Fraudulent Conveyance and Preserving Assets Before Collecting a Judgment in Ontario

Imagine you are about to sue a debtor — or you have just obtained a judgment — and you discover that last month they transferred their house to a spouse, gifted a vehicle to their adult child, or moved money into a company they control. If those transfers were designed to put assets beyond your reach, Ontario law may let you undo them.

Fraudulent conveyance is the legal concept that protects creditors when debtors deliberately move assets to defeat legitimate claims. This article explains what counts as a fraudulent conveyance in Ontario, how to challenge a suspect transfer, and what proactive steps a creditor can take to preserve their claim before a debtor has the chance to strip assets away.

What Is a Fraudulent Conveyance?

A fraudulent conveyance is a transfer of property made with the intent to defraud, delay, or hinder a creditor's ability to collect a debt. Ontario's Fraudulent Conveyances Act allows courts to void these transfers and treat the property as if it still belongs to the debtor — making it available for enforcement.

Critically, the law does not require that you prove the debtor signed a document saying "I am doing this to cheat my creditors." Intent can be inferred from the circumstances, particularly where certain hallmarks (called "badges of fraud") are present.

The Assignments and Preferences Act

Ontario also has the Assignments and Preferences Act, which addresses a related but distinct problem: a debtor who is insolvent preferring one creditor over another by paying them ahead of everyone else, or transferring property to a favoured party when debts are pressing.

While the Fraudulent Conveyances Act targets transfers meant to defeat creditors, the Assignments and Preferences Act targets preferential transfers that give one creditor an unfair advantage over others. Both statutes can be relevant depending on the specific facts.

Badges of Fraud: What Courts Look For

When courts assess whether a transfer was fraudulent, they look for warning signs:

• Transfer to a related party — spouse, parent, child, sibling, or a company owned or controlled by the debtor
• Little or no consideration — the asset was gifted or sold for far below market value
• Timing — the transfer happened shortly before or after a lawsuit was filed, or when debts were already pressing
• Debtor became insolvent shortly after the transfer
• Secrecy — the transfer was not disclosed or was structured to hide it
• The debtor retained control — they transferred legal ownership but continued to use or control the asset

No single factor is conclusive, and courts look at the full picture. A transfer to a spouse for genuine fair-market consideration, documented and completed long before any dispute arose, is likely legitimate. A transfer of a home to an adult child for $2 after a lawsuit is filed looks very different.

How to Challenge a Fraudulent Conveyance

Step 1: Act Quickly

There is a limitation period for challenging transfers under the Fraudulent Conveyances Act. As of writing, you generally have a limited window from when you discovered or ought to have discovered the transfer. Delay weakens your position and may bar your claim entirely. Verify current limitation periods with a litigation lawyer before acting.

Step 2: Gather Evidence of the Transfer

• Land registry records (for real property transfers)
• Corporate registry records (for share transfers or business asset transfers)
• Bank statements (if available through discovery)
• Court records from the judgment debtor examination

Often, the fact of the transfer and its timing are discoverable through public records alone.

Step 3: Commence a Court Application or Claim

To set aside a fraudulent conveyance, you typically bring an application or claim in the Superior Court of Justice asking the court to:

1. Declare the transfer void as against you (the creditor)
2. Order that the property be treated as still belonging to the debtor for purposes of your enforcement

The person who received the property (the transferee) is a necessary party to this proceeding. They have the right to respond and present evidence that the transfer was legitimate.

Step 4: Protect the Asset While the Claim Is Pending

If you are concerned the recipient might further transfer the asset before the court rules, you can seek an interlocutory injunction to freeze it. This is an emergency remedy that requires you to show:

• A serious issue to be tried
• Irreparable harm if the injunction is not granted
• The balance of convenience favours granting the order

Injunctions in this context are available but require prompt action and legal counsel.

Preserving Assets Before Judgment: The Mareva Injunction

Before you even have a judgment, if you believe a debtor is about to dissipate or move assets to defeat your eventual claim, Ontario courts can grant a Mareva injunction (also called a freezing order). This is a pre-judgment remedy that freezes specific assets while the litigation is ongoing.

Mareva injunctions are exceptional remedies. To obtain one, you must satisfy a high test:

• You have a strong prima facie (on its face) case
• The debtor has assets in Ontario
• There is a real risk the debtor will remove or dissipate those assets before judgment
• The balance of convenience favours granting the order

Courts also typically require you to provide an undertaking as to damages — you promise to compensate the debtor if the injunction turns out to have been wrongly granted. This is a significant commitment.

Given the complexity, a Mareva injunction is a remedy for urgent situations where the evidence is strong and the risk is real. Legal representation is essential.

Frequently asked questions