Executive Summary: Key Legal and Evidentiary Issues

• Existence and scope of a fiduciary duty owed by an office manager with banking access to her employer’s personal accounts, and the resulting onus on her to prove authorization for large personal transfers.
• Credibility assessment between the employer’s denial of authorizing payments and the employee’s explanations that they were bonuses, reimbursements, or gifts, including reliance on lifestyle evidence, lack of documentation, and tax reporting omissions.
• Characterization of the impugned payments as fraud and conversion versus legitimate compensation or gifts, considering the scale, timing, and absence of any commercial or personal rationale for the transfers.
• Proper use of summary judgment and the court’s enhanced fact-finding powers to resolve disputed evidence without a trial, including whether credibility issues required a full trial or could be decided on motion.
• Correct application of equitable doctrines of knowing assistance and knowing receipt against a non-fiduciary spouse, particularly the need for proof of participation and strict tracing of misappropriated trust property.
• Justification and scope of punitive damages in response to high-handed, dishonest conduct, and whether punitive damages can properly be used to pre-empt future employment-related claims by an employer company.

Factual background and the parties’ relationship

Robert John Foster owned and operated Capital Canada Limited, an investment firm. Between October 2022 and January 2025, he employed Leticia Lindicey Sobrinho Prado as office manager, placing significant trust in her by giving her access to and control over his personal bank accounts. During this same period, substantial sums flowed from Foster’s personal accounts to Prado beyond her regular salary. These transfers took several forms: a series of e-transfers, cheques, and payments to a Platinum American Express card in Prado’s name. Foster maintained that he never authorized these transfers, while Prado insisted that he did and that they were legitimate. There was no evidence of any personal relationship between Foster and Prado that might explain unusually generous gifts; they “hardly knew each other” when the payments began. In addition, Prado and her husband, Mariano Pellegrini Steiner, were living a lifestyle that depended heavily on these funds. The court later noted that Prado paid the rent and incurred substantial luxury expenses, including an approximately $18,000 tattoo, even though her salary as an office manager alone could not plausibly support that level of spending.

The impugned transactions and their nature

The challenged payments fell into three main categories. First were 31 e-transfer payments from Foster’s personal bank account to Prado’s own account. Most were in the amount of $10,000, with one $5,000 transfer, for a total of $305,000. These transfers were executed using Foster’s bank access code, which Prado had because of her role. The motion judge found troubling evidence that some of these e-transfers were structured so that Foster’s wife would appear to be the recipient, suggesting an effort to obscure who was actually receiving the money. Second were 17 cheques drawn on Foster’s personal account, payable to Prado, totalling $315,886.67. Prado did not produce any documentation showing that she used these funds to pay third parties on Foster’s behalf or in connection with his business. Among these was a $100,000 cheque that Prado claimed was a spontaneous gift to help her and Steiner buy a home, allegedly offered after casual comments about Toronto housing prices, even though they were not then actively looking for a property. Third were payments totalling $563,232.70 from Foster’s bank account to a Platinum Amex card belonging to Prado. These were used for luxury goods, cosmetic medical treatments, business class travel, and other high-end personal consumption. Prado’s explanation was that she applied for this card at Foster’s request and that most or all of the charges were business-related expenses or personal expenses incurred on Foster’s behalf, fully authorized by him.

Competing narratives and evidentiary conflicts

The case turned heavily on credibility. Foster’s position was straightforward: he did not authorize any of the transfers and only became aware of them after a new assistant highlighted a suspicious transaction. The motion judge accepted that Foster was a busy, wealthy investment professional whose attention was largely directed to managing other people’s money, making his failure to detect the misappropriations earlier plausible. By contrast, Prado’s story was that these payments were authorized compensation, bonuses, reimbursements, or gifts. She said that the e-transfers reflected extra compensation for additional work; the cheques were a mix of reimbursements and gifts; and the Amex payments related to authorized business or personal expenditures for Foster. However, she provided no contemporaneous records, no emails, and no corroborating documents showing instructions from Foster or evidence that she had advanced funds on his behalf. Critically, she did not report the large e-transfer amounts as income for tax purposes. The motion judge viewed this as inconsistent with her claim that they were legitimate earnings. Further, her assertion that she had incurred extensive expenses on Foster’s account was severely undermined when she could not identify even a single specific purchase that was actually for Foster’s benefit rather than her own.

Summary judgment and findings on Prado’s conduct

The parties agreed to convert existing Mareva and Norwich proceedings into a summary judgment motion. This allowed the court to consider whether the action could be resolved without a full trial, using the enhanced fact-finding tools available under Rule 20 of the Rules of Civil Procedure. The motion judge first asked whether there was a genuine issue requiring a trial on the record as it stood. He concluded there was not, observing that Prado’s explanations were “spurious” and bore no real connection to the parties’ actual relationship or the economic realities of her role. He further held that, even if there had been a prima facie genuine issue, he could and would deploy the enhanced powers to weigh evidence and assess credibility on the motion, and, doing so, he again found no basis to send the matter to trial. As to the fiduciary framework, the judge held that Prado owed a fiduciary duty to Foster because of her entrusted control over his personal banking access and funds. Once the evidence established that she had in fact caused the funds to be transferred to herself, the burden shifted to her to prove authorization and legitimacy. On this point, she failed. There was no convincing rationale for Foster to start transferring very large sums to a newly hired office manager the day after she commenced employment; there was no evidence of special services or extraordinary value added that might justify “bonuses” tripling her salary; and there was a complete absence of documentary confirmation of supposed business expenses. The court therefore concluded that Prado had engaged in fraud and conversion, misappropriating funds for her own purposes.

The claims against Steiner and the equitable causes of action

The plaintiffs also sued Prado’s husband, Steiner, advancing two equitable causes of action: knowing assistance and knowing receipt related to Prado’s fraudulent breach of duty. Under the doctrine of knowing assistance, a non-fiduciary can be liable where they knowingly participate in or assist a trustee or fiduciary in a dishonest breach of trust. The respondents conceded before the motion judge that there was no evidence that Steiner took part in or facilitated Prado’s misappropriations. Despite that concession, the motion judge nonetheless allowed the claim to proceed and treated Steiner as liable. The Court of Appeal later held that this was an error; without proof of participation, a key element of knowing assistance was missing, and the claim on that basis should have been dismissed outright. Knowing receipt, by contrast, is focused on whether a non-fiduciary has received trust property for their own benefit with actual or constructive knowledge that it was being misapplied. The Ontario Court of Appeal reiterated that knowing receipt has three components: the defendant must receive trust property; must receive it for their own benefit or in a personal capacity; and must have actual or constructive knowledge that the property is being misapplied, including where a reasonable person would have inquired further and the defendant failed to do so. A strict tracing requirement applies: the claimant must show that the alleged recipient took title to, possession of, or control over the specific trust property or its traceable proceeds. In Steiner’s case, the motion judge inferred that he must have known Prado had an additional source of funds beyond her salary—drawing on facts such as his knowledge of the high cost of her large tattoo and that she was paying the rent. The judge described their home economy as resting on funds stolen from Foster. Yet he did not identify precisely what trust property Steiner had actually received, nor did he quantify any benefit in Steiner’s hands. He attempted to cure this by ordering a reference to trace misappropriated funds to Steiner at a later stage, acknowledging it was possible that “nothing will be found” in Steiner’s hands.

Appellate review of the summary judgment process

On appeal, Prado launched a broad challenge to the motion judge’s approach, arguing that he had misused summary judgment, improperly weighed credibility, and employed needlessly pejorative language in his reasons. The Court of Appeal accepted that, in form, the motion judge followed the proper sequence mandated by Hryniak v. Mauldin: first asking whether a genuine issue requiring a trial existed without resorting to enhanced powers, and then, in the alternative, using those powers to determine if a trial was needed. The appellate court acknowledged that relying solely on Prado’s evidence to find no genuine issue would be problematic because that approach implicitly involved rejecting her credibility and preferring Foster’s, something usually associated with enhanced fact-finding. However, because the motion judge expressly went on to weigh the evidence and make credibility findings using the enhanced powers under Rule 20.04(2.1), any sequencing imperfection did not amount to a reversible error. The Court of Appeal also addressed the tone of the reasons. It recognized that the judge’s descriptions of Prado’s evidence were often sharp, even dismissive, and that he might have been more temperate. Nevertheless, it held that critical language alone does not demonstrate prejudgment or bias. There was no reasonable apprehension of bias, and the judge’s ultimate factual and legal conclusions were grounded in the evidentiary record.

Punitive damages and the limits on their use

The motion judge awarded compensatory damages of $1,189,119.37 against Prado in favour of Foster, representing the misappropriated funds. He also awarded $100,000 in punitive damages payable jointly to Foster and Capital Canada, reasoning that Prado’s misconduct was egregious and a fundamental breach of the employment relationship. At the appellate level, the Court of Appeal affirmed the availability and quantum of punitive damages for Foster. Drawing on the Supreme Court’s guidance in Whiten v. Pilot Insurance Co., the court held that Prado’s dishonest and high-handed conduct warranted denunciation, deterrence, and retribution beyond compensatory damages alone, and that a $100,000 punitive award was proportionate to the harm and misconduct. However, the inclusion of Capital Canada as a co-recipient of the punitive award was found to be an error of law. Punitive damages must be tailored to the recognized purposes of punishment, deterrence, and denunciation, and are only appropriate where other remedies are inadequate to achieve those objectives. The Court of Appeal observed that compensatory and punitive damages awarded to Foster already fulfilled these functions; extending the same punitive amount to Capital Canada did not add anything principled. Moreover, the motion judge’s stated rationale—using the punitive award to estop Prado from later asserting a constructive dismissal claim—fell outside the legitimate purposes of punitive damages. That aspect of the award was therefore set aside, leaving the full $100,000 punitive amount payable solely to Foster.

Disposition of the appeals and financial outcome

The Court of Appeal’s disposition produced a mixed but overall clear result. As between Foster and Prado, the summary judgment finding of liability for fraud and conversion stood. Prado’s fiduciary breach and misappropriation were upheld, the compensatory award of $1,189,119.37 remained intact, and the $100,000 punitive damages award in favour of Foster was confirmed. The only modification was to remove Capital Canada as a recipient of punitive damages. Foster was also granted $10,000 in all-inclusive appeal costs against Prado. As between Foster and Steiner, however, the appellate court intervened decisively. It set aside the judgment against Steiner, dismissed the knowing assistance claim altogether given the lack of participation evidence, and directed that the knowing receipt claim proceed to trial because actual receipt of trust property and the strict tracing issues could not properly be resolved on summary judgment or delegated to a reference. No costs of the appeal were awarded to or against Steiner. In net terms, Foster emerged as the successful party in the litigation against Prado, with a total presently fixed monetary recovery in his favour of $1,299,119.37 (comprising $1,189,119.37 in compensatory damages, $100,000 in punitive damages, and $10,000 in appeal costs), while no current damages or quantified costs are ordered against Steiner, and any additional trial-level costs or awards beyond those figures cannot be determined from the decisions available.