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Fraud - Recklessness. CHU de Québec-Université Laval v. Tree of Knowledge International Corp.
In CHU de Québec-Université Laval v. Tree of Knowledge International Corp. (Ont CA, 2026) the Ontario Court of Appeal dismissed an appeal, here brought against a finding that the appellant was "personally liable for civil fraud".
The court considers the test for civil fraud, here focussing on 'recklessness':[70] As reviewed by the trial judge, and as set out in Bruno Appliance, at para. 21, the elements of a claim for civil fraud are as follows:(a) A false representation made by the defendant;
(b) Some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness);
(c) The false representation caused the plaintiff to act; and
(d) The plaintiff’s actions resulted in a loss.[9] ....
[73] I see no error in the trial judge’s articulation of the test for a finding of recklessness, and I see no error in the trial judge’s conclusion that Mr. Caridi’s conduct was reckless for the purpose of finding civil fraud in this case.
....
[75] As the trial judge noted, in Bruno Appliance, at para. 18, the Supreme Court referred to Derry v. Peek (1889), 14 App. Cas. 337 (H.L.), at p. 374, where the House of Lords stated that the knowledge requirement includes not only a false representation made knowingly or without a belief in its truth but also a false representation made “recklessly, careless whether it be true or false” (emphasis added).
[76] The trial judge went on to explain that the court can find recklessness if the person who made the false statement did not have an honest belief that the statement was true, in the sense that they were indifferent or did not care whether the statement was true: Derry, at p. 361; Parna v. G. & S. Properties Ltd., 1970 CanLII 25 (SCC), [1971] S.C.R. 306, at pp. 316-17; and Hearn v. McLeod Estate, 2019 ONCA 682, 439 D.L.R. (4th) 217, at para. 49. Based on Derry, at p. 376, the trial judge further accepted that recklessness can be made out where a person makes a false statement and closes their eyes to the facts or purposefully abstains from inquiring about the facts. This statement of the law is accurate and entirely consistent with Canadian cases in which courts have accepted that recklessness can be made out by showing that a person made a representation with disregard or a lack of care for whether it was true or false and without taking any steps to ascertain its accuracy: Precision Drilling Canada Limited Partnership v. Yangarra Resources Ltd, 2017 ABCA 378, 60 Alta. L.R. (6th) 57, at paras. 34-35; Noble v. Fuller, 1985 CarswellBC 4167 (S.C.), at para. 20.
[77] The trial judge was careful to distinguish between the type of carelessness that amounts to recklessness in the context of a claim for fraud and the type of carelessness that supports a claim for negligence. He explained that carelessness does not amount to recklessness and is not sufficient to meet the knowledge requirement for fraud where a person has an honest but mistaken belief in the truth of the statement:As noted above, “carelessness” has been held to constitute “recklessness”. In this regard, it is important to note that “careless” can mean indifference to the truth of a statement or it can mean failing to take care. This distinction was identified by Lord Herschell in Derry v. Peek, at p. 361: “To make a statement careless whether it be true or false, and therefore without any real belief in its truth, appears to me to be an essentially different thing from making, through want of care, a false statement, which is nevertheless honestly believed to be true”. [78] Accordingly, the trial judge made no error in articulating the test for the knowledge element of civil fraud. His description of the requirement for recklessness was entirely consistent with existing authorities. I see no error in this part of the trial judge’s analysis. He was clearly applying the appropriate threshold for recklessness in impugning Mr. Caridi’s conduct toward CHU.
[79] More importantly, whether one uses the term “recklessness” or “carelessness” as that term is used in civil fraud cases, the trial judge’s evidentiary findings fully support his conclusion that Mr. Caridi’s conduct was reckless. Notably, on March 26, 2020, when the agreement between CHU and TOKI was made, Mr. Caridi represented that he could obtain 3 million NIOSH certified N95 masks at a point when Mr. Lee had provided no information or assurances that he could deliver any masks, let alone 3 million NIOSH certified N95 masks. Mr. Caridi nevertheless represented that, if CHU paid the full contract price, he could deliver the masks. Over the next few days, Mr. Caridi persistently represented to CHU that he could obtain at least some NIOSH certified N95 masks when he never received any assurances or information from Mr. Lee or anyone else that he could obtain and deliver any NIOSH certified N95 masks. He had no subjective belief in these representations, nor any factual basis for them. The trial judge found that Mr. Caridi did not intend to take CHU’s money and vanish – but he did intend to induce CHU to pay TOKI, regardless of whether TOKI could deliver the masks or not. There is no question that this conduct met the threshold for recklessness in the context of a claim for civil fraud.
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