COURT FILE NO.: CV-14-10638-00CL
DATE: 20200928
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ALBERT GELMAN INC., in its capacity as Trustee in Bankruptcy of SPIROS PANTZIRIS
Plaintiff/Moving Party/Responding Party
– and –
1529439 ONTARIO LIMITED, AGLAIA PANTZIRIS, ASPE CONSULTING SERVICES LTD., JULIE PANTZIRIS also known as JULIE TAYLOR also known as JULIE TAYLOR PANTZIRIS and ELLEN BOWLIN
Defendants/Responding Parties/Moving Parties
Lou Brzezinski and Aaron Grossman, for the Plaintiff/Moving Party/Responding Party
Steven Bellissimo, for the Defendants/Responding Parties/Moving Parties
HEARD: September 11 and 12, 2019 and July 10, 2020
REASONS FOR DECISION
Dietrich J.
Overview
[1] In this matter, the court is asked to determine whether two transactions involving property owned by Spiros Pantziris, a bankrupt individual, were transfers at undervalue, fraudulent conveyances, or preferences, and whether these transactions are void as against Albert Gelman Inc., the trustee in bankruptcy (the “Trustee”).
[2] Mr. Pantziris was adjudged bankrupt by an order of this court dated October 8, 2013. He consented to this order, which was based on an application made on April 26, 2013 by one of his creditors, Cobalt Capital Textile Investments LP (“Cobalt Capital”). April 26, 2013 is the date of the initial bankruptcy event for the purposes of the relevant bankruptcy legislation.
[3] The Trustee brings this summary judgment motion seeking to set aside or void the transactions, both of which took place prior to the bankruptcy application. The Trustee seeks to bring the property disposed of by Mr. Pantziris back into Mr. Pantziris’ estate for the benefit of his creditors.
[4] The Defendants against whom the Trustee seeks summary judgment include Mr. Pantziris’ wife Julie Pantziris, his mother Aglaia Pantziris (“Mrs. Pantziris”) and two corporations, 1529439 Ontario Limited (“152”) and ASPE Consulting Services Ltd. (“ASPE”). The Trustee is not pursuing its claim against Ellen Bowlin.
[5] The first transaction involved the transfer by Mr. Pantziris of his undivided one-half interest in a residence at 9 Berkindale Crescent in the City of Toronto (the “Residence”), owned jointly by Mr. Pantziris and Julie Pantziris, to Julie Pantziris as sole owner.
[6] The second transaction involved the transfer of Mr. Pantziris’ Preferred Shares (the “Shares”) in 152, a family-owned company, to the defendant ASPE. Both 152 and ASPE were controlled by Mrs. Pantziris at the time of transfer.
[7] The Defendants bring a cross-motion for summary judgment. They seek a dismissal of the Trustee’s claims in their entirety on the basis that they are statute-barred.
[8] For the reasons that follow, I grant summary judgment to the Trustee and set aside the transactions involving the transfer of Mr. Pantziris’ interest in the Residence and the transfer of the Shares. The Defendants’ cross-motion is dismissed.
Positions of the Parties
[9] The Trustee submits that Mr. Pantziris’ transfer of his interest in the Residence to Julie Pantziris on August 22, 2008 was a transfer pursuant to the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (the “BIA”) and a fraudulent conveyance pursuant to the Fraudulent Conveyances Act, R.S.O. 1990, c. F. 29 (the “FCA”). The Trustee submits that the transfer of the Shares by 152 on April 20, 2013 was also a transfer at undervalue and a preference pursuant to the BIA.
[10] Regarding the Residence, the Trustee asserts that the transfer of Mr. Pantziris’ interest was a transfer for no real consideration, made just two days after he incurred a significant contingent liability and was advised of a claim against him by Export Development Canada (“EDC”). The Trustee argues that Mr. Pantziris and Julie Pantziris intended to defeat and frustrate Mr. Pantziris’ creditors, as evidenced by multiple badges of fraud surrounding the transfer of the Residence.
[11] Regarding the Shares, the Trustee asserts that the purported transfer by Mr. Pantziris, within one week of the bankruptcy application, was so close to the said application that it is presumptively voidable because it had a preferential effect, and it was a transfer at undervalue as well.
[12] The Defendants submit that the transfers of the Residence and the Shares are not voidable against the Trustee because neither was a transfer at undervalue, a fraudulent conveyance, or a preference. They assert that no transfer was made with an intention to defeat, defraud, or delay Mr. Pantziris’ creditors.
[13] The Defendants also assert that the transfer of the Shares was a seizure, not a transfer, and that the Shares were seized by a secured creditor with priority over the Trustee.
[14] In their cross-motion, the Defendants assert that the Trustee’s claims are wholly barred by the Limitations Act, 2002, S.O. 2002, c. 24 (the “Limitations Act”). They further assert that the Trustee did not file a reply to their statement of defence as required by rule 25.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) and, as a consequence, the Trustee is deemed to admit the statements made in the statement of defence, including that its claims against the Defendants are statute-barred.
[15] Notwithstanding that the Trustee was given leave to file a reply, which it did on January 8, 2020, the Defendants assert that the Trustee’s reply does not comply with rule 25.06(1) because the Trustee did not plead all material facts on which it relied. Therefore, the Defendants argue that the Trustee is deemed to have admitted the facts pled by the Defendants, including the fact that the claims are statute-barred. Alternatively, the Defendants assert that if the Trustee’s reply in fact complies with the Rules, the Trustee should not be permitted to use the BIA for a collateral tactical purpose, namely, to collect a debt on behalf of a single creditor.
Factual Background
[16] Mr. Pantziris and his late father founded Spintex Yarns Limited, a corporation incorporated pursuant to the laws of Ontario. The corporation was in the business of manufacturing recycled yarn. It was operated through 1635278 Ontario Ltd. (“163”). Around 2007, Mr. Pantziris sought investors to assist in financing the relocation of 163 to El Salvador.
[17] Cobalt Capital expressed interest and put up investment capital of approximately $3.5 million. A new El Salvadorian corporation, Texspin S.A. de C.V., was established for this endeavour. Cobalt Capital held a 41.7% interest in 163/Texspin S.A. de C.V. (“Texspin”).
[18] On July 13, 2007, Mr. Pantziris and Cobalt Capital entered into a shareholders’ agreement governing the management of Texspin and a Professional Services Agreement regarding Mr. Pantziris’ employment as president and CEO. Both agreements provided that if Mr. Pantziris were terminated for cause, the termination would be a “triggering event.” This would entitle Cobalt Capital to exercise a put option requiring Mr. Pantziris to repay Cobalt Capital’s investment in Texspin by purchasing Cobalt Capital’s shares, valued at approximately $3.5 million.
[19] While Mr. Pantziris was president and CEO of Texspin, his life was insured pursuant to a key man insurance policy. The policy included a death benefit of $9 million, representing the total value of Texspin as of July 13, 2007. Texspin was the designated beneficiary of the policy.
[20] In January 2008, Mr. Pantziris moved to El Salvador to undertake his duties. He bought a house there. Julie Pantziris and their children did not move with him. Mr. Pantziris testified that there had been a strain on the marriage since 2006 and his move to El Salvador only exacerbated his domestic situation.
[21] Texspin ran into financial difficulty very early on. On July 19, 2008, Mr. Pantziris gave written notice of his intention to terminate the Professional Services Agreement and to sever his relationship with Cobalt Capital.
[22] On August 20, 2008, during his working notice period, Cobalt Capital terminated Mr. Pantziris for cause. As a result, he no longer had the benefit of the key man insurance policy. At the same time, Mr. Pantziris was made aware of a statement of claim issued on August 14, 2008 by Export Development Corporation (“EDC”) seeking USD1.2 million from Mr. Pantziris personally.
[23] On August 21, 2008, Mr. Pantziris returned to Toronto. The following day, he and Julie Pantziris attended at a lawyer’s office and arranged for a transfer of his undivided one-half interest in the Residence to her for “$2.00 for natural love and affection.”
[24] On October 21, 2008, Cobalt Capital put Mr. Pantziris on notice of its intention to exercise its put option. Accordingly, Mr. Pantziris would be required to purchase Cobalt Capital’s shares in Texspin within six months of the put.
[25] Mr. Pantziris challenged his termination for cause and the matter proceeded to arbitration. The arbitration took place between June 2009 and December 2011. The result was an award requiring Mr. Pantziris to pay approximately $3.5 million to Cobalt Capital for its shares in Texspin. On May 1, 2012, this court ordered the award against Mr. Pantziris enforceable in Ontario.
[26] On October 8, 2008, about two weeks prior to Cobalt Capital’s exercise of its put option, Mr. Pantziris signed a promissory note in favour of ASPE (the “Promissory Note”). The Promissory Note was in the principal amount of $1.2 million. Mr. Pantziris drew $955,685.69 against the Promissory Note. He testified that he needed the funds to retain counsel to defend against allegations made by Cobalt Capital regarding his termination.
[27] The Promissory Note was drafted by Mr. Pantziris based on a template he found online. It contained language with respect to security for his loan from ASPE. The security described in the Promissory Note includes the Residence specifically, subject to any existing mortgage.
[28] The family company, 152, was formed in 2002 as an investment vehicle for the Pantziris family. At that time, Mr. Pantziris was issued the Shares, being 1,900,112 Class “A” Preferred Shares and 75 Class “B” Preferred Shares. The share conditions included unfettered redemption rights. The combined redemption value of the Shares was approximately $1.9 million. The articles of incorporation for 152 contained no restriction on the transfer or redemption of the Shares.
[29] On June 12, 2012, approximately six weeks from the issuance of the enforcement order obtained by Cobalt Capital, Mrs. Pantziris, on behalf of ASPE, issued a statement of claim against Mr. Pantziris. In its claim, ASPE sought repayment of the whole amount owing on the Promissory Note. On July 12, 2012, one month after issuing the claim, ASPE obtained an undefended default judgment against Mr. Pantziris in the amount of $963,313.24. ASPE filed a writ of seizure and sale against Mr. Pantziris.
[30] About one year later, on or about April 20, 2013, Mrs. Pantziris, who controlled 152, authorized the transfer of all the Shares to ASPE in satisfaction of the amount owing on the Promissory Note. The total amount alleged to be owing to ASPE at that time was $1,164,463.24, including interest and an alleged additional advance of $200,000 for Mr. Pantziris’ legal fees.
The Trustee’s Motion for Summary Judgment
[31] The issues in the Trustee’s motion for summary judgment are as follows:
Is there a genuine issue requiring a trial such that summary judgment under rule 20 of the Rules is not appropriate?
Was the transfer of Mr. Pantziris’ interest in the Residence a transfer at undervalue pursuant to the BIA, a fraudulent conveyance under the FCA, or both?
Was the transfer of the Shares a transfer at undervalue, a preference, or both, pursuant to the BIA?
Was ASPE a secured creditor with a priority over the Trustee?
Summary Judgment
[32] Rule 20 of the Rules states that the court shall grant summary judgment if there is no genuine issue requiring a trial. The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, 2014 CSC 7, [2014] 1 S.C.R, at para. 49, set out the following three-part test relating to this rule:
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[33] I find that the evidentiary record in this case allows me to make the necessary findings of fact. There is considerable documentary evidence in respect of both transactions that the Trustee seeks to set aside. The transfer of the Residence is documented in a public register and the transfer of the Shares is recorded in the record books of 152, which issued the Shares, and in correspondence between Mrs. Pantziris and the Canada Revenue Agency. The effect of the Promissory Note on the Trustee’s claim can be adjudicated based on the written record. In my view, the record before the court allows me to weigh the evidence, evaluate credibility, and draw inferences where necessary. I do not find that any of the defences raised by the Defendants raise facts that require a trial of an issue.
[34] This court has granted summary judgment or rendered judgment on a written record in a number of cases involving fraudulent conveyances, transfers at undervalue, and preferences: Truestar Investments Ltd. v. Baer, 2018 ONSC 3158 at paras. 16 and 27; Juhasz (Trustee of) v. Cordeiro, 2015 ONSC 1781 (“Juhasz”); and National Telecommunications Inc, Re., 2017 ONSC 1475 (“NTI”) at paras. 34-38.
[35] In Truestar, the court granted summary judgment on a preference and transfer at undervalue brought by an assignee of the trustee in bankruptcy. The court held that because the transfers of real property were well documented, the matter could be adjudicated summarily. In Juhasz, the court ruled that the transfer of property was void as a transfer at undervalue on a summary application, though a trial of the value of the property was ordered.
[36] The court in Truestar emphasized the importance of reviewing the bankrupt’s post-transaction conduct, as opposed to his explanations. In Juhasz, the court considered the bankrupt’s conduct in “bankruptcy-proofing” its affairs, including the removal of assets from the reach of creditors, which provided insight into its intention relating to the impugned transfer.
Legal Principles
[37] A trustee in bankruptcy has, by virtue of the bankruptcy legislation, the right and the obligation to bring an action to recover property or the value of property from persons who acquired it from the bankrupt. A trustee also has the right to set aside certain transactions, such as fraudulent preferences and settlements, which the bankrupt could not set aside.
[38] Section 96 of the BIA provides that, for parties who do not deal at arm’s length, certain transactions between them will be void for the purposes of the BIA.
[39] The section reads as follows:
96 (1) On application by the trustee, a court may declare that a transfer at undervalue is void as against, or, in Quebec, may not be set up against, the trustee — or order that a party to the transfer or any other person who is privy to the transfer, or all of those persons, pay to the estate the difference between the value of the consideration received by the debtor and the value of the consideration given by the debtor — if
(b) the party was not dealing at arm’s length with the debtor and
(i) the transfer occurred during the period that begins on the day that is one year before the date of the initial bankruptcy event and ends on the date of the bankruptcy, or
(ii) the transfer occurred during the period that begins on the day that is five years before the date of the initial bankruptcy event and ends on the day before the day on which the period referred to in subparagraph (i) begins and
(A) the debtor was insolvent at the time of the transfer or was rendered insolvent by it, or
(B) the debtor intended to defraud, defeat or delay a creditor. [Emphasis added]
[40] The BIA defines a “transfer at undervalue” as a disposition of property or provision of services for which no consideration is received by the debtor or for which the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor.
[41] Like the BIA, the FCA also provides that conveyances are void as against creditors if they are made with the intent to defeat, hinder, delay, or defraud creditors. Section 2 of the FCA provides:
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 or their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns. [Emphasis added]
[42] The BIA also operates to set aside certain transactions by non-arm’s length parties on the basis of preference. Specifically, s. 95 of the BIA provides as follows:
95 (1) A transfer of property made, a provision of services made, a charge on property made, a payment made, an obligation incurred or a judicial proceeding taken or suffered by an insolvent person
(a) in favour of a creditor who is dealing at arm’s length with the insolvent person, or a person in trust for that creditor, with a view to giving that creditor a preference over another creditor is void as against — or, in Quebec, may not be set up against — the trustee if it is made, incurred, taken or suffered, as the case may be, during the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the date of the bankruptcy; and
(b) in favour of a creditor who is not dealing at arm’s length with the insolvent person, or a person in trust for that creditor, that has the effect of giving that creditor a preference over another creditor is void as against — or, in Quebec, may not be set up against — the trustee if it is made, incurred, taken or suffered, as the case may be, during the period beginning on the day that is 12 months before the date of the initial bankruptcy event and ending on the date of the bankruptcy.
(2) If the transfer, charge, payment, obligation or judicial proceeding referred to in paragraph (1)(a) has the effect of giving the creditor a preference, it is, in the absence of evidence to the contrary, presumed to have been made, incurred, taken or suffered with a view to giving the creditor the preference — even if it was made, incurred, taken or suffered, as the case may be, under pressure — and evidence of pressure is not admissible to support the transaction.
(2.1) Subsection (2) does not apply, and the parties are deemed to be dealing with each other at arm’s length, in respect of the following:
(a) a margin deposit made by a clearing member with a clearing house; or
(b) a transfer, charge or payment made in connection with financial collateral and in accordance with the provisions of an eligible financial contract. [Emphasis added]
Analysis
The Transfer of the Residence
[43] On August 22, 2008, two days following his termination and having been advised of the EDC claim against him and others, Mr. Pantziris transferred his one-half interest in the Residence to his spouse for “$2 for natural love and affection.”
[44] For the reasons that follow, on a balance of probabilities I find that the transfer of Mr. Pantziris’ interest in the Residence was a transfer at undervalue and that the transfer was made with an intention to defraud, defeat, or delay his creditors. The transfer is therefore void as against the Trustee. Because I find that Mr. Pantziris intended to defraud or defeat his creditors, the transfer was also a fraudulent conveyance for the purposes of the FCA.
[45] Pursuant to the BIA, s. 96(1)(b)(ii)(B), an undervalue transfer will be void against the Trustee if it is made to a party who is not at arm’s length; was made within a period five years before the initial bankruptcy event; and the debtor intended to defraud, defeat, or delay creditors.
[46] Based on the record, a one-half interest in the Residence, being located in the City of Toronto, had a value in excess of the $2.00 for natural love and affection that Julie Pantziris paid Mr. Pantziris as consideration. The Certificate of Appraisal included in the record shows that the Residence had a value of $2,475,000 and was encumbered by a mortgage in the principal amount of $900,000.
[47] It is not disputed that Mr. Pantziris and Julie Pantziris, being spouses of one another, do not deal at arm’s length. Persons who are related to one another are deemed not to deal with each other at arm’s length while so related: BIA, s. 4(5). It is also not disputed that the transfer of Mr. Pantziris’ interest in the Residence on August 22, 2008 occurred within the five-year period preceding the initial bankruptcy event that occurred on April 26, 2003.
[48] Mr. Pantziris and Julie Pantziris assert that the transfer for $2.00 for natural love and affection is not a transfer at undervalue for the purposes of the BIA because Julie Pantziris paid the mortgage payments, property taxes, and all other expenses apart from the utilities, maintenance, and minor upkeep of the Residence, which were paid by Mr. Pantziris. Accordingly, they assert that Julie Pantziris owned a greater than fifty percent interest in the Residence prior to the transfer.
[49] There is no documentary evidence before the court to show that Julie Pantziris’ contributions to the Residence were equal to or greater than the value of Mr. Pantziris’ one-half interest in the equity of the Residence at the time of the transfer. I am, therefore, satisfied that the transfer was a transfer at undervalue.
[50] To determine whether the transfer is void as against the Trustee, I must determine whether the transfer was made with the intention to defraud, defeat, or delay creditors. This determination is relevant to finding a fraudulent conveyance and to voiding a transfer as against the Trustee. Mr. Pantziris and Julie Pantziris assert that they had valid reasons for the transfer of his one-half interest in the Residence to her and had no intention to defraud, defeat, or delay creditors.
[51] Under each of the BIA and the FCA, the onus is on the Trustee to show that the intent of the parties to the transfer was to defraud, defeat, or delay a creditor. The Trustee is not required to prove that the sole or even the primary purpose of the transfer was to defeat creditors, only that this intention was among the intentions of those participating in the transfer: NTI at para. 52. Courts have consistently held that proof of actual intent is not required to find a fraudulent conveyance or transfer at undervalue.
[52] Under cross-examination, Julie Pantziris testified that she wanted the Residence in her name because she believed El Salvador was an unsafe place for her husband. If she had the house in her name she could “pay for my kids” if something happened to him. When asked whether it was also so “that the creditors wouldn’t get it,” she responded “That is right.” The Defendants submit that this comment is taken out of context and that the transfer of the Residence was done when Mr. Pantziris did not have any creditors or, if he did, he was able to pay them.
[53] The Trustee submits that, under cross-examination, Julie Pantziris admitted that the transfer was made to avoid creditors. It asserts that this is evidence of an actual intention to defeat creditors. The Trustee further submits that there are a number of badges of fraud that support a finding of this intention.
[54] At the time of the transfer, Mr. Pantziris was aware of the EDC claim against him and others for USD1.2 million. The Defendants do not provide any documentary evidence to show that Mr. Pantziris had sufficient assets at that time to pay the amount claimed by EDC, or to pay Cobalt Capital $3.5 million for its shares if it exercised its put option, which it was then in a position to do. Despite the claim that Mr. Pantziris could have paid any creditors he had at that time, in fact he borrowed nearly $1 million from ASPE on October 8, 2008 to fund the litigation related to his termination. When ASPE sought default judgment to collect that amount, plus interest, Mr. Pantziris did not defend the action and acknowledged that he did not have the money to repay the loan.
[55] The Trustee cites the following as badges of fraud regarding the transfer of the Residence:
• The transfer was to Mr. Pantziris’ spouse, a non-arm’s length person.
• There were actual or potential liabilities facing Mr. Pantziris at the time of transfer. Two days before the transfer, Mr. Pantziris had been told that EDC had brought a claim against him and others for USD1.2 million. His termination as CEO of Texspin, also two days prior to the transfer, had put Cobalt Capital in a position to exercise its put option and demand that he purchase its shares for $3.5 million.
• Mr. Pantziris was paid inadequate consideration for the transfer of his one-half interest in the Residence. He received only $2 for natural love and affection.
• The transfer was done with unusual haste within two days of Mr. Pantziris becoming aware of the EDC claim and the real possibility that Texspin would give notice of its intention to exercise its put option, which it did on October 22, 2008.
• Mr. Pantziris remained in possession or occupation of the Residence for his own use following the transfer.
Courts have considered each of these features of transactions alleged to be made with fraudulent intent as badges of fraud. See: Cybernetic Exchange Inc. v. JCN Equities Ltd., [2003] O.T.C. 1035 15 R.P.R. (4th) 74, 127 A.C.W.S. (3d) 764 at paras. 224-225.
[56] A prima facie case of a fraudulent conveyance may be evidenced by one or more badges of fraud surrounding the transaction: Purcaru v. Seliverstova, 2016 ONCA 619. Once a badge of fraud is found, those defending the transaction must provide a reasonable and credible explanation, supported by documentation, for their conduct prior to and following the transaction: Truestar at para. 16; Juhasz at para. 59; NTI at paras. 54-57; Purcaru at paras. 5-8; and Cybernetic.
[57] Mr. Pantziris and Julie Pantziris deny any intention to defeat, hinder, delay, or defraud Mr. Pantziris’ creditors. They advance an alternative rationale for the transfer of the Residence and assert that the transfer was made to ensure that Julie Pantziris and their children were adequately protected in the event of separation, failure of the business in El Salvador, or Mr. Pantziris’ death.
[58] Julie Pantziris testified that she and Mr. Pantziris had discussed the transfer of his interest in the Residence to her before he left for El Salvador. She further testified that she wanted to ensure that she would have some financial security for herself and their children if Mr. Pantziris died or his business failed. Julie Pantziris’ evidence is that she agreed to Mr. Pantziris’ move to El Salvador provided he obtained life insurance designating her as the beneficiary and provided he transferred his interest in the Residence to her.
[59] Julie Pantziris testified that she contacted a lawyer to effect the transfer of the Residence in June 2008 and actually met with another lawyer in July 2008 to prepare the transfer documents. There is no documentary evidence to support Julie Pantziris’ contact or meeting with these lawyers regarding the transfer of the Residence.
[60] Mr. Pantziris testified that at a meeting of the board of Texspin on August 19 or 20, 2008, as part of the discussion relating to the EDC claim against him, he told the board that he had transferred his interest in the Residence to his spouse. The board included Cobalt Capital’s nominees, Peter Plows and Patrick Keane. Despite what Mr. Pantziris may have believed, in fact, he had not transferred his interest to Julie Pantziris at that time and he had not signed any documentation to give effect to such a transfer.
[61] The dockets of the solicitor who prepared the transfer documentation for the Residence in August 2008 contradict the testimony of Mr. Pantziris and Julie Pantziris that they had made arrangements to transfer the property prior to August 20, 2008. Based on the solicitor’s dockets, the first contact with him was August 21, 2008, the day following Mr. Pantziris’ termination.
[62] Julie Pantziris testified that the transfer of the Residence was important to her because she perceived El Salvador to be a dangerous place; if her husband died there, she would have the security of the Residence for herself and her children. However, prior to the transfer, the Residence was owned by Mr. Pantziris and Julie Pantziris as joint tenants with right of survivorship. The transfer of title into Julie Pantziris’ name was not necessary to ensure that the Residence would pass to her on Mr. Pantziris’ death if she survived him. This rationale for the transfer of Mr. Pantziris’ interest to Julie Pantziris is not compelling.
[63] Mr. Pantziris and Julie Pantziris also assert that, prior to Mr. Pantziris leaving for El Salvador, their marriage was in peril and they were on the cusp of separating. As part of their discussions, they say that Mr. Pantziris chose to give up his interest in the Residence as part of a separation agreement and so he would be free to start a new life in El Salvador. No separation or other agreement to this effect was reduced to writing. The Ontario Court of Appeal has stated that the purpose of ensuring that agreements to transfer real property and binding domestic contracts are in writing is to provide certainty in real estate transactions and written corroboration of a potentially disputed oral agreement: Statute of Frauds, R.S.O. 1990. c.S.19, ss. 1(1) and 4; Family Law Act, R.S.O. 1990, c. F.3, ss. 18, 21, 51, and 55; and Abdollahpour v. Banifatemi, 2015 ONCA 834 at paras. 2-4 and 30. In the case at bar, the alleged separation agreement between Mr. Pantziris and Julie Pantziris had not been reduced to writing and, in fact, they did not separate. I am not persuaded by this rationale for the transfer.
[64] Julie Pantziris also deposed that the transfer of Mr. Pantziris’ interest in the Residence became especially important once he was terminated because Mr. Pantziris could no longer offer Julie Pantziris the security of a death benefit on the key man life insurance policy. Mr. Pantziris testified that his key man life insurance policy had a death benefit of $9 million, representing the full value of Texspin when Cobalt Capital made its investment. He submits that this value would have ensured that Cobalt Capital would receive $3.5 million for its shares in accordance with the shareholders’ agreement should Mr. Pantziris pass away. Mr. Pantziris also testified that, once Cobalt Capital had been paid, the balance of the death benefit would be “effectively paid to Julie from 163 as per the family’s agreement/understanding.” Julie Pantziris conceded that she is not a shareholder of 163. No evidence of the “agreement/understanding” was put before the court and it is not evident how Julie Pantziris would benefit from the life insurance policy on which 163 was named as the beneficiary.
[65] Under cross-examination, Mr. Pantziris was asked whether the lapse of the life insurance policy was a basis for the transfer of his interest in the Residence. He said: “It wasn’t because of the life insurance policy. It was about the security of my family and what my family would look like if I was living in El Salvador full time and my wife was living here full time...” and added, “there are other separate reasons … they’re all melded together.” Mr. Pantziris did not articulate the “other separate reasons.”
[66] Mr. Pantziris’ evidence is that he was not insolvent at the time he transferred his interest in the house and could have paid his creditors at that time. He asserts that he fully intended to respond to the put option once it was exercised and to buy out Cobalt Capital’s interest in Texspin. He submits that he had come back to Canada to seek legal advice on the buyout and his termination for cause. His evidence is that he was denied the opportunity to exercise the option because Cobalt Capital’s directors on the board of Texspin had sent a letter to the Attorney General in El Salvador alleging that Mr. Pantziris had committed fraud there. Mr. Pantziris deposed that he believed he would be imprisoned on re-entry if he returned to El Salvador. There is no documentary evidence before this court to show that such allegations would have led to Mr. Pantziris’ imprisonment. Mr. Pantziris deposed that, on the advice of counsel, he did not return to El Salvador. He made no further attempt to refinance and purchase Cobalt Capital’s interest in Texspin.
[67] The British Columbia Supreme Court held that disposing of assets before insolvency or any triggering event can still be found to be a fraudulent conveyance. In Abakhan & Associates Inc. v. Braydon Investments Ltd., 2008 BCSC 1547 at paras. 59, 60, and 63, aff’d 2009 BCCA 521, citing McGuire v. Ottawa Wine Vaults Co., 1913 76 (SCC) and Newlands Sawmills Ltd. v. Bateman (1922), 1922 742 (BC CA), 31 BCR 351, 70 DLR 165, [1922] 3 WWR 649 (C.A.), the Court states: “A man who contemplates going into trade cannot on the eve of doing so take the bulk of his property out of the reach of those who may become his creditors in his trading operations.”
[68] The term “creditors or others” in s. 2 of the FCA includes future creditors who may become creditors of the debtor/bankrupt, and not just the present creditors of the bankrupt estate. A creditor attempting to set aside a conveyance need not establish that he was a creditor of the transferor at the time of the impugned transaction. In Purcaru, where legal proceedings that resulted in the debt between the parties had begun but were not concluded for several years, the defendants argued that without a judgment there was no liability and therefore no fraudulent intent. The Ontario Court of Appeal rejected this argument and stated that the legal proceedings created a contingent liability for the debtor, which the debtor believed would likely result in some judgment or award in favour of the plaintiff. It stated that the fraudulent intent must be assessed at the time of the impugned transactions: Purcaru at paras. 9-11.
[69] At the time Mr. Pantziris transferred his interest in the Residence, he had at least one creditor. The EDC had issued its statement of claim against him. He also had a contingent creditor, Cobalt Capital. He had been terminated two days prior to the transfer and was aware that his termination triggered the right of Cobalt Capital to exercise its put option and require the purchase of their shares for $3.5 million.
[70] In the face of multiple badges of fraud, I find that Mr. Pantziris and Julie Pantziris have not provided a reasonable and credible explanation for their conduct prior to and following the transfer of the Residence, supported by documentary evidence. I include in this conduct Julie Pantziris’ admission under oath that Mr. Pantziris transferred his interest in the Residence to her to keep it from the creditors. In my view, their evidence does not raise a genuine issue for trial. I find that, for the purposes of the BIA and the FCA, Mr. Pantziris’ transfer of his interest in the Residence to Julie Pantziris was made with fraudulent intent. As such, it is void as against the Trustee.
The Transfer of the Shares
[71] Less than two months after Mr. Pantziris’ termination and two weeks before Cobalt Capital notified Mr. Pantziris of its intention to exercise its put right, Mr. Pantziris purportedly signed the Promissory Note as security for the loan made to him from ASPE. He then allegedly drew $955,685.69 against the Promissory Note. His evidence is that these funds were intended to cover his legal fees in the arbitration relating to his termination, though no invoices in support of these fees were adduced as evidence.
[72] Mr. Pantziris did not repay the loan and ASPE sued him to collect. Mrs. Pantziris, through ASPE, issued a statement of claim against Mr. Pantziris about one month after Cobalt Capital obtained an order permitting them to enforce their claim against him in Canada. The ASPE statement of claim did not reference any security interest of ASPE in Mr. Pantziris’ property.
[73] ASPE obtained default judgment and a writ of seizure and sale in July 2012. On April 19 or 20, 2013, only days before the application relating to Mr. Pantziris’ bankruptcy was issued, Mrs. Pantziris, as director of 152, made a resolution authorizing the transfer of the Shares from Mr. Pantziris to ASPE.
[74] The Trustee asserts that the transfer of the Shares is both a transfer at undervalue and a preference for the purposes of the BIA. It asks this court to set aside the transfer of Mr. Pantziris’ shares to ASPE on both bases. For the reasons that follow, on a balance of probabilities I find that the transfer of the Shares was a transfer at undervalue made with an intent to defraud or defeat his creditors. Given the timing of the transfer, it was also a preference. The transfer of the Shares is void as against the Trustee.
Transfer at Undervalue
[75] In support of its argument that the transfer of the Shares was a transfer at undervalue, the Trustee submits that, according to the articles of incorporation of 152, which place no restriction on the shareholder’s right to redeem the Shares, the Shares had a redemption amount of approximately $1.9 million. Mr. Pantziris testified that he drew down $955,685.69 against the Promissory Note. Accordingly, the Trustee asserts that the transfer of the Shares resulted in property with a value significantly in excess of what was purportedly owed.
[76] The Trustee also submits that the transfer of the Shares on April 20, 2013 was a non-arm’s length transaction made within days of the initial bankruptcy event, and as such is a preference for the purposes of s. 95(1) of the BIA. The Trustee further asserts that the transfer of the Shares is presumptively void, having been made within one year of the initial bankruptcy event.
[77] Under s. 4 of the BIA, a person includes a corporation; therefore, ASPE and 152 are persons for this purpose. Under this section, related persons include an entity and a person connected by blood relationship (Mr. Pantziris) to a person who controls the entity (Mrs. Pantziris). Pursuant to s. 4(5), persons who are related to each other are deemed not to deal with each other at arm’s length while so related and for the purposes of paragraph 95(1)(b) are, in the absence of evidence to the contrary, deemed not to deal with each other at arm’s length. Mr. Pantziris and ASPE did not deal with each other at arm’s length.
[78] Mrs. Pantziris and ASPE submit that the transfer was not a transfer at undervalue because ASPE seized the Shares in full satisfaction of its security. They assert that the amount owing at that time was $1,164,463.24, which included an additional $200,000 advance for legal fees and interest. They also assert that ASPE had to pay tax on the Shares. Mr. Pantziris calculated this tax liability to be the difference between $1,164,463.24 and the approximately $1.9 million borrowed. There is no documentary evidence from Mr. Pantziris or a tax expert on the quantum of tax owing or on why ASPE would be responsible for tax owing on Mr. Pantziris’ disposition of the Shares.
[79] Based on the record, I am satisfied that through the actions of Mrs. Pantziris and the transfer of the Shares to ASPE, ASPE received value in excess of the amount lent to Mr. Pantziris. Mrs. Pantziris and ASPE have provided no credible explanation for a transfer of the Shares to ASPE at an amount in excess of the loaned amount.
[80] These Defendants submit that there was no transfer at undervalue because the Shares were “seized” as security and not transferred. Further, they submit that ASPE’s security interest over Mr. Pantziris’ property gave ASPE “secured creditor” status such that its claim took priority over Cobalt Capital’s unsecured claim.
Transfer or Seizure
[81] The Defendants Mrs. Pantziris, ASPE, and 152 assert that Mr. Pantziris never transferred the Shares to ASPE and that the Shares were seized by ASPE. They argue that the Trustee is not entitled to set aside the transaction between Mr. Pantziris and ASPE because the Trustee was fully aware of the default judgment and the seizure of the Shares before it issued its statement of claim and it did not challenge the seizure in its claims.
[82] I agree with the Trustee’s assertion that seizure implies an authoritative taking of property from the bankrupt by the sheriff. This is a requirement of the Securities Transfer Act, 2006, S.O. 2006 (“STA”). Under s. 47 of that Act, the laws governing civil enforcement of judgments apply to the operation of seizures in ss. 48 to 51: the interest of a judgment debtor in a certificated security may be seized only by actual seizure of the security certificate by a sheriff.
[83] It is common ground that the Shares were not seized by a sheriff. Based on the record before the court, the Shares were transferred from Mr. Pantziris to ASPE, a company controlled by Mrs. Pantziris, by a corporate resolution signed by Mrs. Pantziris as director of 152.
[84] These Defendants assert that there was no need to involve a sheriff because the Shares had been delivered in certificate form to the lawyer for ASPE, Mr. Tom Baldwin. Their evidence is that the collateral for the loan was the security in registered form, the security certificate, which had been delivered to Mr. Baldwin as agent for ASPE. They further assert that this act not only perfected the security pursuant to s. 68 of the STA in accordance with Personal Property Security Act, R.S.O. 1990. c. P.10 (“PPSA”), s. 11(1)(c), but also was an effective seizure by Mr. Baldwin.
[85] I do not accept this argument. Section 11(1)(c) of the PPSA requires a delivery of a certificated security to have been made to the secured party pursuant to the debtor’s security agreement. There is nothing in the terms of the Promissory Note that provides for perfection of a secured interest, or a seizure, in this way. More significantly, there is no reliable evidence that Mr. Baldwin had the Shares in his possession. There is no sworn testimony from either Mr. Baldwin or Mrs. Pantziris to support any arrangement whereby a security interest would have attached to the Shares.
[86] Accordingly, I find that there was no seizure of the Shares; rather, the Shares were transferred by corporate resolution.
Security Interest in the Shares
[87] These Defendants submit that the PPSA registration, the Promissory Note, the default judgment, and the seizure of the Shares have a priority over the Trustee’s claim as secured interests.
[88] The “Security” is described in the Promissory Note as follows:
The Borrower [Mr. Pantziris] agrees to provide the Lender [ASPE] with the following property (the “Security”) as security, until the balance owed under this Note is repaid in full.
Description: General Security of Spiros Pantziris
Full Interest on the property, secondary to any existing mortgages, at 9 Berkindale Crescent, Toronto
The Borrower will grant a security interest in the Security to the Lender until the balance owing under this Note is repaid in full. Regardless of whether the Lender elects to perfect the security interest, he or she shall be listed as a lender on the title of the Security.
[89] The Promissory Note does not include a description of the Shares or any other property apart from the Residence.
[90] ASPE registered a security interest under the PPSA.
[91] The financial statements for ASPE for the years ending in 2009, 2010, and 2011 do not reflect the $1.2 million loan to Mr. Pantziris. Instead, these statements reflect significant expenditures on account of legal fees, which appear to have been incurred by Mr. Pantziris in relation to the arbitration. In 2013, Mrs. Pantziris was advised in correspondence from the Canada Revenue Agency that the legal fees claimed were not valid expenses of ASPE but were personal to her. ASPE then began to reflect the Promissory Note as an asset on its financial statements commencing in 2014.
[92] The Trustee asserts that ASPE had no security interest in the Shares. I agree. While the BIA includes a broad definition of “secured creditor,” the Supreme Court of Canada has stated that reference to provincial security property legislation is necessary to define the rights and priorities of the creditors, including whether a creditor possesses valid security:
Compliance with the perfection requirements of the PPSA is a precondition to maintaining secured creditor status under the BIA. In the event of bankruptcy, the consequences of a failure to perfect are spelled out in s. 20(b)(i). In effect, the secured party with an unperfected security interest becomes an unsecured creditor of the bankrupt:
any secured party with a security interests in personal property, who fails to meet the requirements of the Act for perfecting its security interest prior to the date a petition is filed or an assignment is made, loses the status of a secured creditor in the bankruptcy and is relegated to unsecured status (Cuming at pp. 25-26): Giffen (Re), 1998 844 (SCC), [1998] 1 S.C.R. 91 at paras. 67, 54-66.
[93] The Trustee asserts that the Promissory Note does not provide for security over any personal property of Mr. Pantziris, including the Shares. The Promissory Note describes the security as “General Security of Spiros Pantziris” and then goes on to describe the Residence (in which Mr. Pantziris had no ownership interest after August 22, 2008).
[94] Mrs. Pantziris and ASPE submit that the Shares were covered by the phrase “General Security of Spiros Pantziris.” I do not find this description to be sufficiently specific to create a valid security interest under the PPSA. Section 11 of that Act provides that a security interest is not enforceable against a third party unless it has attached. A security interest attaches to collateral only when value is given, the debtor has rights in the collateral or the power to transfer rights in the collateral to a third party, and, among other circumstances, the debtor has signed a security agreement that contains a description of the collateral sufficient to enable it to be identified: PPSA, s. 11(2)(a)(i). Alternatively, the collateral is a certificated security in registered form and the security certificate has been delivered to the secured party under s. 68 of the STA pursuant to the debtor’s security agreement: PPSA, s. 11(1)(c).
[95] It is doubtful that the Promissory Note would qualify as a security agreement. It is not signed by Mrs. Pantziris on behalf of ASPE and there is no evidence to suggest that Mrs. Pantziris participated in its making. Mrs. Pantziris made no reference to a security agreement when she brought her motion for default judgment. Even if the supposed security agreement had met the requirements of the PPSA, I am not satisfied that the documents purporting to create a security interest were in place at the time the Promissory Note was issued.
[96] The purpose of the PPSA s. 11(2)(a)(i) requirement is to enable one creditor to be able to identify that another creditor has a security interest in identifiable collateral: MacEwen Agricentre Inc. v. Bériault, 2002 62436 (ON SC), [2002] O.J. No. 3314 at para. 31.
[97] I agree with the Trustee that the failure of ASPE’s security to attach renders the Promissory Note unenforceable as a security agreement and precludes ASPE from asserting secured priority to the Shares as against the Trustee. The Supreme Court of Canada in Re Giffen states at para. 54: “It is a policy choice of the legislature that an unsecured creditor’s position, as represented by the trustee, is more meritorious than the unperfected security interest of a secured creditor.”
Preference
[98] The Trustee further asserts that the transfer of the Shares was made with intent to prefer a non-arm’s length creditor and to defeat the interests of creditors. The Trustee asserts that the transfer is void as a preference under s. 95 of the BIA because it is a transfer of property made, or a judicial proceeding taken or suffered by, an insolvent person in favour of a creditor who is not dealing at arm’s length with the insolvent person that has the effect of giving that creditor a preference over another creditor, undertaken during the period beginning on the day that is 12 months before the date of the initial bankruptcy event: BIA, s. 95(1)(b). If the transfer has the effect of giving the creditor a preference, it is, in the absence of evidence to the contrary, presumed to have been made, incurred, taken, or suffered with a view to giving the creditor the preference: BIA, s. 95(2).
[99] The Trustee submits that the preferential effect is obvious: the transfer of the Shares resulted in Mr. Pantziris becoming judgment- and bankruptcy-proof, and Cobalt Capital could not collect on its debt against Mr. Pantziris. By contrast, the $1.2 million debt of ASPE, if indeed it was valid, was paid in full, purportedly in satisfaction of a loan/debt of less than $1 million.
[100] Mrs. Pantziris and ASPE assert that Mr. Pantziris was not insolvent at the time of the transfer of the Shares and, therefore, the transfer could not have been a preference. However, when ASPE sought default judgment against Mr. Pantziris to collect the amount lent, plus interest, Mr. Pantziris did not defend the action and acknowledged that he did not have the money to repay the loan.
[101] I find that Mrs. Pantziris and ASPE have not provided a reasonable or credible explanation to rebut the presumption that the Shares were transferred with a view to giving ASPE a preference over Cobalt Capital so that the value of the Shares would remain in the Pantziris family. Mrs. Pantziris, ASPE, and 152 have not provided cogent, credible, and reasonable explanations to show that the transfer of the Shares in favour of a non-arm’s length creditor in preference to another creditor during the 12-month period prior to bankruptcy—at a time when Mr. Pantziris, by his own admission, was unable to pay his debts—was not a preference. In my view, the explanations offered do not raise a genuine issue that requires a trial.
Other Evidence of Intention to Defeat Creditors
[102] In addition to the transactions that had the effect of keeping the Residence and the Shares in the hands of members of Mr. Pantziris’ family, and not his creditors, there is other evidence of Mr. Pantziris’ efforts to defeat his creditors. Mr. Pantziris signed a statement of affairs on October 17, 2013 that disclosed no appreciable or realizable assets, and he stated that he had not sold or disposed of property within five years of the initial bankruptcy event. He now states that in and around 2008, within five years of the bankruptcy event, he owned RRSPs worth $600,000 and a home in El Salvador worth $300,000, as well as other assets in Canada and El Salvador.
The Defendants Cross-Motion for Summary Judgment
[103] The issues in the Defendants’ cross-motion for summary judgment are as follows:
Is the Trustee’s claim statute-barred?
Is Cobalt Capital improperly using the BIA for a collateral tactical purpose?
The Limitation Period
[104] The Defendants assert that the Trustee’s claim ought to be dismissed in its entirety because it is statute-barred. The Trustee’s statement of claim was issued on July 22, 2014 and amended on February 14, 2018. Amended statements of defence were served on May 4, 2018, in which the Defendants pled a limitation defence.
[105] The Defendants assert that even after the Trustee was given leave to file a reply, its reply failed to state the material facts on which it relied in support of its assertion that its claims were not statute-barred. The Defendants argue that the consequence of that failure is a deemed admission that the Trustee’s claims are statute-barred.
[106] The Defendants further assert that the claims are statute-barred because Cobalt Capital’s knowledge with respect to Mr. Pantziris’ assets should be imputed to the Trustee. With that imputation, the Trustee would be deemed to have the information relating to Mr. Pantziris’ property at the time that Cobalt Capital had it, and the limitation period would run from that date. The Defendants assert that Cobalt Capital was aware that Mr. Pantziris had transferred his interest in the Residence to Julie Pantziris as early as August 20, 2008, and that the transfer of the Residence was publicly registered on August 22, 2008. Mr. Pantziris deposed that on August 20, 2008, he attended a meeting at which two representatives of Cobalt Capital were present and told them that he had conveyed his interest in the Residence to his wife. The minutes of that meeting include a statement that “Mr. Pantziris commented that he has no personal assets in Canada that could be seized by the EDC.”
[107] Mr. Pantziris asserts that the Trustee’s claim was issued on July 22, 2014, being years after the Residence was transferred, years after Cobalt Capital became aware of that transfer, and outside the two-year limitation period prescribed by the Limitations Act. The Defendants ask the court to effectively impute Cobalt Capital’s knowledge of the transfer to the Trustee, such that the limitation period would begin to run from the date on which Cobalt Capital learned that Mr. Pantziris had no personal assets in Canada that could be seized by the EDC.
[108] The Trustee submits that the notes from the August 19 and 20, 2008 meetings, during which the Defendants contend that Cobalt Capital became aware of the transfer of the Residence, make no specific mention of the Residence. Further, in fact, Mr. Pantziris had not transferred his interest in the Residence at that time. He transferred that interest a couple of days later.
[109] The Defendants argue that on or before November 8, 2013, at least eight months prior to filing its statement of claim, the Trustee was fully aware of the Promissory Note and the default judgment obtained by ASPE. The Defendants submit that the Plaintiff Trustee did not seek relief in respect of the Promissory Note in its July 22, 2014 statement of claim. Its challenge to the status, validity, or bona fides of the Promissory Note was not made until the amendment to the statement of claim on February 14, 2018, when it sought to have the Promissory Note set aside and declared void. The Defendants claim that this relief was sought over four years after the Trustee became aware of the Promissory Note, outside of the two-year limitation period prescribed in the Limitations Act.
[110] The Trustee asserts that it pled the only relevant material fact in its reply. That fact, in its submission, is that the limitation period for a trustee in bankruptcy commences at the time the trustee is appointed. Therefore, the only material fact is that the Trustee was appointed on October 8, 2013, as set out in the reply. The Trustee further asserts that its statement of claim was issued on July 22, 2014, before the expiry of any limitation period.
[111] In Re Saran, 2018 ONSC 2998, the court stated that the limitation period began to run when the debtor was adjudged bankrupt, which is the earliest the trustee could have become aware of a potential transfer at undervalue. Further, the BIA specifically permits a trustee to review transactions occurring up to five years before the initial bankruptcy event.
[112] Before a trustee in bankruptcy is appointed, it is not a “claimant” as that term is intended under the Limitations Act. A trustee in bankruptcy can only be considered “the person with the claim” for discoverability purposes under s. 5(1)(a) of the Limitations Act when it is appointed. The Trustee was appointed on October 8, 2013. This is the earliest date on which the limitation period could have commenced. The Trustee brought its statement of claim regarding the transfers of the Residence and the Shares within two years of its appointment. Accordingly, the Trustee’s claim is not statute-barred.
[113] In Golden Oaks Enterprises Inc (Trustee of) v. Laschewski, 2016 ONSC 5321, the court stated that where an individual or corporation is engaged in fraudulent activity and then becomes bankrupt, it would be unequitable to bar a trustee from recovering the assets used in the fraudulent scheme by the bankrupt: paras. 97-100. At para. 119 the court confirmed that the “policy of the bankruptcy legislation is to permit a Trustee to bring actions on behalf of the Estate for the benefit of all creditors. It would be contrary to that policy to foreclose a Trustee from bringing an action for the benefit of the Estate simply because the action involves the setting aside of transactions which the bankrupt could not set aside or involves a claim for damages based upon conspiracy of the bankrupt and others to defeat the creditors of the bankrupt Estate.” At para. 120, on the subject of discoverability, the court found “that the bankruptcy filing alters the discoverability date for the limitation period to start running.”
[114] I accept the Trustee’s submissions. The Defendants did not provide the court with any authority to support their position that the knowledge of a creditor can be imputed to a trustee in bankruptcy or that a trustee in bankruptcy should be deemed to have the knowledge of a debtor’s assets that a creditor in the bankruptcy may have for the purposes of the Limitations Act.
Tactical Use of the BIA
[115] The Defendants also argue that the court should impute to the Trustee the knowledge that Cobalt Capital had with respect to Mr. Pantziris and his assets because the bankruptcy in effect involves only Cobalt Capital. The only other creditor, AMEX, has a modest claim, relative to Cobalt Capital, of $68,000.
[116] The Defendants assert that Cobalt Capital is exploiting the procedures set out in the BIA by using a trustee in bankruptcy to collect its debt by accessing the extended five-year period prior to the bankruptcy during which transactions may be reviewed. It asserts that such action, taken for a tactical purpose, amounts to a collateral attack on the BIA and that Cobalt Capital’s conduct should not be countenanced by this court. The Defendants assert that Cobalt Capital knew about the transfer of the Residence and the Shares well before the appointment of the Trustee and failed to take any action within the two-year limitation period or to toll that limitation period. For these reasons, the Defendants assert that Cobalt Capital’s knowledge ought to be imputed to the Trustee as of the date Cobalt Capital became aware of it, and the two-year limitation period ought to run from that date.
[117] I do not accept these arguments. While Cobalt Capital is the primary creditor in these proceedings, AMEX is also a creditor. The Trustee has a duty to balance the interests of all stakeholders and maximize the value of the bankrupt’s estate.
[118] The law is clear that the limitation period began to run for the Trustee on the date it was appointed. The conduct of the creditor does not change this result. Cobalt Capital is not the plaintiff in this proceeding. When the Trustee was appointed, it became a claimant in its own right, not through a predecessor in right as set out in s. 12(1) of the Limitations Act. There is no evidence to suggest that the Trustee is acting on the instructions of Cobalt Capital and in so doing is misusing the procedures available to a trustee in bankruptcy as set out in the BIA. Accordingly, the Defendants’ cross-motion for summary judgment must fail.
Disposition
[119] I grant the Plaintiff Trustee’s motion for summary judgment. An order shall issue setting aside the transfer by Spiros Pantziris of his undivided one-half interest in 9 Berkindale Court, in the City of Toronto, to his spouse Julie Pantziris also known as Julie Taylor also known as Julie Taylor Pantziris.
[120] An order shall also issue setting aside the transfer of Spiros Pantziris’ Preferred Shares in 1529439 Ontario Limited (with a redemption amount of approximately $1.9 million) to ASPE Consulting Services Ltd., a corporation of which his mother Aglaia Pantziris is the sole director and shareholder. In the result, the estate of Spiros Pantziris will be the registered owner of the Shares.
[121] The Defendants’ cross-motion for summary judgment is dismissed.
Costs
[122] Any party seeking costs in this matter may make written submissions not exceeding three pages in length (excluding a Bill of Costs and Offers to Settle) within fourteen days hereof. Reply submissions, if any, shall be made in writing, not exceeding three pages in length (excluding a Bill of Costs and Offers to Settle), within fourteen days thereafter.
Dietrich J.
Released: September 28, 2020
COURT FILE NO.: CV-14-10638-00CL
DATE: 20209028
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ALBERT GELMAN INC., in its capacity as Trustee in Bankruptcy of SPIROS PANTZIRIS
Plaintiff/Moving Parties/Responding Parties
– and –
1529439 ONTARIO LIMITED, AGLAIA PANTZIRIS, ASPE CONSULTING SERVICES LTD., JULIE PANTZIRIS also known as JULIE TAYLOR also known as JULIE TAYLOR PANTZIRIS and ELLEN BOWLIN
Defendants/Responding Parties/Moving Parties
REASONS FOR DECISION
Dietrich J.
Released: September 28, 2020