Payments void as transfers at undervalue when no commercial basis for transactions

Ontario civil | Bankruptcy and Insolvency | Avoidance of transactions prior to bankruptcy | Fraudulent preferences

N Inc. operated as re-seller of data communications equipment. Respondent S Inc. was incorporated to help out N Inc.. Receiver was appointed in April 2015 and N Inc. was assigned into bankruptcy in July 2015. Trustee noticed that N Inc. received two separate payments from S Inc. in 2013 and 2014 totalling $497,000. Following payments, N Inc. made number of payments to S Inc. in period immediately preceding receivership totaling over $1,055,581. There was no documentation to explain reason for payments. Trustee claimed transactions were transfers at undervalue to extent of excess monies received by S Inc. over and above monies paid by S Inc. to N Inc.. Trustee brought motion for declaration that transactions between N Inc. and S Inc. were transfers at undervalue and order that S Inc. pay estate of N Inc. amount of $334,841. Motion granted. There was no generally accepted commercial basis for transactions. N Inc. and S Inc. were not acting at arm’s length. By entering into transactions, N Inc. intended to defraud or delay major creditor by falsifying receivables and payables in order to mislead creditor, who was monitoring N Inc.’s financial position closely. Payments by N Inc. to S Inc. were void as transfers at undervalue. S Inc. ordered to pay estate amount of $334,841.

National Telecommunications v. Stalt (2018), 2018 CarswellOnt 5360, 2018 ONSC 1101, L.A. Pattillo J. (Ont. S.C.J.).

Free newsletter

Our newsletter is FREE and keeps you up to date on all the developments in the Ontario legal community. Please enter your email address below to subscribe.

Recent articles & video

From ignored to a nation-to-nation relationship: Jason Madden’s 20 years advocating for Metis rights

Ontario Superior Court of Justice welcomes new judges Colin Stevenson and Gilead Kay

Ontario Superior Court upholds award of costs exceeding the damages in a personal injury case

Ontario Superior Court resolves estate dispute between siblings by passing over a sister as trustee

Erika Chamberlain steps down as dean of Western Law

Ont. CA orders new trial in pedestrian collision case due to unfair bad character evidence

Most Read Articles

Erika Chamberlain steps down as dean of Western Law

Ont. CA orders new trial in pedestrian collision case due to unfair bad character evidence

Ontario Superior Court of Justice welcomes new judges Colin Stevenson and Gilead Kay

From ignored to a nation-to-nation relationship: Jason Madden’s 20 years advocating for Metis rights