Court File and Parties
COURT FILE NO.: CV:23-00700167 DATE: July 4, 2023 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: TORONTO DOMINION BANK, Plaintiff AND: AKRAM-ALSADAT SEYEDINASAB AND NASROLLAH NEJAD, Defendants
BEFORE: Justice Papageorgiou
COUNSEL: Cristina Internicola, for the Plaintiff
HEARD: July 4, 2023
Endorsement
Overview
[1] The Toronto Dominion Bank issued the defendant Akram-Alsadat Seyedinasab a visa credit card. He failed to make the required payments and the credit card went into default. He was notified of the default as well as the outstanding amount on March 9, 2021. As at that time, the amount outstanding on the credit card was $23,755.68.
[2] TD Bank commenced a Small Claims Court action on May 27, 2021 seeking repayment of the credit card debt.
[3] TD Bank attempted to serve Mr. Seyedinasab unsuccessfully on four occasions at his home located at 541 Rouge Hills Drive (the “Rouge Hill Property”), and brought several motions for substituted service. It appears Mr. Seyedinasab was evading service, but there were also errors in TD’s materials which caused some of the motions for substituted service to be unsuccessful.
[4] On February 3, 2023, TD then discovered the Rouge Hills Property was transferred from Mr. Seyedinasab to his wife, Nasrollah Nejad, as joint tenants, for natural love and affection.
[5] At the time of this conveyance, the mortgage to Scotia Bank in the amount of $650,000 was paid and discharged, and an additional mortgage in the amount of $1,200,000 was placed on the Rouge Hills Property. Mr. Seyedinasab was a consenting spouse to the placement of this second mortgage. Despite the receipt of these funds, no payments were made to TD Bank.
[6] TD Bank has now commenced an action for fraudulent conveyance in respect of the Rouge Hills Property.
Issue
[7] TD Bank seeks a Certificate of Pending Litigation (“CPL”) in respect of the Rouge Hills Property.
[8] The main issue here is whether a claim based on a fraudulent conveyance is a sufficient interest in land and whether the usual test for a CPL should apply.
Analysis
The usual test for a CPL
[9] The usual test for granting leave to register a CPL is well established in the relevant jurisprudence. It requires the determination of whether there is a triable issue in respect of the moving party’s claim to an interest in the property: 2254069 Ontario Inc. v. Kim, 2017 ONSC 5003, at para. 21; Pacione v. Pacione, 2019 ONSC 813, at para. 20.
[10] In Royal Bank of Canada v. Azkia et al, 2019 ONSC 5894, Master Sugunasiri set out the most relevant considerations for without notice CPL’s:
(i) The test on a motion for leave to issue a CPL is the same as the test on a motion to discharge a CPL;
(ii) The threshold in respect of the "interest in land" issue as set out at section 103(6) of the CJA is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed;
(iii) Factors the court can consider include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security; and
(iv) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted.
Does a fraudulent conveyance action satisfy the requirement that there is an interest in land claimed?
[11] Ordinarily, a creditor who does not have a mortgage, could not seek a CPL as against a property owned by a debtor simply to ensure that there is an asset available for execution at a later point.
[12] However, where the debtor has taken steps to move his assets to another to defeat that creditor, and the creditor seeks to set aside that conveyance pursuant to the Fraudulent Conveyances Act, or the Assignments and Preferences Act, there is a basis for a CPL.
[13] Pursuant to s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 the Court has the power to declare every conveyance with intent to defraud creditors void. The Court has the power under s. 4 of the Assignments and Preferences Act, R.S.O. 1990, c. A.33. Therefore, on its face this proceeding involves a claim to an interest in land, even though TD Bank is not claiming title.
[14] In Keeton v. Cain et al, 57 O.R. (2d) 380, the Court found that a proceeding where the plaintiff claimed a fraudulent conveyance had taken place was a sufficient interest in land for the purposes of a CPL. Scott J. reviewed the authorities and determined that the plaintiff need not assert an interest for himself. “Rather, the authorities are clear to the effect that a lis pendens may be obtained in an action if ‘any title to or interest in land is brought into question.’”
[15] In Grefford et al v. Fielding et al, [2004] O.J. No. 1210 Smith J. agreed that a made by a creditor to set aside an allegedly fraudulent conveyance was a sufficient interest in land.
[16] I am satisfied that a claim to set aside a conveyance on the basis that it is fraudulent is sufficient to constitute a claim in respect of an interest in land. Were it not, then there would be no way for a creditor to protect itself in respect of potential future fraudulent conveyances which could be made to bona fide purchasers for value and which then would render any proceeding claiming a fraudulent conveyance of no utility.
The Applicable Test
[17] The Court in Grefford asserted that a modified test should apply where a plaintiff claimed a fraudulent conveyance. I agree that a modified test is appropriate because some of the considerations set out in the general case law do not make much sense where the plaintiff brings proceedings to set aside a fraudulent conveyance. I add that the governing test set out in Royal Bank of Canada v. Azkia directs that the court should exercise its discretion in equity, and take into account relevant matters between the parties.
[18] The test in Gefford, sets out the following relevant considerations where a plaintiff brings a fraudulent conveyance action:
Does the claimant have a high probability that he or she will recover judgment in the main action? Based on the evidence before me, Mr. Seyedinasab owes TD Bank funds pursuant to a credit card debt and there is a high probability TD Bank will recover judgment.
Has the claimant introduced evidence demonstrating that the transfer was made with intent to defeat or delay creditors? I am satisfied that there is sufficient evidence that the transfer was made to defeat or delay creditors for the following reasons: i) Mr. Seyedinasab conveyed the property to his wife Ms. Nejad, shortly after being notified of Mr. Seyedinasab’s debt to TD Bank for no consideration, ii) After this conveyance, the mortgage in the amount of $650,000 was discharged and a new mortgage in the amount of $1.2 million was placed on the property with Mr. Seyedinasab consenting to the mortgage as a spouse; and iii) Mr. Seyedinasab has evaded service.
Does the balance of convenience favour issuing the CPL in the circumstances of the particular case? This is a without notice motion and so I only have before me TD Bank’s case. On the basis of this evidence the balance of convenience favours TD Bank. Mr Seyedinasab and Ms. Nejad are spouses and appear to have lived in the home for some time. There is no evidence that they wish to sell it; indeed, Ms. Nejad has just placed a large mortgage on the home. On these materials, the risk to TD Bank of further conveyances which would render the fraudulent conveyance action moot outweighs any hypothetical risk to the defendants.
[19] I note that in Gefferd the Court did set aside the CPL, but in that case there was evidence of consideration for the transfer, which is different than the case here.
[20] Therefore, I am satisfied that TD Bank is entitled to a CPL.
[21] Order to go in the form attached.
Justice Papageorgiou Date: July 4, 2023