False pretences: Our step by step new approach creditors
must take for their claim to survive bankruptcy.
We hope that you and your family are safe,
healthy and secure during this coronavirus pandemic. Ira Smith Trustee & Receiver Inc.
is absolutely operational
and Ira, in addition to Brandon Smith, is readily available for a telephone
consultation or video meeting. False pretences and bankruptcy introduction.
Just because you have filed for bankruptcy
doesn't mean you are free and clear of your debts.
In fact, some debts, such as those obtained with the use
of false pretences, may not be discharged through bankruptcy at all.
A creditor can file a proof of claim for a debt incurred by false pretences.
However, it takes more than just stating it in a proof of claim.
A court must have made that determination.
If not, the debt can be ruled as dischargeable through bankruptcy.
But if the court has made
that determination and it is the basis of the claim that debt will not be
discharged upon the bankrupt receiving his or her bankruptcy discharge.
I have discussed the topic of false pretences and bankruptcy before,
but based on a recent Ontario court decision, I need to break down the basics
of this type of debt and how it relates to a person's bankruptcy.
What is a false pretence?
A false pretence is a false claim or statement made for the purpose of inducing
a person to part with property or to give some valuable thing or advantage.
It is a criminal offence in Canada.
The false pretence is the main element of the crime.
The essence of this common law offence is
that a person knowingly makes a false statement of fact,
intending to induce the victim to act on it to his or her detriment.
The reason why the false pretence is
punished is that it is a fraud on the public.
Some people choose to give false information when they apply for credit or
an extension of credit to make their financial situation look better.
This is often done by people who have no
intention of repaying the debt and therefore use certain fake information
with the intent of deliberately misleading the creditor.
They are hoping that the potential
creditor will not verify all the information.
They are able to get away with this when they are not required to prove false
information with the creditor. Crimes of dishonesty.
What is the criminal offence of false pretences?
The offence of false pretences is
a criminal offence that occurs when a person obtains property from another
person by deceiving or defrauding the other person.
This can be done either by a false
representation of existing facts or by a false promise.
The person must intend to defraud
and in doing so, possess the intent to commit an offence.
This is a fairly complex offence under
paragraph 361(2)(1), of the Canadian Criminal Code
and includes a wide variety of possible scenarios.
More often than not, it involves obtaining personal property under false pretences.
Section 362(1)
of the Criminal Code of Canada states ever yone commits an offence by a false
pretence, whether directly or through the medium of a contract obtained
by a false pretence obtains anything in respect of which the offence of theft
may be committed or causes it to be delivered to another person.
If you have been charged with a criminal
offence under subsection 362(1) of false pretence
in Canada, you need to ensure you have a good defence.
Sometimes it is a difficult defence to prove beyond a reasonable doubt.
The only thing the Crown really needs to prove is that you made a false
representation in order to obtain the property of another and that the other
person believed you and was therefore defrauded.
It is up to you to ensure that you have a good defence.
But I am not writing this Brandon's Blog to focus on criminal behaviour.
Rather, I want to discuss this concept from the perspective of someone who might
file an assignment into bankruptcy. Debt arising from false pretences not
released by the bankruptcy discharge. Section 178(1)(e) of the
Bankruptcy and Insolvency Act (Canada)
states that an order of discharge, does not release the bankrupt from any
type of financial obligation or liability arising from obtaining property or
services by false pretences or fraudulent misrepresentation other than a debt or
liability that arises from an equity claim.
In the past, it was quite customary
for a creditor seeking judgment for recovery of a debt
who is alleging that the debt rises
from circumstances caused by section 178(1) of the BIA
to also seek both the civil judgment for the money and also a declaration
in the judgment that the debt is one of the debts that falls into the category
of not being released just because the bankrupt received his or her
bankruptcy discharge.
in the past, the courts have provided such
relief where the evidence before the court substantiated it,
notwithstanding the defendant was not an undischarged bankrupt.
There are now two cases in Ontario that say such a dual judgment,
both the civil award of money plus the bankruptcy debt declaration will not be made any
more where there is not an actual bankruptcy proceeding.
Most recent false pretences released decision in Ontario:
matthew Vanin, twenty twenty one and SC
On April 6, 2021
the Honourable Justice Kurz
of the Ontario Superior Court of Justice released his decision
in this case.
The Bank of Montreal (BMO) was attempting to get a summary judgment against
a defendant for $35,723.71 as well as pre and post-judgment interest as
a result of an unpaid conditional sales contract.
BMO alleged in its statement of claim
that the claim arose because the defendant had fraudulent intent by purposely
misrepresenting her employment and employment income in her application
for credit being a statement in writing under a conditional sales agreement
for an automobile. The false document application was made
to the dealership for financing to purchase a vehicle from it.
The conditional sales agreement was then
assigned to BMO as a normal financing business practice that is used.
The defendant was noted, in default under the rules.
When noted in default, it is as if the defendant admitted
the allegations of fact contained in the statement of claim.
However, the opposite is not true.
The plaintiff is not necessarily entitled to a judgment merely because
the allegations of fact are deemed to have been admitted.
They actually must be proven. The deemed admissions of fact that come
from the statement of claim were that the defendant made certain
representations as to her employment and her employment income.
BMO relied on those representations and provided the defendant credit.
Those details supplied by the defendant were false.
That false information was created solely for the objective of defrauding BMO
to advance credit for the purchase of the vehicle.
BMO gave the credit based on those
representations. The court's decision regarding the false
statements in the credit application document. The court determined that BMO's
statement of claim falls short to state how the false statements meet the test
for false pretences or fraudulent misrepresentation.
It did not say whether they were significant or not.
The affidavit evidence used to support
the statement of claim simply offers the verdict that they were false and illegal.
With those non inclusions, the pleadings in the claim do not support
a finding of fraudulent misrepresentation or false pretences.
The court had no problem in giving BMO judgment for the civil claim for money
being the thirty five thousand dollars plus pre and post-judgment interest.
Where the court had a problem was
in the evidence of the fraud and therefore the request for the additional relief
of stating that the debt is one not released by the discharge of the defendant
when she obtains her discharge from bankruptcy that has not yet taken place.
The court did not grant the additional
relief to protect this claim in the event the defendant ever declared bankruptcy.
But there is another, and in my view,
deeper reason, which all plaintiffs finding themselves in the position of BMO
and seeking the same kind of two phase relief must keep in mind.
The court should not issue hypothetical decisions even with deceitful conduct.
The court did not doubt that the defendant
made the false statements. What the court said following the decision
of the trial judge in Royal Bank of Canada v. Elsioufi,
the Honourable Mr. Justice Dunphy,
that there was not an essential legal basis to determine fraud in order
to approve the civil monetary judgment requested.
Justice Kurz followed the thinking
of Justice Dunphy by stating that even if a positive finding of fraud were called
for to release a judgment, he would certainly refrain from doing so.
That is due to the fact that it would stand for a theoretical declaration
applicable to a bankruptcy case before that proceeding beginning.
Justice Kurz also concurred with Justice Dunphy that
the courts ought to make decisions on the basis of examined evidence and not
only on the basis of admissions or even on consent.
So the old fashioned method in Ontario of bringing to court the request for not
only a civil monetary judgment, but also a declaration that the debt is
one that falls under section 178(1) of the BIA and therefore not
discharged upon the discharge of the bankrupt is over.
In the words of Justice Dunphy,
"I am moved to issue this brief endorsement for publication purposes as I have noticed
a growing practice of some to request such declarations on a routine basis.
I may even have signed one or two before
giving the matter further thought and research and
I have reached the conclusion that the practice is to be discouraged."
Just as Kurz refused to grant BMO any sort
of special costs in its motion, as it did not need to make that kind
of motion merely to get the civil monetary claim in a judgment.
False pretences, a new creditor blueprint is needed. Now that at least in Ontario,
if the old way will not work anymore, what is a creditor to do now?
It is not only for a claim falling under false pretences or fraudulent
misrepresentation, but potentially many other of the classes
of debts falling under section 178(1) of the BIA,
including false pretences or fraudulent misrepresentation.
The above noted court decisions can be instructive.
First, if a plaintiff believes
that the debt was incurred because of a type of fraud,
hard evidence should be provided to the court.
Proof using genuine documents, a copy of original documents proving
a breach of trust as examples of evidence that should be included.
It should not merely be the deponent's or plaintiff's conclusion.
Given the known facts being deposed, it should support a finding of the fraud,
even though the court may refrain from making a finding of fraud in order
to deliver a civil monetary judgment in favour of the plaintiff.
Providing this evidence will be important later on.
Next, there must be an actual bankruptcy.
Either the person must have recognized
their financial condition of insolvency and filed an assignment in bankruptcy or
a creditor have the court issue a bankruptcy order against the person.
It could even be the judgment creditor
able to prove that the person ought to be adjudged bankrupt.
Third, once bankrupt,
the judgment creditor should file a proof of claim with the licensed insolvency
trustee administering the bankruptcy estate.
Proof of the debt would be the judgment
which would be attached to the proof of claim and marked as schedule A.
Fourth, does the plaintiff continue to believe that the claim is one that falls under one
of Section 178(1) of the exclusions and would survive
the person's discharged from bankruptcy such as false pretences?
If so, then the creditor can make
an application to the bankruptcy court to lift the stay of proceedings against
the bankrupt in order for the creditor to attempt to obtain a judgment
from the court that the claim of that creditor is one that is not
released by the discharge of the bankrupt. Fifth and final.
The creditor, having obtained such leave, can then make a new application
to the court for the specific finding that the court refused to make
in both of the cases I discussed above.
The original evidence supplied by the creditor in its original
application will now become very important for the court to review.
That is why I said it should be pleaded with evidence when the civil monetary
judgment was sought so that it could be relied upon now.
False pretences. Summary.
I hope you enjoyed the false pretences Brandon's Blog post.
Are you worried because you or your business are dealing with substantial debt
challenges and you assume bankruptcy is your only option?
Call me.
It is not your fault that you remain in this way.
You have actually been only shown the old ways to try to deal with financial issues.
These old ways did not work anymore.
The Ira Smith Team utilizes new modern day
ways to get you out of your debt difficulties while avoiding bankruptcy.
We can get you the relief you need and so deserve the attention put upon you as big.
We know your discomfort factors.
We will check out your entire situation and design a new approach that is as
unique as you and your problems, financial and emotional.
We will take the weight off of your
shoulders and blow away the dark cloud hanging over you.
We will design a debt settlement strategy for you.
We know that we can help you now.
We understand that people and businesses
facing financial issues need a realistic lifeline.
There is no one solution fits all method with the Ira Smith Team.
Not everyone has to file bankruptcy in Canada.
The majority of our clients never do.
We help many people and companies stay clear of bankruptcy.
That is why we can establish a new
restructuring procedure for paying down debt that will be built just for you.
It will be as one of a kind as
the economic issues and discomfort you are encountering.
If any one of these seems familiar to you and you are serious about getting
the solution, you need contact the Ira smith trustee & receiver inc.
today. Call us now for a no cost consultation.
We will get you or your business back up driving to Healthy and Vallens trouble
free operations and get rid of the discomfort factors in your life.
Starting over, starting now.
We hope that you and your family are safe,
healthy and secure during this coronavirus pandemic.
Ira smith trustee & receiver inc.
absolutely operational.
And IRA, in addition to Brandon Smith,
is readily available for a telephone consultation or video meeting.