Tort Of Civil Fraud Requires Proof Of Inducement, Supreme Court Rules

The Supreme Court recently redefined the requirements to establish the tort of civil fraud (or tort of deceit) and held that proof that the defendant induced the plaintiff to act is a required element of the tort in Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8.

In its companion appeal, Hryniak v. Mauldin, 2014 SCC 7, the Court addresses the scope and interpretation of Ontario's amended Rule 20 on summary judgment (click here to read our article on that decision).

The facts

Albert Bruno, the principal of Bruno Appliance, met with Robert Cranston, the principal of a Panamanian company, Frontline Investments, Inc. and executed several investment documents in favour of Frontline in 2001. In 2002, Bruno met with Cranston and Gregory Peebles, a corporate-commercial lawyer, who at the time was at Cassels Brock & Blackwell and represented Cranston, Tropos Financial Corp. and its principal, Robert Hryniak. While Hryniak was not present at the meeting, Tropos paid for Peebles' attendance. Bruno Appliance subsequently wired US$1 million to Cassels Brock, which was intended to be invested. Bruno Appliance's funds were never invested; instead part of the funds were disbursed to another person, Reinhard, and the remainder was substantially drained. Bruno Appliance and the plaintiffs in the Mauldin appeal commenced an action in civil fraud against Hryniak, Peebles and Cassels Brock and brought motions for summary judgment.

Was there a genuine issue requiring a trial?

The Ontario Superior Court held that Bruno Appliance established its claim in civil fraud as against Hryniak and there was no issue requiring a trial. The claim against Peebles and Cassels Brock was dismissed.

The Ontario Court of Appeal noted that Bruno Appliance's action was complex and concluded that there were two genuine issues requiring a trial as against Hryniak, which had not been addressed by the motion judge:

whether Hryniak induced Bruno Appliance to invest (a necessary element of fraud); and whether some of Bruno Appliance's funds were misappropriated by Cranston, Hryniak, or both. The issue before the Supreme Court was whether Bruno Appliance should receive summary judgment against Hryniak and whether proof that the defendant induced the plaintiff to act was a required element of civil fraud.

The elements of "civil fraud"

Justice Karakatsanis, writing for a unanimous Supreme Court, outlined four elements of the tort of civil fraud:

a false representation made by the...