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Fraud - 'Badges of Fraud'. 6071376 Canada Inc. v. Khedmatgozar
In 6071376 Canada Inc. v. Khedmatgozar (Ont CA, 2024) the Ontario Court of Appeal considered a case of fraudulent conveyance, here focussing on 'badges of fraud':[9] As Laskin J.A. explained in FL Receivables Trust 2002-A v. Cobrand Foods Ltd., 2007 ONCA 425, 85 O.R. (3d) 561, at paras. 39-40:The crucial question in any fraudulent conveyance action is whether the plaintiff has proved the fraudulent intent of the debtor. While the legal burden to prove fraudulent intent remains on the plaintiff throughout the trial, the plaintiff can raise an inference of fraud sufficient to put a "burden of explanation" on the defendant debtor. The plaintiff typically raises an inference of fraud by putting forward "badges of fraud". These "badges of fraud" vary from case to case. They are no more than typical and suspicious facts that may allow the court to make a finding of fraud absent an explanation from the debtor. See C.R.B. Dunlop, Creditor-Debtor Law in Canada, 2nd ed. (Toronto: Thomson Canada, 1995) at 613-15.
The court, however, is not compelled to draw this inference of fraudulent intent from badges of fraud pleaded by the plaintiff. See Koop v. Smith (1915), 1915 CanLII 26 (SCC), 51 S.C.R. 554, at pp. 558-59. The court may dismiss a fraudulent conveyance action because it has decided that the surrounding circumstances taken as a whole explain away the plaintiff's evidence. [10] To the same effect, as noted in in Montor Business Corporation v. Goldfinger, 2016 ONCA 406, 351 O.A.C. 241, at para. 72, leave to appeal refused [2016] S.C.C.A. No. 361:An inference of intent may arise from the existence of one or more badges of fraud. However, the presence of such indicia does not mandate a finding of intent. Whether the intent exists is a question of fact to be determined from all of the circumstances as they existed at the time of the conveyance: see Re Fancy (1984), 1984 CanLII 2031 (ON SC), 46 O.R. (2d) 153 (H. Ct. J.), at p. 159.
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