Vancouver High Net Worth Family Asset Property, Bankruptcy, Creditor and Family Debt Lawyers
BC business persons and professionals are often advised to ensure their assets are protected from creditors claims by having them owned by their spouse, a third party, or a different entity. Our family lawyers warn spouses that under the BC Family Relations Act a triggering event such as the signing of a separation agreement or a section 57 declaration that there is no reasonable prospect of reconciliation vests an undivided one half interest in assets in their spouse’s name and that at that point creditors can pounce on the asset to satisfy debts owed to them.
The situation gets even more complicated when a person who declares bankruptcy deliberately hides assets from the trustee in bankruptcy and their creditors. Even more perplexing, is whether a bankrupt who hid an asset registered in his spouse’s or a third parties name can or should be allowed to later claim a share of that hidden asset in divorce and property division proceedings or in civil proceedings.
The Supreme Court of Canada refused to hear a BC case raising all of these issues based on an approach from the BC Court of Appeal that allowed the husband to make a claim in civil proceedings against his sister in law to this fraudulently concealed asset provided he paid off the creditors of his bankruptcy first. Here is the actual Supreme Court of Canada Summary on their refusal to hear the case:
34940 Carlson v. Carlson (Bankruptcy and Insolvency ― procedure ― former bankrupt failing to disclose beneficial interest in property at time of bankruptcy ― bankrupt transferred property to extended family prior to bankruptcy ― bankrupt commenced an action to enforce an alleged agreement with respect to the property in question ― whether s. 144 of the Bankruptcy and Insolvency Act require the court to assist a former bankrupt to pursue a claim for his own personal benefit which he disclosed only after he was caught fraudulently concealing it ― Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3)
On appeal from the judgment of the Alberta Court of Appeal pronounced June 13, 2012. This appeal concerns the ownership of property valued in excess of $1 million. On December 24, 1997, the respondent, Mr. Carlson transferred the property to his brother and sister-in-law, the applicant, Ms. Carlson. The brother subsequently died. The terms of the agreement with respect to the property are in dispute. On April 11, 2003, Mr. Carlson made an assignment in bankruptcy and made no mention of the BC property. On August 23, 2007, Mr. Carlson commenced an action in British Columbia to enforce an alleged agreement with Ms. Carlson with respect to the property in question. During the discoveries it came to light that Mr. Carlson had declared bankruptcy. Mr. Carlson made an application requesting the Trustee be reappointed as Trustee in bankruptcy and for an order assigning the B.C. proceedings to him in exchange for paying off his creditors. Ms. Carlson cross-applied seeking an order that the Trustee be reappointed and in exchange for a sum of money equal to Mr. Carlson’s creditors’ claims the Trustee provide a release of any claim to the B.C. property to her. The trial judge agreed with Ms. Carlson; however, the Court of Appeal set aside the order and ordered Mr. Carlson could continue with the action against Ms. Carlson if he paid off his creditors and met other conditions.
There are legitimate creditor protection strategies and illegitimate ones. These issues can trap the unwary and you need a lawyer knowledgeable in this area like the lawyers at the MacLean Family Law Group. Contact Lorne MacLean, Q.C. at 604 602 9000 before it becomes a messy situation.
