Builders ’ Floor Centre Ltd. Respondent/Plaintiff - v. -, 2013 ABQB 23

Court of Queen ’ s Bench of Alberta Citation: Builders ’ Floor Centre Ltd. v. Thiessen, 2013 ABQB 23 Date: 20130114 Docket: 1003 18830 Registry: Edmonton Between: Builders ’ Floor Centre Ltd. Respondent/Plaintiff - and - John Thiessen, John Thiessen Operating As Autumn Ridge Homes Inc. and Autumn Ridge Homes Inc. Appellants/Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice K.G. Nielsen _______________________________________________________ I.

Introduction [ 1 ] The Appellants appeal the decision of the Master ( 2012 ABQB 86 , 86 CBR (5th) 16 ) setting aside the transfer of certain lands by Autumn Ridge Homes Inc. (Autumn) to John Thiessen and Verna Thiessen.

II. Facts [ 2 ] Autumn is an Alberta corporation. John Thiessen and Kelly Kijewski are the Directors of Autumn. J & V Holdings

(1999) Inc. and 1318795 Alberta Ltd. are the shareholders in Autumn. John Thiessen and his wife, Verna Thiessen, are the shareholders in J & V Holdings

(1999) Inc. Kelly Kijewski and his wife, Donna Kijewski, are the shareholders in 1318795 Alberta Inc. John Thiessen is the President and Secretary Treasurer of Autumn. [ 3 ] On June 12, 2007, Autumn became the registered owner of property (the Land) legally described as: Plan 9322359 Block 1 Lot 2 Excepting thereout all mines and minerals [ 4 ] Mr. and Mrs. Thiessen provided cheques totalling $100,388.77 to the solicitor acting in respect of the purchase of the Land. These funds represented the purchase price of the Land and legal fees. Mr. Thiessen deposed that Autumn then owed a shareholder loan to J & V Holdings

(1999) Inc. in respect of the funds provided. [ 5 ] Autumn was incorporated for the purposes of constructing, inter alia , single family residences. Mr. Thiessen deposed that the Land was purchased for the purpose of constructing a house thereon that would be the residence for Mr. and Mrs. Thiessen (the Residence). As a result of advice received from a bank that Mr. and Mrs. Thiessen were dealing with and their accountant, the decision was made to register title to the Land in Autumn ’ s name.

This was, apparently, to promote Autumn, to establish corporate credit for Autumn and to allow Autumn to qualify for the Alberta New Home Warranty Program. [ 6 ] On November 6, 2007, Builders ’ Floor Centre Ltd. (Builders ’ ) prepared a flooring installation proposal for Autumn with respect to the Residence. The proposal was accepted and on April 4, 2008, and September 16, 2008 Mr.

Thiessen, on his personal credit card, provided deposits to Builders ’ totalling $17,500. [ 7 ] On January 7, 2008, a mortgage between the Toronto Dominion Bank and Autumn in the sum of $457,465 was registered against title to the Land. [ 8 ] On September 11, 2008, a mortgage between the Toronto Dominion Bank and Autumn in the amount of $682,077 was registered against title to the Land (the Corporate Mortgage).

The mortgage in the amount of $457,465 was eventually discharged. [ 9 ] In November and December 2008, Builders ’ supplied and installed flooring and window blinds in the Residence. [ 10 ] On December 18, 2008, title to the Land was transferred from Autumn to Mr. and Mrs. Thiessen as joint tenants (the Transfer). The consideration shown on the Transfer of Land was $1. Mr. Thiessen swore an Affidavit of Transferee that the current value of the Land was, in his opinion, $800,000. On December 18, 2008, a mortgage between the Toronto Dominion Bank and Mr. and Mrs.

Thiessen in the amount $682,077 was registered against title to the Land (the Personal Mortgage) and the Corporate Mortgage was discharged at that time. [ 11 ] In January and February of 2009, Builders ’ provided an additional quote for work and materials to be provided in relation to the Residence.

[ 12 ] Builders ’ provided invoices to Autumn in respect of the work and materials supplied.

Autumn provided a cheque to Builders ’ dated June 22, 2009, in the sum of $10,000 in partial payment of the invoices submitted. [ 13 ] On November 3, 2010, Builders ’ commenced the within action to recover the balance of the monies outstanding in respect of the work and materials provided by Builders ’ . [ 14 ] On November 30, 2010, John Thiessen made an assignment into bankruptcy. [ 15 ] On April 4, 2011, Builders ’ obtained a Default Judgment against Autumn for the sum of $43,540.90 in respect of the outstanding amounts claimed, interest and costs (the Judgment). On October 26, 2011, an application by Mr.

Thiessen to set aside the Judgment was denied. [ 16 ] Autumn has made no payment to Builders ’ in respect of the Judgment. [ 17 ] On September 12, 2011, Builders ’ received a Financial Statement of Corporate Debtor from Autumn which indicated that Autumn, at that time, had no assets beyond $10 in a Toronto Dominion Bank account. [ 18 ] On February 3, 2012, Master Wacowich released his Reasons for Decision and directed that the Transfer be set aside and that the Registrar of Land Titles return registration of title to the Land to the name and status as it existed prior to the Transfer. [ 19 ] An officer of Builders ’ has deposed that at the time Builders ’ began supplying work and materials to the Residence, and at all material times thereafter, Builders ’ believed that Autumn was the registered owner of the Land and had no knowledge of the Transfer. [ 20 ] Mr.

Thiessen testified at questioning that Builders ’ had completed the supply of the work and materials at his request as an officer of Autumn. He also testified that at the time of the Transfer, the only asset owned by Autumn was the Land, and a line of credit which Autumn had with TD Canada Trust was overdrawn beyond its maximum limit of $50,000. Mr. Thiessen further testified that Autumn was never in a position to pay debts as they became due, outside of funds that were provided by Mr. and Mrs. Thiessen. [ 21 ] This matter was initially argued before me on June 1, 2012.

Subsequent to argument, I learned that the Court of Appeal had rendered its decision in Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 , 524 AR 382 . I was of the view that the decision of the Court of Appeal may have an impact on this appeal and at my invitation both counsel filed further written submissions, and further oral submissions were made on October 16, 2012. [ 22 ] As further submissions were to be made, counsel for the Appellants sought leave to file additional evidence with respect to the value of the Land as of the date of the Transfer.

I granted leave to both the Appellants and the Respondent to file further evidence as to the value of the Land as of December 2008. In addition, I directed that the Appellants provide further documentation with respect to the two mortgages obtained by Autumn and the one mortgage obtained by Mr. and Mrs. Thiessen, all of which were registered against title to the Land.

I also granted leave to counsel for the Respondent to conduct further questioning on the mortgage documents produced if counsel felt such questioning was required. [ 23 ] On June 29, 2012, the Appellants filed an Affidavit of Value and Valuator ’ s Report attaching an appraisal of the Land as at December 16, 2008 (the Appraisal). The Land and the Residence were inspected by the appraiser on June 19, 2012 and the Appraisal was completed on June 22, 2012. The Appraisal valued the Land and improvements at $650,000 (qualified).

The Appraisal was based on the inspection of the Land and on discussions between the appraiser and Mr. Thiessen. The appraiser commented as follows in the Appraisal: The subject is a detached bungalow, built in 2008. As of December 16, 2008, according to the owner, the subject were [sic] missing

several interior and exterior elements including flooring on both floors, air conditioning system, a front door, landscaping/yard, deck and posts and interior painting. It was estimated that it would cost approximately $50,000 to complete the interior and there would be an additional $25,000 adjustment for negative market appeal. Since the subject property ’ s incomplete condition and superior size/building quality were off-setting qualities, the subject property has average market appeal. [ 24 ] Counsel for Builders ’ conducted questioning of Mr.

Thiessen with respect to the three mortgages registered against title to the Land at the material times, and with respect to the Appraisal. [ 25 ] Regarding the Appraisal, Mr. Thiessen testified that: at the time of the Transfer the residence had a deck constructed on it although it was incomplete; the front door of the residence was installed sometime in December 2008; and the residence was painted, although the painting was not complete. [ 26 ] With respect to the mortgages registered against title to the Land, Mr. Thiessen testified that: on October 23, 2008, he and Mrs.

Thiessen had signed a Mortgage Application in respect of the Personal Mortgage in the sum of $682,077 and which estimated the value of the Land and the Residence at $1,065,000; the proceeds received on the Personal Mortgage were used to pay out the balance outstanding on the Corporate Mortgage in the sum of $558,768; and Mr. and Mrs. Thiessen received the sum of $138,352 (net of legal fees), being the net mortgage proceeds on the Personal Mortgage and the builders ’ lien holdbacks on the Corporate Mortgage. III. Issues 1.

Should the Court take into account the additional evidence regarding the mortgages and the value of the Land and Residence as at December 2008? 2. Did the Master err in setting aside the Transfer and directing the Registrar of Land Titles to return title to the Land to the name and status as it existed prior to the Transfer? IV.

Standard of Review [ 27 ] The standard of review on an appeal from a Master to a Judge, on all issues, is correctness and it is settled law that there cannot be deference to the Master ’ s fact findings or discretion when the judge has heard new evidence: Bahcheli v Yorkton Securities Inc ; Gudzinski Estate v Allianz Global Risks US Insurance Co , 2012 ABCA 5 , 519 AR 215 . [ 28 ] In Gudzinski Estate v Allianz Global Risks US Insurance Co , with respect to the matter of additional evidence on an appeal from a Master, the Court commented as follows: 24 ...where, as in this case, new evidence is put before the Queen ’ s Bench Judge, it makes no sense to say that the Master ’ s decision on the facts should be reviewed for palpable and overriding error.

The Master did not have the same evidence as the Queen ’ s Bench Judge had which compels a fresh assessment of the facts. V. Analysis 1. Should the Court take into account the additional evidence regarding the mortgages and the value of the Land and Residence as at December 2008?

[29] Rule 6.14(3) of the Alberta Rules of Court provides as follows: 6.14(3) An appeal from a master’s judgment or order is an appeal on the record of proceedings before the master and may also be basedon additional evidence that is, in the opinion of the judge hearing the appeal, relevant and material. [30] The Court of Appeal has considered Rule 6.14(3) in its decisions in both Gudzinski Estate v Allianz Global Risks USInsurance Co and Bahcheli v Yorkton Securities Inc. [31] In Gudzinski Estate v Allianz Global Risks US Insurance Co the Court stated: 21 The appellant argues that the chambers judge should not have admitted the new evidence tendered by the respondent.

At the timethe chambers judge heard the appeal to her, the Rule provided that new evidence was admissible if it "is significant enough that it couldhave affected the Master's decision". The Rule (6.14(3)) has since been amended to clarify that the new evidence must be "relevant andmaterial", which carries forward the previous practice under the former Rules. Rule 6.14 accordingly provides its own internal test foradmitting new evidence on appeals from the Master: it must be "relevant and material".

Since the Rule contains its own test for newevidence, there is no longer room for the operation of the common-law test in R. v. Palmer (SCC), [1980] 1 SCR. 759, 30NR 181. It is inapplicable to appeals from a Master to a judge. [32] In Bahcheli v Yorkton Securities Inc. the Court stated: 16 Furthermore, the new Rules never said that an appeal from a Master was always on the record. Rule 6.14(3), quoted above, hasalways made an exception where the judge finds it proper to admit further evidence. That used to be a comparatively narrow exception;originally the evidence had to be arguably pivotal (to paraphrase).

But since the Rule was amended in July 2011, the exception to thesubrule is probably wider. In any event, it is now not ambiguous, and is not narrow. Now the proposed new evidence (referred to at theend) need only be "relevant and material" in the opinion of the judge hearing the appeal. The Rules on disclosure (discovery) have usedthat quoted phrase for a number of years now, and the phrase is interpreted quite broadly.

Therefore, the exception to R 6.14(3) is quitewide, making the Rule that the appeal must be "on the record" rather narrow. [33] The Appellants argue that the Residence was always intended to be the personal residence of Mr. and Mrs. Thiessen, and thatMr. and Mrs. Thiessen had, in effect, initially paid for the purchase of the property and for the construction of the Residence and,therefore, the Transfer was for value. [34] The Respondent argues that title to the Land was registered in the name of Autumn and that the Transfer was not for valuegiven the information set out in the Transfer of Land.

The Transfer of Land indicates that the value of the Land at the date of transferwas $800,000 for which Mr. and Mrs. Thiessen paid $1 and obtained a mortgage in the sum of $682,077. There was, therefore, on theface of the Transfer of Land a shortfall of some $118,000 as a result of the Transfer. [35] Clearly, the value of the Land as of the date of the Transfer (December 18, 2008) is in issue. If the value of the Land at thatdate exceeded the amounts in respect of which, at law, Mr. and Mrs.

Thiessen were entitled to receive credit (by virtue of eithercontributing personal funds or obtaining mortgage funds), then the Transfer would not have been for value. If, on the other hand, thecredits which Mr. and Mrs. Thiessen were entitled to receive at law, equalled or exceeded the value of the Land as at the date of theTransfer, the Transfer would have been for value and Builders’ would have to satisfy a more stringent test. [36] In light of the foregoing, in my view, the evidence with respect to the mortgages and the value of the Land as at December2008 is relevant and material.

It is, therefore, appropriate that I consider the Appraisal, the further documentation provided with respectto the three mortgages registered against title to the Land and the further questioning of Mr. Thiessen. 2. Did the Master err in setting aside the Transfer and directing the Registrar of Land Titles to return title to the Land to the nameand status as it existed prior to the Transfer?

[ 37 ] The Master determined on three separate bases that the Transfer should be set aside: 1. The Transfer was a fraudulent conveyance pursuant to the Fraudulent Conveyances Act, 1571 (13 Eliz 1), c 5 (the Statute of Elizabeth ); 2. The Transfer was a fraudulent preference pursuant to the Fraudulent Preferences Act , RSA 2000, c F-24; and 3. The conduct of Autumn was oppressive within the terms of the Business Corporations Act , RSA 2000, c B-9.

The Statutes [ 38 ] I turn first to a consideration of the application of the Statute of Elizabeth and the Fraudulent Preferences Act on this appeal. [ 39 ] The leading case in Alberta which has considered these two statutes is Krumm v McKay , 2003 ABQB 437 , 342 AR 169 .

Romaine J. in that case summarized the purpose of these two statutes as follows: 13 The purpose of the Statute of Elizabeth and the Fraudulent Preferences Act is to strike down all conveyances of property made with the intention of defrauding creditors, except for conveyances made for good consideration and bona fide to persons not having notice of fraud. The legislation is to be interpreted liberally, and includes any kind of transfers or conveyances made with the requisite intent to defraud or hinder creditors, no matter what the form: C.R.B.

Dunlop, Creditor-Debtor Law in Canada (2 nd Edition) Carswell, at page 598. Statute of Elizabeth [ 40 ] Romaine J. in Krumm v McKay made these findings as to the applicability of the Statute of Elizabeth : 14 Under the Statute of Elizabeth , where a transfer is made for nominal or no consideration, it is only necessary to consider whether the intent of the debtor is fraudulent in considering whether the transaction is voidable.

Cases in which fraudulent transfers for nominal consideration have been held to be voidable can be divided into two categories: those in which fraudulent intent is established as a presumption of law and those in which fraudulent intent is established as a fact in evidence: Dunlop (supra) at pages 600, 601. 15 The Respondents submit that the Statute of Elizabeth is inapplicable in this case as they submit that the transfers were made for consideration. While the Statute of Elizabeth includes an exception for bona fide transfers for consideration, it is restricted to transferees who do not have knowledge of fraud.

With respect to a transfer for value, a creditor attempting to rely on the Statute of Elizabeth must establish that the transferor had the necessary fraudulent intention and that the transferee was privy to the fraud. [ 41 ] After referring to the two categories as summarized in Krumm v McKay at para. 14 , Dunlop in Creditor-Debtor Law in Canada at 601 stated: The first classic case obviously involves an attempt by the courts to apply the statute without engaging in the metaphysical excursion into the debtor ’ s state of mind deplored by the writer in the Law Times [previously referred to in the text].

Even in the second type of case, the courts have been ready to rely on the surrounding circumstances as establishing prima facie , the intent to defraud or delay. The so called badges of fraud articulated in Twyne ’ s case are nothing more than typical and suspicious fact situations which may be enough to enable the court to make a finding of fraud unless the debtor leads evidence to rebut the presumption. Again the courts are driven to the surrounding circumstances to assist them in making the necessary finding of fact under the statute.

[42] Ritter J. (as he then was) in Alberta (Attorney General) v Doz (Samuel) Professional Corp et al (1993), (AB KB), 139 AR 198, 9 Alta LR (3d) 201 (QB) recognized that intent is difficult to prove on the basis of direct evidence and that itwould be unlikely that a debtor would publicly admit such an intent.

As a result, intent must be implied from the circumstancessurrounding the transaction which could include elements which have been classed as badges of fraud in decisions relating to the Statuteof Elizabeth. [43] Without intending to be an exhaustive list, the following have been identified as badges of fraud: 1. The consideration was grossly inadequate; 2. The transfer was accomplished quickly; 3. A close relationship exists between the parties to the conveyance; 4. The transfer was very general in nature in that it included virtually all of the assets of the transferor; 5.

The transfer was made pending the creditor’s efforts to obtain judgment; 6. The transfer documents contain false statements as to consideration; 7. The transaction was secret; 8. The transfer was made pending the writ; 9. The deed contained self serving provisions such as “the gift was made honestly, truthly and bona fide”; and 10.

The transferor continued in possession and used the goods as his or her own. (Creditor-Debtor Law in Canada; Alberta (Attorney General) v Doz (Samuel) Professional Corp; Dwyer v Fox (1996), (AB KB), 43 Alta LR (3d) 63, 190 AR 114 (QB); Krumm v McKay; Megbiz v Osprey Energy Ltd, 2006 ABQB 630, 405 AR 165;Gerrow v Dorais, 2010 ABQB 560, 503 AR 65 (QB)). [44] The Appellants submit that the Master incorrectly found that the Transfer was not for value.

The Appellants argue thatfraudulent intent cannot be presumed and Builders’ must prove an actual intent to defraud. [45] In my view, based on the evidence before the Master and the additional evidence which was submitted to me, it cannot besaid that the Transfer was for value. [46] On the face of the Transfer, the consideration is nominal, being $1. On the day of the Transfer, a mortgage in the sum of$682,077 was registered against title to the Land. The Affidavit of Transferee indicates that the value of the Land at the date of Transferwas $800,000.

Therefore, on the evidence before the Master, there was a deficiency in consideration in the sum of $117,922.

Thisdeficiency was determined on the assumption that the Personal Mortgage in the sum of $682,077 was used in full to retire the CorporateMortgage in the same amount. [47] Based on the information before me, it is now clear that the full amount of the Corporate Mortgage had not been advanced.The Trust Account Statement received from the lawyer acting in relation to the Transfer indicates that the Corporate Mortgage had beenadvanced to the sum of $558,768 and that this amount was repaid from funds advanced pursuant to the Personal Mortgage.

The $558,768advanced on the Corporate Mortgage included builders’ lien holdbacks totalling $30,430. This amount plus the balance on the PersonalMortgage in the sum of $110,977 was advanced to Mr. and Mrs. Thiessen. Net of legal fees, Mr. and Mrs. Thiessen received cash arisingfrom the Transfer in the sum of $138,332. [48] Using the $800,000 value for the Land as set out in the Affidavit of Transferee and recognizing $1 nominal consideration andthat $558,768 from the Personal Mortgage was used to pay out the Corporate Mortgage, Mr. and Mrs. Thiessen received $241,231 in

consideration in the form of cash or equity in the Land. [ 49 ] The Appellants argue that they did not in fact receive any additional value as they were entitled to repayment of the personal funds in the sum of $100,388 which they had contributed towards the initial purchase of the Land. Mr. Thiessen deposed that Autumn owed a shareholder loan to J & V Holdings

(1999) Inc. in respect of the funds provided. However, he also deposed that the purchase monies were a shareholder loan from Mr. and Mrs. Thiessen. Counsel for Builders ’ notes that although copies of cheques drawn on Mr. and Mrs. Thiessen ’ s bank accounts dated May 28, 2007 and allegedly used in the purchase of the Land were provided, there was no evidence as to the source of these funds. The initial mortgage to Autumn in the amount of $457,465 and personal guarantees were executed by both directors of Autumn. In June 2007, Mr.

Kijewski (through 1318795 Alberta Inc.) paid $10,000 towards a letter of credit required by the New Home Warranty Program. Autumn ’ s monthly bank statements for the line of credit reference payments being made on account of a “ TD Mortgage ” . [ 50 ] The Appellants also argue that shortly after receipt of the net mortgage proceeds and builders ’ lien holdbacks in the sum of $138,332, Mr. and Mrs.

Thiessen contributed $150,000 to Autumn for the purposes of Autumn ’ s operations, particularly, completion of construction of the Residence. [ 51 ] I do not accept the Appellants ’ arguments. [ 52 ] Dealing firstly with the entitlement of Mr. and Mrs. Thiessen to be repaid the funds which they contributed to purchase the Land, in my view, they stood in no better position to recover those funds than any other creditor of Autumn. Mr. Thiessen gave evidence that this particular transaction was structured in the manner it was based on advice from Autumn ’ s accountants and bankers. That may be.

However, none of the individuals giving such advice provided evidence as to why the transaction was structured in the manner it was. In any event, it appears the funds contributed personally by Mr. and Mrs. Thiessen were ultimately treated as a shareholder loan from J & V Holdings

(1999) Inc. to Autumn. The Appellants argue that this shareholder loan was retired upon the Transfer occurring. Once again, no evidence was forthcoming from the accountant for Autumn as to how this transaction was structured. The repayment of such a shareholder loan from J & V Holdings

(1999) Inc. would not address any alleged entitlement of Mr. and Mrs. Thiessen to take title to the Land personally. Further, the other evidence referred to in para. 49 hereof points to Autumn ’ s interest in the Land. [ 53 ] Dealing with the alleged contribution of the sum of $150,000 by Mr. and Mrs. Thiessen to Autumn shortly after receipt of the mortgage advance and release of the builders ’ lien holdback, the only evidence of such a contribution is a bank statement on Autumn ’ s account indicating that on February 10, 2009 a deposit in the sum of $150,000 was made.

No evidence was provided as to the source of that $150,000. Counsel for the Appellants urged me to conclude that the source had to be, in part, the mortgage advance and the builders ’ lien holdback. The Respondent argues that there is no evidence as to the source of the $150,000, and notes that the Camrose property (referred to later in these Reasons for Judgment) was mortgaged in February 2009 for $280,000. [ 54 ] This application was initially filed on September 30, 2011. The matter was argued before the Master on January 19, 2012.

As stated previously, this matter has now been argued twice before me and the Appellants were given leave to file further evidence with respect to this matter. Notwithstanding the significant length of time this matter has been outstanding, and the opportunity to provide further evidence, no evidence was tendered as to the source of the $150,000. Rather, the Appellants ask me to speculate as to the source of the funds deposited to the Autumn bank account on February 10, 2009. I am not prepared to do so. [ 55 ] Therefore, based on the evidence before me, in my view, Mr. and Mrs.

Thiessen paid a maximum of only $558,769 (retirement of the Corporate Mortgage and $1 nominal consideration) for the Land. [ 56 ] The Appellants also argue that, in any event, based on the Appraisal, the Land and Residence were valued at only $650,000 as at the date of the Transfer. I do not accept that the value of the Land as at December 18, 2008 was only $650,000. I reach this conclusion for two reasons. [ 57 ] First, based on Mr. Thiessen ’ s evidence on questioning, the qualifications which he gave to the appraiser were not accurate.

Therefore, the value of the property would be in excess of $650,000. [ 58 ] Second, all of the documents executed contemporaneously with the Transfer and the obtaining of the Personal Mortgage suggest a value significantly in excess of $650,000. As previously stated, the Affidavit of Transferee sets out the value as being

$800,000. The mortgage application executed by Mr. and Mrs. Thiessen on October 23, 2008 estimates the value of the Land and improvements to be $1,065,000. In my view, documents executed for the purposes of the Transfer and obtaining the Personal Mortgage are much more likely to be accurate as to the value of the Land and improvements than is an appraisal completed on partial information some three and one half years after the date of the Transfer. [ 59 ] In any event, given my findings with respect to the value effectively paid by Mr. and Mrs.

Thiessen for the Land being the sum of $558,769, even if the value of the Land is $650,000, Mr. and Mrs. Thiessen received $91,231 in excess of the amount they paid for the Land. [ 60 ] Based on the foregoing, it cannot be said that the Transfer was for value.

It is, therefore, appropriate to consider badges of fraud to determine if the Transfer was with the intent to defeat, hinder or delay Autumn ’ s creditors. [ 61 ] The Appellants submit that even if the Master was entitled to consider badges of fraud to determine the debtor ’ s intent, the Master erred in finding that there were sufficient badges of fraud present to infer fraudulent intent. The Master did not err in his analysis of the badges of fraud present in this case. There were numerous badges of fraud present. [ 62 ] First, there was a close relationship between Mr. and Mrs. Thiessen and Autumn.

Mr. and Mrs. Thiessen were the shareholders in J & V Holdings

(1999) Inc. which was a shareholder in Autumn. Mr. Thiessen was a director and officer of Autumn. Clearly, Mr. Thiessen knew the financial status of Autumn and knew the risk that the Land could be significantly encumbered, if not lost, if Autumn was unable to meet its financial obligations. As was the case in Krumm v McKay , the close relationship between the transferor and the transferee is the most persuasive factor leading to a finding of fraud. [ 63 ] Second, the consideration paid by Mr. and Mrs. Thiessen was grossly inadequate. As set out previously herein on the best evidence for Mr. and Mrs.

Thiessen, the consideration was $91,231 less than the value of the property ($650,000 appraised value less $558,768 Corporate Mortgage payout and $1 nominal consideration). On the worst evidence for Mr. and Mrs. Thiessen, the consideration paid was $506,231 less than the value of the property ($1,065,000 mortgage application value less $558,768 Corporate Mortgage payout and $1 nominal consideration). On either scenario, Mr. and Mrs.

Thiessen received a significant windfall and, therefore, the consideration paid for the Land was grossly inadequate. [ 64 ] Third, the Transfer of the Land divested Autumn of virtually all of its assets. While Autumn claims to have had an interest in a lot and house being built thereon in Camrose, Alberta, the evidence with respect to this property is limited. Mr. Thiessen testified at questioning that this property was registered in his name personally, on the advice of professional advisors, although the intention was that this property would be Autumn ’ s asset.

The evidence is not clear as to when this property was disposed of, whether there were net proceeds from the disposal of this property and if so, what happened to those proceeds. Whatever the status of the Camrose Property, it seems clear that the Transfer of the Land to Mr. and Mrs.

Thiessen was a disposal of virtually all of Autumn ’ s assets. [ 65 ] The Appellants argue that this badge of fraud is intended to cover a situation in which the debtor has multiple assets and the transaction being challenged is essentially a “ fire sale ” or a liquidation of assets at below market value. [ 66 ] I do not find support for this submission in the authorities. In my view, a consideration of this badge of fraud is undertaken to determine if the impugned transaction will have the effect of depriving a creditor of an ability to recover the debt from the debtor ’ s assets.

Whether the debtor has one or multiple assets which would otherwise be available to the creditor to realize upon is irrelevant to this consideration where the transaction puts those assets beyond the reach of the creditor. [ 67 ] Fourth, the Transfer was done in relative secrecy. I say this as Mr. and Mrs. Thiessen did nothing in their dealings with Builders ’ to bring to Builders ’ attention the fact that the Transfer was being undertaken. It is true that Builder ’ s could have learned of the Transfer by conducting a Land Titles Office search.

In the circumstances of this matter, Builders ’ had no information that would have led it to do so. [ 68 ] I accept that there is some evidence to support Mr. Thiessen ’ s contention that it was intended from the outset that ultimately Mr. and Mrs. Thiessen would reside in the Residence and, presumably, it would become their property. The additional evidence obtained

with respect to the mortgages registered against title to the Land suggests that this was in fact discussed with the mortgagee from the outset. While it is true that the initial deposits totalling $17,500 were received from Mr. Thiessen personally, there is no evidence to suggest that Builders ’ , in any way, believed it was dealing with anyone other than Autumn during the course of the supply of its work and materials. Indeed, Mr. Thiessen acknowledged in his testimony that Builders ’ completed the supply of work and materials at his request as an officer of Autumn.

Further, some six months after the Transfer, Autumn made a partial payment to Builders ’ in the sum of $10,000. [ 69 ] Mr. and Mrs. Thiessen received a substantial benefit from the Transfer and I find that their dealings with representatives of Builders ’ did nothing to alert Builders ’ that its position may be impacted by a pending Transfer. [ 70 ] In my view, the foregoing are sufficient badges of fraud to presume fraudulent intent with respect to the Transfer. Mr. Thiessen has deposed that the steps were taken based on professional advice.

However, from the evidence before me, the financial arrangements with respect to Autumn ’ s operations were haphazard at best. Further, they were either poorly documented, or the Court has not been provided with some of the relevant documentation. Mr. Thiessen, as a principal of Autumn and Mr. and Mrs. Thiessen through their shareholdings in J & V Holdings

(1999) Inc., appear to have treated Autumn ’ s property as their own and, in my view, this is effectively what they did in having the Land transferred to their names personally. If there were legitimate business reasons for the Transaction and for the financial operations of Autumn, such evidence was not put before the Court. [ 71 ] In the circumstances, the onus was on Autumn and Mr. and Mrs. Thiessen to rebut the presumption of fraud. They have failed to do so.

The Master was, in my view, correct in determining that the Transfer was a fraudulent conveyance within the terms of the Statute of Elizabeth and in granting the Order which he did. [ 72 ] If I am wrong, and the transfer was for valuable consideration, the test would be more stringent. Dunlop wrote at 609: The principal problem in establishing that a transfer for value falls within the statute is to prove that the transferor had the necessary fraudulent intent and that the grantee was privy to the fraud... ...When we turn to transfers for value, it appears that there is no presumption which can establish fraud...

Therefore, Builders ’ would have the onus in this case to establish as a fact that Autumn had the necessary fraudulent intention and that Mr. and Mrs. Thiessen were privy to the fraud. [ 73 ] In my view, for the reasons stated above, the badges of fraud in this case are sufficient to meet Builders ’ onus even under this more stringent test. Intent to defraud is reasonably inferred from all the circumstances surrounding the Transfer, and Mr. and Mrs. Thiessen were clearly privy to the fraud. There is no evidence of a bona fide attempt to sell the Land. Mr. and Mrs.

Thiessen obtained a benefit through repayment of the shareholder loan from J & V Holdings

(1999) Inc. and removal of the Residence which they personally resided in from Autumn ’ s exigible asset base. I find, as did Romaine J. in Krumm v McKay , that this constituted an indirect benefit to the transferor, Autumn.

Fraudulent Preferences Act [ 74 ] The Fraudulent Preferences Act renders void any conveyances of real or personal property with the intent to defeat, hinder, delay or prejudice the debtor ’ s creditors at a time when the debtor is in insolvent circumstances. [ 75 ] Romaine J. in Krumm v McKay stated: 35 The Fraudulent Preferences Act is more restrictive than the Statute of Elizabeth in its application, in that it requires that the debtor be insolvent. In addition, the Alberta Act does not use the term, “ creditors and others ” as in the Statute of Elizabeth , but is limited in its application to “ creditors ” .

[76] Thus, the analysis under the Fraudulent Preferences Act is similar to that under the Statute of Elizabeth except that theFraudulent Preferences Act is more restrictive because the debtor must be insolvent and is limited to “creditors” as opposed to “creditorsand others”. The time for determination if the debtor was insolvent is the time of the impugned transaction: Krumm v McKay para. 41.

Ifthe facts necessary to prove insolvency are not and could not be within the knowledge of the applicant, the evidentiary burden shifts tothe respondent to disprove insolvency at the relevant times: Alberta (Attorney General) v Doz (Samuel) Professional Corporation. [77] As set out in my analysis in respect of the Statute of Elizabeth, the Transfer was a conveyance of the Land by Autumn withthe intent to defeat, hinder, delay or prejudice Autumn’s creditors.

The issues pursuant to the Fraudulent Preferences Act in this case, are,therefore, whether Builders’ was a creditor and whether Autumn was insolvent at the time. [78] Builders’ was a creditor of Autumn as at the date of the Transfer. The general meaning of “creditor” is a person to whom adebt is payable: First Edmonton Place Ltd v 315888 Alta Ltd (1988), (AB KB), 60 Alta LR (2d) 122 at 163, 40 BLR28 (QB), var’d (1989), (AB CA), 71 Alta LR (2d) 61, [1989] AJ No 1021 (CA).

As at the date of the Transfer,Builders’ had commenced the supply of work and materials to Autumn in respect of the construction of the Residence. A debt was,therefore, owing by Autumn to Builders’. A party who is owed a debt which may not yet be payable, is nevertheless a creditor pursuantto the Fraudulent Preferences Act: Krumm v McKay at para 40. Therefore, while Builders’ may not yet have submitted invoices toAutumn at the date of the Transfer it was, nonetheless, a creditor pursuant to the Fraudulent Preferences Act. [79] Autumn was insolvent at the time of the Transfer. Mr.

Thiessen testified that at the time of the Transfer, the only asset ownedby Autumn was the Land, a line of credit which Autumn had with TD Canada Trust was overdrawn beyond its maximum limit of$50,000, and Autumn was never in a position to pay debts as they became due, outside of funds that were provided by Mr. and Mrs.Thiessen. While at the time of the Transfer there may have been some equity in the Land, the Appellants have failed to disprove theinsolvency of Autumn at that time. To the contrary, Mr. Thiessen’s evidence leads to the conclusion that Autumn was insolvent at thematerial time.

I therefore find that Autumn was in insolvent circumstances as at the date of the Transfer. [80] The Transfer was, therefore, a fraudulent transfer within the terms of the Fraudulent Preferences Act. The Master, in myview, was correct in holding that the Transfer was void as against Autumn’s creditors and properly gave the Order which he did. Business Corporations Act [81] The Business Corporations Act, RSA 2000, c B-9 (BCA) permits a “complainant” to apply for an oppression remedy: 239(b) “complainant” means ... (iii) a creditor (

B) in respect of an application under

section 242, if the Court exercises its discretion under subclause (iv), or (iv) any other person who, in the discretion of the Court, is a proper person to make an application under this Part. ... 242(1) A complainant may apply to the Court for an order under this section.

(2) If, on an application under subsection (1), the Court is satisfied that in respect of a corporation or any of its affiliates

(

a) any act or omission of the corporation or any of its affiliates effects a result, (

b) the business or affairs of the corporation or any of its affiliates are or have been carried on or conducted in a manner, or (

c) the powers of the directors of the corporation or any of its affiliates are or have been exercised in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer, theCourt may make an order to rectify the matters complained of. [82] In Peoples Department Stores Inc (Trustee of) v Wise, [2004] 3 SCR 461, 2004 SCC 68, the Court commented generally onthe status of creditors in Canada: 48 The Canadian legal landscape with respect to stakeholders is unique.

Creditors are only one set of stakeholders, but their interestsare protected in a number of ways. Some are specific, as in the case of amalgamation: s. 185 of the CBCA. Others cover a broad range ofsituations. The oppression remedy of s. 241(2)(

c) of the CBCA and the similar provisions of provincial legislation regarding corporationsgrant the broadest rights to creditors of any common law jurisdiction: see D. Thomson, "Directors, Creditors and Insolvency: A FiduciaryDuty or a Duty Not to Oppress?" (2000), 58 U.T. Fac. L. Rev. 31, at p. 48. One commentator describes the oppression remedy as "thebroadest, most comprehensive and most open-ended shareholder remedy in the common law world": S. M. Beck, "MinorityShareholders' Rights in the 1980s", in Corporate Law in the 80s (1982), 311, at p. 312.

While Beck was concerned with shareholderremedies, his observation applies equally to those of creditors. 49 The fact that creditors' interests increase in relevancy as a corporation's finances deteriorate is apt to be relevant to, inter alia, theexercise of discretion by a court in granting standing to a party as a "complainant" under s. 238(

d) of the CBCA as a "proper person" tobring ... an oppression remedy claim under s. 241 of the CBCA. [83] It is interesting to note that although s. 241 of the Canadian Business Corporations Act, RSC 1985, c. C-44 (CBCA) is verysimilar to s. 242 of the BCA, the definition of "complainant" under the CBCA does not expressly include a creditor. [84] As noted by the Court in Remo Valente Real Estate

(1990) Ltd v Portofino Riverside, 2010 ONSC 280, 261 OAC 326 (DivCt) at paras. 19 and 20, while there is case law to the effect that debt actions should not be routinely turned into oppression actions (seefor example First Edmonton Place Ltd v 315888 Alta Ltd. (CA), R v Sands Motor Hotel Ltd (1984), (SK KB), 28BLR 122 (Sask QB)), creditors have been given status as complainants against a corporation where those in control of the corporationhave stripped the corporation of assets or dissipated assets rendering it immune from a judgment in favour of the creditor. [85] The Court in A E Realisations

(1985) Ltd v Time Air Inc (1994), (SK KB), [1995] 3 WWR 527 (SaskQB); aff’d on other grounds (1995), (SK CA), [1995] 6 WWR 423 (Sask CA) held that “complainant” under s. 241 ofthe CBCA can include contingent claimants for an unliquidated demand in the category of a creditor. McDonald J. contemplated thisresult under the BCA at para. 53 in First Edmonton Place Ltd. v 315888 Alta. Ltd. [86] McDonald J. also set out the general principles applicable to oppression actions under the BCA in First Edmonton Place Ltd.v 315888 Alta Ltd. (QB).

He held that the applicant was bound to establish at least a prima facie case of having been subjected tooppressive or unfairly prejudicial actions or actions that unfairly disregarded its interests.

McDonald J. further held that the test of unfairprejudice or unfair disregard should encompass the following considerations: the protection of the underlying expectation of a creditor inits arrangement with the corporation, the extent to which the acts complained of were unforeseeable or the creditor could reasonablyhave protected itself from such acts, and the detriment to the interests of the creditor. [87] The Supreme Court in BCE Inc v 1976 Debentureholders, 2008 SCC 69, [2008] 3 SCR 560 discussed the oppression remedyunder s. 241 of the CBCA:

45 A third remedy, grounded in the common law and endorsed by the CBCA , is a s. 241 action for oppression...[which] focuses on harm to the legal and equitable interests of stakeholders affected by oppressive acts of a corporation or its directors. This remedy is available to a wide range of stakeholders - security holders, creditors, directors and officers. ... 68 In

summary, the foregoing discussion suggests conducting two related inquiries in a claim for oppression:

(1) Does the evidence support the reasonable expectation asserted by the claimant? and

(2) Does the evidence establish that the reasonable expectation was violated by conduct falling within the terms "oppression", "unfair prejudice" or "unfair disregard" of a relevant interest? [ 88 ] The Court held that in assessing the first question, useful factors in determining whether a reasonable expectation exists include: general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicts between corporate stakeholders. [ 89 ] The learned Master cited the reasonable expectations listed in MA Springman et al, Frauds on Creditors: Fraudulent Conveyances and Preferences (Toronto: Thompson Reuters Canada Limited, 2009) at 24 - 12.1, 24-13, 24-15, 24-16: 1.

A creditor reasonably expects that a corporation will not be used as a vehicle for fraud; 2. A creditor reasonably expects that the debtor will not convey away, for no consideration, exigible assets which will leave the creditor unpaid and unable to realize upon assets to satisfy the debt; 3. A creditor reasonably expects that the directors of a corporation will manage the company in accordance with their legal obligations, namely to act honestly and in good faith in the best interests of the corporation and to exercise the diligence expected of a reasonably prudent person; and 4.

A creditor reasonably expects that the debtor will honour the understandings and expectations which the debtor has created and encouraged. [ 90 ] These reasonable expectations relate to the fiduciary duties of directors.

The Supreme Court in BCE Inc v 1976 Debentureholders stated: 82 The cases on oppression, taken as a whole, confirm that the duty of the directors to act in the best interests of the corporation comprehends a duty to treat individual stakeholders affected by corporate actions equitably and fairly. ...In each case, the question is whether, in all the circumstances, the directors acted in the best interests of the corporation, having regard to all relevant considerations, including - but not confined to - the need to treat affected stakeholders in a fair manner, commensurate with the corporation's duties as a responsible corporate citizen. [ 91 ] I find that Builders ’ reasonably entertained an expectation that, assuming fair dealing, its chances of repayment would not be frustrated by the Transfer, and that it can establish a prima facie case of having been subjected to the type of conduct targeted by s. 242(2) of the BCA . [ 92 ] While it is true that Builders ’ could have filed a builders ’ lien in this case or taken some other form of security from Autumn so as to protect itself, in my view, this alone does not disentitle Builders ’ from pursuing an oppression remedy.

There is nothing in the evidence to suggest that such steps were necessary and in the circumstances, it was reasonable for Builders ’ to expect that Autumn would be operated in an appropriate manner and in a way which was not oppressive to Builders ’ interests. Builders ’ had commenced provision of work and materials to the Residence prior to the Transfer. The construction of the Residence was a relatively simple and typical construction project.

At that point in time, there was nothing to suggest that Builders ’ was at risk of not being paid and there was, therefore, no reason for Builders ’ to either file a builders ’ lien or seek some other form of security. Therefore, Builders ’ is a proper

person to bring an oppression application. [ 93 ] Further, I find that Autumn unfairly disregarded Builders ’ reasonable expectations as a creditor. The Transfer of Land removed, for little or no consideration, Autumn ’ s only asset. This was conduct that was oppressive, unfairly prejudicial and that unfairly disregarded the interests of Builders ’ as a creditor. [ 94 ] I conclude that the Master did not err in finding that Builders ’ had established entitlement to an oppression remedy. VI.

Conclusion [ 95 ] The Master correctly determined that the Transfer was a fraudulent conveyance pursuant to the Statute of Elizabeth and a fraudulent preference pursuant to the Fraudulent Preferences Act .

Further, he correctly concluded that Builders ’ had established entitlement to an oppression remedy pursuant to the BCA . [ 96 ] Therefore, his Order stands, directing the return of the registration of title to the Land to the name and status of the registered owner as existed prior to the Transfer and directing that Builders ’ may seize and sell the Land and apply the proceeds to Builders ’ Writ of Enforcement after payment of any priority interest. [ 97 ] The parties may speak to me within 30 days of the release of these Reasons for Judgment if they are otherwise unable to agree on costs on this appeal.

Heard on the 1 st day of June, 2012 and the 16 th day of October, 2012. Dated at the City of Edmonton, Alberta this 14 th day of January, 2013. K.G. Nielsen J.C.Q.B.A. Appearances: Patrick D. Kirwin and Jennifer Liddle Kirwin LLP for the Plaintiff (Respondent) Andrew R. Fraser Snyder & Associates LLP for the Defendants (Appellants)