Szymanski v. Lozinski, 2019 ONSC 6968, is a civil litigation case which sets out the legal test for registering a Certificate of Pending Litigation against a matrimonial home.
The Plaintiff in this case is Andrew Szymanski, and the Defendants are Andrew Lozinski (the husband) and Katarazyna Lozinska (the wife).
In July 2015, Mr. Lozinski transferred the matrimonial home to Mrs. Lozinska for no consideration. Approximately two years later, he entered into a loan agreement with the Plaintiff. It appears that the loan was entered into without any involvement or input from Mrs. Lozinska. In August 2018, the Plaintiff demanded that the loan be repaid. A Statement of Claim was then filed against the Defendants in December 2018.
In his Statement of Claim, the Plaintiff sought repayment of the loan and a declaration that the transfer of the matrimonial home was a fraudulent conveyance. In addition, he brought a motion seeking the Court’s permission to register a Certificate of Pending Litigation against the matrimonial home.
If granted, the Certificate of Pending Litigation would have the effect of encumbering the matrimonial home and restraining the Defendants from any dealings with the property, such as financing, mortgaging or selling the property, while the litigation is pending.
Section 103 of the Courts of Justice Act governs the registration of Certificates of Pending Litigation. Per Grefford v. Fielding, a three-part test applies in determining whether a Certificate of Pending Litigation should be registered where the claimant has no interest in the land other than by way of a fraudulent conveyance allegation:
- The claimant must satisfy the Court that there is a high probability that they would successfully recover the judgment in the main action;
- The claimant must introduce evidence demonstrating that the transfer was made with an intent to defeat or delay creditors. Evidence demonstrating that property was transferred for less than fair market value will make it easier for the claimant to show that the transfer was fraudulent; and
- The claimant must demonstrate that the balance of convenience favors issuing the Certificate of Pending Litigation in the circumstances of the particular case.
It is important to note that simply alleging a fraudulent conveyance does not entitle a claimant to a Certificate of Pending Litigation. Instead, the onus is on the claimant to introduce evidence suggesting that the transfer was made to defeat creditors. Such intent can be established through specific “badges of fraud,” such as transfers made for little or no consideration, or transfers done with great haste.
Applying the three-part test to the facts of this case, the Court found that the Plaintiff failed to establish intent on the part of Mr. Lozinski to defeat his creditors. There was uncontroverted evidence that Mr. Lozinksi transferred the matrimonial home to Mrs. Lozinska to remortgage the home. Furthermore, the balance of convenience favored the Defendants, especially given the fact that Mrs. Lozinska had nothing to do with the loan and yet was in danger of the Plaintiff effectively encumbering her home. As such, the Plaintiff’s Motion was dismissed.
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