In Wescom Solutions Inc. v Minetto, the Ontario Court of Appeal confirmed that the test for wilful blindness has the same standard in criminal and civil proceedings, which means asking whether a defendant was in fact suspicious and chose to ignore those suspicious, rather than whether defendant objectively should have been suspicious.
In the decision below, the appellant, Gabriel Fung (“Mr. Fung“) was found to have been wilfully blind, based on an objective standard, to the fraud committed by Nadia Minetto (“Ms. Minetto“), the account manager of the respondent, Wescom Solutions Inc. (“Wescom“). In January 2011, Ms. Minetto began purchasing iPods and iPhones using Wescom’s corporate credit card, without the company’s knowledge or authorization. From late 2011 to July 2014, Mr. Fung, who owned an electronics store, purchased $6.2 million worth of Apple products from Ms. Minetto for re-sale in his store. The trial judge found that the relationship between Mr. Fung and Ms. Minetto evolved from exchanging Apple products for cash in parking lots to Ms. Minetto directing shipments of Apple products to an office rented by Mr. Fung. Mr. Fung periodically raised suspicions about the source of the products supplied by Ms. Minetto, but she reassured him that the source and the products were legitimate.
On appeal, Mr. Fung argued that the trial judge erred by applying an objective rather than a subjective standard to the analysis of wilful blindness (should the accused have been suspicious, rather than, was the accused suspicious). The respondent on appeal argued that an objective standard was appropriate on the theory that the case involved the “knowing receipt” of trust funds, which doctrine allows for an objective standard. The Court of Appeal agreed that allegations of knowing receipt can be proven where the defendant had knowledge of facts sufficient to put a reasonable person on notice or inquiry of the fraud (i.e. on an objective standard). However, the Court found that this case did not involve the doctrine of knowing receipt because the parties had agreed that the case was to be decided on the basis of Mr. Fung’s actual knowledge or wilful blindness.
The Court of Appeal found that the trial judge erred in law by articulating an objective standard in his analysis of wilful blindness. That said, and despite this mischaracterization of the test, the trial judge did not err when he concluded that Mr. Fung was wilfully blind to the fraud. The trial judge made findings of fact that established that Mr. Fung “knew that the Apple products were probably stolen or obtained by fraud, but that he made a deliberate choice not to investigate”. Mr. Fung therefore subjectively knew of the underlying fraudulent conduct but declined to make the necessary inquiry to avoid the truth.
The decision of the Court of Appeal makes it clear that the standard for wilful blindness is the same in the civil context as it is in the criminal context: “[w]here wilful blindness is in issue, the question is not whether the accused should have been suspicious, but whether the accused was in fact suspicious.” While this may impose a greater burden of proof on victims of fraud, the Court of Appeal also confirmed that cases involving the knowing receipt of trust funds from a fraudster can be proven using an objective standard. Overall, this case is another affirmation of the old adage that when something appears to be too good to be true, it usually is.
With thanks to Faye Williams for assistance in writing this article.