Case information

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Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Appeals — Creditor and debtor — Personal guarantee — Real property — Fraudulent conveyance — Creditor collecting on personal guarantee — Creditor claiming transfer of real property to daughters was fraudulent transfer intended to defeat its claim on loan guarantee — Creditors claim dismissed in Court of Queen’s Bench — Majority of Court of Appeal allowing creditor’s appeal and ordering new trial — What evidentiary standard is required to rebut presumption raised by “badges of fraud” where creditor seeking to set aside transfer of property between relatives as fraudulent conveyance or preference — Whether trial judge’s findings of fact can be reversed on basis trial judge was required to “more fully explain” why certain evidence was found to be unhelpful.

The respondent, Paragon Capital Corporation Ltd. sought a declaration that the transfer of a residence that the applicant, Gail Morgan had purchased for approximately $1 million, to her two daughters, the applicants, Cara and Janna-Joy Morgan, constituted a fraudulent preference, and that, as a result of that transfer Paragon had been injured, prejudiced or delayed. Paragon plead the Statute of Elizabeth, 13 Eliz. 1, c. 5 and the Fraudulent Preferences Act, R.S.A. 2000, c. F-24 as amended, and sought a declaration that the transfer was a fraudulent conveyance or alternatively a fraudulent preference, and an order that Cara Morgan and Janna-Joy Morgan convey the lands to it in trust for execution by the creditors of Gail Morgan. The Morgans denied that the transfer was either a fraudulent preference or a fraudulent conveyance. They counterclaimed for damages.
The trial judge concluded that the transfer of the property was bona fide and not for a fraudulent purpose. He allowed the counter-claim. A majority of the Court of Appeal allowed the appeal, set aside the judgment on both the claim and counter-claim and ordered a new trial.