Fraud. Bruno Appliance and Furniture, Inc. v Hryniak
In Bruno Appliance and Furniture, Inc. v Hryniak (SCC, 2014) the Supreme Court of Canada took the oppourtunity to review the current law of civil fraud:
 The classic statement of the elements of civil fraud stems from an 1889 decision of the House of Lords, Derry v. Peek (1889), 14 App. Cas. 337, where Lord Herschell conducted a thorough review of the history of the tort of deceit and put forward the following three propositions, at p. 374:. Wescom Solutions Inc. v. Minetto
First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. . . . Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made. This Court adopted Lord Herschell’s formulation in Parna v. G. & S. Properties Ltd., 1970 CanLII 25 (SCC),  S.C.R. 306, adding that the false statement must “actually [induce the plaintiff] to act upon it” (p. 316, quoting Anson on Contract). Requiring the plaintiff to prove inducement is consistent with this Court’s later recognition in Snell v. Farrell, 1990 CanLII 70 (SCC),  2 S.C.R. 311, at pp. 319-20, that tort law requires proof that “but for the tortious conduct of the defendant, the plaintiff would not have sustained the injury complained of”.
 Finally, this Court has recognized that proof of loss is also required. As Taschereau C.J. held in Angers v. Mutual Reserve Fund Life Assn. (1904), 35 S.C.R. 330 “fraud without damage gives . . . no cause of action” (p. 340).
 From this jurisprudential history, I summarize the following four elements of the tort of civil fraud: (1) a false representation made by the defendant; (2) some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness); (3) the false representation caused the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss.
In Wescom Solutions Inc. v. Minetto (Ont CA, 2019) the Court of Appeal canvasses a tort labelled 'wilful blindness', an apparent variant of fraud, There is no mention of conversion:
 We agree with the appellants’ submission that the trial judge engaged in an objective analysis. Indeed, as part of his wilful blindness analysis, the trial judge stated that wilful blindness is made up of two components:. Gray (Re)
a. In circumstances that arouse the suspicions of a reasonable and honest person that are strong or sufficient enough to raise a duty to inquire; and
b. Whether someone in that person’s position chooses to remain deliberately ignorant to the knowledge that inquiry would reveal.
 The respondent submits that the objective analysis was appropriate because this was a knowing receipt case. It is true that knowing receipt can be proven not only by establishing actual knowledge or wilful blindness, but also by establishing “constructive knowledge” using objective criteria. Specifically, knowing receipt can be proven by showing that the defendant: (i) had knowledge of circumstances that would indicate the facts to an honest and reasonable person; or (ii) had knowledge of circumstances that would put an honest and reasonable person on inquiry: Paton Estate v. Ontario Lottery and Gaming Corp., 2016 ONCA 458 (CanLII), 131 O.R. (3d) 273, at para. 62; see also Gold v. Rosenberg, 1997 CanLII 333 (SCC),  3 S.C.R. 767, at paras. 53, 74. However, in this case the agreed issues for the trial judge were whether Mr. Fung had actual knowledge or was willfully blind to the fact that he was purchasing stolen goods or goods fraudulently obtained by Ms. Minetto. The trial judge was not asked to consider whether Mr. Fung as a reasonable person would have been alerted to a potential breach of trust.
 The trial judge erred in law in his articulation of the concept of wilful blindness. As stated by this court in R. v. Malfara (2006), 2006 CanLII 17318 (ON CA), 211 O.A.C. 200 (C.A.), at para. 2, “Where wilful blindness is in issue, the question is not whether the accused should have been suspicious, but whether the accused was in fact suspicious.” In short, a finding of wilful blindness, which is the same standard in criminal and civil proceedings, involves a subjective focus on the workings of a defendant’s mind.
 Notwithstanding this mischaracterization, we are not satisfied that the trial judge erred when he concluded that Mr. Fung was wilfully blind. It is clear from his reasons that he made findings of fact that established that subjectively Mr. Fung was wilfully blind:
 I also reach this conclusion because Mr. Fung admitted not once, but twice that the iPhones and iPads he was purchasing from Ms. Minetto were not upgrades. This is contrary to his evidence that he took comfort in purchasing cell phones through his store that were mostly upgraded products that had been legitimately obtained. As the availability of Apple products in this volume that were not upgrades, Mr. Fung had to know they were probably products that had been stolen or obtained through fraud. These findings establish that Mr. Fung knew that the Apple Products were probably stolen or obtained by fraud, but that he made a deliberate choice not to investigate. This conduct meets the definition of wilful blindness articulated in R. v. Sansregret, 1985 CanLII 79 (SCC),  1 S.C.R. 570, at p. 584, which arises when a “person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth.” See also R. v. Briscoe, 2010 SCC 13 (CanLII),  1 S.C.R. 411, at paras 21-24. Therefore, despite the trial judge’s error in defining wilful blindness, we do not give effect to this ground of appeal.
 I further find as a fact that Mr. Fung made a conscious choice not to seek verification or further information about the source of the Apple products he was purchasing from Ms. Minetto. He chose to remain deliberately ignorant as to the source of those products. I make this finding of fact because of Mr. Fung’s evidence that he may have asked Ms. Minetto a second time if the products he was purchasing from her were legitimate.
In Gray (Re) (Ont CA, 2014) the Court of Appeal considered the elements required to invoke the fraud exceptions to debt discharge located in s.175(1)(e) of the Bankruptcy and Insolvency Act:
 Section 178(1) of the BIA preserves certain types of claims from a bankrupt’s order of discharge. They are exceptions to the general rule of discharge and should be addressed accordingly: Simone v. Daley, 1999 CanLII 3208 (ON CA),  O.J. No. 571 (C.A.), at para. 28. The onus is on the creditor who seeks to have the debt or liability survive the discharge of the bankrupt to bring it within one of the provisions of s. 178(1).. Meridian Credit Union Limited v. Baig
 It is instructive to examine more closely subsections 178(1)(d) and (e), the two provisions dealing with a bankrupt’s fraud. They provide as follows:
178.(1) An order of discharge does not release the bankrupt from Section 178(1)(d) preserves from discharge a debt or liability “arising out of” fraud, embezzlement, misappropriation or defalcation of the bankrupt while acting in a fiduciary capacity. Its application is restricted to bankrupts acting in a fiduciary capacity. As such, a debt or liability “arising out of” the fraud of a debtor who was not acting in a fiduciary capacity would fall outside the scope of this section and would need to be considered under s. 178(1)(e).
(d) any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others;
(e) any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim;
 Section 178(1)(e) preserves from discharge a debt or liability “resulting from obtaining property or services by” false pretences or fraudulent misrepresentation.
 The reasons of the trial judge demonstrate that he was alive to the specific wording of this section when he concluded at para. 44 of his decision:
On a strict reading of [section 178(1)(e)], this conclusion is sufficient to determine the issue on this application. The Mortgage was obtained by Roberts’ fraudulent misrepresentations that constitute the Misrepresentations. Gray did not participate in the making of the Misrepresentations and neither knew, nor reasonably ought to have known, of them. The appellant acknowledges that in order for there to be a fraudulent misrepresentation there must be reliance by the party to whom the representation is made, and that in the present case the trial judge noted that it was not disputed that the mortgage was obtained in reliance on Roberts’ misrepresentations. The trial judge concluded that Gray did not know, nor ought he reasonably to have known, of the misrepresentations made by Roberts, that led to the mortgage funds being advanced.
 The appellant contends however that the trial judge failed to consider the false pretences branch of s. 178(1)(e). It is asserted that the false pretences consisted of Gray’s participation in the straw borrower scheme, knowing that he was not going to live in the house, and failing to reveal this fact, as well as the payment he was receiving for his involvement when the mortgage was advanced.
 There is a fatal flaw in the appellant’s argument. Irrespective of whether one considers fraudulent misrepresentation or false pretences, s. 178(1)(e) requires a finding that the bankrupt “obtained property by” such conduct. A causal connection between the bankrupt’s wrongdoing and the creation of the debt or liability is required. It is not sufficient that the bankrupt engaged in fraud, or that the debt or liability “arose out of” a fraudulent scheme. The trial judge in this case concluded that the mortgage funding was obtained by Roberts’ fraudulent misrepresentations, and not as a result of what Gray represented or failed to disclose to RBC.
 Since the appellant relies heavily on the decision of the Manitoba Court of Appeal in Ste. Rose & District Cattle Feeders Co-op v. Geisel, an examination of that case is warranted.
 In Geisel there were two debtors, a father and a son, against whom the plaintiff Co-op had obtained a default judgment before both went bankrupt. The father had borrowed money from the Co-op, and agreed to use the funds to purchase cattle, and to brand the cattle with the Co-op’s brand. The father was to notify the Co-op when the cattle were taken to auction, and to repay the borrowing from the proceeds of sale. Ultimately, the cattle, which had not been branded with the Co-op’s name, were transported and sold at auction in the name of the son. The proceeds were deposited into the son’s bank account, where they were seized by one of his creditors. There was no intention to defraud the Co-op; rather the scheme was put in place by the two men for tax reasons, and with the expectation that the proceeds would be used to repay the father’s borrowing.
 There was no fraud on the part of the father and no involvement by the son in connection with the original borrowing, factors that led the trial judge to refuse relief under s. 178(1)(e) on the basis that the debt was not “property obtained by” fraudulent misrepresentation or false pretences.
 This decision was overturned on appeal, with the Manitoba Court of Appeal holding that the judgment debt survived the bankruptcy discharges of both father and son.
 The appeal court noted that, while there was no apparent fraud in the original borrowing, at the later stage where both debtors knowingly diverted the proceeds of sale of the cattle to the wrong bank account, there was fraud on the part of the father and false pretences on the part of the son. The father knowingly withheld relevant information from the Co-op when he advised that the cattle would be sold, but not that they would be sold in his son’s name with the proceeds deposited into the son’s account. This was a fraudulent misrepresentation relied on by the Co-op to its detriment. The false pretences were on the part of the son when he falsely held out to the transport driver and auctioneer that the cattle were his to sell. He obtained the property of the Co-op (the proceeds of sale of the cattle) by pretences which he knew to be false.
 The Geisel case does not stand for the general proposition urged upon us by the appellant – that a debtor’s false pretences are sufficient to exempt a debt from discharge, even where there is no causal link between the debt or liability sought to be preserved and the false pretences of the bankrupt. In Geisel there could be no misrepresentation by the son to the Co-op, because the son had no dealings or relationship with the Co-op. What was key was that the son had obtained from the auctioneer the Co-op’s property (the proceeds of the sale of the cattle at auction) by pretences he knew to be false. He had represented that he was the owner of the cattle.
 In the present case, the trial judge referred to the Geisel decision and he cited that court’s approval of the observation in Buland Empire Development Inc. v. Quinto Shoes Imports Ltd.,  O.J. No. 2807 (C.A.), at para. 14, that “the core content of both false pretences and fraudulent misrepresentation is deceitful statements”. He recognized that both false pretences and fraudulent misrepresentation involved the question of whether Gray had made a deceitful statement that led RBC to advance the mortgage funds. The trial judge considered the very circumstances that the appellant contends were false pretences and he concluded that they did not amount to a fraudulent misrepresentation on the part of Gray.
 The wording of section 178(1)(e) makes it clear that the debt or liability must result from obtaining property or services by false pretences or fraudulent misrepresentation. The trial judge concluded that the money was advanced by RBC as a result of Roberts’ misrepresentations, and not as a result of anything Gray said or failed to say or do. This was a finding of fact that is determinative of both the “false pretences” and “fraudulent misrepresentation” aspects of s. 178(1)(e) as applied to this case.
 Finally, while it is correct to say that “the bankruptcy scheme is intended to benefit honest, but unfortunate, debtors” (see Re Giannotti (2000), 2000 CanLII 16928 (ON CA), 138 O.A.C. 316, at para. 11, cited with approval in Geisel), it is not sufficient to show that there was a false pretence or fraudulent misrepresentation unless it is also shown that the property (in this case the mortgage funding) was obtained thereby. While the Geisel case referred to this interpretive principle, in concluding that the debtors’ motives and intentions to repay the Co-op were not relevant, the court nevertheless found in that case that property had been obtained by each of the debtors by their fraudulent misrepresentation or false pretences.
In Meridian Credit Union Limited v. Baig (Ont CA, 2016) the Court of Appeal commented on the elements of the tort of civil fraud. The case is useful for the fact analysis that the court engaged in respecting the individual elements of fraud:
 The Supreme Court of Canada recently affirmed in Hryniak v. Mauldin, 2014 SCC 7 (CanLII),  1 S.C.R. 87, at para. 87, that a plaintiff asserting a claim for civil fraud must prove the following on a balance of probabilities:The court also pointed out that tortious misrepresentations made by directors were directly actionable against them without recourse to the doctrine of piercing the corporate veil:
1) A false representation by the defendant;
2) Some level of knowledge of the falsehood of the representation on the part of the defendant (whether knowledge or recklessness);
3) The false representation caused the plaintiff to act;
4) The plaintiff’s actions resulted in a loss.
 Subject to an exception that does not apply in this case, “[t]he consistent line of authority in Canada holds simply that, in all events, officers, directors and employees of corporations are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company”: ADGA Systems International Ltd. v. Valcom Ltd. (1999), 1999 CanLII 1527 (ON CA), 168 D.L.R. (4th) 351 (Ont. C.A.), at para. 18. ...