“The Court of Appeal for Ontario has held that the Fraudulent Conveyances Act and the Family Law Act may work together to invalidate fraudulent transactions, even where the claimant spouse is not a judgment creditor. In Purcaru, the Court upheld the invalidating of a transaction between the respondent husband and other parties as fraudulent, and the naming of those parties and affiliated companies in the action. The Court of Appeal affirmed this right in Mikhail v. Cole (2017), 2017 ONCA 262 at 5.
The Court of Appeal has also permitted a claimant spouse to use the FCA and FLA together to invalidate transactions entered into for the purpose of shielding assets from equalization: Stone v. Stone, 2001 CanLII 24110 (ON CA), [2001] 55 O.R. (3d) 491 (C.A.) at paras. 36-39. In Stone v. Stone, (2001), Feldman J.A. noted the Supreme Court of Canada held that in determining matrimonial property rights, courts should not view the Family Law Act as a restrictive code: at para. 43, citing Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70.
Feldman J.A. further considered whether spouses were included in the definition of “creditors or others” within s. 2 of the Fraudulent Conveyances Act. She held that:
… in order for a spouse to qualify as a person who is intended to be protected from conveyances of property made with intent to defeat her interest, she must have had an existing claim against her husband at the time of the impugned conveyances, that is a right which she could have asserted in an action: Stone, at 26.
Thus, the spouse must have an existing claim, but need not be a “judgment creditor” to access the benefit of the Fraudulent Conveyances Act to invalidate a transfer: Stone, at 41. Feldman J.A.’s analysis indicates that courts must be able to set aside transfers under the Fraudulent Conveyances Act in order to properly calculate equalization payments: Stone, at 40. To allow otherwise would result in an inaccurate equalization payment. She concludes:
[W]here on the facts, the Fraudulent Conveyances Act can apply, there is nothing in the Family Law Act which ousts the operation of the Fraudulent Conveyances Act as part of the process to determine the net family property of each spouse as of the applicable valuation date: Stone, at 44.”
Fatahi-Ghandehari v. Wilson, 2018 ONSC 5587 (CanLII) at 102-105