Executive Summary: Key Legal and Evidentiary Issues

• The adequacy of damages awarded for fraudulent misrepresentation by a mortgage broker in a failed private loan transaction.

• Determination of liability for breach of contract and fraudulent misrepresentation among multiple parties.

• Proper calculation of damages to restore plaintiffs to their pre-misrepresentation position.

• Assessment of joint and several liability to prevent double recovery by the plaintiffs.

• Evaluation of the trial judge’s rationale for limiting damages to interest charges rather than full loan principal.

• Consideration of abandoned cross-appeal and its impact on the final outcome.

Facts of the case

In September 2017, Ishwant Singh Cheema and Navjyot Kaur Cheema agreed to lend $100,000 to Devinder, Sukhbir, and Simrandeep Toor for the purchase of a residential property. The transaction was facilitated by Ayyaz Shums, a mortgage broker. To fund this loan, the Cheemas withdrew money from their home equity line of credit, incurring interest charges. The Toors’ property purchase ultimately did not proceed, and they defaulted on the loan, repaying only $16,000 in principal and $12,000 in interest between September 2017 and May 2019. In August 2019, the Cheemas initiated legal action against both the Toors and Mr. Shums, alleging breach of the loan agreement by the Toors and fraudulent misrepresentation by Mr. Shums.

Trial court decision

The trial took place in June and July 2023, with the Supreme Court of British Columbia issuing its decision on January 29, 2024. The trial judge found that both the Toors and Mr. Shums had knowingly made fraudulent misrepresentations about the Toors’ financial situation, which the Cheemas relied upon to their detriment. The judge awarded the Cheemas $182,038.36 in damages against the Toors, comprising $84,000 in outstanding principal and $98,038.36 in contractual interest. Against Mr. Shums, the judge awarded $14,849.88, representing only the interest charges on the Cheemas’ line of credit, and declined to make him liable for the outstanding principal, reasoning that such an award would unjustly enrich the Cheemas.

Appeal and appellate decision

The Cheemas appealed the limitation of damages against Mr. Shums, arguing that the trial judge erred by restricting the award to interest charges instead of the full amount needed to restore them to their original position. Mr. Shums filed a cross-appeal but did not pursue it. On appeal, both parties agreed that the trial judge had erred in principle. The Court of Appeal held that the correct measure of damages for fraudulent misrepresentation is to place the plaintiffs in the position they would have occupied had the misrepresentation not occurred. The appellate court found that, absent Mr. Shums’ misrepresentations, the Cheemas would not have lent the money or incurred any interest charges. Therefore, the damages against Mr. Shums should include the outstanding principal and the interest incurred, less payments received from the Toors.

Outcome and final orders

The Court of Appeal allowed the Cheemas’ appeal and substituted an award of $86,849.88 against Mr. Shums, replacing the trial judge’s lower award. The damages were ordered to be joint and several with the judgment against the Toors, ensuring the Cheemas could not recover more than the total loss. Costs were awarded to the Cheemas at Scale A. The cross-appeal by Mr. Shums was dismissed as abandoned. In summary, the Cheemas were the successful parties on appeal, with a total monetary award of $86,849.88 ordered against Mr. Shums, in addition to the existing judgment against the Toors.