Executive Summary: Key Legal and Evidentiary Issues

• The court considered whether an Agreement of Purchase and Sale signed after the stated irrevocability period remained valid and enforceable.
   
• Section 3 of the Fraudulent Conveyances Act required the court to determine whether the plaintiff purchased the property for good consideration and in good faith.
   
• Conflicting appraisal evidence from two experts raised questions about the fair market value of the property at the time of sale.
   
• Ms. Stolp argued that section 78 of the Land Titles Act rendered the transfer invalid because the property had allegedly been acquired through a forged document.
   
• Credibility findings regarding the plaintiff's principal and real estate agent were central to determining whether the plaintiff had notice of any fraudulent intent.
   
• Whether Ms. Stolp's registration of a non-depletion order against the property after the sale had closed was lawful remained a live issue in the proceeding.
   

Facts of the case

The property at issue, located at 465 Municipal Road, Sauble Beach, Ontario, was purchased in November 2016 by Lisette Maria Silva Stolp and Stacy Henricus Christopher Stolp for $374,000. The property is approximately 37 acres [Note: Mr. Brewer's appraisal report states 37.66 acres, while Ms. Taylor's report states 35.71 acres], zoned RU1 – General Rural, with no municipal water or sewage services. As part of closing, a signature purporting to be Ms. Stolp's appeared on a direction to place title in the name of 2546603 Ontario Corporation ("254"), a company incorporated around the same time with Mr. Stolp as sole director and shareholder. Ms. Stolp took the position that this signature was forged. She acknowledged becoming aware that 254 owned the property as early as September 2018, around the time she and Mr. Stolp separated and a family law proceeding began. In May 2020, Ms. Stolp obtained a non-depletion order from Justice Fitzpatrick prohibiting Mr. Stolp from depleting certain assets, including the property, but she did not register a caution or certificate of pending litigation against it.

Separately, in early 2020, Nitin Jain, principal of the plaintiff, 2628793 Ontario Corporation ("262"), and his realtor, Ted Russell, viewed the property as a potential development opportunity. In May 2021, the plaintiff agreed to purchase the property from 254 for $375,000, under an Agreement of Purchase and Sale dated May 27, 2021 according to the court's overview [Note: Mr. Jain's evidence elsewhere states the agreement was dated May 26, 2021]. The APS was later amended twice: an August 26, 2021 amendment extended the conditions date to September 15, 2021 and the closing date to November 15, 2021, and a second amendment — signed on or about November 5, 2021 per the court's overview [Note: Mr. Russell's evidence states this second amendment occurred on November 11, 2021] — extended closing to November 25, 2021, increased the price to $385,000, and added a $335,000 vendor take-back mortgage. The transaction closed on November 26, 2021, at which time no encumbrances were registered against the property. Ms. Stolp learned of the sale in January 2022 and registered Instrument BR 180207, referencing the Fitzpatrick order, against the property in February 2022. The plaintiff subsequently paid $335,000 into court and commenced this action seeking a declaration under the Fraudulent Conveyances Act and discharge of the registered instrument. The family law trial between Mr. and Ms. Stolp had not yet taken place at the time of this decision.

Policy and legislative provisions at issue

The parties agreed, by a Statement of Agreed Facts, that the sale from 254 to the plaintiff was contrary to section 2 of the Fraudulent Conveyances Act, which voids conveyances made with intent to defeat, hinder, delay, or defraud creditors, unless the transaction fits the exception in section 3. That exception protects a conveyance made "upon good consideration and in good faith" to a person without notice or knowledge of the fraudulent intent. Ms. Stolp also raised section 78 of the Land Titles Act, including subsections (4), (4.1), and (4.2), which generally deem a registered instrument effective but carve out an exception for "fraudulent instruments" registered after October 19, 2006, while preserving the validity of subsequent, non-fraudulent instruments. The indoor management rule, codified in section 19 of the Business Corporations Act, was also engaged, as it allows a third party dealing with a corporation to rely on the apparent authority of a director without investigating internal irregularities. Finally, Ms. Stolp invoked the Statute of Frauds, arguing the APS was unenforceable because it was signed after the offer's irrevocability period had expired.

Reasoning and analysis

On the validity of the APS, the court found that only the contracting parties—the plaintiff and 254—could rely on the timing defect, and that their subsequent conduct, including negotiating amendments and completing the closing, ratified the agreement. Ms. Stolp, not being a party to the contract, had no standing to challenge it on this basis. Turning to the Fraudulent Conveyances Act, the court accepted the appraisal evidence of Dan Brewer over that of Lauren Taylor, preferring his valuation range of $339,000 to $415,000 because his report was prepared specifically for this litigation, used comparables more consistent with the property's actual rural zoning, and was not based on assumptions about imminent development approval that the evidence did not support. Since the $385,000 purchase price fell within that range, the court found the plaintiff paid good consideration. On the question of good faith, the court found both Nitin Jain and Ted Russell credible witnesses who had no knowledge of Ms. Stolp's prior involvement with the property, the non-depletion order, or any fraudulent intent by Mr. Stolp, and that reliance on 254's corporate records and standard closing documentation was reasonable. As to section 78 of the Land Titles Act, the court noted Ms. Stolp had not pleaded this claim or sought relief against the plaintiff, but addressed it in any event, concluding that even if 254's original acquisition of the property involved a fraudulent instrument, the subsequent transfer to the plaintiff was not itself fraudulent and was protected under section 78(4.2), consistent with the indoor management rule and the curtain principle underlying the land titles system. Given these findings, the court determined it was unnecessary to decide whether Ms. Stolp's registration of the restriction order was unlawful.

Ruling and overall outcome

The court declared the plaintiff, 2628793 Ontario Corporation, to be a good faith purchaser for good consideration, without knowledge of any intent to defraud, and therefore protected under section 3 of the Fraudulent Conveyances Act. Ms. Stolp was ordered to delete Instrument BR 180207 from title to the property. The $335,000 paid into court by the plaintiff is to remain there pending further order in the Stolp family law proceeding. The plaintiff and Mr. Stolp were identified as the successful parties, though the decision leaves the issue of costs to be resolved between the parties or through further submissions, meaning no specific costs award has yet been determined.