Documentation:Torts/Fraud

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Fraud

TORT LAW
CASEBOOK
Introduction
Dignitary Torts
Defamation • Discrimination • Harassment • Intentional infliction of mental suffering • Invasion of privacy • Trespass to the person
Property Torts
Interference with goods • Interference with land • Non-natural use of land • Private nuisance • Public nuisance
Negligence Tort
Duty of care • Breach of duty • Damage • Causation • Remoteness
Negligence Categories
Employment • Environmental pollution • Harmful products • Hosting patrons and guests • Infliction of mental injury • Misrepresentation • Occupation of premises • Professional services • Public authorities • Pure economic loss • Relational economic loss • Rescuers • Shoddy goods or structures • Treatment of indigenous children • Unborn children
Dishonesty & Abuse of Position Torts
Abuse of process • Breach of confidence • Conspiracy • Fraud • Inducing breach of contract • Injurious falsehood • Intimidation • Malicious prosecution • Misfeasance in public office • Passing off • Spoliation • Unlawful interference with economic interests
Strict Liability
Keeping dangerous animals • Non-natural use of land • Ultrahazardous activities • Vicarious liability
Defences
Apportionment of liability • Consent • Defamation defences • Defence of property • Denials • Excuses • Illegality • Legal authority • Limitation • Necessity • Self-defence
Remedies
Apologies • Damages • Injunctions • Insurance • Legal costs • Mitigation • Proprietary
Tort Law & Legal Systems
Charter values • Class actions • Concurrent actions • Constitutional torts • Indigenous dispute resolution • No-fault compensation schemes
Tort Theory
Instrumental theories • Constructive theories • Critical theories • Reflexive theories
Study Resources
1L strategy • Answer exercises • Quizzes • Beswick's course site • Opening Up Tort Law Project
Index
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The tort of fraud, also referred to as deceit, is a cause of action pertaining to losses suffered from reliance on a false statement of fact.[1] The term "civil fraud" is used to distinguish the tort of fraud from criminal fraud, although the two types of fraud are similar in their elements.[2] Unlike negligence, fraud is an intentional tort which requires subjective intent by the defendant to deceive.[1][3] Establishing fraud does not require a contractual relationship between parties, but when a contractual relationship exists, an action in misrepresentation under contract law may be pursued concurrently.[4][5]

The development of civil fraud

The word fraud on a clipboard with glasses beside.

Origins of civil fraud

The tort of fraud was recognized in the 1789 House of Lords decision Pasley v. Freeman.[6] In this judgment, Lord Kenyon stated that fraud only covers false statements which cause the plaintiff to incur damage.[6]

In Landgridge v. Levy, Parke B explained that false statements made with an intention that the injured party or an intermediate party will act on it will be actionable under the tort of fraud.[4] This development in the tort of fraud served as a precursor to negligence law – extending tortious liability by giving plaintiffs a means to recover for damages suffered as a result of a manufacturer's carelessness where no contractual remedy was available.[4][7]

Over fifty years later, in Derry v. Peek, the House of Lords stated that a representor must know a representation is false, or be reckless as to its truth or falsity, for it to be actionable under fraud.[8] The Court clarified that honesty of the representer's belief is determined subjectively.[8]

Canadian developments on civil fraud

The elements of fraud in Canada are derived from the House of Lords judgment Derry v. Peek.[9] However, Canadian courts have made two primary clarifications regarding the elements of civil fraud.[9]

Reliance/inducement

In 1970, the Supreme Court of Canada (SCC) in Parna v. G. & S. Properties Ltd. clarified that there must be reliance on the false representation by the claimant in order for an action in fraud to succeed.[10] This position was echoed in Snell v. Farrell, where the SCC stated that tort law requires proof that "but for the tortious conduct of the defendant, the plaintiff would not have sustained the injury complained of".[11]

Causation of loss

In 2014, the Supreme Court of Canada judgment Bruno Appliance and Furniture Inc. v. Hryniak clarified that, in addition to the existent elements of civil fraud, the plaintiff must show that they suffered damage as a result of the defendant's fraud.[9] The SCC set out the elements of fraud as follows:

Elements of fraud[3][9]
1. [A] representation of statement of fact made by the representor that was false;
2. [T]he representor knew that the representation was false or was reckless as to its truth or falsity;
3. [T]he represented relied on the false representation, sometimes stated as the misrepresentation caused (i.e., induced) the representee to act; and
4. [T]he representers reliance on the representation caused/resulted in loss.

Intention to deceive: A fifth element?

Jurisprudence and academic commentary

In addition to the four elements set fourth by the Supreme Court of Canada in Bruno Appliance, academic commentary and jurisprudence have recognized a fifth element of fraud – intention to deceive.[12] This element was set out by the House of Lords in Pasley v. Freeman and has been recognized in subsequent jurisprudence on civil fraud.[12] While the Supreme Court of Canada has not formally recognized intention to deceive as an element of fraud, the Manitoba Court of Appeal formally recognized it as an element of civil fraud in the 2023 Ultracuts v. Magicuts judgment.[12]

Evidentiary issues with intention

Given that proving subjective intention is challenging from an evidentiary standpoint, Canadian courts will infer intent from the surrounding circumstances in which the representation was made.[13] While this common-sense presumption exists to surmount evidentiary challenges, the burden of proof is still on the plaintiff to demonstrate surrounding circumstances sufficient for courts to make such an inference.[13] As with any inference in law, it remains open for a defendant to present evidence to rebut the inference once drawn by the court.[13]

Clarifying the other four elements

In the news
Donald Trump civil fraud case
Picture of Donald Trump
On Feb 16, 2024, following a trial in the New York Supreme Court, former US president Donald Trump was found "liable on claims of falsifying business records, conspiracy to commit insurance fraud, conspiracy to falsify business records and issuing false financial statements."

Trump was ordered to pay $454 million in damages. He has since appealed.[14]

After the Supreme Court of Canada's Bruno Appliance judgment, the Manitoba Court of Appeal further clarified three of the other four elements of fraud in the Ultracuts judgment.

False representation

Regarding the "false representation" element, the Court stated that opinions about facts which both parties know equally are not actionable under fraud.[15] Further, the meaning and truthfulness of a representation are assessed objectively and the plaintiff bears the onus to prove the falsity of the representation.[16]

Knowledge of falsity

The Court confirmed that the test for knowledge of the falsity of the representation is determined subjectively, but clarified that the overall context and circumstances play a role in the court's determination of whether the belief was honestly held.[17]

Reliance/inducement

The Court also confirmed that reliance does not necessarily require a positive act by the representee to be established, rather only an alteration of position must be established.[18] The Court referenced the 2013 British Columbia Court of Appeal decision XY, LLC v. Zhu which confirmed that reliance can include inaction when it is established on the balance of probabilities that the representee would have taken positive action "but-for" the fraudulent representation.[19][20]

Relation to criminal fraud

Unlike civil fraud, which is based on common law jurisprudence, criminal fraud is statutory and contained within the Criminal Code of Canada.[21] The two types of fraud are similar, with the key distinctions between the two being those that separate civil and criminal legal matters more generally.[2] The required standard of proof, parties to the litigation, and outcome/remedies of the proceedings differ according to the respective nature of the proceedings (i.e. criminal versus civil).[2]

Discussion questions

  • What distinguishes the tort of fraud from the tort of negligence?
  • Given that courts will draw a common sense inference of intention to deceive based on the factual circumstances, is this element of fraud redundant with the other elements of the tort?
  • Are the reliance and proof of damage elements of civil fraud necessary in light of the common law's robust requirements for causation and proof of damage?


  1. ↑ 1.0 1.1 Hoyano, Laura (1996). "Lies, Recklessness and Deception: Disentangling Dishonesty in Civil Fraud". Canadian Bar Rev. 75 (3): 478.
  2. ↑ 2.0 2.1 2.2 Milosevic & Associates (7 March 2023). "Criminal Fraud, Civil Enforcement: Civil Fraud" Milosevic & Associates.
  3. ↑ 3.0 3.1 Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at para 49.
  4. ↑ 4.0 4.1 4.2 Langridge v. Levy (1837), 4 M&W 337 (ExP) (§10.1.1).
  5. ↑ Driving Force Inc. v. I Spy-Eagle Eyes Safety Inc., [2022] ABCA 25 (§17.5.1) at paras 22–23.
  6. ↑ 6.0 6.1 Pasley v. Freeman (1789), 100 ER 450.
  7. ↑ Donoghue v. Stevenson, [1932] UKHL 100 (BAILII) (§13.1.1) at para 38.
  8. ↑ 8.0 8.1 Derry v. Peek, [1889] UKHL 1 (BAILII).
  9. ↑ 9.0 9.1 9.2 9.3 Bruno Appliance and Furniture Inc. v. Hryniak, [2014] SCC 8 at para 21.
  10. ↑ Parna v. G. & S. Properties Ltd., 1970 CanLII 25 (SCC) at 316–317.
  11. ↑ Snell v. Farell, 1990 CanLII 70 (SCC) at 319–320.
  12. ↑ 12.0 12.1 12.2 Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at paras 64–67.
  13. ↑ 13.0 13.1 13.2 Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at paras 68–71.
  14. ↑ Sisak, Michael (March 27, 2024). "Trump investigations: New York - civil fraud case". AP News.
  15. ↑ Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at para 55.
  16. ↑ Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at paras 57–58.
  17. ↑ Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at paras 60–61.
  18. ↑ Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at para 75.
  19. ↑ Ultracuts v. Magicuts, [2023] MBCA 71 (§10.1.3) at para 75.
  20. ↑ XY, LLC v. Zhu, [2013] BCCA 352 (§10.1.4) at paras 39–41.
  21. ↑ Criminal Code, RSC 1985, c. C-46, s.380(1).
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