Feb 29, 2020

Garth Drabinsky DeNudes Himself of Property: Fraudulent Conveyance Found

Anisman v. Drabinsky, 2020 ONSC 1197 (CanLII)

Garth Drabinsky, late of Livent and Millhaven Prison, suffered another loss in court this month, in a fraudulent conveyance action brought against him by his former lawyer. In September 2015 Mr. Drabinsky and his wife owned a Toronto home as joint tenants valued at $2.6 million. He transferred the home into his wife’s name for consideration of $2.00 at a time when he was making payments to lawyer Philip Anisman as part of a settlement agreement previously negotiated. Mr. Anisman had represented Mr. Drabinsky in a matter before the Ontario Securities Commission.

The fee settlement provided that Mr. Drabinsky would pay the Mr. Anisman a total of $50,863.00, spread over a 6-month period. Mr. Drabinsky provided the lawyer with 19 post-dated cheques in the amount of $2,677.00 each, dated the 15th of each month from January 15, 2015 to July 15, 2016. The cheques were drawn on the account of Flagship Entertainment Limited, a company controlled by Mr. Drabinsky. Mr. Anisman was able to cash the first two cheques but the later cheques were dishonoured.

After months of haggling over payments and arrears, Mr. Anisman obtained a consent judgment against Mr. Drabinsky for approximately $60,000, which he failed to pay.

At an examination in aid of execution in 2019 Mr. Anisman became aware that Mr. Drabinsky no longer owned the home. He then brought an action against Drabinsky and his wife to reverse the transfer of the home.

The issues before the court were:

1) Was the transfer intended to defeat, hinder, delay, or defraud Drabinsky’s creditors and;
2) Was the action barred by the Limitation Act?

At the hearing Mr. Drabinsky argued that it was the financial institution holding the mortgage on the property that insisted the home be transferred to his wife, as she was the mortgagor, while Drabinsky and his brother were guarantors. However, testimony from a bank officer rebutted this suggestion.

Mr. Drabinsky argued that a two-year limitation period applied to bar the action, but the court applied the ten-year limitation period in the Real Property Limitations Act.

The court also found that prior to the examination in aid of execution there was nothing to prompt the Plaintiff to search the title of the property, as Mr. Drabinsky consistently lead Mr. Anisman to believe that he would be receiving payment imminently, and even provided him with replacement cheques when the previous ones became stale-dated. The court stated:

“Mr. Drabinsky was more than just another debtor; he was a rather renowned debtor who was very much in the public eye. It did not occur to the Plaintiff (or, presumably, to any other creditors) that Mr. Drabinsky would be denuding himself of substantial assets such as the Property. As the Plaintiff submits, there is only a duty to investigate when there is something that leads one to investigate: Fennell v Deol, 2015 ONSC 4835, para 8.”

However, discoverability was not an issue as Mr. Anisman’s claim was brought well before the expiration of the ten-year time period.

The court recited the “badges of fraud” relative to a fraudulent conveyance action, finding that many of them were present:

a) the donor continued in possession and continued to use the property as his own;
b) the transaction was secret;
c) the transfer was made in the fact of threatened legal action;
d) the transfer documents contained false statement as to consideration;
e) the consideration was grossly inadequate;
f) there was unusual haste in making the transfer;
g) some benefit is retained under the settlement by the settlor;
h) a close relationship exists between the parties to the conveyance.

The court granted judgment in favour of the Mr. Anisman with an order that the transfer of title to the property from Mr. Drabinsky and his wife as joint tenants to her alone, was void as against the creditors of Mr. Drabinsky.

Mr. Drabinsky’s civil fraud adds yet another layer to his previous criminal convictions and disbarment. Anisman v. Drabinsky, 2020 ONSC 1197