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FRAUD AND MISREPRESENTATION - Particular relationships - Fiduciary relationship

Thursday, April 02, 2020 @ 9:04 AM  


Appeal by the defendants from trial judgment finding them liable for fraudulent misrepresentation and breach of fiduciary duty. The respondent, a Paraguayan pension fund, was the victim of a massive fraud perpetrated by the individual appellant Garcia and the corporate appellants. The respondent invested over $34 million in three Canadian investments proposed by the appellants. Each proposal purported to be advanced by one of three legitimate regulated Canadian institutions but in fact was made on behalf of unregulated and unlicensed shell companies, the corporate appellants, designed to mimic the relevant legitimate Canadian institutions. The proposals deliberately and fraudulently misrepresented the attributes of the proposed investments.

HELD: Appeal dismissed. While the trial judge did not refer to the corporate identification doctrine or attribution by name, he unquestionably considered and rejected its application and that of ex turpi causa. Application of the corporate attribution rule in this case would not be in the public interest. Its application would deprive a company, vulnerable to fraud because of the neglect and corruption of board members and officers, of any civil remedy, to the detriment of its shareholders and legitimate creditors. Meanwhile, it would permit fraudsters to pocket their gains with civil impunity. While the trial judge did not address the appellants’ stand-alone limitation defence, the earliest that any limitation period could begin to run would have been August 2009, such that the action was commenced well within the applicable limitation period. The trial judge did not err by finding the appellants liable for conspiracy when it was not pleaded against them. The substance of the claim against the appellants was pleaded and it could not be said that the appellants were taken by surprise.

Caja Paraguaya de Jubilaciones y Pensiones del Personal de Itaipu Binacional v. Obregon, [2020] O.J. No. 670, Ontario Court of Appeal, S.E. Pepall, G.I. Pardu and D. Paciocco JJ.A., February 14, 2020. Digest No. TLD-March302020009