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Civil Fraud, Fraudulent Act: Harland v. Fancsali

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**Harland v. Fancsali, 13 O.R. (3d) 103 [1993] O.J. No. 961

“The plaintiffs retained H as their real estate agent for the sale of their home. H was asked by the defendants Mr. and Mrs. F to present an offer, and these defendants also retained H as agent to sell their own home. After negotiations, the plaintiffs accepted an offer at a selling price of $380,000. The offer was conditional on the defendants Mr. and Mrs. F selling their own home before midnight, February 16, and it provided that if the plaintiffs received another offer, then these defendants had 48 hours to waive the condition or the offer would lapse. Before February 16, the Fs, being dissatisfied with H’s efforts to sell their home, spoke to the defendant A, a real estate agent employed by the defendant S Inc., who advised them to make a new offer to purchase the plaintiffs’ home through the scheme of using Mrs. F’s maiden name, which she had not used for 25 years. After some negotiations and after securing a release of the first offer, the plaintiffs, who were unaware of the scheme, agreed to sell their home for $370,000. Just before closing, the plaintiffs discovered the truth; but they closed and subsequently brought this action for damages for fraud or deceit.

Held, there should be judgment for the plaintiffs.

The plaintiffs’ case did not satisfy the requirements for a claim in deceit, but they succeeded in establishing a case of fraud, which is much broader in scope than deceit and does not require proof of a false representation. A general definition is that “defraud” means to deprive a person dishonestly of a belonging or an entitlement available to him or her but for the perpetration of the fraud. If a certain conduct constitutes fraud under the Criminal Code, it also constitutes civil fraud. Here, the defendants intended to deceive the plaintiffs. It was not necessary that the defendants personally believe the conduct to be dishonest; they knew that their conduct was dishonest in the sense that it would have been considered dishonest by the current standards of a reasonable person. The defendants’ conduct thus amounted to criminal fraud.

The plaintiffs proved that the defendants’ fraud deprived them of something; had the plaintiffs known the truth, they would have refused to accept less than $380,000 for their home. The plaintiffs were entitled to special damages and any general damages that flow naturally and directly from the fraudulent acts. Damages should be assessed at $9,400 plus prejudgment interest. Fault should be apportioned at 20 per cent for each of the Fs and at 60 per cent for the defendants A and S Inc. The plaintiffs were also entitled to punitive damages of $5,000 as against the defendants A and S Inc.

 

(a) Deceit

There are four elements of a case in deceit: (1) a false representation or statement made by the defendant, (2) which was knowingly false, (3) was made with the intention to deceive the plaintiff, and (4) which materially induced the plaintiff to act, resulting in damage: Klar, Tort Law (Toronto: Carswell, 1991), at p. 426.

The first consideration is whether there was a false representation in this case. It was obviously not literally false for the Fancsalis to put forward an offer in the name of C. Gargano as that was Mrs. Fancsali’s name. However, the case law has established that it is not necessary that there be a positive misstatement and that a course of conduct may constitute a “false representation”: Klar, op. cit., at p. 427ff.; Fridman, The Law of Torts in Canada (Toronto: Carswell, 1990), at p. 123.

Nevertheless I am uncomfortable approaching the case on the theory of deceit. For one thing, I am not sure how on this theory I can distinguish what happened here from the situation where a developer wishes to make an anonymous offer and I do not think that the latter conduct, without more, constitutes the tort of deceit. I have found no cases which are sufficiently analogous to the facts before me to satisfy me that I should find that this case satisfies the requirements of deceit.

(b) Fraud

Many of the texts and cases are not very clear about the relationship and differences between a civil claim based on fraud and one based on deceit. It would appear that a remedy for fraud was originally only available in equity but that in current theory it would be more helpful to simply consider it as a category of liability based on unjust enrichment (Klar, Remedies in Tort, vol. 1 (Toronto: Carswell, 1987), at pp. 5-11; Klippert, Unjust Enrichment (Toronto: Butterworths, 1983), pp. 280-82) (where the defendant has benefited at the expense of the plaintiff) or, more generally, as simply a tort for which the court will grant a remedy to restore the plaintiff to his original position or compensate him for any loss caused.

As a theory of liability, fraud is much broader in scope than deceit. There is no need to prove a false representation. Indeed, the courts have recognized that it is difficult, if not impossible, to define fraud because it is capable of being committed in endless forms and new forms continually arise: see Klar, Remedies in Tort , supra, pp. 511-12.

Justice Montgomery reviewed the definitions of fraud in Ontex Resources Ltd. v. Metalore Resources Ltd. (1990), 75 O.R. (2d) 513 (Gen. Div.). Perhaps the most general definition he quoted was that “defraud” means to deprive a person dishonestly of something which is his or of something to which he is or would or might, but for the perpetration of the fraud, be entitled.

The arguments of counsel have made me sensitive to the risk of finding fraud based on conduct which might be considered by the general public or particular business groups as “sharp”, or “hardball” or aggressive or competitive conduct but not fraudulent.

To minimize that risk I shall turn to the Criminal Code provisions on the assumption that if conduct constitutes fraud under the criminal law it certainly constitutes a wrong for which a civil court can grant relief.

The Criminal Code, R.S.C. 1985, c. C-46, provides:

380(1) Every one who, by deceit, falsehood or other fraudulent means, whether or not it is a false pretence within the meaning of this Act, defrauds the public or any person, whether ascertained or not, of any property, money or valuable security,

(a) is guilty of an . . . offence . . .

As noted already, there need not be a false representation; it is sufficient if there is “fraudulent means”.

The criminal case law (R. v. Theroux, [1993] S.C.J. No. 42) has established the following propositions concerning the crime of fraud:

— “other fraudulent means” is a third category of conduct   separate from deceit or fraud which includes what   reasonable people consider to be dishonest dealing. The   non-disclosure of important facts may fall into this   category: R. v. Theroux , at pp. 25-26;

— although other fraudulent means have been broadly defined as   means which are “dishonest”, it is not necessary that an   accused personally consider these means to be dishonest in   order that he or she be convicted of fraud (at p. 32);

— fraudulent means does not include mere negligent   misrepresentation, improvident business conduct or conduct   which is sharp in the sense of taking advantage of a   business opportunity to the detriment of someone else (at   p. 45);

— the actus reus of the offence will be established by proof   of the act of fraudulent means and deprivation caused by   that act; and

— the mens rea of the offence will be established by proof of   subjective knowledge of the fraudulent means and subjective   knowledge that those means could have as a consequence the   deprivation of another (at pp. 33-34).

 

THE DEGREE OF PROOF REQUIRED TO ESTABLISH FRAUD OR DECEIT

What degree of proof must the plaintiffs establish in this case? They must discharge the burden of proving their case on the balance of probabilities. Although their allegations include fraud and crime and professional misconduct of a real estate agent, the degree of proof required remains the civil standard although I must scrutinize the evidence with greater care and require a higher level of probability than in an ordinary case such as negligence. In considering whether the plaintiffs have met the standard I must also consider the ethical, social, professional and legal character of the facts in issue and the consequences of my findings: see Sopinka, The Law of Evidence in Canada (Toronto: Butterworths, 1992), pp. 142-48.”

 

**source: Canlii

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