Canada: Fraudulent Signature As Defence

Last Updated: February 12 2015
Article by Jonathan Speigel

On occasion, we see a defence that goes something like this: "You have a very nice document stating that I will pay you this or I guarantee that. You have a very nice signature, under my name, attesting to my agreement to the terms of your very nice document. However, that is not my signature and I did not sign this document." If the person truly did not sign the document, that defence is absolute. In Danos v. BMW Group Financial Services Canada, a 2014 Ontario Superior Court of Justice decision, the defendants took this defence to an entirely new level.

Lease

As the judge put it, husband and wife (the "Couple") "leased a very lovely vehicle from BMW. No doubt (the Couple) enjoyed driving it. Unfortunately they allegedly stopped making the lease payments." BMW seized the vehicle, sold it on the open market, and suffered a loss of $21,000. BMW then commenced an action (the "Brampton Action") in Brampton for the shortfall, presumably in the Superior Court of Justice although it seems that it would have fallen within Small Claims Court jurisdiction.

The Couple defended that action, claiming that BMW misled them into signing the vehicle lease and that BMW re-sold the vehicle for an amount less than fair value.

So far, nothing unusual. However, "What started out as a garden-variety lawsuit morphed into a conspiracy investigation when (the Couple) received BMW's productions. (The Couple) allege that (husband's) signature was forged on the business and personal credit applications. (The Couple) also allege that (wife's) signature was forged on the personal credit application. They say that they are the victims of a shocking fraud by BMW."

Rather than simply amend their statement of defence in the Brampton Action, or add a counterclaim, the Couple brought a separate action in Toronto for fraud and fraudulent misrepresentation, claiming $1 million for damages and $1 million for punitive damages. BMW countered with a motion for summary judgment.

Summary Judgment

The nature of a summary judgment motion has changed significantly over the years, both by way of legislative and jurisprudential pronouncements. In the olden days, a party responding to this motion only needed to show that there was a genuine issue for trial. The judge had no power to assess credibility or weigh evidence. A motions judge now has these tools and more. Under the new normal:

"1. The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial;

2. On the basis of this record, the court decides whether it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits;

3. If the court cannot grant judgment on the motion, the court should:

(a) Decide those issues that can be decided in accordance with the principles described in 2), above;

(b) Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;

(c) In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion."

Summary judgment motions have evolved into a legitimate alternative means for adjudicating and resolving legal disputes. In deciding how to use the powers granted to him or her, the motions judge determines whether a trial is necessary to a fair process and a just adjudication between the parties, considering the relative time and costs involved to the parties of the alternatives of motion and trial.

Evidence

In response to BMW's motion, the Couple submitted one affidavit from wife, nothing from husband, and a report of a handwriting expert attached as an exhibit to wife's affidavit. The Couple's response was a textbook case of how not to present evidence and the judge had a field day with its inadequacy.

1.         Expert evidence may not be adduced by way of an exhibit to another person's affidavit, shielding the expert from cross-examination. The expert has to swear his or her own affidavit. The judge therefore refused to accept the expert's report into evidence.

2.         Even if the judge had accepted the report into evidence, the report had no foundation. The Couple gave the expert 14 documents containing their known signatures and the expert then compared their known signatures to the impugned (unknown) signatures. Although the expert could assume that the known signatures were those of the Couple, the judge could not. The wife identified four of her signatures, but did not identify the others or those of her husband. As a result, ironically, the expert was comparing unknown and unproven signatures to impugned (but known) signatures.

3.         Husband gave no evidence – notwithstanding the "best foot forward" rule. There was no real evidence that his signature was forged. Wife gave evidence, but never stated that the impugned signatures were not hers. She said instead, "it was likely possible that my signature was a forgery as well" (as husband's).

4.         The complaint that BMW, and not the Couple, signed the documents was not being used as a defence to BMW's action, as we stated in our opening; rather, the Couple was using it to support their own action. In that scenario, it was insufficient for the Couple to prove that the signatures were not theirs. They had to prove that BMW forged those signatures. They did not. As the judge put it, "Even if the expert is correct that (wife) did not sign the personal credit application, I cannot draw the inference that a BMW representative forged her signature. (Husband) was part of the negotiating process. Indeed, judging by the pleadings and the evidence, he was the driving force behind the lease negotiations. Where is his evidence regarding that process? How do I know he is not the person who signed his wife's signature (which would not be the first time something like that has happened in the history of matrimonial relations)? Based on the evidence before me, that inference is plausible."

5.         Even if there were fraud, the Couple proved no damages. The best they could assert was that their credit rating suffered, but they could demonstrate no resulting loss of money. A wrong is meaningless without damages that flow from it.

6.         Punitive damages are not awarded in a vacuum. "...it is essential that there still be an independent cause of action or else a person entirely unaffected by the defendant's conduct could sue for exemplary damages. In other words, there is no freestanding independent right for bystanders to sue on the basis that someone has done something bad and is therefore deserving of punishment even if nobody was harmed." Since the Couple had no claim for damages against BMW for the alleged forgery, they had no right to punitive damages for the alleged forgery.

Upshot

The judge dismissed the Toronto action in its entirety, in effect for lack of evidence. He also refused to allow the Couple to add the fraud allegations as a counterclaim in the Brampton Action. The Couple is now left with their original defences, such as they are, in the Brampton Action. Had they moved to amend the defence in the Brampton Action claiming that wife's signature, on which BMW relied, was not hers, wife may at least have had a chance of success. The Toronto action and the mishandling of the summary judgment motion took even that possibility away from her.

"We expect that the judge will award substantial indemnity costs to BMW because of the severity of the unproven allegations of fraud." This is what we wrote before we checked if the costs decision had been rendered. We then checked; the judge did exactly that, awarding BMW costs of $37,000.

Addendum

            The Couple actually appealed the decision to the Court of Appeal. The appeal was dismissed in a 4-line endorsement; the Court ordered the Couple to pay another $6,500 in costs for the appeal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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