Court File and Parties
COURT FILE NO.: CV-19-00627538-0000 DATE: 20220324 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SUEVILIA DEVELOPMENT CORPORATION AND: YIN LIANG
AND BETWEEN: YIN LIANG AND: SUEVILIA DEVELOPMENT CORPORATION, VICTOR XIE and RE/MAX IMPERIAL REALTY INC.
BEFORE: VERMETTE J.
COUNSEL: Peter Neufeld, for the Plaintiff Paul Starkman and Calvin Zhang, for the Defendant and Plaintiff by Counterclaim
HEARD: December 14, 2021
Endorsement
[1] The Defendant, Yin Liang, appeals from the Order of Associate Justice Josefo dated October 22, 2021 granting leave to the Plaintiff to amend its Statement of Claim and adding the Defendant’s husband, Hanyu Zhao, as a Defendant.
[2] On December 16, 2021, I dismissed the appeal with reasons to follow. These are my reasons.
Factual Background
1. The action
[3] The Plaintiff, Suevilia Development Corporation (“Suevilia”), is a corporation incorporated pursuant to the laws of Ontario. Suevilia carries on business as a residential developer and homebuilder in the Province of Ontario. The Defendant, Ms. Liang, is an individual residing in Toronto.
[4] On February 15, 2017, Suevilia and Ms. Liang entered into an Agreement of Purchase and Sale (“APS”) with respect to the purchase of a new home in the City of Markham (“Property”) whereby Ms. Liang agreed to purchase the Property from Suevilia for $3,450,000.
[5] Suevilia eventually scheduled the closing of the purchase and sale of the Property for July 5, 2019. On June 4, 2019, counsel for Ms. Liang wrote to counsel for Suevilia purporting to terminate the APS and asserting that various notices prepared by Suevilia to extend or delay the closing date did not comply with the Tarion Addendum to the APS. On June 18, 2019, counsel for Ms. Liang sent another letter to counsel for Suevilia questioning Suevilia’s right to set a closing date of July 5, 2019. Ultimately, Ms. Liang did not close on the sale of the Property on July 5, 2019.
[6] Suevilia resold the Property on March 17, 2020 for $2,600,000, which is $850,000 less than the price that Ms. Liang agreed to pay in the APS.
[7] Suevilia commenced this action against Ms. Liang on September 17, 2019. Suevilia seeks damages in the amount of $950,000 against Ms. Liang for breach of the APS, as well as a declaration that Ms. Liang has forfeited any and all deposit monies that she paid to Suevilia.
[8] Ms. Liang served a Statement of Defence and Counterclaim dated November 25, 2019. She seeks an order that the APS is void ab initio, void or, in the alternative, voidable and/or terminated. She also seeks the return of the deposit she paid as well as delayed closing compensation in accordance with the Tarion Addendum to the APS, with interest. Ms. Liang pleads that Suevilia did not comply with the notice obligations under the Tarion Addendum. Further, she alleges that Victor Xie, a real estate agent with Re/Max Imperial Realty Inc., represented Suevilia with respect to the sale and marketing of the Property and that he made false representations to her regarding a possible assignment of the Property. Ms. Liang also alleges that she does not read, write or speak English and that she did not understand the nature and extent of the APS that she signed.
2. The proposed amendments
[9] Suevilia proposes to add Ms. Liang’s husband, Mr. Zhao, as a Defendant and to seek the following relief against both of them on a joint and several basis:
a. a declaration that the transfer of Ms. Liang’s interest in a property located in Toronto (“Picola Property”) to Mr. Zhao on June 1, 2017 (“Transfer”) is void as a fraudulent conveyance; b. an order setting aside the Transfer; and c. a certificate of pending litigation as against the Picola Property.
[10] The main amendments relate to allegations of fraudulent misrepresentations and fraudulent conveyance. The proposed amendments regarding the alleged fraudulent misrepresentations read as follows:
Pursuant to section 3 of Schedule D of the APS, Liang agreed to provide Suevilia such financial information as Suevilia required from time to time prior to the closing of the sale of the Property, for the purpose of confirming that Liang had the financial capability of completing the transaction.
On May 18, 2017, Liang received a pre-approval letter for a mortgage from the Canadian Imperial Bank of Commerce (“CIBC”) for $2,242,500 with a down payment of $1,207,500 to be eligible to purchase the Property for $3,450,000 (the “Pre-Approval Letter”).
In agreeing to pre-approve Liang for a $2,242,500 mortgage, the CIBC relied on Liang’s 50% ownership of the Picola Property.
That same day, pursuant to section 3 of Schedule D of the APS, Liang provided the Pre-Approval Letter to Suevilia and thereby represented to Suevilia that she had the financial capability of completing the transaction.
On June 1, 2017, just two weeks after providing the Pre-Approval Letter to Suevilia, Liang, without notice to Suevilia, effected the Transfer to her husband Zhao for no consideration.
Suevilia states that: a. Liang provided the Pre-Approval Letter to Suevilia when she already knew that she and Zhao intended to shortly thereafter transfer her interest in the Picola Property to her husband for no consideration; and/or b. Liang intentionally failed to disclose to Suevilia of [sic] this material change to her assets and the fact that she would no longer be able to secure approval for a mortgage from CIBC to complete the transaction, nor would she be otherwise able to secure financing, without maintaining her ownership interest in the Picola Property.
As a result of Liang’s false representation and breach of section 3 of Schedule D to the APS, Suevilia continued to believe that Liang had the financial ability to purchase the Property, rather than being in a position to mitigate its losses and terminate the agreement pursuant to s. 3(B) of Schedule D of the APS.
[11] Suevilia further pleads that it has and will continue to suffer and incur additional expenses, losses and costs as a result of Ms. Liang’s: (a) breach of the APS (which was pleaded in the original Statement of Claim), and (b) fraudulent misrepresentations concerning her financial capability to purchase the property (which is part of the proposed amendments).
[12] The proposed amendments regarding the alleged fraudulent conveyance read as follows:
Liang and Zhao purchased the Picola Property on August 18, 2014 as joint tenants.
Between February 2017 and June 2017, after Liang had executed the APS to purchase the Property, real estate prices throughout the Greater Toronto Area, including the market value of the Property, plummeted.
During this same time period, on or about April 25, 2017, Liang registered a second mortgage in favour of Prudent Excellence Mortgage Investment Corporation in the sum of $250,000 (the “Eunice Mortgage”) on another property that Liang owned, located at 26 Eunice Rd., Toronto, Ontario (the “Eunice Property”). In total, as at June 2017, the Eunice Property was encumbered in the total sum of $1,286,750, as a first mortgage by Bank of Montreal in the sum of $1,036,750 was previously registered in June 2016 when Liang purchased the Eunice Property. The purchase price for the Eunice Property only one year earlier in June 2016 was $1,595,000.00 -- meaning that these two mortgages totaled in or about 81% of the Eunice Property’s value.
In light of her significant personal indebtedness and to avoid any potential creditors, including Suevilia, Liang and Zhao effected the Transfer knowing that Liang would be unable to obtain a mortgage from CIBC in the absence of this significant asset and thus would be in breach of the APS.
The plaintiff pleads that the Transfer for no consideration was undertaken by the defendants for the purpose of defeating, hindering and/or delaying Liang’s “creditors and others” as demonstrated by the following badges of fraud: a. the Transfer was between non-arm’s length persons; b. the Transfer was done for no consideration; c. the Transfer was done at a time when both Liang and Zhao knew that Liang would face significant liabilities if she was unable to close on the purchase of the Property; d. there was no bona fide business reason for the Transfer: and e. after the Transfer Liang continued to reside on the Property with Zhao.
Accordingly, the transfer of the Picola Property is void as a fraudulent conveyance under the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, and the plaintiff is entitled to a certificate of pending litigation against the Picola Property.
3. The motion and the Associate Judge’s decision
[13] Suevilia served its Notice of Motion for an order granting leave to amend the Statement of Claim on November 10, 2020. It served its Motion Record on April 5, 2021.
[14] Associate Justice Josefo heard the motion on October 19, 2021. He released his endorsement granting the motion on October 22, 2021.
[15] In his endorsement, the Associate Judge set out the question to be answered as follows:
Can Suevilia amend its Statement of Claim to add a new defendant, the spouse of the defendant Liang, and add pleas that, in essence, Liang fraudulently conveyed her interest in a property to her spouse, thus allegedly fraudulently misrepresenting her ability to secure a mortgage?
[16] The Associate Judge reviewed the proposed amendments and the positions of the parties. He then reproduced an excerpt from one of his prior decisions, D’eon v. Hosseini, 2020 ONSC 7500, as he was of the view that the same rules and similar issues surrounding their applicability and interaction were involved in this matter. The excerpt states that each specific proposed amendment needs to be considered to determine whether it is a viable, tenable plea, or whether it is plain and obvious that the plea cannot stand. The excerpt goes on to discuss the concept of scandalousness.
[17] After referring again to the “plain and obvious” test, the Associate Judge turned to the proposed amendments in this case. He stated the following:
In this within matter, plaintiff clearly asserts in the ASOC [Amended Statement of Claim] strong allegations against defendant and her spouse. Indeed, fraud is alleged which, as is often stated, is different from a mistake, or an error in judgment. Rather, fraud is a deliberate act or deliberate course of conduct. The within allegations are thus most serious. Careful scrutiny is accordingly necessary.
After careful consideration, I find that, contrary to D’eon, these within allegations, for that is all that they are at present until proven (if capable of proof), do tell a logical story or paint a logical picture. The within proposed amendments are not based on mere allegations without more; nor do these seemingly stem from malice. Rather these new pleas have a purpose beyond mere “colour” or “atmosphere”. These are grounded in and arise out of the relevant, and undisputed, fact of the conveyance of 50% of Picola from the defendant to her spouse for no consideration. A fact relevant to the litigation cannot be scandalous, it must be recalled, and nor can the allegations made which arise from the relevant fact. Moreover, for my purpose of assessing the ASOC, I must take the allegations to be true. Assessing the ASOC, I find that it does portray a chain of events that do show a cause of action.
The purpose of the proposed amendments is, again, not simply to besmirch the defendant or to damage her reputation. While it was submitted that the amendments are only “tactical” in nature, there is no evidence to support that supposition. Rather, it appears to me that, in recounting its allegations, the plaintiff seeks to obtain redress if it can prove its serious allegations.
Yet, other than those musings in obiter, for this motion I must stay out of and above the merits (or possibly the lack thereof) of the ASOC. In determining the tenability of the pleas in the ASOC, I cannot say that these are plainly unviable, impossible of success, or unachievable, as Master Sandler discussed in the Panalpina decision referenced above. Applying what Lax, J. wrote in Atlantic Steel, referenced above, it is not beyond all doubt that these claims are impossible of success. While I may currently be skeptical of their ultimate merit and provability, my skepticism could well be shown to be misplaced, again depending on the evidence as such emerges at discovery and, ultimately, at trial.
Given that:
- the pleading cannot be scandalous as the allegations are arguably relevant, and,
- much detail has been pled in the ASOC so to meet the test under Rule 25.06(8),
I find the ASOC is tenable. It is a viable pleading.
[18] The Associate Judge then discussed the issue of the limitation period. He stated the following:
I now turn to the timeliness issue. Mr. Starkman withdrew his assertion that the ASOC with respect to the fraudulent conveyance allegations were out of time. He was correct to do so. […]
Regarding the fraudulent misrepresentation aspects of the ASOC, Suevilia again would have only learned or discovered the likelihood of litigation on or about June 4, 2019, when Liang, through counsel, advised that she would not close. Ordinarily, two years later, on June 3, 2021, is when the limitation period would have expired pursuant to section four of the Limitations Act.
The within notice of motion was served November 11, 2020. The motion record of the plaintiff was served April 15, 2021. Both these dates are accordingly well within the normal or ordinary two-year period from what I find is the earliest date when the plaintiff could have known or suspected (discovered) the alleged breach. In this regard, I am deliberately using the earliest possible date, the one most favourable to the defendant.
In so doing, I respectfully disagree with the defendant’s view that the limitation period should have arisen at the expiry of the mortgage letter in or about August 2017, or at some other point before the defendant asserted that she would not close. While plaintiff arguably could have sought ongoing verification of the defendant’s ability to finance the purchase of the new-build, that is a factual issue for the litigation. It does not logically link to an assertion of an earlier limitation period.
It is settled law that the date of serving the notice of the motion for leave to amend, not the date when the motion eventually is heard (especially given the current long delay between serving the notice of motion and having a hearing) is what governs. The date when the notice of motion is served is the date which one references when determining if the requested amendments were sought within the limitation period. See in that regard, 2027707 Ontario Ltd v. Richard Burnside & Associates Ltd., 2016 ONSC 530 (paragraph 57). Thus, again, the notice of motion in this matter was served in good time.
Yet, in addition to the “ordinary” or “normal” limitation period, again, one must factor in the Covid exception and extension arising out of the above-referenced Ontario Regulation. Adding that to the mix, I agree with plaintiff that the limitation period will only expire December 18, 2021. This is after not just the notice of but the hearing of the motion, and is after my decision issues. The expiry date is approximately one year and 28 days after Suevilia served its notice of motion. Thus, the plaintiff is well within time to have pursued these amendments in the ASOC.
For all these reasons, the plaintiff’s motion is granted. The amendments are granted, and the spouse of the defendant is properly made a party to this action.
Grounds of appeal raised by the Defendant
[19] Ms. Liang submits that the Associate Judge erred in law and principle in granting the amendment. She raises the following grounds of appeal in her Notice of Appeal:
a. With respect to the claim of fraudulent misrepresentation, the Associate Judge: i. failed to consider properly and determine if there is a fraudulent misrepresentation and that the pleading of fraudulent misrepresentation is tenable; ii. failed to address that there was no reliance by the Plaintiff with respect to the alleged fraudulent misrepresentation; iii. failed to consider adequately or at all Rule 25.06(8) in stating that said Rule had been complied with in relation to the Defendant’s proposed Amended Statement of Claim; iv. applied and considered Rules 21.01(1)(b), 25.11, and related caselaw, which were not relied upon by the Plaintiff in bringing its motion; v. concluded that the Defendant failed to advise of a “material change”, which constitutes a breach of the APS. There is no contractual obligation under the APS with respect to a “material change”; vi. concluded that the alleged fraudulent misrepresentation claim is not statute-barred pursuant to sections 4 and 5 of the Limitations Act and failed to conclude that the alleged fraudulent misrepresentation claim ran from August 2017; and vii. concluded that the date of service of the Plaintiff’s Notice of Motion is relevant to the limitation period issue, which had not been filed with the Court and the Plaintiff had not scheduled a motion with the Court.
b. With respect to the claim of fraudulent conveyance, the Associate Judge: i. failed to consider whether the Plaintiff has standing under section 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (“FCA”) and failed to determine whether the Plaintiff falls under the definition of “others” in section 2 of the FCA; ii. failed to consider sufficiently or at all whether another creditor existed at the date of the alleged fraudulent conveyance which the Plaintiff did not plead with particulars as required by Rules 25.06(1) and (8); iii. failed to consider adequately or at all that the proposed Statement of Claim does not assert that the transfer was made to defeat the Defendant’s creditors but only to breach the APS; iv. added Mr. Zhao as a party to the action without conducting any analysis under Rule 5; and v. applied the test for Rule 21.01(1)(b) with respect to striking out pleadings and stated that the same test applies in determining whether to amend the Statement of Claim.
[20] The following additional grounds are raised in the Defendant’s Factum with respect to the claim of fraudulent misrepresentation. The Associate Judge:
i. did not assess whether the Plaintiff has a viable claim based upon the alleged fraudulent misrepresentation including that the representation is false or that the Plaintiff relied on the alleged false misrepresentation and suffered loss or injury as a result of such reliance and further does not refer to any applicable caselaw; ii. did not consider that the alleged fraudulent misrepresentation was made by CIBC in the Mortgage Certificate issued in May 2017 and does not consider that the alleged fraudulent misrepresentation is not made by the Defendant; iii. did not consider that the Plaintiff has not pleaded that the representation is false or fraudulent; and iv. did not consider that the Plaintiff has not pleaded facts which address the discovery of the fraudulent misrepresentation claim by the Plaintiff which is statute barred, the alleged fraudulent misrepresentation being made in May 2017.
Discussion
1. Standard of appellate review
[21] The standards of appellate review that apply to judges’ decisions also apply to associate judges’ decisions: see Zeitoun v. The Economical Insurance Group, 2019 ONCA 415 at para. 1.
[22] An appeal from an associate judge’s decision is not a rehearing. On questions of fact and mixed fact and law, deference applies, and the role of the reviewing court is limited. An appellate court cannot substitute its interpretation of the facts or reweigh the evidence simply because it takes a different view of the evidence from that of the associate judge. On questions of law, the correctness standard applies. See Prescott v. Barbon, 2018 ONCA 504 at para. 11.
[23] The decision whether or not to grant leave to amend a pleading is a discretionary one. Absent palpable and overriding error of fact or error of law, such a decision is subject to deference on appeal: Conway v. The Law Society of Upper Canada, 2016 ONCA 72 at para. 16 and Huachangda Canada Holdings Inc. v. Solcz Group Inc., 2019 ONCA 649 at para. 30. An appellate court should interfere only if the judge or associate judge erred in principle or acted unreasonably in the exercise of their discretion: Huachangda Canada Holdings Inc. v. Solcz Group Inc., 2019 ONCA 649 at para. 30.
[24] The question of whether a limitation period expired prior to the issuance of a statement of claim is a question of mixed fact and law for which the standard of appellate review is palpable and overriding error: Longo v. MacLaren Art Centre, 2014 ONCA 526 at para. 38.
2. Applicable tests under Rule 26.01 and Rule 5.04(2)
[25] Rule 26.01 of the Rules of Civil Procedure provides that “[o]n motion at any stage of an action, the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.”
[26] In Mitchell v. Lewis, 2016 ONCA 903 at para. 21, the Court of Appeal stated the following with respect to the applicable test under Rule 26.01:
Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, allows a court at any stage of an action to grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. While the court retains the discretion not to allow an amendment, the denial of leave to amend should only be made in the clearest of cases, when it is plain and obvious that no tenable cause of action is possible on the facts as alleged: South Holly Holdings Ltd. v. The Toronto-Dominion Bank, 2007 ONCA 456, at para. 6; Conway v. Law Society of Upper Canada, 2016 ONCA 72, 395 D.L.R. (4th) 100, at para. 16.
[27] In 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42, the Court of Appeal summarized the general principles that apply to motions for leave to amend at paragraph 25. The first principle set out by the Court of Appeal is that Rule 26.01 requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court’s process; or the pleading discloses no reasonable cause of action.
[28] Based on these statements of the Court of Appeal, three factors should be considered in determining whether a motion under Rule 26.01 should be denied: (a) whether the responding party would suffer non-compensable prejudice; (b) whether the proposed amendments are scandalous, frivolous, vexatious or an abuse of the court’s process; and (c) whether the pleading discloses no reasonable cause of action.
[29] With respect to the addition of parties, Rule 5.04(2) provides that, at any stage of a proceeding, the court may by order add a party on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[30] Under both Rule 26.01 and Rule 5.04(2), a pleadings amendment is not to be made if non-compensable prejudice would result. In contrast to Rule 26.01, however, the language of Rule 5.04(2) imports a discretionary power rather than a mandatory direction. Thus, in motions under Rule 5.04(2), the courts retain a discretion to deny an amendment in a proper case, even in the absence of non-compensable prejudice, when it is sought to change the parties to a proceeding. Generally speaking, the discretion is to ensure procedural fairness and consideration has to be given to such matters as the state of the action, whether the trial is imminent, whether examinations for discovery of all parties have already been held, whether it would be a proper joinder of a new cause of action, whether the purpose in adding a party defendant is improper, and whether the proposed added party is a necessary or proper party. See Mazzuca v. Silvercreek Pharmacy Ltd. at paras. 25-30 (Ont. C.A.).
3. Review of the Associate Judge’s decision
[31] In my view, the Associate Judge considered all the relevant factors under the applicable tests for Rule 26.01 and Rule 5.04(2). While his discussion of some of the factors could have been more detailed, I find no error under the applicable standard of appellate review. It must be remembered that reasons need not detail every step of the reasoning process nor refer to every piece of evidence or argument led by counsel: R. v. H.S.B., 2008 SCC 52 at para. 8.
a. Whether the responding party would suffer non-compensable prejudice
[32] The only non-compensable prejudice that has been alleged by the Defendant relates to the limitation period for the fraudulent misrepresentations cause of action. There is no evidence of any other prejudice.
[33] Under section 5(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (“Limitations Act”), a claim is discovered when the person first knew or reasonably ought to have known the following four elements: (i) the occurrence of the injury, loss or damage, (ii) that it was caused by or contributed to by an act or omission, (iii) that the act or omission was by the defendant, and (iv) based on the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek a remedy. The limitation period does not begin to run until all of these factors have been satisfied: see Kaynes v. BP p.l.c., 2021 ONCA 36 at para. 36 and Apotex Inc. v. Nordion (Canada) Inc., 2019 ONCA 23 at para. 89.
[34] The Associate Judge concluded that the earliest time that the limitation period could have arisen was when Ms. Liang asserted that she would not close in June 2019. He stated that this is because Suevilia “would have only learned or discovered the likelihood of litigation on or about” that time. While it is unclear what the Associate Judge is referring to when he uses the words “likelihood of litigation”, given the factual context of this case, I interpret these words to mean either the occurrence of loss or damage (section 5(1)(a)(i)) or the realization that a proceeding would be an appropriate means to seek a remedy (section 5(1)(a)(iv)). In the following paragraph of his reasons, the Associate Judge expressly finds that June 4, 2019 was “the earliest date when the plaintiff could have known or suspected (discovered) the alleged breach.”
[35] The Associate Judge’s conclusion that the claim was not discovered until June 4, 2019 and not before two years preceding the date of the service of the notice of motion for leave to amend was reasonably available to him on the evidence and is not affected by palpable and overriding error.
[36] The Defendant has not shown that the Associate Judge erred in law when he held that the date of the service of the notice of motion is the relevant date to consider when determining if the requested amendments were sought within the limitation period. In fact, the only case cited in the Defendant’s factum does not support her argument that the relevant date is the date on which the Motion Record is filed. Rather, this case also states that the limitation issue crystallizes as of the date of service of the notice of motion: Sweda Farms Ltd. v. Ontario Egg Producers, 2011 ONSC 6146 at para. 22. In any event, as outlined in the Associate Judge’s reasons and his discussion of the “COVID extension”, the motion to amend was heard by the Associate Judge within the limitation period and, consequently, it is clear that the Motion Record was filed within the limitation period.
[37] Given the Associate Judge’s conclusion on the issue of the limitation period, there is no need for the Plaintiff to rely on the discoverability principle and, therefore, the Plaintiff was not required to plead additional facts in its proposed Amended Statement of Claim regarding discoverability.
[38] Thus, there is no palpable and overriding error in the Associate Judge’s decision with respect to the issue of the limitation period and non-compensable prejudice.
b. Whether the proposed amendments are scandalous, frivolous, vexatious or an abuse of the court’s process
[39] The Defendant does not argue that the amendments are scandalous, frivolous, vexatious or an abuse of the court’s process. In any event, the Associate Judge considered this issue and found that they were not. No error is alleged with respect to this finding.
c. Whether the pleading discloses no reasonable cause of action
[40] The Associate Judge referred to the plain and obvious test in his reasons and found that the proposed Amended Statement of Claim showed a cause of action and contained tenable, viable pleas that were not impossible of success. While these conclusions are not supported by an analysis of the elements of the two causes of action in issue in this case, the elements of the relevant causes of action were discussed in the facta that were before the Associate Judge, which he presumably considered. In any event, I find that the required elements have been pleaded and, therefore, there is no error in the Associate Judge’s decision.
[41] In reviewing the proposed Amended Statement of Claim to determine whether it raises a reasonable cause of action, it is important to remember, among other things, that the pleading must be read generously in favour of the Plaintiff, with allowances for drafting deficiencies: McCreight v. Canada (Attorney General), 2013 ONCA 483 at para. 39.
i. Fraudulent misrepresentation
[42] The elements of a claim of fraudulent misrepresentation are: (1) a false statement by the defendant; (2) the defendant knowing that the statement is false or being indifferent to its truth or falsity; (3) the defendant having an intent to deceive the plaintiff; (4) the false statement being material and the plaintiff having been induced to act; and (5) the plaintiff suffering damages. See Aviva Canada Inc. v. Lyons Auto Body Limited, 2019 ONSC 6778 at para. 65.
[43] With reference to the paragraphs of the proposed Amended Statement of Claim set out in paragraph 10 above, I conclude that:
a. the first element is pleaded in paragraphs 21, 23 and 24, read together; b. the second element is pleaded in paragraph 23; c. the third element is pleaded in paragraph 23; d. the fourth element is pleaded in paragraphs 23 and 24, read together; and e. the fifth element is pleaded in paragraph 25.
[44] Thus, there is no error in the Associate Judge’s conclusion that the proposed Amended Statement of Claim shows a cause of action with respect to fraudulent misrepresentations. Most of the arguments raised by the Defendant with respect to this cause of action – including her arguments regarding the nature of the damages, whether there was a misrepresentation, the involvement of CIBC and the dates on the Mortgage Certificate – go to the merits of the allegations and can be alleged in Ms. Liang’s Statement of Defence.
ii. Fraudulent conveyance
[45] Section 2 of the FCA reads as follows:
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.
[46] In order for this section to apply so as to void a transaction, there must be: (1) a conveyance of property; (2) an intent to defeat; and (3) a “creditor or other” towards whom that intent is directed: Indcondo Building Corp. v. Sloan, 2014 ONSC 4018 at paras. 43-44 (“Indcondo”).
[47] Because the FCA was enacted to prevent fraud and is remedial legislation, it must be given as broad an interpretation as its language will reasonably bear: Indcondo at para. 49.
[48] The courts have interpreted the words “or others” in section 2 broadly to include any person who has a legal or equitable right or claim against the grantor or settler by virtue of which they are, or may become, entitled to rank as a creditor of the latter. This includes prospective creditors, such as a party to whom contractual obligations were owed by the defendant, which, if breached, would render the plaintiff someone with a claim for damages who would rank as a creditor. See Indcondo at paras. 45-48 and Mohammed v. Makhlouta, 2020 ONSC 7494 at paras. 41-43.
[49] Courts have found that, in some circumstances, it is not necessary for there to be any creditors at all at the time of a transaction in order to conclude that it was done with the intent to defeat creditors: Indcondo at para. 45.
[50] This very brief summary of the applicable law shows that many of the grounds of appeal raised by Ms. Liang with respect to the allegations of fraudulent conveyance are legally misguided.
[51] In light of the foregoing, and with reference to the paragraphs of the proposed Amended Statement of Claim set out in paragraphs 10 and 12 above, I conclude that:
a. the first element is pleaded in paragraph 22; b. the second element is pleaded in paragraphs 29 and 30; and c. the third element is pleaded in paragraphs 29 and 30.
[52] Thus, there is no error in the Associate Judge’s conclusion that the proposed Amended Statement of Claim shows a cause of action with respect to fraudulent conveyance.
d. Residual discretion under Rule 5.04(2)
[53] Aside from the limitation period issue, the Defendant has not pointed to any other factor that the Associate Judge should have considered with respect to the addition of Mr. Zhao as a Defendant. I find no palpable and overriding error of fact or error of law in the Associate Judge’s exercise of his discretion to add Mr. Zhao as a Defendant.
e. Particulars
[54] I also find no palpable and overriding error in the Associate Judge’s finding that sufficient particulars have been pleaded to meet the requirements of Rule 25.06(8), which apply where fraud and misrepresentations are pleaded. Further, I note that almost all of the allegations are within the knowledge of the Defendant.
Conclusion
[55] Accordingly, the appeal is dismissed.
[56] If costs cannot be agreed upon, the Plaintiff shall deliver submissions of not more than three pages (double-spaced), excluding the costs outline, within 14 days of the date of this decision. The Defendant shall deliver her responding submissions (with the same page limit) within 14 days of her receipt of the Plaintiff’s submissions.
Vermette J. Date: March 24, 2022