Judge undoes $2 sale of Drabinsky home as effort to thwart creditors

Judge undoes $2 sale of Drabinsky home as effort to thwart creditors
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TORONTO — A deeply indebted former theatre mogul transferred ownership of the family home to his wife to put the multimillion-dollar property out of reach of his creditors, an Ontario judge has ruled.

In ruling against Garth Drabinsky and Ann Elizabeth Winford-Drabinsky, the court found the transaction bore many “badges of fraud” and couldn’t stand.

“The transaction is replete with the badges of this kind of surreptitious creditor-proofing,” Superior Court Justice Ed Morgan said in his ruling. “Mr. Drabinsky offers no other explanation that makes sense.”

Evidence was that the Drabinskys were co-owners of the property in Toronto’s tony Forest Hill South neighbourhood until Sept. 11, 2015, when Winford-Drabinsky paid $2 to become sole owner of the property, appraised at $2.63 million. Drabinsky, the once high-flying impresario who served prison time for fraud, was drowning in red ink at the time.

One of his creditors was lawyer Philip Anisman, whom Drabinsky still owes more than $61,000 for legal work done six years ago when the former Livent Inc. executive was embroiled in enforcement action by the Ontario Securities Commission.

Anisman, who has been pursuing Drabinsky for payment for years, turned to the courts last May after belatedly discovering the 2015 house transaction.

Drabinsky conceded the transfer effectively put the home beyond the reach of his creditors. However, he also argued he had not actually turned his mind to the impact on them.

In his decision, Morgan said the courts have over the years developed signs of fraudulent intent, such as whether the ownership transfer was done in secret. Many of those were present in this case, the judge said.

For example, the couple continue to live in the home as they have done since they married in May 2005 and none of his creditors was alerted to the transfer.

“There was nothing in Mr. Drabinsky’s behaviour or his communications with the plaintiff as an active and ongoing creditor that would have signalled that the property had been transferred,” Morgan wrote.

For his part, Anisman argued that Drabinsky appeared to bank on the logistical difficulties of a creditor continually checking title to the property in the absence of any trigger. Morgan agreed, finding the transfer was effectively hidden despite being publicly registered.

“The transfer was made in the face of threatened legal proceedings,” Morgan found. “It seems too coincidental that Mr. Drabinsky proposed the transfer of title in early April 2015 — within weeks of his default in monthly payments to the plaintiff — and completed the transfer in early September 2015 just when the plaintiff demanded that payments resume.”

While inter-spousal transfers for nominal amounts are not unusual, Morgan said “context is everything.” He rejected Drabinsky’s argument that the transfer was done at the bank’s request or that he had not given any thought to his creditors.

“The objective indicia are such that he could hardly have been thinking of anything else,” Morgan said.

The judge declared the ownership transfer void. He also awarded the self-represented Anisman $13,000 in costs.

Drabinsky’s Livent once brought popular shows such as “Phantom of the Opera,” and “Show Boat” to stages across North America. In mid-1998, it emerged the company’s huge success had been based on cooked books, kickbacks and manipulated expenses. Livent went bust, leaving investors and banks about $500 million out of pocket.

This report by The Canadian Press was first published on Feb. 27, 2020.

Colin Perkel, The Canadian Press

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