Bayerische Landesbank Girozentrale v. Sieber Estate (Trustee) 2015 Ont SCJ

The debtor engaged in extensive shenanigans and transfers. He claimed a trust in favour of a corporation when the corporation was not incorporated until many years after the date the trust allegedly arose. Shares were backdated. The trust agreement was backdated. The creditor obtained a section 38 BIA order. The court held that the trust was a sham. There was no documentation of the creation of the trust. The trust had no accounting records, financial statements, bank accounts, bank records, or tax returns. That in itself was sufficient to be fatal to the supposed existence of the trust. It was a non-operational phantom trust. Once one of the badges of fraud exists, a presumption of fraud takes hold and the defendants must provide some adequate explanation. Of review of cases on fraudulent conveyance and trusts, the judge set aside the fraudulent conveyance to vest the disputed property with the creditor by virtue of the section 38 order.

The creditor had served an offer to settle requiring the debtor to pay $310,000 or to transfer title to the property. Since the judge ultimately ordered the property transferred to the creditor, he held that the offer was as good as or better than his award. Accordingly he awarded partial indemnity cost to the date of the offer and substantial indemnity costs after it. He also noted that it was within the debtor’s contemplation that transferring his property in the manner in which he did would spawn some rather expensive litigation. The judge noted that the complexity of the issues may be taken into account. There was no mention of substantial indemnity costs as a result of the finding of fraud. This was unusual.