Lawyers during litigation at-times provide false or misleading
statements. But when do those statements cross the threshold from
innocently misleading to fraudulent? The Ontario Court of Appeal
recently answered this question in Paulus v. Fleury
("Paulus"),1 therefore shining a light on what
is considered to be a notoriously grey area of law. In overturning
the motion judge's refusal to enforce a settlement, the Court
of Appeal stated that the correct approach to civil fraud in the
context of submissions made by counsel is to determine whether the
submissions were made (1) on a reasonable basis and (2) in good
faith.2
Background
The underlying action arose from a motor vehicle accident. At
the pretrial conference, plaintiffs' counsel indicated that
they had witnesses, describing them as "good people...
independent... solid".3 Believing that the
plaintiffs had no connection to these witnesses, the defendants
agreed to settle in the amount of $850,000.
