Aug 8, 2016

ONTARIO COURT OF APPEAL SUMMARIES (AUGUST 2-5, 2016)

Purcaru v. Seliverstova, 2016 ONCA 610 (CanLII)

[Sharpe, Lauwers and Miller JJ.A.]

Counsel:

Gary S. Joseph and Kenneth Younie, for the appellants

Morris Cooper, for the respondent

Keywords: Family Law, Fraudulent Conveyances, Fradulent Conveyances Act, Fraudulent Intent, Burden of Proof, Fresh Evidence

Facts:

This appeal is from an order awarding relief to the respondent under provisions of theFraudulent Conveyances Act. The respondent’s ex-husband, Don Purcaru (“Mr. Purcaru”) and the appellant, Marine Seliverstova (“Ms. Seliverstova”), who had been in a relationship with Mr. Purcaru, were found to have acted in concert to convey property to Ms. Seliverstova with the intention of defeating Mr. Purcaru’s creditors, chiefly the respondent.

Mr. Purcaru had financial obligations to the respondent due to their matrimonial proceedings. After a trial in 2009, Mr. Purcaru was ordered to pay the respondent in excess of $1 million in arrears of spousal and child support and for equalization of net family property. In the current proceedings, the trial judge made an order voiding the transfers of funds from Mr. Purcaru that had enabled Ms. Seliverstova to purchase two residential condominium units in 2006 and 2008.

Issue:

  1. Did the trial judge err by impermissibly shifting the burden of proof to the appellants, requiring that they disprove the respondent’s allegations?
  2. Did the trial judge err by not assessing the requisite fraudulent intent at the time of the transactions?
  3. Did the trial judge err in law by engaging in speculation in order to make factual findings that were not supported by the evidence?
  4. Did the trial judge err in exercising his discretion to fix a rate of prejudgment interest other than the rate prescribed by s. 127 of the Courts of Justice Act?
  5. Should leave be granted to the appellants to introduce fresh evidence?

Holding: Appeal dismissed and motion for leave to introduce fresh evidence dismissed.

Reasoning:

  1. No. The trial judge correctly stated the law with respect to burden of proof where there is an allegation of a fraudulent conveyance. It is up to the challenger of a transaction to establish on a balance of probabilities that a conveyance was made with the intent to ‘defeat, hinder, delay or defraud creditors or others’, within the meaning of s. 2 of theFraudulent Conveyances Act. Whether Mr. Purcaru had that intention is a question of fact, to be determined from the circumstances at the time of the transactions. 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 shifts to those defending the transaction to adduce evidence showing the absence of fraudulent intent.

Among the badges of fraud identified by the trial judge in this case were: (1) the transactions between Mr. Purcaru and Ms. Seliverstova were not at arm’s length, (2) the transactions were not only secretive but they were in violation of Mr. Purcaru’s disclosure obligations under theFamily Law Rules, and (3) the transactions were made without consideration.

The evidential burden then fell on Ms. Seliverstova to adduce evidence to show that the purpose of the transactions was not to defeat Mr. Purcaru’s creditors. Both Seliverstova and Mr. Pucaru’s explanations in testimony were found ‘to be lacking in cogency and credibility.’ As held in FL Receivables Trust 2002-A (Administrator of) v. Corbrand Foods Ltd., findings that transactions are fraudulent by the trial judge are entitled to deference and there is no basis upon which the court should interfere with them.

  1. No. The requisite fraudulent intent is to be assessed at the time of the impugned transactions. The appellants contend that the trial judge erred by attributing to the appellants knowledge, in 2006 and 2008, of the outcome of the family law proceedings between Mr. Purcaru and the respondent that culminated in the order in 2009. They argue that, until that order was made, they could not have known that Mr. Purcaru would have such a substantial liability to the respondent. Therefore, when the condominiums were purchased in 2006 and 2008, they could not have formed the intent to defeat the claims of creditors.

The Court of Appeal rejected this argument for the reasons given by the trial judge, who found that ‘once the applicant commenced her application for divorce and corollary relief, the applicant became a contingent creditor of Dan Purcaru with 100% likelihood of obtaining some award or settlement.’ The trial judge also found on the evidence that Ms. Seliverstova also knew of the divorce proceedings that the time of the transactions and engaged in the transactions with the intent to defeat the respondent’s claim.

  1. No. The trial judge surveyed the records of the financial dealings of the appellants that were available. He did not have a complete picture of their dealings, which he suspected was deliberate. The trial judge made findings of fact from the evidence that was before him and drew inferences from those findings.
  2. This argument was not strenuously pursed in oral argument and the Court of Appeal saw no merit in it.
  3. No. The appellants were denied leave to introduce as fresh evidence on the appeal an affidavit from Ms. Seliverstova providing additional bank records in support of her argument that the funds she received had come from her mother in Russia and not Mr. Purcaru. The bank records do not show the source of the funds that were in the account and, therefore, were of no assistance in resolving the matters in dispute in the litigation. Furthermore, this evidence could have been discovered previously by Ms. Seliverstova, exercising due diligence.

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