Fraud Recovery Archives

Piercing the Corporate Veil – the Need for Clear Fraudulent or Improper Conduct

By John Pirie

Piercing the corporate veil remains a difficult feat in Ontario. Recently, in Cornerstone Properties v Southside Construction, Justice Hockin of the Ontario Superior Court of Justice refused to pierce the corporate veil to hold a corporation liable for a costs award against its subsidiary. This decision reaffirms that courts will only pierce the veil where a corporation is being abused to the point where it is not functioning as a bona fide corporate entity, and instead is being used as a vehicle to facilitate fraudulent or improper conduct.

Consent judgment survives bankruptcy

By Ben Sakamoto

In Water Matrix Inc. v Carnevale, Justice Sanfilippo found that a consent judgment may survive bankruptcy if it arises from a claim that is based in fraud. This allowed a company that was defrauded by a former employee to continue to enforce the company’s judgment after bankruptcy.

Bank’s Duty of Care to victims of Ponzi Scheme

By Michael Nowina

In 1169822 Ontario Ltd. v. Toronto-Dominion Bank 2018 ONSC 1631 Justice Dunphy of the Ontario Superior Court decided a case where investors in a failed Ponzi scheme sought recovery from the financial institution used by the fraudster to deposit funds. The key takeaways from the case are: it confirms that a financial institution can be liable where it has actual knowledge (willful blindness or recklessness will also suffice) that a customer is using the accounts at the bank to committed a fraud against third parties; and…

Fraudulent Conveyance Claim flounders on procedural shores

By Michael Nowina

In Esfahani v. Samimi, 2018 ONCA 516 the Ontario Court of Appeal confirmed that a plaintiff pursuing a fraudulent conveyance or preference must recognize that the legal landscapes changes with a bankruptcy and that the effects of a bankruptcy filing cannot be ignored. The unfortunate outcome for the plaintiff, Djalaleddin Esfahani (“Esfahani”), was that an otherwise valid claim to set aside a fraudulent conveyance was dismissed because it was brought outside of the bankruptcy process. Foreign Judgment Obtained Esfahani obtained a…

When Should a Defendant Bring a Motion for Summary Judgment in Fraud Proceedings?

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This is our third and final post on the complex fraud carried out by Norma and Ronald Walton, and the Ontario Court of Appeal decisions arising from their scheme. In our earlier posts, we focused on the use of a constructive trust as a remedy for breach of fiduciary duty and third party fraud liability. In this post, we discuss the risk that comes with bringing a summary judgment motion in the context of a complex fraud action. In Trez Capital…

B.C. Court finds Civil Fraud by Omission in Wang v Shao

By Brendan O'Grady

We previously reported in an article last August that Ontario Courts are increasingly finding civil fraud on the basis of material omissions, as in the United Kingdom. This trend has continued in a recent decision by the Supreme Court of British Columbia in Wang v Shao, 2018 BCSC 377. The case involved the aborted sale of a home in Vancouver’s upscale Shaughnessy neighbourhood for a purchase price of $6.138 million. After viewing the home, the purchaser specifically inquired through real estate…

Constructive Trust as a Remedy for Breach of Fiduciary Duty: Court of Appeal Clarifies Test for Granting Proprietary Remedies

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This is our second of three posts on the Ontario Court of Appeal’s recent decision in DBDC Spadina Ltd. v. Walton 2018 ONCA 60 arising out of a complex fraud scheme perpetrated by Norma and Ronauld Walton. This post discusses the finding by the Court of Appeal that it was inappropriate for the application judge to have granted a constructive trust as a remedy for breach of fiduciary duty. The Court of Appeal set aside the constructive trust because a fiduciary’s wrongful…

Stranger Danger: When Companies associated with a Fraudster should be Liable for the Fraudster’s Breach of Fiduciary Duty

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The decision in DBDC Spadina Ltd. v. Walton, 2018 ONCA 60 provides insight on when corporations that are de facto under control of a fraudster can be held liable for claims of knowing assistance in the breach of fiduciary duty and knowing receipt of trust property. This is the first of three posts in which we will report on recent decisions by the Ontario Court of Appeal arising out of a fraud that was found to have been perpetrated by Norma and…

Supreme Court of Canada Shifts the Risks of Cheque Fraud

By Ahmed Shafey

In a narrow 5-4 decision, the Supreme Court of Canada has laid out a new formulation of the “fictitious or non-existing payee” defence under section 20(5) of the Bills of Exchange Act (BEA). The underlying dispute involved an employee who took advantage of weak internal compliance mechanisms to draft a number of fraudulent cheques. The employee made the cheques payable to entities the employer dealt with, as well as two non-existent entities with names similar to those of real suppliers. The…

Documents Prove Fraud in Summary Judgment Decision

By Brendan O'Grady

Summary judgment of an action may only be granted when there is no genuine issue requiring a trial and this can be difficult to prove in fraud cases where credibility is often an important factor. In the recent Ontario Superior Court decision in MacNamara v. 2087850 Ontario Ltd. (Strathcona Construction), 2017 ONSC 499, Justice Akbarali granted summary judgment finding both fraud and grounds to pierce the corporate veil of a corporate defendant. This case demonstrates how liability for even the most serious causes of action can be established by way of summary judgment where a full evidentiary record allows the Court to find the necessary facts, apply the law, and determine that there is no genuine issue for trial.