Selaive v. Meyer

2003BCSC1335

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Selaive and Vannicola v. Meyer et al., 2003 BCSC 1335 Date: 20030828 Docket: 924633 Registry: Vancouver Between: Mario Selaive and Helen Vannicola Plaintiffs And Dieter Meyer and Helga Kaiser and The Estate of Dieter Meyer, Deceased, By his Representative Ad Litem, Helga Kaiser Defendants Before: The Honourable Madam Judge Gill Reasons for Judgment Counsel for the Plaintiffs: W.B. McAllister Acting on their own behalf: Helga Kaiser and David Meyer Dates and Place of Hearing: December 17, 2002, January 10 and February 3, 2003 Vancouver, B.C. [1] The application of the plaintiffs is for an order pursuant to s. 9 of the Fraudulent Preference Act, R.S.B.C. 1996, c. 164, requiring Helga Kaiser and David Winston James Meyer to show cause why a disposition of an interest in certain lands made October 4, 1994, should not be set aside and the property sold. [2] The facts giving rise to this application are as follows. The present action was commenced in 1992. It arose out of an agreement between the plaintiffs and the defendants for the lease of restaurant premises in the Bella Coola area. On November 12, 1998, the plaintiffs obtained judgment in the amount of approximately $100,000. [3] The defendant, Dieter Meyer, died in early 1997. At the time of his death, the property which is the subject matter of this application was owned by

Mr. Meyer, Ms. Kaiser and David Meyer, their son, as joint tenants. Upon Mr. Meyer's death, his interest was transmitted to the surviving joint tenants. [4] Prior to October 4, 1994, the property had been owned by Dieter Meyer and Helga Kaiser as joint tenants. On that date, the property was transferred to Dieter Meyer, Helga Kaiser and David Winston James Meyer as joint tenants for a stated consideration of $1.00 and natural love and affection. Solicitors for the plaintiffs learned of this conveyance on March 25, 1999. The motion before the court is dated January 12, 2001. [5] On October 4, 1994, the plaintiffs were not judgment creditors. The first issue to be determined is therefore whether it was necessary for them to have been judgment creditors at the time of the conveyance in order to take advantage of s. 9 of the Act. [6] Section 9 of the Fraudulent Preference Act is as follows: (1) If (a) a judgment creditor alleges that the debtor or person who has to pay has made a conveyance or other disposition of any of that person's land, which conveyance or other disposition is void, as being made to defeat, hinder, delay, prejudice or defraud creditors, or (b) a creditor or assignee for the benefit of creditors alleges that a disposition is void under sections 2 to 6, it is not necessary to institute an action to set aside the disposition. (2) In the circumstances described in

subsection (1), an application may be made to the Supreme Court by the judgment or other creditor or assignee or person entitled to the money, calling on the judgment debtor or person who is to pay, and the person to whom the conveyance or other disposition has been made or who has acquired any interest under it, to show cause (a) why the land, or a competent part of it, should not be sold to realize the amount payable under the judgment, or (b) why the disposition or payment should not be set aside and the property returned or otherwise dealt with as the court may direct. (3) In an application under this section, a judgment creditor may claim to be entitled to register the judgment against (a) the land in respect of which the application is made, or (b) the judgment debtor's or another person's interest in the land. [7] Counsel for the plaintiffs submitted that although proceeding under the Fraudulent Preference Act, they need not demonstrate that they were judgment creditors at the time of the conveyance. [8] In Re Skinner (1960), 27 D.L.R. (2d) 74 (B.C.S.C.), Wilson J. (as he then was) dealt with an application under s. 7 of the Act, the predecessor to the present s.

9. It was argued by the judgment debtor that the creditor had no status to take proceedings under s. 7 as the conveyance took place before the creditor had obtained judgment. In dealing with that argument, Mr. Justice Wilson referred to authorities which considered transactions in the nature of fraudulent preferences in which it was held that both litigants must, at the time of the allegedly fraudulent transfer, have had the status of creditors. He concluded, at 78-79: Has the ruling any relevance here? This is not an attempt by one creditor to set aside a preferential transfer to another creditor. It is a bid by a judgment creditor to set aside a conveyance as being, in the words of s. 7 "made to defeat, hinder, delay, prejudice, or defraud creditors". I can see that in the preference cases it is only logical that if one creditor is to attack a payment to another as preferential when made then he, the attacking creditor, must also have had the status of creditor at that time. If he had not, there could be no preference, because the debt to the attacking creditor did not exist at the time. Therefore it could not be said that another creditor was preferred over him. It will further be noted that the wording of s. 7 of our Act is not the same as that of s. 5 of the Ontario Act referred to in the Ontario judgments. I think that my decision must be entirely governed by that of the B.C. Court of Appeal in Newlands Sawmills Co. v. Bateman (1922), 70 D.L.R. 165, 31 B.C.R.

351. The application there, as here, was under the summary procedure set up by s. 7 of the Fraudulent Preferences Act. No fraudulent preference was involved, but a fraudulent voluntary conveyance by the debtor to his wife. The plaintiff was not a creditor at the time of the conveyance but was probably, on the contrary, in debt to the defendant. It subsequently became a judgment creditor and made its application, alleging that there was fraud because before making the voluntary conveyance the defendant had entered into a hazardous contract. Martin, J.A., as he then was, says at p. 171 D.L.R., p. 359 B.C.R.: "It thus becomes apparent that the principle is based upon the contemplated entry into a trading or other [my italics] venture which 'might' lead to indebtedness merely, and it is not necessary that the business should be of a hazardous nature." Surely if this is correct then it must follow, a fortiori, that a defendant who has just entered into a contract which, as his solicitor has told him, could involve very large and undefined liabilities is in an even worse position. And surely there is implied in this ruling the right of such a creditor as the applicant here to make this application. I think that the applicant must succeed and that the conveyance must be declared void. [9] In Re Canadian Imperial Bank of Commerce and Ash (1964), 7 C.B.R. 154 (B.C.S.C.), Aikins J. (as

he then was) considered an application by the bank pursuant to s. 7 of the Fraudulent Preferences Act for an order that a conveyance made by Mr. Ash to his wife be set aside. The conveyance was made in 1959. It was not until 1962 that the bank obtained judgment. A question arose as to whether the bank could bring its application under s. 7 and rely upon the substantive law under the Fraudulent Conveyance Act. Mr. Justice Aikins answered this question affirmatively, relying upon Re Skinner. He concluded that insofar as the application of the bank rested upon s. 3(1) of the Fraudulent Preferences Act, it could not succeed but he was satisfied that the property had been conveyed by Mr. Ash to his wife with intent to delay, hinder or defraud creditors and therefore, the bank was entitled to the relief sought. [10] In CIBC v. Boukalis (1987), 11 B.C.L.R. (2d) 190 (C.A.), the court specifically considered whether someone who is not an unsecured creditor at the time of a conveyance had the status to challenge the conveyance under the Fraudulent Conveyance Act. Seaton J.A. noted that there were decisions which supported the conclusion of the trial judge that the bank could not succeed unless it was a creditor but stated that the thrust of the Fraudulent Conveyance Act was to ban the disposing of property to hinder or delay creditors or those who might become creditors. Thus, the Act

referred to "creditors and others". After referring to the differences between the Fraudulent Preference Act and Fraudulent Conveyance Act, Seaton, J.A. concluded, at 194: The two Acts have similarities, but they have differences and those differences should be respected. In Re Skinner (1960), 27 D.L.R. (2d) 74 (B.C.S.C.), Wilson J. (as he then was) dealt with an application under s. 7 of the Fraudulent Preferences Act, R.S.B.C. 1960, c. 156, the predecessor to the present s.

9. He distinguished between a fraudulent preference and a fraudulent conveyance (at p. 78): This is not an attempt by one creditor to set aside a preferential transfer to another creditor. It is a bid by a judgment creditor to set aside a conveyance as being in the words of s. 7 "made to defeat, hinder, delay, prejudice, or defraud creditors". I can see that in the preference cases it is only logical that if one creditor is to attack a payment to another as preferential when made then he, the attacking creditor, must also have had the status of creditor at that time. If he had not, there could be no preference, because the debt to the attacking creditor did not exist at the time. Therefore it could not be said that another creditor was preferred over him. I would adopt that reasoning and reject the reasoning in the first line of authority. [11] Mr. McAllister, on behalf of the plaintiffs, referred to another decision of this court which seemingly reached the opposite conclusion - Granville Savings & Mortgage Corp. v. 332252 B.C. Ltd. (1992), 19 C.B.R. (3d) 199. I am satisfied, however, that those authorities referred to above resolve the issue in the plaintiffs' favour. [12] I turn now to the merits of the plaintiffs' position. [13] This application proceeded summarily. Affidavits were filed by David Meyer and Ms. Kaiser. Mr. Meyer was cross-examined on his affidavit on

December 7, 2001. Ms. Kaiser had been examined in aid of execution on April 8, 1999, almost two years before this application was brought. The argument of the plaintiffs is that the court ought not to accept the evidence of Ms. Kaiser. In reliance upon authorities including Koop v. Smith (1915), 51 S.C.R. 554 and China Software Corp. v. Leimbigler (1990) 49 B.L.R. 173 (B.C.S.C.), it was argued that in all of the circumstances, the court ought not to accept Mr. Meyer's unsupported statement. [14] Referring first to the affidavits, David Meyer deposed that the property in issue is the family farm located in Bella Coola. In 1990, his father insisted that he come to work on the farm rather than go to college. He worked on the farm and in the family business from July, 1990, until October, 1991 giving up not only an opportunity to go to college, but also a scholarship. As a result of conflict between he and his father, Mr. Meyer left in October, 1991. By 1994, his father was becoming incapable of looking after the farm and the business. In exchange for the agreement of his parents to convey to him a one-third interest in the farm, he agreed to return in September, 1994. He deposed that the one-third interest was to compensate for the work he had done, the missed opportunity to go to college and work to be done in the future. He calculated the value of the total equity as

approximately $11,000. [15] Ms. Kaiser's affidavit is brief. She deposed that David Meyer's affidavit and his explanation of the agreement regarding the transfer of the property was "completely correct". That evidence, however, conflicts with answers given in April, 1999, to questions posed about the 1994 transfer. The relevant portions of her examination were as follows: Q Now, this title shows David Winston James Meyer as one of the joint tenants. I understand that occurred in 1994. You and Mr. Meyer transferred your joint tenancy to yourselves and David Meyer? A I -- it must have been so, but I don't clearly remember. Q You don't remember transferring the title or you don't remember when it happened? A I don't -- I can't remember. Q You can't remember what? A Both. Q You don't have any recollection of transferring the title to Mr. Meyer, David Meyer? A Not -- no, really I'm -- would have -- I can't remember, not offhand. Q Did David Meyer pay you or pay Dieter Meyer for the transfer of that property? A I wouldn't know -- see, I don't know. Q You don't know whether David Meyer paid you anything for the property? A Right, correct. Q Did Dieter Meyer handle all the financial affairs? A Everything. Given Ms. Kaiser's evidence that she had no recollection of transferring the property, the statement in her affidavit sworn October 31, 2001, simply cannot be accepted. [16] Turning

to the cross-examination of Mr. Meyer, many questions were asked of him about the alleged agreement. Several portions of the transcript of his cross-examination were referred to on this application in support of the plaintiffs' submission that Mr. Meyer was, at best, evasive and unable to give evidence about a specific agreement and at worst, simply untruthful. [17] The following excerpt gives a flavour of Mr. Meyer's cross-examination: Q Okay. Tell me what you recall about each of the discussions you had with your parents concerning this agreement? A Wasn't very memorable. MR. GREGORY: Sorry, do you want a minute to think about it? Can we take a break? MR. MILLER: Sure. (PROCEEDINGS ADJOURNED AND RESUMED) MR. MILLER: Q Okay, Mr. Meyer, before we took a short break I believe I asked you to tell me about your recollection of each of the conversations you had with your parents concerning coming to this agreement referred to in paragraph five of your affidavit. A I am sorry, was there a question, Mr. Miller? Q Yes. Before we broke I was asking you to tell me about what you remember of each of the conversations you had with your parents before you came to this agreement? A I couldn't call them conversations. Q You can't recall any conversations? A No, I didn't say that, sorry, I couldn't call them conversations, we did not -- Q Did you communicate with your parents prior -- A I

communicated with my father. Q Let me ask my question, please. A Yes. Q Did you communicate with your parents about terms of this agreement? A Yes. Q Was that with your father or with your mother? A Predominantly with my father, and my mother had -- was there as well, yes. Q And were they conversations? A Sometimes conversations, Mr. Miller, sometimes. Q And what were the other times, what form of communication? A Unproductive communication. Q Let me put it this way. Did you send any letters to your parents, or did they send any letters to you? A No, they were arguments. [18] Even when re-examined by his own counsel, Mr. Meyer was unable to provide direct answers. In response to his counsel's question about what he told his parents he wanted for coming back in 1994, he responded: A Um, there were lots of things I would like, and that if I work, and do work, how am I going to get paid for it, how do I get looked after, I can't always work for free, I just can't -- you can't hurt yourself and not be able to work somewhere else, I have to make sure I am being taken care of, and if I am going to be home I need a father that's not going to drink or argue or these sorts of things, there is so many things I asked, you know. You just can't -- someone has to look after you if you are going to work free. [19] David Meyer represented himself on this application, as did Ms. Kaiser. Each

stated that the evidence in the affidavit was true. [20] It was submitted on behalf of the plaintiffs that while there is no direct evidence of collusion or fraud, inferences could be drawn from the date of the transfer, from Mr. Meyer's inadequate responses to questions regarding an agreement and from the untruthful statement in Ms. Kaiser's affidavit. [21] I refer, first, to the timing of the conveyance. As stated, this action was commenced in 1992. On July 23, 1992, the plaintiffs obtained an injunction to restrain the defendants from interfering with the conduct of their business. In April, 1993, an application was successfully brought to have the defendants found in contempt of that order. Despite the continuing conduct of Dieter Meyer, Ms. Vannicola continued to operate the restaurant until May, 1995. [22] The action did not go to trial until October, 1998. The largest component of the claim was lost profits. The allegations of misconduct related to the acts of Dieter Meyer. [23] David Meyer's evidence is that he was told by his parents that this lawsuit was "utterly groundless". Given that injunctive relief had been granted and that there had been a finding of contempt prior to 1994, when the property was conveyed, one might assume that Dieter Meyer at least understood that the court did not share his view of the merits of the plaintiffs' claim. However, having been the

trial judge in this action and having heard extensive evidence about Dieter Meyer's conduct during the period in question, much of his conduct was inexplicable and it would not be surprising that he held views which did not reflect the reality of the situation. Certainly, the property was conveyed while this action was outstanding, which raises suspicions but whether the defendants believed the action had merit is a question that cannot be answered on the evidence put forward on this application. [24] As to Ms. Kaiser's evidence, I have already commented on the discrepancy between her evidence at the examination in aid of execution and the statements in her affidavit. It is, however, relevant that she stated that financial matters were dealt with by Mr. Meyer. [25] Referring to the evidence of David Meyer, I cannot disagree with Mr. McAllister that he was not particularly responsive and did not give any detail. I am reluctant, however, to make what are essentially findings of credibility when the material before the court is so limited. In my view, it would be preferable to have the benefit of viva voce testimony from Mr. Meyer and Ms. Kaiser. Pursuant to s. 10(1) of the Fraudulent Preference Act, the court may order that the matter be tried, and I therefore do so. [26] I have not commented upon the numerous arguments made by David Meyer in opposition to this application.

During oral argument, I stated to both David Meyer and Ms. Kaiser that based upon the briefs that had been prepared, I was concerned that they had failed to appreciate the relevant legal principles. My reason for making these comments was not to be critical but rather, to convey my concerns that the arguments which were made did not address the relevant issues or the relevant law. To illustrate, Mr. Meyer asserted that the notice of motion dated January 12, 2001, was void and a fraud upon the court. It is neither. Nor has Mr. McAllister engaged in legal malpractice by providing the court with a copy of the affidavit and deposition of Ms. Kaiser. Mr. Meyer also raised issues relating to principles of estoppel and want of prosecution. Such issues are not relevant to the matter at hand. [27] There is only one issue which may have relevance, that being the question of whether this application is out of time. In my view it is not. Section 6(3)(d) of the Limitation Act, R.S.B.C. 1996, c. 266, postpones the running of time based upon fraud or deceit and s. 6(4) is therefore applicable. Mr. Meyer seems to believe that time started to run on the day that the property was conveyed. He is, quite simply, incorrect. I therefore reject any defence argument based upon the Limitation Act. [28] In summary, I decline to make the order sought and instead, order that the issue be tried. "K.M. Gill, J." The Honourable Madam Justice K.M. Gill