Regarding a summary judgment order finding the appellants liable for civil fraud arising from a scheme involving falsified invoices and receipts, the Ontario Court of Appeal dismissed the appeal of the corporate and individual appellants, save for one.
In Canadian Tire Corporation, Limited v. Eaton Equipment Ltd., 2025 ONCA 720, the respondent filed an action alleging civil fraud through the following scheme.
Eaton Equipment Ltd., Mr. Milburn’s company, claimed to repair products bought from the Canadian Tire Corporation, Limited (CTC) under a warranty program. Eaton submitted invoices and receipts, most of which were falsified, with no actual customers or products and no repairs performed. CTC paid for these supposed repairs.
On Jan. 7, Justice William Black of the Ontario Superior Court of Justice issued a summary judgment determining that Mr. Milburn’s relatives, associates, and the other appellants participated in his fraudulent scheme and helped run Eaton and other corporate entities that funneled the funds.
The motion judge found:
- clear and uncontroverted evidence of civil fraud
- the appellants jointly and severally liable for $3.325.238.09 in damages, including pre-judgment interest, and $1.2 million in partial indemnity costs
- Mr. Milburn personally liable for $50,000 in punitive damages
The appellants challenged the summary judgment order.
Order mostly upheld
The Court of Appeal for Ontario allowed the appeal only in connection with Ms. Milburn, Mr. Milburn’s daughter. It dismissed the appeal as it related to the other individual and corporate appellants.
The appeal court ruled that the motion judge properly ordered summary judgment against all appellants, except Ms. Milburn, and appropriately determined that the case established the elements of civil fraud.
First, the appellants alleged that the judge erroneously found that the case met the third element of the test for civil fraud, specifically that false representations caused CTC to act. The appellants said the court could not hold Eaton liable because CTC was acting on Servantage Dixie Sales Canada Inc.’s representations, not Eaton’s.
The appeal court disagreed. It directly attributed the fraudulent repair claims to Eaton because it determined that Dixie’s role as an intermediary or messenger lacked legal consequences.
The appeal court said Dixie served as a conduit for the representations and payments between CTC and Eaton and sent CTC monthly spreadsheets with the payments Eaton claimed for repairs, based on Eaton’s invoices. The appeal court added that CTC relied on those claims, paid Dixie, and expected it to forward the funds to Eaton.
The appeal court found that Eaton perpetrated the fraud by electronically mimicking CTC receipts, represented via Dixie that it had performed repairs by issuing falsified invoices, and caused CTC to pay for repairs never performed.
Regarding Ms. Milburn being an exception, the appeal court held that the judge failed to explain the reasoning behind the conclusion that she was deeply embedded in various aspects of the fraudulent scheme as a knowing and willing participant.
The appeal court acknowledged that Ms. Milburn might have handled funds received from her father and managed funds of some corporate appellants. However, the appeal court pointed out that she might not have known that the funds were the proceeds of fraud.
The appeal court emphasized that receiving and managing funds from her father did not, in itself, imply Ms. Milburn’s knowledge of his fraudulent acts. The appeal court saw an insufficient nexus between the conduct the judge identified in his reasons and his inference based on that conduct.