i Trade
Continued From Page 1
merely voidable (i.e. not void ab
initio from the outset). Since
i Trade intentionally lent the
funds to the fraudster’s company (albeit induced by the
fraudster’s lies), the finance
company conveyed to the fraudster’s company what qualified as
an interest that could be
attached under Ontario’s
Personal Property Security Act
(PPSA) by BMO.
According to Salsberg, “the
underlying policy [of the deci-
sion] is that efficient commerce
requires that secured lenders
have a high degree of comfort
that their purported security is
in fact not subject to being
defeated by some unseen—to
them unseen — earlier fraudu-
lent transaction of which they
are not aware.”
He added that if the judg-
ment had “gone the other way,
secured lenders could never be
sure whether there is a flaw in
the chain of title because, for all
they know, there might have
been a fraud somewhere—one,
or two, or three, transfers
before—that wouldn’t turn up
anywhere, so they couldn’t
search anywhere — …and [they
would] be left out in the cold.
And presumably, on an eco-
nomic basis, what would happen
is that secured lenders would
demand higher interest rates, or
what have you, to compensate
them for the risk of loss.”
BMO counsel Joshua Siegel
of Toronto’s Rubenstein, Siegel
did not have his client’s instruc-
tions to comment at press time.
“[If the judgment had] gone the other way,
secured lenders could never be sure whether
there is a flaw in the chain of title because,
for all they know, there might have been a
fraud somewhere…
ster’s pledge to the bank created
an enforceable security interest
under the PPSA.
i Trade contended that BMO
could acquire an enforceable
PPSA security interest only if
the pledgors (the fraudster and
his spouse) had rights in the
collateral to pledge to BMO.
Arguing the maxim “nemo dat
quod non habet” (i.e. no one can
give what he or she doesn’t
have), i Trade asserted that the
fraudster would not have
defect in title. When i Trade
lent money to the company, it
intended to pass title in the
money to the company, regardless of the fact that the lender
was induced to do so by fraudulent misrepresentation.
According to Justice Des-
champs, “the real question is
whether [the fraudster and his
spouse] had rights in the shares
when they pledged them to
BMO. What is considered as
‘rights’ in the collateral encom-
passes a range of interests
beyond legal and equitable title.”
Justice Deschamps observed
that if the debtors did not have
any rights in shares they pur-
chased with i Trade’s money, and
pledged as collateral to BMO,
“then by operation of the nemo
dat rule, BMO could not have
acquired a statutory security
interest that would be enforce-
able against third parties.”
However “fraud makes an
agreement voidable, not void,”
Justice Deschamps emphasized.
“The key is that at the time [the
fraudster’s company] Webworx
acquired the funds, it had
i Trade’s consent to their use,
which brings into play the prin-
ciple that a contract tainted by
fraud is not void, but voidable.
Webworx was entitled to use the
funds. In turn, [the fraudster]
was able to acquire the same
interest in the funds as Web-
worx, and the funds were used
to purchase the shares.”
She held “BMO’s interest in
the shares credited to the invest-
ment account could therefore
attach, giving it an enforceable
PPSA security interest.” n
BC omnibus
British Columbia’s government
tabled an omnibus bill May 19 that
will, among other things, change the
Law and Equity Act in an effort to
resolve uncertainty and avoid
litigation with respect to certain
leases related to common property in
strata developments.
The proposed Miscellaneous
Statutes Amendment Act (No. 2),
2011 would also amend the Child,
Family and Community Service Act to
allow judges to permanently transfer
custody of children to the relatives
with whom they are living in
temporary out-of-care agreements.
Designed as an alternative to bringing
children into foster care, this
amendment includes safeguards to
ensure permanent transfers only
occur when they are in the child’s
best interests and to ensure due
process before parental rights are
severed.
Bill 13 also includes changes to a
number of other Acts.
Grave act
Reasons: i Trade Finance Inc. v. Bank of
Montreal, [2011] S.C.J. No. 26.
We want to hear from you!
Email us at: tlw@lexisnexis.ca
CONTENTS
great cases in canadian legal history
BACKSTORY
SERIES
PRIVACY COMMISSIONER calls for
enhanced enforcement powers ...... 9
TEN TECHNOLOGIES for
automating estates practices..... 10
don’t miss reading part five
of our series. see page 26
HOW BEHAVIOURAL advertising
intrudes on privacy rights........... 10
NEWS
TECHNOLOGY STANDARDS: how
to protect clients’ data............... 11
THE SCC confirms that a
fraudulent agreement is ‘voidable,’
but not void ab initio ....................1
Criminal Law
CROWN POLICY on domestic
violence ...................................... 13
Correction
It’s not every day The Lawyers Weekly is pleased to publish a correction to one of our stories, but in this case we are. In our May 6 issue
in a story called “Canadian law’s last journey to London” we reported
that the only living participant in the last historic trip by Canadian
lawyers to argue a case before the Privy Council in London in 1959,
was James “Herb” Laycraft, who went on to become the Chief Justice
of Alberta.
But several members of the Western legal community were quick
to give us the good news that William Stevenson, who was a junior
lawyer in 1959, but later went on to the Supreme Court of Canada
Bench, is still alive and living in Edmonton.
PROVIDE WOMEN lawyers loans
and counselling, says a LSUC
working group ..............................1
TOP COURT fails to set clear
search and seizure limits............ 13
RICHES, MCKENZIE & HERBERT LLP
PATENTS, TRADE MARKS, COPYRIGHT, LITIGATION
Manitoba has introduced harsher
penalties for cemetery vandalism and
stronger consumer protection for
people who prepay funerals.
On May 24 the government tabled
changes to the Cemeteries Act that
would enable courts to order fines of
between $1,000 and $10,000, jail of
up to one year and restitution to the
affected family or cemetery.
The present penalties for the
desecration of tombstones or
cemeteries — in place for more than
a century — range between $4 and
$40.
The government also proposed
several changes to protect prepaid
funeral plan buyers, including:
allowing contract cancellation for up
to 10 days without penalty and
making it an offence to exert undue
pressure, take advantage of a
person’s inability to understand a
plan, make a sale in the knowledge
the person is unable to pay, or
misrepresent that the services are
required by law or cemetery rules.
Call to the ‘ParaBar’?
BARRISTERS & SOLICITORS - PATENT & TRADE MARK AGENTS
SCC NOMINATIONS should be
non-partisan, says the NDP’s
justice critic.................................. 3
BUSINESS & CAREERS
WHEN A star goes AWOL......... 21
LAWYER PENS top sellers.......... 4
HOW TO make that first
impression go in your favour ...... 24
PAUL HERBERT, B.SC., PHM., R.PH, LL.B., J.D., PH.D.
DAN HITCHCOCK, B.ENG. (ELEC. ENG.), LL.B.
JEFF PERVANAS, B.A.SC. (ENG. SCI.), LL.B.
BOBBY ATH WAL, B.A.SC. (MECH. ENG.), M.A.SC., LL.B., J.D.
B YRON THOM, B.A.SC. (ENG. SCI.), LL.B.
BRANT LATHAM, B.A.SC. B.SC. (CHEM. ENG.), LL.B.
GAR Y M. TRAVIS, B.SC. (GEOL.), LL.B.
MICHAEL ADAMS, B.ENG. (MECH. ENG.), B.SC., LL.B.
MICHAEL YUN, B.SC. (BIOCHEM), J.D.
TRADE MARK AGENT MARTA TANDORI CHENG
A POSTER boy for freedom of
expression: Part 5 of our Backstory
series looks at Ramsden v.
Peterborough (City) .................... 26
MANAGING YOUR time............ 25
2 BLOOR ST. EAST, SUITE 1800
TORONTO, ONTARIO M4W 3J5
ESTABLISHED 1887
TELEPHONE: (416) 961-5000
FAX: (416) 961-5081
E-MAIL: riches@patents-toronto.com
OPINION
DEPARTMENTS
JEFFREY MILLER.......................
5
Subscribe to
FOCUS
Information Technology
LAYOUT TIPS for legal
documents.............................. 9
Announcements. . . . . . . . . . . 23
Careers ................. 21
Classified Ads ............ 19
Lawddities............... 14
Legal Briefs...............2
Names in the News......... 4
Weekly Digest............ 17
www.lawyersweekly.ca/subscribe
The Paralegal Standing Committee
of the Law Society of Upper Canada
(LSUC) has decided that the law
society should hold a welcoming
ceremony for newly licensed
paralegals. However, the occasion
will fall considerably short of a Call to
the Bar ceremony.
In a report to the law society’s
May Convocation, the committee
said that in a survey of paralegals, of
the 67 per cent who responded, over
80 per cent were in favour of the
idea.
As a result, the committee decided
to hold a single “reception” next
November and then two each year,
where there would be room for the
new licensees and caterers but not
for any guests.
