Substance Over Process: Fasken's Win Under The Fraudulent Preference Act Raises Interesting Questions

Creditors want to recover as much money as they can from their debtors as quickly and painlessly as possible. When those debtors take steps to delay, defeat and hinder a creditor's recovery, creditors can rely on the Fraudulent Preference Act, RSBC 1996, c. 164 ("FPA") and the Fraudulent Conveyance Act, RSBC 1996, c. 163 ("FCA") to set aside transactions that have that intention and effect. Generally, the FCA allows "creditors and others" to void dispositions of property designed to delay, hinder or defraud their claims. The FPA generally sanctions debtors who prefer one creditor over another or others.

Such legislation is not self-enforcing. Creditors usually have to bring an action to set aside fraudulent transactions, the cost of which reduces their recovery. There is, therefore, a demand for summary processes that allow creditors to attack transactions meant to stop a creditor from collecting.