky as joint tenants to Ms. Winford-Drabinsky alone. As indicated, the stated consideration for this transfer was a nominal $2.00. That same day, CIBC placed a mortgage on title to the Property in the principal amount of $2,100,000. The registered Charge indicates Ms. Winford-Drabinsky as Chargor and CIBC as Chargee.
44All relevant documents pertaining to these transactions were registered in the Land Registry Office on September 11, 2015.
IV. The limitation defence
45As indicated in Part I above, it is the Defendants’ position that the present action to set aside the transfer of title of the Property is out of time. Paragraph 19 of the Statement of Defence pleads that the action has been commenced contrary to the provisions of the Limitations Act, 2002, SO 2002, c. 24.
46The Statement of Claim herein was issued on June 18, 2019, some 3 years and 9 months after the impugned transfer of title. Defendants’ counsel submits that the 2-year limitation period under the Limitations Act, 2002 was missed by the Plaintiff. Defendants’ counsel further submits that the Defendants having pleaded a limitation defence, it was incumbent on the Plaintiff to serve a Reply pleading. He argues that failing that, the Plaintiff is foreclosed from including anything in the present Motion Record by way of a response to the limitation defence.
47Counsel for the Defendants relies on Rule 25.08 of the Rules of Civil Procedure for the proposition that a Reply pleading is necessary in these circumstances. That Rule provides:
25.08 (1) A party who intends to prove a version of the facts different from that pleaded in the opposite party’s defence shall deliver a reply setting out the different version, unless it has already been pleaded in the claim.
(2) A party who intends to reply in response to a defence on any matter that might, if not specifically pleaded, take the opposite party by surprise or raise an issue that has not been raised by a previous pleading shall deliver a reply setting out that matter…
48It is evident from the wording of both parts of Rule 25.08 that it is the element of surprise that determines whether or not a Reply is required. That is, the Defendants must not be taken by surprise by facts of which they were unaware.
49This court has long noted that, “[i]f a limitation defence is raised, the plaintiff should, where appropriate, serve a reply raising any facts and contentions relied upon to rebut the defence and pleading the basis for any discretion that the court may have in the matter”: D.S. Park Waldheim Inc. v Epping (1995), 24 OR (3d) 83 (Gen Div), quoting Graham Mew, The Law of Limitations (Markham: Butterworths, 1991), p. 54. This is particularly the case where “the plaintiff…relies on…the doctrine of discoverability…[which] depends on an unresolved question of fact”: Epping, at 85.
50The Plaintiff makes a number of arguments in response. In the first place, he submits that there is nothing in his response to the limitation point that will take the Defendants by surprise. Secondly, he contends that the cause of action pleaded in the Statement of Claim was not discovered by him until substantially later, and that there was nothing in the conduct of the parties that would have tipped him off that a transfer of title had taken place with respect to the Property.
51The Plaintiff points out that the Statement of Claim herein was served with a Certificate of Pending Litigation, which the Plaintiff had obtained on an ex parte basis at the outset. Since the Certificate was obtained without notice to the Defendants, the Plaintiff also served them at the same time with his Motion Record in support of the Certificate, as required. That Motion Record contained an affidavit sworn by the Plaintiff setting out how he had discovered the transfer of title. At paragraph 8 of his affidavit, served together with the Statement of Claim on June 25, 2019, the Plaintiff stated:
On September 11, 2015, shortly after my request for payment of August 24, 2015, Mr. Drabinsky transferred his interest in his house at 478 Spadina Road (the ‘Property’) to his wife. I learned of this transfer on April 20, 2019, before I examined Mr. Drabinsky in aid of execution.
52The circumstances and date of discovery – i.e. that he first learned of the transfer when he searched title in preparation for an examination in aid of execution on the judgment he had obtained on November 15, 2018 – are the crucial facts on which the Plaintiff relies in responding to the limitation defence. It is this brief statement of fact that would likely have been contained in a Reply had one been served. Given that it was contained in the package of materials served together with the Statement of Claim and Certificate of Pending Litigation, the Defendants were on notice in much the same way as they would have been had the sentence been repeated in a Reply pleading.
53It is the Defendants’ position that if the relevant facts did not find their way into a Reply, they are to be ignored in assessing the merits of the limitation defence. I do not accept that position. To ignore what was in the Plaintiff’s motion record and affidavit because it was not repeated in a Reply would be to elevate form over substance to an unacceptable degree: Marshall v Watson Wyatt & Co., at para 25 (Ont CA).
54As is evident from the narrative in Part II above, prior to the examination in aid of execution there was nothing to prompt the Plaintiff to search title of the Property. Mr. Drabinsky consistently lead him to believe that he would be receiving payment imminently, and even provided him with replacement cheques when the previous ones became stale-dated. Further, Mr. Drabinsky was more than just another debtor; he was a rather renowned debtor who was very much in the public eye. It did not occur to the Plaintiff (or, presumably, to any other creditors) that Mr. Drabinsky would be denuding himself of substantial assets such as the Property. As the Plaintiff submits, there is only a duty to investigate when there is something that leads one to investigate: Fennell v Deol, 2015 ONSC 4835, para 8.
55Furthermore, it is the Plaintiff’s position that the Limitations Act, 2002, with its 2-year limitation from the date of discovery, is not the applicable statute. Rather, the Plaintiff submits that it is the 10-year limitation period in the Real Property Limitations Act (“RPLA”) that applies in this case.
56As Dunphy J. said in Conde v Ripley, 2015 ONSC 3342, at para 2, “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 10-year limitation period.” Given the time frame in the case at bar, a 10-year period makes the doctrine of discoverability irrelevant; the action was commenced well within a decade of the transaction in issue.
57Rule 25.08 requires that any unknown facts be pleaded in a Reply. It makes no mention of pleading the law. Rule 25.06(2), applicable to all pleadings, is permissive in its direction, and states that “a party may raise any point of law in a pleading” [emphasis added]. While it would doubtless have been proper to plead the RPLA as it would have been supported by material facts in the Statement of Claim, Famous Players Canada Corp. v J.J. Turner & Sons Ltd., [1948] OWN 221 (Ont HC), it was not necessary to do so.
58In general, a failure to plead a statute or other point of law does not constitute an admission: Ralna Ltd. v Canada Life Assurance Co. (1982), 138 DLR (3d) 410 (Ont HC). It is where a party relies on a statutory provision that might take the other party by surprise that courts have specified that the statute should be pleaded: H.E.P.C. Ontario v St. Catharines, [1971] 3 OR 674 (ON SC), aff’d [1972] 1 OR 806 (Ont CA).
59The Plaintiff submits that there is no reason for his reliance on the RPLA to have taken the Defendants by surprise. It is, first and foremost, eminently logical that this would be the case. The present action is not about the Mr. Drabinsky’s debt to the Plaintiff, but rather concerns his transfer of title and claims for recovery of title to the Property: Farley & Onyschuk v Outerbridge Management Limited, at para 30. Moreover, the Conde case, which expressly holds that a claim such as this one under the FCA is governed by the RPLA rather than by the Limitations Act, 2002, was included in the Plaintiff’s Brief of Authorities and served on Defendants’ counsel with all of the other materials.
60In Conde, the court reasoned that the nature of this type of claim makes application of the RPLA only logical. As Dunphy J. put it, at para 44, “The Legislature has seen fit to…differentiate between actions involving recovery of land and other types of actions.” This differentiation goes to the heart of the difference between the two limitations statutes, with one, the Limitations Act, 2002, addressing claims in contract or tort and the other, the RPLA, addressing the recovery of real property:
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…
Condi, at para 41.
61In my view, it is the 10-year limitation period in the RPLA that applies to the present action. The Plaintiff commenced this action before the expiry of ten years from the date of the impugned transfer of title.
62Even if I am wrong about the RPLA applying here, the facts in the record support the Plaintiff’s claim that the claim was neither discovered nor discoverable until the Plaintiff searched title to the Property in preparing his examination in aid of execution in June 2019. There was nothing to trigger a search prior to that time; indeed, Mr. Drabinsky acted in a way which ensured that the Plaintiff was never alerted to the transfer of title. Again, the Plaintiff commenced this action well within two years from the date that the impugned transfer of title was discovered or ought to have been discovered.
63Accordingly, the limitation period does not bar the Plaintiff’s claim.
V. Badges of fraud
64It is not disputed between the parties that the test for whether a transfer of the Property is rendered void under section 2 of the FCA is one of intent: was the transfer of title done in order to defeat creditors? Mr. Drabinsky testified that while putting the Property out of reach of his creditors might be the effect of the transfer, he had not actually turned his mind to the impact on creditors at the time of the transfer.
65The cases hold that, “[i]f there was an intention to defeat creditors, then it does not matter whether it was to defeat present or future creditors”: Incondo Building Corporation v Sloan, 2014 ONSC 4018, at para 48. All creditors of Mr. Drabinsky’s, including the Plaintiff (who in any case was already a creditor when the transfer occurred), could bring this claim. But to succeed they must establish that the transfer was done with intent to defeat the transferor’s creditors, and not just that it has this effect: Bank of Nova Scotia v Holland, [1979] OJ No 1190, at para. 12.
66Over the years, the courts have developed a list of indicia of fraudulent intent, allowing an assessment of the debtor’s subjective perspective to be inferred from objective criteria. These factors, or “badges of fraud”, must be considered as at the time of the impugned transaction: CIBC v Boukalis, 1987 CarswellBC 513, at p. 4 (BCCA).
67As indicated in Incondo, at para 52, the badges of fraud were established several centuries ago:
The badges of fraud derive from Twyne’s Case (1601) 76 E.R. 809. As interpreted by modern courts, the badges of fraud include:
(d) the donor continued in possession and continued to use the property as his own;
(e) the transaction was secret;
(f) the transfer was made in the face of threatened legal proceedings;
(g) the transfer documents contained false statements as to consideration;
(h) the consideration is grossly inadequate;
(i) there is unusual haste in making the transfer;
(j) some benefit is retained under the settlement by the settlor;
(k) embarking on a hazardous venture; and
(l) a close relationship exists between parties to the conveyance.
68Given the timing and the way the transfer was done, many of the badges of fraud were present. The evidence shows that Mr. Drabinsky continues to live at the Property until today. And while it was registered in the Land Registry Office, none of Mr. Drabinsky’s creditors were alerted to it.
69As indicated, there was nothing in Mr. Drabinsky’s behaviour or his communications with the Plaintiff as an active and ongoing creditor that would have signaled that the Property had been transferred. As in a limitation analysis, a creditor must use due diligence in discovering the facts giving rise to his legal rights; but that obligation requires demonstrating only that the creditor “behaved as a reasonable person in the same or similar circumstances using reasonable diligence in discovering the facts relating to the [claim]”: Farhat v Monteanu, 2015 ONSC 2119, at para 34.
70The Plaintiff submits that Mr. Drabinsky appears to have counted on the fact that it would be an excessive burden for the Plaintiff to be checking title to the Property on a periodic and ongoing basis when there was nothing visible to trigger a search. In that respect, Mr. Drabinsky guessed right. Discovering the transfer would have required the Plaintiff not to search title once as one does pending closing in a real estate transaction. Rather, it would have required multiple searches on an ongoing basis since no one search would guarantee that a transfer did not take place the next day. For that reason alone, to require a creditor to search title when there is nothing to trigger the search would be to require a level of diligence well beyond what is reasonable. The transfer was, in effect, hidden despite being publicly registered.
71As the timing demonstrates, the transfer was made in the face of threatened legal proceedings. It seems too coincidental that Mr. Drabinsky proposed the transfer of title in early April 2015 within weeks of his default in monthly payments to the Plaintiff, and completed the transfer in early September 2015 just when the Plaintiff demanded that payments resume.
72While one would not say that the transfer of title was done in haste – it took months to clear off the registered liens and executions so that the transfer could be carried out – the timing is such that it appears designed to forestall seizure of the Property. Preparing the transfer spanned the very period between Mr. Drabinsky’s default in payments to the Plaintiff and the Plaintiff’s renewed demand for payment, all coinciding with a period when the Plaintiff (and, potentially, other creditors) did not yet have a reason to register anything against the Property.
73As for the consideration for the transfer, the Property was of significant value but the consideration was nominal. Defendants’ counsel contends that this is not uncommon for inter-spousal transfers, which is certainly true. But context is everything. This kind of familial relationship could justify a transfer with grossly inadequate consideration, or it could bring the transaction within one of the listed badges of fraud.
74Ms. Winford-Drabinsky paid virtually nothing for title to the Property because she earned no income and doubtless could not have paid its real value. In that respect, it makes no sense that CIBC would ask for the transfer, as Mr. Drabinsky insists, since Ms. Winford-Drabinsky did not have the financial wherewithal to carry the mortgage. At the risk of stating the obvious, banks typically want financially capable mortgagors, not financially incapable ones.
75To all appearances, the transfer can only be explained as an effort to put the Property beyond the reach of Mr. Drabinsky’s creditors. The transaction is replete with the badges of this kind of surreptitious creditor-proofing. Mr. Drabinsky offers no other explanation that makes sense. While he insists under oath that he had not turned his mind to the effect of the transfer on his creditors, the objective indicia are such that he could hardly have been thinking of anything else.
76I find that the only explanation for the transfer of title to Ms. Winford-Drabinsky is that Mr. Drabinsky intended to put the Property out of reach of his creditors, including the Plaintiff.
VI. Disposition
77Judgment is granted in favour of the Plaintiff. There will be an Order under section 2 of the FCA that the September 11, 2015 transfer of title to the Property from Mr. Drabinsky and Ms. Winford-Drabinsky as joint tenants to Ms. Winford-Drabinsky is void as against the Plaintiff and other creditors of Mr. Drabinsky.
78The Defendants’ motion for summary judgment is dismissed.
79The Plaintiff is entitled to costs. He submits that his costs on a partial indemnity basis come to $92,609.83, although he concedes that in view of the principle of proportionality this could be reduced to somewhere in the range of $60,000.
80Counsel for the Defendants submits that as a self-represented litigant, the Plaintiff is not entitled to what he might otherwise claim as counsel fee if he were working for a client. In any case, the Defendants’ costs appear to be far more modest than the Plaintiff’s. Counsel for the Defendants submits that his costs come to $28,000 on a substantial indemnity basis and $13,000 on a partial indemnity basis.
81Costs are always discretionary under section 131 of the Courts of Justice Act, RSO 1990, c. C.43. Whether the party is self-represented or is represented by counsel, the key to the exercise of discretion is to balance the principle of indemnity with the need for access to justice, and to do so by implementing what is “fair and reasonable” under the circumstances: Boucher v Public Accountants Council for the Province of Ontario (2004), 71 OR (3d) 291, at para 24 (Ont CA).
82Under Rule 57.01(1)(0.b) of the Rules of Civil Procedure, the fair and reasonable approach includes “the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed.” Given the circumstances here, where a lawyer has represented himself, the amount of costs that fits this description is an amount equivalent to what the unsuccessful side would claim on a partial indemnity basis.
83The Defendants shall pay the Plaintiff costs of the motion and the action in the all-inclusive amount of $13,000.
Morgan J.
Date: February 25, 2020
COURT FILE NO.: CV-19-00622100 DATE: 20200225 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: PHILIP ANISMAN Plaintiff – and – GARTH H. DRABINSKY and ANN ELIZABETH WINFORD-DRABINSKY Defendants
REASONS FOR JUDGMENT E. M. Morgan J. Released: February 25, 2020
