Executive Summary: Key Legal and Evidentiary Issues

Good faith intention to appeal was established, but trial counsel's personal issues caused delays in filing the Notice of Appeal beyond the procedural deadline. Credibility findings were substantially undermined by Ms. Howard's failure to call a material witness (Mr. Smith) and her destruction or non-preservation of critical business records despite her business experience. The trial judge applied established caselaw correctly in finding that Ms. Howard's silence during meetings constituted both adoptive admission and affirmative misrepresentation, particularly given her knowledge of project risks. Adverse inferences were properly drawn from multiple factors including the suspicious timing of when business records were returned to Mr. Smith, coinciding with a police investigation and the commencement of litigation. Personal liability of a corporate director was justified despite her claims of passivity, based on her personal guarantees of mortgage obligations and authorization of her credit card for business expenses. The proposed appeal lacked sufficient merit to warrant an extension of the filing deadline, as the appellants identified no reviewable errors in the trial judge's factual or legal analysis.

Facts and background of the case

Judith Wiebe and Bradley Proudfoot initiated legal proceedings against Mary Loretta Howard and Colin Smith, alleging that the defendants had defrauded them by misappropriating funds from a real estate development project in Oakville. The plaintiffs obtained summary judgment against Mr. Smith and other defendants, but a full trial was required to determine whether Ms. Howard should be held personally liable for the investors' losses. Ms. Howard and Mr. Smith were former spouses and business partners who operated several Dunmar-related entities, including Dunmar Holdings Inc. and Dunmar Homes Ltd., through which they conducted real estate business activities.

The trial proceedings and credibility determinations

The trial judge's decision, released on October 22, 2024, found Ms. Howard liable for fraudulent misrepresentation. The trial judgment rested substantially on credibility findings that were highly unfavorable to the defendant. The first significant credibility issue arose from Ms. Howard's failure to call Mr. Smith as a witness despite having assured the court on October 24, 2022, that she would call him to testify. Mr. Smith had refused to voluntarily testify at trial, and Ms. Howard did not serve him with a summons to compel his attendance. The trial judge found this conduct problematic because the court had previously adjourned the trial based on her representation that she would make Mr. Smith available. Given the plaintiffs' earlier objection to further adjournments due to concerns about Mr. Smith's attendance, the trial judge concluded that Ms. Howard had a clear obligation to take reasonable steps to secure his attendance through proper legal process. As a result, the court drew an adverse inference that Mr. Smith's evidence would not have supported Ms. Howard's defense. The second credibility issue concerned Ms. Howard's failure to preserve business records of the partnership. Although she was a well-educated woman with considerable business experience, she produced only a few records at trial and provided vague or imprecise accounts of events that were largely uncorroborated. Much of her testimony focused on minimizing her role and involvement in the partnership and the Oakville Project. The trial judge was particularly troubled by the timing of when business records and a computer were returned to Mr. Smith—this occurred largely contemporaneously with a police investigation into the partnership's business activities after a bookkeeper reported concerns to police, and it also coincided with when the plaintiffs commenced their legal action. Ms. Howard had initially made some efforts to preserve the records but then acquiesced when her children arranged to return the paper documents and computer to Mr. Smith without meaningful explanation and without retaining any copies.

Fraudulent misrepresentation findings

The trial judge found that Ms. Howard made false representations to the plaintiffs to encourage them to invest in the Oakville Project. Specifically, the judge determined that although Mr. Smith did most of the talking during meetings between the four parties, Ms. Howard was present, willingly participated in group discussions, and agreed with statements and representations without objecting or qualifying them. Importantly, she never suggested that the investment would be risky. The trial judge held that her silence at these meetings constituted an adoptive admission of Mr. Smith's representations and, more significantly, that her silence itself implicated a false representation due to what was left unsaid. The circumstances of the case created a duty for Ms. Howard to speak in order to avoid subjecting the plaintiffs to inaccurate representations. The trial judge further found that Ms. Howard made her representations about the project's viability and profitability with reckless disregard for their accuracy or truth, particularly in light of the fact that neither she nor Mr. Smith had worked on a real estate development project of similar magnitude. Thus, her representations were made with at least reckless disregard as to their truth.

Personal liability of the corporate officer

A critical issue was whether Ms. Howard could be held personally liable for fraudulent misrepresentation despite her corporate roles. She claimed to be a silent or passive officer and director without directing the companies' operations. However, the trial judge rejected this characterization, finding that she was a directing mind of the corporations at all material times. This conclusion was supported by the fact that she had guaranteed the building mortgage for the Oakville Project personally and had authorized the use of her unlimited credit card to pay for project-related and other business expenses of the corporations. Furthermore, as Mr. Smith's business partner, she stood to share any profits from the project. The trial judge concluded that her conduct exhibited a separate identity or interest from that of the corporations, making her personally liable for her misrepresentations to the plaintiffs.

The appellate motion and its disposition

Ms. Howard's trial counsel failed to deliver the Notice of Appeal within the time required by the Rules of Civil Procedure, as the counsel was dealing with various personal issues. It was not until April 9, 2025, that Ms. Howard's counsel advised her of this failure. In response, Ms. Howard sought an extension of time from the Court of Appeal to file her Notice of Appeal. The court applied the established test for extensions of time, which requires consideration of whether the justice of the case demands an extension, examining factors such as good faith intention to appeal, the length and explanation for delay, prejudice to the responding parties, and the merits of the proposed appeal. While Ms. Howard clearly had a good faith intention to appeal and the respondents had not argued serious prejudice beyond the ongoing delay, the central issue became the merits of the proposed appeal. The appellants' arguments challenged the adverse inferences drawn from the failure to call Mr. Smith, contending that the trial counsel's decision should not be attributed to Ms. Howard. However, the court found no merit to this position, noting that Ms. Howard was aware Mr. Smith had refused to testify and there was no evidence she had instructed her counsel to call him. Furthermore, the failure to call Mr. Smith was merely one of several reasons for the adverse credibility findings. The appellants also argued that Ms. Howard should not have been found knowledgeable or reckless regarding Mr. Smith's representations merely because she was silent. However, the court found no reviewable error in the trial judge's analysis, which properly applied established law regarding silence as misrepresentation and adoptive admission. Ultimately, the Court of Appeal concluded there was no valid basis to extend the time to file the Notice of Appeal, as the appellants had identified no errors in the trial decision.

Outcome and costs

The motion to extend the time to file the Notice of Appeal was denied. The successful parties were the respondents, Judith Wiebe and Bradley Proudfoot, who were awarded costs in the amount of $5,000 all inclusive for the appellate motion itself. The underlying trial judgment's damages award details are not specified in this appellate decision.