Executive Summary: Key Legal and Evidentiary Issues

• Leave was granted to amend pleadings to add claims of fraudulent conveyance and a certificate of pending litigation (CPL) regarding a Toronto property.

• The plaintiff successfully demonstrated a high probability of enforcing Greek judgments in Ontario, despite the defendants’ public policy objections.

• Multiple "badges of fraud" indicated the property transfers were potentially made to defeat creditors, justifying the issuance of a CPL.

• The court held that the creation and amendment of an alter ego trust by the deceased raised triable issues under the Fraudulent Conveyances Act.

• The argument that the claim was statute-barred under the Limitations Act failed due to ambiguity in the trust’s creation date and possible concealment.

• Costs of $15,000 were awarded to the plaintiff, reduced from the requested amount based on proportionality and efficiency concerns.

Facts and procedural history

The plaintiff, N. and G. Lazos Building Contractors O.E., sought to enforce in Ontario three judgments obtained in Greece against the defendants—Maria Kapsalis-Fragaki and her son, Athanasios Tom Kapsales. The judgments arose from an alleged 1984 land purchase agreement between the plaintiff and Maria’s former husband, Charitonas Kapsales. The plaintiff alleged that although the land was paid for, title was never transferred. Following Charitonas’s death in 2001, Maria and her son inherited the land. In 2002, the Greek government expropriated the land and paid compensation to Maria and Tom. Litigation commenced in Greece, with the defendants actively participating and appealing the decisions through various levels of the Greek court system, all of which upheld the plaintiff’s claim. By 2022, the final Greek judgment stood at approximately 700,000 euros.

In 2024, the plaintiff initiated an Ontario proceeding to recognize and enforce the Greek judgments. Meanwhile, Maria, who had moved to Toronto, had taken several steps regarding her property—Unit 201, 160 Fallingbrook Road, Toronto. These included establishing an alter ego trust in 2008, registering property transfers, and appointing her granddaughter, Daphne, as co-trustee. In May 2024, just before her death, Maria transferred the property into joint tenancy with Daphne as trustee. Following Maria’s death in July 2024, Daphne registered a survivorship application.

Motion and legal issues

The plaintiff brought a motion to amend the statement of claim to include a request for a CPL and allegations that the trust and related instruments were fraudulent conveyances under the Fraudulent Conveyances Act. The court applied the test from Fewson v. Bansavatar to determine whether the CPL should be issued: (1) a high probability of success on the underlying claim, (2) evidence that the transactions were intended to defeat creditors, and (3) the balance of convenience.

Assessment of success probability

The court found a high probability of success on the enforcement of the Greek judgments. The defendants’ argument that Greek inheritance law contravened Ontario public policy was rejected. There was no expert evidence substantiating their interpretation of Greek law, and the defendants had attorned to Greek jurisdiction and participated fully in the litigation. The court also found that Maria had timely legal representation and opportunities to understand her inheritance obligations.

Fraudulent intent and badges of fraud

The court found sufficient evidence of “badges of fraud,” including: Maria’s continued possession of the property after purported transfers; secretive transactions; the lack of consideration; the timing during litigation; and the familial relationship between parties. These supported a presumption of fraudulent intent under the Fraudulent Conveyances Act and justified the issuance of a CPL. The court declined to characterize the trust as a “sham” but noted factual ambiguities that supported a triable issue.

Limitations argument and CPL issuance

The defence argument that the claim was statute-barred under the 15-year ultimate limitation period in the Limitations Act, 2002 was rejected. The court found the date of the trust’s creation was unclear, and further noted that the concealment of the trust’s existence in a 2009 transfer could invoke the exception under section 15(4)(c). Therefore, the court held there were triable issues regarding both fraudulent conveyance and limitation defences.

Outcome and costs

The court granted the plaintiff’s motion to amend its pleadings and issued the CPL over the Toronto property. Although the plaintiff sought over $33,000 in partial indemnity costs, the court awarded $15,000. It found the motion was relatively short and did not warrant the extensive hours billed. The court emphasized proportionality and the importance of the property to both parties in assessing costs.