Court Of Appeal Decision Welcome News For Victims Of Fraud

The Ontario Court of Appeal's decision in Wescom Solutions Inc v Minet, 2019 ONCA 251 released on April 1, 2019, provides helpful guidance for victims of fraud seeking to pursue civil recovery against third parties.

Nadia Minetto, the central defendant in Wescom, used a company credit card to fraudulently obtain iPhones and iPads (the "Apple Products"). Using a Kijiji advertisement, Minetto caught the attention of Gabriel Fung, who, after responding to the advertisement, met her for the first time in a parking lot in Yorkdale Mall in November 2011 to make a purchase of the Apple Products. Thereafter, Minetto continued to sell the Apple Products to Fung, who, over a two and a half year period, purchased a total of 4,942 iPhones and 5,321 iPads from Minetto. The transactions initially took place in the Yorkdale Mall parking lot, followed by an Ikea parking lot. Eventually Minetto began to direct the products to a virtual office rented by Fung, with sales ultimately totaling $6.2 million before the scheme was uncovered. The Apple Products were always purchased by Fung in cash. Fung would then resell the Apple Products through an electronics store he operated. Fung also sold to wholesalers and to companies in Hong Kong.

Following the initial trial, the trial judge found that Fung was not wilfully blind during the initial stages of the fraud, where he occasionally met Minetto in the Yorkdale Mall parking lot. However, when the fraud escalated to meetings in the parking lot of an Ikea store, and during the period of time in which the Apple Products were delivered to Fung's virtual office, the court concluded he was wilfully blind, and awarded damages in the amount of approximately $5.094 million.

On appeal, Fung argued that the trial judge had erred by applying an objective, rather than a subjective standard, to his wilful blindness analysis. The respondent, by contrast, argued that the objective analysis was appropriate because it was a case involving allegations of "knowing receipt".

In this regard, the Court of Appeal confirmed that knowing receipt can be proven not only by establishing actual knowledge or wilful blindness, but also by establishing "constructive knowledge", based on the application of objective criteria. Specifically, the Court of Appeal confirmed that knowing receipt can be established where the defendant:

had knowledge of circumstances that would indicate the facts to an honest and reasonable person; or had knowledge of...