Bankrupt B.C. man transferred millions in assets to estranged wife on eve of creditor hearing: court

A bankrupt B.C. man who transferred ownership of 12 properties, two boats and an airplane to his estranged spouse before he was due to face his creditors in court has seen the transfer declared void.

In a decision issued late last week, B.C. Supreme Court Justice Catherine Murray concluded that David and Leah Podollan did not deal at arm's length during the transaction, which was also a "transfer undervalue" designed to defeat the legitimate claims of David's creditors. 

Separation agreement not at arm's length

The transfer was made under the terms of a "separation agreement" that purported to end the parties' marriage and resolve "all issues" between them, according to the decision.

The 2019 agreement indicated that David would transfer ownership of the 12 properties, two boats and a plane to Leah, while taking on all of the couple's debt himself. It also promised that the Podollan Group of Companies – David's business empire encompassing real estate development and the operation of hotels, restaurants and pubs – would continue to pay Leah an annual salary of nearly $146,000 until February 2025.

In exchange for these considerations – valued at nearly $10 million in the decision – Leah told the court she had waived all of her claims to spousal and child support.

According to the text of the agreement, however, that was plainly not the case.

"The separation agreement, which Leah attests she typed up to reflect the terms she and David agreed to, specifically states that child and spousal support were to be determined," Murray's decision reads.

This lack of equivalence in what the two sides got from the agreement was key to the judge's determination that the parties were not dealing with each other at arm's length.

"The terms of the separation agreement are so extreme that it would be impossible to find that any negotiation took place," the decision reads.

"David had no economic interest in the properties/assets at the time of entering into the separation agreement; it resided with his creditors. There was no negotiation because David had no interest in the conclusion. He knew that it was all going to his creditors."

The judge also noted that it was clear from the evidence that David had "chosen not to participate in the fallout from his bankruptcy in any way."

He did not participate in the court proceedings that led to Murray's decision, which notes that he has "reportedly moved to Portugal and is not co-operating with the trustee" that has been tasked with managing his bankruptcy.

'Transfer at undervalue'

The lack of anything of value from Leah in exchange for the assets also weighed heavily on Murray's decision regarding whether the agreement was a "transfer at undervalue" – a legal term defined in the federal Bankruptcy and Insolvency Act as:

"A disposition of property or provision of services for which no consideration is received by the debtor or for which the consideration received by the debtor is conspicuously less than the fair market value of the consideration given by the debtor."

Leah again argued that she had waived spousal and child support rights in exchange for the assets provided to her in the separation agreement. She further suggested that the court could not determine whether the transfer was undervalue because the total value of all of David's remaining properties was unknown, according to the decision.

Murray again rejected Leah's arguments, noting that child and spousal support were left "to be determined" once the parties moved out of their family home in Coldstream, B.C., where they had continued co-habitating and co-parenting their son after their separation in 2019.

"Plus, a parent cannot waive child support," the judge notes in the decision.

"Although child support is paid to a parent, it is the legal right of a child."

Regarding the assertion that David had additional, unaccounted-for assets – and that Leah relinquishing her right to claim half of such assets would therefore render the separation agreement a legitimate transfer, rather than an undervalue one – Murray concluded there was no evidence that this was the case.

"I accept the evidence of the trustee that the assets transferred by David to Leah constitute all of his assets save for his RRSPs," the decision reads.

"There is no question that this was a transfer undervalue. David transferred millions of dollars of property to Leah, took responsibility for all of the debt and agreed to continue paying her a salary until 2025 in exchange for no consideration."

Accordingly, Murray declared the separation agreement and the transfer of assets "void and of no force and effect," and ordered that all of the assets that had been transferred – or the proceeds from any that had already been sold – be held in trust by David's bankruptcy trustee.

The trustee may not distribute the funds to David's creditors until Leah's interest in the property under B.C.'s Family Law Act can be determined.

Under that law, separating spouses are each entitled to "undivided half interest" in all family property and are equally responsible for family debt, unless the parties reach an alternative agreement on the division of assets.