COURT FILE NO.: CV-15-149
DATE: 2021 12 06
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LAWYERS' PROFESSIONAL INDEMNITY COMPANY
Plaintiff
– and –
FRANCESCO FIORE also known as FRANK FIORE, PASQUALE FIORE and DIANA FIORE
Defendants
K. Ferreira and D. Konomi, for the Plaintiff
E. Tingley, for the Defendants
HEARD: September 13 -16, 2021
MILLER J.
[1] The Plaintiff Lawyer’s Professional Indemnity Company (‘LPIC’), as assignee of a 2012 costs awards in the amount of $66,200 payable by Francesco Fiore, brings this action against Francesco Fiore, Pasquale Fiore and Diana Fiore in respect of the ownership of real property located at 132 Grace Street, Toronto, Ontario
[2] Francesco Fiore purchased the property located at 132 Grace Street, Toronto, Ontario from his mother’s estate in 1987. On March 29, 2007 Francesco Fiore transferred title to this property to his son Pasquale Fiore. On April 2, 2012 Pasquale Fiore transferred title to this property to his sister Diana Fiore. Diana Fiore continues to be solely on title.
[3] It is LPIC’s position that the transfers allowed Francesco Fiore to maintain a beneficial interest in the Grace Property, while, simultaneously, using his children to shelter the Grace Property from the reach of his creditors, including LPIC. LPIC takes the position that Frank Fiore retains a beneficial interest in the Grace Property, by way of an express trust or a resulting trust, or, in the alternative, that the transfers were fraudulent conveyances.
[4] LPIC seeks to have this Court unwind the transfers of the Grace Property and re-vest title of the property into Francesco Fiore’s name, which will permit LPIC to exercise its rights as a judgment creditor.
[5] The position of the Defendants Fiore is that the transfers of the Grace property were legitimate transfers and should be upheld. The Defendants further take the position that this action is statute barred.
[6] At the commencement of the trial the parties agreed, in accordance with the Amended Statement of Claim, that I should make an order, on consent, removing the Certificate of Pending Litigation that was registered Dec 16, 2015 as Instrument YR2405054 in respect of the property located at 12082 McCowan Road Stouffville, ON.
[7] For the reasons set out below, I find that the Plaintiff has standing to bring the claims in this action; that the action is not statute barred and that the Defendant Francesco Fiore retains a beneficial interest in the Grace property. The Plaintiff is granted the relief sought.
Evidence
[8] Evidence on the trial of this matter was presented by way of a Joint Document Brief, together with an Agreement in respect of the authenticity and truth of the documents; an Agreed Statement of Fact; read-ins from the discoveries of each of the Defendants and of counsel for the Plaintiff; Requests to Admit of the Plaintiff and Defendants and the Responses to each of the Requests to Admit; and testimony given by Kenneth Goodbrand, Edward Saxe, Francesco Fiore, Pasquale Fiore and Diana Fiore.
[9] The Agreed Statement of Fact sets out an overview of the case, wherein Francesco Fiore is referred to as Frank, and Pasquale Fiore and Diana Fiore are referred to by their first names, as follows:
A. The Parties
LawPro provides errors and omissions insurance to lawyers licensed to carry on business in the Province of Ontario.
Frank is an individual residing at the property (the "McCowan Property") municipally known as 12082 McCowan Road, Stouffville, Ontario.
Pasquale is an individual, ordinarily a resident in Toronto, Ontario.
Diana is an individual, ordinarily a resident in Toronto, Ontario.
Pasquale and Diana are twin siblings and the children of Frank.
B. The Grace Property and the Initial Transfers
- On November 13, 1987, Frank, as administrator of the Estate of his late mother, Antonietta Fiore, transferred the property (the "Grace Property") municipally known as 132 Grace Street, Toronto, Ontario to himself in his personal capacity.
C. The Maple Mortgage
- On December 23, 2002, Frank granted a first mortgage (the "Maple Mortgage") to Maple Trust Company ("Maple") securing the original principal amount of $220,000.00.
D. The Mandel Mortgage
On March 12, 2004, Frank granted a second mortgage (the "Mandel Mortgage") to a private lender, Merle Mandel ("Mandel").
The Mandel Mortgage secured the original principal amount of $50,000.00.
E. Frank transfers the Grace Property to Pasquale
In early 2007, Pasquale obtained approval from RBC for financing (the "RBC Financing") in the amount of $350,000.
The RBC Financing was sufficient to discharge the Maple Mortgage and the Mandel Mortgage.
Frank agreed to transfer the Grace Property to Pasquale.
F. Amounts owing under the mortgages
On March 8, 2007, Frank's lawyer, Kenneth Goodbrand ("Goodbrand") wrote to Maple and to Mandel's real estate lawyer, Robert Aaron ("Aaron"), requesting discharge statements.
On March 15, 2007, Aaron provided a discharge statement (the "Mandel Discharge Statement") to Goodbrand.
On March 27, 2007, Aaron provided to Goodbrand an amended Mandel Discharge Statement. The amended Mandel Discharge Statement indicated that the total amount owing under the Mandel Mortgage as at March 16, 2007 was $54,588.26.
On March 15, 2007, a lawyer for Maple, Paul Mazza ("Mazza"), wrote to Goodbrand and attached a discharge statement (the "Maple Discharge Statement") to his letter. The Maple Discharge Statement indicated that the total amount owing under the Maple Mortgage as at March 16, 2007 was $213,541.52.
The total amount owing under the Maple Mortgage and the Mandel Mortgage as at March 16, 2007 was $268,129.78 ($213,541.52 + $54,588.26).
G. The Transfer of the Grace Property
On March 29, 2007, Goodbrand registered the transfer (the "Transfer") of the Grace Property from Frank to Pasquale.
As consideration for the transfer of the Grace Property to him, Pasquale agreed to pay the total amounts Frank owed on the Maple Trust Mortgage and the Mandel Mortgage, namely, $268,129.78.
H. The Handwritten Notes of Goodbrand
On March 29, 2007, Goodbrand made handwritten notes in his lawyer file with respect to the Transfer and the RBC Mortgage.
Goodbrand's handwritten notes are transcribed as follows:
"RBC was aware Frank Fiore was transferring property [to] Pasquale.
-needed to pay off existing mortgages that were in arrears and going POS [power of sale] shortly
-net proceeds are going to pay bills
-no intention that Pasquale really owning house - needed to get credit Frank couldn't
-if went POS [power of sale]- would trigger immediate [capital] gain adverse to Frank // Accountant to call".
I. The RBC Mortgage and use of funds
On March 29, 2007, Pasquale granted the Royal Bank of Canada a conventional mortgage (the "RBC Mortgage") securing the original principal amount of $350,000.00 (the "Mortgage Amount") at an interest rate of 5.09% per year, calculated semi-annually not in advance.
RBC advanced the Mortgage Amount to Goodbrand in trust for Pasquale.
Goodbrand used the Mortgage Amount to:
a) discharge the Maple Mortgage;
b) discharge the Mandel Mortgage;
c) pay Robert Aaron for the collection and discharge fees;
d) pay the land transfer tax; and
e) pay the balance to Pasquale.
On May l0, 2007, Goodbrand sent a reporting letter, account, and trust ledger to Frank and Pasquale.
Goodbrand issued a cheque (the "Cheque") to Pasquale for $79,578.48 that represented the balance of the Mortgage Amount.
J. Law Pro becomes a creditor of Frank
On March 15, 2007, Frank commenced an action (the "Action") against Yachetti, Lanza, Restivo, J. Ivan Marini and Douglas J. Depaulo, LawPro's insureds (collectively, the "Insured").
Frank was examined for discovery in the Action on January 28, 2008.
On his examination for discovery in the Action, Frank testified that in 2004, he owned the Grace Property.
In the Action, the Insured obtained three costs orders (the "Costs Orders") against Frank. The Costs Orders were:
a) dated December 14, 2011 in the amount of $12,000.00, plus interest at the rate of 3 per cent per year;
b) dated February 24, 2012 in the amount of $1,200.00, plus interest at the rate of 3 per cent per year; and,
c) dated April 4, 2012 in the amount of $53,000.00, plus interest at rate of 3 per cent per year.
- Frank never paid any amount under the Costs Orders.
K. The Second Transfer of the Grace Property
On April 2, 2012, Pasquale transferred the Grace Property to Diana.
Pasquale and Diana agreed that the consideration for the transfer of the Grace Property was funds sufficient to discharge the amount outstanding on the RBC Mortgage and to pay outstanding property taxes.
On April 2, 2012, the amount outstanding on the RBC Mortgage was $335,925.51.
On April 2, 2012, Diana granted Home Trust Company a conventional new first mortgage (the "Home Trust Mortgage") securing the original principal amount of $410,000.00 at an interest rate of 4.29% per year, calculated semi-annually not in advance.
Home Trust Company advanced the sum of $408,288.50 to Diana under the Home Trust Mortgage.
Diana received $46,581.24 from the mortgage proceeds after payment of the RBC Mortgage, property taxes, and costs.
L. The dismissal of the Action
On April 4, 2012, the Insured obtained an order dismissing the Action for failure to pay the first two Costs Orders.
In June 2012, the Insured registered writs of seizure and sale (the "Writs") in furtherance of the Costs Orders. The Writs were registered in the Regional Municipality of York.
Neither the Insured nor Law Pro filed writs of execution in the City of Toronto.
In 2012, the Insured did not search title to the Grace Property.
On October 30, 2015, the Insured assigned the Costs Orders and the Writs to LawPro.
M. Frank is petitioned into bankruptcy
On June 12, 2013, Frank made an assignment into bankruptcy. Sheriff and Sole Inc. acted as the bankruptcy trustee for Frank's estate.
On June 14, 2013, Frank swore a statement of affairs (the "Statement of Affairs") as part of the bankruptcy.
The Insured were listed as creditors on the Statement of Affairs.
The Insured received the Statement of Affairs on or about June 14, 2013.
The Grace Property is not listed on the Statement of Affairs.
The Insured did not file a proof of claim in Frank's bankruptcy until October 30, 2015.
On December 4, 2014, Frank received an absolute discharge.
The Insured did not object to the absolute discharge.
N. The McCowan Property
Frank and his wife, Lucy Fiore ("Lucy"), purchased the McCowan Property on September 17, 1975.
Frank and Lucy have resided in the McCowan Property since 1976.
On November 9, 2010, Lucy transferred her interest in the McCowan Property to Frank.
On March 21, 2012, Lucy made her second assignment of bankruptcy.
Frank continues to hold sole title to the McCowan Property.
O. Law Pro registers Certificates of Pending Litigation against the Properties
In July of 2015, Law Pro obtained historic drive-by-appraisals for the Grace Property.
On December 3, 2015, LawPro commenced this action.
On December 14, 2015, on a motion without notice, LawPro obtained an order for leave to issue the certificates of pending litigation (the "CPLs") against the Grace Property.
On December 16, 2015, LawPro registered the CPLs against the Grace Property, as instrument number AT4096640.
[10] Kenneth Goodbrand is now retired from the practice of law. It was agreed between the parties that the Defendants waived solicitor/client privilege in respect of Mr. Goodbrand’s records and his testimony. Mr. Goodbrand testified about his relationship with Francesco Fiore and his conversations with Francesco Fiore about the 2007 transfer of the Grace property. He testified that although he discussed with Francesco Fiore the possibility of creating a trust in respect of the Grace property in order to avoid having to pay capital gains tax, he was never instructed to create a trust and he did not do so. He testified that he advised Francesco Fiore to speak to his accountant about whether creating a trust made sense, but he did not hear from Francesco Fiore’s accountant, nor did he have any further discussion with Francesco Fiore about creating a trust. Mr. Goodbrand testified that the transfer was to happen March 16, 2007 but due to disputes with the lenders over the amounts owing the transfer did not occur until March 29, 2007.
[11] Edward M. Saxe has been a designated Certified Residential Appraiser since 1992. He was qualified to give opinion evidence with respect to residential appraisals. Mr. Saxe was retained by the Plaintiff to do two historical drive-by appraisals of the Grace property: March 29, 2007 and April 2, 2012. Mr. Saxe’s opinion is that on March 29, 2007 the market value of the Grace property was $580,000-$590,000 and on April 2, 2012 the market value of the Grace property was $750,000-$770,000. He was not challenged on this evidence.
[12] Mr. Saxe also did a June 13, 2013 drive-by appraisal of the McCowan Road property. Mr. Saxe’s opinion is that on June 13, 2013 the market value of the McCowan Road property was $885,000-$950,000.
[13] Francesco Fiore testified that he inherited the Grace property from his parents. The second floor was tenanted and he would use the first floor from time to time to rest while shopping in Toronto. He had purchased a home in Stouffville (the McCowan Road property) in 1977 with his wife where they lived with their children.
[14] Francesco Fiore denied that any of his properties were ever subject to power of sale. However, he conceded in cross-examination that his Hamilton gas station was sold under power of sale in 2005. He sued the lawyers who represented him. This was the Action which resulted in the costs awards against him, now assigned to LPIC. Francesco Fiore testified that when he started that Action he felt he had a strong case and would win it.
[15] Francesco Fiore testified that in 2007 he found that carrying two homes was “too heavy” and it had been the “recommendation” of his father that the Grace property be kept in the family so he decided to transfer the property to his son Pasquale who was responsible. Francesco Fiore testified that he never discussed any trust with Pasquale in respect of the property and no trust was created. He testified that he had nothing to do with the property after the transfer to Pasquale and did not receive rental payments from any tenants. He denied that he received any of the money from the RBC mortgage that Pasquale assumed when the property was transferred to him.
[16] Francesco Fiore testified that he had nothing to do with the transfer of the Grace property from Pasquale to Diana. Mr. Fiore was directed to his testimony from his discovery wherein he testified that Diana is not allowed to sell the house and she knows that. He explained Diana has title and can do whatever she wants with the Grace property, but that his father had asked him not to sell the property and that he had “recommended” to Pasquale and Diana that “if there is an emergency when I pass away…you can sell it”
[17] Pasquale Fiore testified that he had no discussions with his father about holding the Grace property in trust. He testified that he received about $79,000 from the mortgage on the property at the time of the March 29, 2007 transfer. He testified that none of that money went to his father and that he spent it on various things for which he had no records whatsoever. He testified that he was not aware that his father was suing his former lawyers and denied that the transfer was to aid his father in evading creditors.
[18] Pasquale Fiore testified that once the Grace property transferred to him, Francesco Fiore made no contribution to the mortgage payments or the property maintenance and that he, Pasquale, received rental payments from tenants. There is good reason to doubt this testimony.
[19] Pasquale Fiore did not produce any documentation to support this testimony and could not name any of the tenants. He did produce bank statements for November 2007 and December 2007 only, showing two mortgage payments each month. The statements are redacted so that they do not show any deposits to the account. This includes no record of depositing the cheque for mortgage excess of $79,578.48; nor are there any other bank statements showing that Pasquale Fiore made any other mortgage payments for the Grace property.
[20] Further, Pasquale Fiore never produced any lease agreement with any tenant and the bank statements he did produce do not reflect any deposits of rent. He did not produce any statements showing that he paid any of the utilities for the property or the property taxes. He did not produce any tax statements showing his receipt of rental income for expenses related to the rental of the property. He testified that he did not recall whether the lease agreements were oral or in writing nor how much in rent he collected each month.
[21] Pasquale Fiore testified that he lived at the Grace property “a little bit” in 2009-2010 while doing renovations and that he lived there with his wife after their marriage in 2011 for “a year or so”. His wife was not called as a witness. He testified that he and his wife moved out when they purchased a condominium as they wanted their own place. Pasquale Fiore testified that the condominium was purchased before it was constructed in 2009-2010. He testified that he could not carry the condominium and the Grace property so he decided to pass on the property to his sister Diana. He denied having any discussion with Diana Fiore about holding the property in trust for their father or for him. He denied ever giving any money to his father.
[22] Pasquale Fiore testified that he paid property taxes for Grace property for the years 2007-2012 but could not explain why $19,000 in property taxes was owing at the time of transfer in 2012 to Diana Fiore. He agreed that following the judgment in a case in which he, along with his parents, were named as unsuccessful Plaintiffs against the Town of Stouffville, his wages began being garnisheed. He agreed this was after June 2011 and just preceding his decision to transfer title in the Grace property to his sister Diana Fiore.
[23] Diana Fiore testified that in 2011 her brother Pasquale approached her about transferring the Grace property as he and his wife were looking for another place. She could not recall when she moved into the Grace property except that it was “sometime in 2012”. She denied having any discussions with Pasquale or with her father about holding the property in trust.
[24] Diana Fiore testified that at the time of the transfer in April 2012 she mortgaged the Grace property in the amount of $410,000 and received about $46,000 after the old mortgage had been paid off. She testified that she used this money for renovations (doing “a bit more renovations than my brother did”) and for personal use. Diana Fiore produced no records supporting her testimony as to how she spent the money she received from the mortgage. Diana Fiore testified that she “pretty much” used the first floor of the Grace Street property and still resided there at the time of her testimony, which she gave, virtually, from her parents’ home.
[25] Diana Fiore testified that she received rental payments from tenants but produced only one document purporting to show one undated e-transfer of $2,400 from one Kimberly Ha. Kimberley Ha was not called as a witness nor was any other tenant of the Grace property. Diana Fiore testified that she understood that her undertaking to provide copies of “e-transfers” of rental payments meant that she need only produce one. She agreed that her December 2017 bank statement showed less than $2,400 in deposits. She speculated that perhaps the tenant was late with her payment that month or paid her in cash.
[26] Diana Fiore produced bank statements showing utility payments from her bank account in September, October and November 2016. I note this was after this action commenced. She testified that these were utility payments for the Grace Property. Diana Fiore produced three utility statements of 2019 and 2020 for the Grace property, all addressed to her at her parents’ home address. Diana Fiore retrieved these documents during her testimony from her parents’ home where she was giving testimony virtually.
[27] Diana Fiore testified that she tried to get bank statements going back to 2012 but was told by the bank that they had been purged. She produced no document showing that she made any mortgage payments for the Grace property nor that she had requested and been denied production of any bank statements. Diana Fiore agreed that she had been served with the Statement of Claim in this action in January 2016.
[28] Diana Fiore testified that she re-mortgaged the Grace property in July 2015 for $389,000 and in November 2015 for $600,000. When asked why she had done so she testified that she “would have to say a better interest rate”, that she did not know any other reason she would have done so. She agreed that she would have received approximately $210,000 from the $600,000 mortgage once the former mortgage was discharged but could not account for any of that money by way of any bank statement or receipts to show how the money was spent. She denied giving any money to her parents.
[29] Diana Fiore testified that the Grace property had been her primary residence continuously since 2012. She was confronted with evidence that she owns property in Mount Albert, Ontario and that is the address on her driver’s licence. Further, she had used the Mount Albert address on a loan application. Diana Fiore described the Mount Albert address as “a second property I own: and testified that she used that address on her driver’s licence for insurance purposes. Diana Fiore produced no income tax returns showing any rental income from or expenses related to rental of the Grace property.
Standing
[30] The Defendants do not challenge the standing of LPIC to bring this action. LPIC is a judgment creditor of Francesco Fiore and, also, an unsecured creditor in Francesco Fiore’s bankruptcy. As recognized in Lawyers Professional Indemnity Co. v. Clarke 2015 ONSC 2643, and in accordance with Banglar Progoti Ltd. v. Ranka Enterprises Inc. 2009 CanLII 16292 (ON SC), [2009] O.J. No. 1470 at paragraph 28 and the Execution Act R.S.O. 1990, Chapter E.24, LPIC has standing to advance its beneficial ownership claims.
[31] Further, as recognized in Perell, A Pragmatic Approach to Fraudulent Conveyances, 30 Advoc Q. 373 2005 at p. 388, and in Miller v. Debartolo-Taylor 2015 ONSC 2654 at para. 19, subsequent creditors have standing to bring a fraudulent conveyance claim if "at the time of the impugned conveyance, the debtor had the general intent to defraud anticipated creditors." This is true even if no creditors existed at the time of the conveyance.
[32] I am satisfied that LPIC has standing to advance its beneficial ownership claims and its fraudulent conveyance claim.
Is the action statute-barred?
[33] The Defendants take the position that the action is statute-barred by operation of the two year limit imposed by the Limitations Act, 2002.
[34] The Plaintiff submits that action was commenced within two years of the discovery that Francesco Fiore had transferred his interest in the Grace property. The Plaintiff submits that in any event the Real Property Limitations Act applies and they, as is conceded by the Defendants, commenced the action well within the 10 year limitation period imposed by that Act.
The Limitations Act
[35] Section 5(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, provides that:
A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
[36] Section 5(2) of the Limitations Act provides that:
A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
[37] Section 12(1) of the Limitations Act provides that:
For the purpose of clause 5 (1) (a), in the case of a proceeding commenced by a person claiming through a predecessor in right, title or interest, the person shall be deemed to have knowledge of the matters referred to in that clause on the earlier of the following:
The day the predecessor first knew or ought to have known of those matters.
The day the person claiming first knew or ought to have known of them.
[38] It is the position of LPIC that its claims were neither discovered nor discoverable until the summer of 2015, when LPIC directed Speigel Nichols Fox LLP to recover the costs order against Francesco Fiore. LPIC submits that there was nothing to trigger a search prior to that time. LPIC submits that Francesco Fiore acted in a way which ensured that they were never alerted to the transfers of the Grace Property.
[39] The Defendants take the position that LPIC knew, or ought to have known, of its cause of action prior to December 3, 2013. The statement of claim was issued on December 3, 2015. The Defendants submit that pursuant to section 5(2) of the Limitations Act, LPIC is presumed to know of its cause of action “on the day the act...on which the claim is based took place”, unless the contrary is proved. The Defendants submit that LPIC has led no evidence to show when it discovered its cause of action and therefore the time begins running from the dates of the transfers of the Grace property to Pasquale (March 29, 2007) and Diana (April 2, 2012).
[40] The Defendants rely on the Court of Appeal decision in Longo v. MacLaren Art Centre, 2014 ONCA 526, at paragraph 42 which indicated that, “A plaintiff is required to act with due diligence in determining if he has a claim. A limitation period will not be tolled while a plaintiff sits idle and takes no steps to investigate the matters referred to in s. 5(1)(a).”
[41] The Defendants point to the agreed fact that in 2008, Francesco Fiore was examined for discovery in his action against his former lawyers. On that examination, he testified that in 2004 he had owned the Grace Street property. The Defendants submit that the Insured, who assigned their claim to LPIC, therefore knew, or should have known, that in 2004 Frank owned real property in Toronto. The Insured obtained their costs orders against Francesco Fiore in 2012, but did not search title to the Grace Street property at that time. Had they done so, they would have discovered the transfers that form the basis of its claim in this action.
[42] I am satisfied on the evidence before me that the claim in this action was discoverable before December 3, 2013 and that if the Limitations Act applies, LPIC would be out of time to bring this action as of December 3, 2015 when the Statement of Claim was issued.
The Real Property Limitations Act
[43] There is no dispute that if the Plaintiff’s claims based on express trust or resulting trust succeed, then the claims are actions to recover land and the Real Property Limitations Act, R.S.O. 1990, c. L.15 applies. The parties do not agree as to which limitation period applies to the Plaintiff’s fraudulent conveyance claim.
[44] The Defendants point to a number of Superior Court decisions holding that the two year limitation period applies to fraudulent conveyance claims, because they are not actions to recover land. The Defendants rely on Wilfert v. McCallum, 2017 ONSC 3853 at paragraph 26; Stravino v. Buttinelli, 2015 ONSC 1768 at paragraphs 63-66; and, on Indcondo Building Corp. v. Sloan, 2010 ONCA 890, which did not discuss the application of the Real Property Limitations Act.
[45] The Plaintiff submits that a plain reading of the statement of claim in this action shows that it focuses on the various transfers of title by the Defendants and claims for the recovery of the Grace Property. The Plaintiff submits that consequently, the 10-year limitation period provided by the Real Property Limitations Act applies.
[46] The Plaintiff points to the decisions of the Ontario Superior Court in Conde v. Ripley 2015 ONSC 3342 and Anisman v. Drabinsky 2020 ONSC 1197. The Plaintiff submits that in both decisions the court applied the Real Property Limitations Act to cases involving transfers of title and claims for recovery of title to property. In Anisman v. Drabinsky Morgan J. referenced Conde v. Ripley in finding that the Real Property Limitations Act applied to a claim of fraudulent conveyance. The Ontario Court of Appeal affirmed that decision in Anisman v. Drabinsky 2021 ONCA 120.
[47] I have reviewed the case law cited by the parties. I agree with the Plaintiff that the Court of Appeal decision in Anisman v. Drabinsky supports a finding that the Real Property Limitations Act applies to all of the claims in this action and that the action is not statute barred. I so find.
Did Francesco Fiore retain a beneficial interest in the Grace Property?
[48] It is the Plaintiff’s position that despite the transfers in title to the Grace property, Francesco Fiore remained the beneficial owner of the Grace Property. It is the Plaintiff’s position that Pasquale Fiore held and Diana Fiore holds the legal title to the Grace Property for Francesco Fiore as beneficiary of an express trust or a resulting trust. It is the Plaintiff’s position that the transfers were each intended to distance the Grace Property from the reach of Francesco Fiore’s creditors. It is the Plaintiff’s position that the second transfer maintains and continues the express or resulting trust that Francesco Fiore created under the first transfer.
[49] It is the Defendants’ position that there was no express trust and no evidence upon which it could be found. Further, there was no resulting trust nor any fraudulent conveyance as each transfer occurred with good consideration and for legitimate reasons.
Does the evidence establish an Express Trust?
[50] As set out in Rubner v. Bistricer, 2019 ONCA 733; leave refused 2020 CanLII 22069 (SCC), at paragraph 49:
There are four requirements for establishing a valid express trust. The relevant parties to the trust must have capacity; there must be certainty of intention to create a trust, certainty of subject-matter, and certainty of objects; the trust must be constituted, meaning the trustees must hold legal title to the trust property; and the required formalities must be met...
[51] In respect of the “required formalities”, Section 9 of the Statute of Frauds R.S.O. 1990, c. S.19 requires trusts of land to be created in writing (subject to s. 10 which provides an exception for resulting trusts) and section 11 provides that all grants or assignments of trusts of land must similarly be in writing or else are void and of no effect.
[52] The Plaintiff acknowledges the requirement that a trust of land must be in writing but submits that the Statute of Frauds must not be used ”as an engine of fraud” and relies on the equitable doctrine of part performance (Arias v. Brennan, 2020 ONSC 1603 at para. 65; Erie Sand and Gravel Ltd. v. Seres’ Farms Ltd., 2009 ONCA 709 at para. 49; Sigrist v. McLean, 2011 ONSC 7114 at para. 80) to argue that an enforceable trust exists.
[53] There is no trust document between Francesco Fiore and Pasquale Fiore upon the transfer of the Grace property from Francesco Fiore to Pasquale Fiore. There is no trust document between Francesco Fiore or Pasquale Fiore and Diana Fiore upon the transfer of the Grace property from Pasquale Fiore to Diana Fiore.
[54] The Plaintiff submits that evidence of a trust in writing exists in the handwritten notes of Kenneth Goodbrand dated March 29, 2007, the date the Grace property transferred from Francesco Fiore to Pasquale Fiore. Mr. Goodbrand testified that the notes record that he discussed with Francesco Fiore creating a trust so that Francesco Fiore would not have to pay capital gains tax on the transfer. Mr. Goodbrand did not create such a trust in writing. He advised Francesco to consult with his accountant about such a trust. He did not hear back from Francesco Fiore or Francesco Fiore’s accountant about a trust.
[55] The Plaintiff submits that the lack of evidence that Francesco Fiore paid capital gains tax on the transfer of the Grace property to Pasquale Fiore is circumstantial evidence from which I can infer that there was such a trust, and that Kenneth Goodbrand’s notes are the evidence of the trust in writing.
[56] While such an inference could be drawn, it is not the only reasonable inference which could be drawn as it is equally possible, given the dearth of evidence, that Francesco Fiore simply did not declare the transfer to the Canada Revenue Agency and therefore did not pay any capital gains tax.
[57] The Plaintiff submits that the transfer from Pasquale Fiore to Diana Fiore was simply an extension of the original trust between Francesco Fiore and Pasquale Fiore and that Diana Fiore acknowledged as much at questions 66-69 of her discovery August 20, 2018, exhibit # 11 on the trial. In her answers to these questions Diana Fiore acknowledged that there was an agreement to keep the Grace property in the family. If I do not find that there was an express trust between Francesco Fiore and Pasquale Fiore I cannot find that the transfer of the Grace property to Diana Fiore was an express trust.
[58] I am not satisfied on a balance of probabilities that there was an express trust in respect of Francesco Fiore’s transfer of the Grace property to Pasquale Fiore or in respect of the transfer of the Grace property to Diana Fiore.
Is there evidence of a Resulting Trust?
[59] Usually, a claim for resulting trust comes from a transferor of property. In this case both the Defendant transferors and transferees are ad idem that there was and is no trust. In this case the Plaintiff submits that both the transferors and transferees are attempting to hide that such a trust exists.
[60] Pursuant to Kavanagh v. Shiels, 2015 ONSC 5815 at paras. 128-131 (citing Rascal Trucking Ltd. v. Nishi, 2013 SCC 33; a resulting trust can arise in two situations:
First, when A, lacking donative intent, transfers property to B for no consideration, B then holds the property in trust for A, and
Second, when A and B both advance funds to contribute to the purchase price of property but title to the property is registered in B's name alone, B will then hold the property in trust for A in proportion to A's contribution.
[61] As summarized in Novakovic v. Kapusniak, 2005 CanLII 23115 (ON SC) at paragraph 25; aff’d 2008 ONCA 381, in order for a resulting trust to arise, two essential elements must be proven by the plaintiff on a balance of probabilities:
(a) a contribution in money or money’s worth to the purchase price of specific property by the non-titled person; and
(b) a common intention between the parties at the time of purchase that the non-titled person have an ownership interest in the property by reason of that contribution.
[62] Further, the Plaintiff relies on Pecore v. Pecore 2007 SCC 17 and submits that because the transfer was from parent to child, there is a presumption of resulting trust, a rebuttable presumption of law that alters the general rule that the party challenging a transfer bears the burden of proof. The Plaintiff submits that the rationale for the rule is that "equity presumes bargains, not gifts." If the defendants fail to rebut the presumption of resulting trust, the transferee (i.e. the legal owner) will be found to be holding the property in trust for the transferor (i.e. the beneficial owner).
[63] The Plaintiff submits that once they have established on the balance of probabilities that a transfer was made for no consideration, the Defendants must establish on the balance of probabilities that, at the time of conveyance, the transferor intended to gift the property.
[64] The Plaintiff relies on Syrnyk v. Syrnyk, 2019 ONSC 225 in support of the position that assuming a mortgage on a property, when the market value of the property far exceeds the amount of the mortgage, does not amount to proper consideration.
[65] The Defendants rely on Feher v. Healey, 2006 CanLII 29639 (ONSC), with respect to fraudulent conveyances, in support of their position that paying off the outstanding mortgages amounts to consideration, such that a resulting trust is not made out, particularly where the transfer is between family members. In that case the Court held, at paragraphs 44-45 and 54 that:
The law of consideration, as it applies to fraudulent conveyances, can be summarized as follows. “Good consideration” means valuable consideration. It has to be more than just natural love and affection...
Although the courts do not weigh the adequacy of consideration “in too nice scales”, nominal or grossly inadequate consideration is not sufficient and can be an indication or badge of fraud. The court’s examination of adequacy is thus an attempt to ensure that there is a bona fide exchange and a reasonable quid pro quo for the impugned transfer of property.
Inadequacy of consideration as between a husband and wife does not suggest fraud in the same way that a conveyance for an inadequate price to a stranger would raise a suspicion.
[66] Here the evidence, as per the testimony of all of the Defendants, is that both Pasquale Fiore and Diana Fiore, in addition to assuming responsibility for paying the mortgages against the Grace property when title was transferred to each of them, then also acquired the rental income from the property.
[67] In the circumstances here, I am satisfied that there was no consideration for either transfer. I am satisfied that the evidence demonstrates that while Pasquale and then Diana Fiore took legal responsibility for mortgages on the Grace property, neither paid for the mortgages nor was actually responsible for the Grace property, its utilities or the tenancies.
[68] There were many concerning aspects of the testimony of Francesco Fiore. While he began by testifying that none of his properties were ever subject to power of sale, he conceded on cross-examination that he lost his Hamilton gas station to a power of sale. He initially agreed that Mr. Goodbrand “probably” told him in March 2007of the threatened power of sale of the Grace property but testified that he did not recall that conversation. Later in his testimony Francesco Fiore said that he never discussed a power of sale with Kenneth Goodbrand – “no way”, and denied that he received the demand letter from Maple Trust dated March 9, 2007 sent to him by registered and regular mail.
[69] I found Kenneth Goodbrand to be a straightforward, honest witness and where his evidence is inconsistent with that of Francesco Fiore I accept the evidence of Kenneth Goodbrand. I find as a fact that Francesco Fiore was well aware that his mortgage on the Grace property was in default and of the prospect that the Grace property would be subject to a power of sale. I find that was what motivated him to transfer title in the property to his son Pasquale Fiore.
[70] Francesco Fiore testified that the reason he transferred title in the Grace property to his son Pasquale Fiore was that he was finding carrying two homes “too heavy”. Yet, he also testified that he had no difficulty paying bills – that he had lots of experience with mortgages and that he could obtain a second mortgage “no problem” if he had any difficulty paying bills. In March 2007 he already had two mortgages on the Grace property and was not making the mortgage payments as required.
[71] In addition, Francesco Fiore produced no bank statements or tax statements after March 2007. These documents would show, one way or another, whether he continued to receive rent payments from tenants of the Grace property after title was transferred. Further, Francesco Fiore testified that he cannot remember if he paid capital gains tax on the transfer of the prop to Pasquale Fiore and produced no documents to show, one way or another, whether he paid the capital gains.
[72] Francesco Fiore agreed in cross-examination that he had listed the Grace property for sale in 1994 despite the “recommendation” of his father that he keep it in the family. He agreed that in1994 he listed the property for sale at $235,000. He further agreed that in 2005 his daughter Antoinetta offered to buy the Grace property for $560,000, yet could not explain why he transferred title to his son for the equivalent of a mere $268,000 in 2007.
[73] In his 2013 bankruptcy declaration Francesco Fiore said that he was separated from his wife. He testified on this trial that they were separated “with a special condition”. He also testified they were never separated. Both Pasquale and Diana Fiore testified that their parents were never separated. I find that Francesco Fiore was prepared to falsely declare that he was separated from his wife because it was convenient at the time for him to do so. His general credibility is significantly shaken because he did this.
[74] In his sworn statement of affairs at time of his bankruptcy in June 2013 Francesco Fiore listed the McCowan Road property at $697,523 with the exact same amount owing against it. He agreed while testifying that no lender would lend him the exact amount of the value of the property. He speculated that his 2013 value for the McCowan Road property is significantly lower than the Saxe appraisal because of problems with flooding. As noted above, Francesco Fiore says what is convenient to him at the time and he is not to be believed.
[75] Also in his sworn declaration of affairs in 2013 Francesco Fiore said that members of his family were giving him money to live on. In testifying in this case he would not name these family members but denied they were his children. I directed him to answer the question about which family members were giving him money and he refused to answer the question.
[76] The Plaintiff submits that supporting evidence that Pasquale Fiore or Diana Fiore ever made mortgage payments or collected rent on the Grace property is woefully lacking. I agree. I note that Pasquale Fiore produced records showing only two mortgage payments; could not recall the names or amounts paid by any of the tenants; and produced no evidence that he made any utility payments on the property.
[77] Diana Fiore produced only one undated e-transfer document that she testified was from a tenant, but the bank records she produced do not show any rental deposits. Further, the bank statements showing utility payments made by her are for a short time period and after this action commenced. As with Pasquale Fiore, the bank statements produced by Diana Fiore are heavily redacted and do not show the source of any deposits to the account.
[78] While Diana Fiore produced utility bills for the Grace property addressed to her, they were addressed to her at her parents’ address, and that is the physical location where she found them. There is some evidence that Diana Fiore made utility payments from her bank account but there is nothing to show (other than Diana Fiore’s testimony) that these were utility payments for the Grace property. Diana Fiore admitted in cross-examination that she owns another property and I find she was evasive in her testimony as to whether the other property is her residential address.
[79] The absence of documentary evidence produced by the Defendants is part of the picture. The other part is that in the documents they did produce, they redacted other entries so that, for example, it could not be seen what was deposited into the same account or the source of such deposits. The inference to be drawn is that Francesco Fiore (not any tenants of the Grace property) provided money to Pasquale Fiore and to Diana Fiore to offset any costs they incurred in respect of the Grace property.
[80] Neither Pasquale Fiore nor Diana Fiore produced any tax return showing rental income or claims for rental expenses in relation to the Grace property. Francesco Fiore also did not produce his tax returns and therefore did not show that he did not claim rental income or claims for rental expense in relation to the Grace property.
[81] Neither Pasquale Fiore nor Diana Fiore produced a single document to show how they spent the money they testified they received from mortgaging the Grace property. Diana Fiore’s testimony about re-mortgaging the Grace property in November 2015 was extremely vague she “guessed” that she must have got a more favourable interest rate) and she gave no evidence about how she spent the more than $200,000 she would have received from re-mortgaging the property at that time after paying off the existing mortgage.
[82] I find there is good reason to doubt the testimony of all of the Defendants. The Grace property passed to Pasquale Fiore and then to Diana Fiore at well below market value on each occasion. I do not believe the testimony of Pasquale Fiore or Diana Fiore that they received the mortgage monies, made the mortgage payments or received rent from tenants of the Grace property. The only reasonable inference remaining is that Francesco Fiore maintained control over the property – including whether the property could be sold – benefiting from the mortgage monies received and continuing to receive rental income from the property. I find that Pasquale Fiore and Diana Fiore held and hold the property in trust for their father and that a resulting trust in the property to Francesco Fiore has been proven.
Were the transfers fraudulent?
[83] Fraudulent conveyance is pleaded in the alternative to a resulting trust and so it is unnecessary for me to find whether the transfers were fraudulent conveyances. However, much of the evidence in support of my finding there was a resulting trust is also applicable to a finding that the transfers were fraudulent conveyances.
[84] As I have found that the transfers were made without consideration, the Defendants may not rely on Section 3 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29.
[85] It still remains for the Plaintiff to prove fraudulent intent, and, because they were not a creditor at the time of the transfer in 2007, must further prove, as per Wilfert v. McCallum, 2017 ONCA 895 at paragraph 9, either that there remains unpaid a creditor from the time of the conveyance who would have been entitled to impeach the conveyance; or that the debtor’s purpose in making the conveyance was to defraud present and future creditors generally.
[86] As recognized by the Ontario Court of Appeal in FL Receivables Trust 2002-A (Administrator of) v. Cobrand Foods Ltd., 2007 ONCA 425 the legal burden to prove fraudulent intent remains on the plaintiff throughout the trial notwithstanding the presence of badges of fraud. Further, as noted in Bank of Montreal v. Peninsula Broilers Limited, 2009 CanLII 25974 (ONSC) at paragraph 78, because of the seriousness of an allegation of fraud, the evidence relied on by the plaintiff must be particularly scrutinized:
When determining whether a conveyance is fraudulent, “the applicable standard of proof is proof on a balance of probabilities, but to a higher degree of probability than would apply in an ordinary civil case. Where misconduct such as fraud is alleged, the degree of proof required must be commensurate with the gravity of such allegations. Proof commensurate with the occasion requires particular attention to the cogency of the evidence of fraud offered against the defendant”.
[87] There is no evidence that there remains unpaid a creditor from the time of the conveyance in 2007 who would have been entitled to impeach the conveyance. It remains therefore for the Plaintiff to prove that Francesco Fiore’s purpose in transferring title to the Grace property was to defraud present and future creditors generally.
[88] It is the position of the Plaintiff that the transfers satisfy a number of the badges of fraud. Specifically that they were made:
a. in the face of threatened legal proceedings against Francesco Fiore, in secret;
b. between closely knit family members;
c. for significantly less than fair market value;
d. in a rushed and hurried manner; and,
e. for no cash payment.
[89] The Defendants submit that the transfers in title were not secret and were registered on title, for anyone to see, at the time they occurred. I agree. I find however that there is evidence in support of the other four badges of fraud.
[90] As noted above, the presence of badges of fraud do not shift the burden of proof, but as noted in Indcondo v. Sloan, 2014 ONSC 4018; aff’d 2015 ONCA 752 at paragraph 53: “Proof of one or more of the badges of fraud will not compel a finding for the plaintiff but it may raise a prima facie evidentiary case which it would be prudent for the defendant to rebut.”
[91] The Defendants in this case submit that Francesco Fiore’s purpose at the time of the 2007 transfer was to pay off two creditors, keep the property in the family, and to avoid losing the property via power of sale. This is consistent with my findings of fact in respect of the resulting trust above.
[92] I am not satisfied that the Plaintiff has proven to the standard required that Francesco Fiore’s purpose in transferring title to the Grace property was to defraud present and future creditors generally, and so I would not find that that claim of fraudulent conveyance was proven.
Remedy
[93] Pursuant to the Execution Act R.S.O. 1990, Chapter E.24, a creditor may realize on any assets owned legally or beneficially by its debtor. Section 9(1) of the Execution Act provides that:
The sheriff to whom a writ of execution against lands is delivered for execution may seize and sell thereunder the lands of the execution debtor, including any lands whereof any other person is seized or possessed in trust for the execution debtor and including any interest of the execution debtor in lands held in joint tenancy.
[94] I find that in June 2013, Francesco Fiore failed to inform his trustee in bankruptcy that he was the beneficial owner of the Grace Property. His failure to disclose his beneficial ownership was and is a breach of his obligations as a bankrupt.
[95] I accept the Plaintiff’s submission that pursuant to section 71 of the Bankruptcy and Insolvency Act, Francesco Fiore’s beneficial interest in the Grace Property vests in and remains with the trustee in bankruptcy. This remains even despite the fact that the trustee and Francesco Fiore were discharged in 2014.
[96] I am persuaded that the appropriate remedy in the circumstances, in accordance with the decision in Lawyers Professional Indemnity Co. v. Clarke, 2015 ONSC 2643, is to declare that Francesco Fiore is the beneficial owner of the Grace property and to reappoint a trustee in bankruptcy to administer the estate, sell the Grace Property, and pay Francesco Fiore’s creditors. So ordered.
Orders
[97] It is ordered that, on consent, the Certificate of Pending Litigation that was registered Dec 16, 2015 as Instrument YR2405054 in respect of the property located at 12082 McCowan Road Stouffville, ON is removed.
[98] I declare that Francesco Fiore is the beneficial owner of the Grace property.
[99] It is ordered that Francesco Fiore’s reappoint a trustee in bankruptcy is reappointed to administer the estate, sell the Grace Property, and pay Francesco Fiore’s creditors.
Costs
[100] The parties may exchange and submit written submissions as to costs, not to exceed three pages, exclusive of a Bill of Costs, no later than January 3, 2022.
MILLER J.
Released: December 6, 2021
COURT FILE NO.: CV-15-149
DATE: 2021 12 06
m
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LAWYERS' PROFESSIONAL INDEMNITY COMPANY
Plaintiff
– and –
FRANCESCO FIORE also known as FRANK FIORE, PASQUALE FIORE and DIANA FIORE
Defendants
REASONS FOR JUDGMENT
MILLER J.
Released: December 6, 2021