Executive Summary: Key Legal and Evidentiary Issues

• Fraudulent mortgage obtained through impersonation and used to extract $585,700 from a private lender.

• Title insurer, after indemnifying the lender, traced the fraudulent proceeds to various individuals and entities.

• Default judgment granted against non-participating defendants based on deemed admissions and strong documentary evidence.

• Court found liability for fraud, conspiracy to defraud, unjust enrichment, and breaches of conveyancing statutes.

• Punitive damages awarded due to the deliberate and deceitful conduct that shocked the conscience of the court.

• Total monetary award to Chicago Title: $789,455.21, including compensatory, punitive damages, and costs.

Facts and outcome

This case arises from a real estate fraud involving a property located at 7128 Baskerville Run, Mississauga, Ontario. On March 11, 2021, two individuals falsely representing themselves as the property owners secured a mortgage for $585,700 from Ryan Mortgage Income Fund. The mortgage proceeds were deposited into a BMO account and subsequently disbursed through a series of bank drafts and transfers to various individuals and entities. These included payments to 2735046 Ontario Inc., Teng Chun Chiao, Nguyen Hoang Duy, and others.

Chicago Title Insurance Company, having issued title insurance for the mortgage, became aware of the fraud after it was revealed that the individuals who obtained the funds were not the lawful owners of the property. Following an internal investigation and the involvement of the Deputy Director of Land Titles, the mortgage was deleted from title after being found fraudulent in a tribunal hearing.

Chicago Title commenced legal proceedings against several individuals and one corporation: John Doe, Jane Doe, Xuan Dieu Vy Nguyen, 2735046 Ontario Inc. (operating as LPR Global), Cang Tran, Teng Chun Chiao, Thuy Doan Quang, Nguyen Hoang Duy, Albert Baird, and Kerry James. The plaintiff later reached a settlement with Nguyen Hoang Duy and temporarily refrained from seeking judgment against Xuan Dieu Vy Nguyen due to cooperation in discovery. The remaining defendants did not appear or file a defence.

Justice Papageorgiou reviewed the motion for default judgment in accordance with Ontario’s Rules of Civil Procedure. The court found that under Rule 19.02, the failure to defend resulted in deemed admissions of the pleaded facts. However, under Rule 19.06, judgment could only be granted if the pleadings and supporting evidence entitled the plaintiff to judgment.

The court relied on a test from prior case law requiring analysis of both deemed admissions and the sufficiency of corroborating evidence. The evidence, including financial records, sworn statements, and the findings of the land titles tribunal, established that the defendants had knowingly participated in the fraudulent scheme. Specific bank drafts and transfers traced the flow of funds from the mortgage to accounts associated with the defendants.

The court held that the plaintiff had successfully pleaded and proven the torts of fraud, conspiracy to defraud, unjust enrichment, and breaches of both the Fraudulent Conveyances Act and the Assignments and Preferences Act. The defendants were found to have transferred funds without consideration and attempted to delay or defeat the plaintiff’s claim, thereby satisfying the statutory requirements.

Chicago Title had paid $620,500.13 under the insurance policy and recovered $29,000 from a cooperating defendant. The court awarded compensatory damages of $591,500.13 for the unrecovered loss. Punitive damages of $100,000 were also granted. The court applied the test from Whiten v. Pilot Insurance Co., holding that the conduct of the defendants was malicious, oppressive, and deserving of condemnation. The court found that the fraud was planned, deliberate, and concealed, shocking the conscience of the court and justifying a punitive award.

Chicago Title was also awarded substantial indemnity costs in the amount of $97,955.08. The court found that the conduct of the defendants was sufficiently reprehensible to meet the high threshold for such a cost award. The costs claimed were detailed in a Bill of Costs and deemed fair and reasonable.

The total monetary award to Chicago Title Insurance Company was $789,455.21. The decision reinforces the court’s commitment to combatting organized real estate fraud and affirms the remedies available to defrauded insurers through civil litigation.