Executive Summary: Key Legal and Evidentiary Issues

• Niche Developments Corp. alleged a fraudulent conveyance after 1981606 Alberta Ltd. transferred its only asset — land — to a related entity, 2555436 Alberta Ltd., while a debt claim remained unresolved.

• Several "badges of fraud" were identified, including overlapping directors and shareholders between the transferor and transferee, conveyance of all assets, and funds funneled back to principals as shareholder loan repayments.

• Defendants argued the $1.6 million sale price constituted fair market value, supported by an independent appraisal of $1.55 million for the unimproved land, negating any fraudulent intent.

• The Court found the consideration was adequate and rejected Niche's undervalue argument but concluded that inferences of bilateral fraudulent intent arising from the close corporate relationship remained unrebutted on the current record.

• Summary dismissal was denied and the Certificate of Lis Pendens was maintained, with the Court directing the parties to agree on security to replace the CLP and allow construction financing to resume.

• Costs were reserved pending the outcome of the underlying debt claim between Niche and 1981606 Alberta Ltd.

The contractual dispute and the construction project

In March 2019, Niche Developments Corp. ("Niche") contracted with 1981606 Alberta Ltd. ("198") to build a 29-unit commercial condominium on certain lands in Edmonton, Alberta. Sam Dhaliwal was one of the principals of 198. A dispute between the parties arose, resulting in a termination of the contract on September 9, 2022. According to 198, the totality of Niche's work consisted of digging a hole on the property which the City of Edmonton declared unsafe and which 198 subsequently had to fill in. 198 maintained that Niche had been paid in full for its work and had, if anything, inflated its invoices.

Niche's lien claim and the 2023 action

Niche filed a builder's lien on February 13, 2023, well after the statutory lien period had expired. After receiving a Notice to Take Action, Niche filed a Statement of Claim on April 14, 2023, alleging both a contractual debt claim and a builder's lien against the land. 198 defended on May 4, 2023, denying the debt and stating the lien had not been filed in time. No Certificate of Lis Pendens had been registered in respect of the purported lien, and it was removed from title on June 7, 2023. Niche's then counsel appeared to acknowledge this outcome in email with 198's counsel on July 26, 2023. No further steps were taken to advance the remaining debt action for over two years, until Niche filed its Affidavit of Records on July 3, 2025.

The sale of the lands from 198 to 255

The condominium project ran into difficulty in July 2023 when the mortgage holder, Canada ICI Capital Corporation, asked to be paid out and the project principals did not wish to put in more personal funds. Instead, they hit upon a plan to sell the land to another company, 2555436 Alberta Ltd. ("255"), to develop it for a totally different use, an eleven-unit townhouse project. Notably, Mr. Dhaliwal and Mr. Sharma are the two directors of 255 and were also, along with another, the directors of 198. The four shareholders of 255 are also four of the six shareholders of 198 and include companies solely controlled by each of Mr. Dhaliwal and Mr. Sharma. 198 sold the lot to 255 for $1.6 million with a transaction closing date of November 16, 2023. Of the purchase price, $778,927.49 came from KV Capital, an accredited third-party mortgage lender, $500,000 from 4D Investments Ltd. (Mr. Dhaliwal's company), and $350,000 from First Choice Financial (Mr. Sharma's company). The sale proceeds were disbursed as follows: $1,174,129.56 to pay out the Canada ICI mortgage; $125,000 to First Choice Financial Incorporated (Mr. Sharma's company) to pay a loan; $144,801.33 to Samandeep Dhaliwal in partial payment of a shareholder's loan; $144,801.32 to Vikas Sharma in partial payment of a shareholder's loan; and a small balance for vendor's legal fees. 198 is now defunct, has no assets, and has been struck.

The 2025 fraudulent conveyance action and the certificate of lis pendens

At some point prior to July 31, 2025, Mr. Clarke (principal of Niche) drove by the lot and noticed that construction of sorts had resumed. Through his then counsel's legal assistant, Mr. Clarke obtained a current certificate of title showing that title had changed hands from 198 to 255 and that Niche's lien had been expunged. Niche's then counsel commenced the present action on October 14, 2025, framing it as a fraudulent conveyance claim against 255 as the transferee and 198 as the transferor, and also claiming that Mr. Dhaliwal and Mr. Sharma benefitted from fraudulent preferences in that they received funds from the sale to partially retire shareholder loans owed to them by 198. A CLP was sent for registration on October 21, 2025, but it erroneously related to Niche's invalid builder's lien from 2023. By Order of the Applications Judge on December 8, 2025, that CLP was struck. Niche had retained new counsel by that time, who advised that a new CLP referencing the current action had been sent for registration. The Applications Judge suggested the matter be brought before a Judge on the Commercial List.

Legal framework: fraudulent conveyance and badges of fraud

The Court outlined the legal principles applicable to fraudulent conveyance claims under both section 1 of the Fraudulent Preferences Act and the Statute of Elizabeth. Both statutes require proof of fraudulent intent to defeat creditors on the part of a transferor, but the Fraudulent Preferences Act additionally requires an insolvent transferor at the time of conveyance while the Statute of Elizabeth does not. Where there has been a transfer for value, the Statute of Elizabeth is inapplicable unless the transferee is privy to the transferor's fraud. The Court noted the well-established "badges of fraud" — a series of indicia including inadequate consideration, close relationships between the parties, conveyance of all assets, transfers made during pending litigation, and cash funneled back to principals — from which fraudulent intent may be inferred.

The Court's analysis of consideration and badges of fraud

Justice Douglas R. Mah found the transaction was not at undervalue. Niche had suggested that the land was worth up to $9.35 million according to 198's appraisal, but that was in its finished state with a brand new 29-unit commercial condominium building on it. The uncontroverted evidence was that the lot was bare land, that the hole Niche had dug had been filled in, and that none of Niche's work was used. The appraisal showed that the land by itself was worth $1.55 million, and Niche itself says it made its own highest offer for the land at $1.5 million about a year earlier. The Court concluded on this record that the consideration was adequate. However, Justice Mah identified several problematic indicia that remained unrebutted: the involvement of Mr. Dhaliwal and Mr. Sharma with both 198 and 255 and the overlap between directors and shareholders of the two entities, from which one could infer bilateral intention to deprive Niche of its remedy after judgment; the conveyance of all of 198's property while Niche's debt claim remained unadjudicated; and the flow of cash back to Mr. Dhaliwal, Mr. Sharma, and Mr. Sharma's company in repayment of shareholder loans after payment of the Canada ICI mortgage. The Court also noted that the closeness of relationship between individuals and their own corporations involved in both sides of a transaction is the "most persuasive factor" that leads to a finding of fraud. Justice Mah came to no conclusion about 198's solvency or insolvency at the time of the conveyance on the existing record.

Ruling and directions on security

Justice Mah dismissed the application for summary dismissal, finding there remained a genuine issue for trial as to whether under the Statute of Elizabeth, in a case where there is fair consideration, the bilateral intent required for fraudulent conveyance has been established by inference and, if so, is rebutted by evidence not yet in the record. The CLP was maintained in accordance with the general rule in Patel that the CLP should run with the action. However, recognizing that KV Capital, the lender providing the construction financing, had refused further advances in the face of the CLP and that the whole townhouse project was now in jeopardy, the Court directed the parties to agree upon an amount and form of security to stand in place of the CLP in order to discharge it and resume the flow of construction financing. The parties were further directed to agree upon a method of summary determination of Niche's claim against 198, the outcome of which would also determine whether any further security in this action was still required, and if so, how much. Costs of the application were reserved pending the outcome of the determination of Niche's claim against 198. No exact monetary amount was awarded to either party, as the fraudulent conveyance matter proceeds to trial and the underlying debt claim is directed to summary determination.