Fraudulent Conveyance in Canada: Legal Consequences and Notable Cases
Fraudulent conveyance in Canada refers to the intentional transfer of assets to avoid paying debts or legal obligations. This act, often committed to protect property from creditors, is illegal under both provincial statutes like the Fraudulent Conveyances Act and federal criminal laws in Canada. The consequences can be severe, impacting individuals and businesses alike.
Legal Definition and Liabilities
Canadian law treats fraudulent conveyance as both a civil and potentially criminal offence. The purpose of the law is to ensure that debtors cannot deliberately move assets to avoid their legal responsibilities.
Key Legal Consequences:
Courts can void transfers and return the property to the debtor’s estate
Debtors and recipients may face civil liability, including compensation to creditors
Criminal charges may be laid under the Criminal Code, leading to imprisonment
Common Signs of Fraudulent Conveyance
Some red flags that may lead to legal scrutiny include:
Selling property far below market value
Transferring property to a relative shortly before declaring bankruptcy
Moving assets into a spouse’s or child’s name during a financial dispute
Not disclosing the transfer to creditors or during court proceedings
High-Profile Canadian Cases
Garth Drabinsky’s Mansion Transfer
The Ontario Court of Appeal found that Drabinsky transferred his Toronto mansion to his children to avoid creditor claims. The court voided the transfer, reinforcing that intent to defraud is central to such rulings.
Michael Lonsdale Property Dispute
Vancouver developer Michael J. Lonsdale transferred real estate into his wife’s name. The British Columbia Supreme Court ruled the move was fraudulent and ordered the properties returned to satisfy debts.
Peter Sorensen’s Hidden Assets
In Calgary, businessman Peter Sorensen shifted properties into his family’s names amid bankruptcy. The court determined it was an illegal attempt to shield assets and ruled in favour of creditors.
Gerard Comeau’s Pensioner Case
In New Brunswick, a retiree transferred his home to his daughter to dodge debts. Despite his low profile, the court found the transfer fraudulent, showing that anyone-not just the wealthy-can be held accountable.
Legal Penalties for Fraudulent Conveyance in Canada
Fraudulent conveyance is often prosecuted under general fraud laws in Canada.
Penalties Under Canadian Law:
Over $5,000 in value: Up to 14 years in prison
Under $5,000: Up to 2 years in prison
Court orders to reverse asset transfers
Potential fines and compensation orders
Legal costs for creditors’ lawsuits
The severity of punishment depends on:
The size of the asset or debt involved
The intent behind the transaction
Any previous criminal history
Why This Matters to Canadians
Fraudulent conveyance undermines trust in the financial and legal systems. By attempting to sidestep financial obligations, individuals harm not only creditors but also the integrity of commercial transactions in Canada. The legal system responds with serious measures to deter such conduct.
Frequently Asked Questions (FAQs)
What is considered a fraudulent conveyance in Canada?
It is when someone transfers property to another person with the intent to avoid debt repayment or legal obligations.
Can Canadian courts reverse a property transfer?
Yes. Courts can declare a transaction void if it was made to defeat creditors, and return the property to the original estate.
Is fraudulent conveyance a crime in Canada?
Yes, under certain conditions. It can be prosecuted under the Criminal Code if fraud is proven, especially for high-value transfers.
Can someone go to jail for fraudulent conveyance?
Yes. If the property is worth more than $5,000 and fraud is proven, the maximum sentence is 14 years in prison.
Can family members be punished?
Yes. Anyone who knowingly participates in a fraudulent conveyance, including spouses or children, can be held legally liable.
Conclusion
Fraudulent conveyance in Canada is a complex legal issue with serious consequences. From voiding asset transfers to criminal prosecution, Canadian law strongly protects creditor rights and ensures financial transparency. If you’re facing financial trouble, consult a legal expert before making any property transfers that might raise red flags.
