My first case dealing with a fraudulent conveyance came mid-way in my career. It became apparent that the payor spouse was resisting paying the full amount (s) owed to the recipient spouse set out in Court Orders, and delaying Court procedures that would enable the finalization of the litigation. Enforcement steps became necessary but first trying to find where the payor’s money was held and where assets were was challenging. Eventually a motion was brought to join the payor’s adult children, from a prior marriage, to the action, which the Court allowed. As a result of having third parties joined in the action, it was easier to trace the transfer of monies from the payor to his children, and the timing of which, showing the attempts to avoid payment to the recipient spouse. Here, I share some proven strategies for detecting and establishing fraudulent conveyances in the family law context, while setting out how the Appellate Court has defined “creditor” under the Fraudulent Conveyances Act, R.S.O. 1990, c .F. 29 (FCA) both in family law and the civil context.

 “Badges of Fraud”

In the recent case of Ontario Securities Commission v. Camerlengo Holdings Inc., 2023 CanLII 93 (ONCA) (Camerlengo), the Appellate Court observed that the types of facts that may support an inference of a party’s intention to convey property away from creditors – present or future – can be described as “badges of fraud.” The Court cited a summary of badges of fraud from Paul M. Perell’s, “A Pragmatic Approach to Fraudulent Conveyances”, (2005) 30:3 Advoc. Q. 373[1]:

•  the debtor's financial state at the time of the transaction was precarious, including deficiencies in income, assets, solvency, and an inability to pay debts;
•  the existence of a family or close relationship between the parties to the transaction;
•  the transfer effectively divested the debtor of a substantial portion or all of his or her assets;
•  the transfer had the effect of defeating, hindering, delaying, or defrauding creditors;
•  there was evidence of haste in making the transaction;
• there was evidence of secrecy, fabrication, falsehood, destruction or loss of documents, or suspicious circumstances in the making of the transaction;
• the transaction occurred near in time to notice of debts or claims against the debtor;
• the consideration for the transfer did not correspond to the value of the property;
• the absence of a business purpose or other justification for the transaction;
• the transferor retained possession or use of the property;
• the transferor retained a benefit or an ownership interest in the property.[2]

This list provides a very useful guide itemizing signs of fraud to watch for in dealing with any fraudulent conveyance case.  Depending on the case, one or more signs of fraud may be present.

Documents & Procedures to consider in establishing a Fraudulent Conveyance in Family Law

In addition, some of the documents to review and procedures to take in a fraudulent conveyance case, in the family law context, are the following:

1. Review all financial statements submitted by a party – to see if there are any missing assets or significant reductions in bank balances between early financial statements and later ones.  If there are, ask questions as to why the discrepancies;
2. Obtain tax returns for five years together with Notices of Assessment. The returns will show material information of a party, including investment income or other sources of income from year to year.  If investment income suddenly stops being declared, questions can be raised about what happened to the investment;
3. Do subsearches of a spouse’s/ partner’s known properties. Have any of these properties been sold or transferred?  If sold or transferred, to who? Was there fair market value consideration for the transfer?;
4. Review any relevant instruments cited in the subsearch, which will provide names and dates of persons to whom the subject property was sold or transferred and the consideration. As well, details should show who the real estate lawyer was to perform the transactional work, which may be helpful;
5. Do a Personal Property Security (PPSA) search. This type of search may show what vehicles or other assets are owned by a spouse and when. Were they disposed of?;
6. Obtain full particulars of all bank accounts of the spouse or partner, in question, and bank statements for all accounts for a sufficient period to establish a pattern of withdrawals.  (Obtain the bank statements for at least one or two years prior to separation and for a substantial period after the separation). Compare the spending pattern post separation with the spending pattern prior to separation, and note whether there are new bank accounts opened post separation. Are there any large withdrawals or transfers of monies to another account, or new account, post separation?;
7. Through Questioning or seeking additional financial disclosure, find out who owns the account into which monies are being transferred or what the monies being withdrawn are being used for.  Why are the funds being transferred?  If the spouse/ partner is transferring significant funds to another family member, e.g., an adult child of a former marriage or a sibling or another adult, then consider whether you need to seek leave to Question that third party to find out why they are receiving monies from the spouse or partner and whether they have any written obligation to repay the funds;
8. If third parties are regularly receiving significant amounts of money from a spouse or partner post separation, then consider whether you need to bring a motion to have the third parties joined as parties to the action.[3] If they are joined as parties to the action then you can obtain an Order for production of their bank statements and bank accounts, for example. With disclosure from third parties who are receiving monies from a spouse, trace the monies being transferred from the spouse’s bank , into the third party’s bank account, to try to establish whether or not there is even a reasonable purpose for the transfer of funds. Or does the timing and amount (s) suggest that a spouse is simply trying to divest themselves of funds to thwart their spouse’s claims and interests?;
9. Consider preparing a chart to show the interconnections of monies deposited into the spouse’s bank account, and in what amount, together with the date when the monies are withdrawn and/or transferred into a third-party’s bank account.  Do the dates and the amounts transferred form a pattern and/or show that a spouse may be trying to divest themselves of monies at the same time as they have been court ordered to make payments of money to their former spouse? 
10. If there are trusts involved, obtain all documents related to the Trust. As well, consider whether there are “red flags” such as the ones summarized in McGoey (re), 2019 CanLII 80 [4], which may indicate that the Trust is a sham and/or set up to defeat a party’s interests.

An expert may have to be retained to assist with establishing a fraudulent conveyance. For example, in the case of McGoey (re), an expert typographer testified that the fonts used in the subject trust documents were not in existence at the time when the documents were created. [5] For this reason, and others, the presiding Justice found the trusts to be a sham trust. The Judge also noted that had he not found the trusts to be sham trusts, he would still have set them aside as fraudulent conveyances.

The Legal Test: Who is a creditor under the Fraudulent Conveyance Act?

In the civil case of Camerlengo, the Appellate Court interpreted “creditor” under the Act, broadly, by stating that a claimant can attack a transfer of property if the transfer was made with the intention to “defraud creditors generally, whether present or future…”[6] The Court was specifically asked to find that a motions Judge had erred in striking part of the pleadings of the Plaintiff—the Ontario Securities Commission (OSC)—in its claims of fraudulent conveyance against spouses, Mr. and Mrs. Camerlengo. In 1996 Mr. Camerlengo transferred his interest in the jointly owned family residence to his wife, around the same time he incorporated a new company with a business partner.  Both Mr. and Ms. Camerlengo were concerned, at the time of the transfer, about Mr. Camerlengo’s potential exposure to personal liability as a result of his expanding business. (Mr. Camerlengo’s business partner also transferred his interest in his family home to his spouse. Both Mr. Camerlengo and his partner used the same lawyer they had retained to incorporate their new company for the purposes of the residential transfers to their spouses). Years later, in 2011, Mr. Camerlengo faced financial difficulties. The Plaintiff, OSC, brought an action against Mr. Camerlengo and his Wife seeking an oppression remedy, imposition of constructive and resulting trust, and a claim to set aside the 1996 transfer of the family home as a fraudulent conveyance. [7]

The Camerlengos brought a motion to strike the OSC’s pleading on the basis that it did not disclose a reasonable cause of action. The motions Judge dismissed the Camerlengos’ motion, except for their request to strike the OSC’s pleading related to its claim that the 1996 transfer of title of the family residence was a fraudulent conveyance. In considering who were “creditors” under section 2 of the Fraudulent Conveyances Act, the motions Judge found that Mr. Camerlengo’s creditors were not creditors for the purposes of the Act because they were not creditors at the time of the transfer. The OSC appealed.

The Court of Appeal allowed the appeal, concluding that it was not plain and obvious that the OSC’s claim that the 1996 transfer was fraudulent would fail at trial. Specifically, the Court stated that:

An intent to defraud creditors generally can be made manifest by taking steps to judgment proof oneself in anticipation of starting a new business venture. To plead a fraudulent conveyance on this basis, it is not necessary that a claimant be able to identify a particular, ascertainable creditor that the debtor sought to defeat at the time of the conveyance. It is enough, on the case law, to plead facts that support the allegation that at the time of the conveyance the settlor perceived a risk of claims from a general class of future creditors and conveyed the property with the intention of defeating such creditors should they arise… (Emphasis added.) [8]

Similarly, in the earlier family law case of Stone v. Stone, 2001, CanLII 24110 (ONCA), the Appellate Court interpreted creditor broadly but based on different reasoning. In this case, the Court was asked to find that the trial Judge had made an error in finding that the Wife was a creditor, within the meaning of the Fraudulent Conveyances Act (FCA). At issue was the fact that the Husband made inter vivos gifts of all of his business assets and the family home to his two adult children from a former marriage, during his marriage to his Wife, despite not being separated. At the time, he knew that his death was imminent. By the time of the Husband’s death, there was virtually nothing left in his estate.  The Wife elected under s. 6 of the Family Law Act to take her entitlement to equalization under section 5 of the Act, not to take her legacy under her deceased husband’s Will. The trial Judge ruled that the Fraudulent Conveyances Act could be applied in conjunction with the Family Law Act and that the inter vivos transfers by the deceased to his children were void; the transfer of the family home to the husband’s children was also set aside. [9] The deceased’s children appealed.

The appeal was dismissed. The Court of Appeal noted that in order for a spouse to qualify as a creditor under the FCA – or a person who is intended to be protected from conveyances of property made with intent to defeat her interest – she must have an existing claim against her husband at the time of the questionable conveyance (or a right she could have asserted in an action.)[10] In this case, while the husband and wife were not separated when the Husband transferred his assets to his children, he knew that his death was imminent and that his wife’s assets were significantly less in value than his. He had been advised that his wife could elect not to take under his Will but instead to claim an equalization payment. [11] The Court noted that because the husband’s death was imminent, the wife’s claim to an equalization payment was also imminent and would have been triggered by his death.  [12]

The Court further reasoned that had the Wife known of the transfers to the husband’s children, she would have commenced an application under s. 5 (3) of the Family Law Act, making her a “creditor or other” of the deceased under s. 2 of the FCA.  She was deprived of the opportunity to do so because of the deliberate non-disclosure on the part of her deceased husband and his children about the transfers. The Court opined that “Because she had the right to apply for equalization at the time of the transfers, but was deprived of her ability to exercise that right by the actions of the deceased and his children, she was a “creditor or other” within the meaning of the Fraudulent Conveyances Act”, and entitled to its remedies.  [13]

In summary, when dealing with a fraudulent conveyance case, you will likely be met with deliberate non-disclosure in terms of the payor moving funds or properties from the recipient’s reach and making typical remedies for enforcement, like garnishment, difficult, if not impossible. Be prepared to delve deep into where assets and funds may have been transferred to, including joining third parties to the action to find out more. Try to show a pattern of conduct on the part of the spouse or partner that he or she moves or transfers funds or properties or sells assets to a third party, without a reasonable explanation or for questionable or no consideration, in or around the time when monies are due to the other spouse or in contemplation that monies may be due, in the future, to the other spouse. The pattern of conduct may support an intention to transfer property/ assets for a fraudulent purpose, namely to defeat the other spouse’s claim and/or interests under the Family Law Act.  Based on the recent case of Camerlengo, the Court’s liberal interpretation of “creditor” under the Fraudulent Conveyances Act, will allow parties, who meet that definition, a better chance to take advantage of the remedies under the Act against a party trying to defeat their interests.

About the author

Katherine Shadbolt has practiced exclusively in the area of family law for over 35 years. From 1988 to 2023, she practiced in a mid-sized firm in Ottawa, where she became a partner in 1993, providing a full range of services in family law from negotiations to litigation, including appearances at all levels of court proceedings. A certified mediator with Family Mediation Canada, she has completed training in arbitration and collaborative family law and intensive courses in advanced mediation and negotiation. She has contributed to family law and dispute resolution seminars at the University of Ottawa Law School and has acted as a coach in mediation/negotiation courses offered by the Stitt Feld Handy Group. Katherine was included in the 2025 Edition of The Best Lawyers in Canada for Family Law, marking a period of 12 years that Katherine has received this recognition as one of Canada’s Best Lawyers.  She is an advisor with the Law Society of Ontario’s Coach and Advisor Network and a mentor with the Advocates’ Society. She contributes articles on  topical family law subjects to the OBA , and serves as CPD liaison on the OBA’s ADR Executive and member-at-large on the CBA’s Family Law Executive.