Legal Word of the Day: “Badges of Fraud”

Image: Hariadhi

Image: Hariadhi

Badges of Fraud — Suspicious facts or circumstances that are evidentiary indicators of fraudulent intent. One or more of these “red flags” can form the prima facie case needed to raise a presumption of fraud.

The evidentiary burden shifts once badges of fraud are demonstrated.

Suspicious circumstances which our courts may characterize as “badges of fraud” in real estate deals include:

  • 1) Secrecy surrounding a 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

Related Cases:

Conte (Executrix and trustee of) v. Alessandro, 2002 CanLII 20177 (ON SC)

Law Society of Upper Canada v. Jonathan Howard Marler, 2010 ONLSAP 29 (CanLII)