FRAUD AND MISREPRESENTATION – Fraudulent misrepresentation – Specific elements – Recklessness of truth or falsity

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An appeal by TD Bank from a trial decision dismissing its action against Wilde for fraudulent misrepresentation and civil conspiracy. Wilde, a chartered accountant, and a client, Deleeuw, incorporated Hi Plans which then agreed to purchase a cattle ranch from Marsh pursuant to a Land Agreement and a Chattel Agreement.  To acquire the cattle under the Chattel Agreement, Hi Plains obtained an operating loan from TD Bank. Wilde relied on the bank and the lawyers to ensure the disbursement conditions were managed appropriately. TD Bank authorized Hi Plains’ loan in mid-December 2010. The land deal had not closed in November 2010, as required under the Land Agreement. However, all involved knew that ongoing negotiations were taking place. Wilde understood that Hi Plains had acquired an ownership interest in the cattle and was paying related expenses, and that it would eventually acquire the land. The land deal did not close and negotiations between Hi Plains and Marsh came to an end. Marsh took the position that Hi Plains had not purchased anything and that all sums paid to Marsh by Hi Plains had been forfeited. Hi Plains commenced an action against Marsh in 2012 to recover amounts it claimed were owed to it by Marsh, including for cattle, equipment, and related expenses. TD Bank called the loan in 2014, believing that the 2010 receipt confirming the cattle sale from Marsh to Hi Plains had been altered. In 2015, TD Bank commenced an action against Wilde, Deleeuw and Hi Plains claiming they had obtained the credit facility by fraudulent misrepresentation, deceit or civil fraud. It alleged that the 2010 cattle receipt had been altered to read 925 bred stock cows, when the original receipt was for 425 cows, resulting in the value of the livestock increasing from $425,000 to $925,000. The trial judge found that the receipt had been altered in 2010 but accepted that Wilde knew nothing about the altered receipt until 2012 when Hi Plains commenced an action against Marsh. The trial judge accepted that in approving the loan, the TD Bank relied upon the report of its solicitor and the quarterly report prepared by Deleeuw and, subsequently, upon the cattle inventory referenced in the quarterly reports and financial statements prepared by Wilde. The trial judge found that these reports were based on the contents of the faulty April 2011 quarterly report initially prepared by Deleeuw along with other information Wilde gained from Deleeuw, who was dealing with the cattle. The trial judge concluded Wilde did not make a false statement or representation in 2010 by altering the cattle receipt and did not know about the alteration until 2012. He found there was no level of knowledge of the forged document or recklessness on the part of Wilde up to 2012 or after and that no conduct of Wilde could be construed or implied as reckless or willfully blind.

HELD: Appeal dismissed. The trial judge made no error of law with respect to the test for civil fraud, and his assessment of Wilde’s credibility and application of the law to the facts as he found them were entitled to deference. The trial judge accepted Wilde’s evidence about relying upon the bank and the lawyers to work with Deleeuw to ensure the operating loan was appropriately approved, and he was satisfied this was reasonable in the circumstances. The trial judge’s finding that there was no recklessness on the part of Wilde up to 2012 was available on this record and was entitled to deference. The information Wilde received from Deleeuw for altering the 2010 receipt was substantiated, at least to some degree, by other information Wilde had, including from Marsh. Based on the information Wilde had, he reasonably believed, and continued to believe, the cattle inventory reflected in the financial statements and quarterly reports belonged to Hi Plains. The record did not support TD Bank’s argument that the trial judge made palpable and overriding errors in concluding that no conduct of Wilde from 2012 to 2014 could be construed or implied as reckless or willfully blind.

This article was originally sourced by www.thelawyersdaily.ca.