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Alberta Law: Fraudulent Conveyances

An Alberta court explored the issue of fraudulent conveyances. The case of McColman and Sons Demolition Ltd v Chmiliar Business Services Corp, 2020 ABQB 664 dealt with a situation where a creditor was trying to get at assets allegedly placed in the debtor's wife's name.

At paragraph 11 the court said:

A claim under the Fraudulent Preferences Act, whether it be a fraudulent conveyance or a fraudulent preference, requires proof of insolvency (or being on the eve of insolvency) with respect to the transferor. Counsel for the Plaintiffs readily admitted that the Plaintiffs do not have direct proof of insolvency of Chmiliar Corp, but stated that the lack of evidence on the part of Chmiliar Corp and Brenton under these circumstances raises an adverse inference of insolvency. When I asked counsel for the Plaintiffs if he was aware of any precedent case where a court had found insolvency based on an adverse inference, he responded that he was not.

[12] Due to the lack of evidence of insolvency on the part of Chmiliar Corp at the time of the Payments, a claim under the Fraudulent Preferences Act cannot succeed.

The court then looked at a fraudulent preference claim under the Statue of Elizabeth saying: (a) There must be a conveyance of real or personal property;

(b) For no or nominal consideration;

(c) With intent to defraud, delay or hinder creditors;

(d) The party challenging the conveyance must be someone who was a creditor at the time of the conveyance or someone with a legal or equitable right to claim against the transferor; and

(e) The conveyance must have had the intended effect.

Palechuk v. Fahrlander, 2006 ABCA 242 and Milavsky v Milavsky, 2011 ABCA 231.

[14] Proof of insolvency is not required under the Statute of Elizabeth.

Master Summers allowed the application under the Fraudulent Preferences Act.

If you are a creditor or debtor requiring advice with these issues, please feel free to contact us.

The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.

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