The recent Alberta Court of Appeal decision 1007374 Alberta Ltd v Ruggieri, is an
interesting case that affirms an important trial court decision on
fraudulent conveyances and oppression. While not a dramatic
reframing of the law in these issues, it does highlight the
willingness of the courts to sanction those who attempt to
"creditor-proof" their companies to escape judgment
The facts are that in 2011, the respondent in the Court of
Appeal decision had successfully sued
A. Ruggieri Engineering Ltd. ("Ruggieri Ltd."), a
corporation solely owned and operated by Antonio Ruggieri. Although
there was no appeal of the decision by the defendant corporation,
by the time the respondent attempted to enforce the judgment he
learned that the appellants had filed for a name change. They had
also granted general security agreements and promissory notes in
favour of Antonio Ruggieri and another corporation of which Mr.
Ruggieri happened to be the sole director. Ruggieri Ltd. also
issued promissory notes to Antonio Ruggieri and to the same
corporation. Effectively, Antonio Ruggieri had
"creditor-proofed" his company Ruggieri Ltd. Or so he
The respondent sued again, this time on the basis that
Ruggieri's actions were intended to thwart his efforts to
collect on the earlier judgment. At the trial level, Justice Wilson
ruled that Mr. Ruggieri had "simply changed hats" in his
actions to avoid the creditors. The court held that the five part
test under the Statute of Elizabeth (commonly known as the
"Statute of Frauds") for fraudulent conveyances
was met, and also held that oppression, unjust enrichment, and
unlawful conspiracy had been made out. In addition to awarding
judgment against Mr. Ruggieri personally (as well as the new
corporations) for the full amount of the earlier debt plus
interest, Justice Wilson also awarded $100,000 in punitive damages,
noting that Mr. Ruggieri's actions were dishonest, deliberate
and amounted to an obstruction of justice. He also found that Mr.
Ruggieri had given untruthful evidence.
At the Alberta Court of Appeal, the appellants challenged the
trial judge's conclusion on each cause of action. The Court of
Appeal focused primarily on the issue of oppression under
Alberta's Business Corporations Act. The Court agreed
with the respondent that the facts at play showed the appellants
had set out on a deliberate course to strip the judgment debtor of
its assets and thus oppressed the respondent in his capacity as a
judgment creditor of this company.
The Court noted that in a small and tightly held corporation,
where the sole director and officer exercises power in a manner
that is unfairly prejudicial or dismissive, the director can be
held personally liable. The Court of Appeal also upheld the award
for punitive damages. The Court of Appeal did not deal with the
fraudulent conveyances and the Statute of Elizabeth
question, thus opening the door to potential further considerations
by the Court of Appeal in the future.
The Alberta Court of Appeal decision is a useful resource for
counsel dealing with clients or opposing parties who attempt to
"creditor-proof" their companies by stripping
corporations of their assets or encumbering them with debt.
Significant penalties, including punitive damages, can be assessed
to those who partake in such action.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Legal issues surrounding contaminated sites affects landowners, developers, realtors, as well as consultants and contractors working on the front lines. This webinar will provide a practical review of how the legislation is actually being used, recent court decisions, challenges with brownfield developments, and future changes.
Who Should Attend: This webinar will be of interest to developers, contractors, environmental and real estate consultants, realtors, owners or lessors of land which may be impacted, and municipalities.
Canadian engineering and construction giant SNC-Lavalin has been charged by the RCMP with paying bribes of nearly $48 million to Libyan government officials and defrauding Libya of nearly $130 million.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).