Deceit Can Shift Burden of Proof

Deceit

The BCCA in Roy v Kretshmer 2014 BCCA 429 reviewed the law of deceit and held it can shift the burden of proof.

It was  a vendor purchase case involving an exclusion clause that the plaintiff wished to overcome, and did so partially based on deceit.

The headnote summary of the facts and outcome of the case are as follows, with a more detailed explanation of the tort of deceit to follow it.

The appellant, Dennis Kretschmer, represented 1216393 Ontario Inc. (the “vendor”) in the sale to the respondents of a lot in a project on a lake near Vernon, B.C. in the summer of 2005.  The sale was to complete after a subdivision plan for the project was approved and registered in the Land Title Office.  The contract contained a provision limiting any damages payable by the vendor to the return of the respondents’ deposit.  The lot previously had been sold to other purchasers, the Adams, but in July 2004, the vendor cancelled that transaction.  The Adams advised that they did not agree the vendor had that right and in January 2005 noted on the cheque returning their deposit that it was cashed under protest.  Mr. Kretschmer did not tell the respondents about the Adams’ position.  In January 2006, the subdivision plan was registered, but the respondents were not told that this had occurred and were not told the Adams had filed a certificate of pending litigation against the lot.  Mr. Kretschmer advised them that the vendor was still having difficulty obtaining subdivision approval.  The respondents learned the true facts in January 2007.  

The court ordered specific performance of the Adams’ contract.  The vendor could not complete the sale to the respondents.  

They sued the vendor for breach of contract and Mr. Kretschmer for deceit.  The trial judge found Mr. Kretschmer liable in deceit and dismissed the claim against the vendor based on the limitation of liability provision.  

She awarded damages against Mr. Kretschmer of the difference in the value of the lot from August 2005 to January 2007.  Mr. Kretschmer appealed and the respondents cross appealed.

Held: cross appeal allowed and the case remitted to the Supreme Court to assess damages based on the value of the lot as of the end of January 2007.  The operative time for both the breach of contract and deceit claims was January 2006.  The breach and tort were ongoing.  In January 2007, the respondents were entitled to the lot or its value.  In this case, damages for the vendor’s breach and Mr. Kretschmer are the same.  The conduct of Mr. Kretschmer on behalf of the vendor was egregious and went directly to the contractual obligations of the vendor.  The exclusion clause should not be enforced.

Deceit

 

[47]         In tort, the respondents are entitled to be put into the same position they would have been in had the tort not been committed.  Mr. Kretschmer’s deceit deprived the respondents of the option of requiring the vendor to complete the contract or electing to treat the contract as at an end and suing for damages.

]         The trial judge’s consideration of the law of reliance was correct: the onus shifted to Mr. Kretschmer, who failed to establish non-reliance.  Much was said in argument about the onus of proof of reliance.  At paras. 113‑114, the judge stated:

[113]    In an action for deceit it is well established that the plaintiffs must prove on a balance of probabilities that Mr. Kretschmer made a false representation knowing that it was false; that he intended to deceive the plaintiffs by making the false statement; and that the false statement induced the plaintiffs to act to their detriment.

 

In regard to the last element of the tort, the Court of Appeal concluded in Sidhu Estate at paras. 36 and 42, that the plaintiff is not required to prove the false statements were the sole inducement but only a material factor; and, further, once the intentional nature of the false statements, materiality and causation of the loss are proven, the burden of proof regarding non-reliance shifts to the defendant. Shift burden of proof in these circumstances was confirmed by the Court of Appeal in this action: Roy at paras. 38‑39.

[114]    I have found that Mr. Kretschmer made false representations to the plaintiffs knowing that they were untrue at the time. Further, it is apparent that due to the nature of the false statements concerning the reason for the delay in the completion of the plaintiffs’ contract, Mr. Kretschmer intended to deceive the plaintiffs as to the true state of affairs concerning title to Lot 33.

[59]         Having reviewed both Sidhu Estate v. Bains, [1996] 10 W.W.R. 590, 25 B.C.L.R. (3d) 41 (C.A.),and Roy v. 1216393 Ontario Inc., 2011 BCCA 500, I agree with the trial judge and am satisfied that the burden of proof shifted to Mr. Kretschmer.  Having been told falsely that the subdivision plan had not been registered, the respondents believed that they had no legal basis on which to require completion in January 2006.  The statement was false, it was material and induced the respondents to act to their detriment (that is, not to insist on their right to completion) and loss was occasioned, in that the respondents could do nothing until they learned of the true facts.

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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