The debtor engaged in extensive shenanigans and transfers. He
claimed a trust in favour of a corporation when the corporation was
not incorporated until many years after the date the trust
allegedly arose. Shares were backdated. The trust agreement was
backdated. The creditor obtained a section 38 BIA order.
The court held that the trust was a sham. There was no
documentation of the creation of the trust. The trust had no
accounting records, financial statements, bank accounts, bank
records, or tax returns. That in itself was sufficient to be fatal
to the supposed existence of the trust. It was a non-operational
phantom trust. Once one of the badges of fraud exists, a
presumption of fraud takes hold and the defendants must provide
some adequate explanation. Of review of cases on fraudulent
conveyance and trusts, the judge set aside the fraudulent
conveyance to vest the disputed property with the creditor by
virtue of the section 38 order.
The creditor had served an offer to settle requiring the debtor
to pay $310,000 or to transfer title to the property. Since the
judge ultimately ordered the property transferred to the creditor,
he held that the offer was as good as or better than his award.
Accordingly he awarded partial indemnity cost to the date of the
offer and substantial indemnity costs after it. He also noted that
it was within the debtor's contemplation that transferring his
property in the manner in which he did would spawn some rather
expensive litigation. The judge noted that the complexity of the
issues may be taken into account. There was no mention of
substantial indemnity costs as a result of the finding of fraud.
This was unusual.
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