ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-48328

DATE: 2014 Mar 05

BETWEEN:

CANADA MORTGAGE AND HOUSING CORPORATION
Plaintiff

– and –

CATHLEEN BERYL HOLLANCID also known as KATHLEEN HOLL
Defendant

G. Douglas, for the Plaintiff

Defendant, appearing in person

HEARD: October 16, 17, 21 and 22, 2013 at Ottawa. Written submissions received November 28, 2013

TAUSENDFREUND, j.

REASONS FOR JUDGMENT

Overview

[1] The Plaintiff, Canada Mortgage and Housing Corporation (“CMHC”), states that in 2006, the Defendant submitted an application for a mortgage loan to the Bank of Nova Scotia (“BNS”) which contained fraudulent misrepresentations and/or false pretenses regarding the Defendant’s employer, employment history, annual income and the source of her down payment for the property the Defendant purportedly had purchased. That property is municipally known as 8173 Highway 2, Napanee, Ontario (“Napanee property”). CMHC also alleges that the Defendant misrepresented the nature and condition of the Napanee property, its value and the Defendant’s intention to reside there after her purchase of it.

[2] CMHC relied on these same misrepresentations when CMHC agreed to insure the Defendant’s repayment obligation of the mortgage loan to BNS.

[3] The Defendant then defaulted on her mortgage loan obligation. In due course, BNS sold the Napanee property by power of sale. That resulted in a net deficiency of $144,640.64. In 2008, under its insurance obligation, CMHC paid that sum to BNS.

[4] The Plaintiff states that the Defendant knew that the information she had submitted to BNS contained misrepresentations intending to and did mislead BNS and CMHC about the true nature and value of the Napanee property, the Defendant’s portrayal of herself as the purchaser, mortgagor and intended occupant of that property, her financial status and her ability to repay the mortgage loan.

[5] The Defendant denied the Plaintiff’s allegations in their entirety. Her position was that she assisted a friend who needed another person to co-sign a mortgage application for a property not in Napanee, but in Pickering. She denied that she provided any personal information to BNS or that she represented herself to be the actual purchaser of the property. She stated that she was an innocent and naïve participant and likely a victim herself in a scheme orchestrated by third parties.

Facts

Evidence of Muhammad Hanif

[6] Mr. Hanif was employed in 2006 by BNS as a mortgage development manager. His responsibility was to meet with prospective clients and prepare their mortgage applications. If a client expected to make a down payment of less than 20% of the purchase price, mortgage regulations required that the mortgage be insured against default by the borrower.

[7] Mr. Hanif first met the Defendant on July 21, 2006. She came to his office in Toronto at the Lawrence and Birchmont branch of BNS. He identified the Defendant as the prospective borrower. Their meeting in his office included only the two of them.

[8] He confirmed the Defendant’s identification by requesting her driver’s license and S.I.N. card. He stated that it was bank policy that he obtain and review government-issued photo identification when meeting with a prospective borrower. With the Defendant’s permission, he ordered and obtained a Consumer Report on the Defendant.

[9] During that meeting, the Defendant provided Mr. Hanif with the following documents:

• MLS listing of the Napanee property indicating a listing price of $185,000.

• Fully executed Agreement of Purchase and Sale for the Napanee property between the Defendant as purchaser and a numbered company as the vendor for the price of $165,000.00. The present use of the property was described as “single family residence.”

• A letter of July 13, 2006 from “Shoeless Joe’s” identifying the Defendant as an employee of that restaurant in Kingston as of 2004 with an annual salary of $72,800.

• A statement of earnings and deductions issued by Shoeless Joe’s for the pay period ended June 23, 2006 indicating a purported income by the Defendant year-to-date of $25,461.72.

[10] The Defendant told Mr. Hanif that her sibling had agreed to gift her $10,000 to purchase this property. The Defendant either gave or faxed Mr. Hanif a gift letter purportedly confirming this gift representation. This represented gift was important as the Defendant needed to have a down payment of at least 5% of the purchase price plus the closing costs to allow her to qualify for this mortgage. That combined amount was $11,500.

[11] The information regarding her employment and income was crucial as it confirmed her ability to service this mortgage obligation.

[12] He could not remember if anyone else was present during this meeting with the Defendant. He usually would meet with clients alone. Bank policy required these mortgage meetings to be restricted to himself and the prospective borrower, except for a direct family member.

[13] Mr. Hanif then forwarded the completed mortgage application to Scotia Express Service with his added note to “please submit this deal to CMHC.” The Defendant was the only noted applicant for the mortgage loan. Within the BNS organization, the completed mortgage application was to be reviewed by Scotia Express Service for approval or rejection. To that end, Scotia Express Service, as the underwriter, needed to confirm the accuracy of the information provided by a mortgage applicant.

[14] The Defendant’s mortgage application was approved by BNS conditional on CMHC mortgage insurance coverage. CMHC in due course agreed to insure the loan.

[15] Mr. Hanif met with the Defendant a second time on July 27, 2006 when she presented herself at the same BNS branch to sign the mortgage documents. On that occasion, he introduced the Defendant to Mazen Al Taher who was then responsible for closing mortgage arrangements at that branch. He was present when Mr. Al Taher inspected the Defendant’s driver’s license and S.I.N. card to confirm her identification.

Evidence of Mazen Al Taher

[16] Mr. Al Taher held the title of personal banking officer-mortgage closer. His responsibilities included meeting with clients of BNS who had applied for mortgage loans and whose applications had been approved.

[17] He described the Defendant as being visually familiar to him. Beyond that, he had no personal recollection of having met the Defendant. The evidence he gave was based on his review of the documents and on standard procedure as dictated by BNS.

[18] In the normal course, he would receive a package of documents from the bank’s mortgage department. These he would review to confirm completeness. He would then meet with the borrower whose identity he would confirm by reviewing two of the borrower’s personal identification documents such as a driver’s license and S.I.N. card. He would then review the documents with the borrower. If that borrower was satisfied, he would obtain that borrower’s signature on the documents and the mortgage loan would be advanced. Were the borrower to object to any part of the information in those documents, he was required to immediately inform the mortgage development manager, the branch manager and Scotia Express Service. In that event, he was not to proceed further with that mortgage application. In 2006, he was the only bank employee who was authorized to perform mortgage closings at the Lawrence and Birchmount branch of BNS.

[19] He reviewed the documents which he had received from Scotia Express Service in late July 2006 with respect to the Defendant’s mortgage application. These documents included:

• Mortgage application

• Customer Authorization

• Credit Decision Details

• Cost of Borrowing Disclosure Statement

• Conditions of Approval

• Personal Credit Agreement

[20] Based on his review of these documents, he was able to say that he met with the Defendant at the Lawrence and Birchmount branch of BNS on July 27, 2006. Once he had reviewed the Defendant’s identity, he followed his standard procedure. This included his review with the Defendant of the mortgage closing documents. He would also have explained to the Defendant that her mortgage was to be insured by CMHC and that the information the Defendant had provided to BNS in her application would be used by BNS to that end.

[21] He also would have reviewed with the Defendant this statement contained in the “Customer Authorization” document:

“You affirm all information obtained in this application is true, correct and complete.”

He then would have arranged for the Defendant to sign that document as well as the other mortgage closing documents that required her signature. He dated each of the documents that contained the Defendant’s signature.

[22] His standard review of the documents with the borrower would have included the address of the property that was being purchased, the amount that was to be borrowed and secured by the mortgage and the mortgage insurance premium to be charged to the borrower.

[23] The Personal Credit Agreement was reviewed with the Defendant. This document listed the property as 8173 Hwy 2 in Napanee. The Defendant signed that document. He added his bank identification number next to her signature.

[24] During that meeting, Mr. Al Taher also sold the Defendant life insurance. If she died while still obligated to pay back the mortgage loan, the insurance would pay the amount that then remained due and owing.

[25] The Defendant also signed a Payment Change form. That confirmed that the mortgage payments were to be made monthly as of August 25, 2006 and that these payments would be automatically withdrawn from the Defendant’s account number 403030210781.

[26] He would have given the Defendant a package of documents to take with her when she left his office. The package would have included:

• Cost of Borrowing Disclosure Statement;

• Customer Authorization;

• Personal Credit Agreement;

• An Amortization Schedule; and

• BNS Privacy Policy.

[27] Had the Defendant objected to the property being in Napanee rather than Pickering, he would have immediately stopped the meeting and would not have proceeded to have the Defendant sign any further documents. He would have reported it to his superiors. This did not occur.

[28] It was standard procedure for him to have met alone with the borrower, as he would have discussed confidential information personal to the borrower. The only third party that would have been allowed to participate would have been the borrower’s spouse.

[29] Following this meeting, Mr. Al Taher sent these documents to Scotia Express Service the same day.

[30] Following this meeting, his further involvement with Ms. Hollancid was limited to the following:

a. On September 22, 2006, he made a note that her mortgage payment was late;

b. On October 26, 2006, he made a note that the Defendant had attempted to deposit a certified cheque at another branch of BNS in payment of the mortgage; and also

c. On October 25, 2006, he made a note about the Defendant’s telephone inquiry regarding the status of her request to cancel her mortgage life insurance coverage. She had called to cancel that policy shortly after his initial meeting with her. His note made that day indicated that payments for that life insurance policy were then still being debited from her account.

[31] He did not meet with one Anthony Fernandes nor did he know any one by that name.

Evidence of Dale McClease

[32] Now retired, Mr. McClease had worked 20 years for third party bill collection agencies. In October - November 2008 and in that capacity, he pursued one Cathleen Hollancid. Records had indicated that BNS had obtained judgment against that person for a net amount of about $120,000 and that he was calling her to collect.

[33] On November 21, 2008, he made this note: “Debtor called and left voice message regarding wants to set judgment aside. Says please call.” He did. Based on his call that day, he wrote this note:

“Called debtor. Says a friend of a friend kind of thing paid her $5,000 to sign for the mortgage. She was told she would be taken off in 6 months’ time. Says she really needed the money. She had been in school, then was broken into and all her stuff stolen, then had emergency surgery. Says she has filed for credit counselling and is paying back her creditors via credit counselling. Says will do documents and provide information on Anthony and try and raise $5,000 to satisfy in full. Needs up to two weeks. …”

[34] He made a further note on December 9, 2008 in the Defendant’s file:

“Debtor’s residence, says has an appointment with a trustee in bankruptcy Thursday 4:30.”

[35] The Defendant’s file was closed on February 17, 2009 after the Defendant had made an Assignment in Bankruptcy.

Evidence of Marie Dyck

[36] Ms. Dyck is the Manager of Insurance Fraud Prevention at CMHC.

[37] CMHC indemnifies lenders against default by borrowers. The National Housing Act requires lenders to obtain mortgage loan insurance when the loan is greater than 80% of the value of the mortgaged property at the time the loan is approved.

[38] Prospective borrowers must provide personal and financial information on themselves and the property in question plus corroborating documents.

[39] The Defendant’s mortgage loan application was approved by CMHC based on the information the Defendant had provided as part of her mortgage application.

[40] The Defendant needed an annual income of at least $64,000 to qualify for CMHC insurance on this mortgage loan. The Defendant’s application was approved, in part, as she represented her income to have been $72,800.

[41] The Defendant’s mortgage loan application indicated that it was “Owner-Occupied.” That meant that CMHC was informed that the Defendant intended to personally occupy the Napanee property. That was a CMHC requirement for mortgage insurance purposes.

[42] Lenders are entitled to recover from CMHC the shortfall on the loan as well as expenses relating to taking possession of the mortgaged property, the management and sale of it plus legal costs and interest. Her review of the documents indicated that the Defendant had defaulted on August 25, 2007. The loan balance then stood at $157,026.72. The Napanee property was then sold under power of sale for $56,000. The resulting net deficiency of $144,640.64 was paid by CMHC to BNS.

[43] After the Defendant’s mortgage went into default, BNS discovered that the Napanee property was not a detached single family home as the Defendant had represented it to be, but a vacant motel. The down payment the Defendant used to purchase the property was not a gift from her brother, but a second mortgage registered against the title of the property after the Defendant’s purchase of it on July 28, 2006.

[44] After CMHC paid BNS its insurance claim of $144,640.64, it received an assignment of the Judgment BNS had obtained against the Defendant.

[45] Ms. Dyck stated that the definition of mortgage fraud is making a false statement in writing with the intent that it be relied upon by the lender to provide mortgage financing that would not have been granted had the truth been known.

Evidence of Cathleen Hollancid

[46] In 1998, she moved from St. Lucia to Canada at age 26. She graduated from St. Mary’s University in Halifax in 2001 and then continued her studies at George Brown College and the University of Toronto. For a number of years, she worked in the banking business as a teller and was then employed in the private sector in human resources and customer service.

[47] She was a BNS customer between 2001 and 2009. Between 2005 and 2009, she had two savings accounts at BNS and another account at TD Bank. She confirmed that she had never lost her driver’s licence nor her S.I.N. card and that the driver licence’s number that BNS had on file was, in fact, her licence number. The copy of the driver’s licence produced in this trial appeared to be a true copy of her licence.

[48] She was introduced to one Anthony Fernandes in 2006 through a third party.

[49] She was told that Mr. Fernandes bought houses, fixed them up and then sold them. Mr. Fernandes already owned two houses. He wanted to purchase a third property in Pickering, but needed someone to co-sign for a mortgage. He asked her to assist him in this regard. He told her that all that needed to be done was a credit check to confirm that her credit was satisfactory. She agreed to participate. She was asked to send copies of her driver’s license and S.I.N. card to his lawyer, Ms. French. This would allow Maureen French to run a credit check on her.

[50] She did not know anything about the Pickering property or the purchase details. She signed and initialled certain documents pertaining to the purchase by Mr. Fernandes of that Pickering property. She did so as a potential co-signor. She thought that Mr. Fernandes would then list the Pickering property for sale within two years and that she then would have a right of first refusal to purchase the property herself. That appealed to her, as she was interested in becoming a property owner.

[51] At the request of Mr. Fernandes, the Defendant and he met with Muhammad Hanif at the Lawrence and Birchmount branch of BNS for the mortgage application. She stated that all three were present at that meeting. Mr. Hanif told her that she had to sign as a co-signor. Only she signed documents during that meeting. She was told that Mr. Fernandes had already signed.

[52] She had never met Mr. Al Taher, nor did she know him. Both Mr. Al Taher and Mr. Hanif were lying when they said that she had met with him. That was wrong, she stated, as she had met with Mr. Hanif on two occasions and not just on the one occasion, as Mr. Hanif had stated.

[53] She denied Mr. Hanif’s evidence that she had given him documents pertaining to the purchase of the Napanee property. In fact, she denied giving Mr. Hanif any documents at any time.

[54] Her agreement with Mr. Fernandes was to co-sign the mortgage loan for him to purchase the Pickering property. That arrangement did not include any money for her. Her benefit was simply to develop a credit rating to further her plans to eventually own her own home.

[55] In August 2006, after her meeting with Mr. Hanif, she received an envelope in the mail from BNS that contained documents that she had not signed. These purported to show that she had purchased and mortgaged the Napanee property. She agreed that she did not seek out Mr. Hanif nor did she speak to the bank manager of the BNS branch to complain that she had not signed any documents to purchase a property in Napanee, particularly as she did not know where Napanee was. She did speak by phone to a BNS employee stating that she was not supposed to own this property as she was only supposed to be a co-signor and that she was shocked. The bank employee did not give her much assistance. Although she was shocked, she did not ask to speak with the employee’s bank superior.

[56] In August 2006, she sent a handwritten letter to a BNS employee named “Judith.” In that letter, the Defendant stated:

“Please have my mortgage amount taken from the above account as of August 25, 2006, including the insurance amount. Thanks.

Cathleen Hollancid”

[57] The Defendant also acknowledged that on September 28, 2006, she wrote to BNS to request the cancellation of the existing “Loss of life protection” insurance for mortgage loan number 1249649. That is the number for the BNS mortgage on the Napanee property. The letter further requested that the Credit Bureau report be rectified re: the allegation that she was 31 days delinquent with her mortgage obligation. However, she did not write to BNS to advise the bank that a mistake had been made showing her as the purchaser and mortgagor of the Napanee property.

[58] She did not return to the Lawrence and Birchmount branch after her one meeting there with Mr. Hanif. When asked why she did not return to that branch after she received the envelope from BNS regarding her purchase of the Napanee property, she stated that she did not know how to find that branch. She took no steps to address and/or clarify this matter at any other branch of BNS.

[59] In 2008 or 2009, she received a further envelope from BNS that contained a letter and cheque for an amount greater than $6,000 and made payable to BNS. She stated that the letter said BNS no longer wanted her business and the bank would close her accounts. This cheque was drawn on an account in the name of Bonanza Enterprises. She tried to return the cheque to BNS. No branch would accept it. She stated that she had never agreed to purchase a property in Napanee nor be responsible for repaying a mortgage loan on that property. Yet on February 7, 2008, she wrote a letter to a law firm for BNS who was then taken steps to enforce its mortgage security. The Defendant wrote that “no transaction regarding the matter of the 8173 Highway 2, Napanee property in question should be carried out without my knowledge.” She wrote this letter as she wanted to know if anything was going on with respect to this property or if anything was being done or if there was anything she could do.

[60] In 2008, she was served with a Statement of Claim by BNS who sought possession from her of the Napanee property and payment of the arrears owing under the mortgage loan. She acknowledged that BNS then obtained default judgment against her.

[61] She made an Assignment in Bankruptcy in February 2009 and received a Discharge in November of 2009. The bankruptcy documents listed a debt owed to CMHC in the amount of $152,000.

[62] The Defendant acknowledged that she spoke with Dale McClease on November 21, 2008 and that their conversation was as described in Mr. McClease’s note. However, she stated that the reference in this note that she was paid $5,000 to sign the mortgage documents was wrong. She said that she had told Mr. McClease that Mr. Fernandes gave her about $5000 because of the problems she had encountered as a result of the fraud committed by Ms. French and Mr. Hanif.

[63] She denied giving documents to Mr. Hanif which he stated she provided during their meeting on July 21, 2006. She also denied signing any of the documents that Mr. Al Taher said she had signed in his presence on July 27, 2006. According to the Defendant, both Mr. Hanif and Mr. Al Taher were involved in the fraud. Mr. Hanif’s part in that alleged fraud was his switch of the mortgage paperwork from the Pickering property to the Napanee property. Mr. Al Taher’s part in the fraud, she stated, was that he lied that she had met with him on July 27, 2006 or at any date to review and have her sign closing documents.

[64] She tried unsuccessfully to locate both Mr. Fernandes and Ms. French as possible witnesses. In fact, none of her evidence was corroborated.

Analysis

[65] I am faced with the evidence of two bank employees and a third party bill collector on the one hand and the uncorroborated evidence of the Defendant on the other. Both versions cannot be true.

[66] The Defendant asserts that each of the two bank employees, Muhammad Hanif and Mazen Al Taher, committed a fraud. It is a bald allegation based only on her evidence. She does not indicate or provide evidence why either of these employees would carry out and/or be part of such a fraud. In assessing the evidence of these bank employees, I note that they testified of their job performance in a straight forward and reasonable manner. Their evidence was supported by documents.

[67] With respect to their evidence, I note:

a. The Defendant’s name and signature is on the Agreement of Purchase and Sale of the Napanee property. She did not contest that it was so.

b. Although the Defendant claimed Mr. Hanif switched the documents to replace the Pickering property with documents of the Napanee property, she provided no evidence of any possible motive.

c. The Defendant gave no explanation concerning her purported employment and income with Shoeless Joe’s which did not exist and the purported gift letter for the down payment which was later actually funded by a second mortgage.

d. The Defendant provided no explanation as to how her correct address of 510-33 King Street, Toronto, Ontario, M9N 3R7 would find its way into the Statement of Earnings and Deductions from her non-existent employment at Shoeless Joe’s.

e. If the Defendant did not meet with Mr. Al Taher, she did not explain how her signatures ended up on the documents Mr. Al Taher initialled and forwarded to Scotia Express for closing purposes.

f. If the Defendant had not intended to purchase the Napanee property, I would have expected an immediate loud protest and hue and cry from her to BNS. Not even a whimper was heard. In fact, the mortgage payments, without protest, continued to be debited from her bank account for about a year until August 2007.

g. The documents in the months following the closing of the purchase speak of the Defendant’s concern about continued deduction of the insurance premium of $22.62 per month and not of the fact that she had mistakenly purchased a property in Napanee rather than Pickering.

h. Mr. McClease had been at his job as a third party bill collector for about 20 years. Notes of his telephone calls are brisk, concise and to the point, as one would expect. His note of the call from the Defendant leaves no room for ambiguity. Yet the Defendant states he got it wrong regarding the $5,000. That is difficult for me to accept.

[68] The Defendant’s challenge of the evidence of these three witnesses, Hanif, Al Taher and McClease, must also be viewed through the lens of her part in this caper:

a. It was to co-sign on a mortgage for the purchase by Anthony Fernandes of a Pickering property. She would not have the benefit as an owner, but only the obligation of a debtor without security. According to the Defendant, the only apparent benefit would be to enhance her credit and give her a right of first refusal if Mr. Fernandes were to sell two years hence.

b. She had no idea about the value of the Pickering property, the amount of the mortgage, details of the purchase or the plans Mr. Fernandes might have had for the property. She had not even driven by that property, let alone have inspected it on the inside.

c. She denied that she was to receive any monetary benefit in agreeing to co-sign in that manner. If all that were so, it would surely be the height of naïvety.

d. When she attempted to track down Ms. French, she found nothing but disconnected telephones and a vacant office. She stated that she would have liked to have Mr. Fernandes and Ms. French testify, but was unable to locate them.

[69] To assist me to make findings of credibility with respect to the evidence of the Defendant on one side and the Plaintiff’s witnesses on the other, I have regard to excerpts of these decisions:

a. Florillo v. Krispy Kreme Doughnuts, Inc. 2009 29902 (ON SC), [2009] 98 O.R. (3d) 103 (Ont. S.C.J.). Newbould J. stated at para 6:

6 …At issue is … reliability. In making reliability assessments, I find helpful the statement of O'Halloran J.A. in R. v. Pressley (1948), 1948 353 (BC CA), 94 C.C.C. 29 (B.C.C.A.):

The Judge is not given a divine insight into the hearts and minds of the witnesses appearing before him. Justice does not descend automatically upon the best actor in the witness-box. The most satisfactory judicial test of truth lies in its harmony or lack of harmony with the preponderance of probabilities disclosed by the facts and circumstances … of the particular case.

b. Citizens Bank of Canada v. Pastore, [2005] O.J. No. 6092, (Ont. S.C.J.). McMahon J. noted at paras. 34 and 36:

34 In examining the evidence of [the defendant], the court must look [sic] to, not only its reasonableness whether it is internally consistent, but also whether it has been corroborated in any material facts. [The defendant] failed to call any evidence, whatsoever, to corroborate his story. …

36 [The defendant’s] evidence is not only uncorroborated, it does not fit with his life experience, nor is it worthy of belief. …

c. F.H. v. Ian Hugh McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41. Rothstein J. speaking for the court stated at para. 58:

58 … , where proof is on a balance of probabilities there is likewise no rule as to when inconsistencies in the evidence of a plaintiff will cause a trial judge to conclude that the plaintiff's evidence is not credible or reliable. The trial judge should not consider the plaintiff's evidence in isolation, but must look at the totality of the evidence to assess the impact of the inconsistencies in that evidence on questions of credibility and reliability pertaining to the core issue in the case.

The Test in Proving Civil Fraud

[70] I have no difficulty in rejecting the Defendant’s evidence, where it is inconsistent with the evidence of the Plaintiff’s witnesses.

[71] The Ontario Court of Appeal in Gregory v. Jolley, 2001 4324 (ON CA), [2001] O.J. No. 2313 at para.15 noted with approval the test for civil fraud:

[15] … [f]raud is proved when it is shown 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. …

Fraudulent Misrepresentations

[72] Newbould J. in Fiorillo v. Krispy Kreme Doughnuts, Inc., supra, wrote the following on the elements of the tort of fraudulent misrepresentation:

66 Fraud is a false representation of fact, made with a knowledge of its falsehood, or recklessly, without belief in its truth, with the intention that it should be acted upon by the complaining party, and actually inducing him to act upon it. See Parna v. G.& S. Properties Ltd., 1970 25 (SCC), [1971] S.C.R. 306.

67 The elements of the tort of fraudulent misrepresentation can thus be distilled to five criteria which a plaintiff must demonstrate, in order to establish a defendant's liability:

(a) The defendant made a false statement;

(b) The defendant knew that the statement was false or was indifferent to its truth or falsity;

(c) The defendant had the intention to deceive the plaintiff;

(d) The false statement was material in that it induced the plaintiff to act; and

(e) The plaintiff suffered damages as a result of so acting.

68 Deceit can be by way of a false statement or, in appropriate circumstances, by the making of a half truth. As early as 1803, in Tapp v. Lee (1803), 3 Bos. & P. 367, 127 E.R. 200 at 203, it was stated:

An action on the case for deceit is an action well known to the law, and I cannot agree in the argument which has been used for the defendant, that such actions ought to be confined to representations which are literally false. Fraud may consist as well in the suppression of what is true, as in the representation of what is false. If a man, professing to answer a question, selects those facts only which are likely to give a credit to the person of whom he speaks, and keep back the rest, he is a more artful knave than he who tells a direct falsehood.

69 A more recent statement of the same principle can be found in Spencer Bower and Turner, Actionable Misrepresentations, 4th ed, (London: Butterworths, 2000) at 85:

A half truth may be a misrepresentation. To state a thing which is true only with qualifications or additions known to, but studiously withheld by, the representor, is to say the thing which is not. Such a statement is a "lie", and a most dangerous and insidious form.

[73] The British Columbia Supreme Court in Bain v. Empire Life Insurance Co., [2004] B.C.J. No. 2483 stated the following regarding the elements of a fraudulent misrepresentation:

66 The B.C. Court of Appeal set out the elements of a fraudulent misrepresentation in Islip v. Coldmatic Refrigeration of Canada Ltd., 2002 BCCA 255:

In their facta, the parties take the elements of a fraudulent misrepresentation from Fridman, The Law of Contract (3rd Ed.), p. 295, as follows:

(a) the wrongdoer must make a representation of fact to the victim;

(b) the representation must be false in fact;

(c) the party making the representation must have known the representation was false at the time it was made; and

(d) the victim must have been induced to enter into the contract in reliance upon it.

To that summary I would add that the misrepresenter must have intended that the victim act on the representation.

[74] I find that the documents the Defendant provided to Mr. Hanif regarding her employment, her income and the purported gift of $10,000 for the down payment and her representation in the documents that she intended to occupy the Napanee property as her residence were all fraudulent misrepresentations, unsupported by the facts. They were false. The Defendant intended BNS and CMHC to act on these false representations. This they did in approving the mortgage loan to the Defendant and did so to their detriment.

Motive for Making False Statements

[75] Based on the evidence of Mr. McClease which I accept, I find that the Defendant provided the false information and made fraudulent misrepresentations to BNS and the Plaintiff in return for the sum of $5,000 which she expected to be paid. Despite this motive which I attribute to the Defendant, I should add the motive of the Defendant in making false statements as part of her application for the mortgage loan is, in fact, not relevant. On that point, Newbould J. in Fiorillo v. Krispy Kreme Doughnuts, Inc., supra, stated:

75 A plaintiff must establish that the false statement was made with the intention of deceiving the plaintiff. It is not necessary however for a plaintiff to establish that the defendant intended to cause loss to the plaintiff and a defendant's motive is irrelevant. It is immaterial that the false statement was made without any intention of damaging the plaintiff or of benefiting some third-party. In Spencer Bower & Turner on Actionable Misrepresentation 4th ed, (London: Butterworths, 2000) it is stated at 61:

Although fraud involves an intention on the part of the representor that the representee should act in the way he did, there is no need to prove any further intention, and the representor's motive is irrelevant. It is immaterial that the representation was made without any intention of damaging the representee, or of benefiting the representor or some third person, or even with the intention of benefiting the representee. A false representation made without honest belief in its truth will be fraudulent if made with the intention that the representee act upon it, even if there is no apparent motive.

76 In Derry v. Peek, (1889) 14 A.C. 337 at 374, Lord Herschell stated, "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."

77 In Smith v. Chadwick, (1884) 9 A.C. 187 at 201, Lord Blackburn stated, "the motive of the person saying that which he knows not to be true to another with the intention to lead him to act on the faith of the statement is immaterial."

Extent of Liability for Fraudulent Representations

[76] In deciding that the Defendant is responsible to CMHC for the full amount it paid to BNS which is the amount of this claim, I rely on this statement by Lord Denning in Doyle v. Olby (Ironmongers) Ltd. [1969] 2 Q.B. 158 at p.122:

The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement. The person who has been defrauded is entitled to say: 'I would not have entered into this bargain at all but for your misrepresentation…”

[77] CMHC shall have judgment against the Defendant in the sum of $128,927.03 with pre-judgment and post-judgment interest at the rate of 5.55% per annum.

[78] CMHC shall be entitled to its costs of the action. If the parties cannot resolve the issue of costs, particularly the scale of costs to which CMHC claims it should be entitled, the parties may provide brief written submissions within 30 days.

[79] The amount awarded to CMHC including interest and costs is a debt or liability of the Defendant for which she is not released by the Order of Discharge of Bankruptcy pursuant to section 178(1) (e) and (h) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B.3.

The Honourable Mr. Justice W. U. Tausendfreund

Released: March 5, 2014