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BANKING - Fiduciary obligations - Constructive trust - Knowing assistance

Thursday, July 30, 2020 @ 6:24 AM  

Appeal by Duscio from the $3 million trial judgment against her. Garcia orchestrated a massive fraud against the respondent pension fund, which resulted in a loss of $12,460,930. One of Garcia’s former business associates, the appellant’s husband, assisted in rerouting over $7 million. The husband filtered $3 million through Catan Canada, of which the appellant was the sole officer, director and shareholder, through a complex series of transactions. The trial judge found the appellant’s husband was the de facto controlling mind of Catan. He found the appellant was a knowing assister with respect to the money that was routed through Catan.

HELD: Appeal allowed; new trial ordered. The trial judge erred by relying on constructive knowledge based on the appellant’s carelessness to ground his finding that the appellant had been wilfully blind and was liable based on knowing assistance. He failed to make a finding as to whether the appellant knew or suspected the money transited through her company was trust money that was being employed in a dishonest or fraudulent breach of trust. Without such a finding, a proper determination of wilful blindness could not be made. The trial judge committed a palpable and overriding error in finding the appellant continued to sign cheques and authorizations for large quantities of money as there was no evidence that could ground a finding the appellant signed any cheques or authorizations after the respondent’s funds were deposited. Dissenting reasons were provided.

Caja Paraguaya de Jubilaciones y Pensiones del Personal de Itaipu Binacional v. Garcia, [2020] O.J. No. 2820, Ontario Court of Appeal, S.E. Pepall, G.I. Pardu and D. Paciocco JJ.A., June 25, 2020. Digest No. TLD-July272020007