Village on the Park and Greenwood Acres, Re, (2009) 472 A.R. 230 (QB)

• Judge: Ross, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: February 17, 2009
• Citations: (2009), 472 A.R. 230 (QB);2009 ABQB 497

Village on the Park & Greenwood Acres, Re (2009), 472 A.R. 230 (QB)

MLB headnote and full text

Temp. Cite: [2009] A.R. TBEd. SE.007

In The Matter Of Those Condominiums known as Village on the Park and Greenwood Acres (0103 23416; 2009 ABQB 497)

Indexed As: Village on the Park and Greenwood Acres, Re

Alberta Court of Queen's Bench

Judicial District of Edmonton

Ross, J.

August 26, 2009.

Summary:

Six financial institutions (lenders) sued a number of defendants, including Stotts and his agent (a mortgage broker), for damages arising from a fraudulent mortgage scheme. The action against Stotts was based on allegations of fraudulent misrepresentation. The lenders and the defendants, except for Stotts, reached a settlement agreement (a Pierringer Agreement). The matter of Stotts' liability proceeded to trial.

The Alberta Court of Queen's Bench held that the tort of deceit had been established against Stotts. However, liability should be apportioned equally between Stotts and his agent; therefore, Stotts was responsible for 50% of the damages for the tort of deceit.

Agency - Topic 4168

Relations between principal and third parties - Principal's liability for torts by agent - Fraud by agent (incl. negligent misrepresentation) - [See Fraud and Misrepresentation - Topic 6 and Fraud and Misrepresentation - Topic 51 ].

Damages - Topic 1301.5

Exemplary or punitive damages - Deceit or misrepresentation - Six financial institutions (lenders) sued Stotts for damages for deceit respecting 20 mortgage loans, alleging that he made fraudulent misrepresentations about down payments, collateral agreements and the existence of other loans - The Alberta Court of Queen's Bench held that deceit had been established - The court stated that damages for deceit were to be assessed on a tort basis and not on a contract basis - The lenders were entitled to be put back into the position in which they would have been had the false representation not been made, not into the position they would have been in had the representation been true - To compensate the lenders for losses actually incurred, the court held the lenders should recover the amount they advanced less the amount they recovered, together with compound interest - Punitive damages were not awarded where there was no intention to harm the lenders and no malice in participating in the mortgage scheme - See paragraphs 114 to 116 and 128.

Damages - Topic 3625

Deceit and misrepresentation - Fraudulent misrepresentation - [See Damages - Topic 1301.5 ].

Fraud and Misrepresentation - Topic 6

Fraudulent misrepresentation (deceit) - What constitutes deceit or fraudulent misrepresentation - Six financial institutions (lenders) sued Stotts for damages for deceit respecting 20 mortgage loans, alleging that he made fraudulent misrepresentations about down payments, collateral agreements and the existence of other loans - The Alberta Court of Queen's Bench held that deceit had been established - False statements of fact were made to the lenders by Stotts' agent - Stotts had knowledge of the falsity of the representations because he was imputed to have the knowledge of the agent as to the representations made on his behalf, and he was personally aware of the facts which made those representations false - Further, he had actual knowledge of some of the misrepresentations, namely those included in statutory declarations, and in declining to make any inquiries in the face of this knowledge, notwithstanding the suspicious circumstances relating to these investments, he was wilfully blind - That wilful blindness was the equivalent of actual knowledge - An intention to deceive (as opposed to harm) was established because Stotts knew the false representations were made with the intention that they should be acted upon to obtain the mortgage financing - The court held that whether one considered the matter objectively or subjectively, the misrepresentations in this case materially induced the lenders to advance mortgage funds - See paragraphs 54 to 107.

Fraud and Misrepresentation - Topic 51

Fraudulent misrepresentation (deceit) - Elements - General - The Alberta Court of Queen's Bench referred to the elements of the tort of deceit - That is, a plaintiff must prove that (1) a false representation or statement was made by the defendant, (2) which was knowingly false, (3) was made with the intention to deceive the plaintiff, and (4) which materially induced the plaintiff to act, resulting in damage - The court noted that this summary referred to the elements of deceit in the context of interactions directly between the plaintiff and the defendant - However, a direct interaction was not necessary - The interaction could take place through an agent - The court stated that a principal was vicariously liable for "the deceitful conduct of its agent committed during the course of its employment" - The fact that a principal did not specifically authorize a false statement by his agent did not detract from the principal's vicarious liability - A principal was liable for the fraud an agent committed in the course of the principal's business, even if committed for the agent's benefit - See paragraphs 54 to 57.

Fraud and Misrepresentation - Topic 404

Fraudulent misrepresentation (deceit) - Remedies - Damages - [See Damages - Topic 1301.5 ].

Interest - Topic 5002

Interest as damages (prejudgment interest) - General principles - Jurisdiction - [See Interest - Topic 5008 ].

Interest - Topic 5008

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Entitlement - Six financial institutions (lenders) sued Stotts for damages for deceit respecting 20 mortgage loans, alleging that he made fraudulent misrepresentations about down payments, collateral agreements and the existence of other loans - The Alberta Court of Queen's Bench held that deceit had been established - The court held that prejudgment interest was appropriate, either pursuant to the Judgment Interest Act, or as damages to compensate the lenders' loss of opportunity to invest the money - Judgment Interest Act rates were to be applied - The court held that it had jurisdiction to award compound interest as damages - Economic reality dictated that the lenders should recover the amount they advanced less the amount they recovered, together with compound interest - That was necessary to compensate the lenders for losses actually incurred - As the principal amount of damages was measured by funds advanced in 2000, and not in current day dollars, there was no risk that the lenders would be overcompensated by an award of compound interest - See paragraphs 117 to 128.

Interest - Topic 5009

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Calculation of (incl. rate) - [See Interest - Topic 5008 ].

Interest - Topic 5010

Interest as damages (prejudgment interest) - General principles - Calculation of interest - Simple or compound - [See Interest - Topic 5008 ].

Interest - Topic 5149

Interest as damages (prejudgment interest) - Torts - Misrepresentation - [See Interest - Topic 5008 ].

Interest - Topic 5181

Interest as damages (prejudgment interest) - Fraud and misrepresentation - Fraudulent misrepresentation (deceit) - [See Interest - Topic 5008 ].

Practice - Topic 9851.1

Settlements - Mary Carter or Pierringer agreements - Six financial institutions (lenders) sued a number of defendants, including Stotts, for damages arising from a fraudulent mortgage scheme - The lenders and the defendants, except for Stotts, reached a settlement agreement (a Pierringer Agreement) - The Stotts matter proceeded to trial where the court found Stotts liable for damages for deceit - Stotts claimed contribution or indemnity from settling defendants - The lenders argued that once they established Stotts' liability, the onus was on Stotts to establish what percentage of fault could be attributed to him as opposed to the settling parties - Stotts, on the other hand, as the remaining non-settling defendant, claimed that the onus changed because of the Pierringer agreement and therefore the onus was on the lenders to establish what percentage of fault could be attributed to his wrongdoing - The Alberta Court of Queen's Bench held that the onus remained on Stotts; however, the burden went no further than requiring him to prove the causes of action that he alleged in support of his claims for contribution and indemnity - Once that was established the Contributory Negligence Act and Tort-feasors Act placed the duty to apportion on the court - See paragraphs 150 to 171.

Practice - Topic 9851.1

Settlements - Mary Carter or Pierringer agreements - Six financial institutions (lenders) sued a number of defendants, including Stotts and his agent (a mortgage broker), for damages arising out of a fraudulent mortgage scheme - The lenders and the defendants, except for Stotts, reached a settlement agreement (a Pierringer Agreement) - The agreement provided that the lenders would not sue any of the settling parties - The Alberta Court of Queen's Bench held that the tort of deceit had been established against Stotts and that since liability should be apportioned equally between Stotts and his agent, Stotts was responsible for 50% of the damages - Stotts argued that the common law rule that release of one joint tortfeasor released all joint tortfeasors applied in this case - He claimed that although the Pierringer Agreement contained a "covenant not to sue", which was usually considered to be distinct from a release, that covenant was "empty" and the true nature and effect of the Pierringer agreement was to release the settling defendants - The court rejected Stotts' argument, holding that the common law rule was not applicable in these circumstances to release Stotts from liability for that percentage of total damages attributable to him - See paragraphs 182 to 187.

Practice - Topic 9852.1

Settlements - Effect of - General - [See both Practice - Topic 9851.1 ].

Practice - Topic 9853

Settlements - By one or more of multiple defendants - Effect of - [See both Practice - Topic 9851.1 ].

Torts - Topic 7165

Joint and concurrent tortfeasors - Joint tortfeasors - Release of one - Effect of - [See second Practice - Topic 9851.1 ].

Torts - Topic 7382

Joint and concurrent tortfeasors - Contribution between tortfeasors - Apportionment of fault - General - [See both Practice - Topic 9851.1 ].

Torts - Topic 7382

Joint and concurrent tortfeasors - Contribution between tortfeasors - Apportionment of fault - General - Six financial institutions (lenders) sued Stotts for damages for deceit respecting 20 mortgage loans, alleging that he made fraudulent misrepresentations about down payments, collateral agreements and the existence of other loans - The Alberta Court of Queen's Bench held that deceit had been established because Stotts and his agent (a mortgage broker) acted together as principal and agent to deceive the lenders to obtain mortgage funds - The court held that the evidence supported equal responsibility of Stotts and the agent for deceiving the lenders - The court stated that if it had been left in doubt by the evidence as to the respective shares of responsibility of Stotts and the agent (mortgage broker), the court would have had recourse to s. 1(1) of the Contributory Negligence Act (i.e., if it was not possible to establish different degrees of fault, the liability should be apportioned equally) - See paragraphs 172 to 181.

Torts - Topic 7420

Joint and concurrent tortfeasors - Contribution between tortfeasors - Settlement by one tortfeasor - [See second Practice - Topic 9851.1 ].

Cases Noticed:

Pierringer v. Hoger et al. (1963), 124 N.W.2d 106 (Wis. S.C.), refd to. [para. 36].

F.H. v. McDougall (2008), 380 N.R. 82; 260 B.C.A.C. 74; 439 W.A.C. 74; 2008 SCC 53, refd to. [para. 52].

B., Re, [2008] N.R. Uned. 232; [2008] 3 W.L.R. 1; [2008] UKHL 35, refd to. [para. 53].

Sheppard Publishing Co. v. Press Publishing Co. (1905), 10 O.L.R. 243 (C.A.), refd to. [para. 56].

Orris v. Collings (1929), 36 O.W.N. 172 (H.C.), varied (1929), 37 O.W.N. 233 (C.A.), refd to. [para. 57].

Evetts v. Taylor (1925), 28 O.W.N. 67 (H.C.), refd to. [para. 57].

HSBC Bank Canada v. Elm City Chrysler Ltd. et al. (2008), 332 N.B.R.(2d) 13; 852 A.P.R. 13; 2008 NBCA 48, refd to. [para. 72].

Irving Oil Ltd. v. S & S Realty Ltd. (1983), 48 N.B.R.(2d) 1; 126 A.P.R. 1; 1983 CarswellNB 153 (C.A.), refd to. [para. 72].

Scholl v. Royal Trust Corp. of Canada (1986), 40 C.C.L.T. 113 (Ont. H.C.), refd to. [para. 73].

Bartin Pipe & Piling Supply Ltd. v. Western Environment of Oklahoma et al. (2004), 346 A.R. 95; 320 W.A.C. 95 (C.A.), refd to. [para. 84].

R. v. Poonai (V.R.), [2006] O.T.C. 1520; 2006 CarswellOnt 8463; 2006 WL 3909752 (Sup. Ct.), refd to. [para. 84].

R. v. Williams (H.L.) (2003), 308 N.R. 235; 231 Nfld. & P.E.I.R. 1; 686 A.P.R. 1 (S.C.C.), refd to. [para. 85].

Witting v. Tauber et al., [2006] A.R. Uned. 73; 2006 ABQB 23, refd to. [para. 85].

Cora v. Adwokat et al., [2005] O.T.C. Uned. 3; 2005 CarswellOnt 6; 2005 WL 95319 (Sup. Ct.), refd to. [para. 85].

Opron Construction Co. v. Alberta (1994), 151 A.R. 241; 1994 CarswellAlta 470 (Q.B.), refd to. [para. 90].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1990] 3 W.W.R. 690 (B.C.C.A.), varied [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241; 5 C.L.R.(2d) 173; 14 C.C.L.T.(2d) 233, refd to. [para. 90].

40 Sunpark Plaza Inc. v. 850453 Alberta Inc. (2007), 413 A.R. 200; 2007 CarswellAlta 104; 2007 ABQB 54, refd to. [para. 90].

R. v. Park (S.J.) (2009), 465 A.R. 1; 2009 ABQB 38, refd to. [para. 97].

Rainbow Industrial Caterers Ltd. et al. v. Canadian National Railway Co. et al., [1991] 3 S.C.R. 3; 126 N.R. 354; 3 B.C.A.C. 1; 7 W.A.C. 1; 1991 CarswellBC 214, refd to. [para. 115].

Mason (V.K.) Construction Ltd. v. Bank of Nova Scotia and Courtot Investments Ltd., [1985] 1 S.C.R. 271; 58 N.R. 195; 8 O.A.C. 381; 1985 CarswellOnt 714, refd to. [para. 115].

Neste Canada Inc. v. Allianz Insurance Co. of Canada et al. (2008), 429 A.R. 8; 421 W.A.C. 8; 291 D.L.R.(4th) 279 (C.A.), refd to. [para. 120].

Bank of America Canada v. Mutual Trust Co. et al. (2002), 287 N.R. 171; 159 O.A.C. 1; 211 D.L.R.(4th) 385 (S.C.C.), refd to. [para. 122].

Alberta v. Nilsson, [2003] 2 W.W.R. 215; 320 A.R. 88; 288 W.A.C. 88 (C.A.), refd to. [para. 122].

Costello and Dickhoff v. Calgary (City) (1997), 209 A.R. 1; 160 W.A.C. 1 (C.A.), refd to. [para. 123].

Hill v. Church of Scientology of Toronto and Manning (1995), 184 N.R. 1; 84 O.A.C. 1; 126 D.L.R.(4th) 129 (S.C.C.), refd to. [para. 131].

Whiten v. Pilot Insurance Co. et al. (2002), 283 N.R. 1; 156 O.A.C. 201; 209 D.L.R.(4th) 257 (S.C.C.), refd to. [para. 131].

Toronto-Dominion Bank et al. v. Park Valley Village Management et al. (2004), 366 A.R. 148 (Q.B.), refd to. [para. 136].

Bank of Montreal v. Maddox & MacInnis et al. (1987), 83 N.B.R.(2d) 342; 212 A.P.R. 342 (C.A.), leave to appeal refused (1988), 88 N.R. 239; 85 N.B.R.(2d) 359; 217 A.P.R. 359 (S.C.C.), refd to. [para. 138].

Gallop v. Abdoulah et al. (2008), 311 Sask.R. 123; 428 W.A.C. 123; 2008 SKCA 29, refd to. [para. 138].

Vandevelde v. Smith et al. (1999), 243 A.R. 161; 77 Alta. L.R.(3d) 160 (Q.B.), refd to. [para. 155].

Amoco Canada Petroleum Co. et al. v. Propak Systems Ltd. et al., [1999] A.R. Uned. 474; 74 Alta. L.R.(3d) 194 (Q.B.), affd. (2001), 281 A.R. 185; 248 W.A.C. 185 (C.A.), refd to. [para. 156].

Amoco Canada Petroleum Co. et al. v. Propak Systems Ltd. et al. (2003), 334 A.R. 197; 13 Alta. L.R.(4th) 67 (Q.B.), refd to. [para. 156].

Amoco Canada Petroleum Co. et al. v. Propak Systems Ltd. et al., [2004] A.R. Uned. 241; 2004 ABQB 226, affd. in part [2005] A.R. Uned. 644; 2005 ABCA 421, refd to. [para. 156].

Bucknor v. Ryder et al. (2001), 313 A.R. 352; 1 Alta. L.R.(4th) 40 (Q.B.), refd to. [para. 156].

J.M. et al. v. Bradley et al. (2004), 187 O.A.C. 201; 240 D.L.R.(4th) 435; 71 O.R.(3d) 171 (C.A.), refd to. [para. 159].

Totem Electric Ltd. v. Humford Developments Ltd. et al. (1986), 68 A.R. 217; 43 Alta. L.R.(2d) 216 (Q.B. Master), refd to. [para. 165].

Margetts et al. v. Timmer et al. (1999), 244 A.R. 114; 209 W.A.C. 114 (C.A.), refd to. [para. 182].

Leonard Foundation Trust, Re (1990), 37 O.A.C. 191; 74 O.R.(2d) 481 (C.A.), refd to. [para. 182].

Canada Trust Co. v. Ontario - see Leonard Foundation Trust, Re.

Tucker v. Asleson et al., [1993] 6 W.W.R. 45; 24 B.C.A.C. 253; 40 W.A.C. 253; 1993 CarswellBC 94 (C.A.), refd to. [para. 183].

Kelemen v. El-Homeira (1999), 250 A.R. 67; 213 W.A.C. 67 (C.A.), refd to. [para. 189].

C.S. v. Miller et al. (2004), 358 A.R. 196; 26 Alta. L.R.(4th) 345; 2004 ABQB 137, refd to. [para. 189].

Authors and Works Noticed:

Klar, Lewis N., Tort Law (4th Ed. 2008), pp. 669 [para. 54]; 669 to 670 [para. 58]; 673, fn. 42 [paras. 55, 175]; 677 [para. 114].

Sopinka, John, Lederman, Sidney N., and Bryant, Alan W., The Law of Evidence in Canada (2nd Ed. 1999), pp. 53, 79, 80 [para. 153]; 86, 89 [para. 162].

Spencer-Bower, George S., and Turner, Alexander Kingcome, The Law of Actionable Misrepresentation (3rd Ed. 1974), p. 118 [para. 91].

Counsel:

Michael J. McCabe, Q.C., and Tim C. Mavko (Reynolds Mirth Richards & Farmer LLP), for the plaintiffs (lenders);

Christopher N. Leveque, for the defendant (investor), Gerald G. Stotts.

This action was heard on January 12, 13, 15, 19-22, 26, 28 and 29, and February 17, 2009, with written submissions provided on March 3 and 13, 2009, by Ross, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following reasons for judgment on August 26, 2009.