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Agency - Fraud. Eastwood Home Inc. v. Procopio
In Eastwood Home Inc. v. Procopio (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from an action involving two innocent parties and "apparently fraudulent" party who induced payments to himself personally rather than the true corporate contractual party:[8] At trial, the parties agreed that the governing legal principles set out in C.P. Ships v. Les Industries Lyon Corduroys Ltée, 1982 CanLII 5157 (FC), [1983] 1 FC 736, applied. Applying these principles, correctly in our view, the trial judge found that the respondent had not actually authorized Mr. Issonborg to receive payments to him personally rather than to the respondent, nor had the respondent cloaked Mr. Issonborg with ostensible authority by holding out Mr. Issonborg as being so authorized. He concluded:Here, [the appellants] knew that the contract was with [the respondent]. It was therefore [the respondent] that had to be paid. The question then is whether [the respondent] somehow led [the appellants] to conclude that they could pay [Mr. Issonborg] personally. The evidence at trial does not make that out. [Mr. Lin] never told [the appellants] that they could pay [Mr. Issonborg] personally instead of [the respondent]. The only request to pay [Mr. Issonborg] came from him. [Mrs. Procopio] admitted that [Mr. Issonborg] told her he had no access to [the respondent’s] bank accounts. As a result, whatever [Mrs. Procopio] may have thought about [Mr. Issonborg’s] authority vis-à-vis [the respondent], she knew he had no financial authority over it..... [9] As the trial judge found, there was nothing in the contract that authorized the appellants to pay Mr. Issonborg personally nor was there any other evidence that the respondent had authorized personal payments to Mr. Issonborg. Although initially questioning making cash and personal cheque payments directly to Mr. Issonborg and aware of the limitations of his authority with respect to the respondent’s bank accounts, the appellants made no inquiries of the respondent as to Mr. Issonborg authority to receive personal payments. In these circumstances, the principles set out in C.P. Ships required the appellants to receive authority from the respondent to pay Mr. Issonborg directly or assume the risk entailed with paying Mr. Issonborg. We also agree with the trial judge’s finding that there was no evidence of a trade custom that the respondent and the appellants expected that payments would be made personally or in cash to Mr. Issonborg.
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