Court of Appeal

Judge:

Date Heard:

The Honourable Justice David P.S. Farrar

October 8, 2013

Subject:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 178. Fraudulent Misrepresentation. Debt Incurred by Fraud Surviving a Discharge in Bankruptcy.

Summary:

The appellant obtained legal services in his divorce action by misrepresenting that he had arranged two lines of credit to pay for the legal fees. 

The appellant subsequently declared bankruptcy without paying the firm’s account.  The trial judge found his representations with respect to the lines of credit were false, the appellant knew they were false and the law firm relied on the representations in providing legal services.  The trial judge concluded that the misrepresentations were fraudulent and, as a result, the law firm’s account would survive the discharge in the appellant’s bankruptcy.

Issues:

The appellant appealed arguing the trial judge erred in failing to properly apply the law of fraudulent misrepresentation.  In particular, she failed to turn her mind to the issue of reliance and if she did, the reliance by the law firm on the fraudulent misrepresentations was unreasonable in these circumstances.

Result:

Appeal dismissed.  The trial judge clearly found that the law firm relied on the representations made by the appellant.  There is no requirement that the reliance on the fraudulent misrepresentation must be objectively reasonable.  The respondent was awarded costs in the amount of $2,500 inclusive of disbursements.