Canada: Seizure And Redemption Of Shares Successfully Used By Lender To Thwart Guarantor's Fraudulent Conveyance Of Assets

Last Updated: December 22 2016
Article by Graeme L. Ireland

A recent decision of the Alberta Court of Queen's Bench has confirmed that a creditor can require a redemption of shares seized from a guarantor in order to satisfy a debt claim, and has highlighted the broad authority and discretion given to courts and civil collection agencies under Alberta's Civil Enforcement Act.1

The decision in 1815471 Alberta2 concerned an application for summary judgement by a lender (the "Lender") to enforce a judgement it had previously obtained against a guarantor (the "Guarantor") in another action. The Guarantor had been a shareholder and manager of a borrower corporation, Creamery Inc. ("Creamery"). The Guarantor had provided a limited guarantee of the debts of Creamery to the Lender.  In April 2014 Creamery experienced financial difficulties, leading to a loan payment being returned for nonsufficient funds (the "Default").  In May 2014, the Lender demanded payment from, amongst others, the Guarantor. Proceedings were commenced later that month and summary judgement was obtained in November 2014. 

Unknown to the Lender, shortly before the Default, the Guarantor performed an "estate freeze".  On the pretext of an intended move to the United States, and on the basis of alleged tax planning arising therefrom, a corporation, 1815471 Alberta Ltd. ("181") had been incorporated on behalf of the Guarantor.3 A week before the Default, the Guarantor transferred most of his significant assets to 181, including approximately $2,000,000 in cash, real property, high-end motor vehicles, and shares of other companies.4 In return, the Guarantor was issued preference shares in 181 (the "Shares")

At some point after obtaining their initial judgement, the Lender became aware of the estate freeze and in July 2015 instructed a civil enforcement agency to seize the Shares.  In August 2015, the civil enforcement agency, in an attempt to redeem the shares, delivered a letter to 181 requesting the redemption. The letter was not answered,5 which led to subsequent applications by the Lender seeking, among other things, to set aside the transfer of assets pursuant to the estate freeze and to require 181 to redeem the Shares, culminating in the present application.

In argument, the Guarantor raised in defence – and for the first time – that the letter requesting redemption had not required a response, (as it did not indicate when the Shares were to be produced or how many were to be redeemed6)  and also alleged other deficiencies in the Lender's claims. 

The court was required to determine a number of issues, including whether the estate freeze amounted to a fraudulent conveyance, and whether the Lender was entitled to a redemption of the Shares.7

The court found that the estate freeze did amount to a fraudulent conveyance.8 Given the value of the conveyance ($2,000,000 plus) compared to the debt owing ($73,389.82 including costs previously awarded), the Lender was content to rely on the seizure and redemption of the Shares9 rather than a complete unwinding of the fraudulent conveyance. There was no issue as to the solvency of 181 at the time of the request for redemption of the Shares given the extensive liquid assets transferred to 181.

The court also confirmed that as redemption was a statutory right arising pursuant to Section 62 of the Civil Enforcement Act10, it was not necessary to specifically plead the redemption of the Shares. The court found that Section 62 requires only that an application be brought – typically it would be brought within the original action – but the Lender was entitled to bring such application in a separate proceeding, as it had in this instance.11 

With respect to the redemption of the Shares, the court found that by not responding to the letter requesting redemption, the Guarantor and 181 had ignored 181's statutory obligations under Section 58 of the Civil Enforcement Act.12 The court found that section imposed a positive obligation on 181 to respond and to provide certain information to the civil collection agency.  Not responding was not permissible. As a result, given the broad authority granted to the civil enforcement agency under the Act, the court ordered that 181 was required to redeem a sufficient number of Shares to satisfy the debt owing to the Lender.13 

Given that the remedy arises by operation of statute, it follows – though not as a finding of the court – that the Lender would have been entitled to the redemption even had the estate freeze not been found to have been a fraudulent conveyance.  If 181 and the Guarantor failed to redeem the Shares as directed, the Lender was entitled to further remedies related to the unwinding of the estate freeze14

This decision provides comfort to lenders in Alberta that debtors and guarantors will not be able to escape their liabilities. The ability to apply for and obtain a court order requiring the redemption of shares of solvent companies is a powerful enforcement mechanism for lenders.


1 Civil Enforcement Act, RSA 2000, c C-15 ["Civil Enforcement Act"]

2 Business Development Bank of Canada v. Ravi Sood and 1815471 Alberta Ltd., 2016 ABQB 429 ["1815471"]

3 Ibid at para 11.

4 Ibid at para 12.

5 Ibid at para 17.

6 Ibid at para 20.

7 Ibid at para 34.

8 Ibid at para 40. 

9 Ibid at para 41. 

10 Supra note 1 at Section 62.

11 Supra note 2 at para 42.

12 Supra note 1 at Section 58.

13 Supra note 2 at para 45.

14 Supra note 2 at para 45.

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

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
14 Sep 2017, Seminar, Birmingham, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

18 Sep 2017, Seminar, London, UK

Our annual event as part of the London Design Festival is now in its fifth year. We would be delighted if you are able to join us again.

21 Sep 2017, Seminar, London, UK

Has Cloud replaced traditional outsourcing models? We will compare cloud to outsourcing, consider whether they have effectively become the same thing for many solutions and assess some of the advantages and disadvantages of each model.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.