



COURT OF APPEAL FOR ONTARIO

CITATION: Pantziris v. 1529439 Ontario Limited, 2021 ONCA 784

DATE: 20211105

DOCKET: C68762

Doherty, Miller and Sossin JJ.A.

BETWEEN

Albert Gelman Inc., in its capacity as Trustee in
    Bankruptcy of Spiros Pantziris

Plaintiff (Respondent)

and

1529439 Ontario Limited, Aglaia Pantziris, Aspe
    Consulting Services Ltd., Julie Pantziris also known as Julie Taylor also known
    as Julie Taylor Pantziris and Ellen Bowlin

Defendants (Appellants)

Steven Bellissimo, Kristina Bezprozvannykh and Frank
    Bennett, for the appellants

Lou Brzezinski and Alex Fernet Brochu, for the
    respondents

Heard: October 28, 2021 by video conference

On appeal from the judgment of Justice B. Dietrich of the
    Superior Court of Justice dated September 28, 2020; reported at 2019 ONSC 5531.

REASONS FOR DECISION

[1]

In October 2013, the court made a bankruptcy order against Spiros
    Pantziris (the bankrupt) and appointed the respondent, the Trustee in
    bankruptcy (the Trustee). Subsequently, the Trustee took steps to recapture
    certain assets of the bankrupt. The Trustee brought a summary judgment motion
    seeking orders setting aside two transactions:

·

The transfer by the bankrupt in August 2008 of the bankrupts 50
    per cent interest in his residence to the appellant, Julie Pantziris, the
    bankrupts wife and joint owner of the residence; and

·

The transfer of the bankrupts shares in 1529439 Ontario Limited
    (the shares) to the appellant ASPE Consulting Services Ltd. (ASPE) in April
    2013.

[2]

The defendants (appellants) brought a cross-motion seeking the dismissal
    of the Trustees claims on two grounds. First, the defendants argued that the
    proceedings constituted a misuse of the bankruptcy process and an attempt by
    the main creditor, Cobalt Capital Textile Investments L.P. (Cobalt Capital)
    to obtain double recovery from the bankrupt. Second, the defendants submitted
    the claims were time-barred under the
Limitations Act, 2002
S.O. 2002 c. 24, Sch. B
.

[3]

The motion judge found in the Trustees favour on all issues. She granted
    summary judgment vesting the bankrupts 50 per cent interest in the residence
    in the Trustee. She also set aside the share transfer to ASPE and ordered that
    the Trustee be made the registered owner of the shares.

[4]

The motion judges reasons are thorough and demonstrate that the issues raised
    by the parties could properly be addressed by way of summary judgment. We are
    in substantial agreement with the motion judges analysis of those issues.

The Residence

[5]

After a thorough review of the evidence, the motion judge concluded the bankrupts
    transfer of his 50 per cent interest in the residence was both an undervalue
    transfer within the meaning of s. 96(1) of the
Bankruptcy and Insolvency
    Act
, R.S.C. 1985, c. B-3 (
BIA
) and a
fraudulent conveyance under s. 2
    of the
Fraudulent Conveyances Act
,
    R.S.O. 1990, c. F.29 (
FCA
)
. The motion judges findings of fact are fully justified
    on the evidence before her. There is no basis upon which this court can
    interfere with those findings.

The
Shares

[6]

Mr. Pantziris executed a promissory note as security for a loan
    purportedly made to him by ASPE. ASPE was controlled by Mr. Pantziris mother.
    Mr. Pantziris did not repay the loan and ASPE sued. ASPE obtained default
    judgment and moved to transfer the shares in 1529439 Ontario Limited, a
    corporation controlled by the Pantziris family, to ASPE. ASPE took the position
    that the shares were security for the loan in respect of which it had obtained
    default judgment.

[7]

The transfer of the shares to ASPE was authorized only a few days before
    the bankruptcy application. The face value of the shares substantially exceeded
    the amount of the loan purportedly made to Mr. Pantziris.

[8]

The motion judge was satisfied that the transfer of the shares was made
    with intent to prefer ASPE, a non-arms length creditor, and with intent to
    defeat the interest of other creditors. The motion judges factual findings
    support that conclusion. The findings include:

·

The value of the shares transferred far exceeded the value of the
    alleged debt;

·

Mr. Pantziris was insolvent at the time ASPE obtained default
    judgment and was unable to repay the loan;

·

ASPE was not a non-arms length creditor, apparently controlled by
    Mr. Pantziris mother; and

·

The transfer occurred during the 12-month period prior to the
    bankruptcy.

[9]

In addition to concluding the share transfer constituted an improper
    preference, the motion judge also found that ASPE had no enforceable security
    interest in the shares: Reasons, at paras. 92-97. In reaching that conclusion,
    the motion judge considered the relevant provisions of the
Personal
    Property Security Act
, R.S.O. 1990, c. P.10 (
PPSA
), as well as
    the language in the promissory note, the absence of any other documentation
    supporting the existence of a security interest, and the absence of any
    reference to a security interest when ASPE sued on the promissory note and obtained
    default judgment: Reasons, at paras. 87-97.

[10]

The
    appellants have demonstrated neither an error by the motion judge in her
    interpretation of the
PPSA
, nor a material misapprehension of the
    evidence relevant to whether ASPE had an enforceable security interest in the
    shares. The motion judges order with respect to the shares stands.

The
Limitations Act

[11]

The
    appellants argue that, because the main creditor was aware of the facts
    underlying the claims advanced by the Trustee more than two years before the
    Trustee advanced those claims, the
Limitations Act
bars the Trustee
    from advancing those claims.

[12]

The
    claims in issue are all claims by which the Trustee seeks, under various statutory
    provisions, to set aside transactions made by the bankrupt before the bankruptcy
    order was made. The claims are made so that certain property owned by the
    bankrupt may be brought back into the bankrupts estate for the benefit of the
    creditors.

[13]

The
    motion judge analyzed the limitation period argument at some length: see
    Reasons, at paras. 104-14. We agree with her that, for the purposes of the
    claims made by the Trustee in this proceeding, the Trustee could not be the
    person with the claim under s. 5(1) of the
Limitations Act
, until the
    Trustee had been appointed by the court. The limitation period in respect of
    the claims advanced here could not begin to run until the appointment of the
    Trustee in October 2013. Even then, the provisions of the
Limitations Act
must be read, having regard to the powers given to the Trustee to recover the assets
    of the bankrupt.

[14]

Nor
    does s. 12 of the
Limitations Act
have any effect on the Trustees
    right to bring forward the claims. The Trustee is not a person claiming
    through a predecessor in right, title or interest. The Trustee is claiming in
    its own right: Reasons, para. 118.

[15]

The
    appellants make one further submission with respect to the
Limitations Act
.
    They contend, that even if the limitation period runs from the appointment of
    the Trustee, the claim with respect to the shares was not made until the Trustee
    amended the statement of claim in 2018, some five years after the Trustee
    commenced the action and three years after the two-year limitation period would
    have run.

[16]

We
    do not accept this submission. A review of the substance of the amendments reveals
    they did not allege a new cause of action, but clarified the relief sought in
    the existing action.

[17]

The
    motion judge properly rejected the appellants submissions based on the
Limitations
    Act
.

The Abuse of Process Allegation

[18]

The
    appellants argued that its primary creditor, Cobalt Capital, was using the
    bankruptcy process to attempt to recover losses it had already recouped from
    the bankrupt. In oral argument in this court, the appellants submitted that
    Cobalt Capital maneuvered the appointment of the Trustee for that purpose and
    that the Trustee was complicit in the scheme.

[19]

The
    Trustee was appointed on consent. There was no evidence before the motion judge
    that the Trustee was acting on anyones instructions. The appellants theory as
    to the Trustees motivation is speculation and was properly not relied on by the
    motion judge.

[20]

The
    appeal is dismissed.

The Costs Appeal

[21]

The
    Trustee seeks leave to appeal the costs order. The motion judge awarded the
    Trustee costs on a partial indemnity basis. The Trustee submits the motion
    judge should have awarded costs on a substantial indemnity basis. Further, the
    Trustee argues, that even if partial indemnity costs were appropriate, the
    motion judge wrongly deducted certain pre-litigation costs from the award and
    also erred in substantially reducing the quantum claimed on a partial indemnity
    basis.

[22]

This
    court grants leave to appeal costs sparingly. Even if leave is granted, the
    court defers to costs decisions made by judges of the Superior Court. Those
    judges are much more familiar with the various nuances of setting costs in different
    litigation contexts than are members of this court.

[23]

The
    Trustee submits that the unfounded allegations made by the appellants against
    the Trustee amounted to an attack on the integrity of a court officer and
    warranted costs on a substantial indemnity basis. The motion judge did not
    accept the Trustees characterization. She said:

I find that the allegations made against the Trustee in this
    case do not rise to the level of reprehensible, scandalous or outrageous
    conduct. The defendants conduct was more in the nature of an aggressive
    defence of the claim. Accordingly, substantial indemnity costs are not an
    appropriate sanction in this case.

[24]

The
    Trustees submissions invite this court to reject the motion judges assessment
    and adopt the harsher characterization advanced by the Trustee. Deference
    demands that we decline that invitation. Instead, we defer to the motion
    judges assessment. Given the motion judges finding, partial indemnity costs
    were appropriate.

[25]

Similarly,
    we see no reason to interfere with the motion judges treatment of the pre-litigation
    costs, or her assessment of the quantum of costs sought by the Trustee. We see
    no value in this court going back over the individual components of the costs
    claim with a view to redoing the work done by the motion judge.

[26]

We
    grant leave to appeal the costs order and dismiss the appeal.

Costs of the Appeal

[27]

The
    parties were able to agree on the appropriate order with respect to the costs
    of the appeals. The Trustee is entitled to the costs of the main appeal on a
    partial indemnity basis, fixed at $33,727. The appellants are entitled to the
    costs on the costs appeal, fixed at $8,531.

Doherty J.A.

B.W. Miller J.A.

L. Sossin J.A.


