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Fraud - Remedies. McKenzie-Barnswell v. Xpert Credit Control Solutions Inc.
In McKenzie-Barnswell v. Xpert Credit Control Solutions Inc. (Ont CA, 2025) the Ontario Court of Appeal considered the trial court's remedial errors in a finding of 'fraudulent misrepresentation':[48] While I would uphold the trial judge’s findings of liability for fraudulent misrepresentation and unconscionability, I find error in the remedy.
(a) Error in the Contractual Remedy
[49] The first error arises in connection with the damages for negligence and breach of the construction contract. The trial judge awarded damages that would cover the cost of completing the construction and bring the property into compliance with the OBC and the Fire Code. As the trial judge put it:Due to the negligence, breach of contract and fraudulent misrepresentation of the [appellants], they are responsible for payment of all damage or loss sustained by the [respondent] as a result of the [appellants’] negligent construction work. All amounts required to complete the work that the [appellants] should have done under the construction contract, as well as all work required to comply with the OBC and Fire Code, are the responsibility of the [appellants], Mr. Joshi, Xpert Credit and Right Choice, jointly and severally. [Emphasis added.] [50] One of the central findings of the trial judge was that the contract was to be set aside due to fraud. The usual remedy for a fraudulently induced contract is recission of the contract. One cannot logically rescind a contract yet, at the same time, order its enforcement. When induced by fraud to enter into a contract, the deceived party is entitled to sue in tort for damages based on the party’s out-of-pocket loss: S.M. Waddams, The Law of Contracts, 8th ed. (Toronto: Thomson Reuters, 2022), at para. 430; 1018429 Ontario Inc. v. FEA Investments Ltd. (1999), 1999 CanLII 1741 (ON CA), 179 D.L.R. (4th) 268 (Ont. C.A.), at paras. 50, 52. However, the deceived party is not entitled to expectation or “loss of bargain” damages: Waddams, at para. 430; FEA Investments, at paras. 50, 52; see also Todd Family Holdings Inc. v. Gardiner, 2017 ONCA 326, 64 B.L.R. (5th) 1, at para. 25.
[51] In other words, the respondent is not entitled to the cost of completing the work of the contract, though she is entitled to be compensated for her out-of-pocket loss, and the repair of damage to her property flowing from the negligent work. She is entitled to be placed in the position she would have been but for the appellants’ wrongdoing, that is, had she not been induced to enter into the construction contract. . Ontario v. Madan
In Ontario v. Madan (Ont CA, 2023) the Court of Appeal states several remedies (one in restitution and constructive trust) sought by the provincial Crown in a notorious fraud case against an IT employee:[7] In the Amended Amended Statement of Claim (the “Statement of Claim”), Ontario alleged fraud, theft and conversion against the appellants. Ontario sought:. damages;
. a constructive trust over all monies obtained from the frauds and any assets acquired with money obtained from the frauds;
. an accounting of, and restitution of, all funds obtained from the frauds;
. a tracing order; and
. a Mareva injunction.
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