Legal Blog: Collections

CPL (2)

A certificate of pending litigation (CPL) is a notice registered against title to property informing the world that title to this property is in issue. Any purchaser or mortgagee who then deals with the property does so at its peril. An action to set aside a mortgage or a transfer of land under the Fraudulent Conveyances Act (Act) is often joined with a motion for the issuance of a certificate of pending litigation. After all, what good will it do to bring an action to set aside a transfer if, just before trial, the fraudsters simply re-transfer the property to another person complicit in the fraud or, worse yet, sell or mortgage the property to arm’s length third parties.

A CPL may be obtained on motion without notice (Rule 42.01 of the Rules of Civil Procedure) and, if there is an apparent claim for an interest in land, it is not overly difficult to obtain a CPL. The real fight ensues when the property owner is notified, as required by the Rules, that the land has now been bound by the CPL. Such was the case in Nedaneg Financial Corporation v. Talebzadeh, a 2025 decision of the Ontario Superior Court of Justice. In Nedaneg, however, the plaintiff brought its motion on notice to the defendants.

Norwich Order

Canadian Tire Corporation Limited v. Eaton Equipment and Milburn 2025 Ont CA

Canadian Tire recovered against Eaton and others a $3.3 mil judgment for a fraudulent warranty repair scheme in which Eaton billed Canadian Tire for non-authentic repairs. The defendants appealed the summary judgment decision and then brought a motion before the Court of Appeal seeking a Norwich order to compel production of insurance information from Canadian Tire and its insurers. The chambers judge refused the order because a Norwich Order is a pre-trial discovery remedy only. The judge also held that, given their established fraudulent conduct, the defendants did not come to the court with clean hands and were therefore disentitled to an equitable remedy.

Guarantee

Zurich Insurance Company Ltd. v. Aquino 2025 Ont SCJ

John Aquino, a former director of Bondfield Construction Company Limited, provided an unlimited personal guarantee for Bondfield’s credit facility agreement with Bridging Finance Inc. Bondfield defaulted, leading Zurich Insurance Company Ltd. (who acquired the debt) to sue Aquino on the guarantee. Aquino argued against summary judgment, claiming the matter was too complex, key documents were missing, and partial summary judgment was inappropriate given his third-party claims against other Bondfield officers. The court disagreed, finding the guarantee’s enforceability was straightforward despite the insolvency’s complexity. The motion judge rejected Aquino’s claims of creditor misconduct, including impairing security, and altering priority interests; the guarantee explicitly permitted these actions. The court granted summary judgment for $40.8 mil plus interest of $27.8 mil. Aquino has appealed. SNF acted for Zurich.

CPL

Nedaneg Financial Corporation v. Talebzadeh 2025 Ont SCJ

Creditor had a consent judgment against debtor. After the judgment, the debtor’s wife, son, and non-arms length corporation bought real properties. The creditor alleged that the debtor beneficially owned the properties and moved for a certificate of pending litigation (CPL). The associate judgment dismissed the motion. The Superior Court judge granted the appeal and allowed the CPL. The judge held that the associate judge failed to account for the constellation of facts typical of machination that debtors pursue to avoid paying a judgment – using layers of different entities and related individuals and corporations to shield them from judgment creditors while the debtors continue to carry on business.

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Privies (BIA)

Ernst & Young Inc. v. Anwar 2025 Sask KB

Trustee in bankruptcy applied to void transactions as transfers at undervalue (s. 96) or preferences (s. 95) under the Bankruptcy and Insolvency Act. Investigations revealed $1,383,800 in questionable transactions, primarily involving transfers to family members and associated entities of the bankrupts’ principal. The court found that several payments totaling $1.013 mil to the principal and his spouse were transfers at undervalue that diminished the bankrupts’ estates; the bankrupts received insufficient or no consideration,. Two payments to the principal’s nephew, totaling $140,000, were deemed voidable preferences. The court also declared several individuals and entities privy to and liable for these transfers. A privy is someone who benefits directly or indirectly from, and has knowledge of, the transaction for less than fair market value.

Norwich Order (2)

Does an aggrieved party have any recourse when it suspects that it has been wronged, but needs information from a third party to either confirm or allay its suspicions? Under the right circumstances, the creditor can obtain a Norwich order, named after the plaintiff in a 1974 English case.

We first discussed this concept in a February 2009 newsletter discussing Isofoton v. TD Canada Trust, a 2007 decision of the Ontario Superior Court of Justice. Until the Isofoton decision, in Canada there had been a 2002 Alberta decision and that was about it. In our newsletter, we noted that the Norwich order remedy had not been used extensively in Ontario or Canada but suspected that it would have far more use because of the Isofoton decision. We were not wrong. In the past 18 years, the Isofoton decision has been cited seventy times in reported cases and articles and, in 2018, the Supreme Court of Canada examined and applied the concept.

The latest case to deal with a Norwich order is Taylor v. Metrolinx a 2024 decision of the Ontario Superior Court of Justice.

Privileged Production

Sakab Saudi Holding Company v. Al Jabri 2025 Ont SCJ (Div Ct)

The plaintiff claimed a massive fraud and had already obtained a Mareva injunction and a Norwich order. The plaintiff brought a motion for production of law firm trust ledgers and for an order by which copies of foreign bank statements would not be redacted. The court refused production of the trust ledgers because the plaintiff did not show either that (i) there was no reasonable possibility that disclosure of the information would lead, directly or indirectly, to the revelation of confidential solicitor-client communications or (ii) the requested information was not linked to the merits of the case and its disclosure would not prejudice the client. Note the difference between the facts in this case and the case in which a judgment has already been obtained and the plaintiff is merely moving to find where a judgment debtor moved its money. The court did allow an order un-redacting the foreign bank statements, but still left open the possibility that if any of the redacted items could be linked to a lawyer, those items would remain redacted.

Fraudulent Preference

RPG Receivables Purchase Group Inc. v. American Pacific Corporation 2025 Ont CA

Trustee in bankruptcy moved to set aside, under s. 95(1)(a) and (2) of the Bankruptcy and Insolvency Act (BIA). The bankrupt had paid $400,000 to one of its major suppliers approximately one month before it assigned itself into bankruptcy. The bankrupt was insolvent when it made the payment. The bankrupt stated that it made the payment so that it could get more supply from that creditor that it would use to produce product to satisfy its major customer. The court held that paying past indebtedness to enable the continuation of the business is inconsistent with a preference only if the plan to continue in the business had a reasonable basis and, in this case, it did not. The payment was set aside.

Undervalue Transfer – Trust

E. Sands & Associates v. Gidda 2025 Ont SCJ

Trustee in bankruptcy moved to set aside, under s. 96(1)(b) of the Bankruptcy and Insolvency Act (BIA), a previous house transfer from the bankrupt to a non-arms length transferee. The transfer was under value. The transferee argued that the bankrupt had been a trustee under an express trust in favour of the transferee and was merely transferring the legal interest back to the transferee. The alleged express trust was not in writing and was therefore invalid pursuant to s. 9 of the Statute of Frauds. The transferee wanted the trustee to reimburse it for paying mortgage and other expenses to maintain the property while she lived there; however, the judge noted that these expenses did not increase the capital value of the property and that, therefore, the bankrupt was never enriched and the transferee never suffered a detriment because of those payments.

Resulting Trust (2)

We have previously discussed resulting trusts several times (e.g. see February 2025 and October 2023 newsletters) – because a trust normally means that what a creditor sees does not reflect the true state of affairs. A creditor will be disappointed if the debtor is shown to be an owner on title, but, because of a trust, is not the true owner. Conversely, a creditor will be pleased if it can demonstrate that a debtor, though not shown on title, is the true beneficial owner because of a trust.

When a purchaser or transferor gratuitously arranges for the registration of another person on title, the law presumes that this person, who has contributed nothing, holds the property in trust for the purchaser or transferor who paid everything. This is known as a resulting trust.

The concept of resulting trust was discussed in two 2024 cases in the Ontario Court of Appeal: Bradshaw v. Hougassian and Falsetto v. Falsetto.