Ontario Superior Court of Justice

Court File No.: CV-17-572897
Date: 2025-05-05

BETWEEN:
E. Sands & Associates Inc. in its capacity as the Trustee of the Estate of Kaldep Singh Gidda, a Bankrupt, Plaintiff
– and –
Kaldep Singh Gidda and Sunita Rani Saini, Defendants

Appearances:
Brandon Jaffe, for the Plaintiff
Mikesh H. Patel, for the Defendant, Sunita Rani Saini

Heard: February 12-14, 2025

Justice Wendy L. A. Pollak

Reasons for Decision

Introduction

[1] The Trustee seeks relief pursuant to s. 96(1)(b) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (the “BIA”) and, alternatively, s. 2 of the Fraudulent Conveyances Act, RSO 1990, c F.29, to set aside the August 3, 2016 transfer (the “Transfer”) of Kaldep Singh Gidda’s interest in 88 Moraine Drive, Vaughan, Ontario (the “Property”) to Ms. Saini for no consideration.

[2] Section 96(1)(b)(i) of the BIA provides that this court may declare that a transfer at “undervalue” is void against the trustee if the transfer was made between non-arm’s length parties within one year of the bankruptcy:

96 (1) On application by the trustee, this court may declare that the transfer of “undervalue” is void as against the trustee, or order that a party to the transfer pay to the estate the difference between the value of the consideration received by the debtor and the value of the consideration given by the debtor provided that:
(b) the party was not dealing at arm’s length with the debtor and
(i) the transfer occurred during the period that begins on the day that is one year before the date of the initial bankruptcy event and ends on the date of the bankruptcy
[Emphasis added.]

[3] On November 3, 2016 (the date the Office of the Superintendent of Bankruptcy issued a Certificate of Appointment), Kaldep Singh Gidda (“Mr. Gidda”) made an assignment for the general benefit of his creditors.

[4] On August 3, 2016, three months before the Date of Bankruptcy, Mr. Gidda transferred his interest in the Property to Ms. Saini for no consideration. The transfer documents stated that the consideration was $35,262.52, representing half of the amount owing on the TD mortgage as of the date of the Transfer.

[5] If the Transfer occurred between non-arm’s length parties and within a year of the Date of Bankruptcy, the Trustee is not required to establish that Mr. Gidda was insolvent at the time of the Transfer or that he intended to “defraud, defeat or delay a creditor,” as required under s. 96(1)(b)(ii) of the BIA.

Issues

[6] The Plaintiff submits that the following are the legal issues for adjudication:

a) Does s. 9 of the Statute of Frauds, RSO 1990, c S.19 (the “Statute of Frauds”) apply to the Transfer?
b) If the Transfer is a transfer at undervalue, is Ms. Saini entitled to a resulting or constructive trust for paying the mortgage and other expenses to maintain the Property while she was in sole possession?

Findings of Fact

[7] I agree with the Plaintiff’s summary of the material facts, which I find have been established in this trial. For the reasons given in court, a motion to withdraw Ms. Saini’s admissions was dismissed.

[8] I find that the following facts have been established:

• Ms. Saini is deemed to admit all the facts in the Request to Admit.
• In August 2008, Ms. Saini was required to refinance the Bank of Montreal Mortgage registered against title to the Property.
• In August 2008, Ms. Saini was also required to refinance the TD Bank mortgage.
• Ms. Saini was not financially able to refinance the Bank of Montreal and TD mortgages on her own.
• Mr. Gidda made the arrangements for TD Bank to refinance the TD mortgage and the Bank of Montreal mortgages on the property. He paid $126,000 to refinance the TD Bank mortgage and the Bank of Montreal mortgage. He paid the $126,000 directly to his lawyer, Mr. Sherwin Shapiro. No funds were sent to Ms. Saini. He acquired 50 percent of the interest in the Property at that time. He purchased Title Plus Insurance to insure his legal and beneficial interest in the Property. For insurance purposes, the Property was valued at $565,000. Ms. Saini made no financial contribution to the 2008 refinancing.
• The evidence is that the $126,000 equals approximately one half of the net equity in the Property as of the November 2008 transfer of a 50 percent interest in the Property to Mr. Gidda. As of November 2008, about $267,000 was outstanding on the two mortgages. Ms. Saini estimates that the Property was worth at least $450,000 or more. The insurance value of the Property was $565,000.
• It is reasonable to conclude that Mr. Gidda paid fair market value for his half of the interest in the Property.
• Mr. Gidda also made the arrangements for the property insurance.
• I accept the Trustee’s inference that Mr. Gidda paid Mr. Shapiro’s account for the 2008 transfer of a 50 percent interest in the Property. There is no evidence to the contrary.
• Mr. Shapiro did not report to Ms. Saini, he reported to Mr. Gidda.
• Mr. Shapiro does not report that Mr. Gidda holds his interest in the Property in trust for Ms. Saini. The transfer document also does not state that Mr. Gidda holds the Property in trust for her.
• Ms. Saini admits that she told no one that Mr. Gidda holds his interest in the Property for Ms. Saini.
• There is no agreement in writing that Mr. Gidda holds his interest in the Property as a bare trustee, or otherwise.
• There is no evidence from Mr. Gidda to confirm the alleged gift of funds by him to Ms. Saini of $65,000.
• Ms. Saini gave no explanation or reason why she did not call Mr. Gidda as a witness, other than that it was the Plaintiff’s burden to do so.
• Ms. Saini’s evidence regarding an alleged loan by her mother to Mr. Gidda when they both resided in India sometime before 1991 is hearsay. She had no direct knowledge of the circumstances surrounding the loan or the details of the loan.
• Prior to the November 2008 refinancing, Ms. Saini was responsible for payment of the Bank of Montreal and TD Bank second mortgage registered against title. Ms. Saini testified that she was unable to make these payments on her income.
• The Bank of Montreal monthly mortgage payment was $1,531.20 per month.
• There is no evidence on the amount of the TD second mortgage payment.
• After Mr. Gidda paid $126,000 to Mr. Shapiro, he received a 50 percent interest in the Property as tenants in common with Ms. Saini. Mr. Gidda and Ms. Saini also obtained a mortgage from TD Bank in the principal amount of $103,000.
• The monthly mortgage payment under the new 2008 TD mortgage was $552.24 per month; as a result, Ms. Saini reduced her monthly mortgage payments by more than $1,000.
• From November 2008 to September 2012, Ms. Saini’s monthly household expenses were approximately $1,000.
• On October 1, 2012, the monthly mortgage payment increased from $552.24 to $945. As of August 3, 2016, the sum of approximately $70,000 was due on the TD mortgage.
• In November 2016, when Ms. Saini was the sole registered owner of the Property, she obtained a new mortgage from TD Bank in the principal amount of $120,000. The evidence is that TD advanced $110,000. This provided Ms. Saini with approximately $40,000 (gross, or approximately $36,000 after payment of fees).
• After the November 2016 refinancing, the monthly TD mortgage was $1,064.87.
• In November 2016, the final monthly mortgage payment was $916.
• If Ms. Saini had elected to refinance without increasing the principal amount outstanding, she could have qualified for financing several years prior to November 2016.
• On July 27, 2016, a judgment was issued against Mr. Gidda in the amount of $1,587,631.35. Mr. Gidda appeared in person at the reference hearing quantifying the judgment.
• One week later, Mr. Gidda transferred his interest in the Property to Ms. Saini for no consideration.
• To explain the timing of the transfer, Ms. Saini’s evidence is that “she had to do it sometime”, to reflect the reality of the ownership of the property.
• In response to Question 9A of Mr. Gidda’s sworn statement of affairs, he states that he has not “Sold or disposed of any your property”. Ms. Saini’s position is that Mr. Gidda had no interest in the Property. That answer is accurate. The Trustee’s witness, Mr. Gurney, testified that he relied on the evidence in Mr. Gidda’s statement of affairs.
• The Trustee obtained a historical appraisal of the Property that values the property as of August 3, 2016, in the range of $900,000 to $951,000.

Defendants' Position

[9] Ms. Saini’s position is that Mr. Gidda never had a beneficial interest in the Property. His name was on title in 2008 only to facilitate mortgage refinancing, as she was the true beneficial owner. The 2016 transfer was not a fraudulent conveyance but a legitimate reconveyance of legal title to its rightful owner, Ms. Saini. She submits that the Plaintiff has failed to meet the legal burden under the BIA and FCA, as there is no direct evidence of fraudulent intent. Further, she submits that the Plaintiff’s failure to call Mr. Gidda as a witness should lead to an adverse inference against its claims.

[10] Her argument is that public policy and the purpose of the BIA do not support an unjust windfall for the bankruptcy estate at the expense of Ms. Saini, an innocent third party. She submits that she is entitled to financial compensation for her mortgage payments, property taxes, and maintenance of the Property, based on unjust enrichment and constructive trust doctrines.

[11] To summarize, Ms. Saini submits that the property was not fraudulently transferred if Mr. Gidda, the debtor, never owned it.

Analysis

Is the Transfer a “transfer at undervalue” pursuant to s. 96(1)(b) of the BIA?

[12] “Transfer at undervalue” is defined in s. 2 of the BIA as the following:

[T]ransfer at undervalue means a disposition of property or provision of services for which no consideration is received by the debtor or for which the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor.

[13] For the reasons given below, I find that Mr. Gidda transferred his 50 percent interest in the Property to Ms. Saini on August 3, 2016 (the “Transfer”) and that she provided no consideration for the Transfer. The Transfer occurred within one year of November 3, 2016 (the “Date of Bankruptcy”). The Transfer was on August 3, 2016, and the Date of Bankruptcy is November 3, 2016.

[14] Ms. Saini admits that she and her brother-in-law, Mr. Gidda, are non-arm’s length creditors for the purposes of this action.

[15] Ms. Saini’s defence is that in 2008, she was unable to qualify for mortgage financing to allow her to carry the Property on her income. Her evidence is that Mr. Gidda agreed to be registered as a titled owner of the Real Property to get favourable mortgage terms from TD. Her hearsay evidence is that Mr. Gidda was indebted to his mother-in-law (Ms. Saini’s mother) on a loan in the amount of approximately $60,000, and that her deceased mother directed Mr. Gidda to repay the $60,000 he owed her by paying her that amount to Ms. Saini (as a gift from Ms. Saini’s mother to Ms. Saini). She submits that this created an “immediate, undocumented trust affecting ‘land or an interest in land’,” such that Mr. Gidda was a bare trustee of the Property.

[16] There is no corroborating evidence that Mr. Gidda borrowed money from Ms. Saini’s mother.

[17] There is no corroborating evidence that Ms. Saini’s deceased mother “gifted” her the alleged loan repayment. This evidence is also hearsay and inadmissible.

[18] Alternatively, Ms. Saini pleads that the $65,000 payment was a loan. However, the evidence is that Mr. Gidda never gave her any money. Mr. Gidda retained Mr. Shapiro as his real estate lawyer and he made payments to Mr. Shapiro, not to Ms. Saini. The evidence is that in consideration, Mr. Shapiro (his real estate lawyer), Ms. Saini transferred a half interest in the Property to him. In addition, Mr. Gidda became liable for the TD Mortgage.

[19] The burden of proof is on Ms. Saini to adduce probative evidence to support her allegation that Mr. Gidda gifted her funds. There is no evidence that corroborates Ms. Saini’s claim. I find that Ms. Saini has not met this burden.

[20] The Trustee relies on s. 9 of the Statute of Frauds to argue that the alleged trust agreement between Ms. Saini and Mr. Gidda must be in writing. Ms. Saini submits that s. 9 of the Statute of Frauds does not apply because Mr. Gidda holds the Property in trust for her as a resulting or constructive trust.

[21] In the case of Andreacchi v. Andreacchi, 2023 ONSC 4877, para 63, the court stated:

This express trust cannot be established orally because it does not comply with the formal requirements set out by the Statute of Frauds. Paragraphs 9 and 10 of the Statute of Frauds provide as follows:

9. Subject to section 10, all declarations or creations of trusts or confidences of any lands, tenements or hereditaments shall be manifested and proved by a writing signed by the party who is by law enabled to declare such trust, or by his or her last will in writing, or else they are void and of no effect.

10. Where a conveyance is made of lands or tenements by which a trust or confidence arises or results by implication or construction of law, or is transferred or extinguished by act or operation of law, then and in every such case the trust or confidence is of the like force and effect as it would have been if this Act had not been passed.

[22] I do not accept this submission regarding a creation of a resulting trust because Mr. Gidda paid for his interest. He paid $126,000 for a half interest in the Property, and also agreed to be liable on the TD mortgage.

[23] Ms. Saini’s defence to the Trustee’s submission that the transfer in 2016 was “under value” is that due to the creation of a constructive trust, the transfer from Mr. Gidda to Ms. Saini was not “under value”. She had an equitable stake in the property due to her long-standing financial commitments.

[24] Ms. Saini relies on the Supreme Court of Canada’s decision in Soulos v. Korkontzilas, [1997] 2 S.C.R. 217, para 20, where the criteria to establish a constructive trust is set out. At para. 20, the Court stated:

Canadian courts have never abandoned the principles of constructive trust developed in England. They have, however, modified them. Most notably, Canadian courts in recent decades have developed the constructive trust as a remedy for unjust enrichment. It is now established that a constructive trust may be imposed in the absence of wrongful conduct like breach of fiduciary duty, where three elements are present: (1) the enrichment of the defendant; (2) the corresponding deprivation of the plaintiff; and (3) the absence of a juristic reason for the enrichment: Pettkus v. Becker, supra.

[25] Ms. Saini claims she is entitled to an interest in the property because she paid for the expenses required to maintain the property. These expenses include mortgage payments, property taxes, insurance, and utilities. However, in the decision of Albert Gelman Inc. v. 1529439 Ontario Limited, 2022 ONSC 4170, para 36, the court stated:

The Courts have consistently held that claims for items such as the payment of mortgage interest, real property taxes, and improvements or repairs constitute current expenses and do not increase the capital value of the property. (See Duthie v. Duthie (Trustee of), 2001 MBQB 235, paras 9-10; and McKenzie (Trustee of) v. McKenzie, 2005 MBCA 35, paras 4-5 and 22-33).

[26] Ms. Saini submits that this case involved a commercial lease dispute and is inapplicable to an equitable claim over property ownership. She relies on the case of Duthie v. Duthie (Trustee of), 2001 MBQB 235, wherein the court held that ongoing mortgage payments can establish an equitable interest if they contribute to the preservation of the asset.

[27] Further, she relies on the case of Lepage (Re), 2016 ONCA 403, para 20, wherein the Ontario Court of Appeal rejected an argument that mortgage payments should be considered mere living expenses, instead recognizing them as an ongoing financial contribution to equity.

[28] Ms. Saini relies on the case of Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, where the Supreme Court of Canada held that if a party has made significant contributions to a property, they have an equitable interest in it, even without direct ownership.

[29] Ms. Saini argues that her contributions (mortgage payments, property taxes, maintenance) show that she had an existing interest in the property that was merely being formalized. In Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795, the Supreme Court made it clear that a resulting trust can arise even when there is some exchange of value – it does not have to be a traditional purchase.

[30] As stated above, in Soulos v. Korkontzilas, at para. 20, the Supreme Court found that a constructive trust can be imposed in the absence of wrongful conduct like breach of a fiduciary duty, where the three requisite elements are present: “(1) the enrichment of the defendant; (2) the corresponding deprivation of the plaintiff; and (3) the absence of a juristic reason for the enrichment: Pettkus v. Becker, supra.”

[31] Mr. Gidda was not enriched, because he paid fair market value for his interest in the Property and Ms. Saini received a benefit in reduced mortgage and monthly payments and she was able to continue to live in the Property. The first requirement has not been established.

[32] Mr. Gidda was not enriched by Ms. Saini’s payment of the household expenses and the minor repairs she undertook to the Property from 2008 to 2022. Ms. Saini paid the household expenses, which were in the range of $900 to $1,300 per month, for the period of November 2008 to August 2016 to maintain a four-bedroom home in Vaughan. Her only substantial maintenance charges were the replacement of the roof and furnace. However, as Ms. Saini’s payments maintained the property’s value and prevented foreclosure, the court must recognize her equitable interest.

[33] From the evidence, Ms. Saini incurred approximately $1,000 to $1,500 per month in expenses to pay the mortgage, utilities and property taxes for a four-bedroom home in Vaughan. In Lepage (Re), Sharpe, Juriansz and Roberts JJ.A. stated at para. 20:

As the motion judge found, Mr. Lepage was not entitled to credit for his reasonable living expenses because, if Mr. Lepage had not continued to live at his residence, he would have incurred living expenses elsewhere.

[34] Mr. Gidda’s evidence would have been required to prove a constructive trust, loan, or gift, but Ms. Saini did not call him as a witness. Nor did she provide any reasonable explanation for not doing so. The Trustee asks the court to draw an adverse inference that Mr. Gidda’s evidence would have been unfavourable to Ms. Saini.

[35] The equities in this case favour the Trustee.

[36] The Trustee submits that it has proven its case that Mr. Gidda fraudulently transferred his interest in the Property for no consideration.

[37] I do not agree that Ms. Saini has met her burden of proving the establishment of a constructive trust. Ms. Saini has not proven that any of the following occurred:

• An enrichment to Gidda;
• A deprivation to herself, as a non-owner; and
• A juristic reason for the enrichment.

[38] It is therefore not necessary to consider Ms. Saini’s further alternative defence. Ms. Saini submits that the Plaintiff has not presented any direct evidence to establish fraudulent intent.

[39] To conclude, I find that the Trustee has met its required burden of proof pursuant to s. 96(1)(b) of the Bankruptcy Act. Mr. Gidda entered into a commercial transaction with Ms. Saini. In November 2008, he paid $126,000 for the refinancing of the Property and became liable for a first mortgage from TD Bank in the principal amount of $103,000.

Costs

[40] The Plaintiff is the successful party in this action and is entitled to its costs submitted during the hearing, which I find are appropriate and reasonable. I order that the Defendant pay costs on a partial indemnity basis of $97,483.77. However, if the parties are unable to agree on costs that arise as a result of Rule 49 of the Rules of Civil Procedure, RRO 1990, Reg. 194, on Offers to Settle, the Plaintiff may make submissions of no more than two pages, double-spaced, sent to the Defendant, uploaded to Case Center, and with a copy sent to my assistant Roxanne Johnson at Roxanne.stammers@ontario.ca by May 14, 2025. The Defendant may make submissions of no more than two pages, double-spaced, sent to the Plaintiff, uploaded to Case Center, and with a copy sent to my assistant by May 23, 2025. No reply submissions will be accepted. If no submissions are received by May 23, 2025, costs will be deemed to be settled.

Released: May 5, 2025