Court File and Parties
Court File No.: FS-24-00041651-0000
Date: 2025-05-15
Court: Ontario Superior Court of Justice
Between:
Umme Farwa, Applicant
-and-
Bilal Syed and Majid Asif, Respondents
Before: J. S. Shin Doi
Counsel:
Shelley C. Quinn, Emily Kostandoff, and Deniz Afshari (Student-at-Law), for the Applicant
Respondents, Self-Represented
Heard: January 28 and February 9, 2025
Endorsement
[1] The Applicant mother (the “Mother”) seeks a declaration that the transfer of the Disability Van (as defined below) from the Respondent father (the “Father”) to the Respondent Majid Asif (“Majid”) is void as against the Father’s creditors including the Mother. The Mother asks for an order that Majid immediately pay to the Mother the amount of $29,000.00 which he received from the subsequent sale of the Disability Van to Oxford Dodge Chrysler (1992) Ltd. (“Oxford Dodge”) and that the Father also pay any proceeds of sale transferred to him by Majid. The Mother further asks that the Father and Majid pay the costs of a replacement wheelchair van.
[2] The motion was adjourned on terms several times and then heard on January 28, 2025. The Father was granted a further extension until February 9, 2025 to make written submissions. The Father did not submit any. Majid did not attend the hearing of the motion nor opposed the motion.
[3] I declare that the Mother is a creditor of the Father and that the transfer of the Disability Van from the Father to Majid is a fraudulent conveyance which is void against creditors including the Mother. I further declare that Majid was a trustee of the Mother as a creditor of the Father and that the Mother had a claim to the Disability Van as one of the Father’s assets subject to equalization. I conclude that the Mother is entitled to secure her equalization claim through the proceeds of sale of the Disability Van received by Majid from Oxford Dodge. I order that Majid immediately pay to the Mother’s solicitors in trust the amount of $29,000.00 and that the Father also immediately pay to the Mother’s solicitors in trust any portion of the proceeds of sale from Oxford Dodge transferred to him. I also order the Father and Majid to pay costs of the motion fixed at the sum of $5,000.00 ($2,500.00 each), on a partial indemnity basis to the Mother within 30 days.
Facts
[4] The parties were married in Pakistan in 2007. The parties separated on January 10, 2024 after the Mother reported the Father to the police for abuse. The Father was arrested and removed from the matrimonial home.
[5] There are three children of the marriage, born on July 28, 2009, April 25, 2016, and March 6, 2018. The three children reside primarily with the Mother. The eldest child (the “Child”) is severely disabled with a neurological disorder and requires extensive care.
[6] The Mother commenced an Application dated March 22, 2024, claiming a divorce, spousal support, child support, decision-making responsibility, parenting time, equalization, and exclusive possession of the matrimonial home and contents. The Mother also claimed non-depletion of the family’s assets including the 2017 Dodge Caravan (the “Disability Van”) which was the family’s largest asset.
[7] During the marriage in or around December 2017, the Father had purchased the Disability Van and converted it to be wheelchair accessible in order to transport the Child to her appointments. It is alleged that the cost of the Disability Van was over $25,000.00 and the conversion cost approximately $18,000.00, which costs were funded by charitable organizations. The Father states that he paid $4,000.00 to $6,000.00 of the purchase price and the balance was paid from fundraising. The Father’s Form 13 Financial Statement sworn on June 14, 2024 lists the Disability Van as an asset with a value of $48,000.00.
[8] The Father always parked the Disability Van in the underground parking lot in a spot that belonged to a neighbour. The neighbour contacted the Father in April 2024, asking him to move the Disability Van from the neighbour’s parking spot or the neighbour would get it towed. By email dated April 13, 2024, the Father advised the Mother’s lawyer that it was in the best interest of his daughter that the Disability Van be with the Mother and used for the children. The Father offered to drop off the key for the Disability Van to the Mother’s solicitors’ office. By email dated April 15, 2024, the Mother’s solicitors asked for a copy of the ownership and proof of insurance for the Disability Van.
[9] In August 2024, the Disability Van was towed for being parked illegally in another spot in the underground parking lot. The Father alleges that the Mother was the one who parked the Disability Van illegally. The Father states that he received a letter from the Toronto Police on August 19, 2024 informing him about the towing of the Disability Van. The Mother asked the Father to transfer the ownership of the Disability Van to her so that she could retrieve it from the impound lot. The Father responded that he had nothing to do with the Disability Van after January 2024 but the Disability Van had received 3 different parking tickets in the months of July and August for being illegally parked. The Father was now left with the responsibility for those parking tickets, administrative fees, and late fees as well as the costs of the tow and storage. The Father replied that he had to sell the Disability Van.
[10] The Father picked up the Disability Van from the impound site on August 25, 2024 and paid the costs charged by the impound yard, storage costs, and tow charges.
[11] That same day, the Father sold the Disability Van to his friend, Majid. The Father and Majid agreed to a value of $12,000.00 for the Disability Van in “as is” condition. Majid accepted the Disability Van from the Father as partial payment for his personal loans from Majid. The Father produces a handwritten receipt for the Disability Van from Majid dated August 25, 2024. The Father states that Majid is a mechanic and gave the Father a quote of over $10,000 to fix the issues with the Disability Van. The Father states he decided to sell the Disability Van instead of repairing it because he says that he owed $14,000.00 to Majid for two previous personal loans. The Father states that he was loaned $8,000.00 on January 29, 2024 and submits a bank statement showing a deposit for that amount but not the payor of that amount. The Father also states that he received $6,000.00 in cash from Majid on May 5, 2024 for living expenses.
[12] On September 23, 2024, Justice Horkins ordered that the Father be restrained from selling, transferring, or otherwise disposing the Disability Van. Justice Horkins also ordered that the Father immediately deliver the Disability Van and the keys to the Mother’s counsel. It was further ordered that if the Father had sold the Disability Van, he shall not deplete the proceeds from the sale of the Disability Van and shall forthwith pay all proceeds from the sale of the Disability Van to the Mother’s counsel in trust. Justice Horkins also ordered the Father to deliver the bill of sale, an accounting of the proceeds, and detailed tracing of the proceeds of sale. Lastly, Justice Horkins ordered that the motion be returned on October 10, 2024.
[13] On October 10, 2024, the Mother’s motion for the return of the Disability Van was adjourned to October 11, 2024 so that the Mother may amend her pleadings to add the third party, Majid, and the Father may seek the return of the Disability Van from Majid.
[14] On October 15, 2024, Justice Ramsay ordered the Father to pay the Mother temporary and ongoing child support in the amount of $1,299.00 per month based on his imputed income of $65,000.00 and her income of $0, retroactive child support, section 7 expenses, and costs in the amount $3,500 plus HST of $455.00. The Father has not paid child support, section 7 expenses, and costs to the Mother. As of December 1, 2024, the Father owed the amount of $13,727.00 in child support to the Mother.
[15] On November 19, 2024, the Mother served an Amended Application on the Father and Majid, adding Majid as a respondent.
[16] On or about December 2, 2024, the Disability Van was sold for $29,000.00 to Oxford Dodge. There is evidence that the Father negotiated the sale on behalf of Majid who had registered the Disability Van in his name. The Father and Majid both attended Oxford Dodge to complete the sale transaction. Oxford Dodge paid Majid the purchase amount by certified cheque, as requested by the Father. Oxford Dodge then sold the Disability Van to a third party for $46,600.00 plus taxes on December 12, 2024.
[17] The Mother returned her motion on December 19, 2024 and the court ordered that the assets and bank accounts of the Father and Majid be preserved up to $29,000.00 and that the Father provide a detailed tracing of the proceeds of the sale of the Disability Van.
[18] On January 28, 2025, the Father requested that his TD Bank credit card be unfrozen. The court ordered that the Father be permitted to use and access his TD Bank credit card account up to $1000 per month for living expenses including rent and groceries. The Father also requested until February 9, 2025 to make written submissions on the motion because he changed counsel and had not yet retained counsel. The Mother opposed the extension of the time period to make and file written submission because the motion was “peremptory”. The court granted the Father his request because of the seriousness of the motion and ordered that there shall be no further delay, extension, or adjournment granted to the Father on this motion. The court also granted the Mother until February 16, 2025 to reply to the Father’s submissions. The Father did not make any submissions on February 9, 2025 and hence, there was no reply by the Mother.
Issues
[19]
- Is the Mother a creditor of the Father?
- Is the transfer of the Disability Van from the Father to Majid a fraudulent conveyance which is void against creditors including the Mother?
- Is the Mother entitled to the proceeds of sale of the Disability Van which was sold by Majid to Oxford Dodge?
Law
[20] A spouse can become a creditor of the other spouse. In Stone v. Stone, para 26, Feldman J.A. rejects the proposition that spouses are in a constant debtor-creditor relationship but instead, sets out at para. 26 five triggering events where one spouse becomes a creditor when that spouse has the lesser net family property and is entitled to one-half the difference:
“(1) the date of separation with no reasonable prospect of resuming co-habitation; (2) the date of divorce; (3) the date of declaration of nullity; (4) the date one of the spouses commences an application under s. 5(3) of the Family Law Act for improvident depletion of net family property, if the application is granted; and (5) the date before the death of the spouse with the greater net family property.”
[21] “A spouse has standing to allege a fraudulent conveyance where they had an existing claim at the time of the impugned transaction” and “the spouse can initiate a claim after the fact where the transfers were kept secret from them” (Habibi v. Aarabi, 2021 ONSC 5574, para 55, leave to appeal dismissed: 2021 ONSC 6586).
[22] The legal framework of fraudulent conveyances was explained by Myers J. in Purcaru v. Seliverstova et al., 2015 ONSC 6679, para 10, affirmed by the Court of Appeal in 2016 ONCA 610:
…the Fraudulent Conveyances Act provides that the court can declare a transfer of property void if the intention of the person who made the transfer was to defeat or delay his or her creditors. The statute is designed to stop a debtor from hiding assets from creditors by fraudulently transferring the assets to another person. If it is applicable, an order under the statute makes property that was fraudulently conveyed available for execution on behalf of the creditors of the transferor. In addition, if the transferred property has been disposed of prior to the transaction being declared void, s.12 of the Assignments and Preferences Act, R.S.O. 1990, c.A-33 allows the creditors to execute against proceeds received by the transferee.
[23] The Fraudulent Conveyances Act, RSO 1990, c F.29, sections 2, 3, and 4 provide:
Where conveyances void as against creditors
2. 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.
Where s. 2 does not apply
3. Section 2 does not apply to an estate or interest in real property or personal property conveyed upon good consideration and in good faith to a person not having at the time of the conveyance to the person notice or knowledge of the intent set forth in that section.
Where s. 2 applies
4. Section 2 applies to every conveyance executed with the intent set forth in that section despite the fact that it was executed upon a valuable consideration and with the intention, as between the parties to it, of actually transferring to and for the benefit of the transferee the interest expressed to be thereby transferred, unless it is protected under section 3 by reason of good faith and want of notice or knowledge on the part of the purchaser.
[24] Myers J. further explains at paras. 11 and 12:
…Therefore, the law provides that the court can infer the existence of a transferor’s fraudulent intention to defeat or delay creditors where there are recognized “badges of fraud” associated with a transaction. The badges of fraud are facts or fact patterns that courts have held to be indicative of fraudulent transactions. Facts such as: secrecy, transfer of property when an action or execution is pending, transfer of property to non-arm’s-length parties, transfers made with undue haste, and transfers for a conspicuously insufficient price, are all recognized examples of badges of fraud. There are others such as the breach of family law orders requiring a party to preserve his or her assets pending a trial. If the court draws the inference of fraudulent intent due to the existence of badges of fraud, then an evidentiary burden will fall to the respondents to explain their conduct to try to rebut the inference of fraudulent intent. Of course, the ultimate persuasive burden remains on the applicant throughout.
...
The statute and the case law interpreting it also provide that where a purchaser or transferee has paid for property, it is not enough to prove that the seller had a fraudulent intention. Rather, to set aside a transaction where a buyer has paid for property, the applicant must also prove that by participating in the transaction the buyer too intended to defeat or delay the creditors of the seller.
[25] B.W. Miller, J.A. for the Court of Appeal confirmed that the evidential burden first falls on the challenger and then those defending the transaction. B.W. Miller, J.A. held at para. 5:
If a challenger raises evidence of one or more ‘badges of fraud’ that can give rise to an inference of an intent to defraud, the evidential burden then falls on those defending the transaction to adduce evidence showing the absence of fraudulent intent (Re Fancy), Nuove Ceramiche Ricchetti S.p.A. v. Mastrogiovanni, [1988] O.J. No. 2569 (H.C.J.), pp. 4, 5).
[26] Where there is a fraudulent conveyance that is void against a creditor, the transferee of the property becomes a trustee for the creditor and the property may be traced in a subsequent transfer and proceeds of sale. Wilson J. explained in Tsui-Wong v. Xiao, 2018 ONSC 3315, paras 252-254, affirmed by the Court of Appeal in 2019 ONCA 756:
A fraudulent conveyance is void against creditors of the debtor. The transferee of the property becomes a trustee for the creditor, and the creditor can remain entitled to the property. Where the transferee has sold the property to a bona fide purchaser, the creditor’s remedy is the proceeds of the sale.
As the Ontario Court of Appeal stated in Allen v. Hennessey, para 5:
…A creditor is entitled to invoke the Fraudulent Conveyances Act to recover the proceeds of a conveyance void under the statute from a fraudulent transferee. The fraudulent transferee is and bears all the liability of a trustee of the property or its proceeds for the benefit of creditors. As this court stated in Westinghouse Canada Ltd. v. Buchar, at 141:
A remedial statute for the protection of creditors’ rights should receive a fair, large and liberal interpretation to ensure the attainment of its objects; the plain intention of the statutes [the Fraudulent Conveyances Act and Assignments and Preferences Act] to be read together is to constitute the fraudulent transferee a trustee of the proceeds replacing the land, for the benefit of the defrauded creditors.
With respect to tracing, when a conveyance is void under the Fraudulent Conveyances Act, the Court of Appeal held in Westinghouse Canada Ltd. v. Buchar that the tracing provisions in s. 12 of the Assignments and Preferences Act, R.S.O. 1990, c. A.33 are available.
[27] The Assignments and Preferences Act, RSO 1990, c A.33, s. 12(1) and (2) provide that if the transferred property has been disposed of prior to the transaction being declared void, a creditor may seize the proceeds:
Following proceeds of property fraudulently transferred
12 (1) In the case of a gift, conveyance, assignment or transfer of any property, real or personal, that is invalid against creditors, if the person to whom the gift, conveyance, assignment or transfer was made has sold or disposed of, realized or collected the property or any part thereof, the money or other proceeds may be seized or recovered in an action by a person who would be entitled to seize and recover the property if it had remained in the possession or control of the debtor or of the person to whom the gift, conveyance, transfer, delivery or payment was made, and such right to seize and recover belongs not only to an assignee for the general benefit of the creditors of the debtor but, where there is no such assignment, to all creditors of the debtor.
Taking proceeds under execution
(2) Where there is no assignment for the benefit of creditors and the proceeds are of such a character as to be sizeable under execution, they may be seized under the execution of any creditor and are subject to the Creditors’ Relief Act, 2010.
[28] Furthermore, the Family Law Act, RSO 1990, c F.3, s.12 gives the court authority to make an order for the possession, delivering up, safekeeping, and preservation of property if the court considers it necessary to protect the other spouse’s interest. In Bronfman v. Bronfman, paras 18-19:
[18] Section 12 has been used by the courts in two ways:
(a) to place an onus on a spouse who has been required to preserve assets, to account for his or her assets at the date of trial, and
(b) to restrain a person's conduct with respect to his or her property.
[19] The purpose of s. 12 is to ensure that if the court does determine that an equalization payment is owing, there are sufficient assets available to satisfy that payment (Lasch v. Lasch). While preservation orders are frequently made, the reported case law that discusses what criteria must be satisfied before they are granted is limited.
[29] Sachs J. at para. 28 then set out the factors that courts consider in dealing with an interim order:
(a) The relative strength of the plaintiff's case;
(b) The balance of convenience (or inconvenience); and
(c) Irreparable harm.
Analysis
1. Is the Mother a creditor of the Father?
[30] I find that the Mother is a creditor of the Father. The Mother had an existing claim at the time of the impugned transaction between the Father and Majid. The Mother commenced her Application against the Father in March 2024. The Application included claims against the Father for relief including non-depletion, equalization, support and a vesting order with respect to the Disability Van. The alleged fraudulent transfer of the Disability Van by the Father to Majid subsequently occurred in August 2024.
[31] Further, on October 15, 2024, there was a court order by Justice Ramsay that the Father pay the Mother temporary and ongoing child support, retroactive child support, and section 7 expenses.
[32] On November 19, 2024, the Father and Majid were served with the Amended Application adding Majid as a respondent. Thereafter, Majid sold the Disability Van to Oxford Dodge on or about November 29, 2024. Through the Amended Application, Majid had knowledge of the Mother’s claims against the Father including a claim for the Disability Van, and that the Mother was a creditor of the Father, before the Disability Van was sold to Oxford Dodge.
2. Is the transfer of the Disability Van from the Father to Majid void against creditors?
[33] I find that the transfer of the Disability Van from the Father to Majid is void against creditors, including the Mother.
[34] The Father’s fraudulent intention to defeat or delay creditors is recognized through badges of fraud such as the secrecy of the transfer of the Disability Van when the Mother’s Application and claim for equalization and support were pending. The transfer of the Disability Van was to the Father’s friend and roommate, Majid, who is a non-arm’s length party. The Father described Majid as “his brother” to Oxford Dodge. The transfer to Majid was made with undue haste, immediately after the Disability Van was retrieved from the impound lot. The transfer was for a conspicuously insufficient price of $12,000.00 when the Disability Van was later sold for $29,000.00 and then resold by Oxford Dodge for $46,000.00. The Father had no remaining assets after the transfer.
[35] It is telling that the Father was the one who negotiated, co-ordinated, and managed the sale of the Disability Van to Oxford Dodge, despite the fact that the Disability Van was in Majid’s name. There is irrefutable evidence from Oxford Dodge that the Father drove the Disability Van to the dealership and managed the sale. The Sales Manager at Oxford Dodge stated that on or about November 29, 2024, a man “seemed anxious to sell [the Disability Van] quickly.” The Manager is certain that the man is the Father. The Manager states that the Father asked that the purchase price be paid in the form of a certified cheque. The Manager further states that the Father came into the dealership with Majid, who was the registered owner, to complete the transaction. In the Manager’s opinion, the Disability Van was in excellent condition, “near brand-new condition”, with very low mileage. The Manager states that the Disability Van required only $851.71 of work to make it ready for sale.
[36] On the evidence, I am persuaded that the Father and Majid worked together to defeat the Mother’s family law claims. I conclude that the Mother has met the persuasive burden and the Father has not rebut the inference of fraudulent intent.
3. Is the Mother entitled to the proceeds of sale of the Disability Van which was sold by Majid to Oxford Dodge?
[37] I conclude that the Mother is entitled to an order that the proceeds of sale of the Disability Van be paid to the Mother’s solicitors in trust to secure and preserve the Mother’s family law claims against the Father.
[38] The Father’s Form 13 Financial Statement sworn on June 14, 2024 lists the Disability Van as an asset with a value of $48,000.00, a car with a value of $500.00, and cash of $451.28, as of the date of separation. The proceeds of sale are $29,000.00 which is just more than half of the value of assets listed. The Mother has a claim for equalization of the Father’s assets which would be divided equally between the spouses at trial. In addition, there is already an interim order for support and costs against the Father. I am persuaded that the Mother has a strong case to seize and preserve the proceeds of sale of the Disability Van. The balance of convenience weighs in favour of the Mother having the proceeds of sale be paid to the Mother’s solicitors in trust to secure her equalization claim. There would be irreparable harm if the proceeds of sale are not paid to the Mother’s solicitors in trust. Majid and the Father may dissipate the funds prior to trial and prevent equalization.
[39] I note that despite repeatedly being served, Majid has not participated in these proceedings and has not opposed the motion. I conclude that both the Father and Majid acted in concert to sell the Disability Van to Oxford Dodge with undue haste, soon after being served with the Amended Application with full knowledge of the Mother’s claims for non-depletion and preservation, and prior court orders.
Disposition
[40] I find that the Mother is a creditor of the Father. I declare that the transfer of the Disability Van from the Father to Majid is void as against the Father’s creditors, including the Mother. I further declare that the Father’s assets including the Disability Van are subject to equalization. The Mother is entitled to have the proceeds of sale of the Disability Van from Majid to Oxford Dodge be paid to the Mother’s solicitors in trust to secure her equalization claims. The Mother is also entitled to seize the proceeds of sale for outstanding support and costs owing to her by the Father. I order that Majid immediately pay to the Mother’s solicitors in trust the amount of $29,000.00 and that the Father also immediately pay the Mother’s solicitors in trust any portion of the proceeds of sale from Oxford Dodge transferred to him.
[41] The Mother asks for costs of the motion and files a Bill of Costs. The Bill of Costs indicates that fees and disbursements are $15,966.65. The time expended and the hourly rates of the legal team are $425.00, $350.00, and $150.00 are reasonable. There were multiple attendances for this motion and only the December 2024 and January 2025 attendances were listed in the Bill of Costs. The Mother is presumptively entitled to costs as the successful party. Costs are in the discretion of the court. I fix costs of the motion at $5,000.00. I order the Father and Majid to pay $2,500.00 each, on a partial indemnity basis, to the Mother within 30 days. That costs award is reasonable, fair, and proportionate.
Justice J. S. Shin Doi
Released: May 15, 2025