Can the court exercise discretion when determining if a transaction is at undervalue?
The Respondent and her husband (the “Debtor”) married in 2001 and have three children. As one of their children required around-the-clock care, they concluded that retaining specialized staff to care for their child would have cost more than the Respondent would have been able to earn. As a result, the Respondent did not enter the workforce. While the Respondent maintained the household and cared for the children, the Debtor owned and operated a consulting and trading company.
In 2011, the Respondent and the Debtor bought a family home in Richmond Hill (the “Selwyn Property”). The purchase was financed through, inter alia, a cash contribution by the Respondent’s parents. While the Selwyn Property was registered in the Debtor’s name, both believed that they each owned an equal share.
In 2015, the Respondent entered into an agreement of purchase and sale on behalf of her and the Debtor to purchase a home in Aurora (the “Davina Property”). The purchase of the Davina Property closed on the same date as the sale of the Selwyn Property. The purchase of the Davina Property was funded with, inter alia, the net proceeds from the sale of the Selwyn Property and a last-minute contribution of $89,654 from the Respondent’s parents. Title to the Davina Property was registered in the names of the Respondent and the Debtor as joint tenants. The application judge accepted that they believed they each had a 50% interest in the Davina Property because, like the Selwyn Property, it was their matrimonial home.
In 2016, the Respondent’s marriage ended. In 2017, the Debtor was charged with multiple counts of fraud. There was no evidence that the Respondent was aware of any alleged fraudulent activities on his part. Mercado Capital Corporation (the “Appellant”) is a creditor of the Debtor, and claims to be a victim of his fraud. In 2016, the Appellant successfully petitioned the Debtor into bankruptcy. Soon after, the Davina Property was sold, yielding net proceeds of $696,815, with the Respondent’s share of the proceeds of the sale amounting to $348,407.50.
- the Respondent’s “substantial non-monetary contribution to the family by her hard work managing the household and caring for their children”;
- the Respondent’s parents’ contributions to the purchase price of both of the matrimonial homes;
- the couple’s honest belief that the Respondent was entitled to a 50% interest in the Davina Property because it was their matrimonial home;
- the fact that the Respondent and her children have no other guaranteed form of financial support, and the Respondent needs the proceeds from the sale to support herself and her children; and
- the fact that the agreement of purchase and sale for the Davina Property was signed by the Respondent well before the one year period preceding the Debtor’s initial bankruptcy event.
The Court of Appeal concluded that there was no basis for it to void the impugned disposition of the Davina Property to the Respondent, and dismissed the appeal with costs to the Respondent.
Counsel: Michael Myers and Michael Krygier-Baum of Papazian Heisey Myers for the appellant and Veena Pohani of Veena Pohani and Associatesfor the respondent