Dec 1, 2017


Wilfert v. McCallum, 2017 ONCA 895 (CanLII)

[Feldman J.A. (In Chambers)]


P Starkman, for the moving parties

S A Hashim, for the responding parties

Keywords: Civil Procedure, Judgments, Enforcement, Fraudulent Conveyances, Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, s. 2, Gauthier v. Woollatt, [1940] 1 D.L.R. 275 (Ont. Sup. Ct.), Pleadings, Motions to Strike, No Reasonable Cause of Action, Rules of Civil Procedure, Rule 21, Pleading Fraud, Rules of Civil Procedure, Rule 25.06(8), Balanyk v. University of Toronto (1999), 1 C.P.R. (4th) 300 (Ont. S.C.), Bankruptcy and Insolvency, Assignments of Causes of Action, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 38


The action was brought under s. 38 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”), for an order setting aside as a fraudulent conveyance, the 1993 conveyance by McCallum of his one half interest in the matrimonial home to his wife, Boughner. The appellants have appealed the dismissal of the action under Rule 21, and bring a motion seeking a stay to prevent Boughner from disposing of the property pending the appeal. The appellants are judgment creditors of the respondent McCallum, as a result of an action for defamation they brought against him in respect of statements made in 2014. They obtained default judgment on May 12, 2015, following which, McCallum filed an assignment in bankruptcy in September 2015. The appellants obtained an assignment of rights under s. 38 of the BIA to bring the fraudulent conveyance action.


(1) Should the order dismissing the action and setting aside a certificate of pending litigation be stayed pending the hearing of the appeal?

Holding: Motion dismissed.


(1) No. The primary legal issue on the appeal is whether the 1993 conveyance was a fraudulent conveyance within the meaning of s. 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, and whether the appellants are “creditors or others” within the meaning of the section. Section 2 provides: 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.

The appellants became creditors of the respondents many years after the impugned conveyance. The leading case on the test for when a subsequent creditor can set aside a conveyance as fraudulent is Gauthier v. Woollatt, [1940] 1 D.L.R. 275 (Ont. Sup. Ct.), which identified two circumstances: (i) if there remains unpaid a creditor from the time of the conveyance who would have been entitled to impeach the conveyance; or (ii) if the debtor’s purpose in making the conveyance was to defraud present and future creditors generally.

On the record before the court, there was a mortgage on the property to the Royal Trust Corporation of Canada at the time of the conveyance, which was discharged in 2007. There is a bare pleading that there were other creditors, beyond Royal Trust, in 1993 and that the respondents’ intent was to defraud. However, there are no particulars whatsoever to support that bare allegation. The appellants rely on the principle that on a Rule 21 motion the facts pleaded are taken to be true. However, that principle must be tempered by the principle that fraud must be pleaded with particularity: see Rule 25.06(8); Balanyk v. University of Toronto (1999), 1 C.P.R. (4th) 300 (Ont. S.C.), at para. 28.

In the court’s view, on the basis of the record and the law, the issue to be heard on appeal cannot be said to be a serious one. The appellants filed no evidence to support a claim of irreparable harm, or to demonstrate that the balance of convenience favours the granting of a stay pending appeal. They rely on the discharge of the CPL as establishing irreparable harm. However, there is no evidence that the respondent Boughner intends to sell the property imminently, or that if she did, the proceeds would not be available to satisfy a judgment if the appeal were to be successful.