Warren Ramesh Professional Corporation v. Urbia Homes Ltd., 2011 ABQB 600

Court of Queen ’ s Bench of Alberta Citation: Warren Ramesh Professional Corporation v. Urbia Homes Ltd., 2011 ABQB 600 Date: 20110929 Docket: 1003 06956 Registry: Edmonton Between: Warren Ramesh Professional Corporation and Zena Dean Plaintiffs - and - Urbia Homes Ltd. Defendant _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] The Plaintiffs bring an application for a Final Order for Foreclosure.

The foreclosure proceedings relate to what might be described as the “ Stony Plain Lands. ” [ 2 ] An Order Nisi was granted August 13, 2010. The learned Master ordered a one day redemption period followed by a judicial listing at $570,000.00 for 90 days. The redemption period and listing have expired. There were no acceptable offers. At the time of the application, $585,880.46 was owing.

[3] Done-Rite Floors Ltd., a creditor of the Defendant, opposes the application and has brought a cross-application to set asidethe mortgage as a fraudulent preference. [4] Done-Rite received Default Judgment June 10, 2010, against Urbia Homes Ltd. for work done between March 1, 2008 andAugust 20, 2009, on a condominium development on what might be described as the “Leduc Lands.” Done-Rite registered its Writagainst the Stony Plain Lands three days after the August 13 Order Nisi granted by Master Smart. [5] Dr.

Warren Ramesh is a shareholder and director of Warren Ramesh Professional Corporation (one of the Plaintiffs). He isalso a director of the Defendant, Dr. Naeem Dean is a director and shareholder of N. Dean Prof. Corp. Dr. Dean is also a shareholderand director of the Defendant Urbia Homes Ltd. The Plaintiff, Zena Dean, is an assignee of the mortgage from Dr. Dean’s ProfessionalCorporation. [6] In order to set aside the mortgage as a fraudulent preference under the Fraudulent Preferences Act, R.S.A. 1980, c.f. s. 18, itmust shown: 1. That there was a transfer of property; 2.

That the transferor was either insolvent or on the eve of insolvency; 3. The transfer was to a creditor; and 4. The debtor made the transfer with the intent of giving that creditor preference. Shengli Oilfield Freet Petroleum Equipment Co. v. Ascension Virtual Group Ltd. 2010 ABQB 597 per Mason, M. and TitanInvestments Ltd Partnership Re (2005), ABQB 637. [7] Under the Act, “transfer” includes: gift, conveyance, assignment, transfer, or delivery over, of real or personal property. [8] No authority was cited to me that a mortgage is a “transfer” or a “transaction” for the purposes of the Act.

A mortgage doesnot obviously fit one of the descriptions used in the Act. [9] At one time, a mortgage was a conveyance of land as security for the payment of a debt. Noakes & Co Ltd. v. Rice [1902], A.C. 24 at 28 per the Earl of Halsbury LC (HL). However, since our Land Titles Act, R.S.A. 1906,Chapter 24 (and, in England, the Law of Property Act, 1925), a mortgage is a “charge” and the mortgage has effect as security but doesnot operate as a transfer of land (Land Titles Act R.S.A. 2000,

Chapter L4, s. 103 and

definitions “O”). [10] A debenture was found to be a transaction caught by the Act in CIBC v. Grande Cache Motor Inn (ABKB), [1977], A.J. No. 496. A debenture is typically a secured corporate obligation that constitutes a charge on assets. The granting of acharge by way of mortgage would also appear to be caught by the Act. [11] Accordingly, it is necessary to consider whether this mortgage transaction can be impugned under the Fraudulent Preferences

Act. [12] I should note that there is dicta to the effect that the Fraudulent Preferences Act does not apply to real property (Sauer v.Sauer (AB KB), [1981] 33 A.R. 164 at para. 18 per Moore, CJ.) However, that case dealt with an actual conveyance. [13] The mortgage was given December 1, 2007 and registered October 27, 2009. If we follow the reasoning in the CIBC case(above), it is the time the charge is given that constitutes the preference (if at all), and not the time of registration. [14] The B.C. case, Banton v. West Coast Landfill Divers Corp., 2003 Carswell BC 2263 (BCSC), at para. 43, found thatperfecting security by registration was not material.

An act of a creditor in perfecting their security could not be a preference by thedebtor. [15] Since this application is more than a year from the transaction, which occurred December 1, 2007, the Applicant does not getthe benefit of the presumption of a preference under s. 3 of the Act if the effect of the transaction was to prefer. 508072 Alberta Ltd v.Bullard 2008 ABCA 113 at para. 11. [16] The Applicant may not have known about the mortgage until it was registered in 2009. However, this is not a situation towhich the discoverability rules apply. Sun Sudan Oil Company v.

Methanex Corp. (1992, (AB KB), 5 Alta LR (3d)292 pe Hunt, J. as she then was). [17] There is no evidence that the debtor was insolvent or on the eve of insolvency when the mortgage was given. Since we aremissing this key element, the transaction cannot be set aside. [18] I am mindful of the fact that the entities here are closely related and, in the circumstances, the transaction warrants anexamination with “more than the usual care” (CIBC above at para. 33. Gerrow v. Dorais, 2010 ABQB 560, per D.J.

Mandersheid, J.contains a very useful review of authority in this area, generally). [19] The evidence is that consideration was given and that funds were advanced under the mortgage. Because of the timing, theApplicant does not get the benefit of the presumption in s. 3 of the Fraudulent Preferences Act. The effect of value being given has thesame consequences under the Statute of Elizabeth, 1570 13. Eliz. Cap. 5 . Fraud is not presumed.

Rather, it would have to be proved as afact. [20] If the Applicant does not enjoy the benefit of the statutory presumption, or if consideration has been given, proof of fraud isrequired under both the Fraudulent Preference Act and The Statute of Eliabeth. To that end, the Applicant can rely on “the badges offraud” which are a series of evidentiary rules. See Gerrow v. Dorais (above). (A good general discussion can also be found in Dunlop’sCreditor Debtor Law in Canada, Second Edition, Carswell at page 613 et seq.). Almost none of these badges apply to this case.

Some,such as the retention of a benefit (by the mortgagor) would apply to any mortgage transaction. Given the finding that there is no evidencethat the Defendant was insolvent at the time the mortgage was given, it is not necessary to consider the applicability of these evidentiaryrules to this case. [21] Done-Rights Application to set aside the mortgage as a fraudulent preference is denied. The Plaintiff’s Application for FinalOrder for Foreclosure is allowed.

In the circumstances, I need not determine the validity of the Yule Caveat which was also raised inthese proceedings as it follows the mortgage on title. [22] If the parties cannot agree, costs may be spoken to. Costs should follow the event. However, one issue is whether theyshould be awarded on a higher scale given the nature of the Application.

Heard on the 20 th day of June, 2011. Dated at the City of Edmonton, Alberta this 29 day of September, 2011. W.S. Schlosser M.C.C.Q.B.A. Appearances: Coralee J. Schulz Mohr, Witten LLP for the Plaintiffs Terrence N. Lysak, McCuaig Desrochers LLP for Cross-applicant, Done-Rite Floors Ltd.