Kira Domratchev, Associate Gowling WLG (Canada) LLP

I recently came across an interesting decision of the Ontario Superior Court of Justice where the Court used the doctrine of a resulting trust to reach an outcome on a series of events that left a creditor unable to collect an outstanding costs award.

LPIC v Fiore et al, 2021 ONSC 7860 was a decision in an action by a plaintiff indemnity company against a defendant father and his children, claiming that a resulting trust was present due to transfers of property between the defendants. An alternative claim of a fraudulent conveyance was made.

Brief Facts

The plaintiff was an assignee of a 2012 costs awards in the amount of $66,200 payable by Francesco Fiore and brought this action in respect of the ownership of certain real property in Toronto. This property was transferred by Francesco to his son, Pasquale Fiore, on March 29, 2007. Subsequently, Pasquale transferred this property to his sister, Diana Fiore, who was on title as the sole owner as of the date of this decision.

The plaintiff took the position in this litigation that Francesco retained a beneficial interest in this property by way of an express trust or a resulting trust, or, in the alternative, that the transfers represented fraudulent conveyances.

Analysis

Whereas the Court was not satisfied on a balance of probabilities that there was an express trust in respect of Francesco’s transfer of the property to his son or his son’s transfer of the property to his sister, there was a finding of a resulting trust in favour of the plaintiff.

The Court noted that usually, a resulting trust claim comes from the transferor of the property, whereas these circumstances were quite different. Nevertheless, the Court found that there is no requirement that the resulting trust claim be pursued by the transferor and found that the property was held by Diana on a resulting trust for Francesco based on the following factors:

• There was no consideration paid for either transfer;
• The mortgage on the property, while not in Francesco’s name, was funded by him;
• Francesco’s failure to show whether he paid the capital gains tax on the transfer of the property to Pasquale or whether he continued to receive rental income from the property, amongst other missing documents; and,
• The Court found “good reason to doubt the testimony of all of the Defendants.”

But what about the Fraudulent Conveyances Act, which would allow these transfers to be set aside if they were found to be fraudulent conveyances? The Court held that finding the presence of a fraudulent conveyance was not necessary in light of the finding of a resulting trust.

Nevertheless, the Court undertook the analysis and was not satisfied that the plaintiff had proven to the standard required that Francesco’s purpose in transferring title to the property was to defraud present and future creditors generally, and therefore failed to prove the claim of a fraudulent conveyance.

This decision should serve as a reminder that proving the presence of fraud is no easy feat. In this case, the litigation was resolved in the plaintiff’s favour on the basis of a finding of a resulting trust but if that claim was not made, the end result might have been very different.