NICHE DEVELOPMENTS CORP v 2555436 ALBERTA LTD

The Defendants sought summary dismissal of a fraudulent conveyance Action and the concurrent discharge of a Certificate of Lis Pendens (“CLP”) registered against the lands now owned by the Defendants. The Plaintiff alleged that the Defendant, 1981606 Alberta Ltd. (“198”), transferred its only asset to the other Defendant, 2555436 Alberta Ltd. (“255”), while the Plaintiff’s debt claim against 198 remained unresolved. The Defendants maintained that the transfer was a legitimate sale for fair market value and that the claim was without merit.

Pursuant to Rules 7.2 and 7.3, summary judgment is appropriate where there is “no defence to a claim” or no merit to it, provided the Judge can reach a fair determination on the record. The test for summary judgment requires the defendants, to show there is no genuine issue requiring a trial, after which the plaintiffs are to put their “best foot forward” to demonstrate that a trial is necessary.

The Defendants argued that the sale of land from 198 to 255 was a legitimate fair-market value transaction and proved that the land was sold for adequate market value consideration. However, the Court found that several “badges of fraud” existed, including the non-arm’s length relationship between the transferor and transferee and the transfer denuded the transferor of all assets while a debt claim was pending. These factors created a genuine issue for trial regarding the parties’ intent, which led the Court to dismissing the Application for Summary Dismissal.

On the discharge of the CLP, the Court applied the “preferred approach” which established that a CLP should generally “run with the Action” and remain on title as long as the underlying claims are being litigated. Normally, the Court would decline to discharge the CLP because the Court did not grant Summy Dismissal. However, to prevent the collapse of the Defendant’s ongoing construction project due to lack of financing, the Court exercised its discretion to direct that security be posted in place of the CLP.