“People were like, ‘That’s the craziest thing I’ve ever heard. People transfer properties to their spouses all the time for the purpose of creditor protection.’”
She says her view was confirmed at the Court of Appeal in February in Ontario Securities Commission v. Camerlengo Holdings Inc., 2023 ONCA 93. The court allowed the appeal of a successful Rule 21 motion to strike the OSC’s fraudulent conveyance claim.
The respondents in the case were a married couple. The husband is an electrician who ran an electrical contracting business in partnership with another person. In 2011, the husband faced financial difficulties because a client had failed to pay the $1.3 million it owed the business. He got a $200,000 loan from a company that the OSC later discovered had stolen from various clients through a fraudulent investment scheme. The respondents had lost over $600,000 in the fraud.
The OSC got a garnishment order against the respondents to recover the debt on the $200,000 loan and sought a remedy for oppression and to impose a constructive and resulting trust. The regulator also sought to set aside the transfer of the respondents’ family home, which they had executed in 1996, as a fraudulent conveyance.
The motion judge agreed to strike the fraudulent conveyance claim, finding that s. 2 of the Fraudulent Conveyance Act did not apply to the house transfer and later $200,000 loan. Section 2 states: “Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.”