James B. Hoare

The appellant sought to recover funds allegedly stolen by a fraudster and then paid as restitution to an earlier victim, advancing tracing, knowing receipt, and unjust enrichment claims against an individual respondent.

The Court of Appeal majority held there was no basis to interfere with the trial judge’s exclusion of substantive hearsay statements from the fraudster, and no palpable and overriding error in the finding that a CAD$150,000 restitutionary payment was not traced on a balance of probabilities to the appellant’s funds.

As to a separate CAD$40,000 payment, the majority held that even assuming tracing into the corporate respondent’s account, there was no basis for imposing personal liability on the individual respondent because the corporate tax debt paid was not his personal liability at the time.

The appeal was dismissed with costs, over a dissent that would have allowed the claim for CAD$190,000.

The plaintiff was defrauded by its employee, who used some of the stolen funds to pay criminal restitution to his former employer, whom he had previously defrauded.

The plaintiff sued the former employer and its principal for knowing receipt and unjust enrichment, seeking to trace and recover the funds.

The court dismissed the action, finding that the plaintiff could not reliably trace the funds, the defendants lacked constructive knowledge of the second fraud when they received the payments, and there was a valid juristic reason for the defendants' enrichment.