Court File and Parties

Court File No.: CV-23-00710565-0000 Date: 2025-09-15

Superior Court of Justice - Ontario

Re: Judah Holding Ltd. et al v. Chekhter et al

Before: Associate Justice D. Michael Brown

Heard: April 2, 2025

Counsel:

• K. Sherkin and M. Lightowler, for the moving parties/plaintiffs
• M. Mackey for responding parties/defendants

Endorsement

[1] Introduction

This is a motion by the plaintiffs seeking leave to issue a certificate of pending litigation. The defendants oppose the motion. For the reasons that follow the motion is dismissed.

Background

[2] The Underlying Actions

The moving plaintiffs are all companies operating businesses in the greater Toronto area associated with home decoration or renovation. Between 2011 and 2015, the plaintiffs each purchased one or more condominium units in a commercial condominium development from the condominium developer, Improve Inc. In 2018, the plaintiffs commenced an action bearing court file no. CV-18-00591969 against Improve Inc., certain of Improve's officers and directors and certain purchasers and owners of other condominium units in the development (the "Improve Action"). In the Improve Action, the plaintiffs seek recission of their condominium purchase agreements and damages totaling over $10 million for conspiracy, fraudulent and negligent misrepresentation, and oppression.

[3] Status of the Improve Action

Although commenced in 2018, the Improve Action is still ongoing. According to the affidavit evidence filed by the defendants on this motion, discoveries in the Improve Action had not been completed as of March 2025.

[4] The Current Action

The within action was commenced by the plaintiffs (the same four plaintiffs that commenced the Improve Action in 2018) against the defendants Oleg Chekhter and Katherine Chekhter in 2023. Oleg Chekhter is one of the 15 defendants in the Improve Action. At the material times he was an officer, director and minority shareholder of Improve Inc. Katherine Chekhter is Oleg's spouse. She is not a defendant in the Improve Action. The plaintiffs' claim in this action is for fraudulent conveyance. The plaintiffs allege that on February 11, 2020, Oleg Chekhter conveyed his interest in the Chekhters' matrimonial home (the "Property") to Katherine Chekhter for less than market value with the intention to defeat the plaintiffs' claims as creditors of Oleg Chekhter. The plaintiffs' statement of claim also seeks a certificate of pending litigation against the Property. The plaintiffs bring this motion for leave to issue the CPL.

Law and Analysis

[5] The Certificate of Pending Litigation Framework

Section 103 of the Courts of Justice Act provides that a CPL may be issued in an action where an interest in land is in question. The mechanism for seeking a CPL is provided in Rule 42.01 of the Rules of Civil Procedure. The purpose of a CPL is to give non-parties notice of a proprietary claim, thereby permitting a party to protect its claim pending the determination of the alleged interest on its merits.

[6] The Threshold for Interest in Land

The threshold in respect of the 'interest in land' issue in a motion respecting a CPL is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed. [1] The plaintiff's claim in this case is based on an alleged fraudulent conveyance of the property in question. This court has held that an action for fraudulent conveyance can give rise to triable issue as to an interest in land sufficient to support the issuance of a CPL. [2] However, special considerations apply when, as in this case, the plaintiff is not yet a judgment creditor of the defendant who has alleged to have participated in a fraudulent conveyance. [3]

[7] The Grefford Test

Where a plaintiff in a fraudulent conveyance action has yet to obtain judgment in the underlying action, and the underlying action does not include a claim for an interest in the property in question, the test for a CPL is set out in the decision of Justice Smith in Grefford v. Fielding:

i) High Probability of Judgment The plaintiff must satisfy the court that there is high probability that they would successfully recover judgment in the underlying action; and

ii) Intent to Defeat or Delay Creditors The plaintiff must introduce evidence demonstrating that the transfer was made with the intent to defeat or delay creditors; evidence that the transfer was for less than fair market value lightens the burden; and

iii) Balance of Convenience The plaintiff must demonstrate that the balance of convenience favours issuing a CPL in the circumstances of the particular case. [4]

[8] Application of the Grefford Test

The Grefford test clearly applies on this motion. The plaintiffs' claims as alleged creditors of Oleg Chekhter are based solely on the damages claimed against Chekhter in the Improve Action. The Improve Action does not involve any claim to an interest in the Property. The plaintiffs have not obtained judgment against Oleg Chekhter in the Improve Action.

Part One: High Probability of Judgment

[9] Failure to Address the Grefford Test

The plaintiffs on this motion did not concede that the Grefford test applies. They made no argument in their factum on the Grefford test, nor did their factum contain any submission on the probability of judgment against Oleg Chekhter in the Improve Action. The plaintiffs did not file any evidence directly on the issue of the probability of judgment against Oleg Chekhter in the Improve Action. The plaintiffs' only evidence in relation to the Improve Action is an affidavit sworn in the Improve Action on January 8, 2019 by Benjamin Judah, owner of the plaintiff Judah Holdings Ltd.

[10] The 2019 Affidavit - Admissibility Issues

The 2019 Improve Action affidavit was attached as an exhibit to an affidavit sworn by Benjamin Judah on this motion. The 2019 affidavit is described by Judah as being sworn in support of a motion in the Improve Action seeking declaratory and injunctive relief. In the current affidavit Judah states that his 2019 affidavit "sets out the procedural background and the basis of the claims for fraudulent misrepresentation at issue in the Improve Actions." In his current affidavit, Benjamin Judah does not specifically adopt the statements in his 2019 affidavit nor does he affirm the truth of the 2019 affidavit's contents. No other evidence was provided by the plaintiffs regarding circumstances of the 2019 affidavit. It is not clear specifically what declaratory or injunctive relief was sought on the motion, nor is it clear whether the affidavit was ever subject to cross-examination. The court has no evidence as to whether the motion in the Improve Action was ever argued and, if so, whether the court rendered a decision on the motion.

[11] Limited Admissibility of the 2019 Affidavit

The 2019 affidavit is over 600 pages long, including exhibits. In his oral submissions on this motion, counsel for the plaintiffs argued that the 2019 affidavit demonstrated that the plaintiffs have a high probability of obtaining judgment in the Improve Action. I was not taken to any particular excerpt or exhibit in the affidavit in support of this submission. I was simply referred to the affidavit in its entirety. In my view, as an affidavit sworn over six years ago for a different purpose in another proceeding, the 2019 affidavit is not properly before me as evidence of any contested facts on this motion. The 2019 affidavit is admissible for the limited purpose described by Benjamin Judah in his affidavit on this motion, namely to provide background information regarding the Improve Action and the basis of the plaintiffs claims in that action. It is not properly before me as evidence of the likelihood of judgment in the Improve Action.

[12] Failure to Address Defences

Even if were to accept the 2019 affidavit as evidence on the contested issues on this motion, the 2019 affidavit fails to demonstrate that there is a high probability of judgment as against the defendant Oleg Chekhter. The 2019 affidavit was sworn at an early stage of the of the Improve Action, before the defendants in that action had delivered statements of defence and before discoveries had taken place. The 2019 affidavit does not address defences raised by the defendants in the Improve Action, including defences raised by Oleg Chekhter. In particular, the 2019 affidavit does not address Oleg Chekhter's alleged personal liability for the plaintiffs' claims in the Improve Action.

[13] Corporate Veil Issues

The conspiracy and misrepresentation claims in the Improve Action relate to the marketing and sale of condominium units by Improve Inc. Oleg Chekhter's position is that he was acting in his capacity as officer and director of Improve Inc. in the marketing and sale of the units. He has given evidence on this motion is that he is a minority shareholder of Improve Inc. and that he cannot make any decisions or take any steps on behalf of Improve Inc. without the approval of the other directors of the company. The plaintiff's Statement of Claim in the Improve Action does not allege that Oleg Chekhter was acting in his personal capacity or for his own personal benefit and the plaintiffs have filed no evidence on this motion that would support such an allegation.

[14] Piercing the Corporate Veil

I agree with the submission of the defendants that in order for Oleg Chekhter to be held personally liable in the Improve Action, the plaintiffs would be required to pierce the corporate veil and show that Oleg Chekhter was acting in his personal capacity or for his own personal benefit as opposed to acting in his capacity as a director or officer of Improve Inc. The plaintiffs have filed no evidence on this motion, in the 2019 affidavit or otherwise, that would support a finding that Oleg Chekhter was acting outside his capacity as a director or officer of Improve Inc. in the sale and marketing of the condominium units.

[15] Conclusion on Part One

I am not satisfied on the record before me that it is highly probable that the plaintiffs will successfully recover judgment against Oleg Chekhter in the Improve Action. The plaintiffs have failed to meet the first part of the Grefford test. As the test is conjunctive, I would dismiss the plaintiffs' motion for a CPL on that basis alone. However, in case I am wrong in my application of part one, I will go on to consider parts two and three of the Grefford test.

Part Two: Intent to Defeat or Delay Creditors

[16] The Lower Bar for Part Two

The second part of Grefford test presents a lower bar for the plaintiff than the first. As explained by Justice Diamond in Feldman v. Foulidis, whereas the first part requires the plaintiff to lead evidence demonstrating a high probability of success, in the second part of the test the plaintiff need only lead evidence demonstrating that there is a triable issue with respect to an intent to defeat or delay creditors. [5]

[17] The Timing and Consideration of the Transfer

Oleg Chekhter transferred his interest in the Property to his spouse, Katherine Chekhter, in February 2020, more than a year after the Improve Action was commenced seeking damages from Oleg Chekhter. The recorded consideration for the transfer was $2.00, clearly below the fair market value of the asset. The defendants' evidence is that the transfer was made pursuant to a separation agreement between the Oleg and Katherine Chekhter in December 2017, before the commencement of the Improve Action. They say that the transfer did not occur until 2020 due to their accountant's failure to carry out their instructions in 2017. The defendants' evidence includes an affidavit sworn by Katherine Chekhter's family law lawyer who deposes that the transfer was made pursuant to her advice to Katherine and had nothing to do with a condominium development or claims made against Oleg Chekhter in the Improve Action. I note that the lawyer does not reference any separation agreement between Oleg and Katherine nor speak to the date on which the transfer and the related advice occurred.

[18] Plaintiffs' Evidence of Intent

The plaintiffs' position is that Oleg Chekhter was aware of the plaintiffs' claims against him before December 2017 and they point to correspondence between the parties' respective lawyers in August through November 2017 where the threat of litigation was made. They also point to evidence showing that notwithstanding the alleged separation, Oleg continued to reside in the Property with Katherine until at least 2019 and that he did not identify himself as separated in his tax returns during this time. The plaintiffs in their factum describe the alleged 2017 separation as "nothing more than a ruse to facilitate removing this asset from the reach of creditors."

[19] Triable Issue on Intent

Per the guidance of Justice Diamond in Feldman, it is not for the court on this motion to determine whether the transfer was made primarily pursuant to a marital separation agreement or for the purpose of defeating or delaying creditors. That is a matter for trial. There is at least some evidence in support of the plaintiff's position that there was an intention to defeat creditors. The plaintiffs have provided evidence:

a) that Oleg Chekhter was aware of the plaintiffs' claims against him before his interest in the Property was actually transferred to Katherine Chekhter (a non-arms-length party);

b) that the consideration for the transfer was less than the fair market value of the Property; and

c) that the effect of the transfer could be to defeat or delay the creditors of Oleg Chekhter.

[20] Conclusion on Part Two

In my view, this evidence is sufficient to demonstrate that there is a triable issue with respect to whether the transfer of the Property was made with the intent to defeat or delay creditors. The plaintiffs have satisfied the second part of the Grefford test.

Part Three: Balance of Convenience

[21] Lack of Evidence of Plaintiffs' Prejudice

The onus is on the plaintiffs to demonstrate that balance of convenience favours the granting of the CPL. The plaintiffs have filed no evidence of any prejudice they might suffer if the CPL is not granted. This action was brought by the plaintiffs seeking to secure a single asset of Oleg Chekhter for the potential enforcement of a possible future damages award in the Improve Action. There is no evidence in the record before me as to the impact of the potential loss of this one asset of an individual defendant on the ability of the plaintiffs to collect on a future judgment in the Improve Action. Oleg Chekhter is one of 15 defendants to the Improve Action against whom the plaintiffs claim joint and several liability. Depending on the amount of the future judgment and the value of the collective assets of the 15 defendants, the loss of this one asset may have very little impact on the plaintiffs' ability to collect.

[22] Prejudice to Katherine Chekhter as a Stranger to the Action

Katherine Chekhter, not Oleg Chekhter, is the current owner of the Property. Katherine's evidence is that while she has no current plans to sell her home, she does not want title "tied up" by a CPL as it would restrict her ability to deal with her assets in her discretion as advised by her professional advisors. The fact that Katherine Chekhter is a stranger to the Improve Action is a significant factor. In Szymanski v Lozinski, 2019 ONSC 6968, Master Sugunasiri (as she then was) considered the application of part 3 of the Grefford test in circumstances where there was an alleged fraudulent transfer of a matrimonial home to a spouse who had no part in the in the underlying debt claim:

The consequence of a CPL to Ms. Lozinska is heightened in this case where she appears to have had nothing to do with the underlying loan and is now in danger of the Plaintiff effectively encumbering her home. On the other hand, the Plaintiff's prejudice is significantly less. Without the CPL, he will seek judgment on his loan and fraudulent conveyance action without the security of having an asset to collect upon. In other words, he will be in the same position as most other Plaintiffs and have the same collection risks that they have. The Plaintiff's thin record fails to tip the balance in his favour. [6]

[23] Conclusion on Part Three

In my view, the prejudice of a CPL to Katherine Chekhter as a stranger to the Improve Action is similarly heightened. Weighing that prejudice against the lack of any evidence of prejudice from the plaintiffs, I find that the balance of convenience favours not granting the CPL. The plaintiffs have failed to satisfy part 3 of the Grefford test.

Disposition

[24] Motion Dismissed

As the plaintiffs have failed to satisfy the first and third parts of the Grefford test, the plaintiffs' motion for leave to issue a CPL is dismissed.

Costs

[25] Costs Award

The defendants were successful on the motion. In their costs submissions at the conclusion of the hearing of the motion, the parties agreed that the successful party on the motion would receive partial indemnity costs fixed in the amount of $19,000.00. The plaintiffs shall pay to the defendants' costs of the motion fixed at $19,000.00 and payable within 30 days.

D. Michael Brown, Associate Judge

Date: September 15, 2025

Footnotes

[1] Perruzza v. Spatone, 2010 ONSC 841, at para. 20.

[2] See O.K. Tire Stores Inc. v. Mclaughlin; Transmaris Farms Ltd. v Sieber, [1999] O.J. No. 300

[3] Grefford v. Fielding at paras 25-26; Claireville Holdings Ltd. v. Votiuk 2015 ONSC 694 (Div. Ct.) at para. 18

[4] Grefford, at para 26; Jodi L. Feldman Professional Corporation v. Foulidis, 2018 ONSC 7766 at para. 11; Szymanski v Lozinski, 2019 ONSC 6968 at para 4

[5] Jodi L. Feldman Professional Corporation v. Foulidis, 2018 ONSC 7766 at para. 17

[6] Szymanski v Lozinski, 2019 ONSC 6968 (Master) at para. 11