Business associations | Powers, rights and liabilities | Liability of corporations
Parties were victims of fraud perpetrated through multi-million dollar commercial real estate deal by W. Applicant companies (DBDC) invested $111 million into 31 projects. DBDC received $2.99 million as return of equity investments and after appointment of manager, DBDC recovered further $11.6 million in equity payments. Respondent company D Co. invested $4 million and specific-project corporations established for purposes of D investments were included in group of companies known as Listed Schedule C Companies and properties acquired were known as Schedule C Properties. DBDC was awarded damages against W personally for fraudulent misrepresentation, deceit, and breach of fiduciary duty, and declared that damage award would survive bankruptcy. DBDC's claim for joint and several damages against C Companies was dismissed since W was not controlling mind and therefore, could not be liable for knowing assistance or knowing receipt arising out of her breach of fiduciary duty. DBDC appealed. Appeal was allowed. Court of Appeal ruled that W acted as directing and controlling mind of C Companies, and consequently, W's actions could be attributed to them for these purposes. Fact that W did not have legal control was not dispositive; what mattered was factual reality and whether W's actions were “within the field of operation assigned”. D Co. appealed. Appeal allowed. Court of Appeal erred in its application of law of knowing assistance. Minority opinion was adopted by court. Participation element of the fault-based claim of knowing assistance was not made out but was required. Where claim of knowing assistance in fiduciary duty breach was made by one group of defrauded investors against another similarly situated group, there was no reason to expand equitable claim of knowing assistance beyond its proper bounds. Being mere conduit and victim of fraud did not transform companies into participants in dishonest breach of fiduciary duty. Such conduct could not attract liability for damages. There should have been evidence of each individual's benefit from scheme in order to succeed on claim of knowing assistance.
Christine DeJong Medicine Professional Corp. v. DBDC Spadina Ltd. (2019), 2019 CarswellOnt 7557, 2019 CarswellOnt 7558, 2019 SCC 30, 2019 CSC 30, Wagner C.J.C., Abella J., Karakatsanis J., Côté J., Brown J., Rowe J., and Martin J. (S.C.C.); reversed (2018), 2018 CarswellOnt 1571, 2018 ONCA 60, E.A. Cronk J.A., R.A. Blair J.A., and K. van Rensburg J.A. (Ont. C.A.).
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