Nov 29, 2014

FACTS: A had purchased Blackacre subject to caveat (protecting a right of re-purchase) in favour of gov’t; Caveat was cancelled by the Land Titles office by mistake; A contacted gov’t and asked why caveat was removed; Official said it appeared to be an error and would be looked into; Shortly after, and without contacting the gov’t, A transferred his interest in Blackacre to A Ltd., a company owned solely by A and his wife which he claimed was done for tax reason and to raise money for a loan repayment

HELD: On these facts, was held to be fraud under Alberta Torrens law

REASONING: Court acknowledged that “ Knowledge of the unregistered interest, by itself, does not constitute fraud”; Added that “for there to be fraud, the knowledge must be used for an unjust or inequitable purpose”; Such a purpose was found in this case and it was concluded that the transaction was designed, in part, to defeat the unregistered interest

The outcome of McCullogh suggests that even if actual notice of a prior unprotected right is not enough, knowing of the legal effect of a subsequent transfer on that prior right may still suffice