Banton v. Westcoast Landfill Diversion Corp. et al

2004 BCCA 293 Banton v. Westcoast Landfill Diversion Corp.

COURT OF APPEAL FOR BRITISH COLUMBIA Citation: Banton v. Westcoast Landfill Diversion Corp. et al, 2004 BCCA 293 Date: 20040512 Docket: CA31250 Between: Philip Banton Appellant (Plaintiff) And: Westcoast Landfill Diversion Corp. and HUWS Corp. Respondent (Defendant) Before: The Honourable Madam Justice Ryan The Honourable Mr. Justice Braidwood The Honourable Mr. Justice Low Oral Reasons for Judgment M. Frost Counsel for the Appellant C. Boucher Counsel for the Respondent Place and Date: Victoria, British Columbia May 12, 2004 [1] BRAIDWOOD, J.A.: The appellant challenges a mortgage granted by the respondent Westcoast to the respondent HUWS Corp. pursuant to the provisions of the Fraudulent Preference Act, R.S.B.C. 1996 c. 163 and the Fraudulent Conveyance Act, R.S.B.C. 1995 c. 163. [2] The facts are fully set out in the decision of the learned trial judge and reported at 2003 BCSC 1400. [3] The claim was defeated because of the learned trial judge finding that HUWS Corp. had the contractual right to call for the mortgage security on its legitimate past debt granted before the appellant obtained its judgment. [4] The learned trial judge wrote in part as follows: [54] The situation in the present case is analogous in my view to the situation in Frimer v. Lercher, [1984] B.C.J. No. 728 (S.C.). In Frimer, the Plaintiff claimed that a mortgage granted by the Defendant to his father

after the claim to the Plaintiff arose was invalid as a fraudulent preference or alternatively as a fraudulent conveyance. [55] The Court dismissed these claims in Frimer, after being satisfied that the evidence proved that the Defendant's debt to his father and the agreement to provide a mortgage to secure the repayment of that debt had occurred before the Defendant's obligation to the Plaintiff arose. [56] As the evidence showed, this is the situation in the present case. The agreement between Westcoast and HUWS was made in good faith as security for the continuing assumption of liabilities more than a year before Mr. Banton was granted judgment in the first action. The evidence proved that this transaction was neither a fraudulent preference nor a fraudulent conveyance. [5] The case there referred to is the case of Frimer v. Lercher, [1984] B.C.J. No.728 (S.C.): ¶12 The first issue under either Act is whether the mortgage was made with intent to defeat, hinder, delay or prejudice creditors. The question is essentially one of fact, to be determined by the trial judge on all the circumstances revealed on the evidence. However, the Court may find assistance in considering what other judges have found to be indicia of fraudulent intention, the so-called "badges of fraud". Criteria frequently considered include the following: (1) The state of the debtor's financial affairs at the

time of the transaction, including his income, assets and debts; (2) The relationship between the parties to transfer; (3) The effect of the disposition on the assets of the debtor, i.e. whether the transfer effectively divests the debtor of a substantial portion or all of his assets; (4) Evidence of haste in making the disposition; (5) The timing of the transfer relative to notice of debts or claims against the debtor; (6) Whether the transferee gave valuable consideration of the transfer. ¶19 I am satisfied that when Brian Lercher executed and caused to be registered the mortgage in his father's favour in June 1981, his intent was to carry out the obligation he owed his father of registering a mortgage on the property, not to deceive his creditors. The case is similar to that discussed in Bank of Nova Scotia v. Sedlacek et al (unreported) October 4th, 1982, No. C813013, Vancouver Registry (S.C.B.C.). In that case the defendant transferred his interest in the matrimonial home to his wife, after the bank had become concerned about its security and was pressing him for payment. The bank attacked the transaction as fraudulent. The defendant established that the transfer of his interest in the matrimonial home was made pursuant to a property settlement with his wife made some time earlier. At the time the settlement was made the parties were acting fairly and honestly. It was held

that the defendant's action in carrying out this agreement after his creditors were threatening him should be regarded as carrying to fruition the prior honest agreement, and could not be attacked as fraudulent. ¶20 The requisite fraudulent intent not having been established, there is no ground under either statute for setting aside his mortgage. The plaintiff's action on this branch of the case is accordingly dismissed. [6] Accordingly, I agree with the result reached by the learned trial judge and I would dismiss this appeal. [7] RYAN J.A.: I agree. [8] LOW J.A.: I agree. [9] RYAN J.A.: The appeal is dismissed. "The Honourable Mr. Justice Braidwood"