The “Badges of Fraud”

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Fraud is a deception deliberately practiced in order to secure unfair or unlawful gain (adjectival form fraudulent; to defraud is the verb, and the Badges of Fraud are used by the court s as rough gauge as to whether Fraud exists in the situation or not..

As a legal construct, fraud is both a civil wrong (i.e., a fraud victim may sue the fraud perpetrator to avoid the fraud and/or recover monetary compensation) and a criminal wrong (i.e., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities).

Defrauding people or organizations of money or valuables is the usual purpose of fraud, but it sometimes instead involves obtaining benefits without actually depriving anyone of money or valuables, such as obtaining a drivers license by way of false statements made in an application for the same.

There are a number of articles relating to fraud on this website, most of which deal with Fraudulent Transactions or conveyances to try and hinder creditors such as beneficiaries.

 

Undue influence is also a civil form of fraud and yesterdays blog discusses in some detail the fraudulent aspect involved in undue influence

 

The Badges of Fraud

Suspicious circumstances which our courts may characterize as “badges of fraud” include the following:
1) Secrecy surrounding the transaction
2) Cash payments were made
3) No change of possession occurred after the conveyance;
4) Transfer to non-arm’s-length person;
5) The transferor has few remaining assets;
6) The transfer was effected with unusual haste;
7) Grossly inadequate consideration was paid;
8) A benefit was retained by the transferor under the settlement;
9) The transfer was made in the face of potential litigation;
10) Lack of accurate documentation supporting the transaction.

These “badges of fraud” are enumerated in Bank of Montreal v. Vandine (1953) 1 D.L.R. 456;

Prodigy Graphics Group Inc. V. Fitz- Andrews, (2000) O.J. No. 1203 ( Ont. S. C. J.);

and Ferguson v. Lastewka et al ( 1946 ) O. R. 577

 

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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