NEWMARKET COURT FILE NO.: FC-18-56932-00
DATE: 20211007
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sarah Kathleen Fewson (not present)
C. Hooper
Applicant
– and –
Marcius Bansavatar
Deonarine Bansavatar
Mavis Bansavatar
Respondents
Self-represented
HEARD: October 6, 2021
RULING ON MOTION
A. Himel J.
Relief Requested And Decision
[1] The Applicant, Sarah Fewson (“Sarah”), seeks an order for a Certificate of Pending Litigation on the premises municipally known as 81 Walkerville Road, Markham, Ontario (the “Walkerville Property ” or the “home”).
[2] For the purposes of this motion Sarah relied on excerpts of her affidavits sworn September 23 and October 1, 2021, and the Respondent, Marcius Bansavatar (“Marcius”), relied on excerpts of his affidavit sworn September 29, 2021. Affidavits from one Added Respondent, Deonarine Bansavatar (“Deo”) dated February 2, 2021 and sworn September 27, 2021 were attached as exhibits to Marcius’ affidavit. The parties were not permitted to rely on the entirety of the materials filed as they exceeded the page limits set out in the Practice Direction dated September 1, 2021 (and they were so advised by Bruhn J. in an endorsement dated October 1, 2021). Sarah and Marcius made oral submissions on the motion.
[3] For the reasons set out below I am granting an order for the requested relief.
Background
[4] Sarah and Marcius were married for 11 years. They married in 2006 and separated in November 2017. There are two children of the marriage, C. (age 12) and M. (age 9). The children primarily reside with Sarah.
[5] Prior to separation the parties resided at the matrimonial home (“Cardew Property”). That property was sold in January 2020. Sarah’s interest in the net proceeds of sale continue to be held by the real estate solicitor. The parties also jointly owned an investment property, the Walkerville Property, for investment purposes. As of 2018, Marcius resides at the Walkerville Property.
[6] Their matrimonial proceeding (commenced in August 2018) has been ongoing for the past three years and has been high conflict throughout. Initially both parties had counsel, however, Marcius became self-represented on or about March 29, 2021.
[7] While Jarvis J. ordered, on consent, that the Walkerville Property be sold by Jarvis J. (January 10, 2020), Marcius refused to accept any of third party offers. In late March 2020, following the commencement of the Covid-19, pandemic the Court declined to hear Sarah’s motion for control over the sale of the property.
[8] In June 2021, Marcius purchased Sarah’s interest in the home pursuant to Partial Minutes of Settlement (“Minutes”), after lengthy protracted negotiations.
[9] Pursuant to the Minutes dated May 9, 2020, the Walkerville Property and all related liabilities were transferred from Sarah (49.5%), Marcius (49.5%) and Moya Fewson (1%), to Marcius (80%) and his parents, Deo and Mootoomah Bansavatar (10%) (“Mavis”). As consideration for the transfer Sarah received the sum of $211,996 from Marcius’ 50% interest in the net proceeds of sale of the matrimonial home (the “Cardrew Property”).
[10] Sarah acknowledges that the Minutes contain no restriction on Marcius’ ability to sell, transfer or encumber the Walkerville Property. She states that there was no indication that Marcius intended to take these steps (given the steps he had taken to prevent the sale and his continued residence at the home). Marcius submits that he understood he could do as he pleased with the property once Sarah no longer had an interest in same.
[11] Within six months of the transfer between the parties, on October 30, 2020, Marcius transferred 99% of his interest in the Walkerville Property to his parents for $2.00 consideration. Sarah learned of the transfer when Marcius brought a motion in February 2021 to reduce his child support payments (which was unsuccessful).
[12] In April 2021, Sarah amended her Application to add Marvis and Deo as Added Respondents and seeking on order for fraudulent conveyance of the Walkerville Property.
[13] Sarah’s claims in this proceeding include retroactive child support and section 7 expenses (of over $90,000), ongoing child support and section 7 expenses, spousal support, division of property, post-separation adjustments and costs.
[14] At various times Marcius has been in arrears of child support (including six months of arrears as of September 29, 2021). Costs have been awarded against Marcius on three occasions. Other than the Walkerville Property, Marcius has no assets of substantial value.
[15] The retroactive and ongoing child support and section 7 expenses are significant issues. Prior to separation Marcius was a high income earner earning $200,000. Following the separation Marcius states that he lost his job and acknowledge that he stopped working. Based on Marcius’ 2018 income, from severance and other monies owed, he declared income of $250,386. On that basis alone he owes considerable child support, as his total child support payments amounted to $5,000.
[16] As per the without prejudice consent order dated January 10, 2020, Marcius currently pays child support in the amount of $1,000 per month. While there is no income attributed to Marcius in the order, the amount equates to an income of $65,000. Bruhn J. declined to reduce the child support at a motion that was heard on February 24, 2021. At that time Marcius proposed to pay no child support.
[17] This matter will proceed to trial on parenting in November 2021 and it is expected to go to trial on the financial issues in 2022. Each party will incur significant legal costs if he/she is represented at trial. Each party may face a significant costs order against him/her depending on the outcome of the trial.
Law and Analysis
[18] The relevant provisions in the Courts of Justice Act and the Fraudulent Conveyances Act are set out below.
[19] Section 103 of the Courts of Justice Act governs the issuance of CPLs. It provides:
The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2).[1]
[20] The courts have long held that an action to set aside a fraudulent conveyance is an action in which an interest in land is brought into question.[2]
[21] The Fraudulent Conveyances Act, s. 2 states:
Every conveyance of real 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 other persons and their assigns.[3]
[22] The term, “creditor or others” is broad enough to contemplate a person who, while not a creditor at the time of the conveyance, may become one in the future. If the transferor had the intention to defraud when the conveyance was made, it does not matter whether it was to defeat present or future creditors.[4]
[23] As explained by Smith J. in the Grefford v. Fielding[5] decision:
The laws of Ontario do not prevent a defendant from continuing to deal with his or her assets after a claim has been made and before judgment is obtained. A defendant to any claim is permitted to sell any interest he or she may have in land. In order to obtain a CPL in an action alleging a fraudulent conveyance of land, before the claimant in the main action has obtained a judgment, where no interest in land is claimed in the main action, requires special circumstances to fairly balance the interest of both parties.
[24] Jodi L. Feldman v. Foulidis[6] confirms the test for a CPL in the context of a claim of fraudulent conveyance. The Court determined that the Plaintiff (the Defendant’s prior family law counsel) met the test for a CPL on the Defendant’s home. The Plaintiff claimed that the Defendant owed her the sum of $664,323 on account of unpaid invoices. The CPL motion was brought after the Defendant registered a mortgage, in the amount of $525,000, against title to her property. That mortgage was by the Defendant, in favour of her brother-in-law, shortly after being served the Statement of Claim. Diamond J. held as follows:
The Test for a CPL
Traditionally, when a fraudulent conveyance is alleged, title to a property is brought into question. In Keeton v. Cain 1986 2854 (ONSC), Justice Scott held that a creditor need not have a personal interest in a property, but merely “need to claim title”. As long as there are more than bare allegations supporting a fraudulent conveyance, a sufficiently reasonable claim to an interest in land will exist and warrant the issuance of a CPL.
The jurisprudence has since adapted to situations like the one before the Master, namely where a plaintiff is not yet a judgment creditor of the defendant who has alleged to have participated in a fraudulent conveyance. Where a plaintiff has yet to obtain judgment in the underlying/main action, the test for a CPL is set out in the decision of Justice Smith in Grefford v. Fielding 2004 8709 (ONSC):
a) has the plaintiff satisfied the Court that there is a high probability that it will successfully recover judgment in the underlying/main action?
b) has the plaintiff introduced evidence demonstrating that the impugned transaction was made with the intent to defeat or delay creditors?
c) has the Plaintiff demonstrated that the balance of convenience favours the issuance of the CPL in the circumstances of the case?
As held by Justice Sachs in Claireville Holdings Ltd. v. Votiuk 2015 ONSC 694, the Grefford test “applies when the plaintiff has not yet obtained judgment in the underlying action.”
[25] On a motion for a CPL it is not the Court’s role to make a determination on the alleged fraudulent conveyance. Instead, the Court is to make a determination in respect of the three-part test for a CPL, which is as follows.
Probability of Success in the Matrimonial Litigation
[26] Sarah seeks an order for retroactive and ongoing child support and section 7 expenses based on an imputed income of $140,000. She argues that Marcius has materially under-paid child support. Marcius submits that his 2020 income was $6,300 as per his Income Tax Return (approximately $24,000 below minimum wage) and, as a consequence, he has over-paid child support by the sum of $11,000. Marcius also states that his projected 2021 income is $21,600 (almost $10,000 below minimum wage). At the child support variation motion heard on February 25, 2021, Marcius argued that he was unable to secure employment for over two years. In her oral reasons for judgment, Bruhn J. found that position to be unbelievable. She found that he declined a position at Brimm Financial (a company that he co-founded and left following the separation) in December 2017 and a position with another company in 2018 (with an income of $98,000).
[27] The current level of support is based on an imputed annual income of $65,000. At the time that he left Brimm Financial he earned approximately $200,000 per year. A recently obtained position at his partner’s company, SDI, will pay an annual salary of $55,000 plus a potential bonus. A court may well impute a considerably higher income to Marcius, in which case there may be significant retroactive and ongoing child support payable. Moreover, there may be costs payable if the court finds Marcius’ position at trial (on this issue or on any other issues) to be unreasonable.
[28] Marcius alleges that there is a significant equalization payment owed by Sarah on account of pre-marital and marital debts that he owes to his parents. As set out in detail below, the inconsistencies and documentary evidence in respect of the amounts owed, timing and re-payment suggest that the likelihood and quantum of any equalization payment being owed by Sarah is unclear. Sarah states that Marcius’ NFP statement identifies that he owes an equalization payment of $117,840. However, Sarah also acknowledges that the equalization payment payable by either party may be relatively low. Consequently, I am not prepared to conclude that Marcius’ child support arrears will be defrayed against an equalization payment.
[29] I find that Sarah has met the test for a high probability of success in the matrimonial litigation.
Evidence the Impugned Transaction was Made with Intent to Defeat/Delay Creditors
[30] Intent to defeat or delay creditors forms part of a claim for fraudulent conveyance. A moving party must lead positive evidence to show the existence of a triable issue.[7]
[31] Sarah alleges that the Walkerville Property, which had a value of between $1,200,000 as per third party offers early 2020, was transferred without sufficient consideration (the sum or $2.00 plus liability for the mortgage of $450,000). Marcius’ claim that the value was only $960,000 is not credible (as it is based on a 2018 appraisal) and contradicts the undisputed evidence before Bruhn J. that the home was worth between $1,100,000 and $1,200,000. The transfer was at considerably less than any of the values set out above, even after accounting for the mortgage.
[32] Sarah identifies inconsistent statements made by Marcius and his parents about the existence and quantum of the debts that he owed them at the date of the first loan agreement (May 27, 2020), the second loan (September 12, 2020) and in his sworn financial statements. Marcius denies same and admits that the loan agreements were created after the fact because of concerns respecting Sarah’s claims in this litigation. Marcius submits that his parents have always lent him funds in accordance with verbal agreements. It is unclear which of these debts have been repaid as the evidence is contradictory.
[33] While there may be debts owing by Marcius to his parents the quantum of same is suspicious, particularly as the second loan agreement includes prospective anticipated debts, including future costs to build a pool and landscaping at the Walkerville Property. Only the father (and children in accordance with the parenting schedule) reside at the home. Given the father’s stated financial distress, it was not/is not reasonable for him to engage in a plan to build a pool (at a cost of $519,000 as per the September 3, 2020 quote. As the pool was never built Marcius has effectively gifted up to $590,000 to his parents.
[34] Each of the first loan and the second loan are secured by Deo and Mavis taking a 50% and 49% interest in the Walkerville Property. The loans bear no interest. There is no re-payment plan for either debt, nor any evidence of re-payment on these debts. Once again it is unclear if the claimed pre-marital, marital and post-marital debts to the parents have been re-paid in part or in whole.
[35] Sarah states that the Walkerville Property was Marcius’ primary asset of value, which is not denied. Sarah submits that the transfer was done with the intention of defeating her ability to recover significant amounts that will be owed to her. Marcius denies same and states that the transfer of the property was as a result of his dire financial circumstances and subsequent reliance on his parents for financial support. Marcius has a history of misrepresenting his financial circumstances and income as evidenced by his financial statement dated October 2018. He swears that he has no income when, in fact, he had already received $150,000 from his previous employer and ultimately had a 2018 declared income of $250,386.
[36] Given that Marcius and his parents allege that he has no assets of value, Marcius’ unemployment since 2017, and his failure to maintain current with his child support (he was in arrears of six months of support until September 29, 2021), there is no doubt that Sarah will have a difficult time enforcing any order. This includes Sarah’s claim for post-separation adjustments for mortgage payments that she made to protect her credit rating when Marcius was in default (while he resided at the home) in early 2020, which she states have yet to be repaid.
[37] Sarah also argues that the Court may rely on the “badges of fraud” derived from Twyne’s Case, Re (1601), 76 ER 809 (Eng KB) to establish whether Marcius had an intention to defraud Sarah when the conveyance was made. The badges of fraud and my findings (in italics) are below:
(a) the donor continued in possession and continued to use the property as his own – Marcius (and not his parents) reside at home;
(b) the transfer was made in the face of threatened legal proceedings – There exists not only a threat but actual and ongoing legal proceedings;
(c) the consideration was grossly inadequate - $2.00 plus the $450,000 mortgage is inadequate given the value of the home;
(d) there is unusual haste in making the transfer – the transfer takes place within six months after the transfer from Sarah, and four months before the motion to vary child support (which was likely booked in Fall 2020). Following the transfer, the coach house tenants stop paying rent to Marcius, thus further decreasing his income as represented at the child support motion;
(e) some benefit is retained under the settlement by the settlor – Marcius continues to reside rent-free in the home; and
(f) a close relationship exists between parties to the conveyance. – Deo and Mavis are Marcius’ parents. They have been supporting their son for several years. Marcius states that their position in this litigation is as represented in his materials. Their finances are intertwined.[8]
[38] For the reasons set out above, and given the high conflict and prolonged state of the litigation, Marcius’ refusal to comply with the Jarvis J. consent order to sell the Walkerville Property as well as Marcius’ misrepresentations and inconsistencies in this litigation, I accept that Sarah has introduced evidence to demonstrate that the impugned transaction was made with the intent to defeat or delay her claims. I note that on February 25, 2021, Bruhn J. states as follows in her oral decision: “It appears that he is structuring his finances in a way to minimize his assets and the ability to collect on any debts, such as support.” This includes, for example, Marcius’ decision to direct the coach house rent to his parents, (as he cannot pay rent on the home). Bruhn J. states that, since it appears Marcius has given Deo and Mavis about $500,000 in equity for what he describes as anticipated debts, she would have expected that his rent would be included in any anticipated debts.
Balance of Convenience
[39] As determined by Diamond J., “the Court has a broad discretion when examining the equities between the parties to determine the balance of convenience.”[9]
[40] There is no evidence that Marcius will be prejudiced if the CPL is granted. He continues to live rent-free in the Walkerville Property, there is no evidence that the mortgage is up for renewal, and it is anticipated that the trial will be heard in 2022.
[41] The courts have found that the evidence to establish a fraudulent conveyance for the purpose of obtaining a CPL need only demonstrate some basis to support the allegation beyond a bald statement. Sarah has provided substantial evidence of Marcius’ fraudulent actions and has satisfied the test for obtaining a CPL under Grefford v. Fielding.[10]
[42] I accept Sarah’s submissions on the balance of convenience.
[43] Given Marcius’ actions, his finances and the challenges that Sarah will face in the collection/enforcement of any payment order, the balance of convenience favours ordering the CPL.
Conclusion
[44] This order is a step towards leveling the parties’ playing field. Sarah’s share of the net proceeds of sale of the Cardew Property continue to be held in trust, and she is a co-owner of her current residence. In the event that Marcius is successful in this litigation and funds are owed, Marcius will have remedies to ensure collection/enforcement.
[45] In contrast, when Marcius transferred his interest in the Walkerville Property to his parents, he put his primary asset of value beyond her reach. Therefore, if Sarah is successful in her claims against Marcius, and if she persuades the court that there has been a fraudulent conveyance, the likelihood of collection/enforcement materially increases so long as the home has sufficient equity to satisfy her claims. The CPL ensures that the equity cannot be dissipated pending a further order of this court or the agreement of the parties.
[46] The CPL order is supported by the legislation as well as the caselaw. It also conforms with Rule 2(2) of the Family Law Rules (“the Rules” or the “Rule”) whose primary objective is to enable the court to deal with cases justly.
Costs
[47] At the conclusion of the motion, I asked the parties for submissions on the issue of costs for both the win and lose proposition.
[48] Sarah seeks costs in the amount of $8,000, which is almost full recovery as the actual costs incurred is $8,875. Sarah’s request for costs arises from the need to bring the motion, draft materials (including a factum) and for preparation and argument. Sarah served an offer to settle on September 14, 2021, before her counsel incurred any costs. Sarah proposes to pay the sum of $1,000 if Marcius is successful on the motion.
[49] Marcius seeks no costs if Sarah is successful and the sum of $4,300 if he is successful. That is the amount that he incurred to consult with a lawyer and to obtain some legal assistance.
[50] Sections 24(1), (5) and (12)(a) and (b) of the Rules deal, respectively, frame the exercise of the court’s discretion when awarding costs, providing as follows:
SUCCESSFUL PARTY PRESUMED ENTITLED TO COSTS
24. (1) There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.
DECISION ON REASONABLENESS
(5) In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,
(a) the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;
(b) expenses properly paid or payable; and
(c) any other relevant matter.
SETTING COSTS AMOUNTS
(12) In setting the amount of costs, the court shall consider,
(a) the reasonableness and proportionality of each of the following factors as it relates to the importance and complexity of the issues:
(i) each party’s behaviour,
(ii) the time spent by each party,
(iii) any written offers to settle, including offers that do not meet the requirements of rule 18,
(iv) any legal fees, including the number of lawyers and their rates,
(v) any expert witness fees, including the number of experts and their rates,
(vi) any other expenses properly paid or payable; and
(b) any other relevant matter. O. Reg. 298/18, s. 14.
[51] The principles guiding the court’s exercise of its discretion pursuant to the Rules are well-established. The primary objective, of course, is to enable the court to deal with cases in a fair and timely manner. Four fundamental purposes are served: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; (3) to discourage and sanction inappropriate behaviour by litigants;[11] and (4) to ensure that cases are dealt with justly.[12]
[52] Family law litigants must act in a reasonable and cost-effective way: they should, and will, be held accountable for the positions they take in their litigation.[13] As observed by the Court of Appeal in Beaver v. Hill[14] reasonableness and proportionality frame the exercise of the court’s discretion: the amount to be awarded is what the “court views as a fair and reasonable amount that should be paid by the unsuccessful [party]”: Boucher v. Public Accountants Council for the Province of Ontario.[15]
[53] Sarah has been wholly successful on the motion and has met the terms of the offer to settle dated September 14, 2021.
[54] Marcius’ decision to decline to accept Sarah’s offer to settle is unreasonable.
[55] Given the history of this matter and my findings as set out above, Sarah had no option than to bring this motion. Her actions are reasonable and she should be indemnified for some of her costs.
[56] The sum of $8,000 seems high in the circumstances of a single issue motion. Some of the costs relate to the Reply which was excessive in length and thus more costly. I recognize the cost (research and drafting) and value of the provision of the factum.
[57] I also recognize that Marcius incurred costs of $4,300, without any costs associated with preparing for or attending at the motion.
[58] On the basis of these considerations I am ordering costs in the amount of $6,000 inclusive of HST.
Order to Go:
A Certificate of Pending Litigation shall be granted against 81 Walkerville Road, Markham, Ontario, L6B 1B6 pursuant to s. 103(1) of the Courts of Justice Act.
The Registrar shall issue a Certificate of Pending Litigation pursuant to R. 42.01 of the Rules of Civil Procedure against 81 Walkerville Road, Markham, Ontario, L6B 1B6.
Costs payable by Marcius to Sarah in the amount of $6,000, inclusive of HST by November 15, 2021.
Justice A. Himel
Released: October 7, 2021
[1] Courts of Justice Act, RSO 1990, c C 43 (“CJA”), s 103(1): RSO 1990, c C.43 | Courts of Justice Act |.
[2] United States (Securities & Exchange Commission) v. Boock, 2010 ONSC 2340, para 9 cited in Wong v. Smith, 2017 ONSC 2721, para 16: 2017 ONSC 2721 |Wong v. Smith |.
[3] Fraudulent Conveyances Act, RSP 1990, c F 29, s. 2.
[4] Miller v. Debartolo-Taylor, 2015 ONSC 2654, para 4(e) and (f): 2015 ONSC 2654 |Miller v. Debartolo-Taylor |; Indoco Building Corp. v. Sloan, 2014 ONSC 4018, para 48; and Beynon v. Beynon, 2001 28147 (ON SC), [2001] O.J. No. 3653 at para. 51 (SCJ): 2001 28147 (ON SC) | Beynon v. Beynon |.
[5] Grefford v. Fielding, 2004 CarswellOnt 1181, para 25 (Ont SCJ).
[6] 2018 121633 (ON SC). See also Grefford v. Fielding, supra at, para 26 (Ont SCJ); Bronstein v. Bronstein, 2011 ONSC 4952, para 13-24 : 2011 ONSC 4952 |Bronstein v. Bronstein |.
[7] Supra, note 5 at para. 17.
[8] Miller v. Debartolo-Taylor, 2015 ONSC 2654, para 4(h)-(i): 2015 ONSC 2654 |Miller v. Debartolo-Taylor |.
[9] Supra, note 5 at para. 25.
[10] Szymanski v. Lozinski, 2019 ONSC 6968, para 6-7.
[11] Serra v. Serra, 2009 ONCA 395.
[12] Mattina v. Mattina, 2018 ONCA 867 at para. 10.
[13] Heuss v. Sarkos, 2004 ONCJ 141, 2004 CarswellOnt 3317; Peers v. Poupore, ONCJ 615 ().
[14] 2018 ONCA 840, at para. 4.
[15] (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, 48 C.P.C. (5th) 56, 188 O.A.C. 2001, [2001] O.J. No. 2634, 2004 CarswellOnt 521 (Ont. C.A.).