COURT FILE NO.: 18-64961
DATE: 20200731
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Ontario Securities Commission
A. Speigel, for the Plaintiff
Plaintiff
- and -
Ivan Cavric and Louise Diane Cavric
P. Du Vernet, for the Defendants
Defendants
HEARD: December 13, 2019
REASONS FOR JUDGMENT
[1] The plaintiff moves for summary judgment in respect of its claims that the defendant, Ivan Cavric, is wrongfully trying to hide or shelter his family’s interest in a Welland home. The plaintiff seeks a declaration that Mr. Cavric has an interest in the home by operation of either a resulting or constructive trust, or a declaration that the transfer of the home from him and the defendant Louise Diane Cavric to her alone was fraudulent and thus void.
[2] In 2014, the Ontario Securities Commission (the OSC) obtained an order in which Ivan Cavric was found to have breached the Securities Act, R.S.O. 1990, c. S.5. The order imposed a fine, upon which the OSC has been collecting. There remains an outstanding balance. The OSC says that the home is the only exigible asset remaining.
[3] Some basic facts in respect of the home are not in dispute. It is located at 8 Harvest Oak Drive in Welland. Both defendants took title to that property as joint tenants in September of 1997. This followed the sale of a house at 86 Northgate Drive in Welland. The Northgate property was held by the defendants as joint tenants. They occupied it as their home. Ivan Cavric made the down payment on Northgate and made all of the mortgage payments on it. It was sold in August of 1997. The equity, therefrom, plus mortgage proceeds, were used to purchase the Harvest Oak property. At the time of purchase, Harvest Oak was a vacant lot. The defendants built a home on it, using Ivan Cavric’s money. The arrangement always had been that Louise Cavric was the homemaker whereas Ivan Cavric was the breadwinner. By October of 1997, the home was occupiable, and the defendants moved into it.
[4] On August 25, 2000, title to the Harvest Oak property was transferred from both defendants to Louise Cavric only. By that time, the property was mortgage free. Appropriately enough, the Land Transfer Tax affidavit within the registered transfer was executed by her. The consideration for the transfer was $2.00 with this “notional” consideration being rationalized as a transfer “from husband [/] wife to wife [for] actual love and affection.”
[5] In her affidavit sworn on February 4th, 2019, in response to the OSC’s summary judgment motion, Mrs. Cavric explains the transfer thusly:
- In about July or August 2000, I went with my husband to our family lawyer to review our wills. Our lawyer recommended that I have the house and be on title alone. My husband agreed that I could have full interest in the house absolutely. We also agreed between us, to be sure there would be a stable home for our children, that if anything should happen to him or in our marriage my husband would make no claims to the home. I would have the home absolutely.
She also deposed that at the time of the transfer, “there was no indication that my husband had no or was expecting ever to have any creditors.”
[6] In his responding affidavit Ivan Cavric deposed:
i) that family life was separate from his businesses;
ii) that at the time of the transfer he “had no indication …that [he] would have any creditors and that he “was not anticipating any creditors at that time”;
iii) that his wife wanted nothing to do with [his] businesses, and would never claim any interest in it; and
iv) that he “considered that [his] wife effectively paid fair value for her home with all the changes she had done and would continue to do and making no claim to any of [his] business assets or interests.
[7] Notwithstanding what the sworn affidavit of land transfer tax says about the consideration for the transfer to Louise Diane Cavric alone, the defendants now assert that the transferee also gave consideration by means of her maintaining the home and her agreement not to ever make a claim against Ivan Cavric’s business interests. I reject both assertions as proof of beyond nominal consideration having been given. The usual contributions of a spouse to married life do not, on their own, make up valuable consideration. There is no evidence that, for example, Louise Diane Cavric gave up a career to be the homemaker. That was simply the arrangement between the Cavrics. Regarding the alleged forbearance to claim against Ivan Cavric’s business interests. I note that Louise Diane Cavric herself does not assert the proposition. It comes from Ivan Cavric alone. Louse Diane Cavric said that it was discussed, but never actually agreed upon. Further, even if such an agreement had been reached, it is unenforceable under the provisions of the Family Law Act, R.S.O. 1990, c. F.3.
[8] Cross-examination was conducted upon both of these affidavits. A number of pertinent questions were put, and answers given. Inter alia, the cross-examinations revealed:
That the lawyer was one, Angelo Fazari, who had represented Ivan Cavric in connection with some rental properties and knew that Ivan Cavric was self-employed;
That Fazari advised the Cavrics that, “it was a good idea to keep personal, personal, and business, business. Because you are taking mortgages on the rental properties and your partners are riding on your assets. Let the rental properties stand alone on their own merit;
That when questioned on how putting the Harvest Oak property in his wife’s name “keeps your personal, personal?” Ivan Cavric answered, “Because when they ask me what my assets are, I can list all my assets that I own which are the rental properties and bank accounts and stands on its own merit as my personal life is my to do”, and making no claim to any of my business assets or interests.”
The following exchange ensued:
- Q. Which means that if there ever comes a time when the bank is going to – has to sue on the mortgage, your personal property, Harvest, won’t be in the mix; correct?
A. Yes. That’s one of the reasons, yes, since you refused to look at all the other ones.
Q. So, one of the things that it does is it shields the Harvest property from anything bad going on in your business life; correct? It makes it so nobody can go after the Harvest property?
Q. Correct?
A. I suppose.
[9] During the cross-examination of the affiant, Louise Cavric, she indicated that she assumed Fazari’s recommendation to keep business separate from “personal” was “a way to protect the house.”
[10] Further still, I do not accept the defendants’ evidence on this issue for several reasons,
it is inconsistent with the sworn affidavit of the land transfer tax;
it is unsubstantiated by evidence from, or notes made by, the solicitor who recommended and carried out the transfer;
it is inconsistent as between the defendants’ themselves.
[11] I am of the view that these alleged forms of consideration are nothing more than wishful hindsight on the part of the defendants. Consideration from the transfer was nominal.
[12] Leaving aside for the moment the transfer issues, I am of the view that, in light of the nominal consideration and the acknowledged intent of the defendants to “protect” the Harvest Oak property from what can only be creditors, the conveyance was indeed a fraudulent conveyance and therefore void. Who else but creditors would or could have a claim against the home? Moreover, it is not true, as the Cavrics have alleged, that Ivan Cavric had no creditors at the time of the transfer. There was at least one mortgage against the rental properties he owned with others.
[13] The Fraudulent Conveyance Act R.S.O 1990 c. F. 29, s. 2 provides that:
Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.
[14] Inasmuch as there is, as set out in detail above, direct sworn affidavit evidence of the defendants regarding intention, there is no reason to examine the record for “badges of fraud” which are sometimes used to the basis for indirect evidence of an intention to defraud. I do note, however, that many of the historically required “badges” are present here.
[15] It does not matter that the OSC did not become, by virtue of its right to collect upon fines, a creditor until several years after the impugned transfer. In Miller v. Debartolo-Taylor, 2015 ONSC 2654 at para. 19, the court quotes from a British Columbia Court of Appeal decision to state:
[I]t is a question to be decided upon the proper inferences to be drawn from the facts and circumstances as to whether there was an intention to defeat creditors or not, and if there was the intention to defeat creditors, then it does not matter whether it was to defeat present or future creditors.
[16] Having determined that their conveyance was fraudulent, as defined, I shall only briefly address the plaintiff’s alternate trust claims. In the context of a resulting trust claim, the plaintiff argues that the debtors never actually transferred his interest in the subject property and that the recipient actually holds the donor’s interest in trust for the donor. I agree with the general proposition at paragraph 93 of the plaintiff’s fresh as amended factum that, “once the plaintiff establishes on the balance of probabilities that a transfer was made for no [or nominal only] consideration, the defendants must establish on the balance of probabilities that of the time of conveyance the transferor intended to gift the property.” This correctly explains the presumption of resulting trust. I have already commented at length upon the lack of consideration. The courts have held that $2.00 and natural love and affection does not constitute valuable consideration. The question becomes whether the defendants have rebutted the presumption described above. The strongest evidence that Ivan Cavric did not intend to gift his interest in the Harvest Oak property to Louise Diane Cavric is that he continued to occupy the property with her and, more important, and continued to act as an owner by paying all property-related expenses. With this in mind, the plaintiff is entitled to a declaration that Louise Diane Cavric holds Ivan Cavric’s interests in the home in trust for him on the basis of a resulting trust. My ruling on the fraudulent conveyance makes this redundant. However, the plaintiff is still entitled to the declaration it seeks.
[17] Regarding the constructive trust claim, the plaintiff asserts that there was an enrichment of Louise Diane Cavric by means of the transfer, a corresponding deprivation to Ivan Cavric, and that there is no juristic reason for the enrichment and corresponding deprivation. Here, the evidence shows that Ivan Cavric had and continued to contribute all of the funds paid to acquire and retain the Harvest Oak property. To be sure, Louise Diane Cavric acted and acts as homemaker. That obviously entails a non-monetary contribution to both the family and the property. It flows, at least logically, that they would both own the property, probably equally, despite title. I agree with the plaintiff’s argument that it would make little sense for Ivan Cavric to contribute all of the money and be left with nothing in return. Louise Diane Cavric was enriched. Ivan Cavric was correspondingly deprived and then there is no juristic reason in place for that to have occurred. Ivan Cavric is entitled to an interest in the home by means of a constructive trust. Again, in light of my ruling on the nature of conveyance, this finding is redundant. If the plaintiff wants it, however, it is entitled to a declaration regarding Ivan Cavric’s trust interest.
[18] In respect of both trust claims, insufficient evidence was led to permit me to determine the degree of Ivan Cavric’s entitlement or to place a dollar value on the same.
[19] Defence counsel referred me to a number of appellate level decisions which caution against granting summary judgment based upon credibility findings that come from preferring one side’s lawyer-drafted affidavits over those drafted by the other side’s lawyer. The decisions do not stand for the proposition that one should never grant summary judgment in in such circumstances, but do say that caution must be exercised and that the reasons for preference must be fully articulated. In any event, that is not the circumstance here. As the foregoing shows, my decision is not based upon comparing one side’s affidavit against that of the other and preferring one such set. Rather, the key admissions come from the defendants’ own affidavits as expanded upon, under oath, during cross-examination.
[20] This is an appropriate case for the granting of summary judgment. It is most unlikely that the evidence presumably to be called at trial would meaningfully change the overall picture. There is no issue which requires a trial. The appropriate, and, I believe ultimately fair decision can be reached based upon the materials filed and the arguments made on this motion.
[21] If the parties cannot agree on the issue of costs, they may make brief written submissions in that regard. Each set shall be not more than three type-written pages in length with no attachments whatsoever. If the party wishes to reference case law, the relevant passages shall be contained with the three pages. The costs submissions of the plaintiff are due on or before August 14th, 2020. Those of the defendant are due on or before September 14th. The submissions, if any, are to be sent to the trial co-ordinator at the John Sopinka courthouse in Word format.
Parayeski, J.
Released: July 31, 2020
COURT FILE NO.: 18-64961
DATE: 20200731
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Ontario Securities Commission
Plaintiff
- and –
Ivan Cavric and Louise Diane Cavric
Defendants
REASONS FOR JUDGMENT
Released: July 31, 2020