Facts
The plaintiffs, Aleksandr Shinkarev and others, alleged that the defendant, Maria Surovova, fraudulently misrepresented herself as a mortgage broker. Surovova claimed she could assist the plaintiffs in obtaining mortgage financing and requested $85,221 to pay down their debts for better financing terms. Instead of using the funds as promised, Surovova misappropriated them for personal use.
The defendant repeatedly failed to attend examinations for discovery, leading to her statement of defence being struck. The plaintiffs sought default judgment, punitive damages, prejudgment interest, and an order ensuring the judgment survives any bankruptcy.
Issues/Arguments
Did the defendant's conduct meet the legal standard for fraud?
Should punitive damages be awarded to the plaintiffs for the defendant's fraudulent and egregious conduct?
Should the judgment survive bankruptcy under section 178(1) of the Bankruptcy and Insolvency Act?
Are full indemnity costs appropriate in this case?
Ruling/Decision
Justice Koehnen ruled in favor of the plaintiffs, granting:
Default Judgment: The defendant's failure to defend led to deemed admissions of the factual allegations.
Fraud: The plaintiffs established fraud by meeting all elements of the legal test for fraud, as set out in Bruno Appliances and Furniture v. Hyrniak, 2014 SCC 8.
Punitive Damages: Awarded $50,000 due to the defendant’s malicious and high-handed conduct, consistent with precedents (Whiten v. Pilot Insurance Co. and Nanny and Eldercare Services Inc. v. Walsh Business and Tax Management Ltd.).
Judgment Surviving Bankruptcy: The court held that the defendant's conduct fell under section 178(1) of the Bankruptcy and Insolvency Act, ensuring the judgment would not be discharged by bankruptcy.
Costs: Full indemnity costs of $22,342.46 were awarded, reduced for unrelated communications with authorities. Prejudgment interest of $5,674.55 at a rate of 2.8% was also granted.
Key Takeaways
Fraud requires a false representation, knowledge or recklessness of its falsity, reliance by the victim, and resulting damages. The plaintiffs met all elements of the test. Punitive damages were warranted in this case, where the defendants' conduct was egregious - to ensure deterrence, retribution, and denunciation. Courts can make determinations about judgments surviving bankruptcy preemptively if it is just and efficient to do so. Full indemnity costs are reserved for exceptional cases involving egregious misconduct, such as fraud.
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