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Fraud - General

. Ontario v. Madan

In Ontario v. Madan (Ont CA, 2023) the Court of Appeal considered an ambitious fraud defence of contributory negligence, here one that amounts to the accusation that the victim left themselves open to the fraud:
[18] The contributory negligence defence advanced by the appellants is predicated on Ontario’s alleged failure to take adequate steps to protect itself from the fraud perpetrated against it. The defence, as framed in the statements of defence, applies to all of the claims advanced by Ontario, including the fraud, theft, and conversion claims: see e.g., Shalini’s Statement of Defence, at paras. 30-33, 35.

[19] The proposition that a fraudster’s liability for damages flowing from its fraud should be reduced to reflect a victim’s failure to protect itself from the fraud would, if accepted, strongly suggest that if perpetrated against the right victim, crime would indeed pay. Thankfully the law is to the contrary. As the motion judge held, a victim’s negligence or carelessness affords no defence, partial or otherwise, to an allegation of dishonesty: Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at paras. 67-71; Man Financial Canada Co. v. Keuroghlian, 2008 ONCA 592, 47 B.L.R. (4th) 190, at paras. 44-46.


[25] Apart from the state of the case law, the appellants’ claim fails on a first principles analysis. The appellants maintain that even if they are in possession of assets that are the indirect proceeds of the frauds perpetrated against Ontario, and even though the appellants have no legitimate claim to any part of the proceeds of those frauds, they should be entitled to keep the assets, or at least part of the assets, which are the indirect proceeds of the fraud, presumably to “punish” Ontario for not taking adequate steps to protect itself from the fraud.

[26] On this approach, the appellants become the beneficiaries of what can only be described as a windfall, occasioned by Ontario’s failure to protect itself from Sanjay’s fraud. I am unaware of any equitable principle which justifies this result. Indeed, the result, a permanent financial loss for Ontario, the victim of the fraud, and a windfall gain for the appellants, bystanders to the fraud, seems the antithesis of equity.


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