Breaking Fraud Cases from Canadian Courts
At Canadian Fraud News, we report on decisions issued by Canadian Courts related to fraud, that are not reported in the mainstream media, and that contain legal issues the Canadian public and fraud recovery experts should be aware of. The following is one such story.
On October 30, 2017, the Ontario Superior Court released a decision in a civil case where, after a five-day trial that involved allegations of “breach of duty of honest dealings or honest performance, the Court ordered the Plaintiff to pay costs of the Defendant in the whopping amount of $456,560.11.
This case demonstrates the danger of making unfounded allegations of dishonest conduct, even where on the formal allegation of fraud is made, and even when the allegation does not involve an individual person.
The Underlying Case
In Expoed Inc. v. Anaca Technologies Ltd., the plaintiff Expoed Inc. claimed damages of more than $5 million, an accounting for royalties paid and due under the license agreement, and declarations that its software license had been validly terminated resulting in future royalties claimed under the license to be validly accelerated.
The plaintiff Expoed Inc. relied on the Supreme Court of Canada in the case of Bhasin v. Hrynew, 2014 SCC 71 (CanLII) to support its claims are for breach of contract and breach of the duty of honest dealing. Bhasin v. Hrynew was a landmark decision recognizing the right of parties to contractual agreements to honest dealings with those they deal with.
The Court dismissed the Plaintiff’s action, stating that the Plaintiff did not present sufficient evidence establishing breaches of either agreement between the parties, as properly interpreted, or a breach of the duty of honest dealing. The Court noted: “I have no doubt that the plaintiff is frustrated in its dealings with the defendant and would love to be paid funds today to avoid future dealings with the defendant. But that is not the business deal that it made.”
The Cost Award to the Defendants
The results of the trial are not particularly interesting. The order of the Court for the Plaintiff to pay the Defendant $450,000 in costs is an alarm bell, however, to those who believe they are the victims of fraud or dishonest dealing to exercise due diligence before making such allegations.
The Court in Expoed Inc. v. Anaca Technologies Ltd. held that it is not in every case of unsuccessful allegations of fraud that will result in substantial indemnity costs being ordered against a plaintiff. If the case is a close call, punitive or substantial costs awards will not be made against plaintiffs.
That said, where a plaintiff has evidence that the defendant is merely negligent and does not have evidence of dishonesty, especially after its discovery, and persists to trial with such allegations, and such allegations remain unproven at trail, then substantial costs are warranted to compensate a defendant for having to incur the expense of counsel and to act as a deterrent against other making unfounded allegations.
The Court followed various prior court decisions that have recognized that allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception, and go to the heart of person’s integrity.
The Court noted that the allegations, in this case, had stood in the public record and over the heads of the defendants for some time. The plaintiffs admitted, during the trial, that the allegations were akin to, or as serious as, fraud.
The Court held that the Plaintiff made no effort whatsoever to prove that the Defendant made any fraudulent misrepresentations. It adduced no evidence that the Defendant made any pre-contractual misrepresentation that induced it to enter into its deal or that any such pre-contractual representation had been wrong or untruthful (let alone knowingly so).
In all, the Plaintiff’s claim was a scatter gun of allegations hoping that something would stick and lead to an early end to the parties’ dealings. The case was entirely about finding an exit for the plaintiff to an unhappy relationship. To that end, it was willing to make a broad swath of allegations including that the defendant engaged in deliberate dishonesty.
The Court held that parties to litigation know, and ought to know, that due diligence and sober second thought is rightly required before deceit should be alleged. The risk of punitive costs exists precisely because the making of serious allegations can have most serious consequences for the defendant.
Moreover, in litigation, such allegations are protected by absolute privilege and cannot be made the subject of a claim for defamation. As is usually the case, with privilege comes responsibility
Full Reasons for Judgment
For the full reasons for the cost order, see Expoed Inc. v. Anaca Technologies Ltd., 2017 ONSC 6513, and for judgment, see Expoed Inc. v. Anaca Technologies Ltd., 2017 ONSC 5849
For further information on this case or any other fraud recovery inquiry, contact Canadian Fraud News Inc. at Devin@Canadianfraudnews.com .
Read our previous breaking court case here.
Deborah McCoy – Is an investigative journalist and has over 17 years of investigation experience in both the private and public business sectors. Since joining CFN, Ms. McCoy has become a true advocate for victims of fraud and increasing the public’s awareness in fraud prevention.