Moody v. Ashton et al., 2004 SKQB 488

• Judge: Baynton, J.
• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: December 07, 2004
• Jurisdiction: Saskatchewan
• Citations: 2004 SKQB 488;(2004), 258 Sask.R. 1 (QB)

Moody v. Ashton (2004), 258 Sask.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2004] Sask.R. TBEd. DE.032

Thomas Burke Moody, Patrick Moody and Darrel Moody (plaintiffs) v. Brent Ashton, Susan Ashton and Ashton Holdings Ltd. (defendants)

(1997 Q.B.G. No. 2289; 2004 SKQB 488)

Indexed As: Moody v. Ashton et al.

Saskatchewan Court of Queen's Bench

Judicial Centre of Saskatoon

Baynton, J.

December 7, 2004.

Summary:

The plaintiffs, unpaid execution creditors of the defendant, Brent Ashton, sued for a declaration that certain financial transactions entered into by Brent and the other defendants (Brent's wife Susan and Brent's holding company) were fraudulent conveyances and void against the plaintiffs. Alternatively, they sought a declaration that Susan, held certain assets in trust for them as Brent's creditors.

The Saskatchewan Court of Queen's Bench allowed the action.

Editor's Note: there are several prior cases involving these parties.

Estoppel - Topic 398

Estoppel by record (res judicata) - Res judicata as a bar to subsequent proceedings - Exceptions - Special circumstances - The plaintiffs, unpaid execution creditors of Brent Ashton, sued for, inter alia, a declaration that certain financial transactions entered into by Brent and the other defendants were fraudulent conveyances and void against the plaintiffs because, inter alia, they were undertaken at a time when Brent was insolvent - The defendants argued that prior court decisions had determined that Brent was solvent during the times relevant to the current action - Therefore, issue estoppel applied to that matter - The Saskatchewan Court of Queen's Bench held that the "special circumstances" exception to res judicata precluded the application of issue of estoppel in this case - The court found that the finding of solvency in the earlier proceedings was obtained by fraud as Brent had tendered false evidence - Had the prior court had the benefit of Brent's subsequent testimony, the outcome would have almost certainly been different - See paragraphs 209 to 213.

Fraud and Misrepresentation - Topic 1275

Fraudulent conveyances and preferences - Conveyances and preferences impeachable by creditors or others - Fraudulent intent - The Saskatchewan Court of Queen's Bench stated that "[a]lthough a fraudulent intent to delay, hinder or defraud creditors on the part of a transferor at the time of the impugned conveyance is a requirement under both statutes [Statute of Elizabeth and Fraudulent Preferences Act], the insolvency of the transferor as defined above is not a requirement of the Statute of Elizabeth. This material difference in turn effects another difference. A state of insolvency cannot exist unless there are existing or imminent creditors. Accordingly, an intent to defraud existing creditors or imminent creditors is required to satisfy the intent requirement of the provincial Fraudulent Preferences Acts. The intent requirement of the Statute of Elizabeth is satisfied whether the intent to defraud creditors pertains to existing, imminent or even future creditors (i.e those who are not yet creditors but who may become creditors)." - See paragraph 123.

Fraud and Misrepresentation - Topic 1281

Fraudulent conveyances and preferences - Conveyances and preferences impeachable by creditors or others - Conveyances between relatives or near relatives - The Saskatchewan Court of Queen's Bench stated that "certain kinds of 'family arrangements' may, in a particular set of circumstances, demonstrate that the transferor had no fraudulent intent to defeat creditors. This is no different than a conveyance made for less than fair market value where there is a good reason for the conveyance apart from sheltering the asset from creditors. But with due respect, it is not the law that a voluntary conveyance made to a family member is exempt from the application of the Statute of Elizabeth. Nor is it the law (as outlined previously) that the motive to benefit a family member justifies a conveyance that is made with the knowledge that it will defeat creditors. In such a case, there is an intent to defeat creditors even if the motive is to benefit a family member." - See paragraph 156.

Fraud and Misrepresentation - Topic 1281

Fraudulent conveyances and preferences - Conveyances and preferences impeachable by creditors or others - Conveyances between relatives or near relatives - The plaintiffs, unpaid execution creditors of the defendant, Brent Ashton, sued for a declaration that certain financial transactions entered into by Brent and, inter alia, his wife, Susan, were fraudulent conveyances and void against the plaintiffs - Brent had no assets - Susan appeared to have assets in excess of $1M - Brent and Susan argued that the transactions were legitimate investments made by Susan from funds paid to her by Brent pursuant to a legitimate family agreement entered into before their marriage (1987) - Under the verbal agreement, Susan agreed to give up her employment and career opportunities and to remain in the home and be there for Brent and their family - Brent agreed to pay her roughly one half of his professional hockey income on the understanding that Susan would support him with these funds once his hockey career ended (1993) - The Saskatchewan Court of Queen's Bench held, in the alternative, that the transfer of the assets in issue were fraudulent conveyances under the Statute of Elizabeth - From 1989 onward, Brent knowingly conveyed his assets to Susan through several transactions with the fraudulent intent to shelter his assets from his creditors - See paragraphs 187 to 204.

Fraud and Misrepresentation - Topic 1281

Fraudulent conveyances and preferences - Conveyances and preferences impeachable by creditors or others - Conveyances between relatives or near relatives - The plaintiffs were former partners and unpaid execution creditors (obtained judgment in 1999) of the defendant, Brent Ashton - Brent obtained a second life insurance policy in 1989 ($1M coverage) - The annual premiums were $72,000 in the six-year period from 1989 to 1994 inclusive - Brent made four payments totalling $109,222 in that period - He paid $35,000 more than was required by the policy - During this period, he had told the plaintiffs that he could not make his required partnership contributions - He transferred the policy to his wife, Susan, in 1994 - The Saskatchewan Court of Queen's Bench held that Brent made the payments on the policy with the intent to defraud his creditors and constituted a fraudulent conveyance within the ambit of the Statute of Elizabeth - The payments were part of Brent's general scheme to shelter his assets from his creditors - See paragraphs 205 to 208.

Fraud and Misrepresentation - Topic 1401

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under Statute of Elizabeth (1571) - General - [See Fraud and Misrepresentation - Topic 1275 ].

Fraud and Misrepresentation - Topic 1403

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under Statute of Elizabeth (1571) - Intention required - [See Fraud and Misrepresentation - Topic 1275 and all Fraud and Misrepresentation - Topic 1281 ].

Fraud and Misrepresentation - Topic 1404

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under Statute of Elizabeth (1571) - Presumption of intent to defraud - The plaintiffs alleged that certain financial transactions by the defendants were fraudulent conveyances under the Statute of Elizabeth (1571) - The Saskatchewan Court of Queen's Bench stated that one line of authorities held that, in the absence of direct proof of the settlor's intention, a court could infer the settlor's intent to defeat creditors in cases where the settlement rendered the settlor unable to pay existing debts - The court stated that this evidentiary presumption was referred to in the case law as the "necessary consequences" principle - The court concluded that this principle should be confined to factual situations in which the "innocent" conveyance resulted in an immediate insolvency in the face of existing debts - It should not be applied to an insolvency that arose in the future because of future debts - Alternatively, the court preferred the line of cases that held that the Statute of Elizabeth required a creditor to prove a fraudulent intent on the part of the transferor to defeat creditors - Any interpretation of the Statute of Elizabeth that concluded that a fraudulent intent was not a requisite element in any factual situation, appeared to fly in the face of the clear wording of its preamble and its provisions - See paragraphs 129 to 136.

Fraud and Misrepresentation - Topic 1404

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under Statute of Elizabeth (1571) - Presumption of intent to defraud - The plaintiffs alleged that certain financial transactions by the defendants were fraudulent conveyances under the Statute of Elizabeth (1571) - The Saskatchewan Court of Queen's Bench stated that " ... although proof of fraudulent intent to defeat creditors is required in all cases where the necessary consequence of the impugned transaction is to defeat creditors, proof of fraudulent intent will be presumed absent cogent and credible evidence to the contrary. Where there is such cogent and credible evidence to the contrary, the presumption of fraud no longer applies, the evidentiary burden of proving fraud shifts back to the creditor and the court must determine, on a consideration of all of the evidence available to it, whether the creditor has established on a balance of probabilities that the transferor had the fraudulent intent to defeat his or her creditors" - See paragraph 141.

Fraud and Misrepresentation - Topic 1451

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under modern statutes - General - [See Fraud and Misrepresentation - Topic 1275 ].

Fraud and Misrepresentation - Topic 1458

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under modern statutes - Intention required - [See Fraud and Misrepresentation - Topic 1275 ].

Trusts - Topic 1901

Resulting trusts - General principles - When available - The plaintiffs, unpaid execution creditors of Brent Ashton, sued for, inter alia, a declaration that Brent's wife, Susan, held certain assets in trust for them as Brent's creditors - Brent had no assets - Susan appeared to have assets in excess of $1M - Brent and Susan argued that the transactions were legitimate investments made by Susan from funds paid to her by Brent pursuant to a legitimate family agreement entered into before their marriage (1987) - Under the verbal agreement, Susan agreed to give up her employment and career opportunities and to remain in the home and be there for Brent and their family - Brent agreed to pay her roughly one half of his professional hockey income on the understanding that Susan would support him with these funds once his hockey career ended (1993) - The Saskatchewan Court of Queen's Bench held that Susan held the impugned assets in a resulting trust for Brent - Under the alleged family agreement, Brent retained a beneficial interest in the funds that he transferred to Susan - He did not transfer them unconditionally or absolutely - Brent, through Susan, continued to exercise control over the trust - See paragraphs 175 to 186.

Cases Noticed:

Nelson et al. v. Little Estate (2004), 250 Sask.R. 237; 2004 SKQB 310, refd to. [para. 105].

Cooper v. Cooper Estate et al. (1999), 181 Sask.R. 63 (Q.B.), refd to. [para. 105].

Dell'Aquila Estate v. Mellof (1996), 143 Sask.R. 8 (Q.B.), refd to. [para. 105].

Niles v. Lake, [1947] S.C.R. 291, refd to. [para. 106].

Sharp v. McNeil (1913), 15 D.L.R. 73 (N.S.S.C.), refd to. [para. 112].

Clark, Drummie & Co. v. Ryan (1999), 209 N.B.R.(2d) 70; 535 A.P.R. 70; 170 D.L.R.(4th) 266 (C.A.), refd to. [para. 112].

Albert v. Alberta, [1997] O.J. No. 6265 (Gen. Div.), affd. [1999] O.J. No. 5587 (C.A.), refd to. [para. 112].

Hallett's Estate, Re (1879), 13 Ch. D. 696, refd to. [para. 113].

Diplock, Re, [1948] Ch. 465 (C.A.), refd to. [para. 113].

Siemens et al. v. Bawolin et al., [2004] Sask.R. Uned. 195; 2004 SKQB 221, refd to. [para. 119].

Nicholson v. Milne and Davis et al. (1989), 96 A.R. 114; 74 C.B.R.(N.S.) 263 (Q.B.), refd to. [para. 124].

Ramgotra (Bankrupt), Re, [1996] 1 S.C.R. 325; 193 N.R. 186; 141 Sask.R. 81; 114 W.A.C. 81, refd to. [para. 124].

Royal Bank of Canada v. North American Life Assurance Co. - see Ramgotra (Bankrupt), Re.

Petryshyn v. Kochan, [1940] 2 W.W.R. 353 (Sask. K.B.), refd to. [para. 125].

Stewart v. Zacharuk, [1949] 1 W.W.R. 213 (Sask. Q.B.), refd to. [para. 125].

Cadogan v. Kennett (1776), 98 E.R. 1171, refd to. [para. 126].

Lewisporte Wholesalers Ltd. v. Hynes (1975), 24 Nfld. & P.E.I.R. 252; 65 A.P.R. 252 (Nfld. S.C.), refd to. [para. 126].

Proulx v. Proulx (2002), 316 A.R. 150; 25 R.F.L.(5th) 370; 2002 ABQB 151, refd to. [para. 127].

Baxter v. Derkasz (No. 2), [1929] 1 W.W.R. 673 (Sask. C.A.), refd to. [para. 129].

Bank of Montreal v. Chu et al. (1994), 17 O.R.(3d) 691 (Gen. Div.), refd to. [para. 129].

Sun Life Assurance Co. of Canada v. Elliott (1900), 31 S.C.R. 91, refd to. [para. 129].

Freeman v. Pope (1870), 5 Ch. 538, refd to. [para. 129].

Wise, Re (1886), 17 Q.B.D. 290, refd to. [para. 131].

Manddryk v. Merko (1971), 15 C.B.R.(N.S.) 246 (Man. C.A.), refd to. [para. 133].

Bludoff v. Osachoff, [1928] 2 W.W.R. 150 (Sask. C.A.), refd to. [para. 135].

Koop v. Smith (1915), 51 S.C.R. 554, refd to. [para. 143].

Goertz (Bankrupt) v. Goertz et al., [1994] 8 W.W.R. 250; 122 Sask.R. 93; 26 C.B.R.(3d) 222 (Q.B.), refd to. [para. 143].

Wagner v. Hartows, [1922] 3 W.W.R. 1050 (Sask. C.A.), refd to. [para. 143].

Dondee Stock Farms Ltd. (Bankrupt), Re (1993), 117 Sask.R. 1 (Q.B.), refd to. [para. 143].

Anchor Savings Bank v. Maas, [2003] O.J. No. 1863 (Sup. Ct.), refd to. [para. 146].

Mutual Trust Co. et al. v. Alidina, [2000] O.T.C. Uned. C82 (Sup. Ct.), refd to. [para. 146].

Phaneuf Fertilizer Sales Ltd. v. LeBlanc et al. (1998), 170 Sask.R. 161 (Q.B.), refd to. [para. 146].

Mackay v. Douglas (1872), 14 Eq. 106, refd to. [para. 147].

McGuire v. Ottawa Wine Vaults Co. (1913), 48 S.C.R. 44, refd to. [para. 149].

Traders Group Ltd. v. Mason et al. (1974), 43 D.L.R.(3d) 76 (N.S.T.D.), refd to. [para. 150].

Fox v. Fox (1981), 21 R.F.L.(2d) 165 (Alta. Q.B.), refd to. [para. 155].

Austin Marshall Ltd. v. Bennie and Widdifield (1985), 57 C.B.R.(N.S.) 71 (Ont. S.C.), refd to. [para. 155].

Murdoch v. Murdoch, [1975] 1 S.C.R. 423, refd to. [para. 157].

Minott v. O'Shanter Development Co. (1999), 117 O.A.C. 1; 42 O.R.(3d) 321 (C.A.), refd to. [para. 166].

Angle v. Minister of National Revenue (1974), 2 N.R. 397; 47 D.L.R.(3d) 544 (S.C.C.), refd to. [para. 167].

Carl-Zeiss-Stiftung v. Rayner & Keeler Ltd.; Rayner & Keeler v. Courts, [1967] 1 A.C. 853 (H.L.), refd to. [para. 167].

420093 B.C. Ltd. v. Bank of Montreal (1995), 174 A.R. 214; 102 W.A.C. 214; 34 Alta. L.R.(3d) 269 (C.A.), refd to. [para. 167].

Arnold et al. v. National Westminster Bank plc, [1991] 3 All E.R. 41; 142 N.R. 31 (H.L.), refd to. [para. 170].

Nedco Ltd. v. Clark and Communications Workers of Canada, Local No. 4, [1973] 6 W.W.R. 425 (Sask. C.A.), refd to. [para. 172].

Saskatchewan Crop Insurance Corp. v. Greba (1997), 154 Sask.R. 289 (Q.B.), refd to. [para. 172].

Prsala v. Marinovic, [1993] O.J. No. 2123 (Gen. Div.), revd. [1995] O.J. No. 532 (C.A.), refd to. [para. 173].

Authors and Works Noticed:

Clark, Case Comment on The Duties of The Corporate Debtor to its Creditors (1977), 90 Harv. L. Rev. 505, pp. 510, 511 [para. 162].

Dunlop, Charles Richard Bentley, Creditor-Debtor Law in Canada (2nd Ed. 1995), pp. 601 [para. 138]; 602 [para. 121].

Lange, Donald J., The Doctrine of Res Judicata in Canada (2000), p. 223 [para. 171].

Snell, E.H.T., Principles of Equity (26th Ed. 1966), pp. 194, 195 [para. 109].

Springman, M.A., Stewart, George R., Morrison, J.J., and MacNaughton, Michael J., Fraudulent Conveyances and Preferences (2004) (Looseleaf), pp. 1-25, 1-26 [para. 162]; 12-16, 12-17, 12-18 [para. 151].

Waters, Donovan W.M., The Law of Trusts in Canada (2nd Ed. 1984), pp. 304 [para. 105]; 314 [para. 110].

Counsel:

Jeffrey M. Lee and Linda Widdup, for the plaintiffs;

Neil B. Fisher, for the defendants, Brent Ashton and Ashton Holdings Ltd.;

Ronald J. Dumonceaux, for the defendant, Susan Ashton.

This action was heard before Baynton, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Saskatoon, who delivered the following decision on December 7, 2004.