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Civil fraud is a serious issue that can have severe consequences for individuals and businesses. It involves deceiving or misleading another person to obtain an unfair advantage or financial gain. To fully understand civil fraud, it is essential to be familiar with the standard terms used in this area of law. This article will comprehensively overview some of Ontario’s commonly used civil fraud terms.

Common Civil Fraud Terms

False Representation

False representation is a component of the tort of civil fraud, as developed in the leading civil fraud case of Hryniak v. Mauldin. It involves making a misleading statement or providing incorrect information to deceive another person.

False representation is also governed by the “Unfair Practices” section of the Consumer Protection Act, which prohibits businesses from making false, misleading, or deceptive representations to consumers. Specifically, s.14(2) of the Consumer Protection Act provides a non-exhaustive list of claims and circumstances that would be considered false representation, such as:

  1. A representation that the goods or services have sponsorship, approval, performance characteristics, accessories, uses, ingredients, benefits or qualities they do not have.
  2. A representation that the person who is to supply the goods or services has sponsorship, approval, status, affiliation or connection the person does not have.
  3. A representation that the goods or services are of a particular standard, quality, grade, style or model if they are not.

It enables a consumer to rescind the agreement and can result in fines, penalties, and even criminal charges. Additionally, consumers whom false representations have harmed have the right to seek other legal remedies, such as monetary damages or a court-ordered injunction, to stop the business from continuing the false representations. It is important to be aware that false representation can also be a criminal offence under the Criminal Code of Canada.

Fraudulent Misrepresentation

In Ontario, fraudulent misrepresentation can be claimed as a defence in contract disputes. It can be established if the following five elements are present, as set out in Chaba v. Khan:

  1. The plaintiff made a false representation of a material fact;
  2. That plaintiff knew the representation was false or did not know whether the representation was true or false;
  3. The plaintiff intended for the defendant to act on the misrepresentation;
  4. The defendant relied upon the statement; and
  5. That the plaintiff suffered damage as a result.

If the defence can be established, the contract can be rescinded.

Fraudulent Concealment

Fraudulent concealment is a form of civil fraud that involves hiding or failing to disclose important information to deceive or mislead another person. It is governed by the common law of contract in Ontario and is often considered alongside the operation or suspension of limitation periods, such as in Zachariadis Estate v. Giannopoulos Estate. In the case, Rouleau J.A. explained the components and operation of this equitable doctrine:

[35] As La Forest J. explained in M.(K.) v. M.(H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, at pp. 58-59, the doctrine of fraudulent concealment exists to ensure that a limitation period does not “operate as an instrument of injustice”. In order to invoke the doctrine, plaintiffs have traditionally been required to establish: (1) that the plaintiff and defendant had a special relationship; (2) that the defendant’s conduct was unconscionable in light of the special relationship; and (3) that the defendant concealed the plaintiff’s right of action either actively or by wrongdoing.

In this context, a party can void a contract if they can prove that the other party concealed a material fact that would have affected the decision to enter into the contract. It’s also important to note that there is a distinction between concealment and non-disclosure in that non-disclosure is a failure to disclose information. In contrast, concealment is actively hiding or omitting information.

Negligent Misrepresentation

Negligent misrepresentation is a form of civil fraud that occurs when a person makes a false statement without intent to deceive but with a reckless disregard for the truth. Negligent misrepresentation was most recently outlined in Doumouras v. Chander, where the Superior Court of Ontario succinctly stated the five-part test:

  1. there must be a duty of care based on a “special relationship” between the representor and the representee;
  2. the representation in question must be untrue, inaccurate, or misleading;
  3. the representor must have acted negligently in making the misrepresentation;
  4. the representee must have relied, in a reasonable manner, on the misrepresentation; and
  5. the reliance must have been detrimental to the representee in the sense that damages resulted.

Similar to fraudulent misrepresentation, the Court can rescind the contract, and award damages should negligent representation be found. However, the Court can also choose to award damages in lieu of rescinding the contract.

Other Common Terms

Some other standard terms that are used in civil fraud proceedings in Ontario include:

  • Constructive fraud: This occurs when a person uses their position of trust or power to take advantage of another person without necessarily making a false statement.
  • Duress: This occurs when one party is forced to enter into a contract against their will through threats or coercion.
  • Undue influence: This occurs when one party uses their position of trust or power to convince another party to enter into a contract that is not in their best interests.
  • Unconscionability: This occurs when a contract is so one-sided or oppressive that it is considered fundamentally unfair.
  • Punitive Damages: Additional damages awarded to the plaintiff, over and above the actual loss suffered, intended to punish the defendant for their fraudulent conduct.
  • Limitation Periods: The time limit within which a legal action must be taken after the cause of action has arisen.
  • Injunctions: a court order that prohibits a specific action from being taken or requires a particular action.

For Pragmatic and Effective Representation in Civil Fraud Matters Contact Milosevic & Associates

Civil fraud matters are often complex. Our lawyers at Milosevic & Associates have unparalleled litigation experience and regularly represent clients at all levels of court, including the Court of Appeal. We have also represented clients in matters involving cryptocurrency fraud, mortgage fraud, financial advisor fraud, and securities fraud. Call us at 416-916-1387 or contact us online to learn more about how we can help.