Guthrie v. Abakhan & Associates Inc.

2017 BCCA 102 Guthrie v. Abakhan & Associates Inc.

COURT OF APPEAL FOR BRITISH COLUMBIA Citation: Guthrie v. Abakhan & Associates Inc., 2017 BCCA 102 Date: 20170302 Docket: CA44044

IN THE MATTER OF THE BANKRUPTCY OF DAWN LANELLE MICHIE Between: Jodi Lynn Guthrie formerly Jodi Lynn Waters formerly Jodi Lynn Michie Appellant (Appellant) And Abakhan & Associates Inc. Respondent (Respondent) Before: The Honourable Madam Justice Newbury The Honourable Mr. Justice Goepel The Honourable Mr. Justice Savage On appeal from: An order of the Supreme Court of British Columbia, dated November 3, 2016 (Guthrie v. Abakhan & Associates Inc., 2016 BCSC 2030, Vancouver Registry Docket B150483). Counsel for the Appellant: J.R. Shewfelt Counsel for the Respondent: J.L. Williams Place and Date of Hearing: Vancouver, British Columbia February 1, 2017 Place and Date of Judgment: Vancouver, British Columbia March 2, 2017 Written Reasons by: The Honourable Madam Justice Newbury Concurred in by: The Honourable Mr. Justice Goepel The Honourable Mr. Justice Savage Summary: In context of matrimonial litigation, appellant obtained order requiring former husband to pay child support arrears (which he then paid in full) and declaring that his transfer of certain property to second wife was a fraudulent conveyance. Trial judge later made costs order in favour of appellant, which she registered in Land Title Office as a charge against the property. Property was eventually sold on foreclosure and net proceeds paid into court. Transferee declared bankruptcy. Appellant sought possession of

net proceeds but trustee in bankruptcy disputed claim. Chambers judge found appellant's rights against property had been restricted to child support arrears and did not extend to costs judgment. Held: appeal allowed. Judge erred in holding that declaration under Fraudulent Conveyance Act ("FCA") applied only to support arrears order. Discussion of appropriate form of order and consequences of order when conveyance is declared to be "void" under FCA. Once conveyance is declared fraudulent, it remains fraudulent and is ineffective as against all creditors of transferor who are hindered or delayed by the conveyance, even if at a later date. Judge also erred in relying on trial judge's reasons rather than order itself, which permitted registration of "judgments" against property. Trustee must make remaining sale proceeds available to appellant to the extent necessary to enforce costs order and any other judgment she may obtain. Reasons for Judgment of the Honourable Madam Justice Newbury: [1] Compared to its Elizabethan ancestor, the Fraudulent Conveyance Act, R.S.B.C. 1996, c. 163 seems a model of brevity and modernity. The entire statute is in two sections: 1 If made to delay, hinder or defraud creditors and others of their just and lawful remedies (a) a disposition of property, by writing or otherwise, (b) a bond, (c) a proceeding, or (d) an order is void and of no effect

against a person or the person's assignee or personal representative whose rights and obligations are or might be disturbed, hindered, delayed or defrauded, despite a pretence or other matter to the contrary. 2 This Act does not apply to a disposition of property for good consideration and in good faith lawfully transferred to a person who, at the time of the transfer, has no notice or knowledge of collusion or fraud. [Emphasis added.] But as one might expect of a statute that has existed in one form or another since 1571, the Act has become encrusted with age and obscurities. Its terms have been glossed and interpreted far beyond what the modern reader might understand them to mean, to the point that, as stated by the Law Reform Commission of British Columbia in its Report on Fraudulent Conveyances and Preferences (1988), the law relating to fraudulent conveyances is more accurately stated "without paying too close attention to the provisions of the Fraudulent Conveyances Act." (At 11.) [2] This appeal raises questions about the practical operation of the Act that have not been uniformly answered by courts in this province. In general terms, these questions are the same as those posed by M.A. Springman, George R. Stewart and J.J. Morrison in their text, Frauds on Creditors: Fraudulent Conveyances and Preferences (2016, looseleaf): Precisely what happens when a court sets aside

a fraudulent conveyance? What does it mean to say that a conveyance is good as between the parties, but void as between the debtor and his or her creditors? Where land has been transferred, what, if anything, happens to the title register where the creditor is successful in impeaching the transaction? [At 7‒18.] Factual Background [3] In this instance, the issues arise in the context of matrimonial litigation that took place some years ago between the appellant Ms. Guthrie and her former husband, Mr. Michie. After a trial in late 2011, Madam Justice Humphries of the Supreme Court of British Columbia made a lengthy order (the "Trial Order") that inter alia required Mr. Michie to pay child support arrears to Ms. Guthrie totalling some $19,000. The arrears were paid in full some time ago. [4] Another term of the Trial Order concerned a transfer of certain residential property (the "Alderwood Property") carried out by Mr. Michie in favour of his second wife, Dawn Michie, for no consideration in 2008. Humphries J. found that this had been a fraudulent conveyance intended "to make it more difficult for someone with a claim against Mr. Michie to get at the house." (See 2012 BCSC 639 at para. 169.) The relevant part of the Trial Order stated: 10. The transfer by James Alexander Michie to Dawn Lanelle Michie of the lands and premises located at 1104 Alderwood Avenue, Port Coquitlam, British Columbia (the "Alderwood Property") was a fraudulent conveyance within the meaning of the Fraudulent Conveyance Act, , and is void and of no force and effect insofar as it affects the rights of the Claimant Jodi Lynn Waters [Ms. Guthrie] as judgment creditor of the Respondent James Alexander Michie.

11. The Claimant [Ms. Guthrie] is entitled to pursue her just and lawful remedies as a judgment creditor against the Respondent James Alexander Michie as if he were still the legal and beneficial owner of the Alderwood Property to the same extent as he was before the transfer of the Alderwood Property, including that the Claimant is entitled to register judgments against James Alexander Michie on Dawn Lanelle Michie's title to the Alderwood Property. [Emphasis added.] [5] The Trial Order also gave each party liberty to apply for further orders in relation to costs. Later, in December 2012, Humphries J. declined, after hearing argument, to order special costs against Mr. Michie, but did order that costs should be assessed against him at Scale B. (See 2012 BCSC 1942.) The costs have not yet been assessed, but are estimated to be in excess of $168,000. [6] On May 17, 2013, Ms. Guthrie registered her costs judgment as a charge against title to the Alderwood Property in the New Westminster Land Title office. At that time, there were already mortgages and other charges registered against the Property. Eventually one of the mortgagees began foreclosure proceedings and the Property was sold. The mortgages were paid off in accordance with an order of a Master, leaving sale proceeds of some $108,000, which were paid into court. [7] On January 30, 2015, Dawn Michie, the transferee of the

Alderwood Property, became bankrupt. According to her statement of affairs, the proceeds paid into court constitute her only significant asset. In the existing foreclosure action (in which Ms. Guthrie was a respondent), a judge of the Supreme Court ordered that the funds in court be paid to Abakhan & Associates Inc. ("Abakhan"), as the trustee in bankruptcy of Dawn Michie. Ms. Guthrie did not appear at the hearing of that application. [8] Shortly thereafter, however, Ms. Guthrie filed a proof of claim under s. 81(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 ("BIA") seeking possession of the funds in court. Abakhan filed a Notice of Dispute in respect of Ms. Guthrie's claim, taking the position that she was only an unsecured creditor of Mr. Michie. The trustee asserted that the term of the Trial Order declaring the transfer of the Alderwood Property void and of no effect insofar as it affected Ms. Guthrie's rights against Mr. Michie, had been restricted to the child support arrears he had owed at the date of the Trial Order. Since that obligation had been satisfied, the Order had effectively been spent. Abakhan summarized its position thus: The decision of Madam Justice Humphries did not purport to (a) determine Dawn's interests in the Alderwood property, (b) give [Ms. Guthrie] priority over other creditors with judgments registered against the property, or (c)

give [Ms. Guthrie] rights greater than those of an unsecured creditor. Accordingly, the Trustee disputes the claim for property by [Ms. Guthrie]. [At paras. 15-6.] [9] Ms. Guthrie appealed the trustee's Notice of Dispute in accordance with s. 81(2) of the BIA. Her stated grounds of appeal were that: (a) [Abakhan] erred by deciding that the May 3, 2012, fraudulent conveyance declaration of the Honourable Madam Justice Humphries in Vancouver Registry Action No. D109625: (i) does not apply to the costs awarded to the Appellant against James Michie in that action; (ii) did not determine the Bankrupt's [Dawn Michie's] interest in the Alderwood property vis-à-vis the Appellant; and (iii) did not give the Appellant priority over, or greater rights than, the Bankrupt's creditors. She sought an order setting aside the Notice of Dispute, and costs. The Chambers Judge's Reasons [10] The matter came before the chambers judge below on October 6, 2016. He began his reasons by describing the factual background, and then noted the "legislative framework", namely s. 70(1) of the BIA, which provides: 70(1) Every bankruptcy order and every assignment made under this Act takes precedence over all judicial or other attachments, garnishments, certificates having the effect of judgments, judgments, certificates of judgment, legal hypothecs of judgment creditors, executions or other process against

the property of a bankrupt, except those that have been completely executed by payment to the creditor or the creditor's representative, and except the rights of a secured creditor. and s. 86 of the Court Order Enforcement Act, R.S.B.C. 1996, c. 78: 86 (1) In this section, "purchaser" includes lessee or mortgagee. (2) After October 30, 1979, a judgment entered or obtained in British Columbia may be registered against the title to specified land in any or all of the land title offices in the manner provided in section 88. (3) From the time of its registration the judgment forms a lien and charge on the land of the judgment debtor specified in the application referred to in section 88 in the same manner as if charged in writing by the judgment debtor under his or her signature and seal, (a) to the extent of his or her beneficial interest in the land, (b) if an owner is registered as a personal representative or trustee, to the extent of the interest of a beneficiary who is a judgment debtor, and (c) subject to the rights of a purchaser who, before the registration of the judgment, has acquired an interest in the land in good faith and for valuable consideration under an instrument not registered at the time of the registration of the judgment. [Emphasis added.] He did not refer to the Fraudulent Conveyance Act in this context. [11] As the chambers judge noted, Ms. Guthrie took

the position that by obtaining and registering her costs judgment against the Alderwood Property, she had obtained an interest in land that was "still effectively held by Mr. Michie for the purpose of allowing her to pursue her rights as a judgment creditor. That property, to the extent of Ms. Guthrie's interest in it, was not property of Dawn Michie's to be distributed in her bankruptcy." (At para. 22.) On this point, counsel cited a passage from RCG Forex Service v. Lin 1999 BCCA 644, where Esson J.A. for the Court observed: Registration of a judgment vests an interest in land in the judgment creditor. See Roadburg v. British Columbia (1980), 21 B.C.L.R. 114 (C.A.). It follows that, if the plaintiffs obtain a declaration that Mr. Chen is the beneficial owner of the land they can, by registering the judgment, obtain an interest in it. On that basis, their claim is one for an interest in land which satisfies s. 215(1) of the Land Title Act. [At para. 11; emphasis added.] [12] In its response, the trustee relied primarily on the reasons given by Humphries J. both for the Trial Order and for her subsequent costs order. Specifically, Humphries J. had stated in the trial reasons: . Certain claims against Dawn Michie were abandoned at the outset of trial, and the trial thus proceeded against her on the basis of an allegation of fraudulent conveyance to her in respect of two pieces

of property - "the Patrick Road property" and "the Alderwood Avenue property". The issue in respect of Dawn Michie then, is: if Mr. Michie owes arrears and/or retroactive child support to Ms. [Guthrie], and if he conveyed those two pieces of property to Dawn Michie in order to hinder or defeat creditors, then should the resulting orders against Mr. Michie be registered and executed against those titles, which are held by Dawn Michie? . . . Whether there is any significance to this transfer [of the Alderwood Property] in the context of the claim for retroactive child support will depend on whether access to the value of the house is needed to pay any award. [At paras. 6, 170; emphasis added.] Later, in the reasons for her costs order, she had said: Success against Dawn Michie was contingent not only on findings that retroactive support and/or arrears were payable and that Mr. Michie had fraudulently conveyed the two pieces of property to her, but also on those pieces of property being necessary to satisfy the judgment. There was no need for that, given the amount eventually determined to be owing. As well, given my ruling on special costs, there is no need to consider whether the two pieces of property are necessary to satisfy an order for special costs. While the picture was apparently unclear enough at the time she was added to allow a court to make an order adding her as a

party, it is now evident that Dawn Michie's presence in the litigation as a party was not necessary. [At para. 40; emphasis added.] From these comments, the trustee contended it was clear that Humphries J. had "had no intention of making the Alderwood Property available to satisfy a costs award in favour of Ms. Guthrie." (At para. 28.) [13] In addition, Abakhan submitted that s. 70(1) of the BIA operated such that Dawn Michie's bankruptcy took precedence over Ms. Guthrie's judgment. On this point, the trustee cited Re Mackay 2003 BCSC 413, where in a different context the Court had observed: The purpose of the Bankruptcy and Insolvency Act is, in part, to ensure the equal treatment of all unsecured creditors. The fact that a creditor has a judgment registered against property of the bankrupt does not lead to a position of higher priority in relation to other unsecured creditors. [At para. 29 of Mackay, quoted at para. 30 of the chambers judge's reasons.] Abakhan contended that if Ms. Guthrie's notice of claim were allowed to stand, she would be improperly 'leapfrogging' over the claims of other creditors of Dawn Michie who also had judgments registered against the Alderwood Property. [14] The chambers judge began his analysis by addressing the argument regarding s. 70 of the BIA. He noted that that provision 'begged the question' of whether the funds remaining from the sale of

the Property were "the property of Dawn Michie, or rather of James Michie pursuant to the terms of the Trial Order." In his words: If the sale proceeds remain the property of James Michie, then s. 70 has no application because he is not the bankrupt within the meaning of s. 70(1). However, if the sale proceeds are the property of Dawn Michie, and therefore properly part of her bankruptcy, Ms. Guthrie has no claim against the proceeds because she is not a creditor of Dawn Michie. [At para. 33.] It followed, the chambers judge said, that s. 70 had no bearing on the outcome of Ms. Guthrie's appeal. Instead, the appeal turned on the proper interpretation of the Trial Order. [15] Going down this path, the chambers judge reasoned that since Humphries J. in the Trial Order had given the parties liberty to apply for further orders and directions regarding costs, she must have been referring to Ms. Guthrie's status as a judgment creditor of Mr. Michie "as at the time of that order, that being a judgment creditor for the amount of the [child support] arrears only." (At para. 37; emphasis added.) This conclusion, the judge said, was supported by other passages in Humphries J.'s reasons (both for her Trial Order and the costs order) and by Supreme Court Civil Rule 13‒1(8). That rule requires that an order be dated as of the date on which it was pronounced and specifies that it takes effect

on that date. The chambers judge reasoned: The critical date in determining the effect of an order is the date of pronouncement: First Majestic Silver Corp. v. Davila, 2013 BCSC 717 at para. 206, which in this case was May 3, 2012. As such, it is Ms. Guthrie's position as a judgment creditor at that date that is protected. Her status as a judgment creditor is not a blanket one applying to any potential future judgment ‒ it only applies to the order taking effect on May 3, 2012 for the debt of $19,276.27 for arrears of child support. [At para. 38; emphasis added.] [16] In the result, the Court ruled that Ms. Guthrie had "no interest in the proceeds of sale of the Alderwood Property" and that her claim under s. 81(1) of the BIA had been properly rejected by the trustee in bankruptcy. On Appeal The Operation of the Act [17] In this court, Ms. Guthrie contends that the court below erred in holding that the benefit of the declaration under the Fraudulent Conveyance Act applied only to the judgment for child support arrears such that she could not legally enforce her subsequent judgment for costs against the proceeds of sale of the Alderwood Property. In her submission, the chambers judge's conclusion is irreconcilable with the language of the declaration she obtained under the Act, with the general operation and intent of the Act, and with case authority that mandates a liberal

interpretation of the Act in accordance with its remedial purpose. [18] These arguments make it necessary for us to consider "what exactly happens" when a court sets aside a fraudulent conveyance. One helpful source is the Report on Fraudulent Conveyances and Preferences of the Law Reform Commission of British Columbia, supra. As the Commission observed at p. 60, both the Fraudulent Conveyance Act and its sister legislation, the Fraudulent Preference Act, R.S.B.C. 1996, c. 164, are silent on the effect, as between the grantor and grantee, of a fraudulent transfer. Both statutes simply provide that the disposition is "void" as against the successful claimant. [19] In fact, the law is clear that a fraudulent conveyance is only 'voidable'. For one thing, it continues to be valid, or "absolute", against the grantor. Thus in Elford v. Elford (1922) 64 S.C.R. 125, the Court ruled that a husband who had transferred property to his wife "in pursuance of an unlawful design" to defeat his creditors could not re-claim it back from her. Duff J., as he then was, for the majority reasoned as follows: It is quite clear, I think, that such a defence is not competent to the husband. As Lord Hardwick said in Cottington v. Fletcher [[1740] 2 Atk. 155], as long ago as 1740 such "fraudulent conveyances" are "absolute against the grantor." It is quite clear that the husband would not be heard in an

action to impeach his wife's title brought by himself to set up a claim based upon an arrangement of the character he now seeks to rely upon. If authority were needed for such a proposition it would be found in the judgment of Lord Selborne in Ayerst v. Jenkins [[1872] 16 L.R. Eq. 275], and it is equally clear that the wife is entitled to assert her rights as owner, that is to say the rights incidental to her ownership against the husband as well as against a stranger, so long as it is not necessary for the purposes of her case to rely upon the fraudulent arrangement with her husband. The principle is illustrated admirably in the judgment of Mr. Justice Maclennan in Hager v. O'Neil [1891] 20 Ont. App. R. 198 at p. 218], and in the decision of the Court of Appeal in Gordon v. Chief Commissioner of Metropolitan Police [1910] 2 K.B. 1040.[At 129; emphasis added.] (See also Lord Denning's memorable comments in Tinker v. Tinker [1970] 2 W.L.R. 330 (C.A.) at 333‒4; Foster v. Foster (1978) 98 D.L.R. (3d) 390 (B.C.S.C.) at 400; Maysels v. Maysels (1974) 45 D.L.R. (3d) 337 (Ont. C.A.), aff'd [1975] 1 S.C.R. v.) Another consequence of the validity of the transfer as between grantor and grantee is that if the latter sells the property for valuable consideration to a bona fide purchaser, that purchaser takes title. As we will see below, a plaintiff under the Fraudulent Conveyance Act ‒

i.e., a creditor delayed or hindered by the conveyance ‒ can in that event pursue his or her claim against the proceeds of sale. (See C.R.B. Dunlop, Creditor-Debtor Law in Canada (1995, 2nd ed.) at 205-6.) [20] The Law Reform Commission notes that in British Columbia, most plaintiffs suing under either the Fraudulent Conveyance Act or Fraudulent Preference Act seek an order returning the property to the grantor, normally to make it available for his or her creditors. As an example, the Report cites Murphy v. Barr (1921) 61 D.L.R. 343, in which this court ordered the return of the transferred property to the grantor, failing which, the Court said, it would make a vesting order. (The case report does not suggest, however, any fraud or fraudulent intent on the part of the grantor.) Springman et al. also note authorities that suggest that when a fraudulent conveyance is set aside, the property is somehow transferred back, or 'reverts', to the grantor as if the conveyance had not occurred. (See generally ss. 7-18.10(2) to (3) and the cases cited by Professor L.R. Robinson in British Columbia Debtor-Creditor Law and Precedents (looseleaf), vol. 2 at §10.8.522.) [21] The Law Reform Commission questions the "logic" of this approach, in part because as we have seen, the grantee is entitled to retain the transferred property as against the fraudulent grantor. The Commission cites Adams

v. Adams (1962) 38 W.W.R. 54 (Sask. Q.B.) at 60; Fuhr v. Fuhr (1936) 50 B.C.R. 438 (S.C.); Bott v. Smith (1856) 52 E.R. 957; In Re Maddever (1883) 27 Ch. D. 523 (C.A.) and Holmes v. Holmes (1913) 13 D.L.R. 155 (Sask. S.C.) on this point. The courts in those cases granted orders declaring that the transferred property was exigible in the grantee's hands, coupled with a direction to make it available to the grantor's creditors. Some courts have gone further, declaring that the grantee holds the property in trust for the creditors: see G.M.S. v. W.W.R. 2010 BCSC 1741 at para. 46; K.(S.F.) v. K.(T.M.) 2012 BCSC 1346 at paras. 37‒8; 0679372 B.C. Ltd. v. The Winking Judge Pub Ltd. 2011 BCSC 50 at para. 134; all cited by Professor Robinson, supra, at §10.8.523. The learned author also refers to instances in which the court has granted the holder of a money judgment against the grantor, a declaration that the judgment constitutes a valid charge against the property and that it should be registered as such: see, e.g., Cabaniss v. Cabaniss 2009 BCSC 1478 at para. 91; Idaho (Dep't of Finance, Securities Bureau) v. Ultimate Ventures Inc. 2007 BCSC 1710 at para. 45. [22] Springman et al. seem to regard the making of an order that the transferred property is exigible in the grantee's hands for the benefit of creditors, as a sounder approach than a "reversion" order. The authors note a judgment of the Ontario Court of Appeal, Perry, Farley & Onyschuk v. Outerbridge Management Ltd. (2001) 146 O.A.C.

144. In the course of ruling that an action brought under the Fraudulent Conveyances Act of Ontario was not barred by any provision in the Limitations Act, Sharpe J.A. observed for the Court: The plaintiff in a fraudulent conveyance action does not assert the breach of a legal duty, but rather asserts that the debtor has improperly placed assets beyond the reach of ordinary legal process. Any entitlement to the payment of money or damages in favour of plaintiff exists independently and apart from the action to set aside the fraudulent conveyance. The Act gives no right of damages nor compensation for loss. It provides for a declaratory type proceeding that has the effect of nullifying transfers and conveyances of the debtor's property so as to make possible execution of the creditor's debt. It follows, in my view, that the appellant's claim cannot be classified as an action on the case. [At para. 30; emphasis added.] [23] As the authors note, these comments are consistent with a statement made in Taylor v. Cummings (1897) 27 S.C.R. 589 to the effect that the Fraudulent Conveyance Act "avoids the deed, nothing more ‒ it leaves the creditor defeated or delayed to his ordinary remedies, execution, garnishment" (at 592); and a decision of the New Brunswick Court of Appeal, Michaud v. Cyr (1986) 169 A.P.R.

363. There, the transferor had fraudulently made certain gifts of money to family members, which were set aside at the suit of a creditor. When another creditor sought to set the same gifts aside, the Court ruled that a second proceeding did not lie, because the conveyance had already been declared void as against all creditors of the debtor and the proceeds recovered had to be available to all such creditors. (At 364‒5.) Springman et al. then conclude: if the transfer "remains good between the parties", in one sense would it not be inconsistent to then order the "property returned", and legal title altered, when the transfer is set aside? What would be the result if, for example, the value of the property exceeded the judgment debt? Since it has generally been assumed that the surplus would go to the transferee ‒ bearing in mind that the conveyance "remains good between the parties" and is "void" only against the creditors ‒ how could this be the result if the property were formally "returned" to the debtor? It would seem that under existing fraudulent conveyance statutes, successful creditors do not need any such "return" of property (whether or not accompanied by a change in the title register) so long as the court has declared that the conveyance is "void as against" them. Presumably, the creditors would be entitled in any event to enforce any writ of seizure and sale

against the property, despite the fact that the property is now registered in the name of the transferee, since that is the result under the legislation. (At 7‒18.8 to 7‒18.9.) [24] I agree that the better view is that the Act does not operate so as to "re-vest" the conveyed property in the grantor, nor to allow the grantor to set up his or her fraudulent act as a basis on which to re-claim it from the grantee. Rather, as stated by Anglin J. in McGuire v. Ottawa Wine Vaults Co. (1913) 48 S.C.R. 44, " the relief granted is properly confined to setting aside the impeached conveyance, thus removing it as an obstacle to the creditor's recovery under executions against their [sic] debtor." (At 56.) It is then open to the creditor to pursue such additional remedies as may be necessary, including (as we have seen) the registration of a judgment against land, a declaration of trust, etc. [25] Even without a registered interest in land, moreover, a creditor delayed or hindered by a fraudulent conveyance may, by virtue of s. 7 of the Fraudulent Preference Act, R.S.B.C. 1996, c. 164, seize or recover (effectively tracing) the proceeds of sale of the property. Section 7 provides: In the case of a disposition of any property which in law is invalid against creditors, if the person to whom the disposition was made has disposed of, realized or collected all or some of the property, the money

or other proceeds or the value of it may be seized or recovered in an action by a person who would be entitled to seize and recover the property if it had remained in the possession or control of the debtor or of the person to whom the disposition was made. This provision has been interpreted to apply to transfers that are "void" under the Fraudulent Conveyances Act. In In re Allen v. Allen [1948] 2 D.L.R. 778 (B.C.S.C), for example, Whittaker J. stated: The above s. 5 [of the Fraudulent Preferences Act, R.S.B.C. 1936, c. 106, now s. 7 of the Fraudulent Preference Act ] is not confined to conveyances which are invalid under the Fraudulent Preferences Act. In Re Crouse, Garson v. Can. Credit Men's Trust Ass'n. [1929] 3 D.L.R. 300, S.C.R. 282, an almost identical section of the Nova Scotia Assignment Act was invoked to enable a trustee in bankruptcy to recover from a purchaser of the assets of a business the purchase-price obtained on a resale, the first sale having been made without compliance with the Bulk Sales Act; and this notwithstanding that the money received on the resale had been used in the ordinary course of business and could not be ear-marked. Lamont J., delivering the judgment of the Court, said at pp. 303‒4 D.L.R., pp. 286‒7 S.C.R.: "The creation [by the Bulk Sales Act] of a statutory presumption of fraud on the part of both purchaser and vendor as against the

vendor's creditors, indicates, in our opinion, a legislative intention to put a sale in bulk made without compliance with the Bulk Sales Act in the same category as sales made with an intention to defraud the vendor's creditors. Such intent the Act presumes to exist, and this presumption of fraud has the effect of bringing into play all other statutes passed for the protection of creditors against a fraudulent sale of his goods by a debtor to the prejudice of his creditors." In Cameron v. Moseley, [1923] 3 D.L.R. 267, 56 N.S.R. 300, the Nova Scotia Appellate Court decided that the above section of the Assignments Act could be invoked to enable creditors to recover from a fraudulent transferee the proceeds of a sale by the transferee, of property received from the debtor under a transfer void under 13 Eliz., c. 5 [the Fraudulent Conveyance Act], notwithstanding that such proceeds had been paid over to the debtor. Rogers J. said at p. 275: "Nor do I think upon the plain construction of the words there can be much doubt that the Legislature intended, in effect, to create the fraudulent transferee a trustee of the proceeds for the creditors. The proceeds take the place of lands in accordance with the doctrine of equity, and they may now, without the necessity of being ear-marked, be recovered from any one who has received them in whole or in part who is not in the position of a

purchaser without notice or in some equally favourable position." [At 781‒2; emphasis added.] The Court in Allen granted an order declaring a fraudulent conveyance void as against the plaintiff and declaring that the defendant held the sale proceeds in trust for the plaintiff. (At 782.) See also Cabaniss, supra; K.(S.F.) v. K(T.M.),supra; Bernard v. Weiss (1986) 70 B.C.L.R. 318 (S.C.); Westinghouse Canada Ltd. v. Buchar (1975) 9 O.R. (2d) 137 (C.A.); Robinson at §10.9.100; Springman et al. at 7‒23 to 7‒27 and 10.2 to 10.4‒3; and the Law Reform Commission Report at 68. Application to the Case at Bar [26] I agree with the appellant's submission, then, that the chambers judge erred in holding that the orders made by Humphries J. validly restricted Ms. Guthrie's remedies under the Fraudulent Conveyance Act to the enforcement of Mr. Michie's child support arrears. No authority was cited to us, and I have found none, that suggests it is open to a court to declare a fraudulent transfer "void" under the Act only to a certain extent or only to permit a certain debt to be recovered; to declare a transfer void only as against a particular creditor but not as against other creditors delayed or hindered by the transfer; or to declare a transfer void only for a limited time. Once a conveyance has been found to infringe the Act, it remains fraudulent, and is ineffective as against all

creditors who may be hindered or delayed. As counsel for the appellant suggested, it would be "contrary to logic" as well as to authority (and in this case would be placing form over substance) to require that a creditor who wishes to enforce more than one judgment return to court to have the same transaction declared void "time and time again". Similarly, it would offend the purpose of the Act to require that creditor after creditor prove in court that the same transfer was intended to avoid the just claims of creditors. [27] On this point, I note in particular Canadian Imperial Bank of Commerce v. Boukalis (1987) 11 B.C.L.R. (2d) 190, lve. ref'd. [1987] S.C.C.A. No. 180, in which this court (sitting with five justices) ruled that a person who was a secured creditor at the time of a fraudulent conveyance had standing to sue under the Fraudulent Conveyance Act, as could a person who became a creditor after the conveyance took place. The Court cited with approval the following passage from Reid v. Kennedy (1874) 21 Gr. 86: The words in the Act are "creditors and others," and proving that the conveyance was tainted with fraud once, I do not think it loses this stain, but remains a conveyance with this infirmity which prevents it being set up as against a creditor whose debt arises years after the instrument was executed. The words "and others" extend the operation of the Act if

the word creditors confined it to those existing when the deed was made. [Quoted at 195 of Boukalis; emphasis added.] and Petrone v. Jones (1995) 33 C.B.R. (3d) 17 (Ont. Gen. Div.), where the Court rejected the suggestion that "a transaction entered into with the specific intent of defeating, hindering, delaying one creditor may be valid as against another creditor." (At 19). [28] At the end of the day, while it appears from Humphries J.'s reasons that she intended the fraudulent transfer to be void only for purposes of one specific claim of one individual creditor, that issue was not before her. Such a reading would be founded on a misapprehension of the Fraudulent Conveyance Act and the authorities interpreting it. On this basis alone, I am of the view that the appeal must succeed. [29] It must also succeed, in my view, on another ground ‒ the wording of the orders made by Humphries J. Neither the Trial Order nor the costs judgment restricted Ms. Guthrie's rights as a judgment creditor to the support arrears that were outstanding on the date of the Trial Order. Indeed, the word "judgments" in para. 11 of the Order was wide enough to include any other judgment she might have obtained ‒ in this instance, her costs award. It follows that the chambers judge erred in ruling that Ms. Guthrie's status as a judgment creditor was "not a blanket one" that applied to the costs

judgment. [30] Finally, for the sake of clarity, I note that the trustee in bankruptcy did not advance any argument based on the operation of the BIA on the facts of this case. I therefore make no comment on that matter. Not do I comment on the entitlement of other creditors, if any, who may assert rights as secured creditors or as holders of beneficial interests in the proceeds by virtue of the Fraudulent Conveyance Act or otherwise. Disposition [31] In the result, I would allow the appeal, set aside the order of the chambers judge, set aside the decision of the trustee in bankruptcy, and direct the trustee to make the remaining sale proceeds of the Alderwood Property available to Ms. Guthrie to the extent necessary to enforce her costs order and any other judgment she may have against Mr. Michie. "The Honourable Madam Justice Newbury" I AGREE: "The Honourable Mr. Justice Goepel" I AGREE: "The Honourable Mr. Justice Savage "