Reasons for Decision

Court File No.: CV-23-00708091
Date: 2025-02-25
Ontario Superior Court of Justice

Between:
Toronto-Dominion Bank, Plaintiff
– and –
Michael D’Cruz and Rosalind D’Cruz, Defendants

Appearances:
Beverly C. Jusko, Lawyers for the Plaintiff
Self-Represented and acting in person, (and assisted by Joshua D’Cruz), Defendants, Michael D’Cruz and Rosalind D’Cruz

Heard: November 29, 2024

G. Dow, J.

Introduction

[1] The plaintiff seeks summary judgment against the defendants (who are spouses) in the amount of $94,000 plus interest and costs. The claim involves setting aside a payment by the defendant, Michael D’Cruz, to the defendant, Rosalind D’Cruz, in February 2022 of the sought after amount.

Background

[2] This claim arises out of the filing for bankruptcy made by Michael D’Cruz on September 23, 2022 (with assistance of a licensed insolvency trustee). Michael D’Cruz listed his liabilities in a document he signed, dated September 21, 2022, to include amounts owed to the Canada Revenue Agency in excess of $150,000 as well as a loan to TD Canada Trust in the amount of $170,000. The tax liability appears to have been incurred on behalf of a business in which Michael D’Cruz was involved as a part owner.

[3] As part of his business ventures, Michael D’Cruz purchased a business and property in Thunder Bay in 2012. This included the purchase of real property for $380,000 (see paragraph 2 of affidavit of Michael D’Cruz sworn September 28, 2024).

[4] As part of financing the purchase, the evidence was uncontradicted that Michael D’Cruz borrowed $20,000 from his spouse, Rosalind D’Cruz, and $50,000 from one of his sons. Neither loan was documented on paper. The business failed and closed in or about December 2016 (see paragraph 8 of affidavit of Michael D’Cruz sworn September 28, 2024). The property was then rented. In February 2022, the property was sold for $420,000 (see page 4 of Michael D’Cruz’s Statement of Affairs, September 21, 2022). The mortgage was repaid and Michael D’Cruz repaid his wife the sum of $94,000. This repaid her loan to her husband in full and her evidence was that she used the rest to repay amounts lent to her husband by her sons.

[5] Following the filing of bankruptcy, the plaintiff filed its Proof of Claim in the amount of $170,054.20 (Exhibit C of the affidavit of Dennis Zamanis, sworn December 8, 2023). The plaintiff took an assignment from the Trustee in Bankruptcy for the recovery of the proceeds of sale of the Thunder Bay property.

Analysis

[6] This action fits within the criteria identified in Hryniak v. Mauldin, 2014 SCC 7, at paragraph 49. The facts are not in dispute, the law can be applied to the facts and summary judgment is the proportionate, more expeditious and less expensive means to achieve a just result.

[7] The plaintiff relies on the Bankruptcy and Insolvency Act, RSC 1985, c B-3, s. 95 to submit that the debts claimed as liabilities by Michael D’Cruz in September 2022 had been accumulating (given their nature) as of February 2022 when the disposition of the proceeds of sale of the Thunder Bay property occurred. That is, Michael D’Cruz was insolvent when he sold the Thunder Bay property and repaid his spouse $94,000. This was within 12 months of his Assignment into Bankruptcy. As a result, Rosalind D’Cruz received a preference over other creditors.

[8] In addition, the plaintiff relied on the Fraudulent Conveyances Act, RSO 1990, c F.29, s. 2 where, at section 2, transactions such as this one are void given it resulted in Rosalind D’Cruz receiving preferential treatment in the repayment of her spouse’s debt to her.

[9] The defendants sought to avoid the relief sought by raising the following arguments. First, they relied on Michael D’Cruz not being aware as of February 2022 that he would be filing for bankruptcy in September 2022. However, the legislation to be applied does not take that into a consideration or, to the extent it does, requires such transaction be more than 12 months before the filing for bankruptcy. Hence, if Michael D’Cruz had waited until March 2023 to file for bankruptcy, he may have had a successful defence to this claim.

[10] Second, the defendants noted the debts to the Canada Revenue Agency were for corporate debts as opposed to that of Michael D’Cruz personally. Further, the amount purported was not accurate and inflated. However, that was not what Michael D’Cruz attested to in his Statement of Affairs. In addition, the Statement of Claim (paragraph 8) referenced and the Motion Record contained the personal guarantee Michael D’Cruz signed on July 6, 2017 on behalf of that corporate entity (Derry Tools Limited).

[11] Third, the defendants’ materials reference Michael D’Cruz’s relative lack of involvement in the business which was largely being operated by his son, Joshua D’Cruz. However, this does not set aside the guarantee signed by Michael D’Cruz and the listing of his debts as contained in the Statement of Affairs signed September 21, 2022.

[12] The plaintiff also relied on the statement of the law as contained in Purcaru v. Seliverstova et al, 2015 ONSC 6679, paragraphs 10 and 11 which cites the Fraudulent Conveyances Act, supra as well as the Assignments and Preferences Act, RSO 1990, c A.33, s. 12 which provides for creditors to recover “in an action by a person who would be entitled to seize and recover the property if it is remained in possession or control of the debtor or of the person to whom the gift, conveyance, transfer, delivery or other payment was made”.

[13] Regarding the debtor’s intention, the law considers “badges of fraud”. Here, I am satisfied that the lack of documentation attesting to the loans, the close (familial) relationship between the debtor and transferee and the repayment in an amount ($94,000) being greater than the amount acknowledged to have been borrowed ($20,000) from Rosalind D’Cruz and $50,000 from (one of the sons) meets this legal test. This also appears to be the answer to my concern that Rosalind D'Cruz appears to get neither the benefit of being repaid in full (which would reduce the judgment against the defendants to $74,000) nor the ability to claim her debt in the bankruptcy and be paid whatever proportion this debt represented of the entire debt owed.

Conclusion

[14] As a result, I find in favour of the plaintiff. There shall be judgment granted in the amount of $94,000 as against the defendants.

[15] Regarding costs, the plaintiff provided its Costs Outline on the day of the hearing in the amount of $17,740.80 (plus HST) for partial indemnity (60% of actual) and disbursements totalling $1,095.56, inclusive of HST.

[16] I was advised of a plaintiff’s Offer to Settle made in September 2024 that may impact on the quantum of costs to be awarded.

[17] I urge the parties to agree on costs. If not, the plaintiff shall submit to me their written submissions, not to exceed five double spaced pages in a readable font plus the Offer to Settle being relied upon by March 21, 2025. The defendants shall have until April 18, 2025 to respond, identically limited as to the style of length of their written submissions.

Released: February 25, 2025

G. Dow