January 20, 2026

By Brian Babcock

When we hear or think about fraud, most of us probably think about criminal fraud.

Criminal fraud is society’s response to the need to deter and punish deception.

THE ISSUES

How do we deter deception that causes damages or losses to private citizens?

How do we compensate these individuals or corporations?

THE CASE

Civil fraud, which is the cause of action allowing for remedies to individuals or corporations for their losses suffered due to deception, is reviewed in the Ontario Court of Appeal decision in Canadian Tire Corporation, Limited v. Eaton Equipment Ltd. .

The action arose out of a scheme by Eaton Equipment Ltd., a provider of warranty repairs to Canadian Tire customers, based on falsified invoices and receipts. Canadian Tire paid for repairs that were never done to products that were not real products, allegedly owned by non-existent customers. Eaton did not bill CTC directly. It billed an innocent intermediary company employed by CTC to administer the program. CTC paid the intermediary, which in turn paid Eaton its share of the billings.

The test applied by the summary judgment judge, and endorsed by the Court of Appeal (based on a 2014 Supreme Court of Canada decision) requires that, to prove civil fraud, the injured party (the Plaintiff) must establish:

• a false representation made by the defendant;
• some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness);
• that the false representation caused the plaintiff to act; and
• that the plaintiff’s actions resulted in a loss

The wrongdoers of course had to invent a defence or at least try to.

In this case, they argued that the presence of the intermediary meant that Canadian Tire had not relied on the wrongdoer’s deceptions and lies but had instead relied upon the representations of the innocent intermediary.

Have to give the fraudsters credit for continuing gall.

The Court of Appeal gave no weight to this argument. It upheld the judgment against Eaton Equipment and its dishonest principals.

The court also rejected an argument that because the Superior Court decision resulted in what is called a “partial summary judgment”, where the Superior Court still had to resolve the issue of whether one of the individuals sued had the necessary wrongful knowledge to be at fault, the motion for summary judgment ought to have been dismissed , and a trial ordered. The court saw through this stall tactic, saying that:

The issue of Ms. Milburn’s liability is factually distinct from that of the other appellants.  Because this issue can be readily bifurcated, this is not a case in which partial summary judgment poses a risk of duplicative proceedings or inconsistent findings

Another Court of Appeal decision released earlier in October 2025 clarified that the underlying reasons why Ontario courts avoid most partial summary judgments are those risks.

Other than Ms. Milburn, the wrongdoers were found to owe CTC for their fraud.

TAKEAWAYS

• Civil fraud is a cause of action victims may pursue to attempt to recover their losses
• DO NOT wait for the criminal process to unfold. Though the criminal verdict may help prove the necessary facts of civil fraud, there are problems associated with waiting.
• There is no guarantee, even if fraud is proven, that the victim will collect their losses- fraudsters tend to go bankrupt, or end up in jail.
• Though a judgment for civil fraud may survive a bankruptcy, that survival does not magically make money available.
• Unlike criminal fraud, the purpose of civil fraud is to recover money
• The process for recovery may be time consuming and expensive.
• If you think that you may be the victim of civil fraud, seeking early legal advice is your best bet to assess the potential for cost effective recovery. The sooner you start, the more likely that funds might till be available to recover. Plus, you avoid limitation issues or time limits to start the lawsuit.

WHAT WEILERS LLP CAN DO TO HELP YOU

The litigation team at Weilers LLP understands the risks and rewards of pursuing a civil fraud action and knows how to apply the law to our clients’ advantage.

We will give you sound advice early in the process about these risks and rewards, and update that advice as the situation develops.

If you are, or may be, a victim of civil fraud, and are looking for a law firm to represent you, give us a call. We may be the right lawyers for you.