Fraudulent Conveyance and The Estate Planning Defence

Fraudulent Conveyance and The Estate Planning Defence

We have previously blogged on Fraudulent Conveyance.  This cause of action can, on occasion, be met with a defence that the conveyance of property was in furtherance of an estate plan and, therefore, without fraudulent intent.  As with most cases, the specific facts of the case will determine whether the defence can succeed.

In Bank of Montreal v. Real Marleau, the Saskatchewan Court of Queen’s Bench was prepared to entertain the notion that the defendant’s assertion might actually be true, but nonetheless, determined that the conveyance ought to be aside.

The estate planning defence was considered and again rejected in Re Whetstone, 1984 CarswellOnt 157.  In this case, the estate planning defence relied on evidence from the family’s solicitor.  The court noted, at paragraph 28,

“In the circumstances, it is not material that the family’s solicitor recommended the conveyance based on general principles and not on actual knowledge of the company’s financial position; the intent we are concerned with is not that of the family’s solicitor, but of [the defendant].”

Lastly, in an unreported decision of the Ontario Superior Court of Justice, RBC v. Nicolau, the defence was considered but not accepted:

“In this case, Mr. Nicolau testified that the transfer was for estate planning purposes.  He submits that there was therefore no fraudulent intent.

RBC referred the Court to jurisprudence in which the estate planning defence was raised.  I agree with the submissions of RBC that this defence must fail.  While the transfer may have also satisfied Mr. Nicolau’s estate planning goals, this explanation is not, in my view, sufficient to displace the inference of fraudulent intent given the timing of this estate planning and the presence of the badges of fraud.  Accordingly, I find that the April 16, 2012 conveyance of 1 Lister Drive to Gabriel Nicolau was fraudulent, and the provisions of the Act are therefore applicable.”

Thanks for reading,

David Morgan Smith

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